West Coast Hospital Ass'n v. Florida Nat. Bank of Jacksonville

• Decision Date: 28 February 1958
• Citation: 100 So.2d 807
• Parties: WEST COAST HOSPITAL ASSOCIATION, a Florida non-profit corporation, Appellant, v. The FLORIDA NATIONAL BANK OF JACKSONVILLE, a national banking corporation, andPaul F. Randolph, as surviving Trustees of Trust under Will of Mary S. Morrow,Deceased, and Chester B. McMullen, Jr., as Executor of the Estate of M. A.McMullen,Deceased, Trustee, Appellees.
• Court: Florida Supreme Court

Page 807

100 So.2d 807

WEST COAST HOSPITAL ASSOCIATION, a Florida non-profit corporation, Appellant, v. The FLORIDA NATIONAL BANK OF JACKSONVILLE, a national banking corporation, andPaul F. Randolph, as surviving Trustees of Trust under Will of Mary S. Morrow,Deceased, and Chester B. McMullen, Jr., as Executor of the Estate of M. A.McMullen,Deceased, Trustee, Appellees.

Supreme Court of Florida.

Feb. 28, 1958.

Marshall & Rives, Clearwater, and Fowler, White, Gillen, Yancey & Humkey, Miami, for appellant.

Mann, Harrison, Roney, Mann & Masterson, St. Petersburg, for appellees.

DREW, Justice.

Mary S. Morrow died January 9, 1950, leaving a last will and testament in which The Florida National Bank of Jacksonville, Paul F. Randolph and M. A. McMullen were named as executors and trustees. At the conclusion of the administration of the estate, on or about April 1, 1952, the executors distributed to themselves as trustees of a trust created by said will government bonds of the approximate value of $800,000. The will directed Mrs. Morrow's estate to be liquidated and directed her executors to purchase 'United States of America Government Bonds, the kind and issue of said United States of America Government Bonds which shall be purchased I leave to the discretion of my executors provided, however, all the property referred to in this item of my Will must be sold and the proceeds used for the purchase of said Bonds.' It is then directed in the will:

'After my executors have purchased said bonds, I direct them to assign, transfer and set over unto my trustees hereinafter named said bonds, in trust nevertheless, for the following uses and purposes:

'(a) The corpus of said trust to be held intact except as and when said bonds are called by the government of the United States of America, or when it is necessary to exchange said bonds for other United States government bonds by reason of any regulation of the United States Government. Then and in that event I direct my trustees, from the proceeds of any sale, to re-purchase bonds issued by the United States Government, or exchange for bonds issued by the United States Government, and to continue to hold the same in accordance with the provisions herein contained.

'(b) All of the net income derived from the corpus of the trust hereby created I direct my trustees to pay in semi-annual instalments to the West Coast Hospital Association, (a nonprofit charitable corporation) of Clearwater, Florida, which Association operates the Morton F. Plant Hospital in Clearwater, Florida, and I direct that the said West Coast Hospital Association shall use the net income from my trust estate so created for such uses and purposes as Dr. M. E. Black, of Clearwater, Florida, in his sole judgment and discretion shall direct and the direction for the use and application of said net income shall in nowise be questioned nor shall he be interfered with by the then constituted and acting Board of Directors of said Association. Upon the death or inability of the said Dr. M. E. Black to act, then and in that event only I direct the West Coast Hospital Association to use the income from my trust estate for such uses and purposes as my trustees or the survivors of my trustees, in their judgment and discretion, shall direct. This bequest is made in memory of my deceased husband, George K. Morrow.'

Between April 10, 1952 and January 10, 1955, the trustees collected a total of $54,951.15 as income from the various government securities which they held as trustees. During the same period of time the trustees paid themselves $19,993.78 in fees and claimed $3,506.60 in addition for such period of time, making an aggregate of $23,500.38 claimed as reasonable compensation for their services as trustees under the trust created by Mrs. Morrow's will. During such period the trustees distributed to the Hospital Association net income of $45,344.83. A portion of the fees claimed by and paid to the trustees was allocated to and charged against the corpus of the trust rather than the income.

