McClure v. Middletown Trust Co. , 95 Conn. 148 ( 1920 )

The defendant challenges the right of the court to render judgment against it upon the facts found, because it insists that it has fulfilled all of its obligations as trustee and has not become liable through its negligence to the plaintiff beneficiaries. Determination of this question requires, primarily, consideration of the proper measure of care owed by the defendant trustee in the administration of its trust, and then ascertainment whether the measure of care applied by the court squared with this standard.

The defendant's duty was limited to the exercise of due diligence in the light of the particular circumstances surrounding the administration of this trust. What ordinary prudence would do under these circumstances this defendant must do, and need do no more.New Haven Trust Co. v. Doherty, 75 Conn. 555, 560,54 A. 209.

Upon qualification as trustee, the first duty resting upon the defendant was to secure possession of all the assets of the trust estate. 1 Perry on Trusts (6th Ed.) § 438. In the performance of this duty the defendant was under no absolute duty to secure possession of the assets, but merely to exercise due care in the preservation of the trust assets. Hence it follows that a trustee is not negligent in failing to secure assets where there was no reasonable chance of securing them. And hence, too, it follows that due diligence on his part does not require that he advance his own funds or incur expense or liability in the collection of assets for the trust estate. Green v. Gaskill, 175 Mass. 265,56 N.E. 560; 39 Cyc. 322. There were no assets in the hands of the defendant trustee. Before it could pursue a thorough investigation of the liability of the sureties upon this bond, or embark in litigation, it had the right to demand of the beneficiaries indemnity for the expenses attendant upon the undertaking. 2 Perry on Trusts (6th Ed.) § 909. In the event of a refusal or neglect of the beneficiaries to respond to this demand, the defendant need go no further.

While the trustee may not delegate his duties and powers to others, it is obvious that he must act frequently through agents or attorneys. This is not a delegation of his powers, for the trustee remains responsible for the reasonable diligence of his agent or attorney. He must select his agents with reasonable care, and he must supervise their acts with the same care. Donaldson v. Allen, 182 Mo. 626, 650,81 S.W. 1151. Whether, in a given case, the trustee will be justified in entrusting a specific part of the administration of the trust to an agent, must depend upon whether such act would be the act of the reasonably prudent trustee in a similar situation. The necessities of the trust may require the services of an agent, on account of the complexity or extent of the business or the special expert knowledge required. This is especially true in a case such as this, where the question of liability of the sureties, and of who the beneficiaries of the trust fund were, depended upon a careful investigation by a competent attorney of a difficult legal problem. And to this was added the practical consideration of how the trustee should finance the expense, and whether the results would warrant the outlay. All of these were questions for a lawyer, which the trustee would not be expected to solve and should not attempt to solve without the service and decision of competent legal counsel. The questions were not plain and were peculiarly within the lawyer's skill.New Haven Trust Co. v. Doherty, 75 Conn. 555, 563,54 A. 209.

There is no question of the diligence of the defendant in selecting Judge Pearne as the attorney to entrust this matter to. But reasonable diligence on the part of the trustee required it to know generally what the attorney was doing in the carrying out of its business. It could not commit the cause to the attorney and relieve itself of all further supervision. In a general way it should know what steps the attorney was taking, and it should use due care to have him fulfil his employment. Subject to such supervision, it might, as it did, leave to Judge Pearne the investigation of this matter, the decision of what steps to take, and then the taking of these steps Investigation, decision and action it might leave to Judge Pearne. But when it did leave this matter to him it became responsible for his reasonable diligence, his decision became its decision, his acts its acts, and his neglect its neglect.

Four things at least it was incumbent upon Judge Pearne to do: first, ascertain the beneficiaries of the trust; second, decide upon the validity of the claim of the defendant against the sureties and the distributees of Arthur B. Calef, Sr.; third, present the claim of the defendant against the estate of Arthur B. Calef, Sr., in time to preserve its claim against this estate; fourth, having decided upon the validity of the defendant's claim, and finding no assets in its hands, it was his duty to make demand upon the beneficiaries of the trust for funds with which to pursue this litigation. In the protection and increase of the estate the trustee is not required to advance his own funds. Perry on Trusts (6th Ed.) §§ 330, 485. He has the right in case of need to call on the cestui que trust for funds, and if this demand is not met the trustee need go no further. He has done all that due diligence requires of him. 2 Perry on Trusts (6th Ed.) § 909. Judge Pearne made some investigation of the matter, how much did not appear. But he did advise the defendant that it was under no obligation to advance its own funds in order to take legal action against the sureties or their distributees. This advice was correct. It appears that he made demand upon two of the beneficiaries who urged the defendant to bring action, for a named sum to cover the expenses of the litigation, and that they offered to pay one sixth of the demand. This did not meet the duty which the demand of the trustee placed on them; and their refusal ended the obligation of the trustee, so far as they were concerned, to pursue this litigation.

So far as appears, Judge Pearne never presented the claim of the defendant against the estate of Calef, Sr., and because of this the claim is barred. So far as appears Judge Pearne never made demand upon Ettie M. Northrop as surety, nor did the defendant. No other or further investigation appeared to have been made by the defendant than that made by Judge Pearne; and the trial court expressly finds that the defendant did not take any steps to see what its attorney was doing, or to obtain his advice, except as detailed above.

In failing to present the claim against the estate of Calef, Sr., and in failing to make demand upon the seven other beneficiaries, Judge Pearne did not, so far as appears, perform the duty committed to him. Reasonable diligence required that he do these things. The defendant is charged with his failure. His negligence is that of the defendant. It may well be that the unfortunate death of Judge Pearne has prevented the defendant from proving the facts, but we must take the record as we find it.

