First Nat. Bank & Trust Co. of Wyo. v. Finkbiner
| Decision Date | 01 July 1966 |
| Docket Number | Nos. 3458,3459,s. 3458 |
| Citation | 416 P.2d 224 |
| Parties | FIRST NATIONAL BANK AND TRUST COMPANY OF WYOMING, a corporation, and Becky Boehler, Appellants (Defendants below), v. Donald B. FINKBINER, Harold R. Finkbiner, and Dorothy E. MacDougall, Appellees(Plaintiffs below). Donald B. FINKBINER, Harold, R. Finkbiner, and Dorothy E. MacDougall, Appellants (Plaintiffs below), v. FIRST NATIONAL BANK AND TRUST COMPANY OF WYOMING, a corporation, and Becky Boehler, Appellees (Defendants below). |
| Court | Wyoming Supreme Court |
Loomis, Lazear, Wilson & Pickett and Frederick G. Loomis, Cheyenne, for appellants and appellees.
Kline & Tilker and Arthur Kline, Cheyenne, for appellees and appellants.
Before PARKER, C. J., and HARNSBERGER, GRAY, and McINTYRE, JJ.
Plaintiffs, as the remaindermen of an inter vivos trust, commenced an action for a declaratory judgment and other relief against the bank, as trustee, and against Becky Boehler, 1 as the life beneficiary, claiming that the trustee, was administering the trust in violation of the rights of the remaindermen. The basis of plaintiffs' claim to a large extent is dependent upon the power conferred upon the trustee by a provision in the trust authorizing the trustee to invade principal for the proper care and support of Becky. The joint answer and counterclaim of the defendants also requested the court to construe such provision and determine the rights, duties, and legal relation of all the parties to the action. The judgment entered by the trial court failed in certain respects to satisfy either the plaintiffs or the defendants and as a consequence both parties have appealed.
The facts essential to a general understanding of the controversy are not in dispute. The trust was created in the year 1929 by John Huckfeldt. Becky was his wife. They had married in the year 1918.
Turning to the pertinent provisions of the trust instrument, we discover it was first directed that the net income of the trust should be paid to Becky. It was then provided that upon her death the accumulated income and principal were to be paid to his sister, Alma Finkbiner, and in the event of her death prior to termination of the trust the proceeds were to be distributed to her surviving children, who are now the plaintiffs and the remaindermen. It was further provided, and this is the provision forming the crux of the controversy, that:
'The power is hereby given the Trustee in its sole discretion to advance to the wife of the Grantor from time to time such portions of the principal of the said trust fund as in its judgment may be necessary for her proper care and support, and the Trustee in so doing is wholly protected and shall be liable to no one.'
Grantor also reserved the right to amend or revoke the trust during his lifetime.
The trust was funded in the year 1936, upon the death of grantor. The principal received by the trustee was in the sum of $35,405.32. In addition to the benefits conferred by the trust and also as a result of the death of her husband, Becky received 83 shares of American Telephone and Telegraph Company stock, the proceeds of life insurance policies in the sum of $14,000, and the proceeds of a joint checking account in the approximate sum of $4,000. The home in which the couple resided was in the name of Becky.
The trustee from the year 1936 to 1952 made monthly payments to Becky in amounts varying from $130 to $200 per month, which were made up of income and principal. While there was testimony that the trustee was conversant with Becky's financial affairs and gave consideration to such matters during that period, it did not regard its powers to invade principal as limited to bare necessities of Becky after taking into strict account her income from other sources or to require her to exhaust or use her own personal estate for purposes of support. Consequently, no special effort was made to require Becky regularly to report her income and expenses and to account for the expenditure of amounts paid to her by the trustee.
