First Nat. Bank of Catawba County v. Edens, 8125SC529

• Decision Date: 16 February 1982
• Docket Number: No. 8125SC529,8125SC529
• Citation: 286 S.E.2d 818,55 N.C.App. 697
• Court: North Carolina Court of Appeals
• Parties: FIRST NATIONAL BANK OF CATAWBA COUNTY, in its capacity as Guardian of David Royer Geitner, an Incompetent, Appellant, v. Joseph P. EDENS, Jr., Trustee and Harvey A. Jonas, Jr., Trustee, Co-Trustees under the Christine M. Geitner Testamentary Trust, and Joseph P. Edens, Jr., Mrs. Douglas M. Edens, Grace M. Hartis Gibson, Gladys Ponder Mitchell, Virginia M. Rogers, Anita Mitchell, Guardian for Robert L. Mitchell, Jr., and Anita Mitchell, Guardian for David C. Mitchell, Beneficiaries, Appellees.

Page 818

286 S.E.2d 818

55 N.C.App. 697

FIRST NATIONAL BANK OF CATAWBA COUNTY, in its capacity as Guardian of David Royer Geitner, an Incompetent, Appellant, v. Joseph P. EDENS, Jr., Trustee and Harvey A. Jonas, Jr Trustee, Co-Trustees under the Christine M. Geitner Testamentary Trust, and Joseph P. Edens, Jr., Mrs. Douglas M. Edens, Grace M. Hartis Gibson, Gladys Ponder Mitchell Virginia M. Rogers, Anita Mitchell, Guardian for Robert L Mitchell, Jr., and Anita Mitchell, Guardian for David C Mitchell, Beneficiaries, Appellees.

No. 8125SC529.

Court of Appeals of North Carolina.

Feb. 16, 1982.

Sigmon, Clark & Mackie by E. Fielding Clark, II, Hickory, for plaintiff-appellant.

Williams & Pannell by Richard A. Williams and Richard A. Williams, Jr., Newton, for defendants-appellees.

HEDRICK, Judge.

Plaintiff assigns as error the court's ruling that the terms of the Christine M. Geitner testamentary trust gave defendant trustees sole discretion, and the right to exercise such discretion, in determining whether to contribute to the support of David R. Geitner. Plaintiff argues that the trust's terms require defendants to make a contribution from the testamentary trust whenever the income from the guardianship account is not sufficient to pay for David R. Geitner's support for the relevant year.

The powers of a trustee are either mandatory or discretionary. A power is mandatory when it authorizes and commands the trustee to perform some positive act.... A power is discretionary when the trustee may either exercise it or refrain from exercising it, ... or when the time, or manner, or extent of its exercise is left to his discretion.

Woodard v. Mordecai, 234 N.C. 463, 471, 67 S.E.2d 639, 644 (1951). [Emphasis added.]

The language of the testamentary trust in the present case charges the trustees "[t]o use any part of the income from and/or corpus of said Trust which, in the sole discretion of said Trustees, may be necessary or proper for the support, maintenance and comfort of my son DAVID R. GEITNER, so long as he lives." [Emphasis added.] The trust's language also states that if the income from David's share in the John G. H. Geitner estate is not adequate for David's every need and comfort, "then ... said trustees shall have the power and authority, in their sole discretion, to use any part or all of the income from the trust and/or any part or all of the corpus of the trust for such purposes." [Emphasis added.] It is significant that the settlor twice referred to the "sole discretion" of the trustees. Furthermore, the trust instrument addresses the situation of the income from the guardianship account being insufficient for David's support; upon such contingency, the language does not say that the trustees shall distribute from the trust, but only that the trustees shall have the power and authority, in their sole discretion, to so distribute. The language, therefore, is permissive, not mandatory. Compare Kuykendall v. Proctor, 270 N.C. 510, 155 S.E.2d 293 (1967). Upon an income deficit in the guardianship account, the trustees are not commanded to distribute, but are merely empowered to do so; they may either exercise their power to distribute or refrain from doing so, in their discretion. The power to distribute is discretionary and this assignment of error is overruled.

Plaintiff also assigns error to the court's ruling that the trustees did not abuse their discretion in refusing to contribute to David R. Geitner's support. The court will always compel the trustee to exercise a mandatory power.... It is otherwise, however, with respect to a discretionary power. The court will not undertake to control the trustee with respect to the exercise of a discretionary power, except to prevent an abuse by him of his discretion. The trustee abuses his discretion in exercising or failing to exercise a discretionary power if he acts dishonestly, or if he acts with an improper even though not a dishonest motive, or if he fails to use his judgment, or if he acts beyond the bounds of a reasonable judgment.

Woodard v. Mordecai, supra 243 N.C. at 471, 67 S.E.2d at 644.

In the present case, evidence was presented that defendant trustees, in exercising their discretion as to whether to distribute to David R. Geitner, annually examined the plaintiff's reports on the costs for David's care, considered the size of the guardianship account and the income therefrom, and concluded that the guardianship account was still sufficient to provide for David's support; there was also evidence that the guardianship account had a value of $953,270.82. The court made findings of fact consistent with such evidence and this Court is therefore bound by such findings of fact. Henderson County v. Osteen, 297 N.C. 113, 254 S.E.2d 160 (1979). These findings of fact indicate that defendants, in exercising their discretion, considered the costs for David R. Geitner's upkeep and considered whether there were funds available to cover those costs. We therefore are not prepared to say that defendants' determination, as of 1981, not to make a distribution from the Christine M. Geitner testamentary trust was beyond the bounds of reasonable judgment. The findings of fact support the ruling that there was no abuse of discretion, and this assignment of error is overruled.

Plaintiff also assigns as error the court's "establishing the plaintiff's burden of proof to be such that the plaintiff was under a duty to produce the maximum income possible," and the court's "imposing its investmental philosophies upon the guardian." There is nothing, however, in the record or in the judgment to indicate that the court considered plaintiff's investmental policy or that it based its decision on any failure by plaintiff to produce the maximum income possible. Rather, the court's judgment that defendants are not presently required to...