29 P.2d 422 | Cal. Ct. App. | 1934
Certain beneficiaries of a trust estate created by means of a final decree of distribution pursuant to the terms of a will have appealed from a judgment rendered in an equitable action directing the sale of real property contrary to the express prohibition of the trust. The question which is involved in this appeal is whether a court of equity may direct a sale of real property and authorize a reinvestment of the proceeds therefrom contrary to the express terms of a trust, in the absence of consent thereto by the beneficiaries, and without satisfactory proof of the failure of the trust and reasonable assurance of a profitable sale and reinvestment of the proceeds thereof.
Alfred Easter died testate. He was possessed of real property situated in Los Angeles, including a group of houses known as Catalina Court, of the approximate value of $85,000. The deceased left surviving him his widow, Catherine Easter, now Catherine Rupell, and the appellants who are his children by a former wife and his grandchildren. His will was admitted to probate and a final decree of distribution of his estate was entered October *693 3, 1923, from which no appeal was taken. This decree, pursuant to the terms of the will, distributed Catalina Court, together with other real property, to the plaintiff in trust for the benefit of the widow and the children of the deceased. With relation thereto, the decree contains the following provisions:
"Said trustee shall possess, manage, control, sell, convey, lease, rent, assign, transfer and invest and reinvest the proceeds of any property sold, or any substitute therefor, as to it may seem best, . . . upon the following conditions, to-wit: That Catherine Easter, surviving widow of said deceased, shall have the use, rent free, of one of the units of the property known as Catalina Court, so long as she may desire to occupy the same. . . .
"During the lifetime of the said Catherine Easter,notwithstanding the power of sale hereinbefore given, the saidtrustee shall not sell the property known as Catalina Court,located on Catalina Street in the City of Los Angeles, . . . orin any manner dispose of said properties. . . .
"Out of the net income arising from the properties held in trust by said trustee, it shall pay unto the said Catherine Easter, the sum of $300.00 per month for and during the term of her natural life, and the balance of the net income, if any, shall be paid by said trustee in the proportion of one-third thereof to Ephraim B. Easter, son of said deceased, for and during the term of his natural life, and the other two-thirds shall be paid by said trustee in equal shares unto Kate B. Gherky, Elizabeth B. Marriott and Martha B. Todd, daughters of said deceased. . . .
"Upon the death of the said Catherine Easter, the trust hereinbefore referred to shall terminate and all of the property in the hands of the trustee or in its possession or control, shall go to and vest in the heirs at law of the said Alfred Easter, deceased, in accordance with the statute of succession of the State of California."
For a period of time the widow occupied one of the apartments in Catalina Court and was regularly paid the monthly sum specified in the decree. She subsequently remarried. The financial depression so reduced the income from the property in question that the trustee was unable to regularly make the payments in full to the beneficiaries as required by the will and decree. This suit in equity *694 was then commenced to procure a judgment directing the sale of Catalina Court. The complaint asserts the creation of the trust by means of the decree of distribution pursuant to the terms of the will, the depreciation of the value of the property and the inability of the trustee to pay the monthly installments from the income thereof as provided by the trust. It also alleges that a sale and reinvestment of the proceeds thereof will enable the trustee to fulfill the requirements of the trust. The answer of the appellants, who are all of mature age, and who represent all of the heirs at law of the deceased and all of the beneficiaries of the trust, except the widow, denies the material allegations of the complaint, and sets up the terms of the trust prohibiting the sale of the property during the lifetime of the widow. It also sets up the final decree of distribution as an estoppel, alleging that the plaintiff and the widow are bound thereby. The court found that the trust was created as above related by the rendering of the decree of distribution, from which no appeal was taken; that the value of the property had depreciated to such an extent that there was not sufficient income therefrom with which to pay the widow and the other beneficiaries the sum specified by the trust; that the Catalina Court property, consisting of ten units, was in need of repairs; "that the remaining property of said estate does not provide sufficient income to carry out the purposes of said trust or to provide any appreciable income for the beneficiaries thereof; . . . that the proceeds from the sale of said property, when reinvested, will provide sufficient income to carry out the purposes of said trust; that unless said property is sold and the proceeds therefrom reinvested, the trustee cannot carry out said purposes". The court thereupon rendered judgment directing the sale of the property "for the best price obtainable", and authorized the reinvestment of the proceeds thereof. From this judgment all beneficiaries except the widow have appealed.
