Court Opinion

ID: 9640379
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:04:49.588566+00
Date Added: 2024-06-11T18:10:29.432024
License: Public Domain

BIDDLE, Circuit Judge
(dissenting).
I am moved to dissent. The question raised by the appeal is a narrow one, perhaps not free from doubt. It is not, I think, precisely stated by my learned brethren. The confusion arises from, a failure to recognize the incidence of the breach. Thus, if Haskell had sold the stock, reinvested the proceeds in unimpeachable securities and held these for the remainder-men, let us say at substantially increased values, the majority would have held, nevertheless, that the remaindermen could insist that National Biscuit Company had committed a breach and must transfer the stock to them. It is not enough to say that Haskell was not the owner. Haskell had a qualified ownership in the stock as did the remaindermen. Neither one nor the others had unqualified “ownership”. The question is, I think, simpler than has been indicated. Under the law of California has a life tenant, without express power in the will, implied power to sell securities ? By the law of that State a trustee need not obtain an order of court before selling securities, Murphy v. Union Trust Co., 5 Cal.App. 146, 89 P. 988; and apparently a life tenant is charged with the obligations of a trustee. In the absence of a power to consume, and there is none here, he is accountable to the remaindermen for the trust property; but it is not clear from the cases whether or to what extent he can dispose of it. If this legacy consisted of land, personal chattels, or even designated securities, I should be slow in implying any power of sale under the will, but this is a general legacy of the residue of the estate, given to the son of the testatrix during his life, and upon his death to his children, then over to the appellants, in case he died without issue, The gross estate from the Petition for Distribution shows total assets of approximately $38,000, consisting of about $6,000 in cash and the balance in stocks of various corporations.
A power of sale can not only be created in express terms in the will, but .will be assumed where it is “necessary or appropriate to enable -the trustee to carry out the purposes of the trust”.1 The Restatement points out that “among the circumstances which are of importance in determining the existence of a power of sale are (1) the language of the trust instrument; (2) the purpose of the trust; (3) the character of the property; (4) whether the property is specifically .mentioned in the will or other instrument whereby it is transferred to the trustee”.
The question is, of course, as to the intent of the testatrix. Our choice may be unsatisfactorily close where, as in this case, the intent is not expressed or indicated, and the best we can do is to prophesy what the testatrix would have done had she considered the problem. She left the balance of her estate, consisting of cash or securities, to her son for his life, but did not set up a formal trust to secure the remaindermen. I conclude that she trusted her son to act like a trustee, and would have wanted him to have the normal power of selling and buying securities. Since the life tenant was clothed with the responsibilities of a trustee, it becomes not unrea*65sonable to imply the usual powers to deal with securities. This I think the testatrix would have expected.
The majority have quoted from Re Garrity’s Estate, supra, where a similar will was before the California court, who, in affirming a decree in which the life tenant was given possession of personal property, said: “If it appears, from a proper construction of the will, that it was the intention of the testator that the property should be placed in the possession of the life tenant without security, such intention will be carried out.” The will before us seems to supply the “very slight indications * * * that the testator intended the life tenant rather than the executor to be the trustee * * * ”. The majority points out that recent California cases have not described life tenants as trustees. But the law in the Garrity case stands, and we should follow it — that under the will the life tenant was intended to and should have possession of the property with the power to transfer and the attributes of possession. No case cited by the majority opinion in any other State expresses a contrary doctrine.
Of course, if Haskell had the power to sell, the appellee was authorized to transfer the stock to his nominee as long as the certificate was properly endorsed by Haskell as life tenant. Under the Uniform Fiduciaries Act, effective in New Jersey since 1927,2 a corporation is liable only where such a transfer is made with actual knowledge of the commission of a breach of the fiduciary obligations, or with the knowledge of such facts that the registration amounts to bad faith. Such was not the case here.
The majority think that such a conclusion “recognizes a trust of the stock only to the end that such trust may be breached.” This misses the point. Of course, there is a breach of trust, but the breach is that Haskell did not reinvest the proceeds for the remaindermen, just as an express trustee, selling securities and using the proceeds for his own ends, commits a breach; but this does not involve the duty of the corporation to transfer the stock under the direction of the life tenant.
For these reasons I would affirm.

 Restatement of the Law of Trusts, § 190(b).

 R.S. of N.J. 3:44-l et seq., N.J.S.A. 3:44-1 et seq.