# Appendix — Ewing v. Citytrust

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1990
- **Citation:** 495 U.S. 949

## Text

~o, {r— ay wk
So- 153g Glas i
ie Ee A ston
‘\ APR 17 199
IN THE a icocntc

Supreme Court of the United States

OctToBer TERM, 1989

MICHAEL EWING,
Petitioner.
CITYTRUST.

Respondent

APPENDIX TO PETITION FOR WRIT OF
CERTIORARI TO THE UNITED STATES COURT
OF APPEALS FOR THE SECOND CIRCUIT

WILLIAM R. Horner, Esq.
Counsel of Record

HORNER & Isaacs, P.C.
489 Fifth Avenue

New York, New York 10017
(212) 953-2288

Attorneys for Petitioner

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

+

Nos. 17, 47—August Term, 1989

(Argued September 21, 1989
Decided December 13, 1989)

Docket Nos. 89-7246, 89-7258

>

MICHAEL EWING,
Plaintiff-Appellant,

Cross-A ppellee,
—Y —

ALVIN RUML and LYNDA EWING
as Executors of the Estate of Alexander Ewing,

Defendants-Appellees,

CITYTRUST,

Defendant-A ppellee,
Cross-A ppellant.

Before:

VAN GRAAFEILAND, MESKILL and KEARSE,
Circuit Judges.

Appeal from dismissal of claims alleging mishandling of
two estates and two trusts and cross-appeal from an award
of $81,769.58 for mishandling of a third trust. Dismissals
affirmed. Award vacated and matter remanded for further
consideration.

WILLIAM R. HORNER, New York, New York
(Horner & Isaacs, P.C., New York,
New York, of counsel), for Plaintiff-
A ppellant-Cross-A ppellee.

DION W. MOORE, Bridgeport, Connecticut
(Williams, Cooney & Sheehy, Bridgeport,
Connecticut, of counsel) for Defendant-
A ppellee-Cross-A ppellant.

>

VAN GRAAFEILAND, Circuit Judge:

On June 19, 1986, Michael Ewing (‘‘Michael’’) brought
the instant action against Citytrust alone in the United
States District Court for the Southern District of New
York, alleging that the Bank breached its fiduciary duty to
him in the administration of two estates and three trusts.
The estates in question were those of Michael’s grand-
mother, Myra, and his grandfather, George. Citytrust and
Michael’s father, Alexander, were co-executors of both
estates. The trusts in question were a testamentary trust
created by Myra, of which Citytrust was the sole trustee, a
testamentary trust created by George, of which Citytrust

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was co-trustee with Alexander, and an inter vivos trust cre-
ted by George, of which Citytrust was the sole trustee.

When Citytrust moved to join Alexander’s Estate as an
additional defendant, Alvin Rum! and Lynda Ewing, as
Executors of the Estate of Alexander Ewing, were
ncluded as defendants pursuant to stipulation. The action
ce tancg was transferred to the United States District
Court for the District of Connecticut. Michael now
appeals from Chief Judge Daly’s dismissal of Michael's
claims involving Myra’s estate and trust and George’s
inter vivos trust. Citytrust cross-appeals from an

ing the George Bolan testamentary trust. Although
Michael’s notice of appeal is general in scope, the relief he
seeks is limited to his claim against Citytrust. Alvin Ruml
and Lynda Ewing, as Executors of the Estate of Alexander
Ewing, have not appeared in this appeal. The sole issue
before us then is the conduct of the Bank.

ie)

Myra died on January 22, 1967. George died on June 3,
1967, leaving an only son, Alexander. Myra’s trust name
Alexander as the income beneficiary, with the remainder
upon his death going to Alexander’s issue [Michael] if he
survived. Citytrust, as co-executor with Alexander and as
sole trustee, was given the power ‘‘[t]o invest and reinvest

without restriction or limitation’’ and to hold and retain
stocks, bonds or other securities ‘‘whether or not the same
shall be an investment of the character deemed to be legai
and proper for Trust investments under the laws of the
State of Connecticut.’’ Myra’s estate was made up largely
of common stocks. Because they produced only modest
income, the Bank sold them and invested the proceeds in
tax-exempt bonds which produced substantially higher

income. The original trust corpus consisted of approxi-
mately $400,000 of these bonds.

George Ewing’s inter vivos trust also consisted largely
of common stocks. These stocks, having an approximate
value of $1.5 million, were sold, and the proceeds.invested
mainly in bonds providing a higher rate of return. The
income from this trust and so much of the principal ‘‘as
may in the judgment of the Trustee be desirable to or for
the benefit of [Alexander or Michael]’’ was to be paid to
them ‘‘in such amounts and proportions as my said corpo-
rate Trustee in its sole and absolute discretion shall deem
advisable from time to time without regard to equality of
distribution.’’ The Trustee also was empowered ‘‘to invest
and reinvest in any property or security’’ and ‘“‘to make,
retain or change any investment without liability on
account thereof.”’

George Ewing’s will named Citytrust and Alexander as
co-executors and as co-trustees of a trust, the corpus of
which was approximately $283,497. However, Alexander
delegated his responsibilities as co-trustee to Alvin Ruml,
a New York City stockbroker, and Ruml thereafter
offered his investment counsel and advice to Citytrust.
The will empowered the corporate Trustee to pay so much
of the net income to Alexander and Michael ‘‘in such
amounts and proportions as my said corporate Trustee in
its sole and absolute discretion shall deem advisable from
time to time without regard to equality of distribution.’’ It
also authorized the corporate Trustee ‘‘to invade the prin-
cipal for any reason in its discretion for the benefit of
[Alexander or Michael]’’.

Michael argued in the district court that the defendants
breached their fiduciary duties to him by (1) engaging in
an investment policy favoring income production over

A-5

Principal appreciation; (2) delegating investment strategy
decisions to Alvin Ruml; and (3) ) distributing $111,000, the
balance remaining in.George’s testamentary trust, to Alex-
ander without Michael’s knowledge or consent. Both sides
moved for summary judgment. The district court granted
summary judgment in favor of the defendants on the first
two claims and in favor of Michael and against Citytrust
on the third.

Before we can address the merits of the two appeals, we
must determine whether the case comes to us in proper
posture tor review. The district court’s disposition of the
summary judgment motions is entitled ‘“RULING ON
CROSS-MOTIONS FOR SUMMARY JUDGMENT.”
The decretal portion of this ‘“‘RULING”’ provides that

‘‘partial summary judgment shall enter for the plaintiff
only on the question of liability with regard to [the inva-
sion of principal in the George Ewing testamentary
trust].’” With regard to Michael’s remaining claims, the
RULING provides that ‘‘partial Summary judgment shall
enter in favor of defendants Citytrust and the Estate of
Alexander Ewing.”’

Citytrust moved for reconsideration of the portion of
the district court’s ruling that was in favor of Michael, and
Michael moved for entry of final judgment and damages.
On January 25, 1989, the district court denied Citytrust’s
motion for reconsideration and granted Michael’s ‘*appli-
cation for damages. . . to the extent of $55,500 plus pre-
judgment interest. . . .’’ The order stated in conclusion
that ‘‘upon the entry of final judgment, this matter is
hereby closed of record.’’ The judgment, entered on Feb-
ruary 10, 1989, referred simply to the court’s January 25th
‘“‘Ruling’’ on plaintiff’s motion for final judgment and
then stated, it is ““ORDERED and ADJU[D]GED that

judgment be and is hereby entered for the plaintiff in the
amount of $81,769.58.’’ This abbreviated judgment was
signed and entered by the district court clerk.

Where a separate judgment thus is entered as required
by Fed. R. Civ. P. 58, the preferred procedure is to make
it. self-sufficient and complete. 11 C. Wright and A.
Miller, Federal Practice and Procedure § 2785 at 15-16.
Revtblatt v. Denton, 812 F.2d 1042, 1043-44 (7th Cir.
1987). If this is done, it is readily apparent to all what
relief has been granted and what has been denied and the
date when this has occurred for purposes of appeal. See
Cardillo v. United States, 767 F.2d 33 (2d Cir. 1985),
However, where, as here, the appeals are timely and the
district court’s disposition of the case is undisputed, we
may accept the appeal and interpret the judgment in the
light of the district court’s opinions, findings and conclu-
sions of law. See Great Lakes Dredge & Dock Co. y. Huff-
man, 319 U.S. 293, 295 (1943); National Railroad
Passenger Corp. v. City of New York, 882 F.2d 710, 713
(2d Cir. 1989); Security Mutual Casualty Co. vy. Century
Casualty Co., 621 F.2d 1062, 1066 (10th Cir. 1980). Any
other disposition would result in a spinning of wheels for
no practical purpose. See Bankers Trust Co. v. Mallis, 435
U.S. 381, 385 (1978). Upon dismissal by this Court, the
district court simply would enter a new judgment incorpo-
rating all the dispositive provisions of its summary judg-
ment order, and review would be sought once again. /d.
Accordingly, we treat the district court’s disposition of the
issues before it as a final dismissal of all claims made by
Michael against the defendants, except that Michael was
awarded judgment against Citytrust alone in the amount
of $81,769.58 because of the distribution of principal to
Alexander Ewing from the George Ewing testamentary
trust. We affirm the district court’s dismissal of the several

claims that it found to be without basis. We vacate the
$81,769.58 award against Citytrust and remand for fur-
ther proceedings with respect to this claim.

THE DISMISSED CLAIMS

In dismissing Michael Ewing’s claims based on alleged
improper investment policies, the district court correctly
noted that the issue of the defendants’ breach of fiduciary
duty was a matter of state law. Erie R.R. v. Tompkins,
304 U.S. 64 (1938). Where, as here, the interpretation of
state law is made by a district judge sitting in that state, it
is entitled to great weight and should not be reversed
unless it is clearly wrong. Lomartira v. American Automo-
bile Ins. Co., 371 F.2d 550, 554 (2d Cir. 1967). Michael
has not convinced this Court that the district court’s rea-
soning is so flawed as to fail under this standard. Quite to
the contrary, the lower court’s decision on this issue is well
reasoned and correct.

Both in its capacity as executor and trustee, Citytrust
owed Michael a fiduciary obligation. See Satti v. Rago,
186 Conn. 360, 367 (1982); O’Connor v. Chiascione, 130
Conn. 304, 307-08 (1943); 45 Conn. Gen. Stat. Ann. § 45-
100d(a) (West Supp. 1989). Connecticut law generally
requires that a fiduciary such as Citytrust act with the care
of a prudent investor in managing estate assets. United
States Trust Co. v. Bohart, 197 Conn. 34, 48 (1985): see
also Jackson v. Conland, 178 Conn. 52, 55 & n.3 (1979):
Conn. Gen. Stat. Ann. § 45-88 (West Supp. 1989). Lan-
guage in a will or trust agreement, however, may excuse
such a fiduciary from the strictures of this rule and allow it
a broader range of investment discretion than the rule
otherwise would permit. United States Trust Co. y.
Bohart, supra, 197 Conn. at 48; see also Jackson vy. Con-

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land, supra, 178 Conn. at 55 & n.3 (1979); Reed v. Reed,
80 Conn. 401, 409-10 (1908); Conn. Gen. Stat. Ann. § 45-
88 (West Supp. 1989). In such circumstances, courts may
hold the fiduciary liable only where it abuses that discre-
tion. United States Trust Co. v. Bohart, supra, 197 Conn.
at 48. Courts will not find such abuse unless the fiduciary
has acted dishonestly or with improper motive, has failed
‘‘to use his judgment,’’ or has ‘‘acted beyond the bounds
of a reasonable judgment.’’ Restatement (Second) of
Trusts § 187, comment e (1959); see also Gimbel vy.
Bernard F. & Alva B. Gimbel Foundation, Inc., 166
Conn. 21, 37 (1974).

Michael has not shown that Citytrust abused its discre-
tion under any of these criteria. Although Michael argues
that Citytrust should have followed a different investment
Strategy to better serve his interests as the remainderman
of various trust assets, the district court correctly held that
George’s will did not require it to do so. Moreover,
Michael has made no showing that Citytrust acted dishon-
estly, in bad faith, with improper motives, or in a grossly
negligent manner in following a conservative investment
policy emphasizing income over capital gains. We accord-
ingly find, as did the court below, that Citytrust did not
abuse its discretion in following the investment strategy of
which Michael now comolains.

