Hayward v. Bank of America

SALSMAN, J. The appellant is an income beneficiary of a trust established by the will of Edward B. Gross, and appeals from an order denying her petition to require the trustees to sell certain trust property claimed by appellant to be unproductive of income.

By his will, Edward B. Gross devised the residue of his estate to trustees who are respondents here. After providing for the payment of $200 per month to his sister, the remainder of the income of the trust is given 4-10ths to the trustor’s widow, Christine P. Gross, 3-10ths to a daughter, Theodora Gross Anderson, and 3-10ths to the trustor’s other daughter Nancy Gross Hayward, the appellant. The corpus of the trust is substantial, and consists of personal property and numerous parcels of real estate. One of the assets of the trust estate, and the one which gives rise to the present dispute, is a ranch known as the Santa Theresa Rancho, consisting of approximately 758 acres and located a few miles south of the City of San Jose, on U.S. Highway 101. This parcel of property was appraised in July 1954 in the estate proceeding and its value was fixed at $365,907. Various parcels of this property are rented to tenants for uses appropriate to the character of the land, and at the time of distribution of the ranch to the trustees it produced a reasonable income based upon its then appraised value. Since distribution the property has enjoyed a large increase in value, and at the time of hearing on appellant’s petition the total value of the ranch was stated to be in excess of $2,500,000. Although the income from the ranch has increased, the increase in income has not kept pace with the increase in value, and current income amounts to about 1% per cent of the present estimated value of the property.

In the ninth paragraph of his will, incorporated into the decree of distribution, the trustor gave his trustees “full power and authority to hold and retain any and all property coming into their possession.” The appellant contends the trustees do not have absolute discretion to retain the ranch property, and that since it is unproductive of income equivalent to the average rate of return on trust funds generally the trustees are under a duty to sell it and reinvest the proceeds in such manner as to do equal justice between income beneficiaries and remaindermen. The trial court deter[566]mined that the trustor, by use of the language “full power and authority to hold and retain” trust property, had vested absolute discretion in his trustees; that the trustees were acting in accord with the intention of the trustor, and denied appellant any relief.