Jennings v. Murdock

• Decision Date: 19 October 1971
• Citation: 553 P.2d 846,220 Kan. 182
• Parties: Janet M. JENNINGS et al., Appellants and Cross-Appellees, v. Marsh M. MURDOCK (Resigned As Trustee on
• Court: Kansas Supreme Court

Page 846

553 P.2d 846

220 Kan. 182

Janet M. JENNINGS et al., Appellants and Cross-Appellees, v. Marsh M. MURDOCK (Resigned As Trustee on October 19, 1971), and The First National Bank in Wichita, Appellee and Cross-Appellant,

and

Victoria M. Bloom, Appellee.

In the Matter of the ESTATE of Marcellus M. MURDOCK, Deceased.

No. 47888.

Supreme Court of Kansas.

July 16, 1976.

Syllabus by the Court

1. Where the instrument creating a trust gives the trustee discretion as to its execution, a court may not control its exercise merely upon a difference of opinion as

to matters of policy, and is authorized to interfere only where the trustee acts in bad faith or its conduct is so arbitrary and unreasonable as to amount to practically the same thing.

2. The duty to administer a trust and to exercise the discretion vested in it rests on the trustee, and cannot be delegated by it to others.

3. The beneficiaries have no right to demand that the trustee's discretion be delegated to them.

4. Generally speaking the purpose of a trust, and especially a spendthrift trust, is to substitute the judgment of the trustee for that of the beneficiaries in the management of the trust estate.

5. The voting of stock is no different from any other aspect of the administration of a trust, and where discretion is vested in a trustee, it is the trustee's discretion which must govern and not that of the beneficiaries.

6. In voting stock held by it a trustee is required to determine in its best judgment what is in the best interests of the trust estate as such, rather than what a beneficiary may conceive to be his personal interest.

7. The intent of a donor or testator is not to be determined from a single clause standing alone, but from the four corners of the instrument.

8. Spendthrift provisions in a trust instrument, combined with provisions vesting the broadest possible powers and discretion in the trustee, are wholly inconsistent with the concept that the beneficiaries are to have any control at all over the management of the trust estate.

9. Where the chief asset of each of several trusts is stock in a closely held corporation it is in the best interests of the beneficiary of each, as a beneficiary, that the corporation prosper. Regardless of what the beneficiaries of such trust may conceive to be their divergent personal interests, in their roles as beneficiaries all are united in interest.

10. A trustee who, before voting stock held in trust, takes diligent steps to inquire into and analyze the corporation's financial condition so as to make an informed and independent decision, thereby fulfills both the spirit and letter of its fiduciary obligation even though it may come to an erroneous conclusion.

11. Whether a trustee should be removed is a question addressed to the sound discretion of the trial court.

12. The removal of a trustee is a drastic action which should only be taken when the estate is actually endangered and intervention is necessary to save trust property. This is especially true where the trustee is named by the settlor.

13. Conflicts known to the settlor when he names the trustee generally do not afford grounds for removal.

14. Surcharge is a remedy designed to make the trust estate whole, primarily where losses have been incurred through the negligence or bad faith of the trustee. A trustee is not subject to a surcharge for a breach of trust which results in no loss.

15. A trustee who has acted in good faith is entitled to an allowance for its compensation and expenses under K.S.A. 59-1717.

16. A trustee who successfully defends itself against efforts to remove it is entitled to be reimbursed from the trust estate for the expenses of making its defense.

17. In a meritorious action brought to construe a will, attorney fees are allowable under the provisions of K.S.A. 59-1504 as costs of litigation where the services of the attorney have been beneficial to the estate or are necessary for proper consideration of the will.

18. The fact that one who brings an action to construe a will hopes to reap personal benefit from the action does not prevent an allowance to him of attorney fees where the action nevertheless benefits the estate.

19. When the same person is named executor and trustee the normal orderly procedure for shifting roles is for the executor to account and be discharged, and thereafter for the same party to qualify as trustee and begin the trust administration.

20. Where only part of the estate is left in trust, the executor may be some unequivocal act set aside such part and begin administering it as trustee without making a final accounting as executor.

21. One of the prerequisites of a trust is a definite corpus. Where the trust consists of the residue of an estate the trust administration cannot normally begin until the specific legacies and devises have been satisfied and the liabilities determined so that the amount of the residuary estate can be ascertained.

