(123 N.E.)

v. Dutchess County Mutual Insurance Co., | counsel), for appellant. David J. Wagner, of 64 App. Div. 9, 71 N. Y. Supp. 670; Benner | New York City, for respondent.

v. Fire Association of Philadelphia, 229 Pa. 75, 78 Atl. 44, 140 Am. St. Rep. 706; American Central Insurance Co. v. Hardin, 148 Ky. 246, 146 S. W. 418; Underwood v. Penn Fire Insurance Co., 134 N. Y. Supp.

105.

We do not consider the case of Trustees of the First Baptist Church v. Brooklyn Fire Insurance Co., 19 N. Y. 305, an authority to the contrary. The agreement in that case was apparently made by the company itself, and involved no question of an agent's authority. Besides, the plaintiff offered to prove a usage of the defendant to make verbal agreements to renew policies until further notice.

For these reasons, and without discussing the other questions and points which have been raised, the judgment in this case must be reversed, and a new trial granted, with

costs to abide the event.

COLLIN, CUDDEBACK, CARDOZO, POUND, and ANDREWS, JJ., concur. HISCOCK, C. J., not sitting.

Judgment reversed, etc.

(226 N. Y. 453)

PEOPLE ex rel. BRIGGS ▼. HANLEY,
Warden, etc.

(Court of Appeals of New York. June 6,
1919.)

1. RECEIVING STOLEN GOODS 4-GUILT. Where a clerk in the transfer department of a trust company feloniously obtained a credit with another trust company, the credit belonging in fact to the firm defrauded, a woman who received from the clerk, with knowledge of the facts, money drawn from the trust company against the credit, was guilty, under Penal law, 1308, of receiving stolen goods.

2. LARCENY 15(1) — BY CLERK-DRAWING ON FALSE CREDIT.

A clerk of a trust companw, who fraudulently obtained possession of certificates of stock, forged the necessary signatures thereon, and procured a loan and the entry of a credit with another trust company to the amount of the loan, and drew on such credit, committed larceny as to the amount so drawn.

MCLAUGHLILN, J. On the 24th of July, 1917, upon a charge of criminally receiving stolen property, the relator was committed by a magistrate of the city of New York to the city prison to answer to the Court of General Sessions. She procured a writ of habeas corpus, and after a hearing thereon an order was made sustaining the writ and discharging her from custody. On appeal to the Appellate Division the order was affirmed, one of the justices dissenting, and the people now appeal to this court.

The facts upon which the warrant was issued for the arrest of the relator, and upon which she was held to await the action of the grand jury, were not controverted upon the hearing which resulted in her discharge in the habeas corpus proceeding. The question presented on this appeal, therefore, is whether, upon such facts, the magistrate erred in committing the relator.

The determination of this question necessitates a. statement of the facts involved in or immediately connected with relator's arrest, commitment, and discharge. In this connection it appeared that in October and November, 1913, one Foye, who was a clerk employed in the transfer department of a trust company in the city of New York, fraudulently obtained possession of and forged the necessary signatures to certain certificates of stock of a corporation, by means of which he obtained from Charles T. Brown & Co., of Philadelphia, three loans aggregating $100,000. The transaction which resulted in the loans was by correspondence; Foye giving his promissory notes and putting up the forged certificates of stock as collateral security for their payment. Charles T. Brown & Co., upon receipt of the notes and certificates of stock, paid to certain banks or trust companies in Philadelphia the amounts called for, and they in turn telegraphed their correspondents in New York to place such amounts in the Knickerbocker Trust Company of New York to the credit of Foye, which they did by means of checks payable through the clearing house. When the transaction was completed, Foye thus had to his credit in the Knickerbocker Trust Company, by reason of the fraud practiced upon Brown

Appeal from Supreme Court, Appellate Di- & Co., $100,000, less commissions and intervision, First Department.

Habeas corpus by the people of the State of New York, on the relation of Elizabeth D. Briggs, against John J. Hanley, Warden, etc. From an order of the Appellate Division (185 App. Div. 667, 173 N. Y. Supp. 693) affirming an order of the Special Term sustaining the writ and discharging relator, the People appeal. Orders reversed.

Edward Swann, Dist. Atty., of New York City (Robert C. Taylor, of New York City, of

est, and this is all the credit he had. No other moneys were ever paid to the trust company or mingled with the credit thus given. Some time prior to Foye's obtaining this credit he had formed an acquaintance with the relator, which had ripened into relations which it is unnecessary to state, it being sufficient to say that he had told her how he could "steal" from $10,000 to $100,000, but to do so might result in his being sent to prison. She urged him to do it, and when he had obtained the loan of the first $10,000, he in

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(233 Mass. 321)

(123 N.E.)

