Full opinion text
FACTS AND OPINION WILLIAM E. DOYLE, District Judge. This case was tried to the court without a jury commencing on July 24, 1967 and concluding on August 8, 1967. Thereafter briefs were submitted; the final brief having been filed on September 25, 1967, and the cause now stands submitted. The evidence herein is voluminous and although it will not be described in minute detail much of it will be considered and treated so as to furnish a basis for decision. The facts which are herein narrated are to be regarded as findings unless otherwise indicated. Separate formal findings as to the more important facts are appended hereto. Description of the Contentions and Issues The action is brought by two of several beneficiaries of the Agnes Reid Tammen Trust which for convenience will be referred to as the “Tammen Trust.” They attack the sale by the trustee, defendant Denver United States National Bank of 17,705 shares of stock of The Denver Post, Inc. to the defendant Helen G. Bonfils for the sum of $300.00 per share. They assert that this sale was for various reasons in breach of trust — that had the market been tested in accordance with orthodox trust practice the trust would have received $500.00 per share; that S. I. Newhouse was a potential purchaser known to the Bank as such and that the Bank’s failure to explore this source of purchase together with other attendant circumstances subjects it to surcharge for the amount which could have been realized had it followed out the demands of good trustee practice. A further count of the complaint alleges the existence of an unlawful conspiracy between the Bank, The Denver Post, Inc. and Miss Bonfils to sell the stock to Miss Bonfils to the exclusion of S. I. Newhouse in breach of the Bank’s fiduciary duty. Plaintiffs alternatively seek rescission of the entire transaction and the resale of the stock at public auction. It is alleged that Miss Bonfils purchased with knowledge that the stock was sold in breach of trust and that consequently she is not a bona fide purchaser; that she is subject to a rescission decree. The Bank’s position is a vehement denial that it acted pursuant to an illegal plan or scheme or in breach of trust. It denies that it committed any breach of trust; it maintains that it exercised the utmost good faith in all of its dealings and that the result was favorable— that the price realized was far in excess of any price ever paid at any previous sale; that it exceeded actual value and was highly beneficial to the trust. Helen Bonfils and The Denver Post, Inc. deny any scheme or device to injure or defraud the plaintiffs — Miss Bonfils alleges that as a daughter of the co-founder of The Post she had a valid interest in purchasing the stock and in preventing any other adverse interest from coming into it. The claim is that Miss Bonfils paid a fair price for the stock and purchased it following hard bargaining. Her further contention is that she was not a party to any breach of trust — that she was a good faith purchaser entitled to seek a favorable bargain and is not subject to a decree of rescission. Although the stock which has given rise to this case is a minority interest ownership of which could not vest control, nevertheless, it is the competition for control of The Denver Post which has furnished the incentive for purchase by Miss Bonfils and the Post management group so as to prevent S. I. New-house, the owner of a publications chain, from gaining this block as a stepping stone toward control. Thus, a struggle for control is an underlying factor present and apparent in the case. Summary of the Events which Preceded the Filing of this Action The stock of The Denver Post, Inc. has always been closely held. Originally it was all owned equally by the founders of The Denver Post newspaper, H. H. Tammen and F. G. Bonfils. When Tam-men died in 1924 he left one-half of his estate including a large block of Denver Post stock to his wife and the remaining one-half to The Denver National Bank in trust for the Childrens Hospital. The H. H. Tammen Trust held the Post shares (about 20%) until 1960 at which time it sold them to The Denver Post, Inc. for $260.00 per share. Agnes Reid Tammen died in 1942. Her will created a testamentary trust naming E. Ray Campbell, a prominent lawyer, and Sadie Schultz as trustees and the defendant Bank as successor trustee. Under the terms of her will the income was to be paid to certain life beneficiaries and the remainder to the descendants of Helen Crabbs Rippey. Mrs. Rippey is the only surviving life beneficiary. This trust was the holder of the stock (some 17,705 shares or 22%) which is the subject of the present litigation. * The will contains extremely broad powers of sale of the specific stock here in question together with all other assets held in trust. The trustees are authorized to retain and sell at their own discretion and without consulting the beneficiaries or “without regard to the opinion or desire or judgment of the beneficiaries.” It further empowers the trustees: “1. To vote said stock and exercise all rights pertaining thereto, with full control and dominion over the same, and to enter into any lawful voting trust or agreement or agreements with other stockholders of said company or companies for the holding or sale of all or any part of said stock of said company or companies, which in the sole judgment of the said Trustee will promote the best interest of the said company or companies and the beneficiaries in this Article named, and procure the best price for said stock in the event of the sale thereof. “2. To sell at private sale, without advertisement or notice to any one, and without the aid or necessity of any court order, and without any obligation on the part of the purchaser or purchasers to see to the disposition of the proceeds of the sale, all or any part of said stock, at such price and upon such terms as to credit or otherwise as the Trustee shall determine.” A further provision (Article XV) expounds additionally the authority of the trustees to retain or sell at private sale without notice and without consent of any beneficiary and without any court order or approval and further provides that the trustees “shall be free from liability for depreciation or loss through errors of judgment; * * *” It then goes on to provide in the same article but in a new sub-paragraph an exculpatory clause as follows: “My Executors and Trustees shall only be liable hereunder each for his own fraudulent acts. They shall be permitted to employ and compensate, out of the principal or income of the estate or trust estate funds, agents, bookkeepers, brokers, attorneys and assistants as deemed necessary by them for the proper administration of the estate or trust estates, as the case may be, and without liability for neglect, omission, misconduct or default of any such person so employed with reasonable care.” During the tenure of E. Ray Campbell there was no threat of sale of the Agnes Reid Tammen stock. Mr. Campbell was for many years president and general counsel of The Denver Post, Inc. and he took the position that the stock was not for sale at any price — this despite the fact that the beneficiaries, the Rippeys, were continuously urging sale because the dividends were low in relation to the value as indicated by potential sale price. The Agnes Reid Tammen trust instrument which was drafted