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Dennis v. Rhode Island Hospital Trust Co F.2d 893

Citation. Dennis v. Rhode Island Hospital Trust Nat’l Bank, 744 F.2d 893, 1984)
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Brief Fact Summary.

The plaintiffs, the great-grandchildren of Alice Sullivan, are the beneficiaries of a trust created under a will. The plaintiffs allege that the Bank trustee breached various fiduciary obligations under the trust.

Synopsis of Rule of Law.

A trustee is under a duty to the beneficiary who is ultimately entitled to the principal not to retain property which is certain or likely to depreciate in value, although the property yields a large income, unless he makes adequate provision for amortizing the depreciation. A trustee can be removed even if the charges of his misconduct are not made out, if there is an ill feeling that it might interfere with the administration of the trust.


The plaintiffs are the beneficiaries of a trust created under a will. The trust property consisted of buildings that were constructed before the beginning of the century in an area where the value of the property has declined markedly over the last thirst years. The trustee failed to keep up the buildings, renovate them, modernize them, or take other reasonably obvious steps that might have given the remainder men property roughly capable of continuing to produce a reasonable income. The trustees did not appraise the trust property nor keep proper records. It made no formal or informal accounting in 55 years. There was no evidence in the record that the trust’s officers focused on the problem or consulted real estate experts about it or made any further rehabilitation efforts. The trustee did little more than routinely agree to the request of the trust’s income beneficiaries that it mange the trust corpus to produce the larges possible income. The plaintiff’s expert w
itness stated that the suburban flight that led to mid 1950s downtown decline began before 1950; its causes (increased household income; more cars; more mobility) were apparent before 1950.


Whether the district court erred in finding that a Bank trustee acted unfairly in retaining buildings in 1950 instead of selling them?

Whether the court abused its powers in removing the trustee?


Yes. The Bank trustee did not act imprudently in failing to sell the buildings in 1950 because a trustee may indulge a preference for keeping the trust’s inception assts. However the Bank Trustee acted unfairly because he made a preference for benefiting the beneficiaries over the remainder men. The trustee made no did not attempt to modernize or renovate the buildings that were deteriorating. Instead he charged high rents and the building deteriorated over time to the disadvantage of the remainder men. The court correctly chose the date of 1950 as the date that the trustee should have sold the property because it marks a reasonable outer bound of time the trustee could allege that it was ignorant of the serious fairness problem. The trustee should have been aware of the changes of the community that would cause the property to depreciate.

No. The district court did not abuse its powers in removing the trustee. It properly concluded that the course of the litigation in the case demonstrated in an ill feeling that would interfere with the administration of the trust.


In administering a trust, the trustee must consider the best interests of the beneficiaries and the remainder men, equally.

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