In 1952 Becky married Leonard Boehler. At the time of the marriage Boehler was a man of modest means and because of physical disability had not been employed for some time. His only income for the past several years has been a small social security payment. On the occasion of Becky's remarriage, Alma Finkbiner made inquiry of the trustee as to the payments being made to Becky from the trust. Upon being informed that the trustee had been invading principal in order to make the monthly payments of $200, Mrs. Finkbiner, through her attorney, advised the trustee that further invasion of principal under the circumstances then existing was unwarranted and was in fact contrary to the provisions of the trust. In view of the complaint and in view of the changed circumstances, the trustee made a reappraisal of the entire situation. The matter was also referred to its attorney. Thereafter, the trustee concluded that a monthly payment of $162.50 to Becky from the trust-in part from income and in part from principal-was necessary for her reasonable care and support and payments in such amount have been made since that time. Becky did not object. Mrs. Finkbiner was also advised of the decision by the trustee but took no action before her death in November 1962. For the period between August 1, 1936 and January 29, 1965, the trustee paid to Becky out of the principal of the trust approximately $23,000. Of that amount approximately $13,500 has been paid since the remarriage of Becky. The balance of the principal remaining in the trust after making said payments was approximately $12,000.
The action here was commenced in April 1963. In substance, the contentions of plaintiffs below were that the intention of the grantor was that the principal of the trust was to remain intact for the remaindermen except invasion for amounts necessary for Becky's proper care and support; that it was not intended that the principal be used to enhance the value of Becky's personal estate; that the advances made by the trustee were not necessary for Becky's care and support; that because of the remarriage Becky was not entitled to further advances; that the trustee had been careless and negligent in the administration of the trust; and that the payments made from principal by the trustee were simply 'advances' in the nature of loans from the trust and had to be restored. The relief sought was a determination of the rights of the parties under the trust agreement, an order restraining the trustee from further invasion of principal, and that the trustee be required to restore to principal the funds paid to Becky from that source. As we understand plaintiffs' brief, this demand has now been modified to embrace only the payments made subsequent to Becky's remarriage.
The contentions of the defendants were that Becky was the primary interest of grantor in creating the trust; that the trustee had absolute discretion to invade the principal in such amount as in its judgment was necessary for Becky's proper care and support and could be held accountable only for failure to exercise its discretion in good faith; that such discretion is not subject to control by the court except for abuse; that in exercising its discretion it need not consider Becky's other financial means, or in the alternative that it need only consider Becky's other income; and that the payments made to Becky from principal were within the trustee's discretion. By their answer and counterclaim the defendants asked that the court determine the rights of the parties in keeping with their contentions and that plaintiffs' claims for relief be denied.
The trial court in disposing of the matter held that the trust instrument was not ambiguous and the intention of grantor could be determined from the four corners of the instrument; that the trustee did not have absolute discretion in the invasion of principal for Becky's care and support; that Becky was not required to exhaust her personal estate in order to receive payment of principal; that the trustee before invading principal must take into consideration the other income of Becky and her husband so that payments of principal will not result in an increase of Becky's personal estate; that the word 'advance' for purposes of the trust means 'pay'; that Becky's remarriage did not affect her status as the life beneficiary; that the trustee has not been negligent in its administration of the trust, has acted in good faith, and has not abused its discretion; and that defendants were not liable to the remaindermen and neither the trustee nor Becky are required to reimburse principal. The trial court also directed the trustee to investigate and redetermine determine the extent to which the principal should be invaded, taking care that such payments when added to Becky's other income would sufficiently enable her to maintain her present station if life and yet not increase the corpus of her personal estate.
On appeal the plaintiffs in substance contend that the judment of the trial court was in error except that portion which determined the trustee was required to consider Becky's other income before invading principal. The defendants in substance contend that the trial court erred in holding certain extrinsic evidence inadmissible becertain the trust instrument was not ambiguous and in declining to consider other evidence of surrounding circumstances; in holding that the trustee's discretion to invade principal for the purpose stated was not absolute; and in directing the trustee to exercise its discretion in the manner above set forth.
From the foregoing it is quite evident that inquiry into the powers of the trustee is not only essential, but to a large extent will dispose of the questions raised on both appeals.
In approaching the question of interpretation of the clause granting the power of invasion of the principal, we will...
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