Opinion
No. 4765.
Argued November 3, 1959.
Decided December 31, 1959.
1. Where the residue of an estate was bequeathed to two named trustees in trust for the apparent purpose of turning the corpus over to residuary charitable beneficiaries it was held to have been the testator's intent from the will as a whole, the relationship of the testator with the trustees, the broad discretionary powers vested in them, the fact that they were to serve without bond, and the absence of a provision that their number should not be reduced, that in the event of the death of one of them the trust was to be administered by the survivor.
2. In such case, the fact that the surviving trustee is also a life tenant of the trust does not present such a conflict of interest as required the probate court as a matter of law to appoint a second trustee.
3. The probate court in the exercise of the discretionary powers conferred upon it to appoint trustees (RSA 564:10) is required to consider all pertinent circumstances.
4. In such consideration, where the will does not provide specifically for the appointment of a successor in the event of the death of one of two named trustees, the inquiry is whether it will be more conducive to the proper administration of the trust to fill the vacancy.
5. The fact that the survivor of two named trustees is also the life tenant of the trust is but one of the factors to be considered by the probate court in determining the issue.
PETITION, brought by Ernest R. D'Amours, Director of Charitable Trusts of the State of New Hampshire, for the appointment of a co-trustee in the estate of Daniel F. Borthwick, late of Portsmouth, whose will was probated January 5, 1937. Susan B. Hunt, presently the sole trustee, opposes the appointment of a second trustee.
By his will dated June 28, 1932, Daniel F. Borthwick, who died December 20, 1936, provided as follows:
"I give, devise and bequeath all the rest, residue and remainder of my estate . . . to my niece, Susan Elizabeth Hunt and to my brother, James A. Borthwick, to have and to hold the same, to them and the survivor of them and their successors and assigns forever. In Trust nevertheless, and to and for the following uses, intents and purposes, that is to say: . . .
"For and during the term of the natural life of my wife, Mary Eloise Borthwick, to pay the net income thereof, one half to her, the said Mary, one third to my niece Susan E. Hunt aforementioned, and one sixth to my sister, Ora M. Drummond . . .
"From and after the decease of my said wife to pay to my said niece, Susan E. Hunt, one half of the net income of my estate, for and during the term of the natural life of her the said Susan; to pay to my said sister, Ora M. Drummond, or to her husband Robert Drummond, should she predecease him, one third of said net income, until the death of the survivor of them, or the death of my said niece, Susan, whichever event shall first happen; to pay to my said brother, James A. Borthwick, one sixth of said net income, until the death of him, the said James, or until the death of said Susan, whichever event shall first happen.
"Upon the decease of my said niece, Susan E. Hunt, leaving issue surviving her said Trustees, and their successors, shall pay and deliver over . . . to such surviving issue of said Susan, one half of the then residue and remainder of my estate in fee simple and freed of any trust."
The will further provided that if Susan died without issue surviving her "said Trustees and their successors" were to pay one-sixth of the residue to such next of kin of Susan's mother as Susan shall appoint by will and if there is no such appointment to the next of kin of Susan's mother.
After compliance with the above provisions "said Trustees and their successors" were to pay one half of the resultant residue to testator's sister Ora or her husband Robert and one half to testator's brother James "provided that said Ora or Robert and said James, respectively, be then living."
"In the event that said Ora and her husband Robert, or said James, shall predecease said Susan, then said Trustees and their successors shall pay . . . such share[s]" to certain charitable institutions.
Susan E. Hunt, born September 24, 1883, became an orphan at a very early age. The testator and his wife who had no children arranged to adopt and raise her as their own child. Although she was never adopted she grew up regarding them as her father and mother and cared for them during "their many and long illnesses."
James A. Borthwick, the co-trustee named in the will, who had been associated with the testator in his business for many years, died November 15, 1949. No successor has been appointed.
As of January 1959 the principal of the trust was valued at $139,901.16.
The following questions of law raised by the Director's petition were transferred without ruling by the probate court (Treat, J.).
"(1) Does the will contemplate that the trust here involved shall be administered at all times by two trustees?
"(2) Does the fact that the present trustee is also the life tenant of the trust raise a conflict of interest which compels the Court to appoint a second trustee? If not, is it a matter which may be considered in determining whether a second trustee should be appointed under the language of this will."
Ernest R. D'Amours, Director of Charitable Trusts (by brief and orally), pro se.
