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continuing to pay their board. After 1856 neither of the children ever resided in the state of New York. On January 18, 1860, their aunt was married to Benjamin H. Micou, of Montgomery, in the state of Alabama, and the children and their grandmother thereafter lived with Mr. and Mrs. Micou at Montgomery, and the children were educated and supported at Mr. Micou's expense. From 1855 to 1859 Lamar resided partly in Georgia and partly in New York. In the spring of 1861 he had a temporary residence in the city of New York, and upon the breaking out of the war of the rebellion, and after removing all his own property, left New York, and passed through the lines to Savannah, and there resided, sympathizing with the rebellion, and doing what he could to accomplish its success, until January, 1865, and continued to have his residence in Savannah until 1872 or 1873, when he went to New York again, and afterwards lived there. Mr. and Mrs. Micou also sympathized with the rebellion and desired its success, and each of them, as well as Lamar, failed during the rebellion to bear true allegiance to the United States.
At the time of Lamar's appointment as guardian, 10 shares in the stock of the Mechanics' Bank of Augusta, in the state of Georgia, which had belonged to William W. Sims in his life-time, stood on the books of the bank in the name of Mrs. Abercrombie as his administratrix, of which one-third belonged to her as his widow, and one-third to each of the infants. In January, 1856, the bank refused a request of Lamar to transfer one-third of that stock to him as guardian of each infant, but afterwards paid to him as guardian, from time to time, two-thirds of the dividends during the life of Mrs. Abercrombie, and all the dividends after her death until 1865. During the period last named, he also received as guardian the dividends on some other bank stock in Savannah, which Mrs. Abercrombie owned, and to which, on her death, her husband became entitled. Certain facts, relied on as showing that he, immediately after his wife's death, made a surrender of her interest in the bank shares to Lamar, as guardian of her children, are not material to the understanding of the decision of this court, but are recapitulated in the opinion of the circuit court. 7 Fed. Rep. 180-185. In the winter of 1861-62, Lamar, fearing that the stock in the Bank of the Republic at New York, held by him as guardian, would be confiscated by the United States, had it sold by a friend in New York; the proceeds of the sale, which were about 20 per cent. less than the par value of the stock, invested at New York in guarantied bonds of the cities of New Orleans, Memphis, and Mobile, and of the East Tennessee & Georgia Railroad Company; and those bonds deposited in a bank in Canada. Lamar from time to time invested the property of his wards, that was within the so-called Confederate states, in whatever seemed to him to be the most secure and safe—some in Confederate states bonds, some in the bonds of the individual states which composed the confederacy, and some in bonds of cities, and of railroad corporations, and stock of banks within those states. On the money of his wards, accruing from dividends on bank stock, and remaining in his hands, he charged himself with interest until the summer of 1862, when, with the advice and aid of Mr. Micou, he invested $7,000 of such money in bonds of the Confederate states and of the state of Alabama; and in 1863, with the like advice and aid, sold the Alabama bonds for more than he had paid for them, and invested the proceeds also in Confederate states bonds; charged his wards with the money paid, and credited them with the bonds; and placed the bonds in the hands of their grandmother, who gave him a receipt for them and held them till the end of the rebellion, when they, as well as the stock in the banks at Savannah, became worthless.
Martha M. Sims died on November 2, 1864, at the age of 15 years, unmarried and intestate, leaving her sister Ann C. Sims her next of kin. On Jan. uary 12, 1867, Lamar, in answer to letters of inquiry from Mr. and Mrs.
Micou, wrote to Mrs. Micou that he had saved from the wreck of the property of his niece, Ann C. Sims, surviving her sister, three bonds of the city of Memphis, indorsed by the state of Tennessee, one bond of the city of Mobile, and one bond of the East Tennessee & Georgia Railroad Company, each for $1,000, and with some coupons past due and uncollected; and suggested that by reason of his age and failing health, and of the embarrassed state of his own affairs, Mr. Micou should be appointed in Alabama guardian in his stead. Upon the receipt of this letter, Mrs. Micou wrote to Lamar, thanking him for the explicit statement of the niece's affairs, and for the care and trouble he had had with her property; and Ann C, Sims, then nearly 16 years old, signed a request, attested by her grandınother and by Mrs. Micou, that her guardianship might be transferred to Mr. Micou, and that he might be appointed her guardian. And on March 15, 1867, he was appointed guardian of her property by the probate court of the county of Montgomery and state of Alabama, according to the laws of that state, and gave bond as such. On May 14, 1867, Lamar sent to Micou complete and correct statements of his guardianship account with each of his wards, as well as all the securities remaining in his hands as guardian of either, and a check payable to Micou as guardian of Ann C. Sims for a balance in money due her; and Micou, as such guardian, signed and sent to Lamar a schedule of and receipt for the property, describing it specifically, by which it appeared that the bonds of the cities of New Orleans and Memphis, and of the East Tennessee & Georgia Railroad Company, were issued, and the Memphis bonds, as well as the railroad bonds, were indorsed by the state of Tennessee, some years before the breaking out of the rebellion. Micou thenceforth continued to act in all respects as the only guardian of Ann C. Sims until she became of age on June 1, 1872.
