accountant or an attorney or some capable business friend, to look into the whole matter and see that it is all straight. In all trust relations, the beneficiary may have an accounting ordered where there is any reason for suspicion or any failure to allow inspection or to make satisfactory reports and state ment. In all cases where there are trust relations, a court of equity will, wherever it seems advisable, order an accounting, going back as far as may be necessary to show all the dealings with the trust property. The only difficulty in such case is the expense and trouble incident to the procedure. § 421. Right to Restrain Injurious Action The cestui que trust may have an injunction issued to restrain the trustee from proceeding with any unauthorized action, if such action will result in irremediable damage. A court of equity will, in a proper case, issue such restraining order as the particular situation demands. In a case requiring such action, stockholders may restrain directors from taking unlawful action. § 422. Right to Have Trustees Removed A cestui que trust has the right to have the trust property managed by honest, capable trustees, and if a trustee is not capable, or refuses to act, or deals with the trust fund for his own benefit, or fails to pay over the income as directed, or becomes interested adversely to the beneficiary, or if there is any other good cause for change, a bill or petition for his removal and the appointment of another will be received and acted upon if the case against' the trustee is proved. This is a regular court proceeding, and the offending trustee must be duly notified and have the opportunity to file an answer and to be heard in opposition, which means that a formal trial must be had. If there is danger that the trust property will not be properly handled pending the trial, the court will appoint a receiver. It is to be noted that proceedings of this kind are not simple and should be undertaken only on advice and under the direction of capable and conscientious counsel. § 423. Right to Follow the Trust Fund The cestui que trust can follow the trust property and have it subjected to the trust, unless it comes into the hands of an innocent holder for value. This is true also as to property substituted for the original property. As long as the fund can be traced, a court of equity will hold it for the benefit of the original cestui que trust. The right depends: (1) on the tracing of the trust property or money received for it, and (2) on the party in possession having a knowledge of the trust when he bought it. It is not a case that occurs often, and when it does occur, the aid of counsel will assuredly be required. (See § 416.) § 424. Remedy Against Trustee If the trust property has been made away with and cannot be traced, or if when traced it is found to be in the hands of an innocent holder for value, the cestui que trust may then bring an action directly against the trustee. In any case he may do this, for the trustee is always responsible for the damage caused by any breach of trust. As courts of equity always have cognizance of all matters relating to trusts, such a suit would be brought in a court of equity, because the remedies are more effective than the simple judgment for damages given by a court of law. For instance, if the trustee had sold trust real estate to an innocent purchaser for value, a court of law could give judgment only for a sum of money, while a court of equity may: (1) compel the trustee to purchase other lands, or (2) allow the cestui que trust to take the proceeds of the sale with interest, or (3) give judgment simply for damages. As a general rule, a trustee cannot protect himself, following a breach of trust, by showing that with diligence and due care a cestui que trust could have protected himself or prevented the loss or damage; but, in the case where the trustee has failed to bring suit when he should and the cestui que trust has already had the trustee removed because of this, and there is still time to start a suit, the trustee may use this as a partial defense against any later suit brought against him by the cestui que trust. The reason that such evidence is admissible is because it shows that any loss on the part of the cestui que trust was not entirely due to the trustee's negligence, but due in part to the carelessness of the cestui que trust. REVIEW QUESTIONS 1. What rights of inspection has the beneficiary? What is the duty of the trustee as to records? May a beneficiary have the aid of an accountant or attorney in examining accounts? 2. When may a beneficiary have an injunction issued? 3. For what causes may a trustee be removed? Is this a simple matter? 4. If the trustee makes away with trust property, what remedy has the cestui que trust? On what does the right to trace the property depend? 5. Is the trustee liable to action for making away with trust property? In what court? What remedy can be secured? CHAPTER XLIX POWERS OF TRUSTEES § 425. Classification of Powers Trustees have certain general powers by virtue of their offices. Every trustee has these general powers unless the instrument creating the trust in some way limits them. They are inherent in the office of trustee and may be limited by the declaration of trust. If the instrument creating the trust gave other powers, these would be special powers. Special powers are either mandatory or discretionary. Mandatory powers are positive and must be carried into effective action. Discretionary powers are left to the judgment of the trustee as to whether or not they are to be exercised. The rights and powers of a trustee properly qualified and appointed are derived from and measured and limited by, the instrument creating the trust, and usually include not only general authority to possess, manage and preserve the trust property, and to execute this trust, by distributing the property and funds among the cestui que trust, but specific authority to sell, mortgage, lease and pledge the trust property and to invest the trust funds, as well as authority to institute and defend actions for the benefit of the trust and to incur reasonable expenses in administering and executing the trust.1 § 426. General Powers The general powers of all persons who are appointed trustees are as follows: 139 Cyc. 290. 1. To take possession of and hold the trust property. 2. To invest trust funds so as to yield a fair income. 3. To sell and re-invest when it is necessary. 4. To sell and convey real estate when necessary to carry 5. To release real estate so that it may earn income. 7. To sue or defend suits when necessary. 8. To contract so far as may be necessary to carry out the purposes of the trust. 9. To pay over and distribute the trust property to those entitled to it. The enumerated powers include all incidental powers necessary effectively to exercise the powers named. For instance, to take possession may require suit to be brought, counsel to be employed, and, possibly, compromises to be agreed to. If property is leased, the income must be collected and applied. In all cases of doubt as to what the law is, and what the conduct of trustees ought to be under it, they are entitled to instruction and direction from the court.2 § 427. Mandatory Powers Powers are mandatory or imperative when they must be exercised positively within a reasonable time or at a given time or when some contingency happens. Imperative powers may be: I. To sell real estate or other property. 2. To pay over income. 3. To pay over principal. 4. To transfer property. 'Perry on Trusts, § 476. |