## Facts

- Rodney B. Janes died in 1973 with an estate of about $3.5 million, including a stock portfolio of about $2.5 million.
- Approximately 71% of the portfolio consisted of 13,232 shares of Eastman Kodak common stock, worth about $1.79 million at death.
- The will created three testamentary trusts, with the primary objective of providing lifetime support and income for the 72-year-old widow while also benefiting charitable remaindermen.
- A bank served as co-executor (with the widow) and as sole trustee; it identified cash needs for taxes and expenses in mid-1973.
- The bank sold a limited number of Kodak shares to raise cash but otherwise retained the concentrated Kodak position without developing an investment plan tied to the widow’s needs or trust purposes.
- Over the following years Kodak’s price declined substantially, reducing the value of the retained concentration to roughly one-third of its date-of-death value.
- In 1981 the bank petitioned to settle its executor and trustee account; the widow and the Attorney General (for charitable beneficiaries) objected, alleging imprudent failure to diversify and resulting loss.

## Issues

1. Whether a fiduciary satisfies New York’s prudent-person standard by treating a single “blue-chip” stock as prudent without evaluating concentration risk, the portfolio as a whole, and beneficiary needs.
2. Whether maintaining an extreme concentration in one stock for years, given the trust purposes and the widow’s circumstances, constitutes imprudent retention and breach of fiduciary duty.
3. What measure of damages applies for capital depreciation caused by imprudent retention, including the proper benchmark date for sale and the treatment of interest and income offsets.

## Decision

- The Court of Appeals affirmed the finding that the fiduciary acted imprudently by retaining an overwhelmingly concentrated Kodak position for an extended period without a coherent strategy consistent with the will’s purposes and the widow’s needs.
- The court approved damages measured by comparing the stock’s value on the date a prudent fiduciary should have sold it to the amount realized on sale (or, if still held, its value at accounting), with interest discretionary.
- The court held that dividends and other income attributable to the retained asset must offset any interest awarded to prevent overcompensation.

## Legal Principles

- The prudent-person standard requires evaluation of investment decisions in context, including overall strategy, preservation of capital, reasonable income, trust purposes, and beneficiary circumstances.
- A fiduciary generally must diversify and address concentration risk unless it is reasonably determined that non-diversification serves the beneficiaries’ interests under the governing instrument.
- Reliance on a stock’s perceived quality (including “blue-chip” characteristics) is insufficient to justify extreme concentration without portfolio-level risk analysis and attention to beneficiary needs.
- Surcharge for imprudent retention causing capital loss is measured as: value on the date the asset should have been sold minus proceeds actually received (or value at accounting if still held), with equitable interest subject to offset by income earned on the retained asset.

## Conclusion

The court held the fiduciary liable for imprudently retaining an undiversified, highly concentrated stock position inconsistent with the trust’s purposes and beneficiary needs, and it confirmed a make-whole damages approach keyed to the date a prudent sale should have occurred, with discretionary interest reduced by income actually received.


In re Estate of Janes, 90 N.Y.2d 41 (N.Y. 1997)