The district court correctly rejected Michael’s argument
that Citytrust breached its fiduciary duty by delegating to
Alvin Ruml its authority to control the investment policy
of the Ewing trusts. The court found that, although Rum!
and Citytrust had a relationship and a variety of contacts,
their interaction did not indicate a delegation of trust
responsibilities. Michael does not seriously dispute that

Like

finding in this Court, and we see nothing in the record that

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warrants a contrary conclusion. Citytrust, as trustee, was
entitled to consult advisors in making investment deci-
sions. See Restatement (Second) of Trusts § 171 comment
f (1959); McClure v. Middletown Trust Co., 95 Conn.
148, 153-54 (1920). Its dealings with Ruml were nothing
more than such consultation.

THE MONETARY AWARD

As above stated, the George Ewing testamentary trust
authorized Citytrust as trustee ‘‘to invade the principal for
any reason in its discretion for the benefit of [Alexander]
or [Michael].’’ The district court construed this clause to
mean that principal could be invaded only for the persona!
needs of Alexander and Michael:

The primary intent of the settlor in this instance
appears to have been to provide the two income bene-
ficiaries with a fund upon which they could draw
income and invade principal as the need arose.

Proceeding from this premise, the district court held
that payment of principal to Alexander was improper
where Alexander’s admitted intent was to use the money
to help him provide support for his stepchildren. This
interpretation of the trust provisions gave to the word
‘“‘benefit’’ a meaning that is contrary to the overwhelming
weight of legal authority.

In Ferrigino v. Keasbey, 93 Conn. 445 (1919), the Con-
necticut Supreme Court, contrasting the words ‘‘support’’
and ‘‘benefit’’, as used in Conn. Gen. Stat. § §275, now in
substance section 46b-37, said, quoting Webster’s New
International Dictionary, that ‘‘the word ‘benefit’ is

A-10

defined to be ‘whatever promotes prosperity and personal
happiness; advantage; profit; good.’ ’’ Jd. at 451.

This definition accords with that given the word ‘‘bene-
fit’’ in most other states; /.e., that it is more comprehen-
sive than the word ‘‘support’’ and means anything that
works to the advantage, gain or happiness of the recipient.
See, e.g., In re Emmons Will, 165 Misc. 192, 195 (1937);
In re Rachlin’s Will, 133 N.Y.S.2d 181 (1954); Matter of
Estate of Hixon, 715 P.2d 1087, 1090 (Okla. 1985); Matter
of Conrad, 97 Ill. App. 3d 202, 203 (1981); Bird v. New-
comb, 170 Va. 208, 216 (1938); Matter of Estate of
Krause, 173 Wash. 1, 7-8 (1933); Winthrop Co. v. Clin-
ton, 196 Pa. 472, 474 (1900). See also Black’s Law Dictio-
nary 200 (4th ed. 1968).

indeed the word ‘‘benefit’’ is sufficiently broad that a
bequest of all the property of a testator to his wife ‘‘for
her own proper use and benefit, forever’’ has been con-
strued to convey an estate in fee simple absolute. Dei Cas
v. Mayfield, 199 Conn. 569, 573 (1986). ‘‘A gift to a per-
son for his benefit means an absolute gift, and excludes
the idea of a qualified or limited estate.’’ Crain v. Wright,
114 N.Y. 307, 310 (1889). See also Warren v. Webb, 68
Me. 133, 135 (1878); Stowell v. Hastings, 59 Vt. 494, 497
(1887).

The word ‘‘benefit’’ has received a good deal of atten-
tion in tax litigation, where the extent of the power to
invade principal on behalf of a trust beneficiary may
determine who pays an estate tax. A power to invade prin-
cipal that is limited by an ascertainable or measurable
standard, i.e., for support, maintenance, health, etc., is
held not to be a general power of appointment for tax pur-
poses. See Henslee v. Union Planters National Bank &
Trust Co., 335 U.S. 595, 597-600 (1949); 26 U.S.C.

A-11

§ 2041(b)(1)(A). The cases uniformly hold, however, that
a power to invade principal for the ‘‘benefit’’ of a trust
beneficiary does not limit the beneficiary’s power of inva-

sion. See De Oliveira v. United States, 767 F.2d 1344, 1348.

(9th Cir. 1985); Old Colony Trust Co. v. United States,
423 F.2d 601, 604 (Ist Cir. 1970); National Bank of Com-
merce v. United States, 369 F. Supp. 990, 992 (W.D. Tex.
1973), aff’d, 491 F.2d 1271 (Sth Cir. 1974); Newton Trust
Co. v. Comm’r, 160 F.2d 175, 179 (1st Cir. 1947);
Helvering v. Evans, 126 F.2d 270, 272 (3d Cir.), cert.
denied, 317 U.S. 638 (1942). The following language from
National Bank, supra, 369 F. Supp. at 992, is illustrative:

Considering plaintiff’s contentions in order, the
Court begins the search for an ascertainable standard
with the trust instrument. It provides only one express
standard, i.e. ‘“‘benefit [of decedent’s wife].’’ This
standard ‘‘is so loose that the trustee is in effect
uncontrolled.’’

(Quoting Old Colony Trust Co., supra, 423 F.2d at 604).

Alexander Ewing was spending about $5,000 per month
to support his stepchildren, who were remaindermen
under the George Ewing testamentary trust. Alexander
requested that the $111,000 be withdrawn for him because
it would take care of two years of these ‘‘expenses’’. The
Bank determined that it would be to Alexander’s benefit
to take the money for this purpose out of the testamentary
trust rather than the inter vivos one, because it would give
Alexander about a $51,000 tax loss which he could use on
liquidation. We hold that, under the foregoing circum-
stances, the challenged withdrawal was for Alexander’s
benefit. The issue of Alexander’s ‘‘need’’ for the money
therefore was irrelevant. Indeed, because Alexander was a
multi-millionaire, having inherited more than $2 million

A-12

from his parents alone, a limitation of trust payments to
him based solely on need hardly could have been within
the contemplation of his parents when they adopted the
trust language permitting withdrawals for his ‘‘benefit’’.

The $81,769.58 award is vacated, and the issue of liabil-
ity on this claim is remanded to the district court for fur-
ther consideration. Since the several ‘‘irregularities’’ that
the district court found to support this award were prem-
ised upon its erroneous legal finding of unlawfulness, we
believe that the district court should go back to square one
with regard to these alleged irregularities and reconsider
them on a full record interpreted in the light of proper
legal principles. In other words, before determining
whether Citytrust is liable on this claim, the district court
should permit a full development of all the pertinent facts.

CONCLUSION

The district court’s dismissal of all of Michael Ewing’s
claims against Citytrust except that of invasion of princi-
pal in the George Ewing testamentary trust is affirmed.
The award of $81,769.58 against Citytrust in connection
with the invasion of principal in the George Ewing testa-
mentary trust is vacated, and this issue is remanded to the
district court for further proceedings consistent with this
Opinion.

A-13

United States District Court

District of Connecticut

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cross-morc

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A-14

Citytrust's motion for summary judgment
and its opposition to Michael Ewing's
request for the same. None of the parties
has complied with Local Rule 9(c)(2)'S
requirement that "(t]he papers opposing a
motion for summary judgment shall include
a separate, short and concise statement of
material facts as to which it is contended
that there exists a genuine issue to be
tried." However, because it finds no
dispute of material fact, the Court will

rule on these motions.

BACKGROUND

Ewing. Alexander died on October, 1984
and was the only son of Myra and George

Ewing.

Myra Ewing died on January 22, 1967, and

in her will bequeathed to plaintiff ten

A-15

thousand dollars, and to Alexander Ewing
one-half of her residuary estate. The
remaining one-half of her residuary estate
became the principal of a testamentary
trust ("Myra Ewing's Testamentary Trust").
The net income of this trust was to go to
Alexander. The principal, upon Alex-
ander's death, was to go to Alexander's
lawful issue, namely the plaintiff,

Michael Ewing.

Defendant Citytrust, together with

O
h

Alexander Ewing, was named co-executor
Myra Ewing's estate. Defendant Citytrust
was also named sole trustee of Myra's
trust. The will conferred a variety of
discretionary powers on the executors and
trustee, including the power to “hold and
retain" shares of stocks, bonds, or other

securities and the power to “invest and

A-16

reinvest without restriction or

limitation. *

Soon after Myra's death, her estate's
executors sold all the stocks of which she
died seized, and purchased municipal
bonds. Myra Ewing's Testamentary Trust,
consequently, was funded by bonds with a
market value of $388,188.00. Fifteen years
later, upon the death of Alexander and the

termination of this trust, the principal

‘©

funds invested in tax-exempt bonds which

appreciated by only 19% from the trust's

1 In a non-material dispute of fact,
plaintiff's complaint alleges that the
value of the princip of the trust upon

a
as
termination was $471,259.16.

A-17

inception in 1970 to its distribution to
plaintiff in 1985, amounting to a gain of

1.2% per year.

George Ewing died on June 3, 1967. In
his will, George Ewing bequeathed ten
thousand dollars to plaintiff, and one-
half of his residuary estate to Alexander
Ewing. Thus, Alexander inherited outright
from his parents' estates approximately
$2,169,198.00 (including the gift of IBM
and Singer stock worth $1,486,997.75 that
George made to Alexander shortly before
his death). The remaining one-half of
George Ewing's residuary estate was placed
in a testamentary trust (the "George Ewing
“Testamentary Trust"). The net income of
this trust was to go to Alexander and his
lawful issue, "in such amounts”) and
proportions as my said corporate Trustee

in its sole and absolute discretion shall

A-18

deem advisable from time to time without

regard to equality of distribution."

Both Alexander and Citytrust were named
as executors and trustees of George's
Testamentary Trust, which at its creation
had a market value of $283,492.00. Among
the enumerated powers granted them in
George Ewing's will were the power to hold
and retain stocks and other holdings, and
the power to invest and reinvest without
restriction or limitation. Additionally,
Citytrust was empowered to invade the
principal “for any reason" for the benefit

of Alexander or his lawful issue.

Shortly after George's death, his
estate's executors liquidated his stock
holdings and purchased municipal bonds.
The parties agree that the George Ewing
Testamentary Trust operated primarily as

an income producer for Alexander, as

A-19

opposed to a source of capital expansion.
In light of this fact, the trust principal
was also invaded for the benefit of both
Alexander and Michael Ewing, in the
approximate amounts (Of $40,000.00 and

$60,000.00 respectively.

In February 1984, at the request of
Alexander, Citytrust invaded the trust for
the purpose of enabling Alexander to
continue supporting the four children of
his third wife, Lynda, from her previous
marriage, who were at the time Je, 34, 36,
and 38 years old, respectively, thus
terminating the trust. No portion of this
remaining $111,000 in trust was
distributed to the plaintiff despite his
Status as income and principal

beneficiary.

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required by Citytrust's own policy
guidelines. Furthermore, in applying to
the Probate Court for the District of
Norwalk for permission to distribute all
of the remaining principal to Alexander,
Citytrust failed to advise the court that
the Testamentary Trust was also for the

benefit of Michael Ewing.

In the administration of the George
Ewing Testamentary Trust, Citytrust
mermitted Alexander Ewing to delegate his
authority as trustee to Mr. Alvin Ruml, a
stockbroker affiliated with Hallgarten &
Co. in New York City. Mr. Ruml acted as an
investment adviser on the Ewing trusts and
was in contact with Mr. Kenneth Park, a
trust officer with Citytrust, as early as
December 12, 1967 in this regard. This was
done without the knowledge or consent of

the plaintiff.

A-21

George Ewing also created an inter vivos
trust on May 2, 1967 (the "George Ewing
Inter Vivos Trust"), funded solely by
shares of Singer and IBM stock. The trust,
which had a market value of $1,487,715.00
named both Alexander Ewing and plaintiff
as income beneficiaries and defendant

Citytrust as sole trustee.

