Culver v. Culver

169 N.E.2d 486, 112 Ohio App. 100, 83 Ohio Law. Abs. 493, 16 Ohio Op. 2d 38, 1960 Ohio App. LEXIS 646

• Court: Ohio Court of Appeals
• Decided: April 5, 1960
• Docket: 6320
• Status: Published

Opinions

OPINION

By LONG, J.

This is an appeal on questions of law from a judgment of the Court of Common Pleas, Division of Domestic Relations, of Franklin County, Ohio.

As briefly as we can set out the facts which give rise to the questions presented by this appeal, it appears that the appellant, Knight K. Culver, Jr., did, on the 15th day of May, 1954, transfer certain securities of the approximate value of $50,000.00 to The Ohio National Bank, to be held in trust for the purposes set forth in the agreement. In Article II of the Trust Agreement, we find this language: * “The entire net income derived from such Trust Fund shall be paid in monthly or other convenient installments to or for the benefit of the grantor so long as he shall live.” The Culvers had four heirs or children, and apparently for the protection of his children, the settlor also provided in the Trust Agreement as follows: “Upon the death of Betty Culver, or upon the death of the grantor, if she predeceases him, the Trustee shall continue to hold and administer this trust for the benefit of the children of the grantor, pay to, or for the benefit of the children of the grantor, and the issue of any deceased child of the grantor such parts of the income and such parts of the principal as it deems advisable in its absolute and uncontrolled discretion for their health, maintenance, support and education, including college, university or equivalent training until the trust is terminated.”

Thereafter, marital difficulties developed between appellee and appellant, resulting in a separation agreement and a subsequent divorce, wherein the separation agreement was made a part of the decree for divorce. Subsequently the amount of weekly support was, by order of the court, reduced to $60.00 per week. This order was made on November 14, 1956, and ever since that date the appellant has been in arrears on his support payments. On January 14, 1957,- The Ohio National Bank was made a party defendant in the divorce proceedings, and on said date the trial court ordered The Ohio National Bank to pay into the cashier’s office of the court all sums of money payable to Knight Culver, as income, under the trust agreement, to be applied on the arrear-ages.

On August 9, 1957, the June 14th order was modified by agreement of the parties, so that the Bank agreed and was ordered to pay to The Buckeye Savings Company the monthly payments due on its mortgage on the home of the parties, amounting to $89.00 per month; the balance of income from the trust in amount of approximately $75.00 per month was ordered to be paid to appellee, Mrs. Culver. On July 22, 1959, ap-pellee made a motion to reduce the total arrearages of support to final judgment. The income.being exhausted, the only source of payment of the arrearages, amounting to $4,061.50, would be from the corpus of the trust. On August 13, 1959, the court sustained appellee’s motion and rendered judgment against appellant and ordered the Bank to pay the judgment out of the corpus of the trust. On August 20, 1959, appellee made a motion to have the court determine that an emergency, as allegedly defined in the trust agreement existed, as to support, welfare and care of the children, and ordering the Bank to pay the $4,061.50 to appellee. On the following day the appellant Bank filed a motion requesting the court to reconsider its former order of August 13. On September 15, 1959, a hearing was had, and the evidence contained in the bill of exceptions, was offered for the purpose of showing the existence of such emergency so far as the children were concerned. The court held that under the language of the trust, an emergency existed, and ordered the Bank to pay appellee the $4,061.50 from the corpus of the trust. It is from this order of the trial court that the appeal to this court is made.

First of all, we think it is necessary to determine the intention of the settlor in the creation of this trust; incidentally, it provides income for himself, but the real and primary purpose so far as the corpus of the trust is concerned, is for the benefit of his children, or their issue; this is clearly indicated by Article 4, as above quoted. The termination of the trust occurs when both Culver and his wife are deceased, at which time the corpus or remainder thereof is payable to the children, or their issue.

The sole issue in this case as we see it is, whether or not there is anything in the language of the trust agreement permitting the invasion of the trust corpus, resulting from settlor’s permitting arrearages to pile up for lack of payments for support.

Article 2 of the trust agreement provides as follows: “In addition* to such income, the trustee is authorized, in its absolute and uncontrolled discretion, to pay to or for the benefit of the Grantor during his lifetime, parts of the principal of this trust, from time to time in the event of an emergency effecting him, his wife or children.” We think that this language creates a discretionary trust in the bank. The settlor could have averted what has happened here by making his wife the trustee; he could have left it to her sole discretion to determine when an emergency existed. But he didn’t do that. He foresaw that conditions might arise creating emergencies concerning which persons might differ. He desired that The Ohio National Bank be given the “absolute and uncontrolled discretion” to determine the existence of an emergency. It is claimed that the agreement of the Bank to pay some $1500.00 worth of the then existing obligations of the parties, made the Bank a party to the separation agreement, and that having exercised its discretion in that regard, failure of Culver to make support payments, constitutes an emergency and binds the Bank to pay arrearages out of the corpus of the trust, if there be no income. With this contention, we can not agree. It is true, and we are not unmindful of the fact that failure upon Culver’s part to pay for support of his children creates undesirable con • ditions, but we think, in trusts of this kind, deviations from the terms of the trust may not be made because of desire, convenience, or even desperate conditions in the affairs of the beneficiaries, Savings Bank v. Alter, 103 Oh St 188. In Hopkins, v. Cleveland Trust Co., 163 Oh St 539, in the first paragraph of the syllabus we find this language: “So long as a trustee executes the trust in good faith and within the limits of a sound discretion, a court of equity will not interfere with that discre tion or undertake to substitute its discretion therefor.” See, also: Restatement of Trusts, Section 187.

