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jects were stated and discretion as to proportion and manner of payment among them was vested in the trustees. No distinction was made between indefiniteness in the power to choose between several charities and indefiniteness in the power to select the beneficiaries of a particular charity. It is difficult to see how any such distinction can logically be made. If this conclusion is correct, then the many well considered cases holding that charitable trusts are valid, though the beneficiaries are indefinitely described, are authority for the legality of the so-called "foundation" or "community trusts," in respect to the wide latitude given for the selection of different kinds of charity. The cases on this subject are extendedly considered in a note to Perry on Trusts.

The decision in the famous case of Tilden v. Green," where it was held that a devise in trust to be applied to such charitable, educational and scientific purposes as, in the judgment of the trustees, will render it most widely and substantially beneficial to mankind, was void for indefiniteness and uncertainty, has led to an enactment in New York which provides that no charitable gift shall be deemed invalid by reason of indefiniteness or uncertainty of beneficiaries.10

7. Leak's Heirs v. Leak's Ex'r (1904), 25 Ky. Law Rep. 1703, 78 S. W. 471.

8. Note (a) Sec. 729.

9. (1891) 130 N. Y. 29, 28 N. E. 880, 14 L. R. A. 33, 27 Am. St. Rep. 487.

10. New York Charitable Uses Act, Law (1893), c. 701; Utica Trust & Deposit Co. v. Thomson (1914), 87 N. Y. Misc. 41, 149 N. Y. 396.

CHAPTER X

Stipulations for Protection of Trust CompanyIndemnity Clauses

§ 46. In General. Often the duty to be performed in a fiduciary capacity is attended by risks which a trust company cannot safely assume without stipulations for its protection, or so-called "indemnity clauses." The power to insert and rely upon such clauses rests upon the broad right to contract as one pleases, so long as established rules of public policy are not violated. Thus parties cannot contract for immunity from fraud, gross negligence, or their own wilful wrongs, nor can they contract away the right of an aggrieved party to apply to the courts for relief.1

§ 47. Examples and Construction of Indemnity Clauses-Co-Trustees. The effect of clauses exempting a mortgage trustee from liability, "except for its own wilful and intentional breach," is considered in a part of this book entitled "Mortgage Trustee Clauses Annotated." This, of course, is but a particular application of the broad power to abridge the ordinary duties of trustees. The effect of such abridgment with re

1. Hughes on Contracts, Secs. 3, 16, 18.

2. Appendix, page 460.

spect to the liability of co-trustees is well illustrated by an English decision. Here a clause in a will provided— "that any trustee who shall pay over to his co-trustee, or shall do or concur in any act enabling his co-trustee to receive any moneys, shall not be obliged to see to the application thereof; nor shall such trustee be subsequently rendered responsible by an express notice or intimation of the actual misapplication of the same moneys." It was held that, where two trustees under this power enabled a third to receive moneys, who misapplied them, and the fraud was concealed for two years, the two were not liable, "though but for the special power they would have been declared liable on the ground of crassa negligentia." It has been said, however, that in "the majority of cases the attempt of the trustees to evade responsibility by virtue of indemnity clauses has been made without success."5 This conclusion was drawn from a review of English and Canadian cases, digested in the note."

3. Wilkins v. Hogg, 3 Giff. 116, 10 W. R. 47, followed in Pass v. Dundas, 43 L. T. N. S. 665, 29 W. R. 332.

4. Lewin on Trusts (12th Ed.), page 305.

5. 9 Canadian Law Times (1889) 1.

6. McCarter v. McCarter, 7 O. R. 243, holding inactive executors liable for not making inquiry as to disposition of funds, though the will provided that each of the executors should be responsible for his or her acts only, and irresponsible for any loss unless through wilful neglect or default. Robdard v. Cooke, 36 L. T. N. S. 504, 25 W. R. 555, holding that a clause in a will providing that trustees should be responsible only for such moneys as they should actually receive, did not relieve a cotrustee from liability for giving defaulting trustee power to draw from a bank account. Hale v. Adams, 21 W. R. 400, holding co-trustee liable, notwithstanding indemnity clause, for losses from speculation by the other trustee, because he had taken no steps to secure the proper disposition of the funds. Budge v. Gummow, L. R. 7, Ch. 719, holding trustees liable for loss by investment on insufficient security, caused by neglect in not obtaining proper valuations, though indemnity clause provided that the trustees should not be liable for involuntary losses. Rehden v. Wesley, 29 Beav. 213, holding that indemnity clauses must be strictly construed, and that where a deposit is really an investment it will not