This trust empowered Citytrust to invest
and reinvest, and to invade the principal
for the benefit of either or both
Alexander or Michael Ewing without regard
to equality of distribution. Plaintiff was

named remainderman of one-half of the

rt)

remaining principal upon the death c
Alexander Ewing. This trust was
administered at all times to maximize
income without regard to preservation of
the buying power of the corpus of the
trust. Yet, all requests made by plaintiff

for additional allowance, or monies, from

ae

A-22

defendant during his father's lifetime
were acceded to and were sufficient to
meet his living expenses and other needs.
Plaintiff has agreed that his father's
income needs were far greater than his own
and that his father had a greater interest
in the income distribution. Furthermore,
the plaintiff is not contesting the income
allocations from either of the George
Ewing Trusts between plaintiff and his
father or the invasions of principal for
his father under the George Ewing Inter
Vivos Trust. Irivestments in the trust were
made in tax-exempt and corporate bonds to
provide an income in the range of
$100,000.00. In 1973, yearly income was in
the amount of $38,592.00. By 1982, as
Citytrust strove to diversify the high
concentration of Singer and IBM stock in
this trust by selling stock and purchasing

bonds, income had been increased to

A-23

approximately $120,000.00. Having con-
cluded there are no disputed material
facts,* the Court will determine whether
the plaintiff or defendants are entitled

to summary judgment as a matter of law.

QUESTIONS PRESENTED

In the pending cross-motions for Summary
judgment, the questions at issue concern
whether the defendants, in their
respective capacities as executors and
Crustees described above, breached. their
fiduciary duties to Michael Ewing, a

beneficiary, by: 1) engaging in an

¢ There is a non-material factual dispute
as to when Michael Ewing began receiving
information on the three trusts at issue
which the Court need not address.

A-24

investment policy favoring income
production over capital appreciation; 2)
delegating to an individual who was not an
employee of the trustee a role in the
investment strategy of the trusts at
issue; and 3) invading and terminating,
for the exclusive benefit of one
beneficiary without notice to or consent
of another beneficiary, a ceatanentary
trust set up for their mutual benefit.
Neither plaintiff nor defendants put forth
any argument concerning the "THIRD CLAIM"
of the complaint relating to an alleged
improper distribution of principal from
Myra Ewing's Testamentary Trust. Nor do
they address the issue of what damages, if
any, should enter as a result of the
Court's ruling. For these reasons, the
Court treats these motions as only motions

for partial summary judgment and reserves

A-25

the right to require additional briefing

on damages if such is required.

DECISION

To prevail on a summary judgment motion,
the movant must show ‘that there is no
genuine issue as to any material fact and
that the moving party is entitled to
judgment as a matter of law." Fed. R. Civ.
P. 56(c). Any and all ambiguities and
inferences arising out of or to be drawn
from the undisputed facts must be resolved
against the moving party. American Int'l]

/ ae a
G pase 004

F.2d 348, 351 (2d Cir. 1981). The moving

-

party bears the burden of production as

well as the burden of persuasicn with

respect to establishing the non-existence

A-26

before a court, this burden remains the
same and each motion is to be judged on
its own merits. Schwabenbauer v, Board of
Education, 667 F.2d 305, 314 (2d cir.

1981); Knowles v,. Postmaster General, 656

F. Supp. 593, 597 (D. Conn.-1987) .

A) THE INVESTMENT IN BONDS

In this diversity action, the question
of whether the defendants breached their
fiduciary duties to the plaintiff is a

matter of state law. See Erie R.R. Co. y.

Tompkins, 208 3. 64 (1938) In
Connecticut, when a trustee is granted
discretionary powers with respect to a
trust, a court will not attempt to control

such discretion unless it is abused.3

3 Plaintiff argues that the court should
review defendants' actions in light of the
prudent investor rule. It provides that a

(Footnote continued)

A-27

Gimbel_ v. Bernard FF, ¢ Alva B. Gimbel

Foundation, Inc,., 166 Conn. wae 36, 347

A.2d 81 (1974).

Plaintiff's contentions notwithstanding,
the defendants' actions must be judged in
accordance with the abuse of discretion
Standard. The language of the various

trusts dictate this result. Myra Ewing's

trustee is under a duty to act with the
care of a prudent investor Siu. s to
exercise the Skill and care in
administering a trust normally shown by a
person of ordinary prudence in managing
his own property, Restatement (Second)
Trusts § 174). By virtue of the grants of

discretion in the trust instruments
issue, the prudent investor rule does fr
apply and defendants need Only have act
in accordance with and not abused ¢
discretion Granted them to avoi
liability. See United States Trust Co. Vv,
Bohart, 197 Conn. 34, 48, 495 A.2da 1034
(1985); Jackson vy. Conlard, 178 Conn. 52
95-57, 420 A.2d 898 (1979).

yTOoOorRrok
er cv

a0)

q

A-28

Testamentary Trust gives its trustee and
executors, inter alia, the discretionary
power to invest and reinvest without
restriction or limitation and to hold and
retain in the trust any stocks or bonds of
"which [the] estate or any part thereof
may be invested at the time of [the
settlor's] death, whether or not the same
shall be an investment of the character
deemed to be legal and proper for the
Trust Instruments under [Connecticut
law]." George Ewing's Testamentary Trust
contained a similar grant of discretionary
powers to its trustees and executors.
George Ewing's Inter Vivos Trust granted
the trustee, Citytrust, the power to
"hold, manage, invest and reinvest said
fund and pay the income therefrom and so
much of the principal as may in the
judgment of the Trustee be desirable

in such amounts and proportions [as a

A-29

deems advisable in its sole and absolute
discretion] without regard to equality of
distribution." Furthermore, it granted
Citytrust the discretionary power "[t]lo
invest and reinvest in property or
security which it shall select" and "to
make, retain or change any investment
without liability on account thereof."
These broad grants of discretionary power
are in material respects similar to those
granted in Bohart and Gimbel. Therefore,
the Court will apply the abuse of

discretion standard discussed therein.

The question of whether the deflendants
abused their discretion in adopting an
investment strategy favoring the interest
of the income beneficiary depends upon the
language of and the Court's interpretation
of the pertinent trusts. In examining

these trusts, "[t]he expressed intent must

A-30

trom reading the instrument as a whole in
light of the circumstances surrounding the
testator or settlor when the instrument
was executed, including the condition of
his estate, his relations to his family
and the beneficiaries, and their situation
and condition." Connecticut Bank & Trust
Co, v,. Lyman, 148 Conn. 273, 278-79 170
A.2@ 130 (296283. Though a court should
put itself as far as possible in the shoes
of the settlor in an effort to give effect
to his or her intentions, it should not

speculate as to the same.? Jd.

4 Furthermore, when the meaning of a term
Or word in a will iS unambiguous and
unequivocal, a court will not allow parol
evidence to be offered which purports to
supplement or change the expressed

intention of the will. Trav Bank
Trust Co, v.Birge, 136 Conn, 21, 26-27,
68 A.2d 138 (1949). For this reason, the

Court will not consider the recollections
of Mr. McKendry, scrivener of the three

(Footnote continued)

A-31

The plaintiff makes two arguments that
the defendants in their roles as executors
and trustees abused their discretion by
adopting an investment policy geared more
toward generating income than effecting
capital appreciation. The plaintiff first
attacks the executors of the Estates of
Myra & George Ewing - defendants Citytrust
and Alexander Ewing's Estate - for selling
equity issues and purchasing corporate and
municipal bonds with the proceeds.
Specifically, in the case of Myra Ewing's
Estate, two months after her death her
stock holdings of General Electric,
EFastman Kodak Co, IBM, Singer, Standard

Oil, etc., were sold and the proceeds were

trusts at issue, as to the intent of
George and Myra Ewing in the creation of
these trusts.

A-32

invested in a portfolio of municipal
bonds. Nine months later in December
1967, these same executors sold these
municipal bonds at a loss of $103,577.00
and the proceeds were again used to
purchase municipal bonds. Similarly,
after George Ewing's death, his executors
sold his lue-chip stock holdings and
purchased a portfolio of corporate and
municipal bonds. These actions, Michael
Ewing argues, were not in accord with the
intentions stated in George and Myra's
wills and therefore constituted an abuse

of discretion.

The Court disagrees. Myra Ewing's will

clearly empowers defendants to "invest and

reinvest without restriction or
limitation." Nowhere does it indicate
that the testamentary provision
authorizing defendants to "hold and

A-33

retain" stocks of which Myra Ewing died
seized, overrides or otherwise limits or
controls the discretionary power cited
above. Aliso, it is not at all clear from
the will that Myra Ewing intended that her
Stocks be retained if in the judgment of
her executors it was wiser to invest in
bonds. The same is true with respect to
George Ewing's (Will and) Testamentary
Trust, the funds of which were Similarly
converted from stocks into bonds. Quite
frankly, the Court is not persuaded that
the language of Myra's (Will and)
Testamentary arUst, including that
Provision that directed the net income of
the trust to be paid to Alexander "for and
during the term of his natural life," must
be authoritatively read to favor either
the life tenant or the remainderman.
However, to the extent that there are no

restrictions or limitations on the income

A-34

to be paid to Alexander, the Court is not
prepared to override the judgment of
Myra's executors to provide for such
income by the sale of stocks and the
purchase of bonds. See Bohart, 197 Conn.
at 49 (mere errors of judgment are not a
basis for liability). As a practical
matter, it may have been more efficient to
use Myra's trust as the main income
producing source for Alexander Ewing since
this trust was the only one of the three
to name Alexander as the sole income

beneficiary.

The designation, in George Ewing's
Testamentary Trust, of Alexander and
Michael Ewing as co-income beneficiaries
also supports the decision to sell
George's stock portfolio and exchange it
for a bond portfolio that would support,

if necessary, two income beneficiaries who

A-35

were also granted principal invasion
powers. For all these reasons, the Court
holds that the executors' actions in
liquidating the stock holdings of Myra and
George Ewing's Estates and exchanging them
for bond holdings, were not an abuse of

discretion.

The second half of the plaintiff's
argument relates to the investment policy
of the same defendants as trustees
subsequent to the time that these trusts
came into being. Citytrust was a trustee
of all three trusts. Alexander Ewing was
a co-trustee in the administration of the
George Ewing Testamentary Trust. The
defendants argue that investing to
maximize income return, as opposed to
long-term corpus value, was within the
trustees' discretion because the trust

instruments indicated an intent to favor

A-36

the life tenant by virtue of the
designation of the same and the power of
invasion authorized in two of the three
trusts. The plaintiff rejects this
contention and argues that the trust
instruments at issue do not indicate a
preference for either the income or
principal beneficiaries and therefore the
defendants' admitted attempts to maximize
income constitute an abuse of discretion.
The plaintiff carries this argument so far
that it reads the George Ewing Inter Vivos
Trust as providing only for the
extraordinary and unforeseeable needs
Alexander and Michael might face during
Alexander Ewing's life; absent such needs
plaintiff claims the essential intent of
the settlor in that instrument was to
provide Micheel with substantial sums of
money. The Court refuses to adopt either

of these views.

A-37

Outside of the liberal discretionary
powers set out above, the language of
Myra's Testamentary Trust indicates
neither a preference to favor the income
beneficiary nor the principal beneficiary.
The fact that there is no language
authorizing an invasion of the corpus for
the benefit of the plaintiff or his father
indicates an intent to create some rough
equivalency between their competing
interests. Furthermore, any intent to
favor the plaintiff is negated by the fact
that there was no restriction on the

purposes for which the income was to be

paid to Alexander Ewing.

Yo
wy

As previously described, George Ewing
Testamentary Trust contained liberal
discretionary powers on the choice of

investment to be made by the trustees. It

also empowered the corporate trustee,

A-38

Citybank, in the exercise of its sole and
absolute discretion, to pay the net income
of the trust to Alexander and Michael
Ewing in any amount it deemed advisable,
"without regard to equality of
distribution." Furthermore, Citytrust was
authorized to use its discretion to invade
the principal for the benefit of Alexander
or Michael Ewing at any time and for any
reason. Upon the death of George Ewing,
one-half of the eomaitidet of the trust
corpus was to go to the plaintiff and one-

half was to go in trust with Lynda Ewing,

income during her life with the remainder
being distributed to her four children
from a previous marriage.