No objection or complaint was ever made by either of the wards or their relatives against Lamar's transactions or investments as guardian until July 28, 1874, when Micou wrote to Lamar informing him that Ann C. Sims desired a settlement of his accounts, and that he had been advised that no cred. its could be allowed for the investments in Confederate states bonds, and that Lamar was responsible for the security of the investments in other bonds and bank stock. Lamar was then sick in New York, and died there on October 5, 1874, without having answered the letter. Before the case was heard in the circuit court, Ann C. Sims died, on May 7, 1878, and on June 20, 1878, Mrs. Micou was appointed, in New York, administratrix de bonis non of Martha M. Sims, and as such filed a bill of revivor in this suit. On October 3, 1878, the defendant filed a cross-bill, repeating the allegations of his answer to the original bill, and further averring that Ann C. Sims left a will which had been admitted to probate in Montgomery county, in the state of Alabama, and afterwards in the county and state of New York, by which she gave all her property to Mrs. Micou, who was her next of kin, and that Mrs. Micou was entitled to receive for her own benefit whatever might be recovered in the principal suit, and was estopped to deny the lawfulness or propriety of Lamar's acts, because whatever was done by him as guardian of Martha M. Sims in her life-time, or as guardian of the interests of Ann C. Sims as her next of kin, was authorized and approved by Mrs. Micou and her mother and husband as the natural guardians of both children. Mrs. Micou, as plaintiff in the bill of revivor, answered the cross-bill, alleging that Ann succeeded to Martha's property as her administratrix, and not as her next of kin, admitting Ann's will and the probate thereof, denying that Mrs. Micou was a natural guardian of the children, and denying that she approved or ratified Lamar's acts as guardian. A general replication was filed to that answer.
Upon a hearing on the pleadings and the agreed statement of facts, the circuit court dismissed the cross-bill, held all Lamar's investments to have been breaches of trust, and entered a decree referring the case to a master to state an account. The case was afterwards heard on exceptions to the
master's report, and a final decree entered for the plaintiff for $18,705.19, including the value before 1861 of those bank stocks in Georgia of which Lamar had never had possession. The opinion delivered upon the first hearing is reported in 17 Blatchf. 378, and in 1 Fed. Rep. 14, and the opinion upon the second hearing in 7 Fed. Rep. 180. The defendant appealed to this court.
* The authority of the surrogate's court of the county of Richmond and state of New York to appoint Lamar guardian of the persons and property of infants at the time within that county, and the authority of the supreme court of the state of New York, in which this suit was originally brought, being a court of general equity jurisdiction, to take cognizance thereof, are not disputed; and, upon the facts agreed, it is quite clear that none of the defenses set up in the answer afford any ground for dismissing the bill. The war of the rebellion, and the residence of both ward and guardian within the territory controlled by the insurgents, did not discharge the guardian from his responsibility to account, after the war, for property of the wards which had at any time come into his hands, or which he might, by the exercise of due care, have obtained possession of. A state of war does not put an end to pre-existing obligations, or transfer the property of wards to their guardians, or release the latter from the duty to keep it safely, but suspends until the return of peace the right of any one residing in the enemy's country to sue in our courts. Ward v. Smith, 7 Wall. 447; Montgomery v. U. 8. 15 Wall. 395, 400; Insurance Co. v. Davis, 95 U. S. 425, 430; Kershaw v. Kelsey, 100 Mass. 561, 563, 564, 570; 3 Phillim. Int. Law, (2d Ed.) § 589. The appointment of Micou in 1867 by a court of Alabama to be guardian of the surviving ward, then residing in that state, did not terminate Lamar's liability for property of his wards which he previously had or ought to have taken possession of. The receipt given by Micou was only for the securities and money actually handed over to him by Lamar; and if Micou had any authority to discharge Lamar from liability for past mismanagement of either ward's property, he never assumed to do so. The suggestion in the answer, that the surviving ward, upon coming of age, ratified and approved the acts of Lamar as guardian, finds no support in the facts of the case. The further grounds of defense, set up in the cross-bill, that Micou participated in Lamar's investments, and that Mrs. Micou approved them, are equally unavailing. The acts of Micou, before his own appointment as guardian, could not bind the ward. And admissions in private letters from Mrs. Micou to Lamar could not affect the rights of the ward, or Mrs. Micou's authority, upon being afterwards appointed administratrix of the ward, to maintain this bill as such against Lamar's representative, even if the amount recovered will inure to her own benefit as the ward's next of kin. 1 Greenl. Ev. § 179. The extent of Lamar's liability presents more difficult questions of law, now for the first time brought before this court. The general rule is everywhere recognized, that a guardian or trustee, when investing property in his hands, is bound to act honestly and faithfully, and to exercise a sound discretion, such as men of ordinary prudence and intelligence use in their own affairs. In some jurisdictions no attempt has been made to establish a more definite rule; in others, the discretion has been confined, by the legislature or the courts, within strict limits.