KIMBALL v. WHITNEY.

SAME v. BATES.

(Supreme Judicial Court of Massachusetts. Suffolk. June 26, 1919.)

1. TRUSTS 179-CONDUCT OF TRUSTEESSTANDARD OF Good Faith and Discretion. Good faith and sound discretion, as those terms should be understood by reasonable men of good judgment, are the standard by which the conduct of trustees is to be measured.

2. TRUSTS 217(4)—DUTY OF TRUSTEE-IN

VESTMENT.

Though some investment of trust funds in certain securities might be justified, a disproportionate amount of the total should not be embarked in a single kind of stock or bonds. 3. TRUSTS 217(4)—INVESTMENT OF FUNDS -PROPRIETY.

Investment of trust funds in preferred shares of the Massachusetts Electric Companies in February, 1903, held not improper and unwarranted as matter of law.

in so-called preferred shares of the Massachusetts Electric Companies at the market price then prevailing, and to the retention of this investment to the end of the period of the account in 1917. The case comes before us by report upon agreed facts. The facts now pertinent to the decision are that the Massachusetts Electric Companies was an unincorporated association organized and existing under a written instrument entitled "Agreement and Declaration of Trust," dated in June, 1899. The general features of this agreement were similar to those which have come before the court in numerous cases. Property is transferred to trustees, who hold the legal title to all the assets belonging to the trust and exercise the exclusive management and control of it under the terms of the agreement. Certificates of part ownership, resembling shares of stock in a corporation, are issued to those who are the ultimate owners of the property. See Peabody v. Treas. & Recvr. General, 215 Mass. 129, 102 N. E. 435, and cases there collected, and Kennedy v. Hodges, 215 Mass. 112, 114,

4. TRUSTS ~217(4)—INVESTMENT OF FUNDS 102 N. E. 432. -PARTNERSHIP.

Investment of trust funds in preferred shares of the Massachusetts Electric Companies, a trust owning controlling stock interests in various public utilities, was not unwarranted as a matter of law, even if the electric companies' trust was a partnership.

5. TRUSTS 217(4)-INVESTMENT OF FUNDS -RETENTION OF FALLING SHARES.

Trustee's retention of shares in the Massachusetts Electric Companies, and failure to sell them before the end of his period of accounting, held not improper as matter of law under all

the circumstances, though the market had been falling.

The Massachusetts Electric Companies acquired all or a large and controlling majority of the capital stock of thirty-six street railway and electric light corporations in Massachusetts, Rhode Island and New Hampshire. "The companies were merged from time to time and in 1906 consisted of the Boston & Northern Street Railway Company, the Old Colony Street Railway Company, and the Hyde Park Electric Light Company. Prior to 1912 the stock of the Hyde Park Electric Light Company was sold and the two other companies were merged, and the name of the

consolidated company was changed to the Bay State Street Railway Company, of which

Report from Supreme Judicial Court, Suf- the Massachusetts Electric Companies owned folk County.

substantially all the common stock, being a large and controlling majority of all the Petition by Benjamin Kimball, trustee un- stock. The Massachusetts Electric Compader the will of Mary Bates, for allowance of nies did not act as an operating company exhis account, opposed by Harriet A. Whitney cept through its control of the subsidiary and by Mary E. Bates. From a decree allow-corporations, which operated the properties ing the modified first account, opponents ap- in question. The business of the Massachupealed to the Supreme Judicial Court. On report by a single justice for the consideration of the Full Court. Decree of probate court affirmed.

John Noble, of Boston, for appellants.

Warner, Stackpole & Bradlee, of Boston (John G. Palfrey and Howland Twombly,

both of Boston, of counsel), for appellee.

RUGG, C. J. These are two appeals from a decree of the probate court allowing an account of a trustee under the will of Mary Bates. The matters now in controversy relate to certain aspects of the propriety of an investment made by the trustee in February, 1903, of a part of the principal of the trust

setts Electric Companies consisted of holding the stock of the subsidiaries and supervising their management by means of stock control, and assisting in their financing. * Previous to February 26, 1903, a large number of trustees in Massachusetts had investMassachusetts Electric Companies and held ed trust funds in the preferred shares of the

those investments on that date. Before making the investment in question, the trustee made reasonable inquiry among bankers and brokers to ascertain how they regarded the investment, and received favorable opinions. He acted in entire good faith and so far as the financial and general business conditions and prospect of earnings of the Massachusetts Electric Companies and of the prop

