The statements below of the Court of Appeals of the District of
Columbia in this case that abandonment of discretionary power by a
trustee to his co-trustee is a fact to be proved by him who alleges
it, that so likewise is negligence in the supervision of a trust,
and that neither abandonment nor negligence is to be implied
without satisfactory proof of the fact, or of circumstances
sufficient to warrant the inference, and that the court does not
find that proof in the statement of facts contained in the record,
are cited and approved by this Court.
The treatment of facts and law in the opinion of the courts
below was full and satisfactory, and releases this Court from
further discussion.
This is an appeal from a decree of the Court of Appeals of the
District of Columbia which affirmed a decree of the Supreme Court
of the District dismissing a bill in equity, which had been filed
in that court. The complainants were legatees of one Augustus G. P.
Colburn, and their trustee, Franklin H. Mackey, against Robert E.
Grant, the executor of the estate of
Page 181 U. S. 602
George Fitz James Colburn, a deceased trustee of the estate of
said Augustus Colburn, for an accounting, it being alleged that
there had come into the hands of said trustee and his co-trustee,
both of whom were deceased, a large sum of money, namely, $28,000,
and that only $5,000 thereof had been accounted for. The
codefendants of the defendants' executor were those persons who
would be entitled to distribution of his testator's estate. The
case was heard upon the pleadings and an agreed statement of
facts.
The stipulation of facts was as follows:
"In order to obviate the expense of taking testimony in relation
thereto, it is hereby stipulated and agreed that the following are
conceded as facts, and that the statements herein may be read and
taken in this cause as established."
"That the complainant Franklin H. Mackey, as trustee, was
appointed by decree of this Court in equity cause No. 18,728, and
has qualified as such."
"That the complainants Rollinson Colburn and Edward A. Colburn
are the only surviving children of Hervey Colburn, who was a
brother to Augustus G. P. Colburn."
"That the complainants Elizabeth F. Colburn, Gertrude H.
Colburn, F. Helen Colburn and Louise B. Colburn are the only
children of H. Hobart Colburn, a deceased child of the said Hervey
Colburn; that said H. Hobart Colburn predeceased the said George
Fitz James Colburn and that all the above-named parties are now of
full age."
"That George Fitz James Colburn died in September, 1897,
unmarried and without issue, his wife having died before him, and
that all the brothers and sisters of Augustus G. P. Colburn
predeceased the said George Fitz James Colburn except P. D. Miranda
Kimball, who died on the 22d day of December, 1897."
"That under the will of the said Augustus G. P. Colburn, the
said George Fitz James Colburn and John W. Taylor were named as
trustees, without bond, for the management of the trust portion of
said estate, with power to sell the same."
"That the real estate in the City of Newark, State of New
Jersey, mentioned in the will of the said Augustus G. P. Colburn,
was sold by said trustees shortly after the death of the
Page 181 U. S. 603
testator, the net proceeds arising therefrom amounting to
$27,000, which was paid part in cash and the remainder in
subsequent installments, the latter installments being collected by
the said Taylor."
"That the said George Fitz James Colburn removed from the City
of Newark in the year 1873 to the City of Washington, District of
Columbia, where he resided, except for a few months, up to the day
of his death."
"That John W. Taylor, one of the said trustees, was a prominent
lawyer of the City of Newark at the time of his appointment, and
continued so to be up to the date of his death in the year 1893,
and that he was regarded by the general public as a man of business
integrity at the time of his death by his own hands on November 20,
1893."
"That after the death of the said Taylor, it was found that he
had squandered many estates under his custody, amongst others the
said estate of Augustus G. P. Colburn, except the sum of $5,000,
which was under the exclusive control of the said George Fitz James
Colburn, and which latter sum of $5,000 has been turned over by the
executor of said George Fitz James Colburn to said Franklin H.
Mackey, trustee, by order of this Court in equity cause
18,728."
"That the said trust estate, except the said sum of $5,000
referred to, was by the said George Fitz James Colburn left solely
to the collection, management, and discretion of the said Taylor,
who handled said sum without the cooperation, supervision, or
knowledge of the said George Fitz James Colburn, the latter only
requiring from said Taylor the payment of the income of said estate
to him, said George Fitz James Colburn, as provided by said
will."
"Upon the death of said Taylor, trustee, the said George Fitz
James Colburn, as surviving trustee, made claim against the estate
of said Taylor for the amount of the trust fund by him squandered,
as aforesaid, and upon said claim of $22,000 he received a dividend
of $3,342.45."
"That by paper writings dated respectively September 6, 9, and
11, 1895, Rev. Edward A. Colburn, Rollinson Colburn, and H. Hobart
Colburn released all claim to the said $3,342.45 unto
Page 181 U. S. 604
the said George Fitz James Colburn, and that thereupon the said
George Fitz James Colburn purchased an annuity for himself, which
he enjoyed until his death. Said paper writing is in the following
form:"
"I hereby give my full assent that my cousin, George Fitz James
Colburn, shall have full right to use the sum of $3,342.45 received
by him from his father's estate, should he so have need, and do
resign any interest I may have in said sum of $3,342.45 if he so
desire to use it."