The court of chancery, before the Declaration of Independence, appears to have allowed some latitude to trustees in making investments. The best evidence of this is to be found in the judgments of Lord HARDWICKE. He held, indeed, in accordance with the clear weight of authority before and since, that money lent on a mere personal obligation, like a promissory note, without security, was at the risk of the trustee. Ryder v. Bickerton, 3 Swanst. 80, note; S. C. 1 Eden, 149, note; Barney v. Saunders, 16 How. 535, 545; Perry, Trusts, 453. But, in so holding, he said: “For it should have
been on some such security as binds land, or soinething to be answerable for it.” 3 Swanst. 81, note. Although in one case he held that a trustee, directed by the terms of his trust to invest the trust money in government funds or other good securities, was responsible for a loss caused by his investing it in South Sea stock, and observed that neither South Sea stock nor bank stock was considered a good security, because it depended upon the management of the governor and directors, and the capital might be wholly lost, (Traford v. Boehm, 3 Atk. 440, 444;) yet, in another case, he declined to charge a trus. tee for a loss on South Sea stock, which had fallen in value since the trustee received it, and said that “to compel trustees to make up a deficiency, not owing to their willful default, is the harshest demand that can be made in a court of equity.” Jackson V. Jackson, 1 Atk. 513, 514; S. C. West, Ch. 31, 34. In a later case he said: "Suppose a trustee, having in his hands a considerable sum of money, places it out in the funds, which afterwards sink in their value, or on a security at the time apparently good, which afterwards turns out not to be so, for the benefit of the cestui que trust; was there ever an instance of the trustee's being made to answer the actual suin so placed out? I answer, 'No.' If there is no mala fides, nothing willful in the conduct of the trustee, the court will always favor him; for, as a trust is an office necessary in the concerns between man and man, and which, if faithfully discharged, is attended with no small degree of trouble and anxiety, it is an act of great kindness in any one to accept it. To add hazard or risk to that trouble, and subject a trustee to losses which he could not foresee, and, con. sequently, not prevent, would be a manifest hardship, and would be deterring every one from accepting so necessary an office.” That this opinion was not based upon the fact that in England trustees usually receive no compensation is clearly shown by the chancellor's adding that the same doctrine held good in the case of a receiver, an officer of the court, and paid for his trouble; and the point decided was that a receiver, who paid the amount of rents of estates in his charge to a Bristol tradesman of good credit, taking his bills therefor on London, was not responsible for the loss of the money by his becoming bankrupt. Knight v. Plymouth, 1 Dick. 120, 126, 127; S. Č. 3 Atk. 480. And the decision was afterwards cited by Lord HARDWICKE himself as showing that when trustees act by other hands, according to the usage of business, they are not answerable for losses. Ex parte Belchier, 1 Amb. 218, 219; S. C. 1 Kenyon, 38, 47.
In later times, as the amount and variety of English government securities increased, the court of chancery limited trust investments to the public funds, disapproved investments either in bank stock or in mortgages of real estate, and prescribed so strict a rule that parliament interposed; and by the statutes of 22 & 23 Vict. c. 35, and 23 & 24 Vict. c. 38, and by general orders in chancery, pursuant to those statutes, trustees have been authorized to invest in stock of the bank of England or of Ireland, or upon mortgage of freehold or copyhold estates, as well as in the public funds. Lewin, Trusts, (7th Ed.) 282, 283, 287. In a very recent case the court of appeal and the house of lords, following the decisions of Lord HARDWICKE in Knight v. Plymouth and Ex parte Belchier, above cited, held that a trustee investing trust funds, who employed a broker to procure securities authorized by the trust, and paid the purchase money to the broker, if such was the usual and regular course of business of persons acting with reasonable care and prudence on their own account, was not liable for the loss of the money by fraud of the broker. Sir GEORGE JESSEL, M. R., Lord Justice BOWEN, and Lord BLACKBURN affirmed the general rule that a trustee is only bound to conduct the business of his trust in the same manner that an ordinarily prudent man of business would conduct his own; Lord BLACKBURN adding the qualification that “a trustee must not choose investments other than those which the terms of his trust permit.” Speight v. Gaunt, 22 Ch. Div. 727, 739, 762; 9 App. Cas. 1, 19.