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is not before us. Several cases have arisen where the facts showed improper investments in improvements upon real estate. Brigham v. Morgan, 185 Mass. 27, 69 N. E. 418; Warren v. Pazolt, 203 Mass. 328, 89 N. E. 381. In Taft v. Smith, 186 Mass. 31, 70 N. E. 1031, a second mortgage upon real estate, and in Thayer v. Dewey, 185 Mass. 68, 69 N. E. 1074, land in another state were held not improper investments as matter of law upon the facts disclosed. It was decid

erties controlled by it were concerned there was then no reason to believe the investment to be otherwise than financially sound." Regular dividends out of earnings at the rate of 4 per cent per annum were paid on these shares to and including July 1, 1904. After that none were paid until January, 1909, and since July 1, 1910, in general they have been paid at the rate of 2 per cent. In 1912 an issue of new preferred shares was made to take up 174 per cent of dividends then accumulated. The market value hased in Kinmonth v. Brigham, 5 Allen, 270, 279, much diminished.

[1] The rule of law in this commonwealth governing the conduct of trustees in the investment of the principal of their funds was stated in these words in 1830 in Harvard College v. Amory, 9 Pick. 446, 461:

"All that can be required of a trustee to invest is, that he shall conduct himself faithfully and exercise a sound discretion. He is to observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of the capital to be invested."

that the investment in a trading partnership could not be sanctioned.

The precise point reported for our determination is "whether the organization of the Massachusetts Electric Companies was such on February 26, 1903, that the investment of any portion of the trust funds in its preferred shares was as matter of law improper." Put in another way, it is, whether a finding that such investment was proper as matter of fact must be pronounced wrong as matter of law. The form of the report imports a finding of all facts, so far as the facts can go, in favor of the investment.

[3] Tested by the standard established by our law, it cannot quite be said that in February, 1903, the investment of any portion of trust funds in preferred shares of the Massachusetts Electric Companies was improper and unwarranted as matter of law.

Good faith and sound discretion, as these terms ought to be understood by reasonable men of good judgment, were thus made the standard by which the conduct of trustees is to be measured. That is a comprehensive principle. It is wide in its scope. It is not It might have been found from the nalimited to a particular time or a special ture of the properties held by the companies, neighborhood. It is general and inclusive, the character of the agreement and the genso that while remaining itself fixed, it may eral purposes of the so-called trust, that it continue to be a safe guide under new finan- was designed as a permanent investment, cial institutions and business customs, chang- that the combination in a single ownered commercial methods and practices, altered ship of the stock of so many different pubmonetary usages and investment combina- lic service corporations covering such extions. It avoids the inflexibility of definite | tent of territory and serving as matter of classification of securities, it disregards the common knowledge numerous populous comoptimism of the promoter, and eschews the munities, was expected to equalize fluctuaexuberance of the speculator. It holds fast tions of earnings and to stabilize the rate of to common sense and depends on practical dividends. The corporations whose securiexperience. It is susceptible of being adapt- ties were held were not in process of coned to whatever conditions may arise in the struction but were completed properties in acevolution of society and the progress of civil-tual operation. The extent of their earnings ization. Although more liberal to investing is not shown, but regular payments in way of trustees than the law of some states and dividends were made until a considerable countries, it has frequently been reaffirmed and never doubted in this jurisdiction. Lovell v. Minot, 20 Pick. 116, 32 Am. Dec. 206; Brown v. French, 125 Mass. 410, 28 Am. Rep. 254; Pine v. White, 175 Mass. 585, 590, 56 N. E. 967; Green v. Crapo, 181 Mass. 55, 62 N. E. 956; Corkery v. Dorsey, 223 Mass. 97, 101, 111 N. E. 795.

period after the present investment was made. The form in which the case is presented to us warrants and even requires the assumption that the earning power of the public service corporations whose securities were owned had been sufficiently tested so that at the time of the investment prudent and sagacious men of experience made pur

[2] In the application of this rule to vary-chases of these shares for permanent holding facts it often has been held that, while ing. some investment of trust funds in certain securities might be justified, a disproportionate amount of the total ought not to be embarked in a single kind of stock or bonds. Dickinson, Applt., 152 Mass. 184, 25 N. E. 99, 9 L. R. A. 279; Davis, Appeal of, 183 Mass. 499, 67 N. E. 604. That particular point is not within the present report and therefore

[4] In the light of the agreed facts and the form of the report it is not necessary to determine whether the agreement and declaration of trust constituted a partnership among the shareholders as in Williams v. Boston, 208 Mass. 497, 94 N. E. 808; Frost v. Thompson, 219 Mass. 360, 106 N. E. 1009 (see Dana v. Treasurer & Receiver General,

(123 N.E.)

