
    Deaderick, et. al. vs. Cantrell, et. al.
    
    Nashville,
    December, 1837.
    A will directed and authorised the executors to sell lands; the executors proved the will; joined in the sale and conveyance of the lands, and took the notes for the purchase money payable to themselves: Held, that this was an acceptance by both, of the trusts of the will.
    Trusts, in regard to the responsibility of co-trustees for the acts of .each other, are of two classes, discretionary and directory, and the rules which govern each class, as to their liability for each other, are different.
    A discretionary trust is, when by the terms of the trust, no direction is given as to the manner in which the trust fund shall be vested, till the time arrives when it is to be appropriated in satisfaction of the trust.
    A directory trust is where, by the term of the trust, the fund is directed to be vested in a particular manner till the period arrives when the trust is to terminate.
    In order to charge a trustee,, in cases of discretionary trusts, for the acts of his co-trustee, some act by which the trust fund was obtained by his co-trustee, or some act of commission amounting to gross neglect, in permitting the fund to be wasted, must be shown.
    When a trust fund is paid into the hands of one trustee, by the act, direction, or agreement of the other; or where the latter had it in his power to have controlled or received the money, and did not, both are respon-sibJe
    A trustee is liable for a breach of trust by his co-trustee, where the money has been received jointly by them; or ,vvhere a joint receipt is given, unless it be satisfuctoiily shown that the joining in the receipt was necessary, or merely formal, and that the money was in fact paid to his co-trustee.
    Trustees were directed to sell land upon a credit; the land was sold by them; the notes for the purchase money were executed to them jointlys and remained in the hands of one, with the assent of the other, to collect; the court was inclined to the opinion that in such case, both were responsible. if tile money were collected and wasted by him in whose hands the notes were left.
    Where one trustee wrongfully permits the other to detain the trust fund a long time in his hands without security, he will be deemed liable for any loss.
    Where a trustee voluntarily permits a co-trustee to receive purchase money, and retain it a considerable time without calling for it, contrary to the trust, he will be responsible for its loss,
    Where the trust is directory, and the fund is not vested, or is vested in a different manner from that pointed out, it is an abuse of the trust for which all are liable, though but one received the money.
    In directory trusts, all the trustees are bound to attend to the directions of the trust, and all must be careful to execute the trust faithfully and according to its terms, and in compliance with tho intention of the person by whom it was created.
    Where trustees in a directory trust were directed to loan out money to the best advantage, one of whom received the money and wasted it: Held, that the other ought not to be charged with compound interest
    This bill is filed by complainant on behalf of himself and the other legatees of George Michael Deadericlc, deceased, against defendants. It charges (hat George Michael Dead-erick died in 1810, and by his will devised $10,000 to complainant Fielding, and gave other legacies specified in the bill, and appointed Stephen Cantrell, Jesse Wharton, and Robert Searcy his executors, the two former of whom qualified and the latter did not; that the executors were to loan out said legacy till complainant arrived at age, and also the legacies due the other minor legatees; that the executors or at least said Cantrell received his legacy, and that plainant has demanded payment of the balance due him upon bis legacy, and it has not been paid. That Cantrell received the legacy and all the assets of the estate, with the knowledge aud permission of Wharton, who joined Cantrell in selling and executing conveyances for the testator’s land. That the legacies were not loaned out to the best advantage, that is., at stated periods, and the interest compounded, or in fact loaned out at all. That Cantrell made a settlement with the county court, styling himself testamentary guardian in 1833, from which it appears he is indebted to complainant, Fielding, the sum of $14,441 34 cents, but in fact $18,000 is due, and the settlement is erroneous. That the executors, Cantrell and Wharton, entered into a joint bond, and gave security jointly for the faithful performance of their duties. That Jesse Whaiton is dead, and Sidney Smith, the other defendant, is his executor. Concluding with a prayer for an account, and for general relief, &c.
    The will of George Michael Deaderick, which is exhibited and made a part of the bill, contains the following provision: “Tt is my will that after my just debts are paid, that my executors sell my real estate to the best advantage at public auction, at four equal annual instalments,' with interest from the date, the proceeds of which, together with the balance, if any, of my personal estate, I will and bequeath as follows: to my son, John G. M. Deaderick, I give $15,000; to Fielding Deaderick $10,000,” &c. together with a number of other legacies to different persons, all to be paid out of the proceeds of the real estate. The will then proceeds, “it is my will and desire, that the several bequests herein before mentioned, shall be paid by my executors to the several legatees as they arrive to the age of twenty one years, with the interest that may accrue on each bequest; and desire my executors to loan out the money due to each minor legatee to the best advantage, and pay it over to the males at twenty-one, and to the females when they marry, or arrive at twenty-one. And for the purpose .of enabling my executors to fulfil this will, they are hereby vested with full and complete powers to transfer, alienate, convey, and make title to the lands and every other species of property I may possess at the time of my death, in as full and ample a manner as I can novv do.
    The answer of Wharton’s administrator admitted the making of the will, the appointment and qualification of the executors, and the sale of the real properly as charged in the bill? but the answer denied that Wharton was responsible, alleging that Cantrell was the active executor, and that he had received all the assets, proceeds of the real estate, &c. none of which ever passed through Wharton’s hands, &c.
    The facts upon which Wharton’s liability depend were agreed upon by the parties, and a full statement of them is contained in the opinion of the court — a re-statement of them here is therefore deemed unnecessary.
    Chancellor Bramblet was of opinion, that Wharton was liable, as a co-trustee, for the principal and compound interest, and decreed accordingly, from which decree an appeal was prosecuted to this court.
    
