Court Opinion

ID: 3840492
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:09:39.120112+00
Date Added: 2024-06-11T07:40:31.698127
License: Public Domain

Petition for rehearing denied July 12, 1938.                        ON PETITION FOR REHEARING                              (81 P.2d 132)
The respondent, Charles R. Frazier, has filed a petition for a rehearing in this case, in which he urges further consideration of some of the matters discussed in our former opinion and other matters which were not therein specifically mentioned. *Page 538
George W. Frazier, cousin of the respondent and uncle of the appellants, was guardian of the appellants during the years 1919 to 1931, in which period there was paid to him as guardian, by the respondent as trustee for the appellants, money in excess of $25,000. According to the report of the accountants and the books prepared by the accountants for the respondent, this sum included the total which George Frazier as such guardian received from the trustee.
In explaining the transactions involving the Phoenix property, the respondent in his principal brief called attention to the fact that George Frazier was guardian of the appellants during the time that the respondent paid out money for taxes, liens and other purposes in connection with the Phoenix property, and it was argued that since George Frazier was such guardian during that time the expenditure by the trustee should be considered as payment by the trustee to the guardian, thereby relieving the trustee from any responsibility for money so expended. This point is again raised in the petition for rehearing. There is no merit in the respondent's contention. In the first place, the only money which could be said to have been paid to George Frazier with reference to the Phoenix property was approximately $185 as the cost of his trip to Phoenix and return. The balance of the money was paid direct by the respondent, not through the guardian, to the city for liens and the county for taxes and to the Phoenix attorneys who were retained to probate the estates of Colin C. Frazier and Matilda Frazier, his wife, both deceased. Much of the money so expended was not from the net income, but from the principal, of the Marie Frazier Marshall trust estate.
The respondent's duty was to pay the net income of the estate to the guardian. He had no authority to *Page 539 
pay to the guardian any part of the corpus of the trust. Moreover, the appellants could not require George Frazier, as their guardian, to account for the money which was disbursed by the respondent for the Phoenix property, inasmuch as such money never came into the possession of George Frazier as guardian.
[32] In our former opinion we stated that the respondent's account should be surcharged with certain items and that he should also be charged with interest thereon at the rate of six per cent per annum from specified dates. The reason that we allowed interest was that in many instances the respondent appeared not to have remembered that he was acting as trustee of the funds in his charge and to have used such funds as though they were his own.
We did not intend, when in our former opinion we referred to the respondent's willingness to cooperate with the accountants in the preparation of their reports, to imply that the trustee had acted in good faith in making the investments with which his account is surcharged.
[33, 34] Further, in stating that six per cent per annum is a proper rate of interest to be charged the respondent, our opinion is not to be interpreted as laying down the rule that in all instances of surcharging a trustee's account the beneficiaries are entitled to interest. Whether interest shall be charged a trustee depends upon the peculiar facts of each case. The legal rate of interest in this state is six per cent per annum, and, as held in many jurisdictions, when interest is allowed against the trustee it is to be charged at the legal rate, unless the facts warrant a higher rate or justify a lower one: Annotation, 37 A.L.R. 447. *Page 540 
In the present instance there are no extenuating circumstances which a court of equity would regard as grounds for relieving the trustee from the payment of interest or for reducing the amount thereof below the legal rate. He kept no books or accounts showing his handling of the trust fund. He used trust moneys in various business concerns in which he was financially interested, because it was easier, he stated, to borrow money from the trust fund than from banks. For the same reason, he bought automobiles for his mother out of the trust fund and from that fund made loans to her and to his friends and associates. In purchasing shares of stock in various corporations he took certificates therefor in his own name and not as trustee.
In March, 1909, the respondent as trustee of the Colin C. Frazier estate filed his final account in the county court for Union county, relative to the personal property of the said estate. In that report he charged compensation for his services as trustee, which the county court allowed him. Thereafter each year he charged the Colin C. Frazier trust estate until 1918, and the Marie Frazier Marshall trust estate until 1922, compensation for the services performed by him during the preceding year. From 1922 on, the trustee failed to charge against the trust fund an annual fee for his services.
It was in 1923 that the respondent began to invest the trust moneys in the stock of oil companies and other concerns and to take the stock certificates in his own name. After investing the moneys in this manner and making the many loans to which we referred in our former opinion, he seems not to have charged compensation for his services. Apparently he was under the impression that he could not use the money in the *Page 541 
manner that he did, and at the same time charge the cestuis quetrustent a fee for managing their funds.
[35] The net income of the trust estate from 1918 to 1934, when the audit was made, totaled $33,723.71, and for his services during that period the circuit court allowed the trustee $10,000 as compensation, which was approximately 30 per cent of the net income. It is now insisted by the respondent that this court, in reducing the amount of his compensation to 5 per cent of the gross income during that period, ignored the stipulation of the parties to the effect that the trial court might, if it found the respondent entitled to any compensation for his services, determine the amount to which he was entitled. There was no expert testimony as to the value of the respondent's services, but there was a stipulation, referred to in our former opinion, as to the fees charged by trust companies. We do not understand from that stipulation as to the court's fixing the trustee's compensation that the parties to the litigation agreed to be bound by whatever amount the trial judge might determine, and thereby barred themselves from questioning the amount thereof on appeal.
