
151 S.E.2d 78 (1966)
268 N.C. 467
Joseph LICHTENFELS, Johanna L. Abrahams, Carolyn L. Green, and Helen L. Gumpert
v.
NORTH CAROLINA NATIONAL BANK, a Corporation.
No. 118.
Supreme Court of North Carolina.
November 23, 1966.
*83 Williams, Williams & Morris, by Robert R. Williams, Jr., Asheville, for plaintiff appellants.
Adams, Kleemeier, Hagan & Hannah, by Charles T. Hagan, Jr., Greensboro, Uzzell & DuMont, by Harry DuMont, Asheville, for defendant appellee.
HIGGINS, Justice.
During the pleading stage of this controversy the court heard and passed on numerous motions to strike from, and by amendment add to, the pleadings. On defendant's motion the court ordered the case transferred to Mecklenburg County for trial. The order was reversed by this Court. The opinion, reported in 260 N.C. 146, 132 S.E.2d 360, 1 A.L.R.3d 897, contains factual background not now repeated.
After the removal order was vacated and the case returned to Buncombe County, the parties, by stipulation, waived a jury trial and consented for Judge Campbell to hear the evidence, find the facts, enter his conclusions of law, and render judgment. See Woodward v. Mordecai, 234 N.C. 463, 67 S.E.2d 639. Based upon the findings, Judge Campbell concluded the plaintiff had failed to make out a case and entered judgment dismissing the action. The plaintiffs excepted and appealed.
The case on appeal, including the exhibits, comprises more than 1,800 pages. Each of the briefs exceeds 100 pages. Notwithstanding the length of the record, the parties, by stipulation, limited the inquiry to these questions: (1) Did the plaintiffs establish their right to surcharge the trustee with a breach of trust resulting in loss? And (2), if so, what was the amount of the loss?
The powers and duties of the trustee in this case have their foundation in the trust instrumentthe Will of Mrs. Carrie C. Long. The will specifically provides: "My trustees are hereby expressly authorized to retain as a proper investment of trust funds, any stock or other securities owned by me, or which may be purchased by them after my death, and I leave it solely to them to allow such investments to remain intact * * *."
The Lichtenfels Trust, among other assets, received 258½ shares of common and 126½ shares of preferred stock in three Cone corporations. In 1946, by consolidations and mergers, the common and preferred stocks were withdrawn and in lieu thereof 9,101 shares of common stock in Proximity Manufacturing Company were substituted. In 1948 the Proximity stock also was withdrawn and 27,303 shares of Cone Mills Company stock were substituted. At the time of settlement the trustee delivered to plaintiffs 18,000 shares of Cone stock. The other 9,303 shares had been sold in small blocks for purposes of reinvestment.
When the first sale was proposed, Mrs. Lichtenfels was consulted and replied: "I would feel distressed if you disposed of any of the stock for purposes of reinvestment." This advice was given by the life tenant who was the mother of the remaindermen. Later, she approved the trustee's sales made for purposes of some diversification. Is the trustee now responsible for failure to sell more? Here are some of the rules by which the trustee's conduct on this question should be judged:
"Trustees are justly and uniformly considered favorably, and it is of great importance * * * that they should not be held to make good, losses in the depreciation *84 of stocks or the failure of the capital itself, which they hold in trust, provided they conduct themselves honestly and discreetly and carefully, according to the existing circumstances, in the discharge of their trusts. If this were held otherwise, no prudent man would run the hazard of losses which might happen without any neglect or breach of good faith. Sheets v. J. G. Flynt Tobacco Co., 195 N.C. 149, 141 S.E. 355.
"Good faith and the use of ordinary care and reasonable diligence are all that can be required of executors and administrators * * *. They are not insurers." Thigpen v. Farmers Banking & Trust Co., 203 N.C. 291, 165 S.E. 720.
The foregoing cases were decided on the general rule. In them sole discretion or other directives were not given by the trustor.
"When it appears that a trustee has exercised or proposes to exercise * * * discretion in good faith, and with an honest purpose to effectuate the trust, the courts will not undertake to supervise or control his actions. They will not undertake to set aside or override his judgment in matters clearly committed to his discretion and to substitute therefor the judgment of others, or their own judgment, upon the sole allegation that the action of the trustee is not wise or just." Carter v. Young, 193 N.C. 678, 137 S.E. 875.
"It is not the province of the courts to substitute their judgment or the wishes of the beneficiaries for the judgment and wishes of the testator. The controlling objective is to preserve the trust and effectuate the primary purpose of the testator." Carter v. Kempton, 233 N.C. 1, 62 S.E.2d 713.
"A breach of trust necessarily supposes that there is a rule for the government of the trustee. The creator of the trust may prescribe what rules he pleases." Hester v. Hester, 16 N.C. 328.
"A trustor is privileged to impose terms and conditions upon the administration of his estate, as well as to select the agencies for the distribution of his bounty." Young v. Hood, 209 N.C. 801, 184 S.E. 823.
The law selects and applies certain standards for the conduct of trustees. The trustor, however, may fix the rules for the exercise of the powers given, "except so far as the performance of the duties or the exercise of the powers is or becomes impossible, or the provision is illegal, or there has been such a change of circumstances as to justify or require deviation from the terms of the trust." Scott on Trusts, 2d Ed., § 164.
