his estate, by increasing the number of trustees, would be futile; for the death of one of them might result in defeating his whole trust. Where the trust was to raise £2000 out of the testator's estate, by sale or otherwise at the discretion of the trustees, who should invest the same in their own names upon trust, one of the trustees died and the other sold; and Vice-Chancellor Wood held that the survivor could make a good title. He said: "I find a clear estate in the vendor, and a clear duty to perform. Is it to be said that the sale is a breach of trust, because the cotrustee is dead? If I were to lay down such a rule, it would come to this, that when an estate is vested in two or more trustees, to raise a sum by sale or mortgage, you must come into this court on the death of one of the trustees.' "1 The survivorship of the trust will not be defeated, because the settlement contains a power for restoring the original number of trustees by new appointment, unless there is something in the instrument that specially manifests such an intention.3 Where an act of Parliament declared that "survivors should, and they were thereby required" to appoint new trustees, the court expressed an opinion that the clause was not imperative, but simply directory.4 § 415. The general rule is, that one trustee shall not be responsible or liable for the acts or defaults of his cotrustee. This rule was established in the time of Charles the First, after very great consideration and consultation by the judges in the case of Townley v. Sherborne, wherein it was resolved "that Att. Gen. v. Litchfield, 5 Ves. 825; Att. Gen. v. Cumings, 2 Y. & C. Ch. 139; Stater v. Wheeler, 9 Sim. 156. [See infra, § 491 et seq.] 1 Lane v. Debenham, 11 Hare, 188; Hind v. Poole, 1 K. & J. 383. 2 Doe v. Godwin, 1 D. & R. 259; Att. Gen. v. Cuming, 2 Y. & C. Ch. 139; Jacob v. Lucas, 1 Beav. 436; Warburton v. Sandys, 14 Sim. 622; Hall v. Dewes, Jac. 193; Att. Gen. v. Floyer, 2 Vern. 748; Townsend v. Wilson, 1 B. & A. 608. Foley v. Wontner, 2 J. & W. 245; Jacob v. Lucas, 1 Beav. 436. 4 Doe v. Godwin, 1 D. & R. 259. And see Att. Gen. v. Locke, 3 Atk. 166; Stamper v. Millar, id. 212; Rex v. Flockwood, 2 Chit. 252. Townley v. Sherborne, Bridg. 35; 3 Lead. Cas. Eq. 718, and notes; Bowers v. Seeger, 8 Watts & S. 222; Sinclair v. Jackson, 8 Cow. 543; Van where lands or leases were conveyed to two or more upon trust, that one of them receives all or the most part of the profits, and after dyeth or decayeth in his estate, his cotrustee shall not be charged or compelled in chancery to answer for the receipts of him so dying or decayed, unless some practice, fraud, or evil dealing appear to have been in them to prejudice the trust; for they being by law joint-tenants, or tenants in common, every one by law may receive either all or as much of the profits as he can come by; it is no breach of trust to permit one of the trustees to receive all or the most part of the profits; it falling out many times that some of the trustees live far from the lands, and are put in trust out of other respects than to be troubled with the receipt of the profits. But his lordship and the said judges did resolve, that if, upon the proofs or circumstances, the court should be satisfied that there had been any dolus malus, or any evil practice, fraud, or ill intent in him that permitted his companion to receive the whole profits, he should be charged though he received nothing." And the same doctrine has been acted upon from that day to this.1 Connivance, co-operation, permission, acquiescence, or participation will bring liability; 2 and ignorance of the default of a cotrustee if it results from neglect is no excuse, as where one trustee collects a fund and keeps it without reinvestment, the other trustees may be liable.3 (a) dever's App., 8 Watts & S. 405. And see Leigh v. Barry, 3 Atk. 584; Anon. 12 Mod. 560; Taylor v. Benham, 5 How. 233; Ochiltree v. Wright, 1 Dev. & B. Eq. 336; Ray v. Doughty, 4 Blackf. 115; Jones's App., 8 Watts & S. 143; Peters v. Beverly, 10 Peters, 532; 1 How. 134; Taylor v. Roberts, 3 Ala. 86; State v. Guilford, 18 Ohio, 509; Latrobe v. Tiernan, 2 Md. Ch. 480; Worth v. McAden, Dev. & B. Eq. 109; Boyd v. Boyd, 3 Grat. 114; Glenn v. McKim, 3 Gill, 366; Stell's App., 10 Penn. St. 149; Banks v. Wilkes, 3 Sandf. Ch. 99. And see Royall v. McKenzie, 25 Ala. 363. 1 Ibid. [Bruen v. Gillet, 115 N. Y. 10; Purdy v. Lynch, 145 N. Y. 462; Fesmire's Estate, 134 Pa. St. 67, 83; Graham's Estate (No. 1), 218 Pa. St. 344; Colburn v. Grant, 16 App. D. C. 107; 181 U. S. 601; Litzenberger's Estate, 85 Hun, 512; Laurel County Court v. Trustees, 93 Ky. 379.] 