Insofar as this instrument names two

income beneficiaries and authorizes

A-39

income beneficiaries essentially without
restriction, the Court holds that it was
not the primary intent of the settlor to
ensure the substantial appreciation of the
trust corpus for the remaindermen. The
primary intent of the settlor in this
instance appear to have been to provide
the two income beneficiaries with a fund
upon which they could draw income and

invade principal as the need arose.

The Same reasoning and interpretation

given to George Ewing's Testamentary

Ke

Trust, also applies to George's Inter
Vivos Trust. It named Alexander and
Michael as co-income beneficiaries and
empowered Citytrust to invade the
principal for both of them without regard
to equality of distribution. Like Myra's

trust, it failed to state any restrictions

A-40

Finally, George's Inter Vivos Trust
empowered Citytrust "to make, retain or
change any investment without liability on
account thereof." For these reasons, the
Court holds that it was not the primary
intent of this trust to ensure the
substantial appreciation of the trust
corpus, but rather to provide the co-
income beneficiaries with a fund upon
which they could draw income and invade

principal as the need arose.

A trustee has abused his discretion when
he has failed to perform his duties or

acted dishonestly or in bad faith or acted

from an improper motive. See Gimbel, 166

Trusts ("Restatement") $ 187, comments e,
f (1959). Under normal circumstances, in
the course of performing his duties, a

trustee must strive to act with

A-41

impartiality as to Successive
beneficiaries; he has no power to alter
their respective beneficial interests.
Gimbel at 34; Restatement § 183 (1959).
Where there are successive beneficiaries,
a trustee must balance their interests
Such that, on the one hand, he must not
retain unproductive property likely to
yield an income far below that which is
normally earned by a like instrument, and
On the other hand, he must not purchase or
Seexin assets or property likely to waste
Or depreciate in value. Restatement $232,
comment b (1959). However, while a trustee
must always act with "due regard" for each
beneficiary's interest, where he is given
the authority to favor one beneficiary
Over another, a court must not interfere
except to prevent abuses of discretion.

id. at §183, comment a, §232. Ultimately,

A-42

[a] trustee is neither the insurer
nor the guarantor of the value of a
trust's assets. A trustee's
performance is not judged by
success or failure, and while
negligence may result in liability,

a mere error in judgment will not.

Bohart, 197 Conn. at 149 (citing Hartford

(

Nat'l Bank §& Trust Co, vy. Donahue,

Conn. Supp. 194, 402 A.2d 1195 (1972)).

Based on a reading of the three tru

instruments, the Court holds that t

trustees-defendants did not abuse thei

discretion in the performance of the

duties. The Court is not prepared to ho

that the defendants’ investment strate
was undertaken in bad faith
improper motives or was in dereliction
their duties or substantially
materially altered the beneficiarie
interests as set out in the tru

’
4 o+ mantsc
INSTIFUMENTS .

i

35

~

O
ry

WY)

~

A-43

Based on the Court's holding that it was
not the primary intent of the two George
Ewing Trusts to ensure the substantial
appreciation of the corpus for the
remaindermen and the fact that these
trusts granted the trustees liberal
investment powers, the defendants had the
discretion to favor the interests of the
income beneficiaries--one of whom was in
fact the SLs atitt. As an income
beneficiary of the George Ewing
Testamentary Trust, Michael Ewing received
a $66,000.00 distribution of income and
Principal in September 1968. Furthermore,
the principal of the same trust was
invaded for his benefit on other occasions
and without objection in the amount of at
least $60,000.00. Likewise the principal
of the George Ewing Inter Vivos Trust was
invaded for Michael's benefit without

objection, in the amount of $15,000.00 in

A-44

1982 for his medical expenses, and in the
amount of $24,000.00 respectively in both

1983 and 1984 for his living expenses.

There is no doubt that Alexander drew a
Substantial income as a result of the
defendants' investment policies. However,
in light of the income and principal
distributions for the benefit of the
plaintiff noted above, the Court is
unwilling to hold that the defendants'

investment strategy constituted an abuse

Moreover, the fact remains that Myra's

trust appreciated in value from
$388,188.00 to $462,000.00 over the course

f fifteen years. Though small and perhaps
in real dollar terms negligible or non-
existent, this appreciation indicates, at
a minimum, preservation as opposed to

destruction of the corpus for the

-

A-45

G4

J

os

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rea

ephone Co,,

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trustee's attempt to

A-46

of the settlor in providing for the life
tenant and remaindermen simply because the
remaindermen were unhappy about the new
investments made by the trustee. Id. at
441. The Kimball court made this ruling
despite the fact that the trustee, who was
granted a wide berth of discretion, sold
blue-chip stocks at a low market price.
id. Because a trustee is neither the
insurer nor guarantor of the value of
trust assets and because a mere error in
judgment will not result in liability,
Bohart, 197 Conn. at 49, the Court refuses
to hold that the trustees' investment
Strategy constituted an abuse of

discretion.

A-47

RB) ##THE_DELEGATION OF INVESTMENT
CONTROL TO ALVIN RUML

Plaintiff also argues that Citytrust,
alone, breached its fiduciary duty by
delegating to Alvin Ruml the authority to
dictate the investment policy of the Ewing
trusts. The Court rejects this argument

for the reasons set forth below.

A trustee is under a duty not to

delegate acts which it can and reasonably

KT

at eEemMmMeanrt
M~qiil-gege

Should be required to perform. Res

S 171 (1959). If such a delegation takes
place, it may constitute an abuse of

discretion. See Kolodney Vv. Kolodney, 6

Conn. App. 118, 122-23, 503 A.2d 625
(1986) (abuse of discretion to delegate
duty to exercise independent judgment as
to a beneficiary's needs). In particular,
a trustee cannot delegate the power to

7 ; : o ~ A eae
select investments. Restatement “Taree 63 |

A-48

however, should not be read to mean that a
trustee may not consult with others in the
process of administering a trust. Jd. at

comment f£ (1959).

While the trustee may not delegate
his duties and powers to others, it
is obvious that he must act
frequently through agents or
attorneys. This is not a delegation
of his powers, for the trustee
remains responsible for the
reasonable diligence of his agent
Or attorney. . . . Whether, in a
given case, the trustee wil
justified in entrusting a specific
part of the administration of the
trust to an agent, must depend upon

whether such act would be the act

of the reasonably prudent trustee

A-49

The plaintiff's argument that Citytrust
abused its discretion in delegating
investment powers to Alvin Ruml is
misdirected. On June 18, 1970, Alexander
Ewing notified Citytrust that he had
delegated his authority as co-trustee of
the George Ewing Testamentary Trust to
Alvin Ruml and noted that his letter
"([would] be (Citytrust's] authority to
require [Ruml's approval] in connection
with any investment changes [therein]".
Insofar as piaintiff's argument relies on
this delegation, it is ill-founded because
Alexander Ewing, and not Cit ve rust.

delegated his duties.

mm : Ae : : , shire ata -
The record does indicate, however, a

longstanding relationship between Ruml and

rx
+?
NO

Citytrust. From at least December
1967, through January 31, 1984, Citytrust

oe * -

; ' 1 ; '
} tT » | wit. R} ) r ‘ raIng , ra
1 > SG Ww aa K um e¢va MA 4 -

A-50

investment policy on each of the three
Ewing trusts. For example, the plaintiff
has submitted three letters dated December
12, 1967, April 23, 1968, and October 20,
1970, wherein Citytrust asked Ruml to
approve its recommendations as to
investment decisions in the two George
Ewing trusts. Alexander Ewing was carbon-
copied on each of these letters. In light
of Alexander's formal delegation discussed
above, the Court reads these letters to
imply that Ruml, both formally and
informally, acted as a conduit between

Citytrust and Alexander Ewing.

Citytrust's investment reviews for the
period of 1967 to 1984 indicate that Rum]
also acted as an investment adviser and
broker on all three of the Ewing trusts.

They indicate that the buy and sell orders

a ’ — ‘
flowing from CLEVE Lust «Ss investment

A-51

decisions were processed through the
brokerage firm where Mr. Ruml worked,
namely First Manhattan Corporation. In
this context, it is clear that Ruml: 1)
commented on and approved investment
recommendations made by Citytrust both in
the role of investment adviser and as the
"representative" of Alexander Ewing; 2)
communicated to Citytrust regarding
Alexander's income needs: 3) offered
unsolicited investment advice; and 4)
generally acted as an all-purpose

investment broker.

This course of dealings does not
indicate that Citytrust delegated its
investment responsibilities to Ruml, as
did Alexander Ewing. It has not been shown
in any of these investment decisions that
Ruml exercised any kind of ultimate,

controlling authority as to which

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A-52

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A-68

il. Do the three instruments here
at issue manifest an intent of the
testator/testatrix (with regard to the
estates and the testamentary trusts)
and the settlor (with regard to the
intervivos trust) to favor production
of income over preservation of the
buying power of the corpus?

o> Was the court below clearly
erroneous in holding that the appellee
did not abuse whatever discretion was
granted to it in the instruments by
favoring the competing interests of the
income beneficiaries over those of the
remaindermen in making investment

decisions for the estates and trusts?

iV. Was the holding of the court
below that appellee did not breach its
fiduciary duty to appeilant by
permitting Alexander Ewing to assign
his duties as co-executor and
co-trustee to Alvin Ruml Clearly

erroneous?

v4 Is there a_ genuine issue of
material fact on the question of
whether appellee permitted a
non-employee, Alvin Ruml, to have
effective control over investment

decisions for the estates and trusts?

STATEMENT OF THE CASE

Appellant commenced the case in the
Southern District of New York by
service a Summons and Complaint (Index

#: 86 Civ 4840 JES) on appellee's New

A-70

York City branch office on or about
June 19, 1986. Appellant alleged
breach of fiduciary duty owed to him by
appellee in its administration of the
two estates and three trusts here at
issue. Appellee denied the claim, moved
to join the Estate of Alexander Ewing
as a necessary party and to remove the
action to the District of Connecticut.
On Stipulation, the Complaint was
amended to include as a defendant the
Estate of Alexander Ewing and the
matter wasS removed to the District of
Connecticut on or about April 30, 1987,
and assigned Index No. B87-314 (TFGD).
Appellee proceeded to take the
deposition of Appellant on October 8,
1987. Appellant was granted the

opportunity to examine documents

relevant to the case in appellee's

possession on August 26, 1987, and
requested copies of those it deemed
relevant by letter to appellee's
counsel dated September 30, 1987.
Appellee finally made delivery of the
documents requested on or about
February 10, 1988.

On January 26, 1988, appellee moved
the District Court to compel appellant
to answer certain questions which he
refused to answer during his deposition
on advice of counsel and to compel
appellant to fully and completely
answer questions posed in appellee's
interrogatories which appellee claimed
appellant had answered in an incomplete
and/or evasive manner. Before the
District Court could rule on these

pending motions, appellee made its

A-72

motion for summary judgment on February
22; 1988, thus short-circuiting the
still incomplete discovery process and,
in effect, abandoning its then pending
motions to compel.

After a non-relevant procedural
dispute between the District Court and
appellant's trial counsel was resolved,
appellant decided not tO oppose the
regularity of appellee's motion for
summary judgment but, instead, to
cross-move for summary judgment in the
belief that the documents’) discovered
from appellee and from Norwalk Probate
Court records were sufficient to prove
up his cause of action. Appellant's
cross-motion for summary judgment was
filed on April 22, 1988. Appellee's
Reply Memorandum was filed on May 10,

1988, and the Ruling on which the

pennies

—

A-73

instant appeal is based was entered on
November 21, 1988. Final Judgment in
accord with said ruling was entered on
February 10, 1989. Notice of appeal
was filed by appellant on March 8,
1989, and Notice of Cross-Appeal was

filed by appellee on March 10, 1989.

STATEMENT OF FACTS

At the heart of this case is the
interpretation under Connecticut law of
appellee's fiduciary duty to appellant
pursuant to the terms of three
instruments, the Last Will and
Testament of Myra Goldsmith Ewing, set
forth at A 199 - 210 ("“Myra's Will"),
the Last Will and Testament of George
Ross MacKenzie Ewing, set forth at A

211 - 221 (“George's Will"), and the

A-74

Intervivos Trust of George Ross
MacKenzie Ewing, set forth at A 270 -
274 ("George's Trust under
Agreement"). Since these instruments
cannot be interpreted in 2a vacuum, and
since there are some issues’ which
cannot be resolved within the four
corners of these instruments, appellant
will summarize first those facts
believed to be undisputed (i.e., not
controverted by appellee and/or _ so
found by the Court below), then
highlight those terms of each
instrument which appellant believes to
be relevant in this case, and finally
those facts which may (if this Court
does not otherwise dispose of this

case) be both material and genuinely in

dispute.

