Greenwich Trust Co. v. Converse

122 A. 916, 100 Conn. 15, 1923 Conn. LEXIS 154

• Court: Supreme Court of Connecticut
• Decided: November 17, 1923
• Status: Published

Opinions

Beach, J.

The answers to be given to all of the questions reserved, depend upon whether, and to what extent, the discretionary powers conferred on the executor and original trustee survive to the successor trustee appointed by the Court of Probate.

It is not to be expected that the authorities on the subject of the survival of discretionary powers conferred on testamentary trustees should furnish an inflexible rule as to what powers will or will not survive to a successor trustee in the absence of an express grant of the original power to the successors in trust; even though a uniform rule of interpretation had been applied in all cases. This has not been done. While it has been generally agreed that when the power is a matter of personal confidence in the trustee, it will not survive unless the testator so direct, no single test for determining whether or not the power is a matter of personal confidence has been universally accepted and adhered to. The older and more rigid test apparently followed the distinction between the general and special powers of trustees, and assumed that every grant of discretionary power was a matter of personal confidence. See 2 Perry on Trusts & Trustees (6th Ed.) § 496 et seq.

But most of the later cases, cited by Perry in the note to § 503, are inclined to give effect, when possible, to discretionary powers plainly intended by the testator for the benefit and protection of the beneficiaries of the trust.

Thus in Sells v. Delgado, 186 Mass. 25, 70 N. E. 1036, the trust was to pay income to children, and further that as each child attained the age of twenty-five years the two trustees named or the survivor of them “may, if in their or his discretion they or he deem it prudent and advantageous, pay over and convey to the one reaching that age his or her respective share, to vest in him or her absolutely and forever, and my said trustees or the survivor of them shall be the sole judges, and I leave it entirely to their or his discretion to decide whether or not it will be prudent and advantageous for any of my children on his or her reaching that age to receive the principal of his or her share.” Neither of the two trustees named qualified, and the question was whether the power to decide whether or not any child reaching the age of twenty-five years should receive the principal of his or her share, could be exercised by a substitute trustee appointed by a court. Although the words conferring the discretion would apparently, if taken alone, import that the original appointees or the survivor of them were the sole judges authorized to decide the question, the court, looking at the general intent of the testatrix, construed the entire trust provision as warranting the inference that she did not intend to restrict the exercise of the power to the named trustees; observing that a different construction would cause a serious impairment of the full design of the testatrix and leave it imperfectly executed.

As applied to a discretionary power to make payments out of principal, the doctrine now in force in this State and the course of its development may best be understood by a short review of the cases. In Security Co. v. Snow, 70 Conn. 288, 39 Atl. 153, the testator left the fund to his wife “in trust, however, to be invested and managed by my said wife, and to be paid and delivered and conveyed by my said wife to my said daughter from time to time during her natural life as my said wife may deem for the interest and welfare of my said daughter,” and any part “thereof which shall not be paid, delivered and conveyed as aforesaid to my said daughter during her natural life shall at her decease be paid, delivered and conveyed to her lawful heirs.”

The appointee died before turning over any considerable portion of the trust fund to the cestui que trust, and the plaintiff, having been appointed trustee in her stead by the Court of Probate, asked the Superior Court whether it could exercise the discretionary power conferred on the original trustee. Upon a reservation for the advice of this court, we held that the discretionary powers accorded to the wife were purely personal and terminated at her death; also that the gift over to the daughter’s heirs was void under the statute in force at the testator’s death. The result was that the entire trust provision became incapable of execution. It happened, however, that the trust thus defeated was established by a codicil revoking an absolute gift of the same estate to the same beneficiary, and so it was held that the revocation fell with the trust.

