Taft v. Smith

• Decision Date: 20 May 1904
• Citation: 70 N.E. 1031,186 Mass. 31
• Parties: TAFT v. SMITH et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

186 Mass. 31

70 N.E. 1031

TAFT v. SMITH et al.

Supreme Judicial Court of Massachusetts, Franklin.

May 20, 1904

COUNSEL

Henry J. Field and Archibald D. Flower, for plaintiff.

Burt H Winn and Lamb & Lawler, for respondents.

OPINION

HAMMOND J.

All exceptions to the form of the proceedings having been waived by the defendant, the case is before us on the master's report; and the first question arising on the merits is whether the investment in the second mortgage was improper. It has long been the rule in this commonwealth that in making investments, as well as in the general management of the trust, a trustee is held only to good faith and sound discretion, and hence that he cannot be held for the consequences of an error in judgment, unless the error is such as to show either that he acted in bad faith or failed to exercise sound discretion. Harvard College v. Amory, 9 Pick. 446; Pine v. White, 175 Mass. 585, 590 56 N.E. 967. The master having found that the trustee acted in good faith, the real question upon this branch of the case is whether he failed to use sound discretion. Of course, this question should be determined with reference to the situation at the time the investment was made, and not in the light of subsequent events which could not have been reasonably anticipated. The trust fund was small, and not only the income, but such portion of the principal as might be necessary, might be expended for the support of the cestuis que trust for life; and it seems quite apparent from the master's report that at the time of the sale of the real estate the personal property in the trust had been exhausted and that good management required that the real estate should be sold for the purpose in part of paying outstanding claims for which the trust fund was ultimately liable. The real estate consisted chiefly of a farm, subject to a mortgage to the amount of $1,300. By authority of the probate court the property was sold to one Martin at a valuation of $4,300 including the first mortgage. This left $3,000 due to the trust; and Martin paid $1,000 in cash, and in payment of the balance gave his note for $2,000, payable in annual sums of $100 each, with interest at the rate of 7 per cent. per annum. Martin also assumed and agreed to pay the second mortgage. The trustee was a farmer, having owned and occupied for many years a farm which was situated about a mile distant from the Wright farm, both being on the same road. He was one of the selectmen of the town, and had settled several estates. From the glimpses we get of him, he evidently was a sturdy New England yeoman of the best type. By the sale he had received $1,000 in cash, and had as security for the balance of the purchase money of $2,000 what he had just sold for $3,000 to a bona fide purchaser, who, we infer, bought the farm for the purpose of occupying it himself as a farmer. The trustee was familiar with the farm and its value for farming purposes. It is true that his security was subject to a prior mortgage, but he might well have thought that, in view of its size, whether absolute or relative, there was nothing to be feared from that. In this he seems to have been right, for the trouble in this case is due in no respect to the existence of the first mortgage. The...