22. Under K.S.A. 1975 Supp. 58-904(a) an asset may be subject to a trust for the purpose of determining the right to income from it even though it remains part of the probate estate during the period of administration.

23. In an action to enjoin a trustee bank from voting stock held in trust and for its removal and surcharge it is held, the trial court did not err: (a) in refusing to remove or surcharge the trustee; (b) in determining that all parties should be allowed fees and expenses; or (c) in its allocation of those fees and expenses. The trial court did err insofar as it required the trustee to comply with the dictates of the beneficiaries in the management of trust assets, and insofar as it held (at least by implication) that title to stock held in the estate passed from the bank as executor to the bank as trustee before the testamentary trusts were funded.

Paul R. Kitch of Fleeson, Gooing, Coulson & Kitch, Wichita, argued the cause, and Thomas D. Kitch, and Verne M. Laing, of Morris, Laing, Evans, Brock & Kennedy, Chartered, Wichita, were with him on the brief for appellants and cross-appellees.

Charles W. Harris of Curfman, Brainerd, Harris, Bell, Weigand & Depew, Wichita, argued the cause, and Lawrence E. Curfman, and Sidney J. Brick, Wichita, were with him on the brief for appellee and cross-appellant.

Ronald K. Badger, Wichita, argued the cause and was on the brief for appellee, Victoria M. Bloom.

FOTH, Commissioner:

This is an action by beneficiaries of spendthrift trusts to compel their trustee to do their bidding in the management of the trust assets. Specifically, the plaintiff beneficiaries sought orders in the probate court and in the district court requiring the defendant bank as testamentary and inter vivos trustee, to vote corporate stock held in the respective trusts in accordance with their wishes. For its failure to do so plaintiffs also sought in each court the removal of the trustee and the surcharge against it of their expenses (largely their attorney fees) in this litigation.

All together plaintiffs filed four petitions: in the probate court, one for directions to, and one for removal and surcharge of, the bank as executor and testamentary trustee; in the district court, one for directions to, and one for removal of, the bank as inter vivos trustee. In due course all four cases were consolidated in the district court for trial. The trial court held in substance that the trustee was required to comply with the beneficiaries' wishes unless it could show good cause for not doing so, but refused to remove or surcharge the bank as executor or trustee. The beneficiaries have appealed from the order refusing removal and surcharge, and from that part of the order allowing the trustee its expenses. The trustee bank has appealed from the order requiring it to follow the dictates of the plaintiff beneficiaries, and from the order allowing plaintiffs their expenses and attorney fees from the corpus of their respective trusts.

This is the second acrimonious chapter of the on-going dispute over the assets of the late Marcellus M. Murdock of Wichita, who died on March 10, 1970. The first chapter is to be found in In re Estate of Murdock, 213 Kan. 837, 519 P.2d 108 (hereafter Murdock I). In that case this court upheld an antenuptial agreement between Marcellus and his widow Paula Murdock, limiting Paula to a one-fifth or 'child's' share of his estate rather than the one-half she claimed as a widow who had not consented to her husband's will. Murdock I is referred to by the parties as the 'widow's election' case, or simply as the 'widow's' case. The dispute in the present case is over control of his chief asset, stock representing the balance of power in Wichita's daily newspaper, the Wichita Eagle and Beacon. Hence, this case is referred to as the 'voting rights' case. Two more appeals in the Murdock estate (Nos. 48,058 and 48,067, consolidated) are docketed in this court awaiting decision. (Reporters Note: Murdock v. First National Bank, 220 Kan. 459, 553 P.2d 876.)

In Murdock I we encountered for the first time Marcellus' family and his plan for the distribution of his assets after his death. In addition to his widow Paula, when he died at age 87 Marcellus left surviving three adult children (Victoria Murdock Bloom, Marsh Murdock, and Janet Murdock Jennings) and two adult grandchildren (David Colwell and Vici Colwell McComb), children of a predeceased daughter (Jane Murdock Colwell). All of these offspring were the result of his previous marriage to Mabelle Murdock; none were related by blood to the widow Paula. His plan, to be detailed later, was to divide his assets into five equal parts. In due course, one was to go to his widow, one to each of the three surviving children, and the last equally to the children of the predeceased child. The plan was to be accomplished through a combination of an inter vivos and a testamentary trust.

Marcellus' chief asset was a one-third interest in the ...