Case Name: The CONTINENTAL BANK & TRUST COMPANY, a Utah corporation, as Trustee under the Revocable Trust Agreement of Marshall E. Huffaker, deceased, Plaintiff and Appellant, v. COUNTRY CLUB MOBILE ESTATES, LTD., a Utah limited partnership; The First Security Bank of Utah, N. A., Personal Representative of the Estate of Marshall E. Huffaker, deceased; et al., Defendants and Respondents
Court: Utah Supreme Court
Jurisdiction: Utah
Decision Date: 1981-07-14
Citations: 632 P.2d 869
Docket Number: No. 17157
Parties: The CONTINENTAL BANK & TRUST COMPANY, a Utah corporation, as Trustee under the Revocable Trust Agreement of Marshall E. Huffaker, deceased, Plaintiff and Appellant, v. COUNTRY CLUB MOBILE ESTATES, LTD., a Utah limited partnership; The First Security Bank of Utah, N. A., Personal Representative of the Estate of Marshall E. Huffaker, deceased; et al., Defendants and Respondents.
Judges: HALL, C. J., and STEWART, J., concur.
Reporter: Pacific Reporter 2d
Volume: 632
Pages: 869–875

Head Matter:
The CONTINENTAL BANK & TRUST COMPANY, a Utah corporation, as Trustee under the Revocable Trust Agreement of Marshall E. Huffaker, deceased, Plaintiff and Appellant, v. COUNTRY CLUB MOBILE ESTATES, LTD., a Utah limited partnership; The First Security Bank of Utah, N. A., Personal Representative of the Estate of Marshall E. Huffaker, deceased; et al., Defendants and Respondents.
No. 17157.
Supreme Court of Utah.
July 14, 1981.
Peter W. Billings, Daniel W. Anderson, Salt Lake City, for plaintiff and appellant.
Robert B. Huffaker, Modesto, Cal., John B. Anderson, William J. Cayias, Joan Traub, Salt Lake City, Kent S. Marshall, Hampton, Conn., Quentin L. R. Alston, John W. Lowe, Marsha Penny Huffaker Jessee, Michael M. Mollinet, Robert O. Baldwin, Barbara Jane Watkins, Ray L. Montgomery, Craig T. Vincent, Salt Lake City, for defendants and respondents.

Opinion:
OAKS, Justice:
The issue in this appeal is whether a settlor who has created a trust by conveying property that is subject to an option to sell can thereafter extend the period of the option without the participation or consent of the trustee. We hold that he cannot. For ease of reference, this opinion will refer to the plaintiff-appellant, Continental Bank & Trust Co., as the "trustee," to defendant-respondent, Country Club Mobile Estates, Ltd., as the "lessee-optionee," and to Marshall E. Huffaker, deceased, as the "set-tlor."
The sequence of events is critical. On September 29, 1965, the settlor gave the lessee-optionee a fifty-year lease and an option to purchase, during the sixth year of the lease, the 31 acres of land at issue in this litigation. On March 1, 1971, the set- tlor granted the lessee-optionee a five-year extension of its option, to September 29, 1976. On December 6, 1973, the settlor conveyed the subject property to the trustee in trust for various members of his family, signing a trust agreement and conveying the property to the trustee by a warranty deed, which was promptly recorded. The lessee-optionee had actual as well as constructive notice of the creation of this trust by at least April, 1975, when it began making its monthly lease payments directly to the trustee. On March 1, 1976, the set-tlor signed an instrument purporting to grant the lessee-optionee another five-year extension of its option, to September 29, 1981. The trustee was unaware of this action and did not participate in it. On October 30, 1978, approximately one week after the settlor's death, the trustee learned of the March 1, 1976, attempted extension and demanded and obtained a copy of the instrument.
On July 3, 1979, the trustee brought this action against the lessee-optionee and other interested parties to quiet title to the 31 acres of trust property and to determine the validity of the attempted extension of the option. Both parties moved for summary judgment on the issue of the validity of the extended option. The district court denied the trustee's motion and granted the lessee-optionee's motion, and the trustee appealed. We reverse.
A settlor admittedly could reserve power to extend the duration of an option on trust property, and do so without the consent or involvement of the trustee. The question is whether this settlor did so. The issue turns on the terms of the trust instrument, which, in this case, gave the trustee broad powers, including the power to grant options, but also reserved to the settlor the right to revoke the trust or to direct the trustee to sell trust property. The relevant clauses are as follows:
ARTICLE IV.
To carry out the Trust purposes of the Trust created hereby . . . the Trustee is vested with the following powers .: B. To manage, control, sell, convey, . . .; to grant options. . . .
