(pages rustling) -: SJC-13579,
in the matter of trust of Helen Klein
for Denise Joe Levy.
(phone faintly dinging)
-: Okay, Attorney Taylor, whenever you're ready.
-: Good morning, Your Honors.
May it please the court,
Attorney Tracy Taylor for Peter Judson,
the appellant in this matter.
I wanna start out by addressing two key points,
which I feel may not be explicitly clear from my brief.
The first is that
the Massachusetts Principal and Income Act,
which I will refer to as the MPIA,
is by definition,
and this is set forth in Section 3A of the act,
a default act.
By its terms, it only applies,
well, strike that.
By its terms, it only applies
when there is no contrary provision in the trust itself
or when the trust itself does not grant the trustee
a discretionary power to administer the trust.
-: I take it that what you're pointing to
for this proposition is Section 3A?
-: Yes, Your Honor. -: Okay,
so I was going to ask you about that.
Which of the four subsections of 3A
do you contend this situation falls under?
-: I believe it's Section B, Your Honor.
-: No, no, I'm asking about 3A,
which has four subsections.
Not B, we don't get to B yet,
so-- -: I believe
it's Section 3, Your Honor.
-: 3A what?
There's four...
I don't mean to quiz you off your memory
'cause I'm holding it in front of me,
which gives me an advantage.
So if you need to-- -: I believe it's Section 3A3.
Gabrielle: Okay, so--
-: It's a little confusing the way they're all set out, but--
-: Okay, I wanna make sure.
So 3A3 says that, "In allocating receipts and disbursements
to or between principal and income,
a fiduciary shall administer a trust or estate
in accordance with this chapter
if the terms of the trust or the will
do not contain a different provision
or do not give the fiduciary
a discretionary power of administration."
So is that the provision that you're relying on?
-: It's 3A3.
-: 3A3.
Okay, so that is. -: Yes.
-: So as I read that,
and correct me if I'm wrong,
you're saying that the will,
the testamentary trust,
did not give the trustee discretionary power
to allocate between principal and interest, correct?
-: It gave the trustee discretionary power
to allocate between principal and interest,
but only under the most extreme circumstances.
The settlor's in-- -: So they do contain
a different provision?
Tracy: That's exactly right,
Your Honor. -: All right, so--
-: My error if in my nervousness
I quoted the wrong. -: No, no, no, that's okay.
So 3A3 then says that, in those circumstances,
they will administer it
in accordance with the MPIA.
-: Yes. -: That they shall.
-: They shall if it does not contain contrary provision.
And my position is that the will
does contain a contrary provision.
-: So really, you're going,
and this is again unfair
because you don't have the statute in front of you,
but it's 3A1.
Tracy: 3A1, thank you.
-: It says that-- -: I also can't see
in my old age,
so things are... (Justices laughing)
-: Don't we all? -: 3A1.
And exactly, this trust is unique.
First of all, it was created back in 1977,
which is well before
the Uniform Principal and Income Act was enacted.
-: Is it your position that it the statute doesn't apply
because of the 1977 execution of the will?
-: Nope, I believe Massachusetts Principal and Income Act,
well, if you get to the point,
if you decide that the settlor's trust
does not contain a contrary provision,
such as the MPIA does apply,
then we get to the argument
of whether or not the trustee applied Section 3B of the act,
which is the duty to apply the power
to adjust impartially.
And my argument is that it does not.
But my reason for talking about the date
that the trust was created
is that the UPIA and the MPIA,
yeah, MPIA were not in existence at that time.
So the way the trust was written,
the settlor was not anticipating these things to occur.
So she says
explicitly in Section-- -: Well, that's not
exactly true, right?
Because there is still this ability
for the trustee to do this.
You're arguing the emergency circumstances component, right?
Because the trust document
still gave the trustee
the right to change these allocations.
-: The trustee does have that power through the will,
but only under a showing
of emergency circumstances. -: Sure.
I just wanna just make sure I have this right.
Is the increase here
that your client is objecting to,
was it about $25,000?
-: Over the course of the past five years,
it's more in the neighborhood of $276,000,
Your Honor. -: Mm-hmm, okay.
-: And the trustee has been, since at least 2018,
liquidating the principal of this trust,
which I suggest to you
is not invested in gross stocks,
rather it's invested solely
in dividend-bearing stocks
and interest-free municipal bonds.
So my argument--
Gabrielle: Is that in the record?