A-75

A. UNDISPUTED FACTS

Alexander Ewing was the sole
issue of Myra and George Ewing and
Michael Ewing is the sole issue of
Alexander.

Zs Appellee was co-executor, with
Alexander Ewing, of the Estates of both
Myra and George Ewing.

De Appellee was sole trustee of
the testamentary trust established by
paragraph ELEVENTH of Myra's Will
("Myra's Testamentary Trust").

4. Appellee was sole trustee of
George's Trust under Agreement.

i Appellee was co-trustee, with
Alexander Ewing of the testamentary
trust established by paragraph TWELFTH

("George's Testamentary Trust").

A-76

6. Although appellant was over the
age of twenty-one years and not a
resident of the State of Connecticut at
the time appellee caused Final
Accountings for Myra's Estate and
George's Estate to be filed, appellee
never notified appellant of the filing
thereof nor did appellee advise the
Norwalk Probate Court of appellant's
interest as a remainderman therein
(Ewing Affidavit, p. 3, A - 187).

Fa Alexander Ewing inherited $
2,169,198.00 outright from Myra and
George Ewing at their deaths in 1967
(Daly Ruling, p. 3, A - 396).

8. On November 28, 1969, Alexander
Ewing had brokerage account with
Hallgarten & Co. with a balance of

$752,300.00 (Ewing Affidavit, p. 8, A -

192).

ws a

A-77

9. Appellee never even alleged
that it made any investigation to
ascertain Alexander Ewing's need for
income during its administration of the
estates and trusts.

10. Appellee never advised
appellant of his rights in and to the
estates and trusts here at issue (Ewing
Affidavit, p. 5-7, A 189 - 191).

> Appellee acquiesced in the
improper delegation by Alexander Ewing
of his responsibilities as a
co-executor and aS a co-trustee to
Alvin Ruml, which was done without the
knowledge or consent of appellant (Daly
Ruling, p. 4., A - 397).

Lae At her death, Myra Ewing had a
diversified portfolio of blue-chip
common stock (Inventory of her Estate,

A 262 - 264) all of which appellee sold

A-78

within two (2) months after her death,

converting the entire proceeds thereof
into municipal bonds (Daly Ruling, p.
10, A - 403).

13. Within the first year after
Myra Ewing's death, appellee lost
$103,577.34 in trading municipal bonds
in her estate (Daly Ruling, p. 10, A
-403).

14. Appellee administered Myra's
Estate and her Testamentary Trust at
all times in a manner designed solely
to maximize the income produced thereby
for the benefit of Alexander Ewing
without considering appellant's
remainder interest therein and in spite
of appellee's knowledge of ‘the
substantial wealth Alexander inherited
outright from Myra and George Ewing

upon their deaths:

A-79

"Defendant Citytrust

administered Myra's Trust to

maximize income..."
Daly Ruling, p. 2, A - 395,

aa At his death, George Ewing had

a diversified portfolio Of blue-chip
common stocks (Inventory of his Estate,
A 265 - 269) all of which appellee

a

Sold in less than two (2) months after

his, converting the entire proceeds
thereof into municipal bonds (Daly
RULING, Pp, 10, A-- 403).

16. Appellee administered George's
Estate and Testamentary Trust at all
times in a manner designed solely to
maximize income for the benefit of
Alexander Ewing without considering
appellant's remainder interests therein
and in spite of appellee's Knowledge of
the Substantial wealth Alexander
inherited outright from his parents

upon their deaths:

A-80

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A-81

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A-82

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A-83

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A-85

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—- ssn we 2h WILLIS

produced thereby to Alexander and/or

Michael

.--e-in such amounts) and
proportions as my said
corporate Trustee [appellee] in
its sole discretion shall deem
advisable from time to time
without regard to equality of
distribution."

George's Will also authorizes:

ro
ITNE

>

"W

-- only my corporat
Trustee in the administratio
of the Trust created by this
paragraph to invade the
principal for any reason in its
discretion for the benefit of
my Said son. or the lawful

e
YY
Aa

= 1 cs livwi 2
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} - 4 mtr Ac hy
the time of my death.
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als!

A-87

rh

her life. Upon the death O
appellant's stepmother, the half of the
Original corpus which remained in trust
after Alexander's death is to be
distributed, in equal parts, to the
four children of appellant's stepmother
by her prior marriage.

The investment Powers provisions in
George's Trust under Agreement are
extremely similar to those set forth in

his and Myra's Wills. The Wills give

" 8B TN Myo - ne roarnrywoc+ 73 Ae +
Asians & Ww & 414 V SG SD vv Pao '
restriction r 1 mit sn Tha Y c+
56 Che 4 arson + nea raitr aAc+ =
DOWEL 1 l : and rel ]

Y r\r nar » + | iA =
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r + Te) + aa c r) ~ + a ) 7
Drerer eG -AS } ‘ad 4 Wil Xv > Db
£

slanr+ + +

any investment without

account thereof..." All other
investment powers granted in all three
instruments are entirely unremarkable

anda have no conceivable pearing on tn

mm ~ lep AL EF a ¥
rhe only difference in the
Ajenncitive tarme hat a ARanr lo
Ai D> ds eo de VG L-eriMs petween 3JeOrge —

m — Mri o } ae Dee —
Testamentary Prust and his Trust under

ry

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Agreement 1S

Agreement, :

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invade principal for the benefit >f
a vw > r rp : = ~ os a
Alexanaer and/or Micnael 1S aS broad as
+ | 5 7} + ry = oe ~ 7a ‘ ie il an

he appellee's discretion to apportion
; _ ~~ WR ~ . ¢ . | : + a
Lncome between them while, ln the
rm T - c ~
restamentary Trust, the appellee's
“4 “-yrear r + +nwane rinerina) - nor
oo = 2 * o a et + iv Ae tlh + ~ iw ~& ~ ~ s

~ } = ; ~ ~ - } - ‘oe Aston TF
as broad as tne appeiice 5s qiscretion

: lara _ _neam re +.) - Alawvann
allocate income petween ALexancer

A-89

Agreement, paragraph 1 (A - 270). At
Alexander's death, the corpus of the
Trust under Agreement is to be treated
the same as George's Testamentary
Trust: one-half Outright to appellant
with the remaining one-half to remain
in trust with appellant's stepmother as
income beneficiary and her four
children by prior marriage the

remaindermen.

C. DISPUTED FACTS

a Did Alvin Ruml exercise
effective control over the investment

decisions made ln both estates and al]

dé Did appellee ever advise
appellant of his rights in and to the

Cwo estates and the three trusts?

A-90

7

Did appellee ever consider

O
—
O
rh

appellant's needs in administrati

the two estates ana the three trusts?

ARGUMENT

L . OVERVIEW

Appellant's primary contention
throughout this case has always been

that appellee breached its fiduciary

duty to appellant by making investment

decisions in both estates and in ali
t+hrae + nore ae r — 4 + 7a + + rod Arann
Vide = CruUsStls 2S) max Lm1LZe L ne pr =) we td On

»f Lncome without regard to tne
competing interests of remaindermen 1n
preservation of the buying power of the
below agree with appellant's contention
that Connecticut law follows the

yenerdai ruie Ln mos jurisdictions 1Nn

A-91

requiring a fiduciary to balance the

competing interests of Successive

beneficiaries in making investment

decisions in estates and trusts:

"Naturally, even if the Trustee

given the widest possible
discretion, there
nevertheless a duty to
impartially with Successor

beneficiaries."
Appellee Memorandum of Law, Dp.

83.

"Under normal circumstances,
the course of performing his
duties, a trustee must strive
to act with impartiality as to

successive heneficiaries;
haS no power to aliter

respective beneficial

interests. Gimbel at

Restatement § 183 (1959).
Where there are Successive

beneficiaries, a trustee
balance their interests

that, on the one hand, he must
not retain unproductive

property likely to yield

income far below that which is

normally earned by a
instrument, and on the

A-92

hand, he must not purchase or

retain assets or property
likely to waste or depreciate
in value."

Daly Ruling, p. 14, A - 407.

Appellee argued, in its motion for
summary judgment, among other theories,
that its admitted conduct in favoring
production of income over preservation
of the buying power of the corpus was
justified by the discretion allegedly
given in all three instruments here at
issue to favor the interests of the
income beneficiaries over the competing
interests of the remaindermen.

In a footnote to its decision, the
Court below accepted appellee's

argument in that regard:

"By virtue of the grants of
discretion in the trust
instruments at issue, the
prudent investor rule does not

A-93

apply and defendants need only
have acted in accordance with
and not abused the discretion
granted them to avoid
liability. See United States
Trust Co. v. Bohart, 197 Conn.
34, 48 495 A.2d 1034 (1985);
Jackson v. Conland, 178 Conn.
BR 55-57, 420 A.2da 898
(1979)."

Daly Ruling, p. 8, A - 401.

Appellant respectfully urges that
the Court below was clearly erroneous
aS amatter of law in so concluding for
two reasons, which will be examined in
Section II below. First, the Court
below mistakenly concluded that
whatever discretion does exist in the
three instruments had the effect of
relieving appellee of the constraints
imposed under Connecticut law by the
prudent man rule. The Court below then

compounded the error by concluding that

if appellee waS not bound by the

A-94

prudent man rule it was automatically
free to invest in a manner which
favored maximizing income over
preservation of the buying power of the
corpus of the estates and trusts.
Simply put, appellant believes that
there is no necessary connection
between the application of the prudent
man rule to a trustee's investment
powers and the other obligations of a
trustee/executor to a beneficiary,
including, without limitation, the duty
to act impartially as to successor
beneficiaries.

Appellee also argued that the terms

7.
of all three instruments manifest an
intent to favor production of income
over preservation of the buying power
of the corpus. The Court below agreed

with regard to both George Ewing's

A-95

Testamentary Trust and his Trust under
Agreement:

"The designation...of Alexander
and Michael Ewing as co-income
beneficiaries also Supports the
decision to sell George's stock
portfolio and exchange it for a
bond portfolio that would
support, if necessary two
income beneficiaries who were
also granted principal invasion

powers. For all these reasons,
the Court holds that the
executors' actions in

liquidating the stock holdings
of Myra and George Ewing's
Estates and exchanging them for
bond holdings, were not an
abuse of discretion."

Daly Ruling, p. 11, A - 404.
"Insofar as this instrument

nameS two income beneficiaries
and authorizes invasion of the

principal by either of th
income beneficiaries
essentially without
restriction, the Court holds

that it was not the primary

intent of the settlor to ensure
the substantial appreciation of
the trust corpus for the

remaindermen. The primary
intent of the settlor in this
instance appears to have been

to provide the two income

beneficiaries with a fund upon
which they could draw income
and invade principal as the
need arose."

Daly Ruling, p. 13, A - 406.

Appellant respectfully urges that
the Court below was clearly erroneous
aS amatter of law in so concluding for
two reasons which will be fully
examined in Section III hereinbelow.
First, the Court neglected to note that
this reasoning cannot be applied to
Myra's Testamentary Trust. Secondly,
this Sours will note that neither

George's Will nor George's Trust under

Agreement authorize invasion of the
corpus "Dy either of the income
beneficiaries without restriction" as
the Court below held. Ratner,

appellee, and appellee alone, is given

discretion to invade the corpus of

A-97

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A-101

Restaurant

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(appellee) can m

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A-103

the beneficiaries of the estate and/or
trust. Among these are the duty not to
delegate; the duty of loyalty; the duty
to act impartially between different
beneficiaries (whether simultaneous or
Successive); and the duty to invest the
corpuS with the care of a prudent man.
That connecticut law follows these
general principals will be made amply

clear aS we examine the cases cited by

trustee of the duty to balance the

competing interests of the income
beneficiaries wth those Of the
remaindermen either by means of
language to chat effect in the
instrument's dispositive provisions, or

nvestment

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A-104

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of following

be low apparently
he investment powers

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A-105

man rule, the executor or trustee would
still be bound to deal impartially with
successive beneficiaries.