In Whitaker v. McDowell, 82 Conn. 195, 72 Atl. 938, the trustee was directed to pay the income to the cestui que trust for life, and further authorized and directed “if in his judgment any portion of the principal of said trust fund may be needed for the proper and necessary support of my said sister, to use so much of the principal of said trust fund, as may be needed for her suitable care and maintenance and it is my will that said trustee have an absolute discretion in the manner of the disposition of said trust fund, both principal and income, during the lifetime of my said sister, and his decision in said matter is to be final and conclusive.” Notwithstanding the positive direction to the trustee to use so much of the principal as in his judgment might be needed for the proper and necessary support of the cestui que trust, we held that a successor trustee had no power to sit in judgment and make such payments, holding, as matter of construction, that the last four lines above quoted “make it clear that it was not the testator’s intention to require the trustee as one of his duties to pay to the life beneficiary, at any time, any part of the principal of the trust fund, but that he intended to leave it to the judgment and discretion of the original trustee as to whether or not any part of the principal should be paid to the beneficiary. Such discretionary power as to the use of the principal was a matter of personal confidence in the original trustee, which cannot be exercised by the plaintiff.” It will be noted that the discretionary power reposed in the original trustee extended to both principal and income, but as nobody questioned the power of the successor trustee to pay income, that part of the trust was not endangered. .

In Russell v. Hartley, 83 Conn. 654, 78 Atl. 320, the trustee was directed to pay over the income to the cestui que trust for life, and further authorized “to pay over to her from time to time such portion of the principal of said trust as he may deem necessary for her comfortable support.” In that case, also, the power of a successor trustee appointed by the Court of Probate was questioned, and we held that the power to make payments out of principal survived. Admitting that a power of personal confidence ends with the death of the donee, we said: "The terms of the codicil construed with the will furnish the true guide in ascertaining whether the power is one of personal confidence, and this guide is the intention of the testatrix. The testatrix contemplates a trust which shall exist during the life of her niece and provide her with a comfortable support, from the income if this be sufficient, and, if not, from the principal in such proportion as the trustee may determine. In the event of a remainder after the termination of the trust the codicil attempts to dispose of this finally. It is wholly improbable the testatrix, knowing the uncertainty of life and solicitous and insistent as she exhibits herself in the care of her niece during her life, should intentionally have inserted in the codicil a clause repugnant to her own purpose, and taken from her niece the protection which was the object of the codicil, by limiting the powers of the trust to the trustee of her own naming. Repugnant provisions must be construed in such way as to preserve the intention of the testatrix. Viele v. Keeler, 129 N. Y. 190, 199, 29 N. E. 78. The language of the codicil does not either necessarily or impliedly lead to the conclusion that the powers conferred upon this trustee were because of special or peculiar confidence reposed in him. The duty of the trustee is to pay the income to the niece during her life; over that he has no discretion. His authority to pay over the principal is limited by the purpose named, viz: for her comfortable support. When the necessity arises the duty of the trustee is clear. The determination of the occasion for the exercise of this power, and the extent of its exercise, while ordinarily for the discretion and judgment of the trustee, is not an ultimate judgment. A court of equity in an appropriate case will review and revise that judgment. Peckham v. Lego, 57 Conn. 553, 554, 19 Atl. 392.”

It will be observed that there is not much difference between the discretionary powers conferred on the respective trustees in the Snow and Russell cases. In each case the power is to pay over so much of the principal as the trustee may deem necessary for the support of the beneficiary. The difference in result is brought about by applying in the Russell case a more comprehensive method of construction, which puts greater emphasis on the primary intent of the testator to provide for the support of the beneficiary out of principal in case the income proves insufficient for that purpose, and greater emphasis on the power of a court of equity to revise and review a discretionary power which is not intended to be exercised or not at the caprice of the appointee, but is intended to be exercised upon the happening of a contingency foreseen and provided for by the testator.

In Williams v. Gardner, 90 Conn. 461, 97 Atl. 854, the trustee was directed from time to time to make careful inquiry “into the social and business character and relations of my said son; and if after such careful inquiry said trustee be of opinion that my said son would prudently and economically manage the same,” to pay over a fractional part of the principal of the trust fund; otherwise not. There again the question was whether a successor trustee appointed by the Court of Probate could exercise the discretionary power, and in holding that the power survived, we said: “Neither the statute nor the general law authorizes the successors so appointed, of testamentary trustees, to exercise special discretionary powers founded upon personal confidence conferred by a testator upon the latter. Whitaker v. McDowell, 82 Conn. 195, 199, 72 Atl. 938; Pratt v. Stewart, 49 Conn. 339, 341. But powers conferred by the testator, which the testamentary trustee, if acting, would be required to execute, it is the duty of his successor so appointed to execute. In the former case the execution of the power depends upon the mere discretion and will of the donee of the power, and the court cannot control his discretion or exercise it in his stead, and at his death the power ends. Security Co. v. Snow, 70 Conn. 288, 292, 39 Atl. 153; 1 Perry on Trusts (6th Ed.) § 248. In the latter case the power is coupled with a trust which a court of equity will compel the donee to execute, or, in case of his death or refusal to act, will execute by itself or another trustee appointed by it.” We also held that the trustee might be compelled to make inquiry and to form a judgment and find whether the son’s social and business character fitted him to manage the property prudently and economically, saying: "The determination, by such an inquiry, whether the son is capable of prudently managing the property, can be done by the court or a succeeding trustee as well as by the person appointed by the will. The power to sit in judgment is not a naked power.”