Originals of above paper to be filed in this suit.
MR. JUSTICE SHIRAS delivered the opinion of the Court.
The case was heard in the Supreme Court of the District on bill,
answers, and an agreed statement of facts. Some complaint is made
in appellants' brief of the alleged fact that the court treated
certain allegations in the answer of the defendant executor as
evidence, although an answer under oath had been dispensed with,
and it is said that only those portions of the answer which
admitted the allegations of the bill, or contained admissions
against interest, should have been considered.
We are inclined to think that, upon the record made up and
presented at the hearing, the court had a right to consider all the
allegations of the answer. No replication putting the allegations
of the answer in issue appears to have been filed, and the court
may have well supposed that the complainants had agreed to have the
case disposed of on bill, answers, and stipulation. If such a
course was a surprise to counsel, application should have been made
to have the decree suspended, and for leave to take rebutting
evidence.
However, we have examined and compared the respective
allegations of the bill and answer, and do not perceive that, even
upon the theory of appellants' counsel, any such substantial
Page 181 U. S. 605
difference in the facts could have been made to appear as would
have justified a different result.
Not only, then, is there an agreement as to the controlling
facts, but there also seems to be little or no controversy in
respect to the principles of law involved. The learned counsel for
the appellants concedes, in effect, the propositions of law found
in the opinion of the Court of Appeals, but contends that a proper
application of those propositions would call for a different
decree.
The purpose of the bill is to have the estate of George Fitz
James Colburn held liable for a defalcation by John W. Taylor, who
was united with said Colburn in the administration of a trust
estate created by the will of Augustus G. P. Colburn, father of
George F. J. Colburn.
The father, who was a resident of Newark, New Jersey, died on
May 27, 1872, and in his will, dated May 25, 1872, devised to said
son, for and during his natural life, a certain dwelling house and
lot in said city, with power to the trustees named in the will, who
were his said son and John W. Taylor, to sell the same at any time,
and to invest the proceeds of such sale as advantageously as
possible, and to pay over the income arising therefrom to his said
son during his life. Shortly after the death of the testator, the
trustees sold this real estate for the sum of $27,000, which was
paid partly in cash and partly in installments. George F. Colburn
subsequently removed to the City of Washington, where he died in
September, 1897.
John W. Taylor was a prominent lawyer in the City of Newark at
the time of his appointment, and continued so to be up to the date
of his death, and was regarded by the general public as a man of
business integrity at the time of his death by his own hand on
November 20, 1893.
After Taylor's death, it was discovered that he had squandered
many estates in his custody, among others the said estate of
Augustus G. P. Colburn, except the sum of $5,000, which was under
the exclusive control of George F. J. Colburn, and which latter sum
is not in controversy here.
Upon the death of Taylor, George F. J. Colburn, as surviving
trustee, made claims against the estate of Taylor for the
amount
Page 181 U. S. 606
of his defalcation in the estate of Augustus G. P. Colburn, and
upon said claim of $22,000 he received a dividend of $3,342.45. The
amount so received was subsequently, with the consent of the
residuary legatees under his father's will, invested by George F.
J. Colburn in an annuity for himself, which he enjoyed until his
death.
Without going into further details, it is evident, and, indeed,
is conceded, that George F. J. Colburn was not involved in the
dishonest acts of his co-trustee, and which resulted in the loss of
the larger part of the trust estate. Nor is it contended that, as a
matter of law, was George F. J. Colburn liable for the malfeasance
of his co-trustee.
What is contended is that an abandonment of discretionary power
by a trustee to a co-trustee, where the trust is entitled to the
united discretion of both, is such an act of supine negligence as
to render the trustee who has abandoned his active participation in
the management of the trust liable for the losses occasioned by the
misconduct of the co-trustee; that George F. J. Colburn did so
abandon his functions as trustee, and that, accordingly he was, and
his estate now is, liable for the money misapplied by Taylor.
The courts below did not refuse to recognize the soundness of
appellants' statement of the law as a general proposition, and,
indeed, stated it strongly in the following language:
"Co-trustees may not act independently of one another, nor
ignore each other in the management of the trust. The trust is
entitled to the united judgment, discretion, and ability of all the
trustees selected. For this reason, they may not delegate
discretionary powers among themselves."
But it was the opinion of those courts that, while such is the
general doctrine, yet that the facts of the present case do not
call for its application; that the conduct of Colburn was not in
the nature of an abandonment by him of duties devolved upon him as
trustee under his father's will.
The supreme court thus expressed its conclusion:
"After a loss has occurred, as in this case, by the positive
fault of someone, it may be easy to say how it could have been
prevented; but in order to hold someone else fairly
responsible,
Page 181 U. S. 607
the point of view held by the party sought to be made liable at
and before the loss occurred is the only safe point of view to
assume. . . . From the light of the circumstances shown, I cannot
convince myself that George F. J. Colburn was guilty of any such
negligence as to render him liable, nor that the claim now made by
the bill in this case is a proper one to be allowed against his
executor."
