Court Opinion

ID: 8200979
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:29:28.276803+00
Date Added: 2024-06-11T16:40:55.216607
License: Public Domain

Gordon, J.
(dissenting). I respectfully dissent. In my opinion, clause 7 (G) of the will gave to the trustees the power to determine whether capital gains on the sale of the trust property should be attributed in whole or in part to principal or to income. This is precisely what the testatrix had in mind when she granted her trustees power to determine “how all receipts . . . shall be . . . apportioned as between income and priácipal.” I know of no reason why this discretionary power should not be fully respected by the court. The fact that the testatrix went on to say that the decision shall not be “subject to question by any court or by any beneficiary hereof” merely serves to stress the breadth of the trustees' discretion.
The increment which results from the sale of trust securities at a price beyond their cost is not so intrinsically a part of corpus as to make the trustees’ decision erroneous, at least in the absence of affirmative proof thereof. Tax authorities, accountants, and financial experts can find ample substance for debate in attempting to analyze the true nature of profits. For example, see Hills, The Law of Accounting and Financial Statements, p. 173, sec. 5.3:
*79“The terms ‘income,’ ‘earnings,’ ‘profits’ and their derivatives have not been so adequately classified or defined by the courts or the accountants that one may be distinguished from another with any certainty.”
Leading legal scholars have recognized that it is within the proper sphere of a trust instrument to permit profits from the sale of trust securities to be ascribed to income. Bogert put the matter clearly when he said:
“Obviously the settlor may direct the disposition of profits, or give to his trustee power to allocate them in his discretion.”
Bogert, Trusts and Trustees (2d ed.), p. 375, sec. 823. See also 3 Scott, Trusts (2d ed.), p. 1775, sec. 233.5. The aforesaid rule is entirely consistent with the Uniform Principal and Income Act as adopted in Wisconsin. Sec. 231.40 (2), Stats., expressly provides that a settlor may grant discretion to a trustee to apportion receipts and expenses and that such discretion “shall control.”
In my opinion, Mrs. Clarenbach intended to give to her trustees the power to determine what was principal and what was income. While this is not an absolute discretion, there is applicable thereto what the Massachusetts court said in Dumaine v. Dumaine (1938), 301 Mass. 214, 223, 16 N. E. (2d) 625, 630:
“The discretion conferred is not an empty one. It confers an important responsibility to make a determination which, if honestly exercised, calls for no revision by the court.”
There has been no showing of fraud, bad faith, or dishonest conduct on the part of the trustees, and, therefore, I believe that the exercise of the broad powers which were awarded to them by the testatrix should not be disturbed.
I am authorized to state that Mr. Justice Fairchild and Mr. Justice Wilkie join in this dissent.