Stevens v. National City Bank

• Citation: 45 Ohio St.3d 276,544 N.E.2d 612
• Decision Date: 13 September 1989
• Docket Number: No. 88-1049,88-1049
• Parties: STEVENS et al., Appellees, v. NATIONAL CITY BANK, Trustee Under Will of Crider, Deceased, Appellant.
• Court: Ohio Supreme Court

Page 276

45 Ohio St.3d 276

544 N.E.2d 612

STEVENS et al., Appellees, v. NATIONAL CITY BANK, Trustee Under Will of Crider, Deceased, Appellant.

No. 88-1049.

Supreme Court of Ohio.

Submitted May 3, 1989.

Decided Sept. 13, 1989.

Syllabus by the Court

1. If, by the terms of the trust instrument, a trustee is specifically directed to retain certain investments, such trustee is subject to liability if such investments are not so retained, absent impossibility, illegality, or a judicially determined change of circumstances.

2. If, by the terms of the trust instrument, a trustee is merely authorized, but not directed, to retain certain investments, the trustee may retain them, unless under the circumstances it would be an abuse of discretion to retain them, or the trustee may sell a portion of such securities to obtain a diversification of the trust assets.

John S. Crider was an officer and director of the Dow Chemical Company ("Dow") from 1908 to 1950, serving for various periods as a member of the executive committee, secretary, treasurer and assistant treasurer. During the period 1908 to 1919, he also served as an officer, director and general manager of the National Carbon Company, which was acquired in 1917 by Union Carbide & Carbon Corporation ("Union Carbide"). During such service, Crider acquired substantial amounts of common stock of both Dow and Union Carbide. Crider also served on the board of directors of appellant, National City Bank (the "trustee"), for approximately thirty-five years and served at various times on the bank's trust committee. Crider died on January 18, 1952, leaving an estate valued at approximately $4,500,000, of which $2,600,000 was comprised of Dow common stock and $1,400,000 was comprised of Union Carbide common stock, with the balance being various other property and securities.

Crider's will, executed on June 1, 1951, created a residuary, testamentary trust, and appointed the appellant to act as trustee. Under Paragraph 1, Item VI of the will, the trust estate was divided into four shares, consisting of one thirty-percent share for each of three children (Mary C. Stevens, William W. Crider and Ann C. Howe) and one ten-percent share for a grandson (John M. Byrns, Jr.). Each share was thereafter administered as a separate trust. Only the thirty-percent share held for the benefit of the appellee Mary C. Stevens is at issue in this appeal.

Stevens was to receive all income from her share of the trust, plus such discretionary payments of principal as the trustee "shall deem advisable for support and maintenance." Upon the death of Stevens, ¹ the remaining principal was to be divided and distributed to the issue of Stevens, per stirpes. Under Paragraph 6, Item VI of the will, the trustee was granted full power of sale of the trust assets:

"Until the trust created hereunder has been discharged, the Trustee shall have title to and possession of all property coming within the terms hereof with full power and authority to manage, control, sell, exchange, convey, lease for any term of years irrespective of the period of the trust, invest and reinvest the same and any part thereof as it deems advisable and to deal herewith in all respects as though the absolute owner thereof, all statutory or other limitations and restrictions as to the investment of trust funds by trustees or fiduciaries generally now or hereafter enacted or prescribed being hereby waived."

In addition, and the central cause of the dispute giving rise to this appeal, the will contained the following provision, at Paragraph 11 of Item VI:

"My estate has been built up largely from the growth of Union Carbide & Carbon Corporation and The Dow Chemical Company. On account of my confidence in these two companies and their management, I request that the Trustee retain for the most part the shares in them which may be received from my Executrix, unless the outlook should not be the same as it has been for many years past and a change occurring in either or both corporations may prompt the disposition of such shares. It is my intention and desire to relieve the Trustee from the usual diversification of investment, so long as the prospects of these two companies continue to be favorable."

Following Crider's death, the share of the trust held for the benefit of Stevens and her issue was funded from the Crider estate and, by virtue of a pour-over provision in the will, from the trust share held for William Crider who died in 1954. The original composition of Stevens' share as funded during 1953 through 1955 was comprised of 3,500 shares of Union Carbide common stock, 5,337 shares of Dow common stock, and cash and other property and securities (in seven other corporations) in a value exceeding $180,000. In 1959, the Dow and Union Carbide stock holdings each comprised thirty-nine percent of the total trust assets.

