Title Guarantee & Trust Co. v. Bedford

• Decision Date: 05 April 1939
• Citation: 125 Conn. 349,5 A.2d 852
• Parties: TITLE GUARANTEE & TRUST CO. v. BEDFORD et al. (two cases).
• Court: Connecticut Supreme Court

5 A.2d 852

125 Conn. 349

TITLE GUARANTEE & TRUST CO. v. BEDFORD et al. (two cases).

Supreme Court of Errors of Connecticut.

April 5, 1939

Case Reserved from Superior Court, Fairfield County; Carl Foster Judge.

Actions by the Title Guarantee & Trust Company against Frederick T Bedford and others for the construction of certain provisions in voluntary and testamentary trusts, brought to the superior court and reserved by the court upon a finding of fact by the Honorable John W. Banks, state referee, for the advice of the Supreme Court of Errors.

Trusts construed in accordance with opinion.

Under trust authorizing investment by trustee in securities in which trustee was authorized by statute to invest, and in preferred shares of industrial corporations upon which full prescribed dividends had been paid each year for five years next preceding the investment, trustee could purchase shares of an issue of preferred stock which had regularly paid prescribed dividends but which had been outstanding less than five years, if such stock had replaced a previous issue of preferred stock, which, while outstanding, paid the prescribed dividend regularly over a period of years extending back to a date five years prior to date of the investment. Gen.St.Supp.1937, § 776d; Gen.St.1930, § 3995, as amended; Pub.Acts 1923, c. 168.

Arthur M. Comley, of Bridgeport, for plaintiff.

Warren F. Cressy, of Stamford, for defendants.

Argued before MALTBIE, C.J., and HINMAN, AVERY, BROWN, and JENNINGS JJ.

AVERY Judge.

Edward T. Bedford and his wife, Mary A. Bedford, created seven voluntary irrevocable trusts of which the plaintiff is trustee. Mr. Bedford also created a testamentary trust. The value of the assets in all the trusts is more than twenty million dollars. The plaintiff as trustee under the trusts, brought these actions to obtain the advice of the court as to the power to invest vest in preferred and common stocks in view of a provision concerning investments contained in the trust instruments. In each of the trust instruments the directions to the trustee with respects to investments are to ‘ invest and reinvest said fund in such securities as may be lawful for investment for trustees under the laws of the State of Connecticut and in securities of the following character and description,’ and then follow ten additional classes of securities, and among them the following: ‘ Preferred shares of industrial corporations, upon which the full prescribed dividend shall have been paid each year for the five years next preceding such investment,’ ‘ Stock of corporations upon which cash dividends of not less than four per centum per annum on the par value thereof shall have been paid each year for the five years next preceding such investment.’ The questions upon which the plaintiff desires the advice of the court are: (A) ‘ May the trustee purchase shares of an issue of preferred stock which has regularly paid the prescribed dividend but which has been outstanding less than five years, provided, it has replaced a previous issue of preferred stock, which, while outstanding, paid the prescribed dividend regularly over a period of years extending back to a date five years prior to the date of purchase,’ and (B) ‘ Is the trustee confined in its purchase of common stocks to shares of stock having a stated par value, or may the trustee purchase common stocks having no stated par value provided that the amount of invested capital attributable to such issue of no par value stock can be definitely ascertained.’

The referee has found that in many instances corporations with sound issues of common stock having a stated par value have called in such stock and issued in place thereof stock having no par value without in any manner having changed the value of the security as an investment. Eliminating those stocks which have no stated par value there are approximately forty issues of common stock available for purchase of which twenty-seven are considered suitable by the trustee or beneficiary for investment purposes. Of these twenty-seven approximately one-half are issues by companies engaged in the tobacco and food industries, which has the practical effect of limiting the attempts of the trustee to secure a diversification of investments. Because of the large sums of money invested in these trusts, common stocks having a stated par value no longer offer a wide field for investment or diversification of investment. If the trustee is permitted to purchase common stocks having no stated par value the field for investment and the opportunity for diversification will be approximately...