Mrs. North's refusal to advance the necessary funds with which the defendant could prosecute the action against the sureties, bars her from now claiming a recovery for failing to press the action, the funds for which she, though in duty bound, had refused to advance.

Mrs. Blinn, a daughter of Samuel Brewer, one of the five sons of Charles Brewer surviving him and who died in 1897, acting by her husband, had several interviews with defendant between the date of its qualification and the decease of the last survivor of the life beneficiaries under the trust. At one or more of these interviews the husband informed the defendant that its predecessor, Northrop, was paying the arrears of income due to Mrs. Brewer, and that Mrs. Blinn did not wish action taken against Northrop so long as he continued said payments or as long as Susan Brewer lived. The defendant claims that this constituted an acquiescence on the part of Mrs. Blinn in its failure to prosecute its action against the sureties on this bond. We think this request of Mrs. Blinn did relieve the defendant from the prosecution of action against these sureties up to the time of the decease of Susan Brewer, but not after that time. If this request had been made before the period for the presentation of claims against the estate of Calef, Sr., had expired, the fact that the defendant failed to present the claim could not be considered as a ground of negligence in the action in behalf of Mrs. Blinn. The record does not give the date of this interview, so that the request cannot be found to have been made within the period when the claim might have been presented against the estate of Calef, Sr. Mrs. Blinn's request to the defendant would estop her from claiming that the trustee was negligent in not bringing his action prior to the decease of Susan Brewer. After that time there is nothing in her request which suggests that the claim should not be pressed, but the contrary. We find no basis for an estoppel against her present claim upon the defendant.

Two rulings on evidence are assigned on the appeal as erroneous. The plaintiffs laid in evidence a certified copy of the inventory of the estate of Calef, Jr., one of the distributees of the estate of Calef, Sr., a surety on the bond. The plaintiffs also proved that no list of claims presented against the estate of Calef, Jr., had been filed in the Court of Probate. A material issue in the case was whether the estate of Calef, Jr., was solvent or not. Thereupon the defendant inquired of Mr. Carlson, attorney for Mrs. Calef, administratrix of the estate of Calef, Jr.; "Did Mrs. Calef, as administratrix of her husband's estate, make any statement to you with reference to the amount of bills against the estate?" The plaintiffs' attorney objected, on the ground of immateriality and because not the best evidence, and the court excluded the evidence.

Our statutes provide the only method of proving the insolvency of the estate of a deceased person. That method was not pursued here. It is suggested in the brief that Mrs. Calef was in parts unknown and hence this method of proof was the only method available. The complaint does allege that Mrs. Calef has gone to parts unknown, but this fact is not admitted in the record or found in the finding. So far as appears Mrs. Calef was available and no reason appears of record why the statutory procedure was not followed. The ruling was correct.

One other ruling on evidence is assigned as error. Warner, an officer of and a witness for defendant, testified that Judge Pearne had the entire handling of the proposed action against the said sureties. Thereafter, upon his direct examination, defendant offered a letter dated October 8th, 1911, written by Judge Pearne to Fox, husband of one of the beneficiaries and agent for her in this matter. The letter does not appear of record, but counsel for the plaintiffs, in objecting to its admission, summarized its contents as follows: "In this letter he says he has made an investigation of the matter, and his conclusions are, the bank's duties are such and such, and that he finds the situation as to the estate to be such and such and the beneficiaries to be such and such persons, etc., and outlines what he conceives to be the proper course of procedure." The letter was offered as an expression of Judge Pearne's opinion and of the results of the investigation he had made. The defendant also offered what purported to be a reply to this letter, dated October 24th, 1911, and written by Fox to Judge Pearne. Both letters were excluded.

The ruling was in accordance with our law. The letters are the declarations of a deceased agent to third parties, and offered by his principal in its own behalf. As such they are characterized in the law of evidence as self-serving declarations. They fall within none of the recognized exceptions to the hearsay rule, and are not included among the declarations of deceased persons which our statute (§ 5735) expressly excepts from the hearsay rule. The only ground upon which the defendant attempts to secure the admission of this evidence, is through its claim that they are offered to prove knowledge on the part of the agent of a subject relevant to his agency and material to the issue involved. But it does not appear that it was offered for these purposes, and from the statement of the contents of the letters before us it is apparent that they were offered to prove what the agent had ascertained and done in order to justify his failure to pursue the actions and to present his claim. The authorities do not differ substantially in their adherence to the recognized rule against admitting self-serving declarations of a deceased agent in behalf of his principal. InsuranceCo. of North America v. Guardiola, 129 U.S. 642,9 Sup. Ct. 425; Freeborn v. Smith, 69 U.S. (2 Wall.) 160, 176; Snow v. Warner, 51 Mass. (10 Met.) 132;Abel v. Fitch, 20 Conn. 90, 96; Houde v. Tolman,42 Minn. 522, 44 N.W. 879; Providence-Washington Ins.Co. v. Owens (Texas), 207 S.W. 666, 675; Watson v. Davidson, 141 Ark. 591, 595, 217 S.W. 777; 4 Chamberlayne on Evidence, §§ 2734, 2735; 16 Cyc. 1205. Most eminent authority have questioned the soundness of this rule of evidence, and have favored the admission of statements of deceased persons who had competent knowledge when no apparent interest to deceive appeared, and they were made ante litem motam. Mellish, L. J., in Sudgen v. St. Leonards, L. R. 1 P. D. 154; Cockburn, C. J., in Reg. v. Bedingfield, 14 Cox C. C. 342; 2 Wigmore on Evidence, § 1576. But the rule has become too firmly established to be questioned in this jurisdiction.

There is error in part; the judgment in favor of Ella North is reversed, and in favor of the other plaintiffs is affirmed.

In this opinion the other judges concurred.