Farmers & Merchants National Bank v. Reed

CARTER, J., Concurring.

With some mental reservation I concur in the conclusion reached in the opinion of Mr. Justice Gibson, which, as I understand said opinion, is predicated upon the proposition that the order of the trial court authorizing the trustee to sell the United Steel and Wire Company stock had become final and that it was not subject to collateral attack in the manner in which respondent sought to attack said order in this proceeding. Prom a strictly legal standpoint, this conclusion is inescapable.

However, the trial court found that the trust officers of appellant represented to respondent that they had made a full and fair investigation of United Steel and Wire Company and that there was something wrong with it, whereas, in truth and in fact, said trustee had not made a full and fair investigation, and that such investigation if actually made would have revealed that said company was in a sound financial condition; that at the time the trust officers represented to respondent that the sale would be to her best interest, the trustee well knew that the sale of said stock would result in a loss of income and injury to respondent rather than benefit; that respondent relied upon the representations of the trustee, had no independent legal advice, and the trustee never suggested that she obtain it; that in relying upon the representation of the trustee, she did not contest the petition for leave to sell the stock; that she approved the subsequent purchase of bonds without knowledge of the loss that she was suffering. Respondent also asserts that the trustee did not inform her that any doubt existed as to its power to sell the stock; that it concealed this doubt from the court by framing the petition in such a manner as to lead the court to believe that a general power existed and that the trustee *337was simply asking for instructions on a matter within the discretion of the trustee; and that in such proceeding it failed to disclose to the court the contents of the decree of distribution relative to the above-mentioned stock.

In my opinion the above-mentioned matters constitute sufficient grounds upon which respondent can obtain relief in a proper proceeding for the injury suffered by her as the result of the conduct above narrated. There can be no question but that gross misrepresentation by a trustee, resulting in loss to a beneficiary, constitutes a breach of trust, justifying both removal of the trustee and damages for any loss suffered by the beneficiary. Such relief, however, must be obtained in an appropriate action by the beneficiary against the trustee. The original decree authorizing the sale of the stock would, of course, be res adjudicata, on the power to sell the stock and would preclude any subsequent attack on the trustee’s action on the theory of bad judgment in the matter, but it would not prevent a wholly distinct action for damages for actual fraud under the facts and circumstances claimed by respondent to have existed in connection with the transaction which is the subject of this controversy. In addition, there may be a further remedy for the alleged imposition practiced upon respondent and the trial court by the trustee in failing to disclose the source of its power and the doubt which existed as to its right to sell the stock. If respondent can make out a case of imposition upon the court amounting to extrinsic fraud, an independent action in equity could be brought to set aside the original decree authorizing the sale of the stock, without regard to lapse of time.

I deem it advisable to mention the foregoing matters because both the trial court and the District Court of Appeal held in favor of respondent in the case at bar, which is a persuasive indication to my mind that there is merit in respondent’s claim that she suffered injury as a result of the improper conduct of the trustee, and I regret that because of the rules announced in the majority opinion, the redress to which respondent is entitled cannot be obtained in this proceeding.

Rehearing denied. Curtis, J., Houser, J., and Carter, J., voted for a rehearing.