by E. Ray Campbell provided that upon the death or resignation of the trustees, the Denver National Bank, predecessor of the defendant Bank, would become the successor trustee. The Rippeys, although for many years dissatisfied with the earnings of The Denver Post, Inc., did not take legal action so long as E. Ray Campbell continued as trustee. However, he resigned as trustee and as an officer of The Denver Post, Inc. on May 19, 1966, and this occurrence precipitated the flurry of events which culminated in the filing of this action. About this time representatives of the Defendant Bank met with the Post management group and were persuaded to accept the trust and simultaneously were told of the desire of Helen Bonfils or of the Post to purchase the stock held by the Trust and were told also of her not wishing to become embroiled in a bidding competition with S. I. Newhouse in order to obtain it. On May 25, 1966, the Bank became the successor trustee. It decided at the outset that the stock had to be sold and also decided to sell to Miss Bonfils exclusively. It then proceeded to negotiate a sale to Helen Bonfils and finally concluded it on June 22, 1966. There were intense negotiations as to price prior to reaching an agreement to sell (on or about June 20, 1966) for $300.00 per share. The Bank made no effort to sell or to offer the stock to Newhouse. Indeed on June 7, 1966, it entered into a minority shareholders’ agreement with Miss Bonfils and the F. G. Bonfils Trust which precluded any such effort for a period of one year. On learning of this Newhouse sent a telegram to the Bank in which he offered to pay $500.00 per share for all of the stock held by the signers of the minority shareholders’ agreement. This block of stock amounted to about two-thirds of the total issued and outstanding, and together with stock which he had previously purchased would have given Newhouse virtual ownership of the corporation. This offer did not reach the Bank until after the sale to Miss Bonfils had been practically completed. JURISDICTION The Plaintiffs are the sons of Helen Rippey, and are remaindermen of the income and corpus of the trust. They are citizens of Oklahoma and Maryland and our jurisdiction is based on diversity of citizenship. 28 U.S.C. § 1332. Defendants have questioned our jurisdiction by motions to dismiss on two different occasions contending that Helen Rippey the life beneficiary who is a Colorado resident is an indispensable party whose presence would defeat our jurisdiction. Rippey v. Denver United States National Bank, D.C., 260 F.Supp. 704, and see our supplemental memorandum rendered July 3, 1967, 42 F.R.D. 316. The jurisdictional issue has been reasserted at the trial. We adhere to our prior rulings and conclude without repeating the reasons in detail which are set forth in the cited opinions that there is jurisdiction over both parties and subject matter and that Helen Crabbs Rippey need not be joined as a party in order to effectively determine the merits of the cause. This suit was commenced on July 12, 1966, a few weeks after the sale. It was instituted by Bruce R. and A. Gordon Rippey, residents of Maryland and Oklahoma respectively, sons of Helen Crabbs Rippey, the surviving life tenant as Plaintiffs. Almost immediately, (July 22, 1966) the Bank instituted a proceeding in the Probate Court of the City and County of Denver. The Bank had previously cut off and withheld the income payable to Helen Crabbs Rippey on the theory that she had “instigated” this case at bar. This action was taken under the “in terrorem” or forfeiture clause of the Agnes Reid Tammen will (Article XVII). The Plaintiffs here removed that cause as it applied to them to this Court on August 9, 1966. The Bank of course moved to remand to the Probate Court of Denver. This Court granted that motion on the ground that the attempted application of the forfeiture clause to the Rippey brothers was not a separate or independent claim or cause of action within the meaning of 28 U.S.C. § 1441(c), D.C., 260 F.Supp. 717. It is noteworthy, that subsequently the Probate Court ruled that the forfeiture clause was not applicable to this action. Defendants renewed their motion to dismiss after the Probate Court construed the clause. The basis was that the forfeiture clause was no longer a factor which weighed on the side of Helen Rippey being dispensable. By that time all discovery was finished and the case was ready for trial. We held that defendants’ equities under revised Rule 19 had not been enhanced by the ruling whereby we at that stage could or should have dismissed the complaint. Status of the Post Stock Prior to the Sale as of May 1, 1966 It will aid in bringing the issues into perspective to show the shareholdings of Post stock just prior to the sale. Number of Shares (77.928.4525 Shares) Authorized Stk on which Dividends are paid (94.015 Shares) % of Total Stock Outstanding Treasury Helen G. Bonfils 16,389.2602 21.0312% 17.4326% FNB-KC as Trustee: H. G. Bonfils 1,468.9436 1.8850% 1.5625% Frederick G. Bonfils Foundation 5,028.7800 6.4530% 5.3489% Denver U. S. National 17,513.6986 22.4741 18.6286% Bank and First National Bank of Kansas City co-trustees: F. G. Bonfils Trust E. Palmer Hoyt 1.0000 .0013 .0011% E. Ray Campbell-Trustee Agnes R. Tammen 17,704.6487 22.7191 18.8317% E. Ray Campbell 1.0000 .0013 .0011% Charles E. Stanton 10.0000 .0128 .0106% The Herald Company-(S. I. Newhouse) 14,724.0214 18.8943 15.6614% Sub: 72,841.3525) Denver Post Employees Stock Trust 5,087.1000 6.5279 5.4109% Sub Total 77,928.4525 100% Denver Post TREASURY STOCK 16,086.5475 17.1106% TOTAL 94,015.0000 100% The stock listed as Denver Post Treasury Stock plus that in the Employees Stock Trust is the stock which was purchased by the Post from the Bank in 1960. It is here called the Childrens Hospital Stock. As of May 1, 1960, prior to this sale, Miss Bonfils owned outright 21.0321% of the total non-treasury stock. In addition through the F. G. Bonfils Foundation, and the Helen Bonfils Trust and the Denver Post Employer Stock Trust she had control of an additional 14.8659. Thus the stock which was directly under her control amounted to 35.8971%. She also had access to the 22.4741% held by the First National Bank of Kansas City and the Denver U. S. in the Frederick G. Bonfils Trust. This gave her control. During the tenure of E. Ray Campbell she could also count shares in suit. It is apparent that the two blocks of stock held in trust, i. e., that in the F. G. Bonfils Trust together with that in the Agnes Reid Tammen Trust were and continue to be crucial to control of the Post. Ownership by Newhouse would give him control. Therefore, the acquisition of the Tammen Shares and prevention of purchase by Newhouse was a matter of deep concern to Miss Bonfils and the Post group. Acquisition of these shares was also of great importance to S. I. Newhouse. It would not only have given Newhouse a place on the Board it would also have placed him in a position to seek to force a sale of the F. G. Bonfils block, acquisition of which would have given him control. THE SALE TO MISS BONFILS Most of the basic happenings surrounding the stock sale are not disputed. The parties do, however, draw some different inferences and conclusions from them. A chronology of the more important events leading to the sale reveals the following: Immediately before E. Ray Campbell decided