If the trustee is guilty of a breach of trust in selling trust property for an inadequate price, he is liable for the difference between the amount he should have received and the amount which he did receive.
An abstract expressionist painter whose works through the years gained him an international reputation died testate, and the principal asset of his estate consisted of 798 paintings of tremendous value. Within a period of only three weeks, the three executors had dealt with all the paintings by two contracts with galleries in which two of the executors had an interest. The artist's children instituted proceedings to remove the executors, to enjoin the galleries from disposing of the paintings, to rescind the sales agreements, and to recover damages. The trial court, finding for the children, held that the appreciated value of the paintings at the time of trial was the measure of damages for the unreturned paintings. An appeal followed.
Was the use of appreciation damages proper where estate assets--decedent artist's valuable works--were sold below value by his estate's executors as a result of a conflict of interest?
The reason for allowing appreciation damages, where there is a duty to retain, and only date of sale damages, where there is authorization to sell, is policy oriented. If a trustee authorized to sell were subjected to a greater measure of damages he might be reluctant to sell (in which event he might run a risk if depreciation ensued). On the other hand, if there is a duty to retain and the trustee sells there is no policy reason to protect the trustee; he has not simply acted imprudently, he has violated an integral condition of the trust.