The agreed facts show that good faith and sound discretion, measured by the prevailing practice of men of experience and good judgment in such matters, was exercised in making the investment here assailed. That is the standard as established by the authorities to which reference has been made. Giving due weight to all the considerations affecting the trust agreement, no sufficient reason appears for declaring the investment unwarranted. The case is close, but falls within the rule of Harvard College v. Amory, ubi supra.

[5] The retention of these shares and the failure to sell them before the end of the period of accounting cannot be pronounced improper as matter of law under all the circumstances. The decision of the question whether to sell an investment of trust funds on a falling market is a perplexing one. The agreed facts are that "except in so far as the propriety of retaining the investment was affected by the character of the organization in contemplation of law, there was nothing in the future outlook for the Massachusetts Electric Companies and its subsidiaries which required the trustee as matter of sound discretion to dispose of the shares." The case upon this point is governed in principle by Bowker v. Pierce, 130 Mass. 262. Decree of probate court affirmed.

227 Mass. 562, 116 N. E. 941), or a trust as in, resent only honest investment necessary for Williams v. Milton, 215 Mass. 1, 102 N. E. valuable use to the public. 355, where most of the earlier cases are reviewed. Assuming for the purposes of this decision that it was a partnership does not render the investment unwarranted as matter of law. On that assumption it was a partnership of a peculiar kind. It was not an ordinary business, commercial or trading partnership. The nature of its authorized investments seemingly removed it as far as possible from the common incidents of a copartnership adventure. Apparently it was guarded as fully as was practicable from speculative features and the oscillations of value incident to varying conditions of trade. There is nothing in the record to indicate that the amount of shares issued exceeded a conservative valuation of the securities owned. The rights of the shareholders were carefully guarded by the terms of the agreement. Their responsibility was reduced to a minimum so far as possible by written statement of obligations. It was expressly stated that the trustees had no power to bind the shareholders personally. All persons dealing with the trustees were confined by the agreement to the property of the so-called trust to the exoneration of shareholders. See Hussey v. Arnold, 185 Mass. 202, 204, 70 N. E. 87; Williams v. Boston, 208 Mass. 497, 501, 94 N. E. 808; Carr v. Leahy, 217 Mass. 438, 440, 105 N. E. 445; Rand v. Farquhar, 226 Mass. 91, 96, 115 N. E. 286. It was required of the trustees to stipulate in every obligation into which they might enter that the shareholders should not be held liable personally. Whatever may be held ultimately as to the force and effect of those terms in the trust agreement, they manifest an effort to reduce the liability of the shareholders to the lowest limit. In any event, such liability or shareholders was not greater than the liability of stockholders in manufacturing corporations at the time the investment was made, which was before the court in Harvard College v. Amory, 9 Pick. 446. See Child v. Boston & Fairhaven Iron Works, 137 Mass. 516, 50 Am. Rep. 328, for an historical review of our statutes respecting stockholders' liability for debts of the corporation. The exercise of sound judgment and good faith and a strict compliance with the terms of the agreement by the trustees would have a strong tendency to relieve the shareholders from all responsibility. The kind of corporations in which the trustees

(233 Mass. 232) DRISCOLL v. BOSTON ELEVATED RY. CO. (Supreme Judicial Court of Massachusetts. Suffolk. June 24, 1919.)

STREET RAILROADS
TRACK-LIABILITY.

~93(4) — INJURIES ON

lighted street, not near a crosswalk in front of Where a pedestrian started to cross a wella trolley car moving about 10 miles an hour, 50 to 75 feet away, and the motorman rang his gong and braked the car down to 4 or 5 milea an hour, doing all he could to stop, the street railway was not liable for the death of the pedestrian, when struck by the corner of the car without walking in front of it.

Report from Superior Court, Suffolk County; Lloyd E. White, Judge.

were to hold stock were chiefly and primarily
public service corporations operating mainly
in this commonwealth, and of corporations
incidental to or furnishing supplies to such
public service corporations. The law of this
commonwealth for many years has made pro-
vision for careful supervision of the issue of
stocks and bonds of public service corpora-
tions to the end that such securities may rep-both of Boston, for defendant.

trix, against the Boston Elevated Railway
Action by Julia B. Driscoll, administra-
defendant. On report to the Supreme Judi-
Company, resulting in directed verdict for
cial Court. Judgment for defendant on the

verdict.

Herbert A. Kenny, of Boston, for plaintiff.
Fletcher Ranney and Thomas Allen, Jr.,

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