130 Cal. App. 2d 196 | Cal. Ct. App. | 1955
After a hearing on the petition of respondent as beneficiary of a trust created in the will of Marian Mercer Jones, deceased, an order instructing successor trustee as to administration of trust and construing endowment agreement was entered. From this order Crocker First National Bank, as successor trustee, and the Regents of the University of California, as residuary beneficiary, appeal.
Questions Presented
1. The construction of the will as to the endowment provided therein for St. Luke’s Hospital and particularly whether said endowment was or was not to be increased from time to time. This includes the question of whether prior court orders are res judicata of this subject. 2. Did the court have the power to instruct respondent concerning the selection of the beneficiaries of the endowment ? 3. Was respondent entitled to attorney’s fees?
Record
February 14, 1949, a decree of distribution was filed in said estate distributing to the then testamentary trustee pursuant to the terms of the will of said decedent all of her estate. Said trustee then petitioned the superior court for instructions
Teems of Teust
The portions of the will important here follow. The trustee was to pay out of income and if necessary, corpus, specified sums monthly to specified persons. The trust was to continue until the last of these specified persons died or until annuities had been purchased for all of said persons, in the event the trustee elected to purchase them. When the trust terminated the balance of capital fund and income then in the hands of the trustee should be transferred to the trust provided in provision sixth and be disposed of as therein provided. The trustee was empowered from time to time to
Provision sixth provided a second trust subordinate to the payments above mentioned and to others not relevant here. It first provided for the trustee to have installed a stained glass window at such cost as the trustee might determine in Grace Cathedral and St. Luke’s Church. Secondly, it provided that the trustee endow three rooms in the Protestant Episcopal Old Ladies’ Home, and to pay from the trust estate such amount as in the opinion of the trustee might be necessary to endow said three rooms to be used in accordance with the rules of said institution, each room to be named as provided in the will.
Then follow the provisions most necessary to be construed in this controversy. After the trustee shall have installed the windows and endowed the rooms above mentioned, “I authorize and empower said Trustee to use such amount of said trust estate as he shall deem proper to endow a room in ST. LUKE’S HOSPITAL, in San Francisco, California, for the free use by women in reduced circumstances (preferably members of the Protestant Episcopal Old Ladies Home) in accordance with the rules and regulations of said hospital, which endowment I desire named after my mother and to be known as the ‘Margaret J. Jones Endowment.’
“ (5) I authorize and empower said trustee, at any time and from time to time during the term of said trust, to determine, and his determination shall be final, whether there is more property in said trust estate than is necessary to insure the carrying out of the foregoing provisions of this paragraph ‘Sixth’, and if he shall determine that there is an excess he is authorized and empowered thereupon to transfer and deliver to the REGENTS OF THE UNIVERSITY OF CALIFORNIA such excess of said trust property, free and clear of said trust, for an endowment fund named for my father and mother . . .” to be used for loans to students as therein set forth.
It is the position of both appellants that under the will and particularly paragraphs 4 and 5 of provision sixth that it was the intention of the testatrix that an endowment of a single sum be made, while respondent contends it was her intention
The Contract
In it the trustee agreed to transfer to respondent securities of the value of $150,000 and respondent ‘ ‘ agrees to accept the same pursuant to and in fulfillment of said provision of said will . . ."
“3. Except as hereinafter provided, said securities shall be owned and held by Second Party, and the net income therefrom shall be used in accordance with the rules of Second Party to maintain the said room and care for such patients as aforesaid, in perpetuity; and in the event that Second Party shall hereafter find that it is impossible for it to maintain said room and care for such patients, as aforesaid, from the net income of said trust as herein provided, or for any other reason it is unable or unwilling to perform its obligations under paragraph 2 of this agreement, it may, upon written notice to First Party herein and said Protestant Episcopal Old Ladies Home and the Regents of the University of California, apply to the Superior Court of the State of California, in and for the City and County of San Francisco, for appropriate relief ; and Second Party shall continue to perform its obligations as above provided to the extent that the income from such fund shall permit until said court shall determine what relief shall be granted in said action; provided that if the relief granted by said court in said action shall be inadequate or unsatisfactory in the opinion of the Board of Trustees of Second Party, then Second Party shall have the right to terminate this agreement and the fund shall then be disposed of as directed by said Superior Court; provided always that the provisions of said Last Will and Testament of said decedent (including the provision thereof relating to said preferential
In 1950 the average cost of a hospital room per patient day was about $19.62 and the income from the stocks transferred to respondent by the trustee was adequate to meet the then situation. By 1953 the estimated cost per patient day was $30. Early in 1952 the attorney for the hospital wrote the trustee requesting that steps be taken “ ‘to injsure the carrying out’ ” of the will, in view of the “alarming increase of cost of hospital care.” (Emphasis not added.) The trustee declined to do anything. The endowment fund has increased to $198,519, producing an annual yield of $10,125.97 in 1952. Of that year there was a surplus of $11,656.52 which respondent had not used, because it was uncertain whether under the contract it could be used to aid women other than members of the Old Ladies’ Home, nominated by it. Under the “prudent man rule” respondent desired to change the endowment corpus from all stocks (as now) to approximately equal amounts of stocks and bonds, and to receive from the trustee additionally approximately $70,000. This sum together with the present endowment fund, if invested in stocks and bonds yielding 4 per cent, would produce approximately $11,000, a sum sufficient to take care of one patient per year at the present cost of $30 per day.