to retire, effective May 19, 1966, his lawyer (the lawyer for the Agnes R. Tammen Trust) notified Arch Metzner, Vice-President and Trust Officer for the Bank of this impending resignation. Thereafter on May 18 Metzner, Richard Davis, attorney for the Bank, Palmer Hoyt, editor and publisher of the Denver Post, Donald Seawell, representative of Miss Bonfils and Charles Buxton, business manager of the Post met at Davis’ office. The purpose of this was to advise that Campbell would be resigning; that the Post group knew the Bank would be taking over as trustee and that they (the Post) wished to purchase at $260.00 per share. The Post representatives further said that it was important to them to obtain the Agnes Reid Tammen block of stock prior to the annual meeting scheduled for June 8, 1966 because Newhouse might attend the meeting and make an offer. It was explained that Newhouse was desirous of getting control of the Post and that he might pay anything; that money didn’t mean a thing to him. The Bank was assured by the Post people that the will had broad powers of sale and that the forfeiture clause could be invoked if there was any criticism from the beneficiaries. In an effort to determine the value of the Post stock, the Bank set about reviewing its evaluation information acquired in connection with the 1960 sale. It did this through members of its own staff who had generally kept in touch with the stock during the intervening years. The staff reached a tentative conclusion on or about June 3, 1966, based on the 1960 sale price of $260.00 that due to the purchase and redemption of the Childrens Hospital shares, the Tammen stock considered on an arithmetic comparison had a then value of $313.00. This conclusion was based almost wholly on the reduction of the number of outstanding shares and the increase in total percentage of all outstanding shares including those of the Agnes Reid Tammen shares. Roger Knight, Jr., Chairman of the Board, appointed a special advisory committee consisting of prominent members of the Bank’s Board of Directors to counsel him in connection with the sale. On May 25, 1966, Helen Bonfils sent a formal offer of $260.00 per share to the Bank. In her telegram she stressed the importance of completing the transaction at the “earliest possible moment.” On May 27 the Bank proposed that there be a minority stockholders’ agreement between the F. G. Bonfils Trust, the Agnes Reid Tammen Trust and Helen Bonfils. The purpose of this, according to the Bank, was to protect it from getting into an isolated minority position. Bank witnesses testified that they were acutely aware of the power struggle between the Post and Newhouse. At this time the three shareholder signatories held the following: Helen G. Bonfils 16,389.2606 or 21.0312% Denver U. S. National Bank and First National Bank of Kansas City (Bonfils Trust) 17,513.6986 or 22.474% Denver U. S. National Bank 17,704.6487 or 22.7191% A contract between these shareholders was executed on June 7, 1966. The signers undertook to hold, maintain or sell as a block and promised not to sell to anyone except the parties to the agreement unless all of the shares were sold for the same price and on the same terms. The duration of this accord was one year. (See footnote 2). On June 2, Mr. Sherman, the attorney for Mrs. Helen Rippey and the other beneficiaries and who was unaware of the impending sale, called Metzner to discuss the succession of the Bank as trustee. After this conversation Metzner and Sherman met on June 7, 1966. Sherman was told that the Bank was in the middle of an evaluation. The tentative figures were mentioned and Sherman was told that Helen Bonfils was anxious to purchase the stock and would pay $260.00 per share. Sherman was not told that the Bank had entered the restrictive shareholders’ agreement (which effectively eliminated Newhouse as a prospective purchaser). There was a further conference between Metzner and Sherman and Mr. and Mrs. Rippey on June 15 and 16. On this occasion the sale was discussed in some detail with possible prices being mentioned. Metzner disclosed that the minority shareholders’ agreement had been executed. The Rippeys as well as Sherman expressed strong opposition to the manner of proceeding with the sale and particularly to the restrictive agreement. They were not told that a sale was imminent. They were instead led to believe that it would not occur for several weeks — after the valuation study was completed. After this meeting (of June 17) Sherman wrote a letter expressing opposition to this agreement, further stating that the Bank could fulfill its fiduciary duty only if effort were made to sell at public sale by sealed bids. Reference was made to several possible purchasers. The letter also requested that if the Bank were determined to sell at an agreed price that it notify Sherman as attorney for Mrs. Rippey so as to afford an opportunity to seek out a higher cash price. The Bank did not reply to this letter. Metzner testified that following receipt of it he regarded the Rippeys as adversaries. He added that it was not uncommon for a trustee to find itself at odds with its beneficiaries. The Bank transmitted a copy of this letter to representatives of the Post and Miss Bonfils, but did not further communicate with Sherman or the beneficiaries until after the stock was actually sold. Seemingly this letter, whether intended or not, had the effect of bringing about an increase in the Post’s offer because of apprehension that Newhouse would enter the picture. It is unnecessary to describe in detail the meetings between the various officers and directors of the Bank or the meetings of the special advisory committee or the bargaining sessions between the Bank and the Post, and there were many such meetings prior to June 20-22nd when the stock was finally sold. The evidence establishes that a serious effort by both sides had been made to complete the purchase on June 6, prior to the annual meeting of Post shareholders. On that date the previous offer was raised by Seawell on behalf of Miss Bonfils from $260.00 to $275.00. In fact, through misunderstanding Metzner and Seawell believed that an agreement had been reached. Seawell then had in mind a figure of $275.00 while Metzner was thinking of $313.00. This of course fell through and on June 8 Metzner offered to sell on behalf of the Bank for the sum of $300.00 per share. Seawell refused this and reoffered to buy for $275.00 and Metzner then revoked his $300.00 offer. After the Post annual meeting (on June 8) the negotiations continued. The Bank’s financial analysts and those of the Post met to exchange information and viewpoints. Following the receipt of the Sherman letter (described above) the Post on or about June 18 decided that it was willing to pay $300.00. This was communicated to the Bank on June 20. The special Bank committee considered it and decided to accept the offer and the sale was consummated on June 22nd. As part of the sale Miss Bonfils gave to the Bank an indemnity agreement whereby she undertook to indemnify the Bank and save it harmless for any and all loss including costs and expenses of suit which it might suffer as a result of the sale of the stock. The agreement contained other provisions not here important relative to giving of notice, control of litigation, etc. Bank officials said that they did not bargain for this and did