Court Opinion

ID: 9779010
Source: CourtListenerOpinion
Date Created: 2023-08-29 21:32:54.023343+00
Date Added: 2024-06-11T11:23:42.901696
License: Public Domain

*188Tomlinson, Justice
(dissenting).
Mr. Justice Swepston and I think that we should record the reasons which impel us to dissent from the scholarly opinion written for the majority of our brothers on the Court by our Chief Justice. A preliminary statement of the existing situation should, however, be made.
The owners of the Lebeck Building vested their testamentary trustees with the authority and duty of deciding the terms under which, and persons to whom, these testamentary trustees would lease that building. Pursuant to such authority and duty, they agreed with the Cain-Sloan Company upon its lease involved in this litigation. Notwithstanding this, the majority opinion directs, in effect, the issuance of a mandamus upon these trustees to scuttle the Cain-Sloan lease, and lease the building to the Iiarvey Company for twenty-five years in accordance with terms and conditions which were proposed by Harvey after the Cain-Sloan lease had been consummated.
The reason for the above stated action upon the part of the majority of this Court is that the three constituting that majority think, as did the Chancellor, that the lease proposed by Harvey is “superior to” the Cain-Sloan lease. Disavowing* any intention to debate this collateral matter, we do observe that (1) the weight of the evidence, according to the report of the Clerk & Master, favors the Cain-Sloan lease and (2) every sui juris life tenant and remaindermen financially interested in the Lebeck Building and its rental income, including parents of interested minors, have testified that each prefers the Cain-Sloan lease.
We think that the Court (1) has no authority, in con*189nection with the leasing of the Lebeck Building, to substitute its discretion for that which the owners of that building preferred to vest in these trustees, and (2) is without authority to compel these trustees to exercise their discretionary power in a way selected and commanded by it, the Court. In addition, it is the opinion of at least the writer of this dissenting opinion that the majority opinion — though I am sure it does not so intend — imposes a material inequity, to speak conservatively, upon the Cain-Sloan Company in the action which it has taken. And, by the same token, has awarded Harvey that to which Harvey is not equitably entitled. This last stated assertion will be discussed first.
The Harvey Company, as assignee of a twenty odd years lease, has been occupying the Lebeck Building for some years. Anticipating the expiration on December 31, 1953, the trustees, in keeping with a sound business practice, early in 1950 initiated negotiations with Harvey for a lease commencing January 1, 1954. These negotiations continued for much more than a year. However, the only offer they could ever get from Harvey was one which they" considered niggardly and financially disadvantageous in a substantial manner to the beneficiaries of the Lebeck trusts.
In this plight of the matter the trustees then initiated negotiations with the Cain-Sloan Company. That Company, after a reasonable length of time, made the proposal which finally resulted in the lease agreement which this Court today, by its majority opinion, orders the trustees to repudiate. However, before the trustees accepted the Cain-Sloan offer they again approached Harvey and inquired as to whether it had made its best offer. Its reply was that it had. Thereafter, and subsequent to *190the consummation of the lease agreement between the trustees and Cain-Sloan, Harvey made the proposal which the Court by today’s majority decision, orders the trustees to accept.
I am of the opinion that, under the circumstances just stated, it is (1) not right, as a matter of equity, or business ethics, to deprive the Cain-Sloan Company of this lease and (2) the Harvey Company is not equitably entitled to it. In my opinion, a Court ought no more to tolerate a wrong that supposedly benefits a trust, than it should- tolerate a wrong that is detrimental to that trust.
In considering the action of the Court in substituting its discretion for that of the trustees, it should be kept in mind that this action is taken only because it is thought by the majority that the Harvey lease is “the superior” of the two. There is no finding, as indeed, there could not be, that these trustees have acted in bad faith, or arbitrarily abused the discretion vested in them. Therefore, this action of the Court in substituting- its discretion for that of the trustees seems to be contrary to the rule which this Court has always heretofore followed. That rule is clearly stated by our Court of Appeals in the case of Smith v. Fleisch, 4 Tenn. Appeals, 139, 147, in language approved by this Court as follows: “Unless bad faith or a gross and arbitrary abuse of discretion on the part of the trustees is shown, a court of chancery will never interfere with the performance of the duties of the trustee in carrying out the terms of the trust, * * * . ” ppe language used by Scott on Trusts, Section 187, is that “the court will not substitute its judgment for his, (meaning the trustee) * * * so long as he acts not only in good faith and from proper motives, but also within the bounds of a reasonable judgment.”
