Case Name: Heneage, et al. v. Federal Land Bank of New Orleans, et al.
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 1955-12-19
Citations: 226 Miss. 250
Docket Number: No. 39818
Parties: Heneage, et al. v. Federal Land Bank of New Orleans, et al.
Judges: McGehee, C. J., and Roberds, Lee, Hobnes, Arrington and Ethridge, JJ., Concur.
Reporter: Mississippi Reports
Volume: 226
Pages: 250–276

Head Matter:
Heneage, et al. v. Federal Land Bank of New Orleans, et al.
No. 39818
December 19 1955
84 So. 2d 137
Holcomb & Curtis, Clarksdale, for appellants.
Roberson, Luchett & Roberson, Clarksdale; Beverly C. Adams, New Orleans, Louisiana, for appellee, The Fed- - eral Land Bank of New Orleans.
Charles L. Sullivan, Clarksdale, for appellee-trustee, J. U. Talbot.

Opinion:
Hall, J.
On April 16, 1945, Mrs. Dorothy Callicott Shelby, then a widow, conveyed to J. M. Talbot as Trustee for her four minor children, named above as appellants, and for any other children which might thereafter be born unto her, approximately 760 acres of land commonly known as the New Africa Plantation, situated in BOliver and Coahoma Counties. The trust conveyance is quite lengthy, but it provides that Dorothy should maintain an active supervision over and receive the income from the property conveyed until each child should attain the age of twenty-one years. It also provides that she intends to keep the property free of liens and incumbrances; "however, if an emergency should arise, which in the opinion of said creator and grantor and her said trustee, should make it necessary for the health, comfort, maintenance and support of her said children, the said trustee and his successor or successors are hereby authorized, empowered and directed to encumber the said lands by deed of trust, mortgage or otherwise to provide for such emergency. ' '
At the time of this conveyance the property was rented to Dorothy's brother, C. M. Callicott, and he continued to rent it through the year 1948, paying the rents to Dorothy. Some time after the execution of the trust instrument Dorothy was married to Jack A. Guthrie and they lived in Florida until in the year 1948 when they moved, to Clarksdale, Mississippi, in Coahoma County. They decided that in the year 1949 they would operate this plantation, as well as another one owned by Dorothy which was heavily incumbered and not included in the trust conveyance. All of the children except Carey were then living in the home with Dorothy and Jack and were being maintained by them.
The father of Carey, Robert C. Shelby, and Carey's mother, Dorothy, had been divorced from each other in October 1943. No disposition was made in the divorce decree as to the custody of Carey and he remained in. the custody of his mother until February 1948 when a written agreement was entered into between his parents and approved by decree of the Chancery Court of Coahoma County whereby the permanent care and custody of Linda was awarded to her mother and the permanent care and custody of Carey was awarded to his father and the father assumed full responsibility for his maintenance and support and relieved Dorothy of all liability and responsibility in that respect. Thereafter Carey remained in the custody of his father.
After Dorothy and her then husband moved back to Clarksdale in 1948 and decided to operate the plantations during the year 1949 they began to undertake to make arrangements to finance this venture. Guthrie had bought a home in Clarksdale and he and Dorothy were residing therein, and the three daughters of Dorothy were living with them and were being cared for by them. The manager's home on the New Africa Plantation had become uninhabitable and Dorothy's brother, C. M. Callicott, who was then renting the property, had, with Dorothy's knowledge and consent, built a new Manager's home thereon at a cost of approximately $7,700.00 and was claiming a lien on the property for the cost thereof. About 700 acres of the plantation was in cultivation and was not suitable for any other purpose. Farm machinery had to be purchased for operation of the farm. Fertilizer and other necessary supplies were also needed. Taxes thereon were due. Dorothy had borrowed money with which to pay the premiums on life insurance in which the children were named, as beneficiaries and this was due in the amount of about $1,500.00. Dorothy and Guthrie were without funds and owed a large amount of bills incurred in living expenses for themselves and the three children who were living with them. Guthrie had resigned his position in Florida when they moved back to Clarksdale with the view of operating the farm properties. And thus it was that in the early part of January 1949 Dorothy and Guthrie were in debt and without funds. She thereupon conferred with the Trustee with the view of invoking the emergency clause of the trust conveyance.
