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Keywords

hearingtrialtrustwillappellant

appealtrialtestimonytrustwillrespondentappellant

Related Cases

In re Gross’ Estate, 216 Cal.App.2d 563, 31 Cal.Rptr. 281

Facts

The appellant, Nancy Gross, is an income beneficiary of a trust established by Edward B. Gross's will. The trust includes a ranch known as the Santa Theresa Rancho, which was appraised at $365,907 in 1954 but had appreciated to over $2,500,000 by the time of the hearing. Although the income from the ranch had increased, it was only about 1.5% of its current value. The trustees were given 'full power and authority to hold and retain' trust property, and the appellant argued that the trustees should sell the ranch due to its low income generation.

The appellant is an income beneficiary of a trust established by the will of Edward B. Gross, and appeals from an order denying her petition to require the trustees to sell certain trust property claimed by appellant to be unproductive of income. By his will, Edward B. Gross devised the residue of his estate to trustees who are respondents here. After providing for the payment of $200 per month to his sister, the remainder of the income of the trust is given 4/10ths to the trustor's widow, Christine P. Gross, 3/10ths to a daughter, Theodora Gross Anderson, and 3/10ths to the trustor's other daughter Nancy Gross Hayward, the appellant.

Issue

Did the trustees abuse their discretion by refusing to sell the Santa Theresa Rancho, which the appellant claimed was unproductive of income?

The appellant contends the trustees do not have absolute discretion to retain the ranch property, and that since it is unproductive of income equivalent to the average rate of return on trust funds generally the trustees are under a duty to sell it and re-invest the proceeds in such manner as to do equal justice between income beneficiaries and remaindermen.

Rule

A discretionary power conferred upon a trustee is presumed not to be left to arbitrary discretion and may be controlled by the court if not reasonably exercised, unless an absolute discretion is clearly conferred by the declaration of trust.

Section 2269 of the Civil Code provides: ‘A discretionary power conferred upon a trustee is presumed not to be left to his arbitrary discretion, but may be controlled by the proper Court if not reasonably exercised, unless an absolute discretion is clearly conferred by the declaration of trust.’

Analysis

The court analyzed the trust instrument and determined that while the trustees did not possess absolute discretion to retain the ranch, they had ordinary discretion that was not shown to be abused. The trustees had increased the income from the ranch and believed retaining it was in the best interest of all beneficiaries, especially given the potential for future appreciation due to planned developments in the area.

The wisdom of this choice is reflected in the great increase in value of the ranch and the virtual certainty of ultimate gain for all those interested in the trust. The testimony of Warren Holmes, the individual trustee, makes it evident that the time has not yet come to sell, for he told the court of definite plans for a new freeway and a main cross-county highway in the immediate vicinity of the ranch, which together with other developments, project an even greater increase in property values than has heretofore taken place.

Conclusion

The court affirmed the trial court's decision, concluding that the trustees did not abuse their discretion in retaining the Santa Theresa Rancho and acted in accordance with the trustor's intentions.

We have concluded that the trustor has not vested absolute discretion in his trustees to retain the ranch property in the trust, but that the order appealed from must nevertheless be affirmed because no abuse of discretion is shown by the evidence before the trial court.

Who won?

The trustees prevailed in the case because the court found no abuse of discretion in their decision to retain the ranch property, which was consistent with the trustor's intentions.

The trustees have not abused their discretion in retaining the Santa Theresa Rancho but, on the contrary, have exercised commendable judgment in not selling for what the trial court called ‘immediate gain but ultimate loss.’

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