not regard it as necessary but accepted it because it was offered. The sale was closed on June 22, 1966 and on that occasion a down payment of in excess of $500,000 was paid. The balance amounting to some $4,800,000.00 was paid on June 24, 1966, once financing was arranged. The Newhouse offer of $500.00 per share for the entire block of stock embraced in the restrictive agreement was not received until June 23, 1966, the day after the closing. The telegram carrying the offer dated June 22, 1966 was misdirected and delayed. Evidence was received (at the trial) showing willingness of Newhouse to purchase the Tammen shares alone for the sum of $450.00 per share. This is shown in a contemporaneous letter from Sherman dated June 23, 1966. It is also confirmed in the deposition of Newhouse who stated that at the time he had been willing to pay this for the Tammen shares but had later decided to offer $500.00 per share for the control block. Knowledge of the Bank and Post that Newhouse was a Potential Purchaser The interest of S. I. Newhouse in acquiring Post stock and eventually gaining control was well known to both the Bank and the Post management group as early as 1959 at which time Newhouse approached Helen Bonfils who was even then the largest shareholder. Subsequently he sought to purchase the Children’s Hospital shares from the Bank. He was at all times represented in this effort by a newspaper broker, one Kander and locally by Keith Anderson, a Denver lawyer. Anderson and Kander had somewhat of a continuing commission to obtain such blocks of stock as were available. In the spring of 1960 Newhouse made various offers. First he offered $10,000,000.00 for 55%. Later he raised it to $228.00 and finally in later April and early May he offered $240.00 per share. The latter was accepted by May Bonfils Stanton and The First National Bank of Denver (which held a small group of shares in trust). As a result of these purchases Newhouse then held about 15.7% which as of the time of this suit became approximately 18% plus. Mr. Newhouse did not because of his minority holdings lose interest in the Post. He continuously resisted efforts of Miss Bonfils to acquire his shares and bided his time until he could buy more. He kept in touch with the Post as a shareholder and was kept advised of conditions by his representatives. From time to time Keith Anderson assured the Bank of his willingness to pay more than he paid previously and in fact he had promised to pay May Bonfils Stanton any additional amount which he would pay in acquiring additional shares. The Post management group was well aware of Newhouse’s various efforts. In fact he had communicated his wishes to E. Palmer Hoyt, publisher of the Post on several occasions. On the other hand Helen Bonfils had repeatedly demonstrated an intense interest in retention of her shares and had shown a commitment to prevent Newhouse from acquiring more shares and gaining a place on the Board. Thus there existed more than a competition between these two potential purchasers. The condition was accurately described by Bank witnesses as a struggle for power or control. The Bank had been aware of it during the 1960-1966 period because of its having held the Children’s Hospital shares until 1960 and because of its joint holding with The First National Bank of Kansas City of the F. G. Bonfils shares. Furthermore, on the occasion of the May 19, 1966 meeting between Bank representatives and Post representatives the Bank was made aware of the Post’s concern about New-house and a possible bidding contest. The Newhouse documents in turn show that he was committed from 1960 forward to gaining a controlling interest in Post stock. The preferred means of getting it was his outright purchase of the only two blocks available, that is, that held by the Bank in conjunction with the Kansas City Bank, the F. G. Bonfils trust shares, and the Tammen block here in issue. The Newhouse aides considered every possible means of forcing a sale, but a stalemate existed until May 1966 due to the unwillingness of Campbell to sell and the commitment of The First National Bank of Kansas City not to sell the F. G. Bonfils shares contrary to the wishes of Miss Bonfils. There was apparent willingness on the part of Mr. Newhouse to purchase a minority interest as he did when he purchased the Bonfils-Stanton shares if it promised to help his ultimate objective of control. Although the Bank was fully cognizant prior to the instant stock sale of the presence of Newhouse and of his intense commitment to purchase Post stock and ultimately to control the paper, there was no actual knowledge prior to July 22-23 that he might be willing to pay an extraordinarily high price such as $450.00 or $500.00 per share. Previously he had paid $240.00 for the May Bonfils block and although there were indications of willingness to pay more there was no tangible evidence of such willingness prior to July 23, 1966. The Evidence Re Alleged Endue Influence Plaintiffs charge that the Bank was apprehensive about dealing with New-house or soliciting an offer from him because they had been overpowered or awed by the Post management group and were reluctant to offend them. From the time that the Bank was first contacted around the middle of May 1966, the Post representatives, consisting of Palmer Hoyt and Donald Seawell, made it clear to the Bank representatives that they wished to buy the stock at the lowest price possible and at the same time to prevent Newhouse from buying it. Hoyt admittedly exercised pressure on the Bank, talking to various of the directors and former directors with whom he had personal influence. This was not done surreptitiously and there were no expressed threats of reprisal aimed at the Bank or its officers. There was, however, what a bank officer described as a “sales pitch” and the need for haste to complete the sale was continuously stressed. Hoyt complained to the Bank Board Chairman, Roger Knight, that the Trust Department was unreasonable and uncooperative to the Denver Post analysts in completing its value study. There is mentioned in the record from time to time that the Bank officers might have been apprehensive about Post vindictiveness, but the most that can be said is that these officers seemed somewhat solicitous toward the Post. We see no evidence of undue influence. Evidence of Value On the question of the value of the Tammen stock on June 22, 1966, the plaintiffs relied wholly on the testimony as to the willingness of Newhouse to pay $500.00 for control or $450.00 for the Tammen shares. They did not introduce any independent evidence with one exception. They called Miss Ashby, the Bank’s Chief Stock Analyst, as an adverse witness and questioned her at length. She testified that she had evaluated the Post stock first in 1960 when the Bank sold the Children’s Hospital shares. From this time until 1966 she kept in touch with the Post shares and so had a file in May 1966 which furnished a basis for a tentative opinion. After the preliminary negotiations broke down she undertook, in conjunction with the Post financial experts, to carry out a detailed and comparative study of the Post stock. While she was carrying out her study the sale was completed. However, she continued her analysis and finally completed the report some thirty days later. Her method involved consideration of the tangible property and a