Trust of Brooke, In re, 97-1089

• Decision Date: 12 August 1998
• Docket Number: No. 97-1089,97-1089
• Citation: 697 N.E.2d 191,82 Ohio St.3d 553
• Parties: In the Matter of the Trust U/W of BROOKE et al., Deceased.
• Court: Ohio Supreme Court

Page 553

82 Ohio St.3d 553

697 N.E.2d 191

In the Matter of the Trust U/W of BROOKE et al., Deceased.

No. 97-1089.

Supreme Court of Ohio.

Submitted April 7, 1998.

Decided Aug. 12, 1998.

In 1942, two sisters, Mary G. Brooke and Edith L. Gould, executed their last wills and testaments. Under the terms of both wills, trusts were established, which became active in 1968, following the death of Harold Brooke Ressler, a relative of both sisters. Item 6, part 7 of the Brooke will provides:

"After the death of the survivor of said Harold Brooke Ressler and Edith L. Gould, my said Trustee shall, from time to time, in his sole discretion, but in no event at greater intervals than 20 year periods after the death of such survivor, give the net income from my entire trust estate to the Village of Eaton, Preble County, Ohio, for such Worthy Legal Municipal Purpose or Purposes as said Trustee may deem advisable and for something which will be of a substantial and permanent nature and be a benefit to said Village, and which gift shall be known as 'The Gould-Brooke Memorial' or some similar title which will tend to perpetuate the name of Gould and/or Brooke."

The language of the Gould will is identical to that in the Brooke will, except that the name "Mary G. Brooke" replaces the name "Edith L. Gould." The trust appoints a trustee and provides that the president of the Eaton National Bank, Eaton, Ohio, shall serve as trustee following the death of the original appointee. The appellant, Jeffrey A. Maffett, is the third trustee appointed to administer the trusts since their inception.

After the trusts became active, four distributions were made from the trusts. In 1973, two citizens organized a group to develop plans and raise funds for the construction of a new library in Eaton. The citizens sought financial support from the Brooke and Gould trusts, and the trustee at that time, Thurston F. Bittle, agreed to support the project with funds from the trust, if other funds could be secured with community contributions. Subsequently, the citizens sought the support of the residents of the city of Eaton and the Eaton City Council for the project.

The city council supported the project by establishing a fund to deposit private contributions for the project, by submitting a joint application with the Preble County Board of Library Trustees for available federal funds, and by allowing the library to be built on city-owned land. In 1975, following the completion of the library and the naming of it as the "Brooke-Gould Memorial Library," funds from the trusts were distributed to support the project.

A second distribution of funds from the trusts occurred in 1984 for the purpose of supporting an expansion to the library. The distribution was again conditioned on the receipt of other funds raised from the community. The most recent distributions were made for the purpose of supporting construction of a new emergency medical services facility, and for the construction of a new high school.

In 1994, the current trustee, Maffett, filed an application with the Preble County Court of Common Pleas, Probate Division, to amend both trusts for the purposes of acquiring tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and to "verify that there are no other beneficiaries of the Trust other than the City of Eaton, and to clarify the distribution provisions of the Trust." The trial court approved the amendments to the trusts, which provide, in pertinent part, as follows:

"1. Distribution. The Trustee shall, from time to time, distribute such part of the net income and/or principal of the Trust for such charitable and/or worthy legal municipal purpose or purposes for the City of Eaton as the Trustee may deem advisable and appropriate in the Trustee's sole discretion. Particularly with respect to distributions of principal, the Trustee shall give emphasis to distributions that will result in something which will be of a substantial and permanent nature for the City of Eaton. * * * "

The trial court also determined that the "ultimate 'beneficiaries' are the citizens of the 'Village' (now City) of Eaton."

On November 16, 1994, just prior to the filing of the application for amendments to the trusts, the mayor of Eaton, on behalf of the city council, wrote the trustee, requesting his approval for a distribution of funds to construct a new municipal building for the city. The trustee responded in writing, noting that he would consider the request along with others under consideration. On February 14, 1995, after the approval of the trial court of the proposed amendments to the trusts, counsel for the city wrote to the trustee. The city again called for the trustee to distribute the trust funds to the city for the building project, claiming that the trustee's consideration of any other requests for trust funds would conflict with the terms of the trust. In response, counsel for the trustee stated that the "sole discretion" granted to the trustee by the terms of the trust did not require the trustee to distribute funds to the city simply by virtue of its request.

