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Jan18
Trustee and Breach of Contract Part III

The following is not meant to be legal advice and may be outdated research.

 

When a trustee acts in good faith for the benefit of the trust, he is entitled to indemnify himself for his engagements out of the estate in a court of equity.  .  Taylor v. Mayo, 110 U.S. 330 (1884).  This is because the benefits of the contract will go to the beneficiaries of the trust, and the trustee does not gain from the trust administration.  Bogert, Trusts (6th ed.) Section 127. 

If a trustee prudently makes a contract, which is within his powers, he may assert a right of indemnity. 

 

There has been four classes of situations in which a third person is permitted to reach trust property and apply to the satisfaction of his claim in an equity proceeding:  (1) If he cannot obtain satisfaction of his claim out of the trustee’s individual property, he can reach trust property and apply it to the satisfaction of his claim to the extent to which the trustee is entitled to exoneration out of the trust estate.  Restatement, Trusts (2d), Section 268.  (2) If he cannot obtain satisfaction of his claim out of the trustee’s individual property, and if he has conferred a benefit on the trust estate, he can reach trust property to the extent to which the trust estate has been benefited.  Restatement, Trusts (2d), Section 269.  (3) If by the terms of the trust, the settler manifested an intention to permit him to reach trust property and apply to the satisfaction of his claim.  Restatement, Trusts (2d), Section 270.  (4)  If it was agreed that the trustee should not be personally liable upon a contract, but that he should look only to the trust estate.  Restatement, Trusts (2d), Section 271.   

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