A. The Petition to Dissolve the Farm Trust
The Farm Trust is a charitable trust, as it is established for the benefit of the public, specifically the "general benefit of the City." Charitable trusts are subject to different rules than private trusts and are favored by the law, meaning courts are reluctant to terminate them.
Standing: The Attorney General vs. a Party with a Special Interest
As a general rule, the state Attorney General has the exclusive power to enforce a charitable trust on behalf of the public. A member of the general public, even one who may benefit from the charity, typically lacks standing to sue.
However, a critical exception exists for a person who holds a "special interest" in the trust. This special interest arises when the trust instrument provides that upon the failure of the charitable purpose, the assets are to be distributed to a specific, non-charitable beneficiary. This provision, often called a "gift-over" clause, gives that named beneficiary a direct, albeit contingent, property interest.
Here, the will states that if the trust should "fail, for any reason," its assets are to be given to "the children of my granddaughter Betty." Betty's only child, Darcy, is the sole contingent beneficiary of this clause. This gives Darcy a special interest sufficient to confer standing to argue that the trust has, in fact, failed and that her interest should therefore vest. Betty, acting on Darcy's behalf, can properly bring this petition before the court.
Precatory Language vs. Mandatory Direction
The will states that Grandma preferred the farm be used as an active organic-certified farm without chemical pesticides. The word "preferred" is generally considered precatory language, meaning it expresses a wish or a desire rather than a legally binding command. It is a guideline for the trustee, not a condition subsequent that would cause the trust to fail if not met. The primary and overarching purpose of the trust is for the "general benefit of the City." As long as the farm continues to operate for the city's benefit, this primary purpose is being fulfilled.
The Doctrine of Cy Près
Even if the organic farming provision were considered a primary purpose, its failure would not automatically terminate the trust. When a charitable trust's specific purpose becomes impossible, impracticable, or illegal to perform, a court can apply the doctrine of cy près (from the French for "as near as possible"). This doctrine allows the court to modify the trust and direct the assets to a new charitable purpose that approximates the settlor's original intent.
Because the trust's general charitable purpose remains viable, the court will favor modifying the trust's administrative terms over terminating it. Termination would frustrate Grandma's primary intent, whereas modification would preserve it.
B. The Petition to Dissolve the Ancestry Trust
A fundamental principle of trust law is that a trust will not fail for want of a trustee. While Tom, as trustee, engaged in serious misconduct and subsequently died, these events are not grounds for terminating the trust itself.
Upon Tom's death, the office of trustee became vacant. The trust instrument did not name a successor. In such a situation, the court has the inherent authority to appoint a successor trustee to continue administering the trust according to its terms. The trust's purpose—to distribute income annually to Tom's successors in interest (his estate until closed), Betty, and Carol—remains perfectly achievable.
Since the trust's purpose has not been fulfilled, become impossible, or been rendered illegal, there are no grounds for its termination. The proper judicial remedy is to appoint a new trustee and ensure the trust's assets are restored.
C. The Order to Compel Tom's Estate to Repay the Trust
A trustee owes the trust and its beneficiaries the highest duties of loyalty and care. The duty of loyalty strictly prohibits a trustee from using trust assets for their own personal benefit, a practice known as self-dealing.
When Tom wrote a check from the trust's assets to pay his personal medical debt, he directly violated his duty of loyalty. His intention to repay the trust is legally irrelevant to the fact that a breach occurred. The loss to the trust is the amount of money he took.
A trustee is personally liable for any financial loss to the trust resulting from their breach of duty. This liability does not disappear upon the trustee's death. The claim for the misappropriated funds becomes a debt of the trustee's estate. The successor trustee, once appointed, or a beneficiary (like Betty) has the right to bring an action to "surcharge" Tom's estate, which means compelling the estate to make the trust whole for the loss he caused.
Therefore, Betty's petition on this point is proper, and the court will grant the request to order Tom's estate to repay the full amount he misappropriated from the Ancestry Trust. This action is necessary to restore the trust principal and ensure its proper administration for the beneficiaries.
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