Nashville Trust Co. v. Lebeck

270 S.W.2d 470, 197 Tenn. 164, 1 McCanless 164, 1954 Tenn. LEXIS 467

• Court: Tennessee Supreme Court
• Decided: July 23, 1954
• Status: Published

Opinions

Mb. Ci-iiee Justice Neil

delivered the opinion of the Court.

The Nashville Trust Company, Herman Click and Daniel May, as trustees under the wills of Louis Lebeck, deceased, and Michael S. Lebeck, deceased, filed their original bill in the Chancery Court of Davidson County on August 8, 1951, alleging, among other things, that they held in trust property on the north side of Church Street in the City of Nashville, known as the “Lebeck Building”. This building was occupied by the Harvey Company, and for a number of years had been used as one of the large department stores in Nashville. The Harvey lease expired December 31, 1953. Michael S. Lebeck and Louis Lebeck were owners as equal tenants in common.

The bill alleged that complainants had signed a lease with the Cain-Sloan Company for a period of 25 years, the same being made an exhibit to the bill, and that it had been duly recorded in the Register’s Office of Davidson County. The base consideration of the lease was $125,000 a year and an agreement to assume other obligations with reference to the property. A copy of the wills of the respective owners is also filed as an exhibit to the bill.

The hill further alleges that, “The complainant trustees, under the terms of their respective trust instruments, were specifically given the power to lease the above described property, and were expressly prohibited from selling, mortgaging, creating any lien upon, or otherwise disposing of said property”. (Emphasis supplied). The italicized language is important, as will later appear in this opinion.

Under the terms of the will of Michael S. Lebeck, his undivided one-half interest was devised to trustees with directions to pay the income to decedent’s wife for life and remainder to' his sons, Clarence E. Lebeck and Morton S. Lebeck, during* their respective lives, etc., with remainder to children or grandchildren, etc. Under the will of Louis Lebeck his undivided one-half interest in the property was devised to Herman Glick, as trustee, with directions to pay the net income to his wife, Le.ah Lebeck, for life and at her death to certain remainder-men, naming them. It is alleged that Morris Lebeck is 67 years old, unmarried, and is of unsound mind. The will also names certain minor children as beneficiaries, to wit, Thomas Gilbert Mendel, Alice Jean Mendel and James Ira Mendel, who share in the trust property upon the death of their father.

The bill further alleges that complainants are advised that by a proper construction of the respective wills the “trustees had the power to make a lease beyond the probable duration of the trusts” including ultimate remaindermen, those in being- and those not in being. The concluding paragraph to the bill is important to the issues involved, and is as follows:

“Being advised that they are entitled to the guidance and protection of this court in this matter, the complainant trustees seek the Court’s construction of the respective wills; and, in the alternative, if the Court should be of the opinion that the complainant trustees under the wills did not have the power and authority to make the lease exhibited to the Court, and thereby bind the ultimate remaindermen, that the Court, nevertheless, ratify, confirm, and approve the actions of the trustees in entering into the lease agreement with The Cain-Sloan Company, as a valid and binding exercise of their discretion as trustees, the lease agreement being to the manifest best interests of the trust beneficiaries and the ultimate remaindermen. ” '

The prayer of the bill is, ‘ ‘ That the respective wills of Michael S. Lebeck, deceased, and Louis Lebeck, deceased, be construed by this Court, with reference to the authority and power of complainant trustees to make leases of the realty in question, and particularly as to the authority and power of the complainant trustees to enter into the aforementioned lease agreement with the defendant, The Cain-Sloan Company”.

There is a prayer in the alternative to the effect that, if the trustees did not have the authority to make the lease in question and bind ultimate remaindermen without the approval of the court, “that the Court ratify, confirm and approve the .action of the complainant trustees in entering into the lease agreement for the term of years mentioned, as being to the manifest best interests and advantage of the life beneficiaries of the respective testamentary trusts involved, including the ultimate remaindermen”. The bill is sworn to by Herman Grlick and Daniel May.

All parties in interest, including minors and the mental incompetent, were made defendants. The Chancellor .appointed two able members of the Nashville Bar as guardians ad litem with full authority to act for the cestpi que trustent, minors and insane defendants.

Aaiswers were filed by all defendants. The guardians ad litem also filed a cross-bill, which was later approved by the Chancellor. The cross-bill brought to the attention of the Chancellor certain information relating to the Harvey Company’s rights to remove certain fixtures if its lease was not renewed, etc. The cross-bill made Harvey’s a defendant for the purpose of a discovery as to Harvey’s offer to lease the building. The Harvey Company answered and exhibited its proposed renewal lease of the property, all of which was objected to by complainants. Complainants moved to dismiss the cross-bill which was denied, and thereafter application was made to Honorable Sam L. Felts of the Court of Appeals for certiorari to review and reverse the action of the Chancellor, but the petition was denied.

