STATE OF MINNESOTA
IN COURT OF APPEALS
In the Matter of the Residuary Trust
Created under the Will of Helen R. Dwan, Deceased.
Filed February 2, 1999
Ramsey County District Court
File No. C450270680
Bonnie M. Fleming, John F. Beukema, Brendan W. Randall, Faegre & Benson LLP, 2200 Norwest Center, 90 South Seventh Street, Minneapolis, MN 55402; and
William J. Brody, Bronwen L. Cound, Fredrikson & Byron, P.A., 1100 International Center, 900 Second Avenue South, Minneapolis, MN 55402 (for appellants)
Alan H. Maclin, Terence N. Doyle, Scott G. Knudson, Briggs and Morgan, 2200 First National Bank Building, 332 Minnesota Street, St. Paul, MN 55101 (for respondent)
Considered and decided by Shumaker, Presiding Judge, Kalitowski, Judge, and Anderson, Judge.
Appellants Peter S. Dwan, et al., are some of the beneficiaries of the testamentary trust under the will of Helen R. Dwan (the Trust). Appellants challenge the district court order approving a two percent deferred fee against principal to respondent First Trust National Association (First Trust) for acting as corporate trustee for the Trust over the past 47 years. Appellants argue that the individual co-trustees had no power to enter into the fee agreement with First Trust so as to bind future beneficiaries who did not consent to the fee agreement. We affirm.
A reviewing court is not bound by, and need not give deference to, a trial court's decision on a purely legal issue. Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984). The facts here are undisputed. Because appellants object to the district court's determination of the law as applied to the facts, we review the court's order de novo. See Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn. 1989) (holding that where material facts are not in dispute, reviewing court need not defer to trial court's application of law).
Appellants argue Ralph H. Dwan and John G. Dwan, the original trustees appointed in Helen Dwan's will, did not have the power to bind future beneficiaries by agreeing to a fee with First Trust for a deferred two percent of the trust principal to be paid when the trust terminated. We disagree. A trustee may exercise such powers that are conferred upon him by specific terms of the trust, or are necessary to carry out the trust purposes and not forbidden by terms of the trust. Restatement (Second) of Trusts § 186 (1959). General powers of trustees, both express and implied, are incident to the office of a trustee. Butler v. Butler, 180 Minn. 134, 144, 230 N.W. 575, 578 (1930). These include the power to contract and to incur expenses. See Minn. Stat. § 501B.81, subd. 20 (1998) (stating trustee can enter into contracts incident to the trust and in best interests of the trust); Minn. Stat. § 501B.81, subd. 23 (1998) (stating trustee may pay expenses incurred in care, administration, and protection of trust); In re Trust of Butler, 260 Minn. 550, 560-61, 110 N.W.2d 873, 879-80 (1961) (holding agreement regarding fee distribution valid according to public policy).
Performance of [the trustee's] duty is not conditioned on consent of beneficiaries, who are frequently incompetent to consent or not in being at the time.Butler, 180 Minn. at 144, 230 N.W. at 579-80. Finally, a trust company is entitled to reasonable compensation, the amount of which may be agreed on by the parties. See In re Trusts Created by Will of Dwan, 371 N.W.2d 641, 643 (Minn. App. 1985) (finding two percent fee to corporate trustee reasonable).
The record reflects that: (1) in her will, Helen Dwan specifically appointed John and Ralph Dwan as trustees and gave them broad discretionary powers; (2) John and Ralph Dwan voluntarily gave their discretionary powers to First Trust to avoid adverse tax consequences to the Trust; (3) the trustees accepted First Trust's terms as to the two percent fee by appointing it as a corporate co-trustee; and (4) when the fee agreement was made in 1950, and for many years afterward, the two percent fee was a commonly accepted method of trustee compensation.
Further, appellants: (1) do not allege any misuse of power or abuse of discretion by John or Ralph Dwan; (2) do not object to the quality or quantity of services rendered by First Trust; and (3) cite no authority for the argument that by first giving discretionary powers to First Trust as a co-trustee, the beneficiaries then had no authority to enter into the two percent fee agreement. Under these facts we conclude the district court properly determined the individual trustees had the authority to enter into the fee agreement.
Where, as here, a trustee is given broad discretion in disbursing the trust income and corpus, the rule is that the court will not substitute its discretion for that of the trustee except when necessary to prevent the abuse of discretion.In re Trusts Created by Will of Campbell, 258 N.W.2d 856, 866 (Minn. 1977).
Appellants also argue that because no principal beneficiary of the Trust was a party to the fee agreement, the agreement is only binding on income beneficiaries. We disagree. The Trust specifically provided that the adult children of Helen Dwan, including John and Ralph Dwan, had a right to a distribution of principal for their "maintenance, comfort, education and general welfare * * *." We therefore conclude the district court correctly determined that Mrs. Dwan's children could enter into an agreement relating to expenses associated with those trust funds, including a trustee's deferred charge to principal.