-: I'm sorry? -: I didn't see that
in the record.
-: That may not be in the record,
Your Honor, that's-- -: Right, so we can't
consider it if it's not in the record.
-: Understood, Your Honor.
The argument is that--
-: Although the record does show
that the value has gone way up, right?
-: Considerably.
-: It does not say that, Your Honor.
It gives you a value of the trust as of 2021.
What is missing in this case,
and my argument is,
if the MPI is going to apply,
if you get past the words of the settlor in the trust
that say, "Only under emergency circumstances
upon examination of the income beneficiaries,
assets and income, and the."
-: Wasn't that in the summary judgment record though?
Because wasn't there some kind of evidence
from the trustee that he had run this math?
Tracy: No, there was not,
but-- -: There was an affidavit.
-: Affidavit that talks to the amount,
the value of the trust,
but what I'm suggesting to you
is missing and I would refer--
-: No, no, no, not the value of the trust.
That he looked at the income beneficiaries,
liabilities, bills, whatever it is,
but that there was some analysis
of the amount that the trust had grown
versus the fixed amount
that she was getting in income over the years,
and that it was disproportionate
and it needed some kind of recalibration
based on her changed circumstances.
-: There is a very self-serving blanket statement
to that effect by the trustee, Your Honor.
But I'm suggesting to you that what is missing--
Dalila: Is it under oath?
-: It was, it was an affidavit. -: Okay,
so it's evidence on summary judgment.
What's the contrary evidence?
Tracy: The contrary evidence is the--
-: You can't just say he's lying, right?
You have to come up with something.
-: Exactly, the contrary evidence
is the affidavit of the appellant, Peter Judson,
who says his mother told him
that she was doing very well.
She had realized $1 million
from the liquidation of one of the other family trusts,
and that she had earned considerable money
and was making considerable income on it
and was not running debt, so--
-: We have an affidavit of the mother?
-: There was no affidavit of the mother.
-: Okay. -: She did not file
an affidavit of objection.
She objected, but she never filed
an affidavit of objections in this case.
-: Right, but how are his hearsay statements
of what his mother said admissible?
-: I don't think I even need- -: Is there a deposition
testimony, anything? -: to this argument
because what I'm really contesting here is,
if you get past the settlor's intent
that says, "Only under an emergency,"
and you get to the application of the MPIA,
the MPIA was enacted in response
to the adoption of the Prudent Investor Act,
which gave, for the first time,
trustees the ability to maximize
the overall growth of a trust,
potentially sacrificing the income beneficiary's race.
-: I have a couple of questions
that are driven by the specific language in the will.
So you may wanna look at them, if you want.
The first is the will uses the term
distribution or distribute,
and it also uses the word adjustment,
allocate or apportion.
And those are not synonyms, correct?
Tracy: They are not, Your Honor.
-: Right, so can you please tell me
your view of what is the meaning
of distribute or distribution?
And then separately,
what is your view of the meaning of adjustment?
-: And this goes to the appellee's argument
where they argue that the prohibition against distribution
does not equate to a prohibition against adjustment.
-: It's not really about an argument.
And I'm trying to get,
because those terms' definitions must mean something
because those terms appear in the portions of the will
that you're relying on.
-: Okay, so then adjustment would mean
reallocating capital assets to principal
of two income. -: Okay,
and distribution means?
-: Distribution would be paying out those.
-: Okay, so-- -: And that's what
has happened in this case, the--
-: Well, hold on,
because those are two separate acts.
I agree, you can have an allocation,
a reallocation or an adjustment,
and then the distribution gets made, right?
The distribution is actually when the race
is transferred out of the trust
to a beneficiary.
Am I correct on that?
-: Correct, on the trust-- -: Okay, so let's look
at page 47 of the record appendix.
Tracy: Okay, I'm there.
-: This is the last paragraph of,
paragraph or section seventh,
so it's the first full paragraph on that page, 47.
(pages rustling)
Now, this paragraph, as I read it,
doesn't have anything to do with distributions, correct?
-: Paragraph seventh, Your Honor?
Gabrielle: No, the last paragraph of paragraph seventh.
-: Last paragraph. -: So it's on page 47.
-: Starts with, "My fiduciary in their absolute discretion
shall have the authority to claim items."
Do you see that?
-: Yeah, what article are we on?
-: Seven. -: Look at Article 8th.