The testator's intention must be ascertained from the will and given effect "unless it is contrary to some rule of law or at variance with public policy." Entwistle v. Covington, 250 N.C. 315, 108 S.E. 2d 603.
An executor (likewise a trustee) is one named by the testator and appointed to carry the will into effect after the death of the maker and to dispose of the estate according to its terms. In re Will of Wilson, 260 N.C. 482, 133 S.E.2d 189; Wachovia Bank & Trust Co. v. Bryant, 258 N.C. 482, 128 S.E.2d 758; Callaham v. Newsom, 251 N.C. 146, 110 S.E.2d 802.
More is involved in this case than the wisdom of diversification in the management of a trust estate. The corpus of the trust contained what had become a large block of Cone Mills stock. The Cone family originated and developed the textile business into the fifth or sixth largest in this country. The ownership and management were in the hands of members of the family. According to the evidence, those in control were careful, cautious, highly respected and successful businessmen. The trustor, a member of the family, made her brothers executors and trustees. She provided, however, that the Atlantic Bank and Trust Company, defendant's predecessor, should succeed the brothers if they failed to qualify. *85 The terms of her will expressly authorized the trustee to retain the Cone stock as a proper investment of trust funds. "* * * and I leave it solely to them to allow such investment to remain intact."
By succession, the present defendant became trustee. Its trust officers lived in Greensboro. They were well acquainted with the business operations of Cone Mills. The trust officers and trust committee of the defendant knew that to sell stock in a company operated close at hand and whose management they knew to be careful and successful, and to reinvest in other stocks would not only involve transfer and brokerage fees, but would place in the trust portfolio stocks in companies operated away from Greensboro by people not known, or not well known.
But recognizing, as the trust officers of the defendant bank did, that under ordinary circumstances there is some safety in diversification, nevertheless these questions confronted the trustee: When would it be good business to sell Cone stock? When, and at what prices, would it be good business to buy replacements? Not only the considerations discussed in the preceding paragraphs, but the directives in the will served not to lock, but to put a brake on, and to slow down, the spin of the diversification reel. Mrs. Long had taken the risk of accumulating and retaining what had developed into a large block of Cone Mills stock. By the terms of her will she authorized her trustee to continue the risk solely in its discretion. The excellent income, amounting to almost one million dollars, to the life tenant was an added inducement to hold Cone stock.
The depreciation in the value of textile stocks, according to one witness, resulted from two-price cotton and synthetics. By looking backward, one may find in financial records times at which Cone stock could have been sold and times and prices at which other stock could have been bought with great benefit to the trust. But wisdom resulting solely from a backward look is not a fair test. Many businesses considered by the experts as sound, have wound up in bankruptcy. The future of a business, as an investment, may look bright, but success is never a certainty. The experts are able to give well informed forecasts but future success is only a hope and a prediction never a certainty. Looking backward to 1946, two hundred fifty-eight and one-half shares of common stock and 126½ shares of preferred stock had, by consolidation, become 9,103 shares of Proximity Manufacturing Company stock; and in 1948 had become 27,303 shares of Cone Mills. The trustee held and delivered to the plaintiffs 18,000 shares. The remainder had been sold in small blocks for reinvestment. When a sale was first proposed, Mrs. Lichtenfels, the life tenant, advised "* * * I would feel distressed if you disposed of any of the stock for purpose of reinvestment." This advice came from the life tenant who was the mother of the remaindermen. Later on, however, she approved the trustee's sales made for purposes of diversification.
The parties in their exhaustive briefs have discussed various rules relating to diversification. The discussions involved the Massachussetts, New York, and Pennsylvania rules, the prudent man, the all eggs in one basket, the bad faith and gross negligence rules, and cite cases, textbooks and law review articles sufficient to keep a slow reader busy from now until Christmas. 47 A.L.R.2d, 187; 54 Am.Jur., § 327; Scott on Trusts, 2d Ed.; Bogert on Trusts, § 683; 41 Columbia Law Review 1282; 1963 Michigan Law Review 1282. After all, this is a North Carolina case. The trust was created by the Will of a North Carolina citizen to be administered under the laws of this State. Here the directives in a Will are honored and given effect unless some overriding and compelling reason requires deviation. Redwine v. Clodfelter, 226 N.C. 366, 38 S.E.2d 203; Cocke v. Duke University, 260 N.C. 1, 131 S.E.2d 909. The rule of law which fits this case is stated in 47 A.L.R. 2d 187, at 266: "But where a decedent leaves an estate which is not diversified in a prudent manner, as where the principal *86 asset of the estate is stock in a family corporation, and he authorizes the retention of investments, the trustee is not obliged to sell part of the assets merely to obtain diversification." Citing authorities, including the leading diversification StateMassachussetts.
As a side reflection on the trustee's decision to sell only 9,303 shares of common stock at prices as low as $12.37 per share, we may note the stipulation in this case that on the day of distribution, November 8, 1963, the fair market value of Cone Mills stock was $14.77 per share; and on the day trial began, April 26, 1965, the stock had a fair market value of $26.87 per share. From the foregoing it may be well argued the trustee sold as much as was wise.
The evidence shows, and the court found, the defendant gave due attention to the composition of the Long trust. The record sustains Judge Campbell's findings and conclusions that the plaintiffs have failed to make out their case. The judgment dismissing the action is
Affirmed.
