81 Ky. 646 | Ky. Ct. App. | 1884
delivered the opinion of the court.
John Bull, of Louisville, died some years since, leaving surviving him his widow and four infant children. He was the owner of a large estate, including real estate and personalty, all of which he disposed of by a last will and testament that was, after his death, admitted to probate in the Jefferson county court. He left his widow an annuity of twelve thousand dollars, and gave to his children, with certain'limitations and restrictions, the balance of his estate. At the time of his death, and for years prior thereto, he was engaged in the business of making and selling patent medicines, and by certain provisions of his will empowered his executor, or his successor, to continue this business for the benefit of his estate; and from a clause of the will relating to the income arising from the patent medicine business springs the questions that are made prominent by this appeal.
By the 2d clause of the will he devises to his executor,'
By the 3d clause he devises to his executor, in trust for his son Edward during his life, certain real estate, the executor to pay over to him, in quarterly payments, the net proceeds of the rents and profits. At the death of Edward the unexpended rents and profits, and the estate devised to him is to pass to his descendants.
By subsequent clauses of the will he places similar limitations and restrictions on the property devised to his other children. Clause 10 provides: “All the balance of my estate, real,.personal, and mixed, subject to the charge made in the 9th clause (which is a charge for the benefit of his wife, securing her the annuity) hereof, and all the accumulations thereof, as hereinafter provided for, are to be held undivided by my said executor in trust for my four children above named, upon the same conditions and uses set forth in the 3d clause hereof, and with like restrictions upon alienation .and incumbrance, and with each and every part of said -clause applying thereto as fully as if the same was here fully repeated and set forth, and so far as my two daughters are concerned, with further like restrictions,” &c.
The children are to hold this residuary estate “in pre- - cisely the same manner, and for the same uses and trusts, as they hold the property specifically devised to them herein before, and that my said four children shall have the same, and no other rights in and powers over their respective interests in the residuary than they have over the property specifically.devised to them in trust.” The meaning of this is, that in the 3d clause he had given the estate specially devised to Edward for life, remainder to his descendants, ■and as to the residuary, the trustee was to hold it for his
In the 15th clause of the will, the testator having required his executor to continue the business of making and selling his medicines, undertakes to direct him as to the disposition he is to make of the profits.
The income arising from these medicines amounted to-sixty or seventy thousand dollars annually, and the intention of the testator, or rather the extent of the power conferred upon the executor in disposing of'it to the children, is the-principal question involved in this controversy.
It is maintained by the guardian ad litem for the grandchildren of the testator that they have an interest in this income, and the trustee has no power to give to their parents, who are the children of the testator, more of the income - than their necessities demand, or that the chancellor, regardless of the question of mala fides on the part of the trustee, has the power to say to the trustee, “You are giving to the-children more of the income than you should give, and I therefore direct you to give a less sum.” The children, on the other hand, maintain that in the absence of fraud or bad faith on the part of the executor, the chancellor can not control his discretion; that under the 15th clause the trustee-may give to each child his entire portion of the income, if in his discretion he thinks the child should have it. The-15th clause reads: “The profits arising from the business,, and proceeds of any final sale of same (the patent medicines),, shall form a trust fund in the hands of my executor, for the-use of my four children, and be held under the same trusts»
The testator then proceeds: ‘ ‘ My executor may, in his-discretion, pay out of said profits as they accumulate, to-any of my children, the whole or a part of their portion of the same, as he shall deem proper, in view of their necessities or capacity to use the same advantageously m business; or he may invest the same in real estate, to be held in like trusts,, and in all respects as the real estate herein devised in clause io hereof; or he may use the same in improving any real estate held under this will, or invest it in any other way that to him may seem best, and his discretion therein shall not be questioned or controlled, but all such investments, shall be held under like trusts as the real estate herein devised. Any money paid to any of my children, under the power granted in this clause, must be paid to said child or children in person, and in no other way.”
The executor, Thomas L. Jefferson, accepted the trust, but resigned his. position in January, 1879, and, when this: was done, the widow and children appeared in court and selected William Cromie, the present appellee, as provided by the 17th clause of the will.
The construction of the 15th clause of the will was made necessary by reason of the petition filed by the trustee for a settlement of his accounts, and the resistance of the grandchildren, those entitled in remainder, to certain acts of the trustee in the exercise of the powers conferred on him by this particular provision of that instrument.
The grand-children fear that the trustee may deprive them
That courts of equity can and will interfere to prevent the improper exercise of a discretionary power is a doctrine well understood. Hence, if the trustee acts fraudulently, or abuses the power confided to his discretion, by refusing to •execute the trust, or, in the attempt to exercise it, does that which is unreasonable and calculated to defeat the purpose of its creation, the chancellor will interfere, at the instance of the parties in interest, for the preservation of the trust estate, and will see that the trustee discharges his duties as such. In the case of Bohon v. Barrett (79 Ky.) the trustee declined to execute the trust, and the chancellor said to him, “You must execute it, although a discretionary powér was conferred. ” So, in the case before us, if Cromie had, in the exercise of his discretion, declined to make any advancements to these children out of the income, the chancellor would have compelled him to have given them at least .so much of the fund as was necessary for their comfortable .support. It is difficult, in fact, to create a trust where the trustee has such unlimited power over the trust property as ■to preclude the chancellor from controlling his action, when his conduct is such as to indicate a palpable or fraudulent ■abus.e of his power to the injury of the parties in interest. To say that the chancellor had no control over such a fiduciary would be to vest the trustee not only with the absolute fee, but with the beneficial interest in the trust estate. ■Conceding the doctrine to be as contended by counsel for the appellee, and we see no reason to question its correctness, still it can not be applied to the case before us. ‘ ‘ In the nature of things,” says Perry on Trusts, “-only very
The two sons had engaged in the manufacture of glass bottles, and were in a condition requiring the aid of the trustee from the means placed in his hands by the devisor :for their benefit, and if the trustee had advanced the entire
The question of more doubt than any other, suggesting itself to the mind of the court, arises as to the power of the-trustee to withhold any part of the income by investing it in real estate, or any other property, when the child is capable of managing it himself. There is an intention plainly-expressed that the child should have the income; but when we consider the relation occupied by the trustee toward these children, and the broad and comprehensive power conferred, he stands in the place of the parent, with the power to say that a part of the income shall be invested in real estate or other property, with the limitation placed upon it by the devisor in the 10th clause of the will. He may invest a part of the income of one. of the children, and pay over the entire income to the others, the investment, of course, being made so as to secure the child entitled to it to the increase of the investment during life, remainder to-his or her children.
The general doctrine is that “if trustees exercise their discretionary powers in good faith, and without fraud or collusion, the court can not revise or control their discretion.” (Perry on Trusts, sec. 511.) There is less difficulty with counsel as to the law of this case than in its application
As to the remaining question made by counsel for the trustee on the appeal of the latter, with reference to the character of the investments authorized to be made, the construction already given as to the powers over the income determines, in effect, the extent of his power to make investments. It is maintained by counsel for the appellant
The English rule as to investments prevails in several of the States, and cases may be found somewhat analogous to this case, sustaining the judgment below, but no case has been referred to in which the trustee has been made liable with such a broad and uncontrolled power given by the will.
The testator confided the management of his entire estate to his executor, with a discretion as to investments that indicates clearly an intention on the part of the testator that this executor and trustee should manage and conduct his
The judgments on the appeals of Mary A. Bull v. Cromie, trustee, and Ella B. Snively, guardian, v. same, are each affirmed. The judgment on the appeal of Cromie, trustee, v. Edward Bull and others, is reversed, and cause remanded for proceedings consistent with this opinion.