The preferential trust consists of cash and securities appraised at $542,428.90 and a surplus of $25,986.58. In the subordinate trust (provision sixth trust) there are stocks appraised at $198,519.
1. Intention of Testatrix.
Did she intend that the endowment made to respondent was to be one payment or was it to be added to during the existence of the preferential trust? “ . . . the duty of the court is to first ascertain and then, if possible, give effect to the intent of the maker” of the will. (Estate of Gump, 16 Cal.2d 535, 548 [107 P.2d 17].) As the determination of the testatrix’s intent and the construction of the will are based solely upon the will itself, without the aid of evidence, this court is not bound by the construction given by the trial
In her will the testatrix first provides that the trustee shall pay certain persons monthly sums, from the income of the capital fund left for that purpose, and if necessary from the capital itself. The trustee may, if he sees fit, purchase annuities for all or any of said persons. If annuities are purchased for all, then, or at the death of the last annuitant, this trust (called preferential) terminates and all funds, either capital or income, go to the trust provided in the sixth provision (called the subordinate trust), which includes the endowment to respondent, to “be disposed of as therein provided for the disposal of assets” in that trust. The trustee may from time to time in his absolute discretion determine if there is a surplus in the preferential trust beyond the moneys necessary to take care of the annuitants, and may transfer such surplus to the subordinate trust to be disposed of as provided for the disposal of assets in the latter trust. The subordinate trust must take care of two matters before proceeding to the endowment for respondent: (1) It must install a stained glass window in each of two churches. (2) It must “endow” three rooms in the Old Ladies’ Home in the names of certain persons. (There is no provision or restriction as to the use of these rooms.) Then the trustee shall “use such amount ... as he shall deem proper to endow a room in ST. LUKE’S HOSPITAL . . . for the free use by women in reduced circumstances ...” “. . . at any time and from time to time during the term of said trust” the trustee may determine, in his absolute discretion “whether there is more property in said trust estate than is necessary to insure the carrying out of the foregoing provisions of this paragraph 1 Sixth, ’ and if he shall determine that there is an excess” he is authorized to transfer such excess to the Regents.
Under provision sixth the necessary expenditures for the first two matters contained therein were required to be over and done with before the trustee could act on the endowment. Taking the language in paragraph 4 of provision sixth “to endow a room . . . for the free use by women in reduced circumstances” alone requires the conclusion that it meant one sum only.
Moreover, paragraph 5 is in nowise dispositive. Nor is paragraph 3 of provision third, which authorizes the trustee from time to time to transfer surplus beyond that necessary to insure the payment of the annuitants, from the preferential trust to the subordinate trust, and which paragraph respondent contends, like paragraph 5 of provision sixth, indicates the testatrix’s intention to make the hospital endowment a continuing one. Both of these paragraphs deal with the handling of the trust funds and the determination of whether surplus is available to be transferred from one fund to another. The only clause providing for any disposition to respondent is paragraph 4 of provision sixth.
It is significant that in paragraph 3 testatrix directed the trustee in endowing the three rooms in the Old Ladies’ Home
Moreover, the trust would never terminate. Even after the termination of the preferential trust, the trustee would have to keep funds on hand to meet the possibility of hospital costs continuing to increase from time to time, requiring more funds to be given respondent. Although he had the discretion to make a determination, he might feel that he could not reasonably do so.
