Gould v. Gould

Smith, J. (dissenting):

I have no doubt of the power of the court in this action to make this order for removal, if facts are conceded sufficient to show that the appellant trustee has acted in bad faith and that the interests of the estate and of the cestuis'que trustent require such removal. This action is an action brought by the trustees for an accounting and for a ratification and confirmation of the acts of said trustees and asking that the will be construed and that the interests of the beneficiaries be ascertained; that the action of the trustees in deferring the, physical division thereof into separate trust funds be approved and that the plaintiffs may obtain such advice and *813direction of the court as to thus holding said funds in the future and that all other matters in connection with the administration of the said trust funds be ratified and approved and that plaintiffs have such other advice and direction of the court as may be necessary or advisable in the premises, and for such other and further relief in the premises as may be just. The action is what has been called an administration action. All persons interested in the estate are made parties thereto. None of the answers interposed asks for the removal of George J. Gould as trustee of the estate. By his consent he was examined before trial in part. Although two years have passed during which said examination has been pending, the defendants have not yet concluded their direct examination of George J. Gould and no opportunity has been given to him to make explanation of the various transactions which are claimed to have been illegal. This order, therefore, cannot rest upon the admissions made in such examination alone, because of lack of opportunity upon his part to make explanation of the transactions there involved. In reply to the affidavits, however, upon which this motion was made, George J. Gould has made affidavit giving his explanation at least in part of the various transactions which are claimed to have been illegal transactions and are claimed to show his mala files.

That the court has power to remove a trustee in an administration action as relief incidental to the relief which the parties may seek in that action, is stated in 2 Lewin on Trusts (8th ed.), 848, and in Lewin Law of Trusts (12th ed.), 1088. In Perry on Trusts' (6th ed.), section 282, the text reads: “ Courts of equity, having jurisdiction to remove and appoint trustees, may be applied to either by bill or petition; or, if a bill is already pending for administration of the estate, application may be made in those proceedings, by motion.” And this power has been held to exist although such relief be not asked either in the bill or in any counterclaim interposed. (See Lewin Law of Trusts [12th ed. by Dale & Streetem], 1088.)

Where the power to remove a trustee exists in an administration action as incidental thereto, the power to suspend or restrain the trustee from acting during the pendency of the action must be implied therein.

In section 768 of the Code of Civil Procedure it is provided: Any proceeding which is required by statute to be instituted by petition may also be instituted by an affidavit setting forth the matter which it is required that the petition shall contain, accompanying a notice of an application for the relief which would properly be prayed for in the petition; and in like manner a pro*814ceeding which is required by statute to be instituted by affidavit may be instituted by petition.” (See Civ. Prac. Act, § 119.) Apart from this provision of the Code, however, the practice adopted by the court upon this application is authorized in an action for administration of an estate where the court with full jurisdiction of the subject-matter and with all interested parties before it may grant the motion as incidental to its power and duty to supervise the execution of the trust, and the right to make a motion does not depend upon the provisions of the Code of Civil Procedure or the Civil Practice Act authorizing the granting of injunctions in other cases. The relief here sought asks for an accounting, approval of the acts of the trustees, for advice and direction of the court and such other relief as may be proper. This relief sought, if necessary, makes this an administration action leaving to the court full power to grant any relief which may be necessary for the proper administration of the trust. As long as this power is allowed as “ incidental ” to the granting of ultimate relief it should be exercised only so far as necessary to accomplish its purpose.

Again, a trustee is not to be removed for every breach of trust or “ because the trustee has transgressed the strict line of his duty, providing there was no wilful default, but merely a misunderstanding.” (2 Lewin Trusts [1888 ed.], *849, and cases cited; Lewin Law of Trusts [12th ed.], 1089.)

