Reintroduction of the Term "trustee De Son Tort" to the California Trust Lexicon
| Citation | Vol. 15 No. 4 |
| Publication year | 2010 |
By Ralph E. Hughes, Esq*
In King v. Johnston1, plaintiff, a trust beneficiary, contended that the defendant was liable either because (i) the defendant had actively participated in, or knowingly participated in, a trustee's breach of trust, or, (ii) the defendant had acted as the "trustee de son tort" of a decedent's trust. The court accepted plaintiff's arguments - in particular the contention that defendant could have liability based upon her status as a "trustee de son tort," a doctrine introduced into California's common law of trusts as early as 1857 and last employed in a reported decision in 1925.2 The King v. Johnston court commented, "the equitable principles on which the notion of a trustee de son tort is based remain relevant today."3
This article will: (i) discuss the history of the common law concept of "trustee de son tort," (ii) comment on the use of the doctrine in King v. Johnston, (iii) discuss the distinction between the concepts of "trustee de son tort" and "de facto trustee," and (iv) examine some of the potential uses and limitations of the "trustee de son tort" concept.
In King v. Johnston, a husband died, leaving his wife, Lenora, as Trustee of a trust created in his Will. The trust was to provide for Lenora during her lifetime, then be divided among various individuals and charities at her death. Lenora suffered a stroke and transferred management of her finances to her daughter, Barbara. Lenora's condition deteriorated over time. Barbara caused Lenora to transfer a parcel of real property out of the trust and into Lenora's name, without consideration. While Lenora was susceptible to the undue influence of Barbara, Barbara caused Lenora to sign the documents required to use the trust property as security for a loan to Lenora. The loan was not repaid, the bank foreclosed, and the property was lost. Lenora then died, and the transactions regarding the real property were not discovered until more than a year after her death, a circumstance that barred any action against Lenora's estate.4 The money obtained through the loan was spent, and was no longer on hand.
The plaintiff faced the following situation as a beneficiary who discovered the loss of the real property: (i) no action could be maintained against the estate of the former Trustee, Lenora; (ii) no action could be maintained against Barbara as a Trustee, because she had never been appointed (she had, instead, unduly influenced a nominal Trustee to act improperly); and (iii) there was no obvious action for a constructive trust, because Barbara did not retain the real property formerly belonging to the Trust or its proceeds.5 It was necessary, therefore, to search for a theory or combination of theories to hold Barbara responsible for the loss that was - ostensibly - caused by Lenora's breach of trust in signing the various deeds and loan documents transferring and mortgaging trust property.
One potential theory under which Barbara could have been held liable was the dormant doctrine of "trustee de son tort."
California's statutory Trust Law does not define a "trustee de son tort." Nevertheless, the common law doctrine of "trustee de son tort," has a role to play in modern trust law.6 Several cases in the late 1800s and early 1900s discussed the concept of "trustee de son tort." In 1881, the United States Supreme Court (citing a California case) commented, "in certain circumstances, a court of equity decrees a wrong-doer to be a trustee de son tort, and exerts its jurisdiction over him... [W]here a defendant has wrongfully intermeddled with property already impressed with a trust, he may be required as a trustee to account for it as was done in the case of People v. Houghtaling (1857) 7 Cal. 348...."7
The New York Court of Appeals employed the concept of "trustee de son tort" in Easterly v. Barber.8 Easterly v Barber arose under an old law that required trustees of corporations to publish annual statements regarding corporate finances. Failure to publish a required statement rendered the trustees personally liable for corporate debts. Plaintiff, Easterly, sued the co-trustees of a corporation to recover a debt. The co-trustees argued that they should not be liable because Easterly, himself, had shared in the wrongful act of failing to publish, because he had acted as a co-trustee, even though he had never been elected as a co-trustee. The court agreed that, if Easterly held the status of co-trustee, he would not be able to recover his debt under the punitive provisions of the statute requiring publication. It then examined the question of Easterly's status as a co-trustee. It observed that he had not been elected to the position, but then determined that he had, in fact, acted as a co-trustee by assisting in the management of the corporation. It held that, having acted as a managing co-trustee, he could not recover his debt. It concluded, "It is a well-settled rule of trusts that if a person not being in fact a trustee acts as such by mistake or intentionally, he thereby becomes a trustee de son tort."9
In 1884, the Illinois Supreme Court relied on the doctrine to decide Lehmann v. Rothbarth.10 In Lehmann v. Rothbarth, a widow was guardian of funds for her children. Her second husband, Rothbarth, took control of the funds and managed them behind the scenes for many years. During this period the widow was ostensibly in charge, and she filed accounts with the probate court, which accounts were approved. After the widow divorced Rothbarth, her children sued him, seeking to compel him "to account directly to them for the management and disposition of their estate while under his control..."11 Rothbarth argued that his former wife had always been the guardian, and that he was at most an agent, not required to
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