      R. J. Meigs, J. Campbell and Geo. S. Terger, for complainants,
    insisted, 1st. That Wharton by proving the will, joining in the sale of the real estate, executing conveyances therefor, and assenting to the notes for the purchase money being made payable to himself and Cantrell, accepted the trust and acted under it. Willis on trustees: 38, Smith vs. Wheeler, 1 Ventris’s Rep. Í26.
    2d. Trusts are of two kinds, discretionary or directory. In cases of discretionary trusts, a co-trusfee joining in conveyances or receipts for conformity, or merely being passive, by permitting his co-trustee to receive and retain the fund, &C-, will not, in general, be responsible. But we think the evidence in this case clearly subjects Wharton to liability even if it vtere a discretionary trust. When, however, the trust is directory, as it is here, and points out the manner and mode in which the trust is to be executed, the trustees, by accepting the trust undertake jointly and severally to perform the trusts. The confidence, in such cases is reposed in all; it is tire duty of each to act and to see that the trusts are performed, and each has power to compel, as against the others, tin execution of the trust in chancery. One cannot, in such , - , J ' ’ case, tie heard to say that he trusted to the other. 1 he breach ol trust by co-trustees in directory trusts consists, notin receiving the money, or permitting it to pass out of their hands, or joining in receipts or conveyances, but in not seeing that the trust money is invested as directed. Vide 1 Bar. & Gill’s Rep. 32, 73, 77: 3 Exch. Rep. 26, 312: Willis on Trustees, 196: 2 Story’s Equity, 524: 5 Con. Ch. Rep. 487: G Exch. Rep. 117: 4 Con. Ch. Rep. 193: 31 Vesey, 119, 326, 327: Jeremy Eq. Jurisdiction, 147.
    3d. It was the duty of the trustees, in this case, to have loaned the money to the best advantage, which would have been to have compounded it from year to year, and to have loand it on good security. 4 John. Ch. Rep. 281: 2 Story’s Eq. 525, 516: 3 Swanson’s Rep. 81.
    
      F. B. Fogg, W. E. Anderson and E. II. Ewing, for Wharton’s administrator,
    contended, that the personal estate of Deaderick having beGn exhausted in payment of debts, the question in this case arose entirely upon the liability of Wharton, as to the application of the proceeds of the real estate; tb'at in regard to this the executors were constituted trustees of the real assets, by the will, and Wharton’s liability was to be tested by the rules which subject trustees, as contra distinguished from executors. That a co-trustee who has not received the fund, or had the control of it, but-who was merely passive, and who joined in receipts and conveyances merely for conformity, was not liable for the acts of the other trustee. They cited and commented on 2 Williams on Executors, 1118 to 1128: 5 John. Ch. Rep. 296: 6 John-. Ch. Rep. 1 to 18: 7 John. Ch. Rep. 17: 1 IMerivales Rep. 712: 7 Vesey Rep. 199: 6 Vesey Rep. 488: 3 Swanson’s Rep. 1: 2 Story’s Eq.’520: 11 Vesey, 326: 2 Bro. Ch. Rep. 114: 3 Bro. Ch. Rep. 112: 4 Con. Ch. Rep. 93: 1 Dallas Rep. 310: 1 P. Williams, 243: Fonb. Equity, book 2, p. 184: 2 Devereux’s Equity Rep. 51, Clark vs. Cotton-: 1 Dev. & Battle, 326, Chiltree vs. Wright.
    
