Opinion
Rehearing Denied Aug. 12, 1975.
Page 102
Wehrle & Johnson, Norman Dart Johnson, Richard T. Wehrle, Denver, for objectors and petitioners-appellants.
Hughes & Dorsey, Richard S. Kitchen, Sr., L. Don Wyman, Denver, for respondent-appellee The First Nat. Bank of Denver.
COYTE, Judge.
This is an appeal from orders of the probate court on objections to the final report of an executrix, and the accounting of a testamentary trustee. We affirm.
By his last will and testament, Harold R. McKeen designated his daughter, respondent, Elizabeth M. Campbell (Campbell) as executrix and respondent First National Bank of Denver (Bank) as trustee. This will provided that the Trustee was to divide the assets received by it as trustee into two separate equal parts. His wife, Maude B. McKeen, was the beneficiary of one part. The other one-half of McKeen's estate was to be divided equally into two parts with Campbell the beneficiary of one part and decedent's grandson, Harold R. McKeen III, who was one of the objectors and one of the petitioners, the beneficiary of the other part.
Decedent's instructions relative to his wife's rights under the trust to which she was the beneficiary stated in part, 'I direct my trustee to pay to her net income in accordance with her needs and welfare, and principal according to her wishes.' This trust also contained a provision for a testamentary power of appointment which could be exercised by the wife, but provided that if the power was not exercised, then the remainder of that trust fund was to be divided equally and applied to the other two trust funds created out of decedent's estate. The provisions of the trust wherein Campbell and deceased's grandson were beneficiaries were much different from the above and need not concern us here.
After Mr. McKeen's death in 1963, his will was probated and Elizabeth M. Campbell was appointed as executrix of his last will and testament. The inventory filed in January 1964 showed approximate value of the estate to be $860,000. Except for $124,755.15 which she retained to pay estate taxes and other probate expenses, the executrix in mid-1964 made a distribution of assets of the estate to the Bank as trustee so as to fund the three trusts.
Maude B. McKeen died in 1969, and her last will and testament designated Elsbeth McKeen Berthoud, Rebecca McKeen Halpin, Harold R. McKeen III, and Elizabeth M. Campbell as her beneficiaries. At the time of her death, her trust was nearly depleted. When the executrix Elizabeth M. Campbell filed her final report for Harold McKeen's estate in 1970, petitioners objected to it on the grounds that the executrix had made improper expenditures from the estate. The Bank also filed objections to the final report of the executrix claiming that she had paid excess fees to herself and to the estate attorney and had made unauthorized expenditures from the estate funds. Appellants also objected to disbursements made by the Bank as trustee from the trust estate of Maude B. McKeen.
In a trial to the court on these objections, the executrix of the estate of Maude B. McKeen was made a party so as to preserve the status quo of the assets. After extensive testimony, the court found that the executrix had not properly administered the estate and ordered her to refund to the trust certain improper expenditures made by her which included excessive executrix and attorney fees. The Bank was ordered to reimburse the trust for certain expenditures made by it which the court found had not been paid 'according to the wishes' of Maude B. McKeen.
Neither Campbell nor the Bank appeals the order for repayment of funds to the Maude B. McKeen trust. The appellants appeal only against the Bank. They contend that the trial court erred in holding that, in the absence of any facts or circumstances which would or could have given notice to the Bank that Mrs. McKeen was not exercising her own 'wishes,' the trust instrument imposed no duty upon the Bank to inquire further than to determine that expenditures of principal were made 'according to Mrs. McKeen's wishes.'
The trust, though unusual, specifically provided that Maude B. McKeen be paid the principal of the trust 'according to her wishes.' As the court stated, '(C)ompletely denuded of any standards. Satisfactory determination of the validity of these wishes cannot be determined. Suspicion is great . . . proof is nil.' There was no restriction on invasion and the corpus of the trust could be totally consumed by Mrs. McKeen. There was no necessity that Mrs. McKeen state the reason for requesting funds. The trust is clear and unambiguous on this point. We must assume this is the intent of the settlor, and the trust will be enforced in accordance with that intent. Bacon v. Kiteley, 101 Colo. 559, 75 P.2d 590. A similar provision as to wishes, albeit in a will not a testamentary trust, was held to allow the holder of the life estate to extinguish the remainder of the estate. McLaughlin v. Collins, 109 Colo. 377, 125 P.2d 633.
Appellants also contend that the Bank did not properly administer the trust and is thus liable to the appellants for money spent by Campbell and Mrs. McKeen. With an instrument granting such broad powers to the beneficiary to invade the corpus, the duty of the trustee in following the directions of the settlor would be to determine that the expenditures were made in accordance with Mrs. McKeen's 'wishes.' Maude B. McKeen expressed her 'wishes' in writing in November 1965, when she requested that a joint checking account be created in the names of Maude B. McKeen and Campbell and that it be funded by periodic transfers from the trust. Previous expenditures had been requested by Mrs. McKeen for individual expenditures or ratified by Mrs. McKeen after payment. All transfers to the checking account from the trust fund were made according to written instructions, signed by her. Upon receipt of a written directive to transfer funds to the joint checking account followed by the appropriate transfer, the Bank was not obligated to inquire as to the proper expenditure of the funds in the account. The Bank could not interfere with payment of checks drawn on the account until it could verify that Mrs. McKeen had actually requested the expenditure of such funds. Campbell was properly surcharged with making improper expenditures from this account and there is no appeal from that order. In light of the broad terms of the trust, the Bank had no obligation to inquire beyond the fact that it was Mrs. McKeen's desire that the funds be placed in the joint account.
The trial court found that the Bank had paid out $4175 of creditors without the express wish of Maude B. McKeen. As to the other items of which appellants complain, the court found that: 'While there may have been innuendo concerning the validity of the signature and the capacity of Mrs. McKeen, the record is without sufficient and convincing evidence to challenge either.' As stated in In re Estate of Blanpied, 155 Colo. 133, 393 P.2d 355:
'The only issue before us, however, is whether the executor should be surcharged with respect to the transactions objected to by the claimant. The law is clear that to surcharge an executor (trustee) there must be a finding that he failed to exercise common prudence, common skill and common caution in his management of the estate, and that these failures resulted in loss to the estate and prejudice to the persons in interest.'
There was no such finding by the trial court, and since the record supports the rulings of the trial court, they will not be disturbed on appeal. Linley v. Hanson, 173 Colo. 239, 477 P.2d 453.
Judgment affirmed.
PIERCE and BERMAN, JJ., concur.