determination of book value of the shares, the earnings history, growth trend, comparison with other newspapers, including prior Post stock sales and stock sales of other comparable newspapers. From all of this data she arrived at a price-earnings multiple. This was applied to average earnings per share and the result was the reasonable value. Her conclusion was that the fair value of the stock was $219.00 per share (Book value was figured at less than $100.00 per share). She considered the $300.00 per share sale price a premium amount. The Bank called an outside expert, one Ralph Badger, who was also shown to have made a careful and detailed study of the Post and of the Post stock. He followed much the same price-earnings approach as Miss Ashby and arrived at substantially similar results. He also concluded that the reasonable value of the stock was much less than the $300.00 sales price, but took into account the particular interest of the prospective purchasers and concluded that the reasonable value per share was in the range from $275.00 to $300.00. Badger did point out that at $300.00 per share the Post earnings were, in fact, but 2.6%. This testimony is entitled to limited credit except that it gives us a comparative standard. It virtually ignores the presence of the two intensely interested buyers. Both experts gave opinions based on ordinary purchasers and ordinary market conditions considering the actual or intrinsic value of the stock. This objective approach was unrealistic in this case. It is questionable whether newspaper stock is ever purchased on such a basis and certainly the competing buyers in the instant case were not seeking an investment. Control and finally influence was the object. Mr. Newhouse wished to round out his empire whereas Miss Bonfils desired to retain the paper’s local control and character. Such motives are not susceptible to objective valuation. Actual testing of the market was the only means of determining price in these circumstances. The Bank’s Contention that it Acted Prudently As a justification for its action in selling to Miss Bonfils to the exclusion of Newhouse, the Bank stresses that the result was favorable to the Trust in that the price was higher than any previously obtained and was fair in relation to the intrinsic value of the stock. The Bank also stresses that it acted within the broad powers conferred on it under the will. As to its failure to contact New-house the Bank claims that this was a judgment call and within its discretion. They (Bank’s counsel) argue that the situation in which the Bank found itself was one of dilemma — that there were risks in each direction and that they had to balance these risks and decide on the least hazardous course and that a good faith decision in such circumstances is not negligence. The Bank, according to the testimony was apprehensive that if it contacted Newhouse and the Post learned of it the result might be that there would be no purchasers, and that it regarded the safe course to be negotiation with a certain purchaser to obtain a fair price. Mr. Newhouse might give a negative response. Miss Bonfils would no longer pay a premium price. Miss Bonfils’ illness might take her out as a purchaser or she might decide to sell her interests to Newhouse. These and other perils they claim to have weighed and considered, including the possibility that Newhouse would make a lower offer (than $300.00 per share) and that their bargaining position with Miss Bonfils would be destroyed. In the end it was decided to deal with the in or management group and to sell the stock to Bonfils. The Bank officers called as witnesses testified that it was sound business practice to negotiate with a single buyer in circumstances such as this, and not good practice to encourage competitive bidding; that when an interested buyer is found for a business or the stock of a corporation it is good business practice to negotiate with that purchaser to the exclusion of other possible purchasers; that in this instance they were negotiating with the management or control group who were certain to purchase and to pay a fair price and the safe course— that which would avoid the risk of possibly having to sell for a lesser price was to bargain exclusively and finally sell to it. Factual Contentions of Miss Bonfils In support of her position that she was a bona fide purchaser, Miss Bonfils maintains that the sale here was authorized under provisions of the will which vested a broad discretion in the trustee, and that since private sale was authorized on a discretionary basis she cannot in law be a bad faith purchaser— that the trustee had the responsibility of discharging its duty to obtain the best price available and she had the right to pursue her own interest to buy for the most favorable price for which she could get it. Miss Bonfils also offered evidence to show that her motives were valid. She did not testify. Her position was revealed through her attorney, by various documents together with the surrounding circumstances. According to this she sought to retain control of the Post so as to carry out her father’s wish that the paper remain locally controlled and not become an outlet in a chain. She also wished to leave a family contribution to the community. To this end it appeared that she has taken steps to insure that its local ownership will be permanent by making available the treasury shares purchased from the Childrens Hospital Trust for employee purchase at a low price per share. This is a plan similar to one adopted by the Milwaukee Journal. The employees are the beneficial holders of the stock during their lifetime. When they resign or die, it reverts (by purchase) back to the trust for reissue. A self-perpetuating board administers the program and votes the stock. This allows the employees to participate in ownership and to realize income and growth and also insures against an outside chain interest gaining access to shares and ultimate control. The shares in suit have been transferred to the Helen Bonfils foundation and are intended ultimately to be appropriated to the employee trust. As to the present shares she argues (as indicated) she was dealing at arm’s length with the Bank; that the purchase price resulted from hard bargaining and that as a purchaser she had the right to buy the stock at the lowest obtainable price without regard to a fiduciary duty of the Bank to obtain the best price obtainable; that she owed no obligation to become embroiled in a bidding contest so as to enable the trust to get more money; that she had the right to pursue her own interest and to expect the Bank to take care of its interest. She denies that there was any conspiracy to injure anyone. Evidence as to the Alleged Conspiracy Plaintiffs point to various bits and pieces of evidence in an effort to establish that the transaction was influenced by insider persuasion or pressure. This is in support of their contention that the Post and Miss Bonfils unlawfully conspired with the Bank to injure plaintiffs. One of the Board members, Mr. Ricketson, was also appointed to the Board Chairman’s special advisory committee relative to the sale of the stock. Ricketson was in addition a long-time friend of Palmer Hoyt and Miss Bonfils. In 1960 when the Employee Stock Plan was being set up, Ricketson advised Hoyt to employ as a tax lawyer Stephen H. Hart, who was also