Duncan v. Kahn

DRAPER, J. This action concerns a trust established in his lifetime by Eugene Sommer, an unmarried man. He was the owner of 538 shares of the capital stock of Sather Gate Book Shop. Defendant Kahn owned 339 shares and one share was held by a third person. By declaration of trust dated September 29, 1936, Sommer transferred his shares, in trust, to defendant Kahn. By addendum of the same date, Sommer designated defendant Akers as cotrustee. Pursuant to right reserved, this declaration was amended November 1, 1940. As amended, the trust named four beneficiaries, who were to share equally. Plaintiff was one of these. Upon the death of any beneficiary except Siegfried Sommer, his interest in the trust was to pass to his heirs. As to Siegfried, it was provided that if he shall “predecease me or if he shall die after I do but prior to the distribution of this trust,” his interest should not go to his heirs, but was to vest equally in the remaining beneficiaries or their survivors.

The trustor, Eugene Sommer, died September 21, 1941. The issues here involved arose after his death, and we are concerned only with the provisions of the declaration referring to the “trust after my death.” The trust was to continue for 10 years after the death of the trustor, but was to end sooner upon the death of defendant Kahn or upon the purchase of the stock by Kahn, or upon Kahn’s sale of the assets of the corporation. The declaration also provided: “Notwithstanding anything hereinbefore set forth, I hereby authorize you at any time to terminate this trust in your absolute discretion, notwithstanding the fact that the said period of ten years has not elapsed. ’ ’ The declaration further specifically authorized defendant Kahn to purchase the trust shares from himself as trustee, at book value, excluding therefrom good will or going concern value. The trust instrument stated, after authorizing such purchase by the trustee Kahn, “it is my hope that you may be able to do so to the end that the institution which I helped to build up may be perpetuated by you.” Kahn had been associated with trustor in the book shop for many years, and was vice-president of the corporation, trustor being president, at the time of the declaration of trust. The trust instrument provided that no beneficiary should have the right to sell or anticipate his interest. Upon termination of the trust, whether by expiration of the 10-year period from trustor’s death or by one of the earlier events specified, the trust property (whether it was then cash or remained corporate shares) was to go to the [404]beneficiaries equally. It is clear that this was to occur despite the provision against alienation or advance, and despite the provision that Siegfried’s interest, if he died before termination, was not to go to his heirs. The declaration further specified that the trustee should “not be liable or accountable to any of the beneficiaries for any losses or liabilities” incurred while he was managing the corporation or voting the stock, and authorized him to vote the stock and manage the corporation in his “absolute discretion; but in the event that you may find it necessary to advise with counsel, then the opinion of counsel in writing signed by him . . . shall be a full protection and justification to you for anything suffered or done in good faith and in accordance with such opinion.”