Court Opinion

ID: 3684342
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:29:20.519026+00
Date Added: 2024-06-11T15:30:43.104083
License: Public Domain

There is no doubt that The Ohio National Bank, at Columbus, Ohio, under the terms of the trust entered into between it and the grantor, Knight K. Culver, Jr., on June 7, 1954, is the sole judge of whether or not it will pay, for the benefit of the grantor, funds out of the principal of the trust on account of an emergency affecting the grantor's children. This absolute discretion was given the trustee in Article II of the trust agreement.
Now, discretion is from discretio (L), meaning separation ordifference, so that discretion is the act of separating ordiscerning or discriminating or judging (Webster's New International Dictionary [2 Ed.]). In other words, by this language in the agreement the trustee was to have full power, either to make or not to make payments for the benefit of the grantor in the event of an emergency affecting his children. However, it is only reasonable to suppose that the law and the courts would have some supervision over such unlimited authority, so that there could be an intervention in case of an abuse of such power. So, in 54 American Jurisprudence, 142, Section 180, it is said: "No matter how broad or absolute the discretion is, however, the general duties of a trustee to exercise good faith, reasonable care, diligence, and skill require that the discretion be exercised upon judicious and responsible consideration, subject to review by the court for abuse of discretion."
Thus, in paragraph three of the syllabus of Viall v. RhodeIsland Hospital Trust Co., 45 R.I. 432, 123 A. 570,32 A.L.R., 437, it is said that: "Where the purpose of testatrix was to secure an income for her son and also that he should have the trust fund if it was for his best interest to have it, in the opinion and discretion of the trustee, and the will appointed a trust company *Page 107 
as trustee but gave the same discretion to any succeeding trustee there was no intention to give an uncontrolled discretion to the trustee, and while the court will not substitute its judgment for that of the trustee, it will when circumstances require, review the exercise of such a discretion and decide whether it is reasonable."
And in 54 American Jurisprudence, 143, Section 181, we find this language:
"It [the court] will not ordinarily substitute its discretion for that of the trustee, but upon a proper showing it may and will control or interfere with such discretion of a trustee and, where necessary, direct a suitable allowance for support of beneficiaries, as where the trustee is about to act or has acted unreasonably or arbitrarily or from improper motives, or where his refusal to act is similarly objectionable."
So, in Frye, Trustee, v. Burk, 57 Ohio App. 99, at page 113, the court said that: "The discretion of trustees may, without impropriety, be likened to that of judges. It is not an arbitrary discretion. It does not include the unrestrained power to do what the trustee pleases. The trustee, instead of doing merely what, in his present circumstances, he chooses to do, in deference to his interests or inclination, is to do that which his honest, disinterested judgment approves, or ought to approve. * * *"
And in paragraph one of the syllabus of Stewart v.Madden, 153 Pa. 445, 25 A. 803, 34 Am. St. Rep., 713, it was held in the syllabus that "When a trust created by deed of the cestui que trust for her own benefit gives discretionary power to the trustee to apply so much of the principal of the trust estate for the benefit of the cestui que trust as he shall deem necessary, the discretion of the trustee is a legal discretion which might, on presentation of a proper case, be constrained for the benefit of the cestui que trust."
Likewise, in paragraph twelve of the syllabus of ThirdNational Bank v. Scribner, 175 Tenn. 14, 130 S.W.2d 126, 123 A. L. R., 1385, it was said that "where provisions in will that income from trust estate in excess of an amount payable to testator's daughter should be applied under her direction for support, maintenance, and education of her children, were revoked by codicil providing that trustee should apply income necessary *Page 108 
for such purpose, chancellor would direct suitable allowance to be made to children for their support, maintenance, and education, to be altered at any time as circumstances might require if amicable arrangement could not be reached between daughter and trustee as to amount to be allowed."
So, in paragraph six of the syllabus of In re Trust ofLarkins, 243 Iowa 322, 51 N.W.2d 396, it was held that: "The court will not interfere with the trustee's determination, in the absence of clear abuse. It will not ordinarily substitute its discretion for that of the trustee, but upon a proper showing may interfere with such discretion where the trustee acted unreasonably or arbitrarily or from improper motives." (Emphasis added.)