We pretermit any reference to the order of reference to the Clerk and Master and his report, since it is not in our view of the case of any importance.

The learned Chancellor held in a memorandum opinion that “the authorities seem to be almost unanimous in this country that such a lease as the one involved here, in order to be binding, must be ratified by the Court.” Speaking further, he held: “A number of authorities hold that a lease of trust property terminates with the trust, and any lease beyond its duration is void.” Johnson v. Johnson, 92 Tenn. 559, 23 S. W. 114, 22 L. R. A. 179; Coffee v. Ruffin, 44 Tenn. 487; Meath v. Porter, 56 Tenn. 224; 26 R. C. L., Sec. 133 (Trusts); In re Hubbell Trust, 14 Am. & Eng. Ann. Cases 648; Bogert on Trusts and Trustees, Vol. 4, Secs. 790 & 791; and 54 Am. Jur. Sec. 473. Upon the above legal question we are in accord with the Chancellor.

It cannot be doubted but that the Cain-Sloan Company lease extends beyond the life of the trust. An examination of the Chancellor’s opinion discloses that he held that the trustees were without power to execute a lease that would extend beyond the life of the trust without the court’s ratification or express .approval. Upon a full consideration of all the evidence the Chancellor disapproved of. the Cain-Sloan lease and found that the proposal of the Harvey Company was for the best interest of the beneficiaries.

The complainants appealed to the Court of Appeals and that Court reversed the Chancellor, holding that the trustees had full power to make the lease to Cain-Sloan, which concluded and settled the rights of all parties.

The guardians ad litem petitioned this Court for certiorari, which was granted. The issues have been orally argued by counsel and elaborate briefs filed on behalf of all parties in interest.

The principal question at issue is raised in the assignments of error that the Court of Appeals erred in finding and adjudging that the trustees had full power to execute the lease, and that the same was binding upon the mentally incompetent and the minor defendants, and all remaindermen, including those in being and those not in being; it was further error to hold that the trustees had already exercised such power and authority and that the discretion of the Chancery Court could not be substituted for the discretion which the settlors of the trust gave to the trustees.

It would unduly prolong this opinion for us to respond to every contention made by counsel on tbis appeal, even if thought advisable to do so. At the outset we think the Court of Appeals misjudged the case by holding that the complainants sought a declaratory decree to declare the rights of the parties. Nothing is said in the bill about seeking declaratory relief, but the bill was primarily and solely to construe the wills of Michael and Louis Lebeck. While Code Section 8838 authorizes a suit to declare rights arising in the “construction of wills and other instruments”, the Court will not entertain it to decide contingent interests that may never arise. U. S. Fidelity & Guaranty Co. v. Askew, 183 Tenn. 209, 191 S. W. (2d) 533, and cases cited therein.

We also dismiss the contention of counsel for the trustees and Cain-Sloan that the signing of the contract, and recording it, effectively closed the entire matter. If this is to be thought of as true as a matter of law, which we do not concede, then the complainant’s suit should have been dismissed.

We look to the wills in a vain search to find appropriate language which confers upon the trustees the power to make the lease in question. The intention of the settlors of the trust to confer such authority must be found within the four corners of the respective wills, expressly or by clear implication, and it is not to be found. The complainants can derive no comfort from the finding of the Court of Appeals that the trustees having the right to -sell the property would have the power to lease it. The basic error of this statement is found in the will of Michael Lebeck as follows: “There shall be no power in the trustees to sell, mortgage, create a lien upon, or otherwise dispose of said property, or any part of it.” The major premises being false the conclusion is false.

The record before us discloses almost beyond dispute, that the complainant trustees entertained serious doubts as to their authority to make this lease. It appears on the face of the bill and the prayer, “that they are entitled to the guidance and protection of this court in this matter.” Why should these complainants seek “the guidance and protection of the court” if they had unquestioned authority as they contend? Moreover as further indicating doubts as to the validity of the lease the complainants sought to amend their bill to have the Chancellor approve the Cain-Sloan lease for a period that would not extend beyond the life of the trust. It was properly denied. They are not permitted to assume an unequivocal position as in the original bill, and abandon it for another in an attempt to limit the jurisdiction of the Chancery Court. The complainants’ suit presents two amazing and irreconcilable contradictions, to wit, (1) the trustees craved the “protection and guidance” of the court, and at the same time deny the authority of the court to grant any protection to minors and lunatics, the cestui que trustent; (2) they have burdened the trust estate with an enormous expense, seeking a decree validating the Cain-Sloan lease and now contend that the lease was and is binding upon all parties without court approval, the plain inference being that this suit was not necessary for any purpose. In other words, the court’s “advice and protection” is of value to them only if and when it suits their partisan purposes, otherwise its jurisdiction is positively disavowed.

