Trust Known as Great Northern Iron Ore Properties, Matter of
Decision Date | 10 February 1978 |
Docket Number | No. 47571,47571 |
Citation | 263 N.W.2d 610 |
Parties | In the Matter of the Trust Known as GREAT NORTHERN IRON ORE PROPERTIES. |
Court | Minnesota Supreme Court |
Syllabus by the Court
In this second appeal from district court proceedings upon the trustees' petition for instructions in the administration of an express trust, we hold that the trial court's instruction that the trustees have a duty to convert all trust assets to cash, resulting in the complete destruction of the reversion, before trust termination is erroneous and inconsistent with our prior opinion in In re Trust Known as Great Northern Iron Ore Properties, 308 Minn. 221, 243 N.W.2d 302, certiorari denied sub nom. Arms v. Watson, 429 U.S. 1001, 97 S.Ct. 530, 50 L.Ed.2d 612 (1976). The trustees shall be instructed that by the terms of the trust instrument they are given discretionary powers to convert trust assets to cash and to distribute proceeds to the certificate holders, but they are limited in their exercise of those powers by a legal duty imposed by the well-established law of trusts and successive estates to serve the interests of both term and reversionary beneficiaries with impartiality, and they have no duty to exercise the powers of sale and distribution unless required to serve both term and reversionary interests.
The order of the district court instructing the trustees is reversed with directions to enter an order instructing the trustees in accordance with the views expressed herein.
Frank S. Farrell, Richard V. Wicka, Briggs & Morgan and Richard E. Kyle, J. Neil Morton and Steve A. Brand, St. Paul, for B. N. Inc.
Doherty, Rumble & Butler and Jack C. Foote, Frank Claybourne and Perry Wilson, Jr., St. Paul, for The Trustees of trust known as Great Northern Iron Ore Properties.
Arter & Hadden, Thomas V. Koykka and David G. Coleman, Cleveland, Ohio, Oppenheimer, Wolff, Foster, Shepard & Donnelly, William Oppenheimer and James R. Oppenheimer, John H. Wolf and Mark H. Stromwall, St. Paul, for Arms.
Harold Siegel, Minneapolis, for Margot Siegel.
Considered and decided by the court en banc.
The subject matter of this extended litigation is the James J. Hill Trust, known as Great Northern Iron Ore Properties. In 1972, the trustees petitioned the district court for instuctions as to their powers and duties to convert trust assets to cash for distribution to income beneficiaries as termination of the trust term approaches. 1 The issue concerning the trustees' powers and duties comes before us a second time. In the first appeal, In re Trust Known as Great Northern Iron Ore Properties, 308 Minn. 221, 243 N.W.2d 302, certiorari denied sub nom. Arms v. Watson, 429 U.S. 1001, 97 S.Ct. 530, 50 L.Ed.2d 612 (1976), we reversed as clearly erroneous the trial court's findings that the trust should be terminated before its specified term, and that Burlington Northern, Inc., a successor in interest of the settlor, had no interest in the trust. We remanded for further proceedings to permit the trial court to answer the trustees' petition for instructions. Upon remand, the trial court instructed the trustees that they have the authority, and indeed the duty, to convert all trust assets to cash, in effect destroying the reversion for the benefit of the income beneficiaries as trust termination approaches. Upon this second appeal by Burlington Northern, we reverse with instructions to the trustees that they have the authority to convert trust assets to cash, short of violation of their legal duty of impartiality between trust reversioner and income beneficiaries, but have no duty to convert assets unless required to serve both reversion and income interests.
The history of the Great Northern Iron Ore Properties Trust was detailed in our prior opinion. The trust holds several thousand acres of Minnesota ore lands, which are mined by lessees under long-term royalty leases. After payment of trust expenses, the trustees in their discretion distribute royalties from the mining operations to the income beneficiaries, some 10,000 holders of 1,500,000 negotiable certificates of beneficial interest which are traded on the New York Stock Exchange. 2 Burlington Northern, Inc., as successor in interest to Great Northern Railway, 3 holds a reversion in all trust assets other than cash remaining at trust termination.
In initial proceedings before the first appeal, the trial court found the trust instrument ambiguous and admitted a great volume of extrinsic evidence. Rather than issue the requested instructions, the trial court declared the trust terminated before its full term and, finding that the settlor had intended the railroad to have no interest in the lands, ordered the trust assets transferred to a corporation for the sole benefit of the certificate holders. On the appeal from that order, we reversed, holding that the trust instrument was not ambiguous and that the trial court's admission of extrinsic evidence, its findings, and its termination of the trust were clearly erroneous. 5 We remanded to permit the issuance of instructions, consistent with our opinion, as originally requested by the trustees.
Upon remand, the trial court instructed that the trustees have unlimited authority to convert the trust assets to cash for the certificate holders. The trial court based its finding of unlimited authority upon the broad power of sale conferred in trust paragraph 9, an alleged "practical construction" of the trust instrument, 6 and a finding that the trustees of a "business trust" of "wasting assets" are exempted from any limits imposed upon their powers by the law of trusts and successive estates. In its memorandum of instructions, the trial court further instructed that the trustees in fact have a duty to exercise their power of sale to destroy the reversion by converting all trust assets to cash for certificate holders before the end of the trust term. In support of this finding, the trial court has again referred to the extrinsic evidence which we found inadmissible on the last appeal. Based upon this evidence, a reading of trust paragraphs 4 and 9, and inferences from the historical background of the trust relating to the acquisition of the ore lands, the trial court has "gleaned" a settlor's intent to benefit only the certificate holders to the exclusion of "any possible reversioner." This alleged intent of the settlor is supposed to give rise to a duty to exercise the power of sale in destruction of the reversion.
Since both parties now concede and trust paragraphs 4 and 9 unambiguously provide that the trustees have full authority to sell assets, reinvest, and distribute proceeds of sale, the issue on this appeal narrows itself to what the trustees' duties are with respect to the exercise or nonexercise of their powers of sale and distribution.
We consider first the arguments of the parties concerning what duties may be imposed upon the trustees in the exercise of their powers of sale and distribution by the trust instrument, extrinsic evidence, or an alleged "practical construction." Secondly, we consider what duties with respect to exercise of those powers are imposed upon the trustees by law.
Charles and Elizabeth Arms, intervening certificate holders, 7 and the trial court have looked to the trust instrument, considered extrinsic evidence of the settlor's intent, and applied "practical construction" to impose a duty to exercise the power of sale for the sole benefit of certificate holders. Burlington Northern challenges the propriety of relying upon extrinsic evidence, disputes the alleged practical construction, and relies upon the trust instrument and this court's prior opinion to argue that finding a duty to convert trust assets would be inconsistent with our former opinion. We hold that the trustees' powers of sale and distribution under trust paragraphs 4 and 9 are discretionary, and no duty to exercise or refrain from exercising those powers is created by the trust instrument, extrinsic evidence, nor any practical construction.
Trust instrument
The Arms certificate holders contend that trust paragraph 9, providing an unlimited power of sale should be read as obligating the trustees to use that power to liquidate all trust assets as trust termination approaches. We do not agree. It is true that trust paragraph 9 contains no limit on the power of sale and that trust paragraph 4 permits distribution of proceeds without requiring reinvestment. But these unambiguous trust provisions clearly do not require the trustees to exercise the powers conferred. The decision to...
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