And, also, in In re Estate of Tone, 240 Iowa 1315,39 N.W.2d 401, it was said that "the exercise of discretion by the trustee of a spendthrift trust is subject to review by the court and to correction in a proper case." (Emphasis added.)
Moreover, in 90 Corpus Juris Secundum, 281, Section 253, is found that "redress may be had against the trustee if he exceeds his powers, acts negligently or abuses his discretion." (SeeIn re Emmons' Will, 165 Misc. 192, 300 N. Y. Supp., 580.) And in 90 Corpus Juris Secundum, 303, Section 261, this is said: "* * * courts of equity have the right to exercise a supervisory control over trustees, and their jurisdiction is generally deemed to be exclusive and not to be vested in probate or orphans' courts, or county courts, unless jurisdiction has been conferred on other courts by statute. The power exists solely for the protection of the rights of the grantor who created the trust and of the rights of the beneficiaries of the trust * * *."
In this regard, see Sunday School Union of African MethodistEpiscopal Church v. Walden, 121 F.2d 719; Rollins v.Helvering, Commr., 92 F.2d 390, the eighth paragraph of the headnotes of which reads: "Discretion lodged in a trustee is rarely a permit to act arbitrarily, but is usually confined to exercise of judgment not unreasonable in the light of purposes of trust and of circumstances in which discretion is to be exercised." And, see Acken v. New York Title  Mortgage Co.,9 F. Supp., 521. Further in 90 Corpus Juris Secundum, at page 308, the following appears: "The court, however, will interfere *Page 109 
with the exercise of a trustee's discretion where there is shown bad faith on his part, fraud, malice, misconduct, abuse of authority, a gross and arbitrary abuse of discretion — or failure to exercise discretion in a reasonable manner."
So, in paragraph eight of the headnotes In re Bricklayers'Union No. 1 of Pa. Welfare Fund, 159 F. Supp., 37, it was held that "under Pennsylvania law, where discretion is conferred upon trustee with respect to exercise of a power, its exercise is not subject to control by the court, except to prevent an abuse by trustee of his discretion."
And paragraph nine of the syllabus of Peach v. First Natl.Bank of Birmingham, 247 Ala. 433, 25 So. 2d 153, reads: "In exercise of discretion by trustee, there is a rule of reasonableness, that a court will not without cause interfere to control a trustee in the exercise of discretion vested in him." See, also, McCarthy, Trustee, v. Tierney, Trustee,116 Conn. 589, 165 A. 807; Robison v. Elston Bank  Trust Co.,113 Ind. App. 633, 48 N.E.2d 181; and In re Estate of Ternansky
(Ohio, Court of Appeals), 141 N.E.2d 189, whose paragraph seven of the headnotes is as follows: "Where trustee is given uncontrolled discretion, he acts much as a judicial officer and is duty bound to exercise sound discretion under the circumstances, and court of equity will not tolerate abuse of sound discretion and in a proper case will compel exercise of discretion."
Finally, in 1 Restatement of the Law of Trusts (2d), 402, Section 187, it is said that "where discretion is conferred upon the trustee with respect to the exercise of a power, its exercise is not subject to control by the court, except to prevent an abuse by the trustee in his discretion."
So that the law seems settled that the court will not interfere with the discretion of the trustee unless there is an abuse of this discretion, and unless, therefore, the judgment of the trustee is clearly contrary to what is reasonable. Moreover, the court ordinarily will not substitute its discretion for that of the trustee, but in certain cases it will so substitute its own discretion.
So that in the present case it must be determined whether or not there was such an emergency as was referred to in the trust agreement in its refusal to pay the sum of $4,061.50 from *Page 110 
the corpus of the trust fund; whether or not there was an abuse of discretion on the part of the trustee; and whether the court was justified in substituting its discretion for that of the trustee. In order to make such determination, it is necessary that we turn to the record in the case and review the evidence. The evidence disclosed that a divorce had been granted to Betty Culver from Knight K. Culver, Jr., and that a separation agreement had been incorporated in the divorce decree, by the terms of which Knight K. Culver, Jr., agreed to pay $69.25 a week for the support of his four minor children. This separation agreement had been approved by Knight K. Culver, Jr., and The Ohio National Bank. Later on, Knight K. Culver, Jr., went to Florida and became in arrears in his payments. Thereafter, the court reduced these payments to $60 a week.