From 1958 through 1976, generally on an annual basis, the trustee made sales of the Dow and Union Carbide stock for purposes of diversification, and nominally for the payment of its fees. As of June 24, 1977, Stevens' trust share was comprised of, inter alia, 9,008 shares of Dow common stock and 2,400 shares of Union Carbide common stock. The record shows that had the trustee not made any sales of these stocks, the Stevens trust share would have contained 36,760 shares of Dow common stock and 7,000 shares of Union Carbide common stock, the increases due to various stock dividends and stock splits during the period of 1953 to 1977.

On May 17, 1977, Stevens filed objections to the thirteenth and latest partial account and all prior accounts filed in her trust, asserting that the trustee should not have sold any shares of Dow or Union Carbide common stock under the terms of Paragraph 11, Item VI of the Crider will. On June 24, 1977, Stevens filed a separate complaint in declaratory judgment for breach of trust against the trustee, also asserting that sales of the Dow and Union Carbide stock were contrary to the intent of John Crider. Named as additional defendants were Stevens' adult children, who are remainder beneficiaries of the trust, Stevens' grandchildren, who are contingent beneficiaries, and other unknown and unborn issue. Each of these defendants, through their answer or answers by their guardian ad litem, joined in the prayer of Stevens against the trustee. These actions were consolidated by the probate court, and the cause was referred to a referee.

In January 1980, an evidentiary hearing before the referee was held solely on the issue of liability. Following various extensions of time during which the parties filed post-hearing briefs, the referee issued a report on August 26, 1983, rejecting the trustee's affirmative defenses and concluding that the trustee's sales of Dow and Union Carbide stock constituted a breach of trust. The trustee filed objections to the report which, by judgment entry on December 6, 1983, the trial court held in abeyance and ordered the matter remanded to the referee for a determination of the remedy involved.

In December 1985, a hearing to determine the appropriate remedy was held. In his report of March 11, 1986, the referee concluded that Stevens had suffered a loss of $174,616 in income, and that the remaindermen suffered a loss of $540,673. The trustee's objections to both reports were overruled by the trial court on November 28, 1986.

The trial court issued its findings of fact, conclusions of law and judgment entry on January 5, 1987. The court ordered the trustee to use one half of the surcharged $540,673 to purchase Dow stock and one half to purchase Union Carbide stock, both at the prevailing market price. The court ordered the $174,616 loss to be distributed directly to Stevens. Finally, the court vacated its prior orders approving the first through fourteenth partial accounts in the trust, insofar as they purported to approve the sales of Dow and Union Carbide stock. Fees for the trustee and guardian ad litem were taxed against the trust, as were the attorney fees of Stevens and the remaindermen.

The court of appeals affirmed on all issues, with one judge dissenting.

The cause is now before this court upon the allowance of a motion to certify the record.

Rippner, Schwartz & Carlin, Angela G. Carlin, Cleveland, and Linda Gebauer Mayer, for appellees.

Hahn Loeser & Parks, John A. Hallbauer, Craig A. Glazer and Jeffrey D. Van Niel, Cleveland, for appellant.

Porter, Wright, Morris & Arthur, David A. Swift and Edward M. Segelken, Columbus, urging reversal for amicus curiae, Ohio Bankers Ass'n Trust Div.

HOLMES, Justice.

We are presented in this case with the task of construing the terms of the will of John S. Crider, in a manner which is consistent with the intent of the testator. Townsend's Executors v. Townsend (1874), 25 Ohio St. 477. Specifically, the issue before us is whether the language of Paragraph 11, Item VI of the Crider will constitutes a mandatory limitation on the trustee's general power to sell trust assets granted in Paragraph 6, Item VI of such will. For the reasons which follow, we answer such query in the negative, and thus reverse the court of appeals.

Recently, in Ohio Citizens Bank v. Mills (1989), 45 Ohio St.3d 153, 155, 543 N.E.2d 1206, 1208, this court set forth the basic parameters of will construction:

"First, it is axiomatic that the intent of the testator, grantor, or settlor will be ascertained and given effect wherever legally possible. Townsend's Executors v. Townsend (1874), 25 Ohio St. 477; Jones v. Lloyd (1878), 33 Ohio St. 572; Wills v. Union Savings & Trust (1982), 69 Ohio St.2d 382, 23 O.O.3d 350, 433 N.E.2d 152; Sandy v. Mouhot (1982), 1 Ohio St.3d 143, 1 OBR 178, 438 N.E.2d 117; Tootle v. Tootle (1986), 22 Ohio St.3d 244, 22 OBR 420, 490 N.E.2d 878. The express language of the instrument generally provides the court with the indicators of the grantor's intentions, Casey v. Gallagher (1967), 11 Ohio St.2d 42, 40...