In 26 R.C.L., Trusts, page 1392, § 258, it is said:
"The question of what is a reasonable compensation for trustees depends largely on the circumstances of each particular case, and can not be properly determined by any inflexible rule. While in practice it is usually claimed and awarded in the form of a commission, the rate is not usually determined by any established rule. The general rule running through all of the cases is that a trustee should receive a compensation adequate to his care and trouble. Such compensation is proportioned to responsibility incurred and to the labor and care bestowed. A trustee's compensation may be increased, diminished, or withheld altogether, according *Page 542 
to the circumstances of each case, in the sound discretion of the court. If the transactions of the trust are involved in obscurity, which might have been removed by the trustee by a proper attention to duty, his compensation should be put at the lowest estimate."
We are of the opinion that in view of the facts in this case the allowance which we made to the trustee as compensation for his services was indeed adequate.
In our former opinion we charged the respondent individually with $3,000 as the balance unaccounted for by him on the William Webster mortgage as of January 7, 1924, the date on which the respondent satisfied that mortgage of record. It is now argued that January 7, 1924, is a date which this court arbitrarily fixed as the one from which the respondent should be charged interest. It may be possible that the respondent received the $3,000 prior to that date. Yet since the record is silent on this subject it must be presumed that he had received the balance of the purchase money mortgage on or before January 7, 1924. Otherwise, the mortgage would not on that date have been satisfied.
This $3,000 was not deposited in the trust account, and the only money repaid by the Crescent Paper Company, as far as the record shows, was that which had been loaned to it by the trustee out of the trust account. Therefore, there is no basis for claiming that the $3,000 was part of the trust fund loaned to the paper company and repaid by it to the trustee. Nor can it be said that our former opinion had the effect of charging both the paper company and the trustee interest on this $3,000 at the same time. The only interest paid by the paper company was on money loaned to it that has been accounted for as definitely a part of the trust fund. *Page 543 
The first purchase of 500 shares of Corporate Trust shares by the respondent was made May 8, 1930, and the remaining 500 shares on June 11 of the same year. Section 32-803, Oregon Code 1930, to which we referred in our former opinion, was a part of chapter 384, Laws 1929. Therefore § 32-804, which is a part of the same 1929 enactment and provides that nothing contained in the act "shall be construed to affect the validity of investments heretofore made of funds of the character described in the preceding section hereof", does not aid the respondent in any way in his contention that the legislature did not intend by this enactment to affect prior investments, inasmuch as the Corporate Trust shares were purchased long subsequent to the effective date of this statute. Moreover, we did not say or intend it to be understood that the act above referred to was in any way controlling in the investment of trust funds by individual trustees, but only that it and other statutes to which we referred were indicative generally of the kind of investment regarded by the legislature as safe and suitable for trust funds.
The respondent asserts that Mr. Schumann, an uncle of the plaintiffs, had advised him to buy the Corporate Trust shares, and Mr. Schumann, who was called as a witness for the respondent, confirmed this statement, saying that he had vouched for the soundness of this investment. The same witness stated that he was a securities salesman and had sold Corporate Trust shares for many years. After he had stated that Ross, Beeson  Company had put Corporate Trust shares on the market, Mr. Schumann was asked if he had advised his clients to exchange Corporate Trust shares for Quarterly Income shares, which also originated with Ross, Beeson  Company. He answered that question *Page 544 
in the negative, and was asked, "Why not?" He thus explained:
"Well, that is purely a matter of personalities, I think. I became quite disgusted with the Ross, Beeson management. These shares that the boys bought were what we called the original Corporate Trust shares. After that Beeson came out with two other series and endeavored to trade people — each time they came out with a new one — and endeavored to trade them out of the old one with the new one, which meant an additional loading charge for the people, although they didn't know it, and he went through that two or three times, and it had all the earmarks of a racket as far as I was concerned and I just refused to change any of the Corporate Trust shares. Well, his subsequent actions justified me in my conclusions, I think, and he has gone from Quarterly, now, he has gone into a new one called Maryland Fund, and they are continually switching and switching and switching, and it was because of the racketeering tendencies that I quit selling Corporate Trust shares and advise[d] people not to exchange them when they would get these letters from various companies."
Without reiterating what was said in our former opinion we hold that the purchase by the respondent, first of Corporate Trust shares and later of Quartely Income shares, was an improper investment of trust funds.
We have given the respondent's petition for rehearing careful consideration and are of the opinion that the same should be denied. It is so ordered.
BEAN, C.J., and LUSK and RAND, JJ., concur. *Page 545