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Venables v. Seattle-First National Bank

April 22, 1991

ANNE VENABLES, APPELLANT
v.
SEATTLE-FIRST NATIONAL BANK, RESPONDENT



Baker, J. Scholfield and Kennedy, JJ., concur.

Author: Baker

Anne Venables appeals a summary judgment order which approved Seattle-First National Bank's allocation of charges against the income and principal of a testamentary trust. We affirm.

Venables is one of two remaindermen of a testamentary trust created by the will of her father, John Baillargeon. Her mother, Margret Ames Baillargeon, is the income beneficiary. Venables sued the trustee, Seattle-First National Bank (hereinafter Seafirst), questioning the allocation of charges against trust principal. Her mother and brother (the second remainderman) intervened as defendants and supported Seafirst's position. (Hereinafter, the brother will be referred to as John and the father as Baillargeon.)

Baillargeon died in 1952. His will was executed in 1936. In providing for his children, Baillargeon left "their care and support entirely within the hands of my said wife during her lifetime" and left them each $1. He then provided

that the shares of his solely owned corporation be placed in trust with Margret as trustee and income beneficiary. Margret was given the power to sell the stock. If she did sell the stock, Baillargeon directed that the proceeds were to be placed in a trust administered by Seafirst as successor trustee with income going to Margret. Paragraph Fourth of the will states:

I direct that the income arising from said proceeds, after deduction for the costs and expenses of the succeeding trustee, be paid by the succeeding trustee to my said wife during her lifetime as was the income arising from said shares of J. A. Baillargeon & Company stock.

The will further provided in the event of a sale of the shares (or upon Margret's death) that Seafirst administer the trust in the same way it administered another trust created in Paragraph Sixth of the will "except that the income from said property, less the costs and expenses of the succeeding trustee, shall be paid by said succeeding trustee to my said wife, individually and not as a trustee, during her lifetime."

Paragraph Sixth gave the remainder of the estate to Margret and provided for the creation of a second trust, in the event of Margret's death, with Seafirst as trustee and with Venables and John as the income beneficiaries. Seafirst was directed to "defray the reasonable costs of this trust including reasonable compensation to said trustee." Further, Paragraph Sixth provided that the trustee would not be liable for error except for dishonesty, willful breach of the trust or gross negligence.

On January 1, 1982, Margret sold the company stock, and Seafirst became trustee. Since then, Seafirst has charged one-half of its fees to trust income and one-half to principal. Seafirst has charged the following items entirely against trust principal: capital gains taxes and attorney's fees on the sale of the company stock; capital gains taxes on sale of other securities; brokerage commissions; and attorney fees and costs from this litigation.

In the case below, Seafirst and Venables submitted an agreed statement of facts on cross motions for summary judgment. The trial court upheld Seafirst's allocation of charges, granted its motion for summary judgment, and denied Venables' motion. The bank was awarded its attorney fees, to be charged equally against trust principal and income. The individual parties were ordered to bear their own costs and attorney fees.

I

Venables contends the trust instrument unambiguously directs deduction of all trust costs and expenses from income. Seafirst (hereinafter including Margret and John unless otherwise noted) contends that the trust instrument does not specifically direct allocation of costs and expenses in a manner contrary to the Washington Principal and Income Act, and thus the act controls.

The principal and income act, effective January 1, 1972, was intended to provide uniformity in the law relating to allocation of receipts and expenses among income beneficiaries and remaindermen. Laws of 1971, ch. 74, p. 164; ยง 19, p. 173. The act applies to any trust whether established before or after January 1, 1972, "[e]xcept as specifically provided in the ...


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