The contention made by the trustees and Cain-Sloan that this was in fact a lease contract which had been definitely concluded, and binding upon all parties in interest, is not sustained by the record. On the contrary the parties expressly agreed that it would not be a binding obligation until it was approved by the Chancery Court. On April 26, 1951, the parties signed .a preliminary agreement which provided:

“A formal lease will be drawn embodying all of the conditions and spelling out the full details of the lease. * * * the lease agreement shall be submitted to and approved by the Chancery Court of Davidson County, Tennessee, and this offer is made subject to such confirmation by the Chancery Court of Davidson County, Tennessee.”

On the same day and contemporaneously with the signing of the purported lease agreement, a so-called “Collateral Agreement” was signed by the parties to the effect that the trustees, Morton Lebeck and Ira Mendel will have a bill prepared and filed seeking approval of the lease by a court of competent jurisdiction and determination that the lease is advantageous and should be approved. The foregoing agreements fully justify the conclusion that the lease was merely an offer to lease the property, or a tentative agreement, which was to be binding only' when approved by the Chancery Court. The foregoing agreements were later reaffirmed by the trustees .as appears in their testimony as follows:

“Q. (To Daniel May). In other words it was your understanding that there was not to be a valid lease for any period of time, unless the court approved it?

A. That was my understanding.

‘ ‘ Q. That’s what you intended when you executed the document? A. I can see no other reason why I went to court.”

To the same effect was the testimony of Mr. Warner McNeilly, President of the Nashville Trust Company, as shown by the following: “I don’t know anything about it being left ont of the lease, bnt I know it was contemplated all the time that the lease would be submitted to the court, Chancery Court, for .approval.”

These complainant trustees, having signed the foregoing agreements, and having acknowledged them under oath, are estopped from making the contention that the Cain-Sloan lease was binding upon all parties in interest without the approval of the Chancellor. According to the testimony of May it was not valid for any period of time, and with this statement the Court agrees.

The equitable doctrine of estoppel is not ,a new principle which we think is applicable here. It is as old as the Chancery Court itself, and is universally recognized. One of the elements of estoppel according to Gibson’s Suits in Chancery is, “He is not to be heard who alleges what is contrary to his former statement.” (Sec. 67, 3rd Ed.). It is further stated by the author, “The estoppel is commensurate with the thing represented, and operates to put the party entitled to its benefit in the same position as if the thing represented were true.” The prejudice to the guardians ad litem and the insane and minor defendants is the effort to deprive them of the right to the protection of the Chancery Court, i. e. an investigation to determine if the lease contract of Cain-Sloan, or any contract, made on their behalf is for their best interest.

The complainant trustees invoked the jurisdiction of the Chancery Court for its “protection and guidance” and for a decree as to the validity of a particular contract, i. e. the lease proposal of Cain-Sloan. The cross-bill of the guardians ad litem prayed that another proposed lease, to wit, the Harvey Company proposal be appraised. When the complainants brought to the Chancery Court the question of their authority under the respective trusts, and craved its jurisdiction for specific purposes, the court, then and there, had jurisdiction for all purposes. The guardians ad litem naturally prayed for the protection of minors and lunatics, who had become wards of the court.

The Chancellor in this situation, having considered the issues involved, said:

“The Court being convinced that its action is necessary in the premises, it follows, as of course, that, in acting for those who are unable to act for themselves, the Court will be concerned with the question of obtaining the best contract available for those in whose interests it must act. ’ ’

"We think the Court of Appeals failed to give due consideration to the inherent jurisdiction of the Chancery Court in dealing with the administration of trust estates, especially where the interests of minors and lunatics are involved. With reference to the disposition of the property of infants and lunatics, i. e. the sale or lease of such property, the Chancellor stands in loco parentis, Ricardi v. Gaboury, 115 Tenn. 484, 89 S. W. 98,100, and in authorizing “the making of a lease of the property of a minor”, must consider that which “will be most beneficial to him.” Ricardi v. Gaboury, supra. Regardless of the pleadings, when minors and lunatics are before the court, the protection of their property rights and interests is said to be “matters of conscience” and fall “strictly within the scope of the Chancellor’s extraordinary jurisdiction.” Sec. 8, Bispham Principles of Equity. In protecting their rights the Chancellor is not circumscribed and limited by technical pleadings of counsel, but stands aloof and acts within the law as parens patriae. Magevney v. Karsch, 167 Tenn. 32, 49-50, 65 S. W. (2d) 562, 92 A. L. R, 343, opinion by Green, C. J.