As we read the trust agreement, the Bank has the right to not only determine whether an emergency exists, but it has the obligation to determine how much money should be paid out of principal to alleviate the emergency. The settlor had a right and probably a purpose in appointing the Bank in preference to his wife or any other individual, who might be moved by sentiment or lack of vision. We think that the law is well settled that in a discretionary trust, as we have here, so long as the trustee executes the trust in good faith, and within the limits of sound discretion, a court of equity has no right to interfere with the exercise of that discretion, and substitute its discretion for that of the trustee.' Even if the court would, in the exercise of a sound discretion, find that an emergency exists, under certain circumstances, it could not substitute its discretion for that of the trustee. ’Of course the courts have supervision over discretionary trusts; but the sole inquiry is limited to whether the discretion exercised by the trustee has been abused; if the bank in the exercise of good faith, failed to exercise its discretion, or, having exercised it, was guilty of bad faith, then the courts can interfere, but not before.

Let us look at the record in this case. The only testimony in the Bill of Exceptions is that of Mrs. Culver; it is upon her testimony alone and the trust agreement that we must decide the issues in this case. There is nothing in the testimony to indicate that the arrearage of $4,061.50 in and of itself created an emergency. Appellee testified on September 15, 1959, as to the necessity of repairs to the home; and generally as to various debts she owed, and that how she had borrowed money, and that her credit was exhausted; but the order finding an emergency to exist was made by the court on November 4, 1959. This order must be based on the testimony offered on September 15, 1959. The trial Court in its entry finds that the $4,061.50, arrearages were due on July 16, 1959. How can Mrs. Culver’s distress on the 15th of September, 1959, be considered an emergency calling for the payment of arrearages which were payable two months before? if what the trial court said is true, then an emergency existed each time an additional $60.00 was due. We can not follow this reasoning. The testimony further discloses that when Mrs. Culver called to the attention of Mr. Rugg, Trust Officer of the Bank, that her home was in need of repairs, he sent Mr. Hamilton out to investigate and apparently $1,800.00 worth of repairs were made by the Bank in the exercise of its discretion. There is not one syllable of testimony in the record that Mrs. Culver called the Bank’s attention to the fact that her husband was in arrears in support payments; that she claimed, as a result thereof, an emergency existed, or that the Bank refused to exercise a discretion thereon, or that its failure amounts to an abuse of discretion, or exercise of bad faith. What happened was that on August 13, 1959, she obtained a judgment for the full amount of the arrearages of $4,061.50, without giving the Bank an opportunity of exercising its discretion; the trial court substituted its discretion for that of the Bank, declared an emergency to exist because of the arrearages and ordered the Bank to invade the corpus of the trust: This it can not do; nor do we agree that the settlor still has an interest in the corpus of the trust estate which his children can reach. It was at this time that the Bank refused to pay on the order of the trial court; but it did file a motion for a reconsideration of the ruling on which this appeal is predicated. We think the Bank was justified in its refusal.

In the case at bar, although the trust was for the benefit of the settlor, in that the trustee, in its discretion, might pay out principal for his benefit, he has no vested interest until the trustee exercises that discretion. In a similar case, that of Athorne v. Athorne, 100 N. H. 413 (1956) a wife attempted to reach the interest of a husband in a discretionary trust, for the purpose of alimony, and the court held this could not be done, at least until the trustee had exercised the discretion provided in the trust. See, also: Restatement of Trusts, Section 152.

In conclusion, we hold that the trust in the case at bar is a discretionary one; that the trial court was in error in ordering the Bank to pay the judgment of $4,061.50 out of the corpus of the trust estate; that the trial court substituted its discretion for that of the trustee; that the trustee has the sole and absolute discretion to determine if an emergency exists, and the amount which is to be paid to alleviate the emergency: of course, the exercise of its discretion, as to good faith or abuse of discretion, being subject always to review by a court of equity.

The orders and judgments of the trial court made on August 13, 1959, and November 4, 1959, ordering the Bank to pay the sum of $4,061.50; are hereby reversed, and the cause remanded to the Court of Common Pleas, Division of Domestic Relations, of Franklin County, Ohio, for further proceedings according to law.

MATTHEWS, PJ, concurs. O’CONNELL, J, dissents.