Court of Chancery Interprets Trust Language

IMO: H.M. Mosher Trust Dated January 14, 1938, C.A. No. 2017-0653 (October 29, 2018)

       In this case, in the context of competing motions for judgment on the pleadings, Vice Chancellor Glasscock found that a great-great-grandchild of a settlor was entitled to an equal share of the settlor’s trust as that of the great-grandchildren in that stirpital line.  In doing so, the Court applied equitable principles and read the trust instrument as a whole to determine what the settlor would have intended in the distribution of the trust proceeds.  As a result, the Court granted respondent’s (the great-great-grandchild’s) motion for judgment on the pleadings and denied petitioners’ (the other great-grandchildren) motion.

       Settlor Henry Mosher created the relevant trust in 1938, which provided for equal payment of trust income to each of his four children upon his death.  The grandchildren, upon death of the children, came to share in the trust income.  Finally, the trust is to terminate upon the death of the last named grandchild and the trust principal is to be distributed at that time amongst the beneficiaries in the percentage share each had been receiving income.  One of Mosher’s grandchildren disclaimed her interest in the trust income, and it thus passed to her four children.  One of those great-grandchildren, Mark, died, leaving one heir. 

       The trust managers filed a petition for instructions asking the court to determine how the trust should be distributed.   It was the petitioners’ position that Mark’s share should be redistributed to the surviving great-grandchildren, while it was respondent’s position that she is entitled to the entirety of Mark’s share.  Interpreting California trust law, the Court looked to the trust instrument as a whole to determine Mr. Mosher’s intent.  The Court noted that, while the language of the trust is simple, that language illustrates that “simplicity and clarity are not synonyms.”  Upon closely reviewing the trust instrument, the Court found that the trust should be read to dictate that the income is to flow down stirpital lines, rather than being redistributed among surviving members of the preceding generation.  As such, Mark’s daughter—his only heir—was entitled to the entirety of Mark’s interest in the trust income.