NATIONAL ACADEMY OF SCIENCES V. CAMBRIDGE TRUST CO.
370 Mass. 303, 346 N.E.2d 379 (1976)


PROCEDURAL POSTURE: Petitioner beneficiary sought revocation of payments made by respondent bank to decedent's widow after the decedent's wife had remarried. The Appeals Court (Massachusetts) affirmed the probate court's decision, which ordered the bank to restore the erroneous payments. However, it struck the probate court's decision that permitted the bank to charge the estate for legal services the bank incurred in a recovery action. The bank appealed.

FACTS: Leonard Troland created a trust in his 1932 will to benefit his wife. Florence while she remained unmarried. The express terms of the trust indicated that Troland was worried that Florence would give money to her relatives rather than use it for herself. He indicated that he did not want any portion of the trust income or principal to go to his wife's family and he instructed the trustee (D) to remember this point in administering the trust. Troland provided that his wife should benefit from the trust until she remarried, at which point the benefits of the trust would be transferred to an agency of the National Academy of Sciences (P) (the "Academy"). The trust was established and the trustee (D) regularly paid the income to Mrs. Troland until her death in 1967. During the period of 1932-1945 Mrs. Troland provided 18 different addresses to which the payments were to be sent. In February of 1945, she remarried, changed her name to Florence Flynn, and relocated to New Jersey. She never told the trustee (D) about her remarriage. In April of 1944, she directed the trustee (D) to forward all checks to her in care of her brother-in-law [by marriage to her sister) Kenneth Custance. Over the years, the trustee (D) sent the checks to Custance. who in turn forwarded them to Florence. Florence indorsed them by the name "Florence Troland" then sent them back to her brother-in-law, who deposited them in his bank accounts. After Florence's death in 1967, the trustee became aware of her remarriage. The total of the checks sent to Florence after her remarriage was $106,013.41. The twelfth through thirty-third accounts of the trustee regarding the trust covered the same time period. The accounts were filed with the probate court and the probate court allowed every one. The Academy had notice of the accounts but never challenged any of them because the accounts did not indicate that Florence had remarried. After Florence's death, when both the trustee (D) and the Academy (P) became aware of the deceit, the Academy petitioned the probate court to reopen the faulty accounts and revoke them, and also sought to have the trustee (D) reimburse the trust for the amount it had wrongfully paid to Florence after her marriage, plus interest. The probate court ordered the trustee (D) to restore $114,314.18 to the trust. The trustee (D) appealed.

ISSUE: Where a trustee innocently administers a trust based on false information regarding a beneficiary, is the trustee liable for any payments incorrectly made?

RULE OF LAW: If a trustee innocently makes a false factual statement in the accounts, but has not made reasonable efforts to determine the true facts, he is liable for the jmisrepre s entation.

ANALYSIS: In his will, the decedent directed that all his real and personal property was to be held in a trust by the bank. The net income of the trust was to be paid to his wife during her lifetime so long as she did not remarry. Furthermore, the will provided that if the decedent's wife remarried or died then the remains of the trust would have been paid to the beneficiary. After the decedent passed away, the bank started to make trust payments to the decedent's widow. Unbeknownst to bank, the decedent's widow remarried soon after the decedent's death and continued to receive trust payments until death. It was not until the death of the widow that the bank discovered that she had remarried. On appeal, the court noted that the bank made the disputed payments for 22 years and during that time made no effort to ascertain if the decedent's widow had remarried. Therefore, the court held that marital status of the decedent's wife fully justified the reopening of the accounts. With respect to the surcharge, the court held that the bank was liable to the beneficiary to make restitution. The court also saw no reason to disturb the probate court's award of attorney fees.

OUTCOME: The court affirmed the appellate court's decision that affirmed and modified the probate court's decision.