The construction of the will which we have given was the construction given by the trial court in its previous orders and by the trustee and respondent in the contract. In the “Petition . . . for Instructions and Advice as to St. Luke’s Hospital Endowment” the trustee stated that he held certain described stocks “available for use for the creation of said endowment” and that stocks of the aggregate value of $150,000 “are necessary and reasonable for such purpose,” asked that he be authorized to select stock in that amount ‘ ‘ and transfer the same to ST. LUKE’S HOSPITAL for the endowment above set forth” and that he be authorized to execute a “proper contract to effect such endowment. ...” The “Decree Authorizing and Directing Payment of Endowment to St. Luke’s Hospital” stated that the trustee had petitioned for instructions and advice “as to St. Luke’s Hospital endowment,” and then provided that “pursuant to said Will” the trustee was authorized and directed to select securities of the aggregate value of $150,000 and transfer them to respondent “for the endowment above set forth” and to execute a contract “to effect such endowment.” While it is nowhere stated
The contract provides, also, that respondent will keep separate from all other property of respondent, in a fund to be known as the “Margaret J. Jones Endowment” said securities “and any other property which shall hereafter be acquired in the place thereof, and the income therefrom.” If it were contemplated by the parties or the court in approving the contract, that additional funds might be given respondent for the endowment, it seems reasonable to assume that this clause would not have limited the Margaret J. Jones Endowment Fund to the securities and property to be acquired in their place, and the income, but there would have been an additional clause similar to “and other property or funds which hereafter may be given for this purpose.”
Then comes a most interesting provision, in view of respondent’s contention that a continuing endowment was contemplated, —if respondent shall hereafter find it to be impossible to maintain said room and care from the net income of the trust provided in the agreement, or for any other reason is unable or unwilling to perform its obligations it may apply to the superior court for appropriate relief, and if the relief granted by the court is inadequate or unsatisfactory, respondent may terminate the agreement and the fund shall then be disposed of as directed by the court, provided al
The trial court made a finding that at no time during the proceedings in which the prior orders were made were the provisions of paragraph 5, provision sixth, urged, raised or considered, nor were they necessary to any decision and that consideration of them would have been premature. That they were not raised in so many words is true, but they must have been considered. Their consideration would not have been premature, because, in passing upon the trustee’s petition for advice and permission to transfer the securities which petition referred “particularly to the Will,” as well as in the later order passing upon the contract, the court would be required to know whether a full payment was being made or merely a part payment. While the court orders did not spell this out in so many words, such is the effect of the orders. Continuing payments are completely inconsistent with the determination in these orders that the transfer^ of the $150,000 securities was pursuant to and in fulfillment of the terms of the will. As was the order made upon the trustee’s petition for instructions in Estate of Keet, 15 Cal.2d 328 [100 P.2d 1045], each order “became a final determination of the matters adjudged ...” (P. 333. See also Smith v. Williams, 66 Cal.App.2d 543 [152 P.2d 465].) Griffen v. Keese (1907), 187 N.Y. 454 [80 N.E. 367] is not in point. There the testator created a number of annuities and directed that his executors set apart and invest “ ‘. . . a fund sufficient to produce the several annuities . . .’ ” (P.
In Merriam, v. Merriam (1900), 80 Minn. 254 [83 N.W. 162], the will required the trustees to set aside sufficient securities to produce an annual net income of at least $8,000 to be paid the testator’s wife as long as she lived. The trustees set apart securities that produced that income. However, as time went on, their yield did not produce that income. The court held that the intention of the testator was not to provide an unchangeable fund, but that the fund was to be kept sufficient to provide the designated income. Merritt v. Merritt (1887), 43 N.J.Eq. 11 [10 A. 835] and In re Mc-Kenna’s Estate (1940), 173 Misc. 579 [18 N.Y.S.2d 482], were cases similar to the Merriam case. In each the will required the trustees to invest sufficient funds to produce and pay specified yearly amounts to the beneficiaries. Obviously such situations are different than in our case as in those cases it definitely appeared that the particular testator required the payment of the specified sums annually which could not be done if the fund from which the income came were not increased when necessary.