    They also contended that the evidence did not show such an acceptance of the trust by Wharton, as made him liable for the reaj assets. The probate of the will by him was only 1 mi n an acceptance of the trust, as to the personalty. That Cantrell did not receive the money as executor, but as a co-trustee, and that Wharton’s joining in the executor’s bond, &c. only made him responsible for the personal estate, as contra distinguished from the proceeds of the real estate. On these points they cited and commented on Leigh & Dalzeil, on Equitable Conversion; 5 Law Library, 27, 57, 103: 11 Mass. Rep. 190: 2 Randolph’s Rep. 488: 4 Dessausere’s Rep. 70:'Williams on Executors, 1118 to 1128: 1 Sell. & Lefroy, 341: 2 Pennsylvania Rep. 419.
   Turley, J.

delivered the opinion of the court.

This is a bill of complaint filed by the legatees of George M. Deaderick, for an account and decree against Stephen Cantrell and Jessee Wharton, executors and trustees to the will of said George M. Deaderick, upon the following facts: Some time in the year 1816, G. M. Deaderick died in Davidson county, Tennessee, having previously to his death duly made and published his last will and testament, by which, after directing that all his debts be paid, and having appropriated to that purpose his personal estate and the rent of his lands, he provides, that his executors shall sell all his real estate at four equal annual instalments, with interest from the date, the proceeds of which he bequeathed to the complainants seperately in different proportions, some of them being specific legacies and others residuary, payable at the different periods when those entitled thereto should arrive at the age of twenty-one, or marry; in the mean time he directs his executors to loan out the money to the best advantage. This will was duly proven by Stephen Cantrell aud Jesse Wharton, two of the executors named therm, who took upon themselves the bur-then of executing the same. In l;!ay, 1820, the said executors jointly proceeded to sell the real estate of the testator, and did sell and convey the same, upon a credit of one, two, three and four years, taking notes with interest from the date, payable to themselves jointly. These notes Wharton permitted to remain in the hands of his co-trustee and executor, Stephen Cantrell, who collected the same as they fed iluo, and instead of loaning; the money to the best advantage, as directed by the will, appropriated it to his own use for _ , . • . . , senes ol more than ten or twelve- years, at which period of time he failed entirely, leaving, a deficit in the assets of said estate of many thousand dollars. Wharton received no part of the money, and does not appear to have paid any attention whatever to the execution of the duties imposed on him by the will after the sale of the lands, until it was understood that Cantrell had failed.

That Cantrell is liable for the amount of money and property used by him, is not disputed, indeed he has not appealed from the decree of the court below.j Wharton’s liability for the abuse of the trust by his co-trustee is disputed, and depends upon the following propositions.

1st. Did he take upon himself the execution of the trust imposed by the will? That he did is too evident to admit of debate. He proved the will and joined in the sale and conveyance of the land, and assented to the notes being payable to himself and Cantrell. Having accepted the trust and partially executed it, he could not denude himself of it afterwards.

2d. Was the trust abused? This proposition is also so clearly proved as not to have been denied. Stephen Cantrell, in violation of the directions of the will, which required the money to be loaned out to the best advantage, appropriated large amounts of it to his own use, for which he has never accounted.

3d. Is Wharton responsible for this abuse of trust on the part of his co-trustee? Trusts of the character now under consideration are of two kinds, distinguishable by the law as discretionary and directory trusts, the rules for regulating the responsibilities of co-trustees, being different when applied to these different trusts.

We will proceed to examine, 1st, When and under what circumstances a trustee is liable for an abuse of trust by his co-trustee, when the trust is discretionary; and 2d. When and under what circumstances he is liable, where the (rust is directory. A discretionary trust is, when by the terms of the trust no direction is given as to the manner in which the trust fund shall be vested, till the time arrives at which it is to be appropriated in satisfaction of the trust. In such cases rr 1 . in order to charge a trustee for an abuse by his co-trustee, some act of commission must be shown on his part, by which ^ tms(. fuu(j wa3 attained by his co-trustee, or some act of commission amounting, to gross neglect in permitting the fund to be wasted. In the case of Monell vs. Mcnell, 5 John. Ch. Rep. 287, Chancellor Kent, after an elaborate examination of the authorities on that point, says, “It may be laid down as a principle, that if two guardians or other trustees join in a receipt for money, it is prima facie, though not absolutely conclusive evidence that the money came to the hands of both; that one trustee may show by satisfactory proof that the joining in the receipt was necessary, or merely formal, and that the monies in fact were paid to his companion; that without such satisfactory proof he must be liable to the cestue que trust; and that if the monies were in fact paid to his companion, yet if they were so paid by his act, direction or agreement, and when he had it in his power to have controlled or received the money, he is and ought to be responsible.”