The Trustee, who is an attorney at law, wrote the Federal Land Bank, explained the situation and sent the trust conveyance for advice as to whether the bank would approve a loan on the property under the circumstances if the title was found otherwise to be good. After a telephone conversation with an attorney for the Land Bank he was advised that the bank would make the loan upon an affidavit as to the necessity therefor and upon the obtaining of title insurance. The Trustee then got in touch with a title insurance company who agreed to furnish the insurance to the bank upon a strong affidavit as to the necessity of the loan. After the usual delays in consummating the transaction the Trustee and Dorothy and her then husband Guthrie executed a deed of trust to the bank in the amount of $21,500.00 on February 15, 1949. The property was operated by Dorothy and her husband for the year 1949 at a loss of between $6,000.00 and $7,000.00 which was paid by Guthrie out of the proceeds of the sale of property which he owned in Louisiana. Dorothy and Guthrie were divorced in January 1950. In March 1950 she married B. L. Stockett and they continued to operate the farms until her death on March 22, 1954. On October 26, 1950, nothing had been paid on the deed of trust held by the Land Bank, and the bank had been paying the taxes, and Dorothy and Stockett along with the Trustee then executed a new deed of trust to the bank for $24,000.00 which merely brought forward the old deed of trust, with the interest accrued thereon and the taxes advanced by the bank.
About four months after the death of Dorothy this suit was brought by appellants for cancellation of the two deeds of trust upon the ground that no such emergency existed as to authorize their execution. The chancellor found against this contention and dismissed the bill. Hence this appeal.
In A. L. I. Restatement, Trusts, Section 187, paragraph e, it is said:
"If discretion is conferred upon the trustee in the exercise of a power, the court will not interfere unless the trustee in exercising or failing to exercise the power acts dishonestly, or with an improper even though not a dishonest motive, or fails to use his judgment, or acts beyond the bounds of a reasonable judgment. The mere fact that if the discretion had been conferred upon the court, the court would have exercised the power differently, is not a sufficient reason for interfering with the exercise of the power by the trustee. ' '
In Bogert on Trusts and Trustees, Vol. 3, Section 560, it is said: "If a settlor has given his trustee a discretionary power, the court is reluctant to interfere with the trustee's use of the power. As long as the honest judgment and decision of the trustee can be obtained by the cestui on the use of the corpus, no matter how inefficient the cestui máy think the trustee is in this respect, the beneficiary has no ground for complaint. He is getting just what the settlor provided for him. Hence chancery takes the position that it will not direct the trustee when and how to use his discretionary power, so long as he is honestly and with some degree of reason employing that power. Even though the court would make a far different decision from that which the trustee has made or is about to make with regard to the discretionary power, the court will not overrule the trustee or take other action, unless he is refusing to exercise the power at all, or is acting in bad faith, or is acting in a wholly unreasonable and arbitrary manner."
The court found that Dorothy and the trustee were the only ones who could determine whether an emergency existed such as to justify the exercise of the emergency provision of the trust, that they acted on it honestly and that they had a right so to do, and accordingly he dismissed the bill. We think that the evidence is sufficient to support his findings and conclusions, and that, except as hereinafter stated, the decree should be affirmed.
It is contended by appellants that Dorothy and the trustee had no right to incumber the interest of Carey Shelby, and since by the decree of the court entered in February 1948, the care and custody of Carey was awarded to his father, and he was charged with full responsibility for the. support and maintenance of Carey, and Dorothy was relieved of all liability in that respect and was contributing nothing to Carey's maintenance, we think this contention is well taken, except to the extent that the proceeds of the loan in question inured to the benefit of Carey in connection with his undivided one-fourth interest in the trust property, Dorothy never having had any children other than the four named.
On July 17, 1943, Dorothy entered into a written trust agreement with the Bank of Clarksdale whereby there was deposited with said bank securities of the value of $10,000.00 for the benefit of Linda and Carey Shelby. In the trust conveyance to J. M. Talbot, Trustee, which is involved in this suit, there is a specific reference to the trust with the Bank of Clarksdale and a provision to the effect that the share of Carey in the Talbot trust shall he reduced protanto to the extent of his share in the Bank of Clarksdale trust.
We think the decree of the lower court should he reversed insofar as it affects Carey's interest in the land as affected by the Federal Land Bank deed of trust, but that Carey's one-fourth interest in the land should be reduced in value to the extent that his half of the Bank of Clarksdale trust will reduce it, and also that his interest should be charged with that portion of the Federal Land Bank loan which was used in paying for the manager's home and other improvements, if any, as well as taxes, premiums on insurance on Dorothy's life in which Carey was a beneficiary at the time the premiums were paid, and any other items which are properly chargeable pro-rata against Carey's interest, including taxes paid by the Federal Land Bank subsequent to the loans, and the cause should be remanded to the lower court with directions to take an accounting as to Carey's interest.
Affirmed in part and reversed and remanded in part.
McGehee, C. J., and Roberds, Lee, Hobnes, Arrington and Ethridge, JJ., Concur.