on the Board of the Bank. Hart continued as the' Post counsel and took part in negotiating the present sale. However, he disqualified himself from participation as a Board member and fully disclosed his interest to the BánkY" While the present transaction was in negotiation, Ricketson talked to Hoyt from time to time but did not disclose that he was a member of the special committee. Ricketson was strongly committed to sale of the stock to the Post group but not any more so than other Board members. The offices of Mr. Chris Dobbins who had been on the Board of the Bank were also utilized by Mr. Hoyt. Dobbins called a meeting of Bank and Post officers in an effort to facilitate a sale. This evidence of a conspiracy does not rise higher than suspicious circumstances. At most it shows an aggressive effort by Mr. Hoyt. He sought, it is true, to exercise personal and newspaper influence but the efforts on the part of the Post were straightforward and open and do not disclose the existence of any fraudulent or diabolical confederation designed to injure plaintiffs. The 1960 Sale Some mention must be made of the evidence presented relative to the facts surrounding the sale by the Bank in 1960 of the Childrens Hospital block of stock. This was offered by plaintiffs in an effort to prove knowledge of New-house and to contrast the actions of the Bank on that occasion with its present actions and so as to demonstrate their then and presumably present knowledge of the duties of a fiduciary in the sale of trust property. The stock sold in 1960 derived, as did the stock here in question, from the Tammen estate. It was held in trust by the defendant Bank for the benefit of Childrens Hospital Association. The officers of that association had for many years been dissatisfied with dividends received and had consistently urged that it be sold. The Bank had for some time recognized that it should be sold, but was uncertain as to how to proceed. It considered a public offering inadvisable believing that it would cheapen the stock. So when Mr. Newhouse made an offer to pay $10,000,000.00 for 55% in April, the Bank, acting through a different group of officers, concluded that it should make an intense effort to sell. Mr. Campbell was approached and he sought to persuade the Bank to retain it. It was not until Mr. Newhouse increased his offer to $240.00 per share that Campbell and the Post became concerned. A restrictive agreement between the shareholders having minority blocks of stock available was then entered into to protect each from becoming an isolated minority. This has been described as a first refusal agreement. Each shareholder undertook not to accept an offer to purchase his stock unless the purchaser offered in writing for 30 days to purchase the stock of each of the other parties to the agreement on the same terms. The Bank at last sold the shares to the Post for $260.00 per share and although it did not seek open competition bidding or sealed bids, it did communicate with Newhouse and in a quiet way at least sought the highest price it could obtain regardless of the identity of the purchaser. The Post was favored somewhat, but there was not as in the present instance a commitment to sell to it and to exclude Mr. Newhouse as a purchaser. Thus, the circumstances and atmosphere of the 1960 sale were quite different from those which surrounded the present one. The Bank acted more independently and showed awareness of its fiduciary duties. Summary of the Ruling 1. The first duty of a fiduciary is to protect the interests of its beneficiaries. In selling an asset of the trust he must make every reasonable effort to sell at the best price obtainable. It is a violation of the fiduciary duty to sell at a private sale to one purchaser to the exclusion of another known interested purchaser who would foresee-ably pay more. The Bank’s failure to make any effort to contact Mr. New-house and its determined effort to sell to Miss Bonfils without regard to consequences, which determination is evidenced by the exclusive shareholders’ agreement together with its other actions which were designed to complete the sale without either contacting Mr. Newhouse or affording opportunity for Newhouse to make an offer, constituted a breach of trust. 2. The appropriate remedy is surcharge, rather than rescission. The plaintiffs have stated a preference for the remedy of rescission and resale, however, there has not been an unequivocal election to seek rescission. The request has been alternative. Mr. Newhouse is not before the court and has not made any binding offer; hence there is no assurance that the trust would benefit from such a decree. Furthermore, the measure of relief which the plaintiffs are entitled to have in this type of breach is the difference between the sale price and the price which would have been obtained if the Bank had conducted a non-restricted sale. This measure can be best realized by awarding damages. If plaintiffs are correct in their predictions that Mr. Newhouse would pay as much as $1,000.00 per share the trust would obtain a measure far in excess of that provided by law in the type of breach of trust here presented (non-fraudulent). 3. As noted above the proper measure of recovery in circumstances like the present is out of pocket loss as of the time of sale. There is substantial evidence that Mr. Newhouse would have paid the sum of $450.00 per share for the Agnes Reid Tammen shares if he had been given the opportunity to purchase them. Therefore, plaintiffs are entitled to recover for and on behalf of the Trust the sum of $150.00 per share the same being the difference between the $300.00 purchase price and the sum which probably would have been obtained had the Bank carried out its fiduciary duty. 4. Mr. Newhouse is not a party to this suit although his presence as a possible bidder has enhanced the sale price of the .shares in question. He does not have any rights in this case either legal or equitable. Therefore, in fashioning the appropriate remedy and measure of recovery we cannot properly consider the interests which he seeks to advance. He alone would probably gain an advantage from the grant of rescission. This is not and cannot be a factor in our decision. I The Breach of Trust Question The plaintiffs advance a number of theories and arguments in support of their allegation that the Bank violated its trust in making the instant sale. They point to the restrictive agreement, the indemnity agreement, the failure to furnish information as to the terms and progress of the sale to the beneficiaries as well as the failure to test the market and to obtain the highest price obtainable for the stock. These several acts are related and considered in totality to evidence the alleged breach of trust. We emphasize that this is not a self-dealing case, such as is often encountered in this area of the law. Thus the trustee Bank has not sought monetary benefit from extrinsieally fraudulent acts or from acts which were beyond the authority granted in the will. Here the trustee had the legal power to sell at private sale and hence the alleged breach of trust arises, according to plaintiffs, ‘from" the failure of the trustee to exercise good judgment in conducting the sale and from its failure to act fairly and to follow accepted trust practices in seeking a sale which would yield the maximum price. A. The Standard of