530. A trustee is subject to the control of the chancellor in the exercise of the power which he possesses, whether inherent or special. A discretion, as we have seen,2 leaves the doing of the act to the personal judgment of the trustee, and to that extent liberates him from the control of the court.

1 See §153, ante, et seq., for a discussion 2 See $158, ante.

of powers in a trustee.

Discretionary powers as to the legal title have no effect on the interest of the cestui que trust. They fall when the trust terminates and are of no importance in the present discussion.3 Where, however, the discretion is as to the doing of an act affecting the equitable interest, a different question presents itself. If the exercise of the discretion involves the substitution of another equitable interest, it seems unobjectionable except in so far as the rule against perpetuities is concerned.* If no one else can have any benefit under the discretion, its exercise may be a restraint on the equitable estate of the cestui que trust, and void at his instance as violating the rule forbidding restraints on enjoyment. This is the particular point to be examined in this chapter. The matter has, however, been very little discussed by the text writers, and there is a great dearth of authority on the subject.

Legal Discretion

531. The discretion is said to be legal when the trustee is authorized to exercise the discretion if certain specified circumstances exist. The court will judge whether the facts are in existence, and if they are, the trustee will be compelled to exercise the discretion. If the facts do not exist the chancellor ordinarily will not interfere.

Absolute Discretion

532. An absolute discretion is said to exist when the doing of something with respect to the trust property is left to the sole discretion of the trustee, without reference to any extrinsic circumstances. In such case the discretion cannot be interfered with unless its exercise amounts to a restraint on the use and enjoyment by the cestui que trust of his equitable estate.

Distinction Between Discretion as a Condition Precedent and Discretion as to a Vested Interest

533. One further distinction remains to be noticed: the exercise of the discretion may be a condition precedent to the

3 See 88415-436, ante, for a discussion of these powers and the application of the rule against perpetuities.

For the application of the rule against perpetuities, see §§411-413, ante.

vesting of the interest or it may be a discretion exercisable as to an interest already vested. In the first case the validity of the interest taking effect under the discretion is determined by the application of the rule against perpetuities. In the second case the donee of the interest may or may not be able to interfere with the exercise of the discretion, according to whether the rule forbidding restraints on enjoyment applies or not.

Legal Discretion as to Principal

534. Legal discretion with reference to principal usually appears in the form of a clause giving the trustee discretion to make advances out of the principal to the life tenant if certain extrinsic circumstances exist. While such a clause is of frequent occurrence, cases in which any question as to the force and effect of the discretion is involved are rare. Since the principal belongs to the remainderman, the failure of the trustee to exercise the discretion in favor of the life cestui que trust does not violate the rule forbidding restraints on enjoyment. The discretion simply involves a change of equitable beneficiaries. The life tenant must make out a case showing that the necessity exists if he wishes to compel the exercise of the discretion by the trustee.

Erisman v: Directors of the Poor

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535. In Erisman v. Directors of the Poor a testator gave a portion of the residue of his estate in trust for the use of Lydia, a married woman, directing the trustee to hold the same in trust during her life and from time to time to "apply the interest arising thereby for the purchasing and payment of such necessaries of life as he may think right and proper, but such trustees shall only be allowed to apply any principal if urgent necessity should require, and in no case shall be allowed to pay any debts contracted by said Lydia or her husband," and after her death to divide what remains among the children of Lydia. Lydia was declared a lunatic, and an action was brought by the Directors of the Poor against the trustees

5 For a discussion of this point, see §§411-413, ante.

For instances of the clause, see Gochenauer v. Froelich, 8 Watts, 19 (1839); Eberly's App., 110 Pa. 95, (1885),

Clark's Est., 134 Pa. 140 (1890); Yetter's Est., 160 Pa. 506 (1894); Stiles v. Bank, 33 Super. Ct. 57 (1907); Jones's Est., 28 Pa. C. C., 293 (1903), s. c. 12 D. R. 113. 7 47 Pa. 509 (1864).