Boynton, Waldron Dill (Mr. Boynton orally), for Susan Elizabeth Hunt, as trustee.
The first question transferred is "Does the will contemplate that the trust here involved shall be administered at all times by two trustees?"
The granting clause of the will which creates the trust devises the residue of the estate, in this instance practically the whole estate, "to my niece, Susan Elizabeth Hunt and to my brother, James A. Borthwick, to have and to hold the same, to them and the survivor of them and their successors and assigns forever."
Although the will repeatedly refers to "said Trustees and their successors" this language is used in clauses directing disposition of the estate at the death of Susan to certain beneficiaries "in fee simple and freed of any trust." It seems unlikely that the testator intended two trustees should be available merely for the purpose of turning the corpus over to these residuary beneficiaries. Furthermore the will contains no provision indicating an intention that the number of trustees should never fall below two. Restatement (Second), Trusts, s. 108, comment b.
The family history shows that the testator and his wife, who had no children, raised their orphan niece, Susan, as their daughter and that she considered and acted toward them in the same manner. James, the other trustee named in the will, worked with his brother, the testator, in the latter's business for many years. "In his later years Daniel . . . came to rely more and more on the business ability of James." The testator's business was sold shortly after the latter's death.
The will provides that neither Susan nor James "shall be required to file any bond, or to furnish any surety upon any bond . . . in their capacity as Trustees under this will." The trustees are authorized "to sell and convey any and all property . . . of the trust fund . . . without . . . authority of any court, and to invest and reinvest the proceeds of any such sale or sales as they may deem wise, freed from the restraint of any law governing trust investments."
Considering the will as a whole; the relationship of the testator with the trustees; the fact that he granted them broad discretionary powers and wanted them to serve without bond and the absence of a provision that their number should not be reduced, it is our opinion that the testator intended that the trust be administered by Susan and James and in the event of the decease of one of them, by the survivor, in this instance, Susan. Amoskeag Trust Co. v. Haskell, 96 N.H. 89, 91; 1 Restatement (Second), Trusts, s. 9, comment b; anno. 151 A.L.R. 1308.
The answer to the first question is "No."
The second question is "Does the fact that the present trustee is also the life tenant of the trust raise a conflict of interest which compels the Court to appoint a second trustee? If not, is it a matter which may be considered in determining whether a second trustee should be appointed under the language of this will?"
There is no intrinsic incompatibility in the situation. Susan, in her capacity as surviving trustee, holds the entire legal interest in all of the trust property. As an individual, Susan, along with others, has an equitable interest in the trust estate. Spengler v. Kuhn, 212 Ill. 186; 1 Restatement (Second), Trusts, s. 99 (2).
The Director argues however that because Susan is the sole life beneficiary of the trust a "potential conflict arises out of the fact that a life beneficiary, who is also a trustee, is naturally interested in getting all the income that a fund can possibly produce as against the interest of the same trustee to maintain a secured permanent fund for the remainderman. Hence, the inclination to engage in more speculative investments which generally can be expected to produce a greater yield for the beneficiary, but less security for the remainderman."
When the testator executed his will on June 28, 1932, Susan was about 49 years of age and James was 66. It is reasonable to assume that when he devised his property in trust to Susan and James and the survivor of them the probability that Susan might at some time become the surviving trustee must have entered his mind. Furthermore there is no evidence that Susan as trustee has acted in any manner detrimental to the interest of the other beneficiaries. We see no such conflict of interest as would compel the probate court as a matter of law to appoint a second trustee. Sweet v. Schliemann, 95 N.Y. App. Div. 266, 270; Spengler v. Kuhn, supra; 1 Scott, Trusts (2d ed) s. 108.1, p. 788.
The answer to the first part of the second question is "No."
RSA 564:10 grants to the probate court discretionary powers in the appointment of trustees. Carr v. Corning, 73 N.H. 362, 365; Rockwell v. Dow, 85 N.H. 58. In the exercise of these powers all pertinent circumstances may and should be considered by it. When as in this case the will does not specifically provide for the appointment of a successor to a deceased trustee, the inquiry is whether it will be more conducive to the proper administration of the trust to fill the vacancy. In re Koretzky's Estate, 19 N.J. 352, 359; 1 Scott, Trusts (2d ed.) s. 108.1, supra. The fact that the present sole surviving trustee is also the life tenant of the trust is only one of the factors to be considered by the probate court in determining this issue.
The answer to the second part of the last question is "Yes."
Remanded.
All concurred.