The International Trust Company v. Preston

• Decision Date: 01 May 1916
• Docket Number: 820
• Parties: THE INTERNATIONAL TRUST COMPANY, AS TRUSTEE, v. ORD PRESTON, GUARDIAN. IN THE MATTER OF THE ESTATE OF CLARANCE W. HICKS, DECEASED
• Court: Wyoming Supreme Court

156 P. 1128

24 Wyo. 163

THE INTERNATIONAL TRUST COMPANY, AS TRUSTEE, v. ORD PRESTON, GUARDIAN. IN THE MATTER OF THE ESTATE OF CLARANCE W. HICKS, DECEASED

No. 820

Supreme Court of Wyoming

May 1, 1916

ERROR to District Court, Laramie County; HON. WILLIAM C. MENTZER Judge.

Hearing had upon objections filed by Ord Preston, guardian, to an investment of trust funds by the International Trust Company as trustee. From an order surcharging the trustee with the amount of said investment it brings error. The material facts are stated in the opinion.

Affirmed.

Hughes & Dorsey, W. E. Mullen, and E. I. Thayer, for plaintiff in error.

The context of Paragraph Fifth of the will establishes the intention of the testatrix to authorize the trustee to exercise a discretion in the selection of investments. This intention is also made apparent by Paragraphs Seventh and Eighth of the will; the trustee acted within the power conferred by the will and exercised a sound discretion as well as good faith and honest judgment; the investment had the consent and approval of the beneficiaries and of the court for many years prior to the protest; there is no evidence to show any loss whatever sustained by the trust estate by reason of the Mexican bonds except the testimony of Preston, guardian; the trustee acted within the terms of the will. (Willis v. Brancher, 79 Ohio State 290, 87 N.E. 185.) The question of lawfulness and fitness of the investments is to be judged at the time it was made. (Brown v. French, 125 Mass. 410, 28 Am. Re. 254; Baker v. Fooks, 8 Del. Chy., 84, 67 A. 969.) A trustee is protected if he exercises honest and sound discretion with regard to investments. (Nagel v Robbins, 9 Wyo. 211, 62 P. 154.) Breach of trust was waived, if any, by the natural parent or guardian of the cestuis que trustent. (39 Cyc. 413.) The doctrine of estoppel applies. (39 Cyc. 519-520; 1 Perry on Trusts (5th Ed.) Sec 467.) Where the ward has an election between alternative rights or remedies, the guardian can exercise the necessary election on his behalf. (15 Am. & Eng. Ency. of Law (2nd Ed.), 72; Lamar v. Micou, 112 U.S. 452.) A guardian is not an insurer of the safety of investments and if he acts in good faith, he will not be liable for pecuniary loss. (21 Cyc. 73, 83-84, 87-89.) The investment was approved by Fannie Converse Preston, mother of the minors, as early as 1905 and by Ord Preston, during the years 1912 and 1913. The guardian had authority to appear in the lower court on behalf of his wards and approve the investment. (Redmond v. Peterson, 102 Cal. 595; Wrisley v. Kenyon, 28 Vt. 6; Smith v. McDonald, 42 Cal. 484; Gronfier v. Puymirol, 19 Cal. 629; Ewing v. Hollister, 7 Ohio (pt. 2), 138; Simpson v. Belbin, 37 Tex. 674; Ankeny v. Blackiston, 7 Ore. 407.) The guardian is estopped to deny his authority to waive the breach of trust. (15 Am. & Eng. Ency. of Law (2nd Ed.) 76; 21 Cyc. 108-109; 16 Cyc. 684.) The court orders approving reports of trustee are conclusive. (Comp. Stats. 1910, Section 5594.) The probate court had jurisdiction in the premises. (Comp. Stats. 1910, Section 5400; Lethbridge v. Lauder, 76 P. 682 (Wyo.).) Section 5594 was adopted from California where it had been construed by the courts of that state. (Estate of Cahalan, 70 Cal. 604, 12 P. 427; Reynolds v. Brumgan, 54 Cal. 254; Washington v. Black, 83 Cal. 294, 23 P. 300; In re. Cout's Estate, 87 Cal. 480, 25 P. 685; In re. Fernandez's Estate, 119 Cal. 582, 51 P. 851; In re. Pratt's Estate, 119 Cal. 156, 51 P. 47; Crew et al. v. Pratt, 51 P. 38 (Cal.); Crew v. Pratt, 51 P. 47 (Cal.).) In a hearing on an administrator's third account, it was error to set aside a former order settling the second account, from which there had been no appeal. (Estate of Grant, 131 Cal. 426, 63 P. 731; In re. Wells' Estate and Guardianship, 73 P. 1066 (Cal.); In re. McDougald's Estate, 79 P. 879 (Cal.).) Approval orders are not subject to collateral attack. (L. Harter Co. v. Geisel, 122 P. 1095 (Cal.); Lethbridge v. Lauder, 13 Wyo. 9, 76 P. 682; Rice v. Tilton, 14 Wyo. 101, 82 P. 579.) Probate orders are proceedings in rem which conclusively determine the rights of all parties whether then in being or not. (Ladd v. Weiskopf, 69 L. R. A. 785 (Minn.).)

Herbert V. Lacey and John W. Lacey, for defendants in error.