K. . The enumeration of certain powers of the Trustee herein shall not be construed as a limitation of the Trustee's power, it being intended that the Trustee shall have all rights, powers and privileges that an absolute owner of the property would have.
ARTICLE V.
The Trustor by an instrument in writing filed with the Trustee may modify, alter or revoke this Agreement in whole or in part, and may withdraw any property subject to the agreement; . . .
There is hereby reserved to the Trustor the power to direct the trustee, in writing, from time to time, to retain, sell, exchange or lease any property of the trust estate. . . . Upon receipt of such directions, the Trustee shall comply therewith.
The lessee-optionee argues, and the district court held, that in the foregoing provisions of the trust agreement the settlor reserved the power to direct the trustee in regard to the leased property, and that the effect of his executing the extension of the option on March 1, 1976, was to direct the trustee to sell the property to the lessee-op-tionee upon its exercise of the option. We disagree. We are unable to find an exercise of the "power to direct the trustee, in writing," in an act that was not intended to communicate and did not in fact communicate anything to the trustee. We are likewise unable to construe the extension agreement signed by the settlor and the lessee-optionee as "an instrument in writing filed with the Trustee" to "modify, alter or revoke this Agreement. . . . " Nor can we agree with the dissent's argument for "liberal construction . to the reserved powers of a settlor" in a trust agreement which expressly vests the trustee with the power "to grant options" and explicitly states its intention that the trustee "shall have all rights, powers and privileges that an absolute owner of the property would have." Article IV, quoted above.
A trust is a form of ownership in which the legal title to property is vested in a trustee, who has equitable duties to hold and manage it for the benefit of the beneficiaries. Restatement of Trusts, Second, § 2 (1959). It is therefore axiomatic in trust law that the trustee under a valid trust deed has exclusive control of the trust property, subject only to the limitations imposed by law or the trust instrument, and that once the settlor has created the trust he is no longer the owner of the trust property and has only such ability to deal with it as is expressly reserved to him in the trust instrument. Boone v. Davis, 64 Miss. 133, 8 So. 202 (1886); Marvin v. Smith, 46 N.Y. 571 (1871). As stated in Bogert, Trusts & Trustees, § 42 (2d ed. 1965):
After a settlor has completed the creation of a trust he is, with small exceptions noted below, and except as expressly provided otherwise by the trust instrument or by statute, not in any legal relationship with the beneficiaries or the trustee, and has no liabilities or powers with regard to the trust administration.
None of the exceptions identified by Bogert applies in this case.
This is a case where a settlor created a trust and then chose to ignore it. He could have modified or revoked the trust, or directed the trustee in writing to sell or lease the trust property, but he took neither of these actions. Instead, more than two years after the creation and recording of the trust, and without any direction or notice to the trustee, the settlor gave the lessee-optionee a signed instrument purporting to extend its option to buy the trust property for another five years. The trustee did not learn of this instrument until two and one-half years later, immediately following the death of the settlor.
An extension of the option to buy would obviously have a limiting effect on the value of the reversion owned by the trust (and thus on the rights of the trust beneficiaries), which the trustee has a duty to protect. Acott v. Tomlinson, 9 Utah 2d 71, 77, 337 P.2d 720 (1959). Even a revocable trust clothes beneficiaries, for the duration of the trust, with a legally enforceable right to insist that the terms of the trust be adhered to. If we gave legal effect to the settlor's extension of this option in contravention of the existence and terms of the trust, we would prejudice the interests of the beneficiaries, blur some fundamental principles of trust law, and cast doubt upon whether it is the trustee or the settlor who is empowered to manage and dispose of the trust property in a valid revocable trust.
The judgment of the district court is reversed and the cause is remanded with instructions to enter judgment for the plaintiff. Costs to appellant.
HALL, C. J., and STEWART, J., concur.
MAUGHAN, J., heard the arguments but died before the opinion was filed.
. It is noteworthy that even as to trustees, the power to grant or extend options to sell trust property is strictly limited. Bogert, Trusts & Trustees, § 793 (2d ed. 1965).
. Trager v. Schwartz, 345 Mass. 653, 189 N.E.2d 509 (1963), relied on by the dissent, is clearly distinguishable. That case merely defines the effect of a recording requirement specified in the trust instrument as a prerequisite to the effectiveness of an exercise of a power (partial revocation) clearly reserved in the trust instrument. Where there were no intervening rights of third parties, the court held that there was no reason not to give effect to the exercise of the power "once it has been recorded." 345 Mass. at 658, 189 N.E.2d at 512. Trager is not authority for giving effect to the settlor's attempted exercise of a power that was not reserved in the trust instrument or inherent in the trust relationship, when to do so would adversely affect the interests of the trust beneficiaries as a whole.