Armington v. Meyer
103 R.I. 211, 1967 R.I. LEXIS 602, 236 A.2d 450 (1967)
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Rule of Law:
A private trust is void for indefiniteness if its beneficiaries are not a definite and ascertainable class; however, a valid portion of a trust can be severed from an invalid portion if it aligns with the settlor's general intent. Where trustees with discretionary distribution powers are also beneficiaries, a court of equity must oversee distributions to those trustees to prevent conflicts of interest.
Facts:
- Simon W. Wardwell died on February 19, 1921, leaving a will that included a trust in its Tenth paragraph.
- The Tenth paragraph of Wardwell's will established a trust that allocated specific annual net income amounts up to $50,000 to his wife, her family, his own siblings and their descendants, and his trustees.
- The will further provided that all annual net income in excess of $50,000 should be "administered in trust and distributed by my trustee [sic] aforesaid at their discretion and will for the benefit of all aforesaid persons and for any and all men and women among my employees and acquaintances known to my said trustees to have been loyal to me and my inventions."
- By 1965, all original trustees except Arthur A. Armington had died, and new successor trustees were appointed; Armington himself died on October 7, 1966.
- In 1965 and 1966, the annual net income of the trust estate exceeded $50,000, and there was a likelihood of this occurring in future years.
- Arthur A. Armington, as the sole surviving original trustee, identified only two former employees, Louis Shulver and Lucien Jules Geoffroy, who were living in 1965 and known to him to have been loyal to the testator.
- The current trustees, Oscar L. Heltzen, Frank Lee Baker, Perry E. Farnum, and Theodore A. Fisher, are all also beneficiaries of part of the net income of the trust estate under the designation of 'aforesaid persons'.
Procedural Posture:
- A civil action was commenced in the superior court on April 15, 1966, by the plaintiffs, trustees under the will of Simon W. Wardwell, for construction of certain portions of the will and for instructions to the trustees.
- After the complaint was filed, one of the trustees, Arthur A. Armington, died.
- Theodore A. Fisher, successor trustee to Arthur A. Armington, was substituted as a party plaintiff.
- The estate of Arthur A. Armington was added as a party plaintiff, and an amended complaint was filed.
- A guardian ad litem was appointed for persons unknown.
- The action was heard on the amended complaint, answers, and proof in the superior court.
- As soon as the cause was ready for final judgment in the superior court, it was certified to the Supreme Court of Rhode Island for determination in accordance with G. L. 1956, §9-24-28, as amended.
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Issue:
1. Are trustees required to distribute all annual net income exceeding $50,000, or are they permitted to accumulate it? 2. Is a testamentary trust provision allowing discretionary distribution to 'employees and acquaintances known to my said trustees to have been loyal to me and my inventions' void for indefiniteness? 3. If a portion of the discretionary distribution provision is void, is the remaining portion, which benefits 'aforesaid persons' (the testator's family and trustees), severable and valid? 4. May trustees, who are also beneficiaries, unilaterally determine the amount of discretionary income to distribute to themselves or to an estate of a deceased trustee where current trustees serve as executors?
Opinions:
Majority - Paolino, J.
1. Yes, the trustees are required to distribute all annual net income of the trust estate which exceeds $50,000. The testator's language clearly directs distribution of all excess income, granting discretion only over beneficiary selection, proportions, and timing, not accumulation. The court referenced Leo v. Armington, which construed another section of the same will and found no intent to accelerate charitable gifts or accumulate funds. 2. No, the provision for distributing income to "employees and acquaintances known to my said trustees to have been loyal to me and my inventions" is void for indefiniteness. A valid private trust requires definite and ascertainable beneficiaries. The term "loyal" is too broad and provides an insufficient criterion for the trustees or the court to select individuals from the class. The court cited treatises on trusts and cases like Clark v. Campbell and Murdock v. Bridges where similarly vague beneficiary descriptions were deemed invalid. 3. Yes, the gift of excess income to "aforesaid persons" (the testator's family and trustees) is valid and severable from the void gift to "employees and acquaintances." The grantor's intent at the time of execution controls severability, and the general rule favors it, especially when separating the invalid part does not defeat the settlor's general intent. Invalidating the entire clause would lead to intestacy or premature charitable gifts, which the testator did not intend. The court distinguished Rhode Island Hospital Trust Co. v. Proprietors of Swan Point Cemetery because, in this case, the proportions are not unascertainable, and the invalid provision is not inseparably blended. 4. No, the trustees may not unilaterally determine the amount of discretionary income to distribute to themselves or to the estate of Arthur A. Armington when current trustees are also executors of that estate. While the testator intended for trustees to be beneficiaries, the inherent conflict of interest when all trustees have discretionary power over distributions to themselves requires judicial oversight. The court directed the trustees to apply to the superior court and petition it to take over the duty of approving any distributions of excess income to the trustees themselves or to the estate of Arthur A. Armington, for which two current trustees serve as executors. This approach ensures an unbiased administration, akin to the court's intervention in Rogers v. Rogers.
Analysis:
This case significantly clarifies the requirements for establishing valid private trusts by emphasizing the need for definite and ascertainable beneficiaries, thereby preventing trustees from having unbounded discretion that could lead to arbitrary distributions. It also establishes an important procedural safeguard for managing inherent conflicts of interest when trustees are also discretionary beneficiaries, requiring court supervision for distributions made to themselves. This ruling impacts future trust instruments by compelling careful drafting of beneficiary clauses and by setting a precedent for judicial intervention to ensure fair and impartial trust administration.
