“§ 1(b) of the Act, 15 U.S.C.A. § 80a-l(b), in effect codifies the fiduciary obligations placed upon officers and directors of investment companies.”
How later courts described this case
- “§ 1(b) of the Act, 15 U.S.C.A. § 80a-l(b), in effect codifies the fiduciary obligations placed upon officers and directors of investment companies.”
Written by the judges who cited it.
The opinion
PETERS, J.
(concurring). I concur in the conclusion of the other members of the court that the judgment of the District Court should be affirmed; but I do not think it is necessary to go further than to say that, granting the terms of the trust instrument were sufficiently broad in wording to authorize the purchase of the control of a race track, an investment of such a character by trustees is so unusual and, in this case, so foreign to the established policy of the management of the trust that it requires a clear showing of the highest degree of good faith and wholly disinterested motives on their part to justify it. It has been said that “The broader the latitude of the discretion given to the trustee, the greater is the duty of good faith required in the exercise thereof.” Mayfield v. First Nat. Bank of Chattanooga, 6 Cir., 137 F.2d 1013, 1019 . The District Judge, who saw and heard the witnesses, reached the conclusion and found as a matter of fact that, in making their purchase, the trustees were motivated by self interest. Even if motivated only in part by self interest the result would he the same, in my opinion, and certainly to that extent the finding cannot be called clearly erroneous or unreasonable.
In view of the declaration of policy set forth in the Act in question it appears that the term “gross abuse of trust”, as used therein, covers a course of conduct by the officers and controlling stockholders of an investment company in violation of the standards of conduct generally applied to fiduciaries, such as would exist if they were acting with other than disinterested motives.