State Street Trust Company v. Walker

• Decision Date: 21 May 1927
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: STATE STREET TRUST COMPANY & another, trustees, v. DAISY B. WALKER & another.

259 Mass. 578

STATE STREET TRUST COMPANY & another, trustees, v. DAISY B. WALKER & another.

Supreme Judicial Court of Massachusetts, Essex.

May 21, 1927

November 16, 1926.

Present: RUGG, C.

J., BRALEY, CROSBY PIERCE, CARROLL, WAIT, & SANDERSON, JJ.

Trust Trustee's accounts, Trustee's duty as to investments. Negligence, Of trustee.

At the hearing of a petition by two trustees, one a trust company and one an individual, under a will which directed the trustees to keep the trust fund invested "in good mortgages of real estate, having greater regard to the goodness of the security than for the amount of income to be derived therefrom," for the allowance of accounts covering a period from 1910 to 1923, it appeared that the trust company was appointed a cotrustee in 1902 and that the individual was appointed a cotrustee with it in 1918; that in 1892 predecessor trustees had made an investment of $10,000 in a mortgage maturing in 1897 and through their neglect the investment had been permitted to stand until 1902; that then the security, by reason of obvious changes in the character of the neighborhood, had decreased to the value of $8,000; that the next year an agent of the trust company had informed it that the mortgage ought not to exceed $5,000; that in 1898 the mortgagor had made an assignment for the benefit of his creditors; that from then until 1912, the interest was paid by a third party who to the knowledge of the trust company died in 1913 and from whose estate the trust company was unable to collect the mortgage note; that the trust company made no effort to collect or to reduce the mortgage until 1913, when it was foreclosed and the trust company took title; that after foreclosure the trust company was not negligent, and afterwards recovered $6,700 of the principal that the trust company had taken no steps to have its predecessor and cotrustee charged with the loss that the trust had suffered under their management; that at the time in 1918, of the appointment of the individual trustee petitioner, the entire loss on account of the investment had been sustained, and that he had taken no steps to have the trust reimbursed. By order of the judge, a decree was entered charging both petitioners in the account with the loss on account of the principal of the investment. The petitioners appealed. Held, that,

(1) The safety and preservation of the investment were paramount; the amount of interest received was merely of incidental importance;

(2) The proximate cause of the loss having been found to be due to the failure of the trustees preceding the trust company to foreclose while the security of the mortgage was ample, they were jointly and severally responsible for the loss;

(3) A finding by the judge that such trustees failed to comply with the directions in the will of the testator was justified by the facts reported;

(4) The trust company was chargeable with the loss on the principal; (5) There being no basis for a finding that the individual trustee was negligent in any particular, he was not chargeable with any of the loss.

An allowance by the judge to the individual trustee of $81 for travelling expenses due to the fact that when appointed he was a resident of this

Commonwealth but later became a resident of the State of Illinois, was held to rest in the discretion of the judge under G.L.c. 215, Section

45; and his finding that such allowance was reasonable and proper must stand.

In the circumstances above described, it was proper to charge the trustee trust company with interest at five per cent, the rate of the mortgage, from the date when interest was last paid on that investment, upon the principal sum as reduced at different times when sales of the mortgaged land were made by the company.

PETITIONS by State Street Trust Company and Leslie W. Millar, trustees under the will of Samuel A. Walker, late of Nahant, for the allowance of their twenty-ninth to thirty-seventh accounts, inclusive, covering a period from October 1, 1910, to and including September 30, 1923.

The petitions were heard by Dow, J. Material facts found by the judge are stated in the opinion. Besides the findings there quoted were the following:

"In arriving at the amount with which the trustees are charged in the decree on account of principal I have charged them with $10,000 and have credited them with the total receipts from sale of the property after the foreclosure and have disallowed the various credits which they have asked for on account of their expenses in handling and selling the property after the foreclosure. . . .

"In the decree the trustees are not charged with income on the investment after June 16, 1912. If they should be so charged I find that the decree should be amended by adding interest on $10,000 at five per cent from June 16, 1912, to June 24, 1915, amounting to $1,511.10 and on $7,500 from June 24, 1915, to September 12, 1923, amounting to $3,083.34 less $857.14 received from rents accounted for to the beneficiaries while the property was in the hands of the trustees after the foreclosure, making the total income with which the accountants would be chargeable $3,737.30."

By order of the judge, a final decree was entered in accordance with the findings above described, increasing Schedule C of the thirty-seventh account by $3,382.01, all of which was added to the shares to be distributed to the respondent children of A.R. Walker, a son of the testator.

The allowance to the petitioner Millar for personal travelling expenses, referred to in the opinion, was $81.65, which was due to the fact that when he was appointed trustee he was a resident of Newton in this Commonwealth but later became a resident of Wilmette in the State of Illinois.

Schedules D and E of the accounts were not altered by the decree, and no addition to the share of the respondents on account of the lost interest described in the judge's findings was included in the decree.

Both the petitioners and the respondents appealed. The case was argued at the bar in November, 1926, before Rugg, C.J., Braley, Crosby, Pierce, & Sanderson, JJ., and afterwards was submitted on briefs to all the Justices.

A.W. Blakemore & T. Eaton, for the petitioners. F.W. Bacon, for the respondents.

RUGG, C.J. Samuel A. Walker, who died in 1880, by the fourteenth clause of his will gave the residue of his estate to trustees, with directions well and securely to "invest the same as soon as may be done, and keep the same so invested, in good mortgages of real estate, having greater regard to the goodness of the security than for the amount of income to be derived therefrom, and with full authority to loan the same upon mortgage as aforesaid at less than the legal rate, if they deem it necessary or expedient, and also with full power to change investments from time to time as they see fit."

In December, 1892 Charles T. Russell and Joseph B. Russell, who were then the trustees, invested $10,000 of the trust fund in a mortgage given by one Witherell on real estate to secure a note of that sum with interest at five per cent payable semiannually, the principal becoming due on December 16, 1897. At that time (1892) the district in which the mortgaged real estate was situated was a high class, single house residential district, and the mortgage was a proper investment for the trustees to make. At about that time the neighborhood began to...