The city, appellee, then filed a motion pursuant to Civ. R. 60(B) for relief from the order of the trial court amending the trusts. Following settlement discussions, the parties agreed to amend the trusts by merging them and providing as follows:

"1. Distribution. The Trustee shall, from time to time, in his sole discretion, but in no event at greater intervals than twenty year periods after the death of Harold Brooke Ressler (i.e. 1968), give the net income of the entire Brooke/Gould Trust to the City of Eaton, Preble County, Ohio, for such worthy legal municipal purpose or purposes as the Trustee may deem advisable and for something which will be of a substantial and permanent nature and be a benefit to said City, which gift shall be known as 'The Brooke-Gould Memorial' or some similar title which will tend to perpetuate the name of Gould and/or Brooke. Notwithstanding the above, the Trustee shall make all distributions in compliance with all applicable laws and regulations, including but not limited to Section 4942 of the Internal Revenue Code of 1986 as amended ('Code') or any successor section of the Code and any regulations promulgated thereunder. Accordingly, the Brooke/Gould Trust is organized exclusively for charitable, religious, educational or scientific purposes, including for such purposes, the making of distributions to the City of Eaton, a governmental unit described in Section 170(b)(1)(A)(v) of the Code."

The agreement did not determine the issue of who was intended to be the beneficiary of the trusts.

Upon a subsequent motion requesting a declaration of the rights of the city under the trust, the trial court determined that "the City of Eaton * * * is not the 'sole beneficiary' under the Trusts * * *. [Emphasis sic.] Rather, the community of residents in the more broad or generic sense is/are the beneficiaries of the Trusts." The trial court added, "the word 'Village' means the community of residents. Had the Settlors intended to leave the income of the Trusts to the 'governmental entity' there would be no reason to grant the Trustee the authority to control the distribution of the income and determine proper purpose(s) for the use of that income."

The trial court also found that the city was not the designee for creating and developing plans for uses of the income because the language of the trust expressly reserved that function to the trustee. Finally, the trial court denied the city's application for attorney fees.

The city appealed to the Preble County Court of Appeals. The court of appeals reversed the judgment of the trial court. The court of appeals determined that the word "Village" as used in the trusts meant the "legal entity" of the municipality and the residents of the city. The appellate court also determined that the city was the only entity intended to expend the trust income to fulfill any plans for uses of the trust.

The cause is now before this court pursuant to the allowance of a discretionary appeal.

Thompson, Hine & Flory L.L.P., Laurie J. Nicholson and Richard F. Carlile, Dayton, for appellant.

Porter, Wright, Morris & Arthur and Jonathan Hollingsworth, Dayton, for appellee.

Leppla & Ambrose Associates, Ltd., and R. Mark Henry, Dayton, urging reversal for amicus curiae, Concerned Eaton Citizens.

MOYER, Chief Justice.

This dispute arises from a declaratory judgment action brought to construe certain language contained in two trusts of which the appellant is the trustee. ¹ For the reasons that follow, we hold that the trusts grant exclusive power to the trustee to control and distribute the net income from the trust, subject to the requirements for distribution as stated in the trusts. We also hold that the words of the trusts indicate that the net income from the trusts is to be expended on behalf of the residents of Eaton, Ohio, for a use that the trustee, exclusively, determines to be a worthy legal municipal purpose, so long as that purpose is of a substantial and permanent nature, benefits the residents of Eaton, and perpetuates the name of the settlors in some way. Accordingly, we reverse the judgment of the court of appeals.

When construing provisions of a trust, our primary duty is to "ascertain, within the bounds of the law, the intent of the * * * settlor." Domo v. McCarthy (1993), 66 Ohio St.3d 312, 314, 612 N.E.2d 706, 708. The express language of the trust guides the court in determining the intentions of the settlor. Casey v. Gallagher (1967), 11 Ohio St.2d 42, 40 O.O.2d 55, 227 N.E.2d 801. Any words used in the trust are presumed to be used according to their common, ordinary meaning. Albright v. Albright (1927), 116 Ohio St. 668, 157 N.E. 760.

Applying those principles to the trusts at issue, it is evident that these trusts are charitable trusts. The language of the trusts indicates that the...