Opinion ID: 1640458
Heading Depth: 3
Heading Rank: 1

Heading: Duties of trustee

Text: The Banks assert that the PSC, as trustee, was required to represent their interest as a receipt holder because the PSC has the statutory duty to represent all receipt holders in an insolvency proceeding. Neither the general principles of the law of trusts nor our statutory scheme require that the PSC, as trustee, blindly advocate the asserted interests of a claimant to the trust fund without regard to its belief as to the validity of the claim. Although a trustee is under a duty to deal impartially with the beneficiaries of a trust [ see Wehe v. Wehe, 63 N.D. 176, 247 N.W. 54 (1932); Restatement (Second) of Trusts § 183 (1959)], the trustee is also under a duty to protect and preserve the trust assets and to defend actions which may result in loss to the trust, unless under all of the circumstances it is reasonable not to make such defense. See Brisnehan v. The Central Bank and Trust Company, 134 Colo. 47, 299 P.2d 113 (1956); In re Lunt's Trust, 236 Iowa 28, 17 N.W.2d 803 (1945); State ex rel. Strykowski v. Wilkie, 81 Wis.2d 491, 261 N.W.2d 434 (1978); Restatement (Second) of Trusts § 178 (1959); 2 A. Scott, The Law of Trusts § 178 (3d ed. 1967); G. Bogert, The Law of Trusts and Trustees § 581 (2d ed. rev. 1980). We conclude that if the PSC, acting in the capacity of trustee under the provisions of Chapter 60-04, N.D.C.C., has a good faith reasonable belief that a claimant is not a valid receipt holder and that the claim is therefore adverse to the trust, it is under no duty to advocate the asserted interests of that claimant. Rather, the failure of the PSC to protect the integrity of the trust would constitute a violation of its fiduciary duty to valid receipt holders. Brisnehan, supra ; G. Bogert, supra. The PSC did not violate its trust responsibilities in this case.