In re Trust of Brooke
1998 Ohio 185, 82 Ohio St.3d 553 (1998)
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Rule of Law:
In construing a charitable trust, a court's primary duty is to ascertain the settlor's intent from the express language, and if a trust grants a trustee "sole discretion" for distributions to a "Village" for "Worthy Legal Municipal Purpose," the trustee, not the municipal government, holds exclusive authority to determine the timing, purpose, and recipient entity for such distributions, with the actual beneficiaries being the community's residents broadly.
Facts:
- In 1942, sisters Mary G. Brooke and Edith L. Gould executed their last wills and testaments, establishing trusts.
- The trusts became active in 1968, following the death of Harold Brooke Ressler, a relative of both sisters.
- The trust language directed the trustee, in his "sole discretion," to distribute net income "to the Village of Eaton, Preble County, Ohio, for such Worthy Legal Municipal Purpose or Purposes as said Trustee may deem advisable and for something which will be of a substantial and permanent nature and be a benefit to said Village," while also perpetuating the names of Gould and/or Brooke.
- The trusts appointed a trustee, specifying that the president of the Eaton National Bank, Eaton, Ohio, would serve as trustee after the death of the original appointee; Jeffrey A. Maffett is the third trustee appointed.
- Past distributions from the trusts included funds for the construction and expansion of a new library (named the "Brooke-Gould Memorial Library"), a new emergency medical services facility, and a new high school.
- In 1994, the mayor of Eaton, on behalf of the city council, requested a distribution of funds from the trusts to construct a new municipal building for the city, to which the trustee responded he would consider the request along with others under consideration.
Procedural Posture:
- In 1994, Jeffrey A. Maffett (Trustee) filed an application with the Preble County Court of Common Pleas, Probate Division, seeking to amend both trusts for tax-exempt status and to clarify beneficiaries and distribution provisions.
- The trial court approved the amendments, determined that the "ultimate 'beneficiaries' are the citizens of the 'Village' (now City) of Eaton," found the city was not the designee for creating plans for income use, and denied the City of Eaton's application for attorney fees.
- The City of Eaton (appellee) appealed the judgment of the trial court to the Preble County Court of Appeals.
- The court of appeals reversed the trial court's judgment, concluding that the word "Village" meant the "legal entity" of the municipality and residents, thereby making the city a co-beneficiary and the only entity intended to expend the trust income.
- Jeffrey A. Maffett (appellant) then sought a discretionary appeal to the Supreme Court of Ohio, which was allowed.
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Issue:
Does a charitable trust granting the trustee "sole discretion" to distribute income "to the Village of Eaton, Preble County, Ohio, for such Worthy Legal Municipal Purpose or Purposes as said Trustee may deem advisable" confer exclusive decision-making authority upon the trustee for the timing and purpose of distributions, and are the intended beneficiaries the municipal governmental entity or the community residents broadly?
Opinions:
Majority - Moyer, C.J.
Yes, a charitable trust granting the trustee "sole discretion" to distribute income "to the Village of Eaton, Preble County, Ohio, for such Worthy Legal Municipal Purpose or Purposes as said Trustee may deem advisable" confers exclusive decision-making authority upon the trustee for the timing and purpose of distributions, and the intended beneficiaries are the community residents broadly, not solely the municipal governmental entity. The court's primary duty when construing a trust is to ascertain the settlor's intent from the express language, presuming words are used according to their common, ordinary meaning. The phrase "sole discretion" is clear and unambiguous, indicating the settlors intended the trustee to be the lone decision-maker regarding both the timing and purpose of distributions, as further confirmed by the language "as said Trustee may deem advisable." This power is subject to the trust's standards that distributions be for a "substantial and permanent nature" and "benefit to said Village." The definition of "municipal purposes" is broad and does not restrict the trustee to purposes defined by the local government. Furthermore, the term "Village of Eaton", when read within the context of the trusts and general trust law, refers to the community of residents rather than solely the legal entity of the municipality. Charitable trusts are often intended to benefit an indefinite class of beneficiaries, with the public or community being the "real beneficiary" and governmental entities merely serving as potential "instrumentalities through which the community benefits flow." (Bogert, Trusts & Trustees).
Dissenting - Cook, J.
No, the trust language does not confer sole discretion upon the trustee for the purpose of distributions, nor are the residents of the city the sole beneficiaries; rather, the "sole discretion" applies only to the timing of distributions, and the city is the intended entity to receive and expend the funds for municipal purposes, alongside its residents as co-beneficiaries. The dissenting opinion reads the phrase "in his sole discretion" as applying only to the timing of distributions, as it is positioned between two timing restrictions. While acknowledging the language "as said Trustee may deem advisable" confers broad powers on the trustee over purposes, the dissent disagrees with the majority's conclusion regarding the beneficiaries. The use of "Municipal Purpose[s]" rather than "Public Purpose(s)," coupled with the directive to "give to the Village," supports the construction that the legal entity of the city is the logical conduit to receive and expend funds for the benefit of its residents, making the city a co-beneficiary with its residents.
Analysis:
This case provides crucial guidance on interpreting the scope of trustee discretion and identifying beneficiaries in charitable trusts. It emphasizes that a court's paramount focus is the settlor's original intent, derived from the plain language, even if that intent limits the direct control of a municipal government over funds designated for its community. The ruling clarifies that a "Village" or "City" mentioned as a recipient in a charitable trust often implies the broader community's residents as the true beneficiaries, with the governmental entity potentially acting as a mere conduit. This precedent reinforces the strong discretionary power of trustees in charitable giving, setting a high bar for municipalities seeking to assert control over such endowed funds.