At the time of filing the action to reduce the arrearage to judgment, the amount owing was $4,061.50. Credit was given him for approximately $165 a month, the amount (interest) of the income from the trust payable to Knight K. Culver, Jr., and sent by the bank to the mortgagee of the premises owned by Betty Culver ($90) and to Betty Culver ($75 approximately). Meanwhile, the value of the trust fund has grown from $50,000 to approximately $73,000, and Betty Culver has gone to work to effect the pecuniary deficiency brought about by Knight K. Culver's failure to comply with the order of the court in the matter of alimony.
From the testimony of Betty Culver, the following facts were established: That there are four minor children of this marriage; that she was unaware of her husband's present whereabouts; that he had made no payments; that there was an arrearage in the sum of approximately $4,061.50; that the home was "in a bad state needing all kinds of repairs"; that there was an estimate of $185 as the cost of repairs to the outside of the house (repairs and paint); that there was also cement work and "brick work to be done" and there was "yard work to be done and — windows to be replaced and screens to be replaced"; that the inside needed electric repairs; that "the wiring had deteriorated; needs paint, repair work on the inside; walls, ceilings, woodwork and kitchen needs papering and we need a new garbage disposal"; that nothing had been "done on the outside of *Page 111 
the house since we bought it"; that she had incurred "quite a few" obligations; that she "had to borrow from my mother and father to keep going at times and my sister"; that these borrowed funds were necessary for the support of the children; that she owed her mother $350; her father $250; her sister and brother-in-law $150; that she owed $175 on a loan on her car and $300 on her ring; that she owed interest on the last named loan ($9 a month) in the sum of about $75 or $80; that she owed a hospital bill (about $75), a doctor bill ($50); that she herself had gone to a doctor about once a month and that she had paid for each visit; that the doctor had advised her with reference to her own hospitalization; that around once a month she got a "severe depression" and that she was "in a very nervous condition"; that she paid for plumbing bills, washer and dryer repair bills and TV repair bills, as well as automobile repair bills; that she had an outstanding grocery bill; that she owed for raincoats and bathing suits for the children; that the total of all these bills is about $1,800; that her mother took care of the children, generally without pay, while Betty Culver worked; that her mother was no longer able to care for the children and that she had to pay $15 a week for care of her children; that the children needed clothes; that there were no other assets of any kind; that the children needed dental and medical care; that the matter grew more critical and that the expense of the children was increasing; and that she owed a drug bill and attorney's fees.
Now, the court in its entry of August 13, 1959, granted the motion for an order reducing the arrearage to judgment; and in its entry of November 4, 1959, on the matter of the motion for a reconsideration of the order of August 13, 1959, found that Knight K. Culver, Jr., was in arrears in his alimony payments in the sum of $4,061.50; that "the children are in need of medical care, for clothing, repairs to the house — and that an emergency does exist as provided for in Article II of the trust agreement, dated May 15, 1954, between the defendant Knight K. Culver, Jr., and the defendant The Ohio National Bank; and that to overcome said emergency, the defendant, The Ohio National Bank, should pay to the plaintiff the sum of $4,061.50 as permitted by the terms of said trust agreement." *Page 112 
This judgment of the court should be affirmed. It is true that the court will not interfere with the discretion of the trustee unless that discretion has been abused. The evidence clearly shows such abuse. The court by implication so held when it ordered the payment of $4,061.50 to the plaintiff. The court in ordering such payment did substitute its judgment for that of the trustee. Such action is unusual, but not without precedent. (See 54 American Jurisprudence, 143, Section 181.)
The judgment of the trial court should be affirmed for the reasons that it is to the best interests of the grantor (in the trust fund, Knight K. Culver, Jr.) that his obligations should be fulfilled; that the dire need of the children constitutes an emergency as contemplated in Article II of the trust agreement; and that the refusal of The Ohio National Bank to pay the sum of $4,061.50 in accordance with the terms of the trust agreement results in an abuse of discretion lodged in the trustee.
MATTHEWS, P. J., LONG and O'CONNELL, JJ., of the First Appellate District, sitting by designation in the Tenth Appellate District. *Page 113