It is not controverted that where the settlor of a trust directs trustees to dispose of property by sale or lease in a specific manner, and it does not violate any positive rule of law, the trustees must act accordingly to carry out the intention of the testator. But even then the Chancellor has the inherent authority to consider if the trustees have in any way deviated from the mandate of the will to the manifest prejudice of the cestui que trustent. Ricardi v. Gaboury, supra; Restatement of the Law of Trusts, Sec. 187; Scott on Trusts, Sec. 187. In Meath v. Porter, 56 Tenn. 224, 228, it is said:

‘ ‘ a court of equity will watch over the administration and execution of a trust, and see that the interest of all parties is protected, as far. as it can be done consistent with the rules of law and of equity, and fairness to .all concerned.”

The foregoing is a clear cut statement of the issue, and it is always the issue except in cases where the will, or instrument creating the trust, expounds itself, and ,a court review is not at all necessary.

Contention is made by the trustees that the Chancellor has no authority to make a lease contract, but it rests solely within their discretion. That is true only in a qualified sense. In the instant case the Chancellor responded to the issue as to what he conceived to be the manifest interest of the parties and more especially the minors and insane cestui que trustent. He clearly indicated in his opinion that “the trustees will be under a legal and moral duty to execute the lease adjudicated to be best for the estate. ’ ’

It conclusively appears that the Chancellor considered the evidence bearing upon every issue ,and, having done so, disapproved the proposal of Cain-Sloan and approved the Harvey Company’s proposal for a renewal contract. He unmistakably pointed out wherein the latter was superior to that of the former. His finding in this regard appears in his action upon the Clerk and Master’s report, and covers many pages. It would be well nigh impossible to refer to every fact. But one item in particular should be mentioned. Thus on page 29 of his opinion, he says:

“It is shown by the record that the Harvey Company had spent $686,694.00' on the Lebeck Building during its occupancy thereof up to the time of taking testimony herein, (Harvey exhibits ‘AA’ and ‘BB’), and this is without taking into account what was done by Harveys’ own staff of carpenters, painters, and other artisans (Hep. Todd, pp. 109, 112.).

“ Prudent trustees might well have foreseen that, if the present tenant, after having spent so great a sum of money in improving the property, were denied the right of renewal, litigation with respect to these improvements, on surrender of the premises, would almost inevitably follow.

“It is worth much to ,an estate to avoid such a controversy.

# # * «S # *

“On the question of percentage rental, which is a very vital part of the contract, the record shows that as of the fiscal year ending January 31, 1952, Harveys ’ sales had attained a level that would result in the payment of rent considerably in excess of the fixed minimum of $125,000.00 a year; whereas, the Cain-Sloan sales during- the same year would not have produced any percentage rental. In fact, on the figures produced, Cain-Sloan sales for that year would fall far short of sufficient volume to produce any percentage rental. Furthermore, it is shown that Cain-Sloan sales would not result in percentage rental until they increased by almost 50% of the total sales over those for the year ending January 31, 1952.”

Another important provision in the Harvey lease, and found to be superior to the Cain-Sloan lease, appears in the Chancellor’s findings, as follows:

“Under the Harvey proposal, it is agreed that escalators, air-conditioning, blowers and equipment, elevators, etc., all of which were installed by Harvey prior to the execution of its proposed lease, and any replacement thereof; will be surrendered to the lessors at the end of the term, whereas, there is no requirement in the Cain-Sloan lease for the installation of escalators, air-conditioning equipment, nor is there any requirement that the property be improved.”

The foregoing finding of fact cannot be brushed aside as of no importance. The fixtures and improvements at present represent an investment of $686,694.

No question is made by the trustees .as to any lack of financial responsibility of the Harvey Company to fulfill its contract.

It should be noted as we conclude this opinion that the complainant trustees and Cain-Sloan Company did not assign any error in the Court of Appeals to the finding of the Chancellor that the Harvey Company lease was of superior benefit to the trust estate. We think there is abundant evidence to support his decree. It results that the Court of Appeals is reversed and the decree of the Chancellor is affirmed. The cause is remanded to the Chancery Court for such further orders and decrees as may become necessary to a final adjudication of the rights of the parties.

Prewitt and Burnett, Justices, concur. Tomlinson and Swepston, Justices, dissent.