George J. Gould had been associated with his father before his father’s death for fifteen years and had managed in large part Lis estate. His father expressed in the codicil to his will great confidence in him and had even provided that in case of disagreement among his trustees George J. Gould should control any action of the estate. It is claimed that he had a dominant influence over the other trustees. Not once did he exercise the right of stock control by a dominant vote as was given him in the will during all the term of the trust. Upon the record, his dominance, if it existed, would seem to have existed by reason of a deference to an older brother who had longer experience and better knowledge of the various properties which his father held and of the intricate problems arising therein. It does not appear that any act of his was ever questioned by any of his brothers and sisters during the existence of this trusteeship, until the bringing of this suit in 1916. His acts were concurred in by all the brothers and sisters, except that the sale of the Missouri Pacific and the Western Union were made without the knowledge of Helen Gould, by reason of her sentimental feeling that the financial interest of the estate should be retained by the estate in the properties which her father in part built up and in which he took a very great interest. *815It is true that this knowledge and acquiescence by his brothers and sisters is not binding on the infants. But these infants had only a very remote interest in case a child should die without having made a will. This proceeding for the removal of a trustee is not for the purpose of punishment, but to conserve the interests of the cestuis que trustent and by reason of the necessity of such removal from any reasonable apprehension that their interests will be in danger by his continuance as trustee.

I will discuss only one of the grounds upon which his removal was made, to wit, that he had habitually subordinated the interests of the estate to his own private interests. While Gould denies the charge and swears that all transactions of which complaint are made were executed by him in good faith and with strict fidelity to the obligations of his trust, facts are charged in the moving affidavits which are not fairly met by such general denial. He was not authorized to mingle trust funds with his own. He might easily in his stock accounts have adopted another name, as he did in other instances and have kept those accounts separate. There would then have been no opportunity for his claiming the benefit of a profitable investment and placing upon the estate the burden of an unprofitable investment. The law does not permit a trustee to so commingle the trust funds with his private funds as to create such an opportunity. It matters little whether or not he availed himself of that opportunity at the expense of the estate. The fact is that by thus mingling the trust funds with his own in these accounts he created an opportunity so to do and this conduct endangered the trust, and unless further explained, should require his removal. It is denied on the part of Gould that these matters in which the funds were commingled were speculative accounts. They were called short sales. It is claimed, however, that these short sales are not what is ordinarily known as short sales upon the street,” but are sales for delivery at a later date, and that they were made for the purpose of getting rid of the stock of the Missouri Pacific railroad, which stock he should eventually have sold. But a short sale is always to an extent speculative. It is further claimed by appellant that they were not made in his own name, in order that it might not be known that the Gould estate was disposing of its own stock in this road and its connections. This answer is not satisfactory. Whether this transaction, as well as other transactions of which complaint is made in the moving affidavits, was made in bad faith, and whether the interest of the estate as it now exists may require his removal from the trusteeship, are questions for decision in the administration action, where all parties are before the court *816and the matters may be inquired into more particularly than in affidavits presented upon a motion. Ordinarily, complete relief will not be given upon an interlocutory application. An interlocutory remedy is generally given for protection pending final determination. I have no doubt, however, that with the prima facie case made by the respondents here, George J. Gould should be suspended as trustee until the .determination of the accounting proceeding, and the request for his removal from the trusteeship should be there determined. Under such an order all the interests of all the cestuis que irustent will be fully protected, while the evident desire of the testator that his son George should exercise a dominating influence in the administration of the trusts will be respected, and the court may find that there has been no act of bad faith on the part of George J. Gould, and that the interests of the estate do not demand his removal.

I am unable to see any reason why this matter has dragged along so slowly. Two years is more than sufficient time to finish the direct examination of George J. Gould upon his so-called examination before trial. If he had not consented to the examination it is very doubtful if the court would have permitted it. Inasmuch as all of these matters can be brought out fully upon an examination in the accounting proceeding, that action should be brought to a hearing and the matter determined therein as quickly as possible, even though this preliminary examination has not been finished.

There are other specific charges of grave import made against this trustee. Most of the acts complained of were committed with the knowledge of some, if not all, of the other children for whom the trust was being administered and without dissent on their part. All of these charges are under review in the accounting action and I can see no reason for a final disposition of the question on this interlocutory application where by interlocutory order all the interests of all parties will be fully protected until the final determination of the pending action and the trustee will be given a fair opportunity to explain more fully such charges than is possible in affidavit.

In my judgment the order should be modified so as to suspend the trusteeship of George J. Gould pending the determination of the administration action, and striking therefrom the order for absolute removal from his position as trustee, without costs to either party.

Finch, J., concurs.

Order affirmed, with ten dollars costs and disbursements.