Nature of the Case
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Facts
The trustee was given full power and full discretion under the trust to determine whether any money or other property received by him was principal or income. Fred Jr. and Fred Sr. were the life tenants and plaintiffs (P) under the trust indenture and the other trustees, Ds were the remaindermen. The terms of the trust agreement called for certain property to be conveyed to P to be held in trust to manage, invest, and reinvest and after paying the expenses of administering the trust to pay the net income as therein directed. The trustee had a hold harmless clause to his benefit in the agreement. The trustee basically had absolute and uncontrolled discretion as to the purchase and retention of securities. A dispute arose over the distribution of the proceeds from the sales of certain stock as it related to the allocation of those sales from the profit realized on those sales. The life tenant wanted that profit distributed as income, and the remainders wanted that profit to join the trust corpus. Ds did not argue that the settlor has no power to confer discretion upon his trustees to determine what is income and what is principal. They argued instead that the trustee has no power to determined contrary to established law, what money or other property received by the trustee is principal or income.
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