## Facts

- Charles E. Crowell, an investment professional and co-founder of the Vermont Real Estate Investment Trust, received $50,000 in estate funds from the Estate of Thomas C. Sawyer to invest.
- The estate’s administrator, John Durrance, instructed that the funds be invested conservatively and stated an objection to investing in the real estate trust.
- Crowell initially placed the funds in Ford Motor Credit commercial paper, maturing on August 12, 1981.
- After the paper matured, Durrance sought a shorter-term investment so funds would be available to close the estate; Crowell decided to invest the funds in the Vermont Real Estate Investment Trust.
- On October 15, 1981, Crowell sent a letter about withdrawal requirements and disclosed the trust investment, but addressed it to Durrance’s secretary.
- The secretary informed Durrance only about the withdrawal requirements and did not inform him that the funds were invested in the trust.
- On December 31, 1981, Durrance discovered the trust investment after learning of withdrawal problems affecting another investor and reviewing the estate file.
- Durrance immediately demanded return of the $50,000; Crowell did not return the funds, and the trust later entered bankruptcy.
- The trial court found a material breach and ordered Crowell to repay $50,000 plus interest; Crowell appealed.

## Issues

1. Whether the estate ratified the unauthorized trust investment through silence after the secretary received Crowell’s letter disclosing the investment.
2. Whether investing contrary to the administrator’s stated objection and conservative-investment instruction was a material breach warranting repayment of principal plus interest.
3. Whether mitigation (avoidable consequences) limited recovery based on the October letter and the estate’s failure to act earlier.

## Decision

- The Vermont Supreme Court affirmed the judgment for the estate.
- The court rejected ratification based on silence where the administrator lacked actual knowledge that the funds were invested in the trust.
- The court upheld the finding that investing in the trust, despite prior objection, was a material breach.
- The court declined to reduce damages for failure to mitigate, concluding the estate acted promptly once it had actual knowledge.

## Legal Principles

- Ratification of an unauthorized transaction requires the principal’s actual knowledge of the material facts; silence without such knowledge does not constitute ratification.
- Receipt of a disclosure by an intermediary does not establish ratification when the principal does not learn the essential information and reasonably believes prior instructions are being followed.
- A material breach occurs when a party disregards central investment constraints (e.g., conservative strategy and specific prohibited investment), justifying restitutionary-type relief to restore the injured party’s position.
- Mitigation limits damages only when the injured party has a reasonable opportunity to avoid loss after learning (or having reason to know) of the breach; prompt action upon actual discovery satisfies the duty.

## Conclusion

The court held Crowell liable for placing estate funds into a prohibited investment without the administrator’s actual, informed approval, found the breach material, and affirmed an award requiring repayment of the principal with interest, without reduction for mitigation.


Estate of Sawyer ex rel. Howard Bank v. Crowell, 151 Vt. 287, 559 A.2d 687 (Vt. 1989)