Appellant contends that the cases
cited by the Court below make it

abundantly clear that Connecticut law

does not permit interpretation of
investment powers (administrative)
provisions to alter the dispositive

provisions except in cases where the
executor/trustee is expressly required
to retain assets of the
testator/settlor and compliance with
such instructions necessarily effects
the amount of income produced or limits
the fiduciary's ability to preserve the
buylng power of the corpus. Whatever
aAiscretion may exist in the language

cited by the Court below relating to

A-106

assets of the estates can be ignored
Since it 1s clear that appellee chose
to retain none of the blue-chip stocks

with which Myra and George Ewing died

.. May the executors and
trustees exercise the powers,
authorities and discretions

conferred upon them by the Will
in such a manner as to alter
Substantially the value of the
respective interests of the
income beneficiary and the
remainderman (1) in oil and gas
property interests; (2) in the
estate and trust assets, other
than oil and gaS property
interests."

Gimbel, supra, at 27-28.

In deciding how to answer this
question, the Gimbel court noted:

"Although the settlor
imparted to the trustees the
widest possible discretion,
they are, nonetheless, under a
duty to deal impartially with
the succesSive beneficiaries.
Connor v. Hart, 157 Conn. 265,
277, 253 A.2d 9; Restatement
(Second), 1 Trusts §§ 183, 232.
"[T)he interests of the two
beneficiaries are toa certain
extent antagonistic, and the
trustee is under a duty so to

A-131

administer the trust as to
preserve a fair balance between
them." 3 Scott, Trusts (3d Ed.)
GS 434. In the Connor case, we
stated (p. 274): “Although the
use of the term "sole
discretion' confers a wide
discretion, no language in a
trust will be so construed as
to remove a trustee from
equitable control. ‘To the
extent to which the trustees
had discretion, the court will
not attempt to control their
exercise of it as long as they

have not abused it.... But the
law will not tolerate its
abuse, however great the

creator of the trust intended
the grant of discretion to be.'
Conway v.Emeny,...[139 Conn.
612, 619, 96 A.2d 221). This
rule applies even when the will
has used the term ‘'absolute' or
‘sole' discretion. Ibid. The
same rule is recognized in
Connecticut Bank & Trust Co. v.
Lyman, 148 Conn. 273, 281, 170
Av#e i130.”

Gimbel, Supra, at 34-35.

The

Supports only the appellant's position

answer the Gimbel court came to

herein:

A-132

"While the settlor's will in
article thirteenth both greatly
enlarges the administrative
powers of the trustees and
insulates them from liability
for the exercise of those
powers, they have been given no
dispositive, as distinguished
from administrative, powers and
there is nothing in the will
which would allow the executors
and trustees to exercise any of
their administrative powers to
alter substantially the value
of the respective interests of
the income beneficiary and tne
remainderman either in the oil
and gas interests or the other
trust assets. Our answer to
guestions B (5), C and Dis
"No.""(emphasis added)

Gimbel, supra, at 35-36.

In examining the Kimball case,
appellant notes that this decision was
made in 1947, not 1977, as the Court
below erroneously noted, and that this
lower Connecticut court decision was
made before Connecticut adopted the
current, limited prudent man rule

(embodied in C.G.S. 45-88) in 1949.

A-133

A careful reading of the Kimball
case reveals that it, also, has no
applicability to the instant case. In
Kimball, the trust was initially funded
with blue-chip stocks and the trustee
was directed to pay the income produced
by the corpus to named income
beneficiaries for their lives and, on
the death of the last income
beneficiary, to distribute the corpus

to remaindermen. (Kimball, supra, at

433 and 435) The case does not
indicate if there was any power to
invade the corpus. The Kimball Will

gave his executors and testamentary

trustees "to invest and reinvest the
[corpus], and, in its discretion, to
sell the same..." (Kimball, supra, at
434). The Will also stated that "...in

no event shall the Executor be liable

A-134

for any loss or depreciation of
property held by it aS Executor
hereunder unless such loss occurs
through its bad faith or wilful
default." (Kimball, supra, at 434).
The remaindermen complained of losses
incurred by the executor in selling
blue-chip stocks (primarily AT&T and
GE) during the depressed stock market
conditions which prevailed during World
War II in order to diversify the
portfolio of the estate.

The Kimball court notes that under
Connecticut law

"[t]he executor's primary duty
is to settle the estate, pay

debts, and make distribution,
and not to sell and reinvest the
assets....The general rule as to

the duty of a trustee is that he
must exercise due diligence in
light of the particular
circumstances surrounding the
administration of his trust.
[citations omitted])...He must

A-135

act aS a prudent man under the
circumstances [citations
omitted])."

Kimball, supra, at 440.

The Kimball Court then noted that:

wre. acts of this
executor-trustee must be
examined in the light of the
“exculpatory clauses" of this
Widds"

Kimball, supra, at 440, primarily as a

result of which the Kimball court
concluded that the trustee had not
breached its fiduciary duty to the
remaindermen.

Simply put, it 1s appellant's
position that none of the Connecticut
cases cited by the Court below can be
read to Support the position that
either a grant of discretion to
allocate income among various income

beneficiaries or a grant of discretion

A-136

to invade principal for the benefit of
one or more income beneficiaries can be
interpreted to indicate an intent by
George wang to authorize appellee to
make investment decisions for his
estate, his Testamentary Trust, or his
Trust under Agreement which have the
effect of favoring income production
over preservation of the buying power
of the corpus. Moreover, the Court
should note that the dispositive terms
of Geotge's Will and Trust under
Agreement do not come within the only
exception to such duty to balance
interests which is when the income
beneficiaries and the remaindermen
(whether one or more) are the same
individuals or parties. In the instant
case, Alexander Ewing is not a

remainderman and some of the

A-137

remaindermen (Lynda Ewing and her
children by her prior marriage) are not
income beneficiaries. To the extent
that the Court below relied upon the
fact that appellant was both one of the
income beneficiaries and one of the
remaindermen, appellant respectfully
urges that such reliance is clearly

erroneous aS a matter of law.

Appellant also respectfully
contends that the Court below
misconstrued the meaning of the

dispositive provisions in George's Will
and his Trust under Agreement in
ignoring the Significant wealth
Alexander Ewing inherited outright from
his parents and in ignoring George
Ewing's apparent intent in both
instruments to provide for remaindermen

wno were not also income beneficiaries

A-138

- Lynda Ewing and her four children by
her prior marriage. The interpretation
which the Court below made of the
discretion George Ewing granted to
appellee makes a mockery of the clear
intent envisioned by the plain language
of his will and Trust under Agreement.
Accordingly, appellant contends that
appellee must be surcharged for
brazenly ignoring George Ewing's clear

intent.

IV. ABUSE OF DISCRETION

Even if this Court sustains the
decision of the Court below that all
three of the instruments here at issue
gave appellee the discretion to make

investment decisions in a manner

favoring the income beneficiaries over

A-139

appellant's remainder interests
therein, appellant respectfully urges
that the decision of the Court below
waS clearly erroneous as a matter of
law in holding that appellee's conduct

did not constitute an abuse of such

discretion. Appellee justifies its
conduct... "[{bJecause of the income
needs of Alexander --.-" (Appellee

Memorandum of Law, p. 2, A - 82), and
that "...it was clearly the duty of the

Trustee to provide the necessary income

for Alexander." (Appellee Memorandum
of Law, p. 5, A - 82, emphasis added),

z

without ever offering even one shred of

evidence that appeliee either

investigated Alexander's need for

income or that Alexander in fact had

any such need. On the contrary,

",..-Alexander inherited outright from

A-140
his parents' estates [in 1967)
approximately $2,169,198.00..." (Daly

Ruling, p. 3, A - 396). Although not
cited by the Court below, it is also
undisputed that Alexander had a trading
account with the brokerage firm of
Hallgarten & Co., which had a balance
of $752,300.00 on November 28, 1969
(Affidavit of Ewing, Exhibit Q, A -
360).

Appellant asks this Court to take
judicial notice of the fact that Two
Million Dollars was a great deal of
money in 1967, and, even with the
substantial inflation which has since
occurred, is still a rather tidy sum.
Given the substantial wealth Alexander
inherited, even if he had no other
means of support, appellant contends

that this Court should conclude aS a

a

A-141

matter of law that appellee abused
whatever discretion it had pursuant to
the terms of the three instruments by
administering both estates an all three
trusts from their inception (literally
within months after the deatns of Myra
and George) solely to maximize income
for the benefit of Alexander.

Appellee also argues that the
discretion given to it to invade
principal (in George's trusts only!) is
sufficient to permit appellee "...to
invade the principal and pay the entire
amount to Alexander...". (Appellee
Memorandum, p. 14, A - 94.) Appellee's
argument would permit it to invade the
principal to Support, for example,
gambling on horses by Alexander. The
Gimbel decision makes it clear that no

grant of discretion is broad enough to

A-142

permit such a result. In considering
this argument advanced by appellee,
this Court must note that appellee has
never offered any justification for its
invasions of principal, even though it
is clear aS a matter of law that no
discretion is untrammeled. This is an
abuse of discretion.

Appellee then urged upon the Court
below the theory that it had discretion
to maximize income produced by both
estates and all three trusts to avoid
the necessity to invade the corpus

thereof to provide for Alexander's

alleged but never documented needs:

"...[Citytrust] attempted to maximize
income to meet the needs of
Alexander....without invasion of
principal, in an attempt to preserve

the estate. (Appellee Memorandum of

%

A-143
Law, p. 3, A - 83). Appellant notes
that this theory is totally

inconsistent with the justification
offered by appellee above. Also,
appellee cites no law to support its

extremely novel theory in this regard.

In fact, such theory is totally
inconsistent with the undisputed
requirement of Connecticut law

requiring a fiduciary to balance the

competing interests of successive
beneficiaries, and conflicts with
appellee's own internal "Investment

Policy" guidelines set forth at A 276 -
ye TE

Sensing that it could not prevail
on the theory of reasonable exercise of
discretion granted to it in the three
instruments, and admitting "[t]here is

no material dispute as to the

A-144

investment ~~ policy [pursued by
appellee}...." appellee urged upon the
Court below that "[{t)he Trustee, in
fact, made investments to increase
income for Michael's father as it was

obligated to do under the trust

instruments." (Appellee's Memorandum of
Law, P. 15, A - 95). Since appellant
has shown in hereinabove that the
instruments cannot be read to permit or

mandate such discrimination in favor of

an income beneficiary over the
competing interests of the
remaindermen, appellee's admitted

conduct in doing so must be held to be
an abuse of discretion as a matter of
law.

Although appellee also contended
that its conduct in administering the

estates was justified because it sold

A-145

",..high concentrations of speculative
securities..." (Appellee Memorandum of
Law, p. 2, A - 82), the Court below

found that appellee, in George's estate

"4 SOAS his blue-chip stock
holdings..." (Daly Ruling, p. 10, A -
403), and "...in the case of Myra

Ewing's Estate, two months after her
death her stock holdings of General

Electric, Eastman Kodak Co., IBM,

Singer, Standard Oia, etc., were
S0iGs+." (Daly Ruling, p. 10, A -
403). Moreover, the Court below held
that:

"Nine months later in December
1967, these same executors sold
these municipal bonds at a loss
of $103,577.00 and the proceeds
were again used to purchase
municipal bonds." (Daly Ruling
mp. 19, A = 603).

A-146

This is not the appropriate liquidation
of “speculative securities" as appellee
contends, but a clear abuse for which
appellee ought to be surcharged.

One of the reasons the Court below
found the conduct of appellee not to be
an abuse of discretion was because some
income went to appellant and because
some invasions of principal were made

for appellant's benefit:

rere, * requests made by
plaintiff for additional
allowance, or monies, from

defendant during his father's
lifetime were acceded to and
were sufficient to meet his

living expenses and other
needs." (Daly Ruling, pg. 5, A
- 398).

