Indian Head Nat. Bank of Nashua v. Brown

• Decision Date: 26 January 1983
• Docket Number: No. 82-169,82-169
• Citation: 455 A.2d 1056,123 N.H. 87
• Parties: INDIAN HEAD NATIONAL BANK OF NASHUA v. Elsie B. BROWN et al.
• Court: New Hampshire Supreme Court

Page 1056

455 A.2d 1056

123 N.H. 87

INDIAN HEAD NATIONAL BANK OF NASHUA v. Elsie B. BROWN et al.

No. 82-169.

Supreme Court of New Hampshire.

Jan. 26, 1983.

Sullivan, Gregg & Horton P.A., Nashua (James L. Sullivan, Jr., Nashua, on brief and orally), for plaintiff.

Brown & Nixon P.A., Manchester (Robert G. Whitman, Manchester, on brief and orally), for defendant Phyllis French.

Gottesman & Hollis P.A., Nashua (David M. Gottesman, Nashua, on brief and orally), for defendant Elsie B. Brown.

DOUGLAS, Justice.

This is an appeal from a decision of the Superior Court (Dalianis, J.) in favor of the plaintiff trustee's interpretation of how the income from a residuary trust should be distributed. We affirm.

On August 14, 1969, the deceased settlor, Raymond Dexter Brown, established a revocable inter vivos trust. During the settlor's life, he was to receive the income from the trust. After his death, the trust agreement named his wife of twenty-five years, Elsie Brown, the sole beneficiary of the marital portion of the trust (marital trust), and Elsie and his two children by a prior marriage, Phyllis French and Gardner Brown, as beneficiaries of the residuary portion of the trust (residuary trust). On the same date, the decedent duly executed a will by which a substantial portion of his estate assets would "pour over" into the inter vivos trust.

Article Second of the trust directs the trustees, upon the settlor's death, to pay the income from the marital trust to Elsie at least quarterly during her lifetime. Article Second also provides, in relevant part:

"The Trustees shall also pay to the Settlor's said wife from time to time such amounts of the principal of said [marital trust] property as will make payments of money under this Trust Agreement to her or for her benefit aggregate thirty-five thousand ($35,000) [dollars] annually ...."

(Emphasis added.) Article Third, which established the residuary trust, provides that the income from the residue of the trust property should be distributed initially as follows:

"During the life of the Settlor's wife, Elsie B. Brown, to pay to her or for her benefit so much of the net income thereof as may be necessary to make the aggregate of income payments to her from all sources, including that under Article Second hereof, Thirty-five Thousand ($35,000) Dollars annually."

(Emphasis added.) If there is a balance of income from the residuary trust remaining after the payment to Elsie, Phyllis French and Gardner Brown, the settlor's children by his first marriage, are to receive up to $5,000 each. Any excess residuary trust income after the foregoing payments is to be divided equally among Elsie and the settlor's two children.

Thus, the trust guarantees Elsie $35,000 of income annually, first from the marital trust income, then as a first charge upon the residuary trust income, and finally from the corpus of the marital trust. Since the settlor's death in February 1974, the plaintiff has interpreted these trust provisions to mean that if income from the marital trust did not equal Elsie's $35,000 annual income entitlement, she was to receive payment from residuary trust income to equal that sum. It excluded any extra-trust income received by Elsie in determining whether to supplement her marital trust income with income from the residuary trust. Until the settlor's death in February 1974, the plaintiff administered the trusts jointly with him, pursuant to Article Tenth. After his death, the plaintiff administered the trusts with William Minot, the drafter of the trust instrument, until his resignation in December 1976. Since then, the plaintiff has been sole trustee.

As required by the terms of the trust, the plaintiff sent Phyllis French and Gardner Brown quarterly financial statements through 1979 showing the distribution of income and principal of the residuary trust. Although contested on appeal, the superior court found that the two children either approved or failed to make timely objections to these financial statements.

In 1980, in response to questions raised by certain beneficiaries as to the method of distribution of residuary trust income, the plaintiff filed a petition in superior court for instructions as to how the income from the residuary trust should be distributed. The plaintiff asked the court to find that its interpretation of the trust was correct. Phyllis French, the real defendant in this case, filed an answer, alleging that Article Third requires all income received by Elsie from the marital trust and from any outside sources, to be computed in determining whether any residuary trust income would be distributed to Elsie to ensure that she receives $35,000 income per year.

After a hearing, the superior court granted all the plaintiff's requested findings of fact and rulings of law, including the following rulings of law:

"That trustee Indian Head National Bank of Nashua has, since the death of Raymond Dexter Brown, administered the August 14, 1969 trust consistent with Raymond Dexter Brown's intention that his wife's annuity of $35,000 shall be paid first from the income of the marital trust, second from the income of the residuary trust, if necessary, and, third, from the principal of the marital trust, if necessary;

That trustee Indian Head National Bank of Nashua has, since the death of Raymond Dexter Brown, administered the August 14, 1969 trust consistent with Raymond Dexter Brown's intention that distributions from the residuary trust be made to the settlor's wife irrespective of said wife's income outside of the trust ...."

The defendant then appealed to this court.

We note at the outset that our purpose is to effectuate the settlor's intention in creating the...