The Hospital Association objected to the amount of fees which the trustees had paid themselves as well as the allocation of a portion thereof to corpus, but they were unable to reach any agreement with reference to the dispute, whereupon the Hospital Association notified the trustees that unless a proposal with reference to reduced fees, which had been previously submitted, was accepted by them within twenty days, they would institute suit for the purpose of securing a determination of the matter. Before the expriation of the twenty day ultimatum by the Hospital Association, the trustees brought this action for declaratory judgment, and secured a decree in the lower court favorable to their contention. Under these circumstances the rules allowing a trustee to recover his attorneys' fees in defending a suit brought against him are applicable because the litigation was precipitated by the beneficiary. See Powell v. Cocowitch, infra. Moreover, the Hospital Association asserts in its brief 'The trustees only applied to the Court when suit by the beneficiary against them was imminent.'

In this appeal from the decree, three principal points are urged for reversal. First, the Hospital Association contends that the lower court erred as to the amount of fees awarded and in authorizing the trustees to charge a portion of said fees to the corpus of the trust. Second, it argues that it was error to fix annual fees on an arbitrary percentage of the corpus and income instead of a reasonable compensation for the services performed to the trust and to approve said formulae for future years; and, third, it says that the court erred in awarding attorneys' fees payable out of the corpus of the trust for the services of the trustees' attorneys in said cause. No error is assigned to the award of fees to the attorneys for the Hospital Association.

In the construction of testamentary trusts, it is the duty of the courts to ascertain and give effect to the intention of the testator. This is an elementary proposition. Cartinhour v. Houser, Fla.1953, 66 So.2d 686; Morgenthaler v. First Atlantic National Bank, Fla.1955, 80 So.2d 446. That it was the intention of the testator to hold the corpus intact is quite obvious. The word has a well defined meaning, is one easily understood and commonly used in instruments of this kind. The significance of the word, however, must be considered in the light of well settled principles of law regulating the administration of trust estates, one of the most firmly established being the rule that the cost and expenses of administering a trust are, in the absence of a statute or instructions in the trust instrument or other writing to the contrary, in proper cases allocable between principal (corpus) and income on some rational basis. Many services of the trustees relate to preservation and protection and enhancement of principal and others to collecting, disbursing and protection and enhancement of income. Courts having jurisdiction of the trust have, necessarily, and by virtue of the very nature of the thing, some latitude in determining whether such compensation shall be paid in whole or in part from the corpus of the estate. Dunscombe v. Smith, 1937, 127 Fla. 797, 174 So. 38; Campbell v. Vining, 1931, 101 Fla. 939, 133 So. 555; Vol. 4 Bogert on Trusts & Trustees, Sec. 802, pages 112, 116. There is no statute in this State regulating the subject. Chapter 737, Florida Statutes 1955, F.S.A. is inapplicable because the will and codicils of Mrs. Morrow were dated prior to the effective date of such Chapter. Such awards are controlled by the decisions of this Court and applicable general law.

The record shows the income from the trust to be ample to provide for the effective administration of the trust and the payment of all expenses in connection therewith. This fact, coupled with the manifest intent of the creator that the corpus should be kept intact-and our duty to give effect to this purpose if it may reasonably be done-leads us to the conclusion that all of the fees and expenses involved in these proceedings should have been paid out of income. The discretion of the chancellor, therefore, was improperly exercised and in this respect the decree is reversed with instructions that all of the charges involved in these proceedings and ultimately awarded shall be charged against income.

The decree of the lower court approved an annual fee to the Florida National Bank of Jacksonville as corporate trustee which was equivalent to and based upon 1/4th of 1% of the principal (paid from income) and 1/4 of 1% of...