In this country there has been a diversity in the laws and usages of the several states upon the subject of trust investments.
In New York, under Chancellor KENT, the rule seems to have been quite undefined. See Smith v. Smith, 4 Johns. Ch. 281, 285; Thompson v. Brown, 4 Johns. Ch. 619, 628, 629, where the chancellor quoted the passage above cited from Lord HARDWICKE's opinion in Knight v. Plymouth. And in Brown v. Campbell, Hopk. Ch. 233, where an executor in good faith made an investment, considered at the time to be advantageous, of the amount of two promissory notes, due to his testator from one manufacturing corporation, in the stock of another manufacturing corporation, which afterwards became insolvent, Chancellor SANFORD held that there was no reason to charge him with the loss. But by the later decisions in that state investments in bank or railroad stock have been held to be at the risk of the trustee, and it has been intimated that the only investments that a trustee can safely make without an express order of court are in government or real estate securities. King v. Talbot, 40 N. Y. 76, affirming S. C. 50 Barb. 453; Ackerman v. Emott, 4 Barb. 626; Mills v. Hoffman, 26 Hun, 594; 2 Kent, Comm. 416, note b. So the decisions in New Jersey and Pennsylvania tend to disallow investments in the stock of banks or other business corporations, or otherwise than in the public funds or in mortgages of real estate. Gray v. Fox, Saxt. 259, 268; Halsted v. Meeker, 3 C. E. Green, 136; Lathrop v. Smalley, 8 C. E. Green, 192; Worrell's Appeal, 9 Pa. St. 508, and 23 Pa. St. 44; Hemphill's Appeal, 18 Pa. St. 303; Thmsen's Appeal, 43 Pa. St. 431. And the New York and Pennsylvania courts have shown a strong disinclination to permit investments in real estate or securities out of their jurisdiction. Ormiston v. Olcott, 84 N. Y. 339; Rush's Estate, 12 Pa. St. 375, 378.
In New England, and in the southern states, the rule has been less strict. In Massachusetts, by a usage of more than half a century, approved by a uniform course of judicial decision, it has come to be regarded as too firmly settled to be changed, except by the legislature, that all that can be required of a trustee to invest is that he shall conduct himself faithfully and exercise a sound discretion, such as men of prudence and intelligence exercise in the permanent disposition of their own funds, having regard, not only to the probable income, but also to the probable safety, of the capital; and that a guardian or trustee is not precluded from investing in the stock of banking, insurance, manufacturing, or railroad corporations within or without the state. Harvard College v. Amory, 9 Pick. 446, 461; Lovell v. Minot, 20 Pick. 116, 119; Kinmonth v. Brigham, 5 Allen, 270, 277; Clark v. Garfield, 8 Allen, 427; Brown v. French, 125 Mass. 410; Bowker v. Pierce, 130 Mass. 262. In New Hampshire and in Vermont, investments, honestly and prudently made, in securities of any kind that produce income, appear to be allowed. Knowlton v. Bradley, 17 N. H. 458; Kimball v. Reding, 11 Fost. 352, 374; French v. Currier, 47 N. H. 88, 99; Barney v. Parsons, 54 Vt. 623.
In Maryland, good bank stock, as well as government securities and mortgages on real estate, has always been considered a proper investment. Ham. mond v. Hammond, 2 Bland, 306, 413; Gray v. Lynch, 8 Gill, 403; Murray v. Feinour, 2 Md. Ch. 418. So, in Mississippi, investment in bank stock is allowed. Smyth v. Burns, 25 Miss. 422.
In South Carolina, before the war, no more definite rule appears to have been laid down than that guardians and trustees must manage the funds in their hands as prudent men manage their own affairs. Boggs v. Adger, 4 Rich. Eq. 408, 411; Spear v. Spear, 9 Rich. Eq. 184, 201; Snelling v. McCreary, 14 Rich. Eq. 291, 300.
In Georgia the English rule was never adopted; a statute of 1845, which authorized executors, administrators, guardians, and trustees, holding any trust funds, to invest them in securities of the state, was not considered compulsory; and before January 1, 1863, (when that statute was amended by