2 Hinson v. Williamson, 74 Ala. 180; Knight v. Haynie, id. 542. Richards v. Seal, 2 Del. Ch. 266. [Fesmire's Estate, 134 Pa. St. 67,83.] (a) In the administration and management of the affairs of a trust it is usually impracticable for every trustee to actually participate in § 416. In the same case of Townley v. Sherborne, it was determined that if the trustees joined in signing a receipt for every act. To some extent they may delegate to each other the merely ministerial duties of management, and each is entitled to rely upon the honesty and prudence of the other unless he has notice of facts which should lead him to distrust the other. On the other hand, a trustee cannot escape the responsibility for the proper management and the safety of the trust property by remaining passive and allowing his cotrustee to have the control and management of the property. A trustee's liability for losses due to the dishonesty or culpable mismanagement of his cotrustee must depend largely upon the circumstances of each case, and, except where he has delegated some positive duty requiring the exercise of his discretion, depends upon whether or not he has acted in the matter with the caution and prudence which a reasonable man would exercise in the conduct of his own affairs. He is neither " 'an insurer of the trust funds against the possibility of loss, nor a surety for his cotrustee." Fesmire's Estate, 134 Pa. St. 67, 83; Bermingham v. Wilcox, 120 Cal. 467; In re Gasquoine, [1894] 1 Ch. 470. Liability for acts of his cotrustee in which he has not participated and which he has not sanctioned rests upon neglect of some duty which has made the loss possible. Graham's Estate, 218 Pa. St. 344; Colburn v. Grant, 16 App. D. C. 107; 181 U. S. 601; Barroll v. Foreman, 88 Md. 188; Bruen v. Gillet, 115 N. Y. 10; Dover v. Denne, 3 Ont. L. Rep. 664; Shepherd v. Harris, [1905] 2 Ch. 310; Speight v. Gaunt, 9 App. Cas. 1. See also infra, § 848. Where funds for investment have come into the hands of one trustee, the other has the duty of seeing for himself that they have been properly invested, and if he fails to do so he is liable for a loss made possible by his negligence. He is not protected in taking the cotrustee's word that he has properly invested the funds. Thompson v. Finch, 8 De G., M. & G. 560; Bermingham v. Wilcox, 120 Cal. 467; Beatty's Estate, 214 Pa. St. 449; Fesmire's Estate, 134 Pa. St. 67, 83; Strong's Estate, 160 Pa. St. 13; Robinson v. Harkin, [1896] 2 Ch. 415. So also of neglect to ascertain whether or not a cotrustee has properly deposited to the credit of the trust account a large sum which has been paid to him. Wynne v. Tempest, [1897] W. N. 43. It is sometimes said that a trustee who "unnecessarily" does any act by which trust funds are transferred from the joint possession of all to the sole possession of one is responsible for a resulting misappropriation by the latter, but the word "unnecessarily" is not to be taken in its literal sense. It has been said that an act "is unnecessary when done outside the usual course of business pertaining to the subject," and that "the true question is, taking into consideration all the facts and circumstances, has the trustee employed such prudence and diligence in the discharge of his duties as in general men of average prudence and discretion would under like circumstances employ in their money, they should each be responsible for it.! (a) But where the administration of a trust is vested in several trustees, they 1 Townley v. Sherborne, Bridg. 35; Spalding v. Shalmer, 1 Vern. 303; Sadler v. Hobbs, 2 Bro. Ch. 114; Bradwell v. Catchpole, cited 3 Swanst. 78, note (a); Fellowes v. Mitchell, 2 Vern. 516. own affairs?" Purdy v. Lynch, 145 N. Y. 462. In the cited case where three trustees had the duty of paying out trust funds to a large number of beneficiaries and two of them allowed the third to have the custody of the funds and intrusted him with paying them out, the court, applying the foregoing test, held that the two were not liable for misappropriations of the one to whom they had left control. Similar language was used in Shepherd v. Harris, [1905] 2 Ch. 310, where the dishonest trustee, who was a broker, obtained exclusive control of the trust funds in the course of his employment as a broker in the sale of certain trust securities for the purpose of purchasing certain others. As the usual business precautions were taken and as the defaulting trustee was a broker of good standing at the time, the innocent trustee was held not to be