
    CASÉ 103. — AC'TIEON BiY C. B. HAlWiKlENB, &c., AGAINST THE FIDELITY TRUST COMPANY
    January 12, 1906.
    Fidelity Trust Company v. Hawkins, &c.
    Appeal from Woodford Circuit Court.
    From the judgment the Trnst Co. appeals.
    Affirmed.
    Trusts — Authority of Trustees — Mortgage—Protection of Trust Estate — Where testamentary trustees were authorized by the will to do all things necessary for the proper care of the property, and given ail necessary .powers to accomplish the objects of the trust, they had authority to give a mortgage on the trust estate to secure mioney advanced, with which to make a settlement with those who had instituted a contest to establish the invalidity of the 'will, where an adjudication of invalidity would result in the beneficiaries ol the trust receiving nothing.
    FIELD M’LiEOD for appellant.
    WALLACE & HARRIS for appellee.
   Opinion of the Court by

Judge Barker

Affirming.

Prank B. Harper died testate at his home in Wood-ford. county, Kentucky. By his will he devised two farms in Woodford connty, aggregating some nine hundred and seventy acres, to C. B. and P. H. Hawkins, in trust for the use and benefit of P. H. HawMnsj and C. W. Hawkins until the latter arrived at the age? of twenty-one years, at which time the eestnis qne trustent were each to take designated portions fon life with remainder to their children,- if any. If either died childless, the survivor should take the lands for life — remainder to his children, if any; if none, then to- such persons as by will the survivort might appoint. C. W. Hawkins is an infant, and hi^ father, C. B. Hawkins, his statutory guardian. ¡

After the will was duly probated in the county court, the heirs at law of the decedent, Frank B, Harper, instituted a contest to establish its invalidity, and carried the matter on 'appeal to the "Woodford circuit Court, where it was pending when the proceedings hereafter to be recounted took place. .

The testator was a bachelor. The contestants are his sisters and his nephews and nieces. If they succeeded in having the will adjudged invalid, the trust established by the testament for the benefit of F. H. Hawkins and C. W. Hawkins would certainly be dissipated, and the beneficiaries receive little — -if anything — from the estate, so large a part of which was devised to them. When the case was approaching the day of trial, the danger of the situation became apparent to the trustees and the beneficiaries, and thereupon a compromise was agreed upon by which certain notes of the contestants held by the estate, and which are said to be worthless, were surrendered to the makers, and in addition thereto the trustees; agreed to pay over to the contestants the sum of thirty-five thousand dollars, to be distributed among them pro- rata :according to their respective rights. The trust estate consists in the main of the land heretofore mentioned, and includes no money with which to pay the thirty-five thousand dollars agreed upon as; a settlement of the contest of .the will.

The appellee, the Fidelity Trust Company, of Louisville, Kentucky, agreed with the trustees to loan the trust estate the sum of thirty-five thousand dollars, provided the loan could he lawfully secured by a first mortgage lien upon the land embraced in the trust estate. The right of the trustees to borrow the money in question could not be definitely determined without the adjudication of a court having jurisdic-; lion of the subject matter and the parties. Thereupon this procedure was instituted in the Woodford Circuit Court in order to obtain the advice 'and consent of the chancellor to borrow the money necessary1 to secure the permanent integrity of the trust estate. All of the parties in interest were properly before the court, and a judgment was entered holding that the trustees were lawfully empowered to borrow thej money in question, and authorizing them so to do: From that order this appeal is prosecuted.

There is, and can be, no question ias to the bona fides of this litigation, or of the necessity that the trustees should be authorized to borrow the sum in question in order that the integrity of the trust may be assured. The relation of the trustees to the eestuis que trustent, and their deep interest in the maintenance and preservation of the trust estate, are a sufficient guaranty that their action in the premises was warranted by great danger of an adverse verdict in, the contest as to the validity of the will. The following is an excerpt from the "will prescribing the am thority of the trustees: i

“And (they) shall do and perform all things andj acts necessary and expedient for the proper care and maintenance of said property, controlling and managing the same for the best interest of said cestui que trusts in every respect as any prudent and reasonable man would control and maintain his own property in a similar kind of business ; and to fully accomplish the objects and purposes of the trust herein created said trustees shall have and are hereby given and granted all necessary and incidental powers and authority.” ¡

It seems to us that this language fully authorized the trustees to- meet and obviate the danger with which the trust estate was confronted by the contest as to the validity of the will. It is undoubtedly a cardinal rule for the government of trustees, that they should preserve the trust, committed to their care, from destruction. It is inconceivable that the¡ creator of a trust should desire to withhold from its trustees the power to preserve the estate which he'has created. The trust estate herein is worth, in round] numbers, one hundred and twenty thousand dollars.' If the contest proved successful the beneficiaries received nothing. The practical question confronting the trustees was, whether it was safer and, therefore! more beneficial to the cestuis que trustent, that they should certainly receive eighty-five thousand dollars worth of property, and pay the thirty-five thousand dollars to the contestants, or assume the risk of receiving nothing by an adverse verdict as to-the validity of tli e will under which they claimed. The wisdom of the proposed compromise necessarily depended upon the danger involved in the contest as to the will. This danger the parties, themselves, and their attorneys were in a position to properly weigh and appreciate. The learned ’ chancellor, who approved the compromise, has his home in Woodford county, and doubth-ss is well acquainted with all the parties hereto. His opinion as to the merits of the settlement made, has, and is entitled to, great weight in the problem before us. 1