*191Moreover, in ordering these trustees to enter into the lease agreement proposed by Harvey, the majority has, in our opinion, ignored the long recognized rule stated as far back as 1850 by our case of Deadrick v. Armour, 29 Tenn. 588, 596, to be that “where trustees have a discretionary power to consent or not, a court of equity has no power to control or enforce them.” All it can do if they violate the trust is to remove them, after holding their action illegal.
The departure from these rules, as well as the action taken by the majority, is rested upon a premise which, in our opinion, (1) does not in fact exist and (2) assuming its existence,' does not render legally permissible the action taken.
The premise upon which the majority predicates its action is that the Cain-Sloan lease was by agreement of the parties not to become effective unless sanctioned as to all its terms and conditions by the Court. This being the supposed situation, the Court is authorized, so says the majority, to order the trustees to accept a lease with a different party because the Court thinks it the superior of the two leases.
The majority decision establishes this premise by means of the construction which it places upon the word “approved”, as used by the trustees and Cain-Sloan during the course of their negotiations. The tentative offer recited that “it would probably be necessary to have Court approval of the lease”. The trustees’ letter of acceptance stated that it should “be approved by the Chancery Court”. Another stated that it was “subject to appropriate court approval”. Testimony was to the same effect. In giving so broad a construction to the word “approved”, as there used, the majority opinion *192has, we think, failed to consider the facts and circumstances surrounding the use of that word, in these negotiations. Those circumstances will now he stated.
It is not reasonably possible to lease the Lebeck Building on advantageous terms, or to a responsible lessee, unless the lease be for a reasonably long term. All the proof in this case is that the lease of a building in Nashville of the type and location of the Lebeck Building reasonably requires a duration of between twenty and thirty years. Pursuant to this requirement, the trustees and Cain-Sloan Company agreed that the duration of this lease would be twenty-five years.
Because of the fact, however, that the Lebeck wills provided that each trust “shall cease” upon the death of certain life tenants, and fee simple title vest in remaindermen, and because the ages of some of these life tenants were such that in all probability they would die long before twenty-five years had passed, the parties were doubtful as to whether the contemplated twenty-five years provision in the lease would be of any further validity after the death of a life tenant occurring before the expiration of that twenty-five years. The sole surviving life tenant of one of the two trusts was seventy and one half years old at the effective date (January 1, 1954) of the lease.
Except as to this period of twenty-five years, there was never any doubt in the minds of any one, and could not reasonably have been, that the trustees had authority, in the absence of an abuse of discretion, to agree, without court approval, upon such terms, conditions and provisions as they saw fit in the making of the lease. Hence in the use of the word “approved” by the Court, the parties had in mind, we think, an approval as to the term *193of twenty-five years, if the court should first find that the wills did not give the trustees the authority to make a lease extending’ in time beyond the probable duration of both or either of the trusts.
The collateral agreement between the parties conclusively demonstrates, we think, that the construction we have just placed upon the word “approved”, as used by these parties, is the correct construction. That collateral agreement, after reciting that “there is a legal question” as to the authority of the trustees to validly lease the building for twenty-five years, then provides that the trustees “will apply to a court of competent jurisdiction for a determination as to whether or not the trustees had authority to malee said lease for twenty-five years to be binding upon all parties, even if the trusts, or one of them, 'Should terminate prior to the termination of the lease”. (Emphasis supplied.)
The trustees are expressly given the right to make such an application to the Court by Code Section 8838(c) providing that any “trustee * * * may have a declaration of rights or legal relations * * * to determine .any question arising in the administration of the * * * trust, including questions of construction of wills”. Scott on Trusts — and I know of a no more highly respected text authority on the subject — says at Section 189.3, page 1015, that when the authority as to the period of time for which* trustees may agree that a lease will run does not seem to them to be clearly expressed in the trust instrument, then “the trustee should seek the advice of the superior Court as to the period they may be made to run”. (Emphasis supplied.) Pursuant to that right and duty the trustees filed this bill.
