Opinion
November 24, 1964 —
January 5, 1965.
APPEAL from an order of the county court of Milwaukee county: RUDOLPH J. MUDROCH, Judge. Affirmed.
For the appellants there were briefs by Quarles, Herriott Clemons, attorneys, and Lester S. Clemons and Peter J. Lettenberger of counsel, all of Milwaukee, and oral argument by Mr. Lettenberger.
For the respondent there was a brief by Brady, Tyrrell Bruce, attorneys, and Richard H. Tyrrell and Samuel J. Recht of counsel, all of Milwaukee, and oral argument by Mr. Recht.
The appellants Irene B. Brady and Elizabeth B. Casper are beneficiaries under the Patrick Cudahy Family Trust created by a trust indenture dated June 7, 1918, and supplemented June 11, 1918. The respondent First Wisconsin Trust Company is the trustee. The appeal is from an order denying the claim of the appellants for $4,500 attorneys' fees as not a proper charge against the trust.
Josephine C. Hoyt was one of the subscribers to the trust and as such retained for her life the income from the 999 shares of stock which she placed in the trust and also the right to appoint by her will the person to whom such income should be paid after her death. On February 25, 1944, Mrs. Hoyt partially released her power of appointment by limiting the class in whose favor she could exercise the power. She died on November 2, 1961, without issue and in her will she exercised the power of appointment in favor of Helen Bischoff who was not, however, within the limited reserved class of appointees described in the partial release. The trust agreement provided that in the absence of a valid appointment the income from the stock of a subscriber would be paid to the subscriber's issue and if none to the surviving subscribers or their issue living at the time of distribution. It is upon this provision of the trust that the appellants base their claim.
The First Wisconsin Trust Company became the executor of Mrs. Hoyt's estate but as trustee of the Cudahy Trust petitioned the court for a determination of the validity of Mrs. Hoyt's exercise of the power and thus who were the beneficiaries entitled to receive that part of the income of the trust previously paid to Mrs. Hoyt. The trial court determined Mrs. Hoyt did not validly appoint Helen Bischoff as the recipient of the income. At the hearing the appellants did not have counsel; the respondent took no part other than to present the matter to the court, which was participated in by Mrs. Bischoff, by the guardian ad litem appointed by the court, and by others. On appeal, the appellants engaged counsel, and the determination of the trial court was affirmed by this court. In re Cudahy Family Trust (1963), 22 Wis.2d 198, 125 N.W.2d 344. In a companion case it was determined Mrs. Bischoff was entitled to payment of her attorneys' fees and expenses from the estate of Mrs. Hoyt on the ground she defended Mrs. Hoyt's plan of distribution which the First Wisconsin Trust Company as executor could not do because of its conflict of interest as trustee of the Cudahy Trust. Estate of Hoyt (1963), 22 Wis.2d 209, 125 N.W.2d 350.
The application of the appellants for their attorneys' fees in resisting the claim of Mrs. Bischoff was denied by the trial court on the basis the proceedings in the Cudahy Trust were in the nature of a contest over the construction of a will and each party was required to pay for his own attorney. Pursuant to sec. 324.11, Stats., the court did allow $25 attorneys' fees as costs, which have been waived.
The issue is whether the appellants are entitled to have their reasonable attorneys' fees paid out of the trust estate when the trustee stands neutral in a controversy to determine who are the proper beneficiaries to receive trust income.
The appellants contend the respondent as trustee had a duty to defend the rights of the beneficiaries of the trust against the adverse claim of Helen Bischoff and the trustee having failed to do so the appellants are entitled to their attorneys' fees from the trust estate for performing such services. We do not view the facts as giving rise to a contest between the trust on the one hand and an adverse claimant on the other. In such a case it is quite true as claimed by the appellants, the trustee has a duty of loyalty to the beneficiaries arising out of the fiduciary relationship and the responsibility of administering the trust according to its terms and of protecting the trust estate. Will of Hughes (1942), 241 Wis. 257, 5 N.W.2d 791; Will of Cosgrove (1941), 236 Wis. 554, 295 N.W. 784; Estate of Allen (1935), 218 Wis. 349, 259 N.W. 848.
If, because of the failure of the trustee to perform its duties, it becomes necessary for a beneficiary of the trust to perform such duties, he is entitled to be compensated the same as a trustee would have, had it performed its duty. The same rule applies to executors and beneficiaries of an estate. Estate of Marotz (1953), 263 Wis. 99, 56 N.W.2d 856; Estate of Sheldon (1946), 249 Wis. 430, 24 N.W.2d 875; Will of Rice (1912), 150 Wis. 401, 136 N.W. 956, 137 N.W. 778. On this principle of extraordinary circumstances when Helen Bischoff discharged the duty of the First Wisconsin Trust Company as executor to protect the estate's plan of distribution in the Hoyt estate, a duty the executor could not perform, she was allowed attorneys' fees out of the estate.
The similarity of the facts here to Hoyt is only superficial. The appellants were not performing any duty of the trustee. The determination of who were the beneficiaries of the Cudahy Trust could not be made solely from the agreements of 1918. Because of the power of appointment reserved in those documents, it is required to consider the will of Mrs. Hoyt and her partial release. These instruments are part and parcel of the documents relating to the trust and its administration and are as necessary and pertinent in determining the appellants' rights as they are the rights of Helen Bischoff. Because of this, both the appellants and Helen Bischoff base their claim on documents constituting the trust instruments. Neither the appellants' nor Helen Bischoff's claims are adverse to the trust as such but are adverse only to each other as potential beneficiaries of the trust. Since this is a dispute between parties claiming to be beneficiaries of the same income, Helen Bischoff if she had won would not be entitled to attorneys' fees from the trust any more than the appellants are now.
In a dispute between two beneficiaries concerning a construction of the terms of a trust, a trustee is under no duty to take sides. It performs its duty as trustee in seeking a construction of the documents relating to the trust so that it may carry out its terms. If such matter is not fully presented to the court by the interested parties, it may be proper or even the right of the trustee to present its view to the court. Will of Asby (1939), 232 Wis. 481, 490, 287 N.W. 734. However, no such situation developed here, nor is this a case where a claim of the beneficiary is so obviously without merit that it is in effect an adverse claim. On the contrary we stated in Hoyt the issue created by Mrs. Hoyt's will was worthy of adjudication.
Here, the conflict is in fact between two persons claiming to be beneficiaries, i.e., between Helen Bischoff as a specific beneficiary and the appellants as residuary beneficiaries. Thus the duty of the trustee as custodian of the trust res for the benefit of all the beneficiaries was to treat those claimants impartially and not to assume the advocacy on behalf of either or assume the validity of the contention of either. In such a contest each party must assume the cost of his own legal services. Will of Hughes, supra; Will of Larson (1933), 211 Wis. 237, 247 N.W. 880; Estate of Donges (1899), 103 Wis. 497, 79 N.W. 786; Estate of Cole (1899), 102 Wis. 1, 78 N.W. 402; Restatement, 1 Trusts 2d, p. 393, sec. 183. We find no error in the ruling of the trial court and the order denying reasonable attorneys' fees to the appellants must be affirmed.
By the Court. — Order affirmed.