26 Mass. (9 Pick.) 446 (1830)
The testator established a trust fund of fifty thousand dollars for the support of his wife, to be invested by trustees in safe and productive stock according to their best judgment and discretion.1 The trustees, who were also the executors, were the brother and cousin of the wife.2 The testator had within three or four years invested nearly half his property in manufacturing stock.3
On February 9th, 1824, after due notice, the executors presented their account to the probate court and appropriated stock from the estate to constitute the trust fund of fifty thousand dollars.4 The Massachusetts General Hospital participated in the hearing with counsel raising objections, and the probate judge allowed the account.5 No appeal was taken from that decree.6
Subsequently, the value of the capital stock declined, leading Harvard College and the Massachusetts General Hospital to seek recovery of the deficiency from the surviving trustee Amory in proceedings that resulted in an appeal to the Supreme Judicial Court of Massachusetts from the probate court's decree.7
Whether the trustees abused the trust in selecting and managing investments for the $50,000 fund?8
All that can be required of a trustee to invest is that he shall conduct himself faithfully and exercise a sound discretion.9 He is to observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested.10 The testator expressly authorized the trustees to invest in other stock than bank shares or the public funds.11 The trustees are not to be made chargeable but for gross neglect and wilful mismanagement.12
No. The trustees selected stock that was of the required value at the time of appropriation and acted according to their best skill and discretion in choosing manufacturing stock.13 The testator had within three or four years invested nearly half his property in manufacturing stock, a circumstance the trustees properly considered when exercising their judgment.14 The trustees were the brother and cousin of the wife.15 The testator reposed unbounded confidence in them by directing that they give only their own bond without sureties and by leaving the selection of investments to their discretion.16
The court examined the evidence and found no indication that the trustees failed to act with sound discretion or engaged in gross neglect when they appropriated the stock on February 9th, 1824.17
The trustees did not abuse the trust in selecting and managing the investments.18
Whether the trustees may be held liable for the decline in value of the trust fund capital stock?19
To compel trustees to make up a deficiency not owing to their wilful default is the harshest demand that can be made in a court of equity.20 Trustees are justly and uniformly considered favorably.21 It is of great importance to bereaved families and orphans that they should not be held to make good losses in the depreciation of stocks or the failure of the capital itself.22 They are protected provided they conduct themselves honestly and discreetly and carefully according to the existing circumstances.23
No. The decline in value of the capital stock occurred after the trustees had selected and appropriated the stock at its then full value of fifty thousand dollars.24 The court found no evidence of wilful default, gross neglect, or mismanagement by the trustees in the selection process.25 The testator had authorized investment in other stock beyond public funds and bank shares.26 The capital of any investment carries some risk of fluctuation whether placed in government securities or in the stock of manufacturing and insurance companies managed by directors.27
Because the trustees acted honestly and with sound discretion under the circumstances existing at the time of the February 9th, 1824 appropriation, they cannot be required to restore the subsequent loss in value.28
The trustees may not be held liable for the decline in value of the trust fund capital stock.29
Whether the probate court's allowance of the executors' account bars the remaindermen's claim against the trustees?30
A settlement of the account by the probate court after due notice to all persons interested, from which no appeal is taken, is final and conclusive upon the parties.31 Where the executors and trustees are the same persons, the decree approving the appropriation of stock to constitute the trust fund bars later claims that the selected stocks did not form a proper fund.32
Yes. On February 9th, 1824 the executors, who were also the trustees, presented their account to the probate court after due notice and appropriated the stock to constitute the fifty thousand dollar trust fund.33 The Massachusetts General Hospital participated in the hearing with counsel raising objections, and the probate judge allowed the account. No appeal was taken from that decree.
Because the executors and trustees were the same persons, the probate settlement resolved the root question of whether the selected stock constituted a proper trust fund, rendering the decree final and conclusive against subsequent claims by Harvard College and the Massachusetts General Hospital.34
The probate court's allowance of the executors' account bars the remaindermen's claim against the trustees.35