We think the prayers of that bill conclusively place *194upon, tlxe word “approved”, as used by these parties, the construction which we have placed upon it. Moreover, since parties to a litigation .are bound by their pleadings, it becomes immaterial as to what these parties meant by their use of the word “approved” in negotiating the Cain-Sloan lease. The bill says this lease is binding upon the trustees if they had the authority to make a lease of twenty-five years, or if the Court approves such a period of time. The answer of Cain-Sloan says identically the same thing. So, it makes no difference what meaning the parties had in mind during the course of negotiations in their use of the word “approved”.
In quoting the pertinent prayers of this bill any italicizing is added. Prayer 2 of the bill is as follows:
“2. That the respective wills of Michael S. Lebeck, deceased, and Louis Lebeck, deceased, be construed by this Court, with reference to the authority and power of complainant trustees to make leases of the realty in question, and particularly as to the authority and power of the complainant trustees to enter into the aforementioned lease agreement with the defendant. The Cain-Sloan Company, so as to bind the life beneficiaries and the ultimate remaindermen, both those in being and those yet unborn, for the term of years commencing January 1, 1954, and ending December 31,1978.”
The other (third) prayer of the bill is as follows:
“3. That, in the alternative, if the Court should be of the opinion that the complainant trustees did not have the authority under the respective wills to execute the lease agreement for the period of years set out in the lease agreement so as to bind the ultimate remaindermen, those in being and those not yet *195in being, without obtaining- approval of this Court, that the Court ratify, confirm and approve the action of the complainant trustees in entering into the lease agreement for the term of years mentioned, as being to the manifest best interests and advantage of the life beneficiaries of tlie respective testamentary-trusts involved, including the ultimate remainder-men in being and those not yet in being.”
In our opinion, the language of these prayers permits only the conclusion that the relief prayed by the bill of the trustees is that the Court construe these wills with reference to the power of the trustees to make a lease for a period of time longer than the probable duration of the trusts, and if the wills do not give that power, then that the Court approve the action of the trustees in agreeing to a lease of twenty-five years as being manifestly to the best interest of all concerned.
Therefore, we think that the premise upon which the majority rests its conclusion does not in fact exist. Moreover, had it existed, that would not, in our opinion, make legally permissible the action of the majority. In the New York case of City Bank Farmers Trust Co. v. Smith, 263 N.Y. 292, 189 N. E. 222, 223, 93 A. L. R. 598, 600, it is said that :
“In accepting a trust, the trustee assumes the duty of administering the trust with reasonable care. That duty cannot be shifted, and though, at times, a trustee, when in doubt, may ask instructions of the court, the court will not, ordinarily, .advise the trustee what course he shall pursue where there is room for the exercise of choice.”
There is room for the exercise of choice in the making of a lease of the Lebeck Building, as demonstrated by the *196fact that two leases are before the Court in this case. The only thing as to which there is doubt is the period of time which the trustees are authorized to let the lease run. That, then, is the only question which these trustees have the right to ask the Court to determine; and it is the only question that the Court has the authority to determine, in our opinion, in this case' where the terms and provisions which should be inserted in the lease of the Lebeck Building are matters which its owners left to the discretion of these trustees.
In my judgment, when these wills are properly construed, it must be held that each of the Lebeck brothers intended to vest his trustees with the .authority to make a lease for a reasonable period of time (in this case 25 years) regardless of whether such period of time would extend beyond the probable duration of both or either of the trusts.
Each of these wills, within its four corners, demonstrates that the dominant scheme and purpose of each testator was to provide his widow and children an income during all the years of their lives from rents paid by the lessees of the Lebeck Building. They had no way of knowing the identity of those who would then become the owners of this building. It has to follow by necessary implication that each testator intended for his trustee to agree upon such a term of years in the making of the lease as would procure an advantageous lease to an acceptable lessee. To say that the testator intended to limit the power of the trustees as to the period of time to the probable duration of the trusts is. to say that the testator intended to so shackle his trustees as to destroy the rentability of the property. No responsible person would lease it under such conditions.
