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Stanton v. Wells Fargo Bank and Union

    Brief Fact Summary. Respondent life beneficiaries (Respondents) sought revision of a testatmentory trust provision which limited the Trustee (Trustee) to investment of the trust property in various bonds. The lower court entered judgement for Respondents, and Trustees sought review.

    Synopsis of Rule of Law. The rule against courts modifying the terms of a contract, and that they should construe it precisely as the parties had made it, does not apply to declarations of trust, where the primary purpose of the trust would not be accomplished by a strict adherence to the terms of the declaration of trust and that when it is made to appear in a court of equity that the benefits and advantages which the trustors desired to confer upon the beneficiaries would not accrue to them by a slavish adherence to the terms of the trust, the court may modify the terms of the trust to accomplish the real intent and purpose of the trustors.

    Facts. Respondents sought to have a trust to which they were the life beneficiaries modified in order to obtain more profit interest from the property that composed the trust. The trust settlor had specifically stated a series of bonds in which the trust property was to be held. Respondents argue that given the change in economic circumstances that had occurred since the creation of the trust, which were, according to Respondents, not anticipated by the settlor when he executed the trust, the modification was necessary in order not to defeat the goal of the settlor. Therefore, the Respondents argue that strict adherence to the trust terms should be relaxed in order to fulfill the settlor’s purpose of assuring a continued income for the trust beneficiaries in as large an amount as was oncsistent with reasonable investment safety. The Trustee argues that the change in econmic circumstances did not defeat the goal of the settlor and therefore did not warrant an adjustment in the trust t
    erms. The Trustee contends that Respondents simply want flexibility in the property investments. The lower court held for Respondents and Trustee seeks review.

    Issue. Does the rule against courts modifying the terms of a contract, and that the court should construe the contract precisely as the parties had made it, apply to declarations of trust, where the primary purpose of the trust would not be accomplished by a strict adherence to the terms of the declaration of trust and when it is made to appear in a court of equity that the benefits and advantages which the trustors desired to confer upon the beneficiaries would not accrue to them by a slavish adherence to the terms of the trust?

    Held. No. The rule against courts modifying the terms of a contract, and that they should construe it precisely as the parties had made it, does not apply to declarations of trust, where the primary purpose of the trust would not be accomplished by a strict adherence to the terms of the declaration of trust and that when it is made to appear in a court of equity that the benefits and advantages which the trustors desired to confer upon the beneficiaries would not accrue to them by a slavish adherence to the terms of the trust, the court may modify the terms of the trust to accomplish the real intent and purpose of the trust. The lower court was proper in stating this rule. However, in instances where there is no grave emergency of the trust property being depleted and the goal of the settlor not being fulfilled, there is not a justification for fulfillment of the rule provisions. Here there is no emergency. Therefore, the lower court improperly allowed the deviation. Although the pro
    visions of the trust were established during the Great Depression, there is little evidence that the settlor was unaware of the consequences of placing the limitations on the trust investment property. The trust has proceeded to generate a substantial income in the tide of numerous changes in economic conditions. In addition, there is no evidence that that trust is not providing for the needs of the beneficiaries and no threat that in the future it should fail to provide such. We therefore reverse the lower court ruling.

    Discussion. The cy pres doctrine allows courts to modify a trust as necessary in order to satisfy the goal of the testator in creating the trust.


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