Counsel contend that the provisions of the will conferring broad powers as to the control and management of the property, including power to sell and convert the same, authorized the investment in Mexican bonds. In doing this counsel ignore the chief provision of the will in relation to investments, which are separated distinctly from other matters mentioned in the will; but it is manifest that the provisions of the will cannot be stretched or distorted into general authority to the trustee to use discretion in the matter of investments. The position is not sustained by Willis v. Brancher, Brown v. French nor Baker v. Fooks, involving wills expressly conferring discretion as to investments. Nagel v. Robbins did not involve a trust instrument fixing bonds within which discretion should be exercised, yet one of the loans was disapproved by the court and surcharged. The directions given in the instrument must be strictly followed. (1 Perry on Trusts, Section 460, Page 475; Womack v. Austin, 1 S. Car. 421, 438; Sanders v. Rogers, 1 S. Car. 452, 457; Ringgold v. Ringgold, 1 Harris & Gill (Md.) 11, 68; Bateman et al. v. Davis et al., 3 Maddock 98; Bannister and wife v. M'Kenzie, 6 Munford (Va.) 447.) The breach of trust was not waived; the rule of strictissimi juris does not apply to corporations in their administration of trusts. (Empire State Surety Co. v. Lindenmeier, (Colo.) 131 P. 437, 440; Guaranty Co. v. Pressed Brick Co., 191 U.S. 416, 426; Chicago Lumber Co. v. Douglas, (Kan.) 131 P. 563, 568; Hormel v. American Bonding Co., 33 L. R. A. 513.) The life tenant cannot concur any breach of trust before his or her interest falls into enjoyment. (2 Perry on Trusts, Section 849.) While a cestui que trust may waive a breach of trust his release, confirmation, waiver or acquiescence must have been made upon full knowledge of all the facts and his rights under the law. (2 Perry on Trusts, Section 851.) Preston as guardian was without authority to release or waive the breach. (Woerner on Guardianship, Page 173; Blaubelt v. Van Winkle, 29 N. J. Eq. 111; Freiberg v. DeLamar, et al. (Tex.) 27 S.W. 151; Brown, et al. v. Fidelity, &c. Co. (Tex.) 76 S.W. 944; Hite's Executor v. Hite's Legatees, 3 Randolph (Va.) 409; Forbes' Heirs v. Mitchell, et al., 1 J. J. Marshall (Ky.) 441; Woerner on Guardianship, Page 164-192.) The principle of estoppel has no application. The California statute which is similar to Comp. Stats. 1910, Section 5594, must be read in connection with several other sections of the California law which were not adopted by Wyoming and which have no counterpart in this state. Deering's Code, Section 1638, 1633, all of which require notice to be given before current accounts, are made conclusive by the California section resembling Section 5594 of our statutes. In Wyoming current reports are filed and approved without notice; final accounts are settled with full notice and the section might apply as to them. The earlier cases cited from California were upon final accounts. The approval of current accounts is not conclusive. (Vinson v. Vinson, 1 Delaware Chancery 120; Seawell v. Greenway, 22 Tex. 691, 694; Boynton v. Dyer, 18 Pick. 1; Blake, et al. v. Pegram, et al., 101 Mass. 592, 598; Longley v. Hall, 11 Pickering (Mass.) 120, 124; Stetson, Guardian, v. Bass, Executor, 9 Pick. (Mass.) 26, 29; Bachelor v. Schmela, (Neb.) 68 N.W. 378, 380; Fraim, Executor, v. Millison, 59 Ind. 123, 129; Bliss v. Seaman, (Ill.) 46 N.E. 279, 281; Musick v. Beebe, 17 Kan. 47, 52; Boales, et al. v. Ferguson, (Neb.) 76 N.W. 16, 19; Griggs, et al., Trustees, v. Shaw, et al., (N. J.) 9 A. 578; Jackson v. Reynolds, 39 N. J. Eq., 313, 315; In re. Long Island Loan & Trust Co., 78 N.Y.S. 65, 67.) The rule has been adopted by this court. (Nagle v. Robbins, 9 Wyo. 211, 231.) The following additional memorandum was presented at the time of the argument: --Authorities on the principle of estoppel: --First Nat. Bank v. Ragsdale, (Mo.) 71 S.W. 178, 182; Davis v. Pryor, (C. C. A. 8th Cir.), 50 C. C. A. 579, 582, 112 F. 274, 278; Dickerson v. Colgrove, 100 U.S. 578, 580; Thompson v. Sioux Falls National Bank, 150 U.S. 231, 244; Steel v. Smelting Co., 106 U.S. 447, 455. Rule as to character of investments permitted when trust instrument authorizes investment at the trustee's discretion: --Pabst v. Goodrich, (Wis.) 113 N.W. 398, 406; 1 Perry on Trusts, (1911 Ed.) Sec. 460, P. 747. As to the power and authority of a guardian concerning an estate placed in the hands of trustee as here: --Estate of Alexander Young, Deceased, 17 Phila. Rep. P. 511. Upon the matter of notice: --(a) The notice required as to final accounts, Laws 1915, Page 52; (b) Our only statute for notice upon infants requires that the infant be served as well as the parent or guardian, Compiled Statutes of 1910, Sec. 4395.

Hughes & Dorsey, W. E. Mullen and E. I. Thayer, in reply.

A careful study of the will does not disclose that the matter of investments is separate and distinct from other matters mentioned in the will, as to the exercise of discretion by the trustee. The breach of trust, if any, was waived; there is no analogy between a surety company and a trust company the guardian is estopped to deny authority to waive the breach of trust, if any. The controversy here is between the trustee and the guardian. If the minors have an election to sue the trustee, the right should not be exercised by the guardian but by a guardian ad litem or next friend. Section 5594, ...