Care It is generally agreed that a trustee owes a duty to his beneficiaries to exercise such care and skill as a man of ordinary prudence would exercise in safeguarding and preserving his own property. This rule obtained at common law and has been codified in Colorado. The Statute, C.R.S., ’63, 57-3-1 reads as follows: “In * * * selling and managing property for the benefit of others, fiduciaries * * * shall exercise the judgment and care under the circumstances then prevailing, which men of prudence, discretion and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital.” Thus it appears that the “reasonable prudence” standard applies to protecting and caring for the property and does not permit one to prudently speculate for example. The trustee may not subject his trust property to hazards which a man dealing with his own property might consider warranted if to do so would create danger to the trust estate. We have examined the will to ascertain whether this general standard was modified by Mrs. Tammen in the broad powers of sale and disposition which are set forth in it. In the will the trustee is authorized to sell the trust property (1) in its sole judgment; (2) at private sale; (3) without advertisement or notice to anyone; (4) without the aid or necessity of any Court Order ;• (5) without consulting the beneficiaries and without regard to their opinions, desires or judgment; (6) and at such price and upon such terms as to credit or otherwise as the trustee shall determine. The trustee is not authorized to exercise unlimited or absolute discretion in making a sale of trust property. Therefore, it cannot be said that it was intended that the trustee could operate beyond the bounds of prudent judgment or that he could act unreasonably. But even if the instrument had contained language granting absolute and uncontrolled discretion, it would not follow that the trustee could act recklessly or in willful abuse of discretion. In the instant case the action of the Bank in failing to test the market or to make a move toward Mr. Newhouse created not a simple risk of injury and damage to the trust, but rather in our mind a high degree of probability that the interests of the beneficiaries would be damaged. Consequently even a grant of absolute discretion in the will would not have protected the Bank in this case. Nor can it be said that the grant of authority to sell at private sale increases the authority of the Bank or excuses it from exercising reasonable diligence. The same can be said of the authorization to sell without advertisement or notice. These powers assume that reasonable methods will be employed. See Webb & Knapp, Inc. v. Hanover Bank, 214 Md. 230, 133 A.2d 450, 456 (1957). Furthermore, the authorization to sell without consulting the beneficiaries does not modify the standard of care even though the trust regulates the information which the trustee must give. The trustee is not as a result of this excused from communicating information to the beneficiary which would permit him to enforce his rights under the trust or to prevent a breach of trust. Finally, the authorization to determine the price at which the property will be sold does not have the effect of allowing the trustee to sell at a price less than the best price obtainable. He must use reasonable diligence and judgment in selling trust property, and cannot expose the trust to a high degree of hazard of loss. There are two exculpatory clauses in Article XV of the will which the Bank contends frees it from liability. The first of these provides that the trustee shall be free from liability for “depreciation or loss” of trust property “through error of judgment.” It is doubtful whether this provision applies to a loss which resulted from a sale which was not conducted in accordance with orthodox trust principles. But even if it does apply it falls short of exculpating the Bank here. Such a provision is usually held to add nothing. It does not limit the trustee liability for even negligence: “The extent of the trustee’s immunity from liability will, in large measure, depend upon the terms - of the exculpatory provision. If that provision in express terms relieves the trustee from liability merely for errors of judgment, its effect does not go beyond what a court of equity would do in the absence of an exculpatory provision, for a trustee is never held to the liability of an insurer.” 158 A.L.R. 276, 278. The other clause goes further but it does not expressly apply to the misfeasance of a trustee in conducting a sale. It is found in a paragraph of the will which deals with the employment of agents and the responsibility of the trustees for their acts. It provides: “My Executors and Trustees shall only be liable hereunder each for his own fraudulent acts. They shall be permitted to employ and compensate, out of the principal or income of the estate or trust funds, agents, bookkeepers, brokers, attorneys and assistants as deemed necessary by them for the proper administration of the estate or trust estates, as the case may be, and without liability for neglect, omission, misconduct or default of any such person so employed with reasonable care.” The Bank would have us broadly interpret this to apply to each and every act of the trustees. Plaintiffs argue that it should not be applied beyond the particular setting in which it appears. The intention of the decedent is not clear and the clause is not one in any event which commends itself to a court of equity whereby extensive or expansive application is invited. Our disposition is to hold that it was not intended to and does not excuse negligent conduct of a trustee in relationship to a sale. There is another and independent reason why this clause does not excuse the Bank from liability here, and that is because the Bank’s conduct is not simple negligence. The Bank acted as it did despite a high probability that the beneficiaries would suffer loss. Such conduct is in law reckless and is not protected by such a clause. B. Loyalty of the Trustee The obligation of the trustee to exercise prudence is a species of his duty of loyalty to the beneficiaries. He owes his allegiance to the beneficiaries first. Other considerations are secondary. The accepted standard is declared in the famous opinion of the late Mr. Justice (then Judge) Cardozo in Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545, 62 A.L.R. 1 (1928): “Many forms of conduct permissible in a workaday world for those acting at arm’s length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctillio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts or equity when petitioned to undermine the rule of undivided loyalty by the ‘disintegrating erosion’ of particular exceptions. * * Only thus has. the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd.” The Bank directors — (special committee members) made the error throughout the negotiations and the consummation of the sale that ordinary business mores governed. All of their testimony at the trial proceeded on the assumption that the practical standards of business conduct which they were accustomed to observe in their various enterprises were adequate in the present fiduciary sale. This, of course, is not the law. That which appears over-all practical is not sufficient in the trust area of the law. The courts do not now and never have allowed a compromise with this fundamental