In the case of United States Trust Company v. Roche, 22 N. E. Rep., 265, a trust estate had been allowed by the trustee to become encumbered by liensj for unpaid taxes and water rents for about fifteen| thousand dollars, and the property was in danger of being lest by an enforcement of these liens. Thereupon the trustee borrowed the necessary money foj pay off the liens from the United States Trust Company, and executed and delivered to it a mortgage to secure the debt thus created. Upon failure to pay this last indebtedness the Trust Company instituted! an action to enforce its mortgage lien. This was resisted on the ground that the borrowing of the money and the execution of the mortgage were illegal and! void as’ being a contravention of the f ollowing statutory provision: “Where the trust shall be expressed in the instrument creating the estate!, every sale, conveyance, or other act of the trustees, in contravention! of the trust, shall be absolutely void.” To' this contention the Court of Appeals of New York said:, “Were the loan and mortgage in contravention of the trust? Assuming that the failure of the trustee to pay the taxes assessed upon the subject of the¡ trust out of its income was a devastavit, his wrong, has no legal connection with the primary question in-, volved in this case, and above stated. The plaintiff in no way contributed to the wrong committed by the trustee, which had been fully accomplished before the loan was applied for. The money was not, borrowed and applied in payment of a debt illegally contracted by the trustee; but was borrowed and! actually applied to pay a debt owing to the State, which, by virtue of the power of taxation, was a lien, upon the subject of the trust, prior and superior to¡ all of the rights arising out of it. The loan in no wise. increased (except by tbe sum incurred in obtaining: it) the burden upon tbe estate, but prevented its total loss, which, but for this, or a like loan, would have been the inevitable consequence of the non-paymem; of tbe taxes. Had this trustee been removed because of bis devastavit, and a new one substituted while tbe sale fox taxes was impending, tbe new trustee would) not have been without power, having the consent of¡ tbe court, to have borrowed money upon tbe credit ofi the estate for tbe purpose of saving it from being wholly lost. A mortgage given by a trustee so situ-i ated, and for such a purpose, would not have been, in contravention, but in aid, of the trust. There is) no difference in principle between tbe case supposed and tbe one in band. Neither borrowing tbe money) for tins purpose nor securing its repayment by mortgage was an act in contravention of tbe trust. Tbe act being lawful, tbe expenses incidental to doing it (the! items are not questioned) were a charge upon tbe estate, and tbe sum of tbe expenses was properly included in tbe mortgage.” i

In tbe case of Smith v. Nones, 28 Ky. Law Rep., 248, we held that the1 trustee of an estate was authorized to dedicate a part of it in laying out roads, streets and boulevards, and in conveying a part of it to an, agent who' performed valuable services to the estate, and thereby greatly enhanced its value as a whole, although tbe number of acres was diminished. ¡

The rule as to trustees’ power with reference to¡ tbe preservation of trust property is thus laid down, in tbe Am. and Eng. Encyc. of Law, 1st Ed., vol. 17, p. 136: ' ' |

“Tbe trustees’ powers are such as are ordinarily incident to tbe proper execution of the trust and thei care of property. He is not limited to those expressly conferred; any acts done in good faith for the manifest good of the trust will be sustained; thus, he may compromise claims by or against the trust estate, or submit a controversy to arbitration; and may, in certain cases, borrow money for the use of the estate, and execute a mortgage on the property.”

In so far as the interest of the infant cestui que trust is concerned, his statutory guardian, who is also his trustee under the will, is authorized by section 2030, of the Kentucky Statutes to make the compromise;' under consideration. The statute is as follows:

“A guardian shall discharge the liabilities of the ward for the debts of the ancestor out of his personal estate, and when the personal estate, with the rents of the real estate is not sufficient therefor, he may, by petition to a court of his county having equity jurisdiction, obtain leave to sell land for that purpose. He shall also receive and sue for the debts and demands, •owing to the ward, defend actions “against him, and, with leave of the court, may compound a debt or demand, or settle or compromise any controversy concerning the lands of his ward when the interest of the ward will be subserved thereby.” ;

Limitations on the powers of trustees are for the benefit of the cestui que trust and the preservation of the estate. These can have no place where their enforcement tends not to preserve, but to destroy the estate. To deny to the trustees the power they seek to exercise in the case at bar, would be to make the letter of the law kill the spirit. We, therefore, feel authorized, both upon reason and authority to affirm the judgment of the chancellor, and it is so ordered.  