It appears from these cases that if the power is coupled with a testamentary disposition for the benefit of the cestui que trust, and is to be exercised or not if and when a stated condition of fact appears to exist, then the original trustee may be compelled to exercise the power; that is to say, he may be compelled to inquire into the existence of the condition and in good faith to determine whether in his judgment it does or does not exist. Within the limits of due inquiry and debatable decision the discretionary judgment of the trustee is final; otherwise it may be reviewed and revised by a court of equity. In such a case the power is said to be annexed to the trust and survives to a successor trustee.

This statement of the rule of law does not exhaust the subject, for the question whether the power survives is fundamentally a question of testamentary intent, and hence a question in each case of the proper construction of the will.

Applying these considerations to the case at bar, it must in the first place be assumed that this testatrix contemplated the possibility that in the ordinary course of nature her son would outlive his father. Russell v. Hartley, supra. And since she has expressly provided that all the discretionary powers conferred on the original trustee are to remain potentially operative throughout the lifetime of her son, it is—as we pointed out in the Russell case—“wholly improbable” that she should have intentionally defeated that purpose by a repugnant provision. Full effect should be given, if possible, to the manifest intent of the testatrix that her son and his family should, throughout his lifetime, have such parts of the principal of this trust fund as the trustee might deem for his or their benefit. The doubt arises from the use of the words “absolute discretion” when understood as importing an irresponsible discretion to pay or withhold at will.

We think, however, that the whole clause is capable of a construction which will preserve and not defeat the intent of the testatrix; namely, that the power is to be exercised only when in the judgment of the trustee it is for the benefit of the son and his family that some part of the principal should be paid over. The intent being clear, the single word “absolute” could not be allowed to defeat or seriously to impair the execution of the full design of the testatrix. Even if apparently repugnant, we should apply the rule stated in Russell v. Hartley, that repugnant provisions must be construed in such a way as to preserve the intention of the testatrix. But there is no necessary apparent repugnancy, for a discretionary power which is to be exercised in pursuance of an enforcible rule laid down by the testatrix is not “absolute” in any objectionable sense. In that context the word means no more than the corresponding words in Sells v. Delgado,my said trustees or the survivor of them shall be the sole judges, and I leave it entirely to their or his discretion to decide whether or not,” etc. Though the trustee is to be the sole judge, a court of equity will, in a proper case, compel him to sit in judgment, and compel him to execute the power in good faith. When that is so, an enforcible trust exists, which will not thereafter be permitted to fail for want of a trustee. Sells v. Delgado, Williams v. Gardner, supra.

On the point of construction, Eastlick v. Smith, L. R. (1904) 1 Ch. Div. 139, is interesting. In that case a power given to three trustees “to sell the whole or any part of my said real and personal estate as they in their absolute discretion may think fit, and apply the proceeds arising therefrom for the sole and absolute use and benefit of my wife for and during her natural life,” was held not personal to the trustees originally appointed, but annexed to the office and to be exercised by the trustees for the time being, two of whom were successor trustees.

For the reasons stated, we hold that the power is annexed to the office and survives to the successor trustee. This answers the first of the questions reserved. As to the second question we are of opinion that the provisions for the payment of income and principal to the wife (not named in the will) of the testatrix’s son were for the benefit of the wife as one of her son’s “family,” and were not otherwise for the personal benefit of his then wife, who is now divorced and remarried; and further, that his present wife, Estelle Converse, takes in her place.

Answering the third question, the substituted trustee has the same rights, privileges, powers and duties with reference to the payment of the principal and income of the trust as did the original trustee.

The Superior Court is advised to render judgment accordingly. No costs will be taxed in this court in favor of any party.

In this opinion Curtis, Burpee and Keeler, Js., concurred.