liable. See also In re Gasquoine, [1894] 1 Ch. 470. Allowing a cotrustee to have the custody of non-negotiable securities and to collect and pay over the income to the persons entitled has been held not such negligence as will render a trustee liable to make good the default of the cotrustee in paying over the income. Dyer v. Riley, 51 N. J. Eq. 124; Fesmire's Estate, 134 (a) In view of later decisions it seems doubtful if much should usually turn upon mere receipt of the Pa. St. 67, 83. See also Colburn v Grant, 16 App. D. C. 107, 181 U. S. 601. It has been held that a trustee who has no cause to suspect that his cotrustee is dishonest, is not liable for the latter's misappropriation of unregistered negotiable bonds which were kept in a place of deposit to which either trustee had access without the other. In re Halstead, 89 N. Y. S. 806, 95 N. Y. S. 1131. But the innocent trustee has been held liable to make good his cotrustee's misappropriations of such securities when, after receiving notice of a misuse of the securities and compelling their return to the place of deposit, he took no steps to prevent a similar misuse, other than to exact a promise from the delinquent trustee. Matter of Howard, 97 N. Y. S. 23, 110 App. Div. 61 (affirmed 185 N. Y. 539); In re Adams' Estate, 221 Pa. St. 77. See also Matter of Westerfield, 63 N. Y. S. 10, 48 App. Div. 542. And the negligence in such a case has been held to be a "willful" breach of trust. Matter of Howard, ubi supra. It has also been held that a trustee is negligent in allowing a cotrustee an opportunity to collect a note after the latter has become insolvent. Darnaby v. Watts, 21 S. trust funds. See Purdy v. Lynch, 145 N. Y. 462; Bruen v. Gillet, 115 N. Y. 10; see also note a, § 415. must all join in signing a receipt for the principal or capital sum of the trust fund, and it is now established that a trustee who joins in the receipt for conformity, but without receiving any of the money, shall not be answerable for the misapplication of the money by his cotrustee who receives it; as it would be tyranny to punish a trustee for an act which the nature of his office compelled him to do.' But in such case the burden is on the trustee to prove that his acknowledgment of the receipt of the money was merely for conformity, and that in fact he received none of the money, and that his cotrustee received it all. If there is 1 In re Freyer, 3 K. & J. 317; Brice v. Stokes, 11 Ves. 324; 3 Lead. Cas. Eq. 730; Harden v. Parsons, 1 Eden, 147; Westley v. Clarke, id. 359; Heaton v. Marriott, cited Pr. Ch. 173; Ex parte Belchier, Amb. 219; Leigh v. Barry, 3 Atk. 584; Fellowes v. Mitchell, 1 P. Wms. 81; Gregory v. Gregory, 2 Y. & C. 316; Sadler v. Hobbs, 2 Bro. Ch. 117; Chambers v. Minchin, 7 Ves. 198; Shipbrook v. Hinchinbrook, 16 Ves. 479; Harrison v. Graham, 3 Hill's MS. 239, cited 1 P. Wms. 241; Carsey v. Barsham, cited 1 Sch. & Lef. 344; Anon. Mose. 35; Ex parte Wackerbath, 2 G. & J. 151; Kip v. Deniston, 4 Johns. 23; Jones's App., 8 Watts & S. 147; Irwin's App., 35 Penn. St. 294; Sterrett's App., 2 Penn. 419; Wallis v. Thornton, 2 Brock. 434; Monell v. Monell, 5 Johns. Ch. 283; Deaderick v. Cantrell, 10 Yerg. 264; Aplyn v. Brewer, Pr. Ch. 172; Churchill v. Hodson, 1 P. Wms. 241; Att. Gen. v. Randell, 7 Bacon, Ab. 184; Murrell v. Cox, 2 Vern. 173; Terrell v. Mathews, 11 L. J. (N. s.) Ch. 31; McMurray v. Montgomery, 2 Swanst. 374; Griffin v. Macauley, 7 Grat. 476; Worth v. McAden, 1 Dev. & B. Eq. 199; Stowe v. Bowen, 99 Mass. 194. 2 Brice v. Stokes, 11 Ves. 324; Scurfield v. Howes, 3 Bro. Ch. 95, note (8); Chambers v. Minchin, 7 Ves. 186; Monell v. Monell, 5 Johns. Ch. 394; Hall v. Carter, 8 Ga. 388; Manahan v. Gibbons, 19 Johns. 427; Martindale v. Picquot, 3 K. & J. 317; Cottam v. Eastern Counties Ry. Co., 1 John. & H. 243. W. 333 (Ky. 1893). The rule is stated as follows in the last cited case: "Although it is a well-established general rule that one trustee is not responsible for the waste of his cotrustee, it is equally well settled that if the trustee connives at the waste or misappropriation of his cotrustee or has reason to believe that he will waste or misappropriate the trust estate, or that his condi tion has so changed as to make it unsafe for him to control the estate, it is the duty of the trustee, upon being informed of these conditions, to take prompt action to secure the estate against the apprehended waste or misappropriation; for it is well settled that a trustee is responsible for all loss by his associate, caused by his actual or constructive negligence or connivance." |