[1] Section
In the present case, the judgment of the court of equity authorizing the sale of real estate is in direct violation of the express terms of the trust, which provide that "during the lifetime of the said Catherine Easter, notwithstanding the power of sale hereinbefore given, the said trustee shall not sell the property known as Catalina Court, . . . or in any manner dispose of said properties". Ordinarily a court of equity has no power to direct the sale of real estate in contravention of the explicit terms of a trust created by will or deed. (65 C.J. 730, sec. 594; 2 Perry on Trusts, 7th ed., p. 1306, sec. 764.) Section 870 of the Civil Code provides that, "Where a trust in relation to real property is expressed in the instrument creating the estate every transfer or other act of the trustees, in contravention of the trust, is absolutely void." In the case of Anderson v.Mather,
It has always been the settled policy of the law to respect and enforce the solemn explicit declarations of the wishes of a testator which are embodied in the terms of his last will. The Supreme Court of the United States says in Shelton v. King,
[3] In the present case it does appear that the income from the property in question has decreased on account of the present financial depression approximately forty per cent since the creation of the trust in 1923; that the income is now barely sufficient with which to pay the taxes, repairs and maintenance of the property, and that for several years the trustee has been unable to pay to the beneficiaries any substantial sums upon the declaration of trust. Still it appears that most of the property is constantly occupied at a decreased monthly rental which practically pays the expense of maintaining the property at the present time. There was no showing that the trustee would be able to secure a reasonable price or any sum whatever for the property in the event of a sale. There was absolutely no attempt to show in what character or value of property the trustee proposed to reinvest the proceeds of sale.
Mr. Sherman Grail, an officer of the plaintiff trustee, testified that there was no present sale for the property at any price whatever. He said in that regard: "Q. What do you think this property would sell for at the present time? A. I seriously doubt if it is salable at the present time. Q. In other words, you would almost have to give it away to dispose of it at the present time? A. I think so, yes. The Court: No market value? A. I wouldn't go so far as to say no market value. As a matter of fact, we haven't endeavored to sell it for some time. My general opinion is it would be extremely difficult to get anything in the present market."
The record contains no evidence to the contrary. It therefore appears without conflict that there is no present market for the property at any price. It seems like a radical departure from the meticulous rule justifying a court of equity in interfering with the explicit provisions of an express trust to give the trusteecarte blanche authority to sell real property and reinvest the proceeds therefrom without any assurance that a reasonable price can be procured for the property and without any showing as to the nature or security of the proposed reinvestment. We are of the opinion an order of a court of equity to sell real *699 property and reinvest the proceeds thereof contrary to the terms of an express trust under such circumstances is unauthorized.
[4] Assuming, without so deciding, that the facts of this case would otherwise authorize a court of equity to make an order to sell the real property in question and reinvest the proceeds, it does affirmatively appear there is no present market value for the property. It does not appear the trustee can procure a reasonable value, or any value whatever, for the property. There is absolutely no showing regarding the character or security of the property in which the trustee proposes to reinvest the proceeds in the event of a sale. The finding "that the proceeds of the sale of said property, when reinvested, will provide sufficient income to carry out the purposes of said trust" is not supported by the evidence.
The judgment is therefore reversed.
Pullen, P.J., and Plummer, J., concurred.
A petition for a rehearing of this cause was denied by the District Court of Appeal on March 16, 1934, and an application by respondent to have the cause heard in the Supreme Court, after judgment in the District Court of Appeal, was denied by the Supreme Court on April 13, 1934.