Opinion ID: 2517704
Heading Depth: 2
Heading Rank: 1

Heading: The Denver Foundation's Power to Conclusively Construe

Text: The Denver Foundation possesses, under both the 1925 and the 1997 Declarations, the power to conclusively construe in good faith any term or provision of its Declaration. We analyze such discretionary powers according to an abuse of discretion standard, and we will only interfere when discretion has been exercised arbitrarily or capriciously. [12] Matter of Brooks' Estate, 42 Colo.App. 333, 335, 596 P.2d 1220, 1221 (1979); see also Cent. States, Se. & Sw. Areas Pension Fund v. Cent. Transp., Inc., 472 U.S. 559, 568, 105 S.Ct. 2833, 86 L.Ed.2d 447 (1985) (according significant weight to trustees' interpretation when their construction was to have binding effect under the trust agreement). An arbitrary and capricious benchmark restrains the exercise of our independent review and interpretation save for instances of abuse of discretion, bad faith, dishonesty, or arbitrary action. Thus, an interpretation or construction that we ourselves would not have arrived at under de novo review will not necessarily fail. Restatement (Second) of Trusts § 187 cmt. e (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. . . .); George T. Bogert, Trusts § 89 (6th ed. 1987) ([E]ven if the court would have taken different action or believes that a reasonable man would have come to a contrary conclusion discretionary decisions will generally not be upset); 33 Charles Alan Wright & Charles H. Koch, Jr., Federal Practice and Procedure: Judicial Review § 8334 (2006) (The arbitrariness standard requires only that the court reach the negative conclusion that the . . . decision is not implausible under the circumstances; it need not confirm the decision in any real sense.). Instead, only in the most egregious of circumstances, in which an interpretation is extraordinarily imprudent, extremely unreasonable, or substantially out of step with the settlor's intent, will we interfere to impose our own reading of the document. Bogert on Trusts § 560 (rev.2d ed.1980) (suggesting courts upset the use of discretionary powers only to remedy improper actions such as acting for the benefit of the [holder of the discretionary power] himself or some third person, or for the purpose of harming the beneficiary or out of ill will or prejudice against him, or an action contrary to the purposes of the trust); Restatement (Second) of Trusts § 187 cmt. e (determining courts will not intervene unless the discretionary power is wielded dishonestly, or with an improper even though not a dishonest motive, or effects a patently unreasonable judgment). In this case, while we may not have independently construed Article 3-1.1 in the same manner as has The Denver Foundation, we cannot conclude that The Denver Foundation has arbitrarily or capriciously arrived at its interpretation of that language. It is not outside the bounds of reason that Article 3-1.1, by its title, sanctions The Denver Foundation to direct the transfer of trust corpus to the Foundation's nonprofit corporation for administration and investment but not for disbursement to outside end-user charities. So construed, the Foundation's exercise of power under Article 3-1.1 would not conflict with the 1976 Trust Agreement provision barring inva[sion] of principal. Rather, it would simply reflect the drafters' intent that the Sterne-Elder Trust exist as a permanent endowment fund, the principal of which would never be distributed to end-user charities but instead would exist in perpetuity to benefit the Denver community. [13] We are also reluctant to meddle with The Denver Foundation's right to construe in good faith the terms of its Declaration because the Sternes, by incorporating into their 1976 Trust Agreement the 1925 Declaration and any later amendments thereto, knowingly and intelligently conferred upon The Denver Foundation that precise power. We have not seen any evidence that would suggest The Denver Foundation seeks to construe its Declaration dishonestly or for improper motives, nor, it should be said, has Wells Fargo alleged any such intention. Indeed, we have no reason to question the good faith of The Denver Foundation. Ultimately, however, we endorse this interpretation of the 1976 Trust agreement because we conclude that transfer of the Sterne-Elder Trust principal to The Denver Foundation furthers the Sternes' overarching intent and essential purpose in creating their Trust.