In a New York case a will contained the provision: "And I exempt every trustee of my will from liability for losses occurring without his own wilful default." One of the two co-trustees defaulted for a large amount of the trust funds. As to the part of the default, of which he had no knowledge, the innocent trustee was not liable, but as to the amount of which he was informed, he was liable because after learning of such default, he permitted the defaulter to continue in the performance of active trust duties. With reference to the indemnity clause, the Court said: "The words 'wilful default' imply more than negligence or carelessness; the word 'wilful' means intentional, while the word 'default' means transgression; thus it was evidently the intention of the testator to relieve each trustee from everything but his individual intentional transgression." The Court regarded the action of the co-trustee, after he had direct notice that the other was a defaulter, in permitting him to collect rent and interest as "a wilful

6. (Continued from preceding page)— come within an indemnity clause, providing that trustees shall not be liable for loss of trust money deposited with any banker for safe custody. Brumridge v. Brumridge, 27 Beav. 5, holding that an indemnity clause does not exonerate a trustee from the consequences of misapplication of funds by a co-trustee. Dix v. Burford, 19 Beav. 409, holding an executor liable for misapplication by a co-executor, notwithstanding an indemnity clause providing that the executors should not be chargeable except for their respective receipts, etc. Drozier v. Brereton, 15 Beav. 221, holding trustees liable for not making inquiry as to security of an investment, although the trust deed contained a provision that they should not be responsible for deficiency in title or value of securities. Fenwick v. Greenwell, 10 Beav. 412, where a settlement contained a covenant and agreement that £5,000 stock, the property of the intended wife, should be transferred to trustees. The trustees, after the marriage, took no steps to enforce the transfer, and the stock was sold by the husband, and the proceeds misapplied. The trustees were held liable, although there was an indemnity clause providing that they should not be liable for any casual or involuntary loss without their wilful default, but for such money only as should actually come into their hands.

7. Matter of Mallon (1904), 43 N. Y. Misc. 569, 89 N. Y. Supp. 554. Compare Elliott v. Turner, 13 Sim. 477, holding that neglect may be wilful, though unintentional; Connolly v. Connolly, 17 Ir. Ch. Rep. 208, holding that mere negligence or imprudence may be wilful default.

default, within the meaning of the testator's will" and that "therefore he should be surcharged with the same.

In a New Jersey case an indemnity clause provided that neither of two trustees "shall be held responsible for the acts, omissions, or faults of the other in which they did not jointly participate, or of which they are not jointly guilty and that their respective liability and accountability shall not exceed beyond the exercise of ordinary care, diligence and fidelity." This was held not to relieve a trustee from liability for any misfeasance by his co-trustee, unless he takes measures, by suit or otherwise, to enjoin or to compel restitution of the property and its application according to the terms of the

trust.

§ 48. Examples and Construction of Indemnity Clauses-Employment of Agents. An English text writer" states that: "In conformity with the rule laid down in Ex parte Belchier, Amb. 218, s. 31 of Lord St. Leonards' Act (22 & 23 Vict. c. 35), enacted that every instrument creating a trust should be deemed to contain a clause exonerating the trustees from liability 'for any banker, broker, or other person, with whom any trust moneys or securities may be deposited'-a clause which, we may observe, is, nevertheless, not uncommonly inserted, in similar terms, in wills and settlements. But this clause does not authorize a delegation of the trust in any case in which there is no 'moral necessity from the usage of mankind' for the employment of an agent; per Lord Selborne, in Spright v. Gaunt, 9 App. Ca. p. 5.

And the true effect of such a clause, which is, in fact, but declaratory of the law, is that it throws the

8. Crane v. Hearn (1875), 26 N. J. Eq. 378.
9. Godefrois' Law of Trusts (1891), p. 234.

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