*197The Wisconsin Case of In re Upham, 152 Wis. 275, 140 N. W. 5, 48 L. R. A., N. S., 1004, is so similar in its facts pertinent to the instant case on the point under discussion as to make its reference appropriate. After observing that the property involved was of such character and location as to require a lease of long duration, if its income producing character was not to be seriously impaired, the Court said this:
‘ ‘ So from the will itself and from it, in connection with the circumstances characterizing its origin, we are constrained to hold that the power to lease, within any reasonable limitations, * * * was given by Mr. PlanMnton to his trustees, * * * unless such unqualified power as was conferred in this case ‘during the term of the trust’ by necessary implication or by settled law, conferred no power to create a leasehold term extending beyond the termination of the trust.
“The general doctrine, applicable to the matter under discussion, is that an express power to lease given to a trustee, confers authority to make .a lease for any reasonable period, considering the kind of property and the custom of the country and all the circumstances bearing on the subject.
# # &
< £ * * * where effectuation of the purpose of the trust reasonably requires the long lease. Then the power to do so, unless expressly or by necessary implication negatived, is presumed to be conferred by the trust. The exercise of it to carry out the purposes of the trust, is as legitimate as the exercise of any power expressly conferred.” 152 Wis. 275, 140 N. W. 5, at pages 11-12, 48 L. R. A., N. S., at pages 1014-1016.
*198The power to make this lease of twenty-five years is not negatived by either of the Lebeck wills expressly or by necessary implication. The only fact which raised a question in the minds of the trustees was that each will provides that the trust for the benefit of the. life tenants shall cease upon the death of the life tenants and fee simple title vest in the remaindermen.
The fact is that upon the termination of the trust by reason of the death of a life tenant, the rents from that time on to the expiration of the lease are the properties of, and will be paid directly to, these who then, .as remaindermen, become the owners of the property. Except, therefore, in a strictly technical sense, that period of the lease then unexpired is not in conflict with that provision of the will directing the vesting of title in fee simple upon the death of the life tenant.
In our case of Ricardi v. Gaboury, 115 Tenn. 484, 493, 89 S. W. 98, 100, (a case in which the powers of testamentary trustees were not involved) the Court said with reference to the making of a ninety-nine year lease in which minors were interested that:
“ * * * the making of a lease such as the one desired by the complainants in this cause does not deprive the parties of any interest in the property to be leased. Its effect is simply to prevent the lessors from entering upon the property and taking actual possession thereof as long as the terms of the lease are observed by the lessee. The title to the property, and the right of alienation subject to the lease, remain as if no lease had been executed.”
But if there be a conflict, this provision with reference to the termination of the trust must yield to each tes*199tator’s dominant scheme and intent to procure to his widow and children an income during their lives from the proceeds of the lease of the Lebeck Building. East & Collins v. Burns, 104 Tenn. 169, 181, 56 S. W. 830. When this required yielding to that dominant intent is had, it seems to follow that implicit in this dominant intent of each testator is the intent to authorize his trustees to rent the Lebeck Building under any condition for a reasonable length of time (in this case twenty-five years) without regard to the probable duration of either trust estate.
But if mistaken in the conclusion that the intent of the testators was to vest authority in the trustees to lease the property for a reasonable term of years, notwithstanding the fact that such a term will extend beyond the probable duration of the trust, nevertheless, all the Courts which have been involved in this litigation have concurred in finding that it is for the best interest of all concerned that the Lebeck Building be leased for a reasonable period of time, to wit, twenty-five years; and that, in the language of Scott on Trusts, the Court is authorized to permit, and does permit, a lease of this duration “since the Court has power to authorize or direct deviations from the terms of the trust where exigencies have arisen not contemplated by the settlor”. Scott on Trusts, Section 189.3, pages 1015-1016. In our opinion the Court should have stopped right there. This would have left in full force and effect the lease which the trustees, in the exercise of the discretion that the testators clearly vested in them, had selected, to wit, the Cain-Sloan lease.
However, we think the Court has strayed far from the law of trust, as heretofore understood and practiced, *200in going further by substituting its discretion for that of the trustees, in a matter as to which there is a choice, and-in mandamusing, in effect, these trustees to scuttle the lease which they had made and sign the one which the majority of this Court considers “superior”.