From this opinion we understand the chancellor to have held, that a trustee is liable for an abuse of trust by his co-trustee, 1st. When the money has been received jointly. 2d. When a joint receipt has been given, unless it be shown by satisfactory proof that the joining in the receipt was neces-s'ary or merely formal, and that the money was in fact paid to his companion. 3d. When the moneys were in fact paid to his companion, yet so paid by his act, direction or agreement. Chancellor Kent is high authority, and we are satis¿ Bed to adopt his conclusions on the subject under consideration, without entering into an investigation of the decisions from which he extracted these principles — we think it would but encumber the opinion and be a useless consumption of time. It is admitted in the case under consideration, that the money was not 'jointly received, and that no joint receipt was executed, but it is contended that the money was paid to Cantrell by the act, direction, or agreement of, Wharton, and Under such circumstances as must make him liable for its waste, and we think successfully. This is not like ordinary cases of a fund outstanding, which has to he received by . , . trustees, but it is a case in which property was devised , i ,, , , , , , , them to be sold, the notes ot which were taken payable to both trustees. Upon the payment of the money no receipts were necessary, the notes were taken up by the makers, and being in the name of both it seems_ to us, without so determining, constitutes as strong, if not a stronger case than that of a joint receipt. But we do not hesitate to say, that the notes could not have gone exclusively into the hands of Cantrell, and the money been collected on them by him without the act, direction and agreement of Wharton; in fact, the case agreed shows that the notes remained with his assent with Cantrell. In 2d Sory’s Commentaries on Equity, 524, it is laid down by that able jurist, “tint if by any positive act, direction or agreement of one joint executor, guardian or trustee, the trust money is paid and comes into the hands of the other, when it might and should have been otherwise controlled or received by both, then each of them will be held chargeable for the - whole.” Again, in note 1, p. 525, he says, “if a receipt be given under circumstances purporting that the money, though not actually received by both executors, was under the control of both, both shall be charged.”

The true question in all such cases is, whether the money was under the control of both. Now the money must of necessity be in the hands of one or the other, as it cannot be. in both at the same time. What then is meant by its being under the control of both? manifestly where it has been received by the act or consent of both. If one receive money outstanding without consulting the other, inasmuch as he had a right to do so, the other shall not be charged, btit when a debt is due by note to both, one cannot receive it against the assent of the other, it being a debt due to them jointly, and for'which they may sue as individuals, and the fund, when collected, would be held in trust. But if the fund was not collected in such a manner as to charge Wharton with his co-trustee’s default, has not his negligence in attending to the execution of the trust made him so chargeable. At p. 525 of 2d Story’s Commentaries, it is said, if one trustee wrongfully permit the others to detain the trust fund a long time in own bands without security, be will be deemed liable for J " loss. Where trustees voluntarily permitted a co-trustee to receive purchase money, and retain it a considerable tune wphout calling for it, contrary to the trust, they were charged with the loss' occasioned by their co-trustee. Bone vs. Cook, McClelland’s Rep. 168, and cases there referred to. This principle is consonant with justice. Two trustees are appointed to execute a trust, the final operation of which is not to be completed for years, they underlake to execute it, they are intended as checks on each other, have an equal control over the fund, are mutually bound to attend to the interest of the trust, and shall one of them be permitted to go to sleep and trust every thing to the management of his co-trustee, and when In the course of ten or fifteen years the fund having been wasted, and his co-trustee insolvent, he is called upon to make it good, shall he be heard to say that he had implicit confidence in his companion, and permitted him to retain all the money i and appropriate it as he pleased, and that he ought not therefore to be charged? Surely not, it is neither law nor reason. This is what Wharton did, and this is his excuse and reason why he should not be made liable for the act of his co-trustee. We therefore think, that -if this were a discretionary trust, Wharton is bound to make good the losses occasioned by Cantrell.

But this is not a discretionary, but a directory trust. A directory trust is when by the terms of the trust the’ fund is directed to be vested in a particular manner, till the period arrives at which it is to be appropriated. In such cases if the fund be not vested, or vested in a different manner from that pointed out, it is an abuse of trust for which both trustees are responsible, though but one received the money, because both are bound to attend to the directions of the trust, and must be careful to execute it faithfully, according to its terms and the intention of the person by whom it was created. Bone vs. Cooke, McClelland’s Rep. 168: Ringold vs. Ringold, Har. & Gill Rep. 12: 3 Bro. Ch. Rep. 90, 112: Oliver vs Court, 3 Exch. Rep. 312: 4 Cond. Ch. Rep. 93: Brice vs. Stokes, 11 Ves. 326. These cases so fully establish the principle above laid down, that it is useless to comment- further upon it, it fixes the liability of Wharton beyond controversy. The fund never was vested in pursuance of the directions of the will, but was wasted by Cantrell. We therefore affirm the decree of the chancellor, so far as it makes Wharton liable for the defalcation of Cantrell, but see no reason for charging him with compound interest, and reverse the decree thus far, and direct an account which shall charge him with simple interest on annual balances.

Decree affirmed;  