The Court of Appeals, after a full statement of the facts and
the law applicable thereto, expressed the following conclusion:
"But we fail to find in the agreed statement of facts sufficient
proof of the abandonment of the duties of the trust by George Fitz
James Colburn or any proof of negligence on his part in the
supervision of the trust in such manner as to render him or his
estate liable."
"It is true that it is said in the statement that the trust
estate, to the extent of $22,000 was left by Colburn to 'the
collection, management, and discretion solely of Taylor,' and that
Taylor 'handled said sum without the cooperation, supervision, or
knowledge of Colburn.' But this is not sufficient. The statement
may be consistent with the relinquishment only by Colburn of the
ministerial duties which he might well have entrusted to Taylor. In
order to hold Colburn responsible, there should be some evidence of
abandonment by him of the discretionary duties which it was not
proper for him to delegate to his co-trustee."
"It is very evident that the testator had confidence in Taylor,
whom he designates as his friend, and who was in all probability
his legal adviser, and the joinder of Taylor in the trust is, under
the circumstances, strong evidence that it was the testator's
intention that his should be the controlling mind in the management
of the trust, and this view is fully corroborated by the fact that
Colburn, in view of his own special interest in the trust and that
there was a residuary devise of the trust fund, might not be
entirely impartial or entirely judicious in such management. If the
real estate which originally constituted the trust fund had
remained unsold, and no duty had been imposed on the trustee Taylor
other than to collect the rents and to remit them to Colburn in
Washington, and this
Page 181 U. S. 608
duty had been left exclusively to him, we do not think that it
would be reasonable to infer from this fact alone that Colburn had
abandoned the trust, and yet in that contingency this would have
been the only duty to be performed under the trust, except the
payment of taxes and insurance, and all this would necessarily have
been under the supervision of Colburn and subject to his approval
and ratification in the acceptance of the rents remitted to him.
When the real estate was sold and the proceeds invested or
reinvested, did any different condition arise? It does not anywhere
in the record appear how this fund of $22,000, alleged to have been
left to the management of Taylor, was invested. It does not appear
that, after having been once invested, there was ever need or
occasion for reinvestment. Indeed, it may reasonably be conjectured
that the amount remained as a mortgage on the property sold, and
inasmuch as there is nothing to show that such mortgage was ever
paid and that the proceeds were reinvested, it would not be
unreasonable to assume that the investment remained as it was first
placed. At all events, we cannot assume the contrary in the absence
of proof. We cannot assume that the money became due, and that
Taylor received it and reinvested it without the concurrence of
Colburn, or that he wholly failed to reinvest it and converted it
to his own use. That Taylor obtained control of the fund and
misappropriated it is very clear, but when, or how, or under what
circumstances he did so we are not told. For all we know, he may
have come into possession of the fund in the last week or the last
month of his life, and he may have been the ministerial agent to
receive the money when it was due and payable. He may have come
properly into possession of it, and the misappropriation may have
been an afterthought. We cannot infer delinquency on the part of
Colburn when there is no more proof than is contained in this
record that, by his abandonment of his trust or by his negligence
in the supervision of it, he had put it in the power of his
co-trustee to prove faithless in his duty. Abandonment of
discretionary power by a trustee to his co-trustee is a fact to be
proved by him who alleges it, and so likewise is negligence in the
supervision of a trust. Neither abandonment
Page 181 U. S. 609
nor negligence is to be implied without satisfactory proof of
the fact or of circumstances sufficient to warrant the inference,
and we do not find that proof in the statement of facts contained
in this record."
Another fact in this case is not without weight.
After Taylor's death, and when it appeared he was a defaulter,
Colburn at once presented a claim, as co-trustee, against his
estate, and was allowed a dividend in the sum of $3,342.45.
Thereupon the residuary legatees consented in writing that Colburn
should have a right to use said sum in the purchase of an annuity
on his own account.
While we are not disposed to accept the suggestion, on behalf of
the appellees, that, by consenting to such a use by Colburn of the
money received from the estate of Taylor, the residuary legatees
were estopped from claiming liability for the rest of the fund
misapplied by Taylor, we yet think that such a consent tends
strongly to show that the residuary legatees, who were fully aware
of all the facts and circumstances, did not regard Colburn's
conduct as subjecting him to liability for Taylor's misconduct. And
the further fact, shown by the record, that no intention to hold
Colburn for Taylor's defalcation was ever disclosed till more than
two years after Colburn's death, and nearly six years after that of
Taylor, tends to show that the effort to so hold him is an
afterthought, not entitled to the approval of a court of
equity.
The treatment of facts and law in the opinions of the courts
below, contained in the record, was so full and satisfactory as to
relieve us from further discussion.
The decree of the Court of Appeals of the District of Columbia
is
Affirmed.
