Court Opinion

ID: 3566320
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:16:04.418366+00
Date Added: 2024-06-11T13:47:49.021082
License: Public Domain

The appeal in the present case is from a decree dismissing the bill of complaint which in effect alleges that the respondent, as trustee for appellant, purchased and retained certain securities contrary to and in violation of a trust agreement, and seeks to have the investments declared illegal and to compel the trustee to restore the trust fund. *Page 289 
It appears that the complainant received the sum of $300,000 representing the proceeds from certain insurance policies upon the life of her deceased husband, Henry G. Dechant, and after advising with the trust officer of the respondent bank, she decided to create a revocable trust with the funds so received. A trust agreement was accordingly executed on the 21st day of February, 1931, which named one William Berg as co-trustee with the respondent bank, and under the terms thereof the trustees were restricted to such investments as are prescribed for the investment of trust funds by law or judicial decision either of the State of New York or the State of New Jersey. In October, 1932, Mr. Berg resigned as trustee, and C. Chandler Ross, the present husband of the appellant, was named in his place and stead.
The appellant contended that on February 24th, 1931, the respondent invested $150,000 in non-legal securities, which consisted of a $75,000 guaranteed first mortgage certificate issued by the Lawyers Mortgage Company of New York, in a bond and mortgage covering property situated at No. 506 West One Hundred and Seventy-eighth street, New York City, and bearing interest at the rate of five per cent., and a $75,000 guaranteed first mortgage certificate issued by the New York Title and Mortgage Company, of New York City, known as Series F-1, bearing interest at the rate of five per cent., which was secured, both as to principal and interest, by a group of bonds and mortgages on deposit or thereafter to be deposited with the Bank of Manhattan Trust Company. The appellant charged that the respondent, when purchasing these certificates, failed to exercise the due care and caution required of trustees, by reason of the fact that it made no investigation, inspection or appraisal of the properties covered by the mortgages, and that it made the investments without the knowledge and consent of the co-trustee, Berg.
The learned vice-chancellor held that the certificate issued by the Lawyers Mortgage Company was a proper investment of trust funds under the New York statute which does not impose on the trustee any duty of inspection, appraisal or *Page 290 
examination of properties affected by the mortgages. He further concluded that the purchase of the certificate issued by the New York Title and Mortgage Company, Series F-1, was an investment of trust funds not authorized or permitted by the New York statute, and among other New York cases cited In re Stupack,278 N.Y.S. 403. However, after the opinion of the court of chancery had been filed, the court of appeals of New York reversed the lower court in the Stupack Case, 274 N.Y. 198, holding that fiduciaries were reasonably warranted in believing that the New York statute describing lawful investments for trust funds intended to include securities of this character.
The dismissal of the bill was based upon the sole ground that the appellant had acquiesced and authorized the making of the investments which she now questions, and that being so, cannot complain even though same were illegal. The learned vice-chancellor, who saw the complainant and heard her testify, found as a fact that she was above the average in intelligence and business ability, and thoroughly understood and was fully informed as to the character and nature of the certificates she now complains of, and that both she and the co-trustee, Mr. Berg, acquiesced to the purchase of these securities and were content to have them retained in the trust fund. I think the record supports such a conclusion, as the proofs show that prior to the purchase of said securities, the complainant and co-trustee conferred on several occasions with the trust officer of the respondent bank and favored the purchase of same. The evidence indicates that the complainant from time to time, by letter and otherwise, directed the trust officer of the respondent bank to purchase for the trust fund non-legals consisting of stock, and she testified that whenever she gave the trust officer instructions to purchase securities, she expected her orders to be obeyed. The trust was a revocable one, and the complainant realized that if her instructions were not followed, she could terminate her relations with the bank at any time. The fact was undisputed that a complete list of the securities was sent by the respondent bank to the complainant on February 26th, 1931, shortly *Page 291 
after the investments had been made, and that on June 9th, 1931, a detailed description of each investment was forwarded to her, but she did not question the investments until February, 1933, after same had depreciated in value. The complainant testified that on one occasion the co-trustee, Ross, was in favor of selling the mortgage certificates, but that she opposed such action.
The general rule is that either concurrence in the act, or acquiescence without original concurrence, will release the trustee; and there are no circumstances in the present case that warrant an exception to this rule.
The decree under review should be affirmed; and I am instructed, by all members of the court who favored an affirmance, to say that they concur in the views herein expressed.
The court being equally divided, the decree was affirmed.