"As an income beneficiary of
the George Ewing Testamentary
Trust, Michael Ewing received a
$66,000.00 distribution of
income and principal in
September 1968. Furthermore,
the principal of the same trust
was invaded for his benefit on
other occasions and without

A-147

objection in the amount of at
least $60,000.00. Likewise,
the principal of the George
Ewing Inter Vivos Trust was
invaded for Michael's benefit
without objection, in the
amount of $15,000.00 in 1982
for his medical expenses, and
in the amount of $24,000.00
respectively in both 1983 and
1984 for his living expenses."
(Daly Ruling, p. 15-16, A 408 -
409).

Although appellant received no
income on a regular basis from the
estates or trustS prior to 1979, the
entire issue of what money flowed to
appellant prior to his father's death
is legally irrelevant because, as the

Court below did recognize:

"52th plaintiff is not
contesting the income
allocations from either of the
George Ewing Trusts between
Plaintiff and his father or the
invasions of principal for his
father under the George Ewing
Inter Vivos Trust.* (Daly
Ruling, p. 5-6, A 398 - 399).

A-148

The real point here is that appellee
has never even alleged hat it ever
considered appellant's needs during the
seventeen year period of its
administration of the estates and
trusts here at issue. This court must
conclude as a matter of law that
appellee's total failure to consider
appellant's needs makes the investment
policy of maximizing income over the
competing interest of preserving the
buying power of the trust corpus an
abuse of discretion.

In fact, what stands out is that
appellee always gave virtually all
income in both estates and all three
trust to Alexander while it always

invaded the principal of one or the

other of George's two trusts in these

A-149

few occasions when it did determine to
provide money for appellant. sc. an
respectfully urged that such conduct is
clear evidence of an abuse of

discretion by appellee.

V. DUTY TO PRESERVE

Althcugh appellant never argued
that the instruments here at issue
required appellee to guarantee
Substantial appreciation of the corpus
of the estates and trusts, appellant
disagrees with the holding of the Court

below that:

"Based on the Court's holding
that it was not the primary
intent of the two George Ewing
Trusts to ensure the
substantial appreciation of the
corpus for the remaindermen and
the fact that these trusts

A-150

granted the trustees liberal
investment powers, the
Gefendants had the discretion
to favor the interests of the

income beneficiaries -- one of
whom was in fact the
plaintiff."

Daly Ruling, P. 15, A - 408.

The Court below also observes that
since appellant inherited over One
Million Dollars from Myra's
Testamentary Trust and George's Trust
Under Agreement, his instant complaint
is like those of the Kimball
remaindermen who complained they would
have inherited more if the trustee has
made better investments (Daly Ruling,
p. 16-17, A 409 = 410). The Court
below entirely misconstrues the nature
of appellant's complaint, and
completely ignores the precedent cited

in Dennis v. Rhode Island Hospital

Trust National Bank, 571 F. Supp. 623

RE ee)

A-151

(P. Rhode Island, 1983). On appeal of
that case, the First Circuit confirmed
that the trustee had violated its duty
to deal impartially with successor

beneficiaries and held that:

"For one thing, it seems
reasonable for the court - in
devising a remedy for the
trustee's violation of its duty
of impartiality - to assume
that a fair trustee would have
maintained the property's real
value from 1950 through
1982....Such an assumption is
consistent with basic trust law
policies of providing income to

| income beneficiaries while
preserving principal for the
remaindermen,....Where a court

is trying to create, not a
measure of the trustee's duty,
but Simply 4 plausible
reconstruction of what would
have occurred to a hypothetical
1950 reinvestment, we see
nothing unreasonable in
assuming that the value of the
corpus would have kept pace
with inflation." (emphasis
added)

A-152

Dennis v. Rhode Island Hospital Trust

National Bank, 744 F.2d 893, 900

(1984).

It is appellant's contention that
what appellee did in the estates and
trusts here at issue is fundamentally
no different that the breach committed
by the corporate trustee in the Dennis
case. The value of appellant's
remainder interests in both estates and
in George's Trust under Agreement when
they were established was $
1,344,728.00, , but on his father's death
only $ 1,193,564.00 was distributed to
appellant by appeliee in spite of the
fact that the Consumer Price Index went

up 312% over this period!!

A-153

VI. DELEGATION TO RUML

In the event that this Court does
not rule in favor appellant on the
basis of appellee's admitted failure to
balance the competing interests of the
income beneficiaries with those of the
remaindermen, appellant respectfully
urges that appellee failed to meet its
obligation below to extinguish all
genuine issue of material fact
regarding Mr. Ruml's role in
controlling investment decisions in
the estates and trusts, for which
reason the case should be remanded for

trial on this issue.

RELIEF SOUGHT

Appellant respectfully requests

this Court to direct entry of Judgment

A-154

against appellee in the amount of

$3,001,998.50 (plus statutory interest

in Connecticut at 10% per annum from

October 29, 1984, when appellant's
father, Alexander Ewing, died, thus
triggering distribution to appellant)
which represents the difference between
what appellant should have inherited
had appellee invested to keep up with
inflation, (See number fta Be 3h
hereinabove) and the $1,193,564.00
which appellant actually received from
appellee on his father's death, as
calculated below.
& Myra Ewing's Residuary Estate
as of January 22, 1967 (A -
238) = $459,260.00
x 3.12 (Conswner Price Index -
See p. 11 hereinabove)
= $1,432,891.00 less
$472,259.16 actually
received by appellant from

appellee
= $960,632.00.

Il.

Ill.

IV.

$442,

By:

A-155

George Ewing's Residuary
Estate as of June 3, 1967 (A -
256) = $283,492.00

x 3.12 = $884,495.00 divided
by 2 (appellant only 1/2
remainderman) =

$442,247.00 less amount
distributed by appellee to
appellant of $ 0.00

= $442,247.00.

George Ewing's Trust Under
Agreement as of May 2, 1967 (A
- 268) = $1,487,445.60

x 3.12 = $4,640,830.20 divided
by 2 (appellant only 1/2
remainderman) =

$2,320,415.10 less amount
distributed by appellee to
appellant of $721,305.85

= $1,599,109.30.

Total: $960,632.00 plus
247.00 plus
$1,599,109.00 = $3,001,988.00.

APPELLANT
MICHAEL EWING

William R. Horner, Esq.
Horner & ISaacs, P.C.
489 Fifth Avenue

New York, NY 10017
(212) 953-2288

A-156

UNITED STATES COURT OF APPEALS

FOR THE

SECOND CIRCUIT

MICHAEL EWING,
Plaintiff-Appellant,
-against-
CITYTRUST and ALVIN RUML and LYNDA EWING
As Executors of the Estate

of Alexander Ewing,

Defendants-Cross-Appellants.

ON APPEAL FROM THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF CONNECTICUT

$$ —————— —E—E el

APPELLEE'S AND
CROSS-APPELLANT'S' BRIEF

et

Dion W. Moore

Williams, Cooney & Sheehy
One Lafayette Circle
Bridgeport, CT 06604

(203) 331-0888

A-157

AnrKIM
AWL

"Tre
VIEW

j/

A-158

CASE PAGE

Anderson v. Liberty Lobby, Inc.,
106 3.00 2505 1ES06) ve seucss
Brig Cj
Beach, 119 Conn. 131, 139, 174
Rie SOS eee se creer eee

Carten v, Carten, 153 Conn. 603,
CLG, 2he Ace Fae SESS? oO 8 aves

Celotex Corp, v, Catrett, 106 S.
CE. BOSS: CRSCO? bee ee bc wees wees

Lyman, 148 Conn. 273, 278, 170

> eee 4 8 Se ee
Cromwell] _v. Converse, 108 Conn.

412, 425, 143 Atl. 416 (1928)
Davis v ngi in -

549 F.2d 314, 324 (Sth Cir.

kg oy are en eae

Dennis v, Rhode Island Hospital
Trust National Bank, 571 F.
Supp. -622 (DB. R,1.¢ LISS) «scces

eS eee ee ee ee ee
Fed. R. App. P. 2S (a) (9) ccsviccccvers
G r : lin, |76 N.H.

SUiy: OS.Bs Bad 34 686 Overebe Seas

A-159

CASE

Gimbel_ vy, Bernard F. and Alva B.
Gimbel Foundation, Inc., 166
Conn. 21, 36, 347 A.2d 81
CEPEU) bo eewneee canbe

Harris v, Plastics Mfg.Co., 617
F.2d 438, 440 (Sth Cir. 1980)

Kelly v, Ivler, 187 Conn. 31, 39,
$50 A.2@ BT (i906) ccc.

Kimball _v, New England Trust Co.,
14 Conn. Supp. 432 (1947) .....

King v. Horizon Corp., 701 F.2d
1313, 1315 (10th Cir. 1983)

Knight v. United States Fire Ins.
Co., 804 F.2d 9 (2nd Cir.
Res is ew ae ob ee eee

Loveridge v. Dreagoux, 678 F
G70, 877 (i0th Cir. 19862) .....

Mathews v, Sheehan, 76 Conn. 654,
660, 57 Atl. 694 (1904) .......

Rhode Island Hospital Trust

Company v,. Egan, 52 R.I. 384,

aes Be £96 55595 eee eee

Rousseau v, United ;

(S.D.N.Y 19

© @ 82.062 23 42.4°3 85 ¢ 2 3

A-160

CASE PAGE

Smith v. Sturm, Ruger & of. eee 6
524 F.2d 776 (9th Cir. 1975)

United States Trust Co, vy, Bohart,
197 Conn. 34,495 A.2d 1034
(1968S) ccscvcccceveweeeen eevee.

Wards Co,, Inc, V. Stamford
Ridgeway Associates, 761 F.2d
117 (2nd Cir. 1985) .----+-+eeees

Zeoli v,. Commissioner of Social
Services, 179 Conn. 83,425
A.2d 553 (1979) cc ececeseveces

C AC Cr) \
conn Gen Stat 15-100e (37)
Conn Gen Stat 1 re ee a

A-161

UNITED STATES COURT OF APPEALS

FOR THE

SECOND CIRCUIT

MICHAEL EWING,
Plaintiff-Appellant,
-against-
CITYTRUST and ALVIN RUML and LYNDA EWING
As Executors of the Estate

of Alexander Ewing,

Defendants-Cross-Appellants.

ON APPEAL FROM THE UNITED STA
COURT FOR THE DISTRICT OF

APPELLEE'S AND
CROSS-APPELLANT'S BRIEF

INTRODUCTION

This is an appeal and cross-appeal from

CAas\s

A-162

on a Ruling on Pending Motions (A-473) in
a diversity case decided by the District
Court for the District of Connecticut (The
Hon. T. F. Gilroy Daly). In its Ruling on
Cross-Motions for Summary Judgment, the
Court, based upon undisputed material
facts, concluded, as a matter of
Connecticut law, that the defendant,
Citytrust, as trustee, did not abuse its
discretion in its administration of
certain Estates and Trusts created by

George and Myra Ewing. (A-400-410).

The District Court did conclude, how-
ever, that Citytrust abused its discretion
when it invaded the principal of George
Ewing's Testamentary Trust for the benefit
of his son, Alexander, despite language in
that Trust which authorized the Trustee
"to invade the principal for any reason in

its discretion. ; : ae (A-413). The

A-163

invasion involved was in the amount of
$111,000 and terminated the George Ewing
Testamentary Trust. (A-416). As the
grandson, Michael, had a one-half
remainder interest in this Trust, damages
were awarded in the amount of $55,500 plus
prejudgment interest resulting in the
judgment in the amount of $81,769.58. (A-
479-480). It is from this judgment that
Citytrust filed a Cross-Appeal relating
solely to the issue of the invasion of
principal of the George Ewing Testamentary

Trust.

STATEMENT OF ISSUES

1. Did the District court correctly
decide, as a matter of Connecticut Law,
that Citytrust did not abuse cs
discretion in the administration and
investment policies relating to the George

vr) + Py
SUS S. Y
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OF FACTS

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A-165

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A-166

under the laws of the State of
Connecticut." (A-205). The trustee was to
invest and reinvest the residuary estate
and pay over the net income to Alexander
for his life. Upon his’ death, the
principal was to go to his lawful issue in
equal shares per stirpes. (A-203). In the
event that Alexander and Michael
predeceased Myra, all the residue was to
be paid to Lynda Ewing, Alexander's wife
and Michael's stepmother, and upon her
death to her children, Michael's

stepbrothers and sisters.