8

to recover the money they had paid out for her support in the Pennsylvania Hospital. It was held that they could recover out of principal and income. Thompson, J., in the Supreme Court, said, "The objection that this dispenses with the discretion of the trustee has no merit. His discretion is but a legal one, and whenever the law determines that a proper case has arisen in which the trustee's discretion should have been exercised in a particular way, he will be constrained to act in accordance therewith.""

Baeder's Estate

536. In Baeder's Estate 10 the testator divided his estate into as many shares as he had children, and as to the shares of the sons he directed his trustees to pay each of them five thousand dollars on attaining the age of twenty-one years, and, on attaining the age of twenty-five, to advance an amount equal to one-half the son's share, the power to be exercised as the trustee should deem proper, "looking to the habits, conditions and circumstances of my said sons respectively." The residue was to be held by the trustees, the income to be paid to the sons respectively, without liabilty, etc., and, upon the death of the sons, the share to be paid to their children, and in default of children, to pass under the will as if the sons had died before the testator. One of the sons passed the age of twenty-five without the half of his share having been advanced to him, and died, and a claim was made by his executors to have this one-half paid to them. The Supreme Court, in an opinion by Mitchell, J., held that the executor was entitled to the one-half of the share, because there was an absolute gift of the one-half to the son, with a clause giving the trustee discretion to withhold payment and add to the residue upon certain conditions, and as the trustees had not exercised that discretion affirmatively in the lifetime of the son, they could not do so now, the opportunity to judge of the circumstances having passed, as the son was dead. It is submitted, however, that since there was a gift over of the principal on the death of the son, the discretion was to be exercised against the remaindermen, and, therefore, until it was exercised the son took nothing.

8 At p. 514.

Dictum in Stewart v. Madden, 153 Pa. 445 at 448 (1893), stated §663, post;

Geiger's Est., 24 Pa. C. C. 238 (1900), s. c. 9 D. R. 457, accord.

10 190 Pa. 606 (1899).

Preliminary Discussion of Absolute Discretion as to Principal

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537. An absolute discretion as to principal generally takes the same form as legal discretion, that is, a clause giving the trustee discretion to make advances out of the principal to the life tenants. If the discretion is not exercised in such case, the money which should otherwise have been paid goes over to those entitled in remainder, and it is not necessary, where such disposition appears from the whole course of the settlement, for the settlor to expressly direct the trustee to add the sum which he did not not pay to the life cestui que trust to principal, for it is already there. Since the discretion is absolute in this case it will not ordinarily be controlled by the court, and the life cestui que trust has no remedy if the trustee declines to exercise the discretion in his favor.2

Marshall's Estate

538. In Marshall's Estate 3 the testator gave his estate to his executors in trust for the benefit of his children, making them all equal at twenty-one, and should any of them die without issue their interest should go to the survivors or heirs of his deceased children, with a clause giving the trustees power to give or withhold the corpus as they thought for the best interests of the children. An account of the trustees being filed, the court below said that one of the questions presented was as to the duration of the trust under the will. It is presumed, although the report does not so state, that one of the children applied to have it terminated. On appeal, the Supreme Court held that the trust was active and did not terminate when the youngest child reached twenty-one. The court based the decision on the ground that as the trustees

11 For an example of such a discretion, see Ogden's Est., 211 Pa. 247 (1905).

1 For a case where a trustee exercised his discretion and made advances out of the principal to the life tenant, see Beaumont's Est., 195 Pa. 1 (1900); the case arose on an attempt by those entitled in remainder to surcharge the trustee with advances he had made; see also Brubaker v. Huber, 13 Pa. C. C. 78 (1893), s. c. 2 D. R. 703; 10 Lanc. L. R. 99.

2 There may be an absolute discretion

to divide the principal among the members of the class, and in such a case no one of the class can compel the exercise in his favor; McAllister's Est., 15 D. R. 430 (1906). And if the absolute discretion is to apportion the principal, no one in remainder can compel the exercise of the discretion; Barker's Est., 159 Pa. 518 (1894), stated §239, ante.

3 147 Pa. 77 (1892). This is the same will as was before the court in Marshall's Est., 138 Pa. 260 (1890).