principle of loyalty. As previously noted, the Bank had somewhat of a conflict in that it owed loyalty to Miss Bonfils in connection with the F. G. Bonfils Trust and also owed loyalty to the beneficiaries of the Tammen Trust. This was a difficult dilemma. This of itself does not however appear to be the factor which caused it to favor Miss Bonfils. Nor do we believe that the Bank was overpowered by the Post management group. And it does not appear that the factor of personal friendships (of directors) was the prevailing element. It seems more likely that the personality of Miss Bonfils who has been an important and benevolent figure on the Denver scene together with reluctance to disturb the status quo explains the unreasonable Bank actions. It is, of course, obvious that a fiduciary cannot allow personal motives to interfere with the discharge of its fiduciary duties. It cannot favor the interests of third persons and subordinate the interests of its beneficiaries as it did here and this duty is not modified by the provision of Article IV of the will which allows the trustees to enter into stockholder agreements limiting the sale of stock when such agreements would, in the sole judgment of the trustee, “promote the best interest of said company or companies and the beneficiaries in this Article named, and procure the best price for said stock in the event of the sale thereof.” While this provison allowed the trustee to consider the interests of the Post, it did not empower it to disregard the interests of its beneficiaries. In any kind of balancing of interests under this clause the beneficiaries’ interests must prevail. We have considered also the several arguments of the Bank that they carefully weighed the conflicting possible solutions and at last decided that the exclusive sale to Miss Bonfils was the only prudent and expedient course to follow. Testimony of Bank officers was that the restrictive agreement was a proper precaution to take because it insured that Miss Bonfils would not sell her stock to Newhouse and thus isolate the stock in suit. We are convinced that this was not even a remote possibility — that Miss Bonfils was unalterably opposed to selling her stock and particularly to selling it to Newhouse. These officers also testified that they considered it good business policy to deal with the control group and not antagonize it since the block of stock held by the Bank was a minority block which was subject to possible decrease in dividends or other actions. This does not bear careful scrutiny because the Bank had the only two blocks of stock available for sale and in truth the Post could not afford to antagonize it. Until the restrictive agreement was signed the Bank was in control of the situation and in a position to demand concessions. The Bank gained nothing by signing the agreement. It was entirely advantageous to Miss Bonfils and the Post group. In summary the reasons advanced for preferring the Bonfils group are not convincing and appear to be in the nature of afterthought. We do not say that the violation of the Bank’s duty of loyalty would be of itself a sufficient reason for holding that there was a breach of trust. This evidence tends rather to show the reasons for the Bank’s action, but it is the actions which point up the breach of trust. C. Failure to Obtain the Highest Price The Bank officers and the attorneys for the Bank offer a number of reasons in support of its decision not to contact Newhouse and solicit a bid from him. First they were concerned about the prospect that Miss Bonfils would have nothing to do with competitive bidding and would leave the Bank without its one sure purchaser. There is no support in the evidence for such an apprehension. Miss Bonfils had raised the original offer from $260.00 per share to $275.00 per share, however, toward the end of the negotiations she raised suddenly the price to $300.00 per share following the receipt of a letter from Sam Sherman, the lawyer for the Rippeys. An increase of approximately a half million dollars does not suggest that she might walk out. In any event it was clear to the Bank officers that Miss Bonfils was determined to prevent purchase of this crucial block of stock by Newhouse. She was not ready to give up the fight and this was apparent. A second reason for not contacting him was the possibility that Miss Bonfils would become critically ill and thus the competition which they had created would have evaporated. But even if she had become ill this would not have lessened her interest. In fact she was at the time ill but her determination did not diminish. Finally they say that Newhouse might have made a low offer and this would have prevented Miss Bonfils from making a premium offer. This assumes that a discreet contact could not have been made. There is every reason to suppose that this could have been done. One reason which the Bank does not mention and which probably entered into the Bank’s thinking and that is that they had decided to favor Miss Bonfils and on that basis it was impractical and unconscionable to contact Newhouse knowing that he had little or no chance to buy the stock. This, of course, goes back to the impropriety of making such a decision. We are of the opinion that the reasons given are after the fact rationalizatons. They are not convincing. The law is clear that the Trustee’s duty of loyalty and of reasonable care dictate that he must seek to obtain the best price obtainable for the property which he is selling. The principle is recognized in the recent decision of the Supreme Court of Colorado in Whatley v. Wood, 157 Colo. 552, 404 P.2d 537. There a trustee gave a quit claim deed to mining property for a fraction of its value. The breach of trust was there more palpable than it is here, but the language of the Court is nonetheless apposite: “The rule is that a trustee has a duty to determine the fair value of trust property before selling it. And, any sale of it for an inadequate consideration measured against its fair value may be subject to being set aside as a constructive fraud upon proper complaint being made.” How does a trustee determine value? It is entirely proper for the trustee to conduct a study for the purpose of ascertaining intrinsic worth, but the trustee must recognize the limitations of such an appraisal. He must also test the market and if he fails to do so he may be held responsible: “The trustees must be held to have assumed full responsibility for the fairness of the price accepted from May [the purchaser]. The evidence shows no attempt of any kind to ascertain the fair value of the stock from any source except the calculations by one of the trustees.” In re Sedgwick’s Will, 74 Ohio App. 444, 59 N.E.2d 616, 622 (1944). The rule was expressed in the early English case of Harper v. Hayes, 2 Giff. (English Ch. 1860) 210 as follows: “In the present ease no attempt was made by the defendant, Hayes, to secure competition. It has been urged, in defense of his conduct, that there were difficulties in the title that induced him most prudently not to proceed with the sale without the concurrence of all the cestuis que trust. But these difficulties afford no sufficient reason why he should not endeavor in a careful and proper way to obtain offers from persons willing to purchase the estate.” The courts of the United States have given full recognition to the duty to test th