The Estate of Myra Ewing had high
concentrations of IBM and Singer stock.
These securities were sold, and the trust,
from its inception was invested in tax-
exempt bonds which appreciated in market

value from approximately $388,000 to

$462,000 as well as providing income for

A-167

Alexander. By way of comparison, Singer
Stock lost substantially all of its value
in the mid-1970's, and IBM produced little

income. (A-104-105).

Just prior to his death, George Ewing

Created an jnter Vivos Trust funded

largely with Singer and IBM stock.
Citytrust was the Trustee and was
authorized to invest and reinvest the
funds in the trust and to "pay the income

therefrom and so much of the principal as

mm
4

Oo
(

rustee

may in the judgment of the

desirable to or for the benefit of th

40)

Grantor's son, Alexander Lunt Ewing, or
Grantor's grandson, Michael George Ewing,
in such amounts and Proportions as my said
Corporate Trustee in its sole and absolute
discretion shall deem advisable from time

to time without regard to equality of

fat , ih : : " eo
distribution. (A-27

A-168

her children, were also named in the inter
yivos Trust. (A-271). The Trustee had the
power "to invest and reinvest in any
property oF security” and "to make, retain
or change any investment without liability

on account thereof." (A-272).

The inter vivos Trust originally
consisted largely of Singer and IBM stock.
However, during the course of the
administration of the Trust, Citytrust
sold these concentrations, and invested in
a diversified portfolio mainly in bonds,
which preserved the principal and provided
a dramatic increase in income. Michael
received principal distributions from this
Trust in the approximate amount of $40,000
compared to $6,000 of principal dis-
tributed to his father, Alexander. (A-
102)... :As2 requests made by Michael for

3 8 s ; ee re + oo i. ~~ YT)
additional allowance or monies from

A-169

Citytrust during his father's lifetime
were acceded to and were sufficient to
meet his living expenses and other needs.

(A-398) .

George Ewing also created a Testamentary
Trust funded by one-half of the residuary
of his Estate, which was in the
approximate amount of $283,492. Under the
terms of the Will, the Trustee was
empowered to pay sO much of the net income
to Alexander Ewing and the lawful issue of
Alexander "in such amount and proportions
as my said Corporate Trustee in its sole
and absolute discretion shall deem
advisable from time to time without regard
to equality of distribution. " (A-214).
Lynda Ewing and Michael's stepbrothers and

sisters weve again mentioned in the George

Ewing's Testamentary Trust (A-215). The
Trustee also had the power to invest and

A-170

(A-218). It was also suggested
Trustee consult with George
attorneys, Perry & McKendry,

matters pertaining to the conduct

settlement of my Estate
administration of the Trust.

220).1

1 In this regard, Citytru
letters from Perry & McKendry

of 1973, and May of 1980 . Th

indicate that

possible power and discreti

invasion of principal and that
intent of the Grantor/Testat
the son, Alexander, except ich
might be necessary to supplemer:
"obligation to support hin

The District Court t

upon the letters from Perr
scrivener of the three Trust
the District Court wa : 4
the language in tI T

unambiguous and unequiv
footnote 4)

that the

Ewing's

"in ai

re + _
- ~+> a
>
my,
a »
>
- . .
“~
> >
“

7
4

and

ry

A-171

In addition, Michael Ewing recei

Statements relating to the Trus

administered by Citytrust since 1980,

not longer. (A-190). However, he

1@))
=

W
ct
¢))

threw them in his desk, often unopened,

and he never made any inquiry
Citytrust, his father or anybody e

regarding statements. (A-106). After

death of his father in October of 195

Michael received final accounts submit

to the Probate court, however, he nev

, ® 8 Se » om . a] 2 C
In this suit filed on June 19 19%
,
Michael nor seeks “te review
1 estment policies of Citytrust

determine if Citytrust has violated

rt)

ad its fiduci

whether Citytrust breach

ay)

is
»

)
rh

\Q

A-172

principal in the George Ewing Testamentary
Trust for the benefit of Alexander. (A-
194). Michael makes the unusual request of
an Appellate Court by asking that it take
judicial notice of the consumer price
index (Brief at p. 10) and enter judgment

in the amount of $3,000,000.00.

ARGUMENT:

I. THE STANDARD OF REVIEW AND
PROPRIETY OF SUMMARY

JUDGMENT.
Upon careful review of the underlying

Trust documents, and the undisputed

material facts, the District Court deter-

the claims that it had breached its

A-173

that there was no improper delegation by
Citytrust of its investment responsi-
bilities to Alvin Ruml. (A-412). The Court
did find, however, "that Citytrust abused
its discretion in authorizing {the
invasion of the George Ewing Testamentary
Trust] for the monthly support of Lynda
Ewing's children. , thd (A-414) This
conclusion was reached because certain
interpretations by the Court "cast a
Substantial shadow of doubt on Citytrust's
good faith, or at the least call into
question its performance of its duties as

Trustee," (A-414).

At the Outset, appellate review Of the

“es, re c PhS oe eet ae -
qagetermination of tne District LOurt ina

A-174

In addition, since the action was
one based on diversity "(d)eference
is to be accorded the views of a
resident federal district judge
with respect to the interpretation

and application of the law of his

state . . . (and) appellate review
is . . . governed by the “clearly
erroneous standard." Loveridge v.
Dreagoux, 678 F.2d 870, 877 (10th

Cir. 1982) Courts of Appeals have
generally taken the view that it
will not overrule a district judge
on questions of state law unless

the judge's findings are "clearly

wrong." Smith v. Sturm, Ruger §&
Co., Inc,, 524 F.2d 776 (9th Cir.
1975).

In Connecticut, the construction of a

WY)
c?
t
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ct
3
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r
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mw
3
ey)
+
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D
ry
O
> ty

will or a tf
law for the Court to determine from a

| reading of the instrument as a whole in

A-175

148 Conn. 273, 278, 170 A.2d 130 (1961)

the Court wrote:

We cannot rewrite a Will or a
Trust instrument. The express
intent must control, although this
is to be determined from reading
the instrument as a whole in the
light of the circumstances

surrounding the testator or settlor

when the instrument was executed,
including the condition of his
estate, his relations to his family
and beneficiaries, and their

situation and condition. 'The

construing court will put itself as
far as possible in the position of
the .. . [settlor], in the effort
to construe .. .- [any] uncertain
language used by him in such a way
as shall, conformably to the
language, give force and effect to

his intention.'

The same type of judicial review is made
with respect to other documents in

Connecticut, and the meaning and effect

————K

A-176

are to be determined by the intent
expressed in the language of the document
considering all of its relevant provisions
and reading it in the light of the
Surrounding circumstances. In Connecticut,
the interpretation of the document
presents a question of law. See: Kelly v.
Ivierwr, i187 Conn. 31, 39. 450 A.2@ §17

(1982).

The District Court properly applied this
analysis in reviewing the provisions of
the Trust documents. It also had before it
the undisputed underlying facts
Surrounding the execution and the factual
circumstances relating to the parties
involved. Rule 56(c) provides that summary
judgment shall be rendered if there is no
genuine issue of any material fact and the
moving party is entitled to judgment as a

matter of law. As there were no

A-177

ambiguities in the language of the Trusts,
and no disputed factual issues concerning
the investments made or actions taken by
the Trustee with respect to the
administration of those Trusts, Citytrust
was properly entitled to judgment as a
matter of law under both federal procedure
and Connecticut substantive law. See:
Anderson v,. Liberty Lobby, Inc,., 106 S.Ct.
2505 (1986); Celotex Corp. v, Catrett, 106

S.Ct. 2548 (1986); ight Unite tates
Eire Ins, Co,., 804 F.2d 9 (2nd cir. 1986);
Wards Co,, Inc, v,. Stamford Ridgeway

Associates, 761 F.2d 117 (2nd Cir. 1985).

II. THE DISTRICT COURT
CORRECTLY DETERMINED THAT
CITYTRUST DID NOT ABUSE
ITS DISCRETION IN ITS
ADMINISTRATION AND
INVESTMENT POLICIES.

The District Court, applying Connecticut

law, recognized the long-standing

A-178

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A-180

Trustee" be desirable either for Alexander
or Michael "in its sole and absolute

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A-187

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CITYTRUST DID NOT ABUSE IT
DISCRETION IN THE INVASION

OF
OF

THE TESTAMENTARY TRUST
GEORGE EWING.

S

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A-188

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A-191

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A-193

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A-197

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A-198

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A-199

CONCLUSION:

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see

A-200

89-7246/7258

United States Court of Appeals
for the
Second Circuit

MICHEAL EWING,

Plaintiff-Appellant-
Cross-Appellee

-against-

CITYTRUST and ALVIN RUML and
LYNDA EWING
As Executors of the Estate of
Alexander Ewing,

Defendants-Respodents-
Cross Appellant.

ON APPEAL FROM THE UNITED STATES
DISTRICT COURT FOR THE

DISTRICT OF CONNECTICUT

—> > +

William R. Horner,
Horner & Isaacs, P.
Attorneys for Plain

‘amon s

At f
Appellant-Cross Appellee
4839 Fifth Avenue

New York, New York 1001/7
(212) 953-2288

>

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roma nAArmMeanNn ,Y

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hafnre be } “ :
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INnNNHneCT1L1Ccut a
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made
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A-201

OVERVIEW

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A-202

the remainder interests therein of
appellant (cross-appellee), arguing
variously that it was required by law
to do so, that it had been given
discretion in the instruments here at
issue to do so, and that it did so to
avoid having had to make larger and
more frequent invasions of principal
(corpus).

The primary reason for this appeal
is appellant's contention that the
Court below was clearly erroneous aS a
matter of law when it held, in Part "A"
of its ruling (A400-410), that the
instruments here at issue gave appellee
discretion to make investment decisions
which favored production of income over
preservation of the buying power of the
corpus, and that such discretion had

not been abused by appellee, except in

A-203

one instance (the subject of appellee's
cross-appeal). Both parties agree with
the Court below that the language of
the instruments here at issue is clear
and unambiguous. Appellant, however,
argued strongly in its Main Brief that
there was no language in the
instruments, which gave, or could even
be construed as giving, such discretion
to Appellee. Appellant also argued, in
its Main Brief, that even if this Court
should agree with the Court below tnat
appellee had been given such discretion
in all of instruments here at issue,

this Court should reverse the lower

Court's determination that such
discretion had not been abused by
appellee. Finally, appellant

¥

emphasized that the Court below had

failed to explain how it inferred that

appellee

Testamentary

1scretlio

had been

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A-206

reinvest without limitation" by holding
that such language is evidence that the
testator and/or settlor intended to
give the executor and/or trustee
authority to discriminate between
successive beneficiaries in making
investment decisions for such estates
and trusts.

Appellant also argued in its main
brief that, even if appellee had
discretion to favor the income
beneficiaries over the remaindermen, it
should be held to have abused this
discretion. Appellee chose not to
attempt rebuttal of these arguments,
and instead contended, in effect, that
its discretion was so broad that it
could not have been abused. Since
Connecticut law clearly holds that no

grant of discretion is absolute and

A-207

unconditional, if this Court sustains
Part A of the Ruling below, it will be
reversing long-standing Connecticut law
in this regard. Such a ruling would
mean that fiduciaries in Connecticut
are beyond the reach of Court review in
their conduct in handling estate and

trust assets.

II. THE FACTS

Appellee has never taken the
trouble to really familiarize itself
with the facts of the case. In
contrast, all facts cited by the
appellant are fully documented in the
record of this case. Appellee refers
to the date of death of Myra Ewing as
May 22, 1964 (which is the date of her

Will), when she actually died on

January 22, 1967 (A - 196). Likewise,
appellee refers to the date of death of
George Ewing as May 3, 1967 (the date
on which his Will was executed) when he
actually died on June 3, 1967 (A -
198).

Appellee also frequently refers to
facts which are totally irrelevant to
the instant proceeding. One example,
which might be funny if the bank's
misconduct were not so serious, is the
reference (

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385020_1401%3A2. Public record. Not legal advice.