Respondent cites Estate of Ferrall, 92 Cal.App.2d 712 [207 P.2d 1077], seemingly to support its contention that the court could order, as it did here, the trustee to increase the amount of the endowment. Were this a continuing endowment and the trustee refused arbitrarily to act, that case might support respondent’s contention. But this is not a continuing endowment, and no contention has been made that the trustee acted in bad faith in making the single payment. The Ferrall case supports the action of the trustee here (pp. 715-716) : “Section 2269 of the Civil Code provides: ‘A discretionary power conferred upon a trustee is presumed not to be left to his arbitrary discretion, but may be controlled by the proper court if not reasonably exercised, unless an absolute discretion is clearly conferred by the declaration of trust. ’ An absolute discretion, as to the amounts to be paid from the corpus, was conferred by the trust provisions herein. An absolute discretion, exercised in good faith by a trustee, cannot be controlled by a court on considerations going to the soundness of the discretion so exercised.”
2. Instructions to Hospital.
In its order the court found that it was the intention of the testatrix, and so instructed respondent, that the income from the endowment is to be used to furnish hospital services to such women in reduced circumstances as respondent may select, provided that at all times it recognize the preferential right of members of the Protestant Episcopal Old Ladies’ Home to receive such services. Appellant trustee contends that this instruction is inconsistent with the provisions in the contract which the court previously approved, and that such approval is res judicata of the question of selection. We agree with this contention. Paragraph 2 of the contract provides that respondent agrees to provide a room in St. Luke’s Hospital for the use “by women in reduced circumstances (preferably members of the . . . Old Ladies Home) . . .” It then goes on to say that respondent agrees to furnish perpetually “to such persons, who are to he women selected and designated hy the . . . Old Ladies Home, the full services of the hospital . . . including a one-bed private room of a type that shall he satisfactory to said Home.” In approving the contract in that form the court construed the terms of the will to require the selection of the women to benefit from the endowment to be made by the Old Ladies’ Home. The trial court on the hearing of the present petition had no power to again determine that question, even though it might be that the will intended only that women from the home be given preference and not that the home was to select the other women to be benefited in ease there were no women from the home needing hospital care. (See Estate of Keet, supra, 15 Cal.2d 328.)
The instruction by the court to the hospital that it might change the securities held by it from stocks to stocks and bonds was a matter within the equity power of the court. We doubt, however, if it was necessary for respondent to obtain such instruction. Under the contract respondent was
3. Attorney’s Fees.
The award of attorney’s fees to respondent here comes within the principle set for in an annotation in 9 A.L.R.2d 1132, pages 1182-1183: “It is sometimes expressly recognized that where the provisions of the will are actually ambiguous and the commencement of a suit for construction is necessitated thereby or, at least, constitutes a perfectly reasonable step, an allowance for costs or attorneys’ fees may be made either to the trustee or to the complainant beneficiary.” This proceeding is different from the one in Estate of Marré, 18 Cal.2d 191 [114 P.2d 591], where the beneficiary of the trust sought additional sums from the trust for his own support, maintenance and education. Here respondent sought additional sums, and clarification of rights, not for itself but for a class which testatrix desired to favor,—women in reduced circumstances.
“. . . whenever a will making bequests to charity has to be judicially construed to clear up ambiguities, the expenses of the suit, including an attorney’s fee for the defeated party, are to be paid out of the testator’s estate.” (11 C.J., 370, Charities, § 98.)
Until the question of the nature of the endowment provision of the will was determined, the trustee would never be able to determine whether he could start paying surplus to the Regents. Therefore, this litigation was “a benefit and a service to the trust” which in Dingwell v. Seymour, 91 Cal.App. 483 [267 P. 327], was deemed to be “the underlying principle which guides the court in allowing . . . attorney’s fees . . .” (P. 513.)
Those portions of the order authorizing respondent to diversify the investment of the endowment funds and allowing respondent attorney’s fees are affirmed. In all other respects the order is reversed.
Peters, P. J., and Wood (Fred B.), J., concurred.
A petition for a rehearing was denied February 11, 1955, and respondent’s petition for a hearing by the Supreme Court was denied March 9, 1955.
Unless otherwise noted, all emphasis added.
Randolph V. Whiting, the trustee appointed by the will, functioned as such until his death, which was after the execution of the contract with respondent and the transfer of the securities to the latter. Thereupon, under the terms of the will, appellant Crocker Bank became and now is the successor trustee.
" Endow: To furnish with money or its equivalent, as a permanent fund for support; ... as, to endow a hospital, or scholarship. ’ ’ (Web