If you look at Article 8th
and you look at the paragraph
immediately above-- -: There I am,
my page is--
-: That's okay.
Immediately above paragraph eighth,
I'm talking about the...
47. -: Sorry.
-: Of the record appendix. -: Record appendix.
Tracy: Article 8th.
-: And just look at the paragraph above
where Article 8th starts. -: Okay,
so you're looking at Article 7th, okay.
Gabrielle: Right, the last paragraph of Article 7th.
-: Well, I'm glad you actually raised that
'cause I wanted to get to that
and that's where I was trying to head
when I said that this trust
was created prior to the enactment of the MPIA,
and-- -: But can we agree
that this paragraph indicates
that the fiduciaries will have discretion
to make adjustments or apportionments
among the beneficiaries
or as between principal and income?
-: And I would argue too, Your Honor,
that, yes, it does that solely in the context,
you have to read that in the context
of the entire article,
which talks about estate, succession,
transfer taxes and income taxes.
And as I was saying,
this trust was created prior to the MPIA,
when accounting principals for trust were far different.
Prior to the enactment of the MPIA,
you took deductions from income
and stayed with income,
and principal deductions for principals
stayed with principal.
So that paragraph that we're just reading--
-: So if it does give them discretion in that regard-
Tracy: It gives them the discretion
because-- -: then how is it
that this case doesn't fall under section 3A2?
-: If I may address the Article 7th first, Your Honor.
This article that we're talking,
this clause that we're talking,
this paragraph that we're talking about
that gives the discretion to apportion
is done so for the express purpose
of maintaining net income
for the income beneficiary,
because if you did not have that clause in that section,
the trustee would've had to deduct income taxes from income.
This is giving the trustee
the actual ability to maintain net income
for the income beneficiary.
-: So the judge erred in relying on that
you're saying I take it?
'Cause the judge bases her decision,
I think it's a her,
decision on this, right?
-: She did, but she-- -: Yeah, can I ask one thing?
I don't know about the others,
my page 46 is completely illegible.
-: It just goes
from 45 to 47. -: 47.
-: Oh, oh, okay, all right.
Okay, so this thing in your view is a red herring,
it's just a income tax?
-: It is because it applies
to the accounting principals for trust
that were in effect when the trust was created.
Those principals were changed
by the enactment of the MPIA.
We didn't have those principals.
The trustee back when this trust was written
was not allowed to deduct income taxes from principal.
So if you had not included that language in Article 7,
net income would've decreased.
-: So if the trust did give,
or if the will did give the trustee
a discretionary power of adjustment
or allocation between principal and income,
why does this case not then fall under section 3A2
instead of 3A1?
-: I think they're both equally applicable, Your Honor.
They both-- -: Except that the outcome
would be very different.
-: I don't believe the outcome
would be very different. -: Because 3A2
says that if the trust
gives a discretionary power of administration
to the fiduciary by the terms of the trust or the will,
which this paragraph does,
then you would apply the terms of the MPIA,
even if the outcome is different,
then the result would be under the,
even if the outcome would be different.
-: I still think we have contrary provisions in the will.
But even if you get beyond that
and you apply the MPIA,
Section 3 of the MPIA, 3B,
says the trustee has the duty
to apply the power to adjust impartially
and in a method that's fair to all beneficiaries.
And I would direct your attention
to the comment to the UPIA,
which I believe is at page 116 in the appendix,
and the second full paragraph there,
which makes it explicitly clear
that these acts were enacted
as a response to the Prudent Investor Act,
which allowed the trustee
to then grow principal
without regard to the income beneficiary's rights.
So the comment to the act
makes it clear that in order to apply it impartially,
in order to apply the power to adjust impartially,
you can't just say, "Oh, the trust has grown
and the income beneficiary's income has not kept up."
You need, and this goes to the Example 4
under the comment,
which is exactly on point in this case,
you need to show-- -: Well, excuse me,
it's not exactly on point
because that example
contains a 6% ceiling- -: You're correct.
-: which you don't have a 6% ceiling here.
-: No, but you could infer
that when the rate of income
that the income beneficiary was receiving,
at the time that the trust was created,
at the death of the testator,
that if you're going to utilize the power of adjust,
the trustee would need to make a showing
that he has, A, made a change in investments.
And I would suggest to you
we do not have any evidence here
that that has occurred.
He needs to make the showing
that he made a change in investments
to benefit the full value of the trust
and that the income beneficiary's income has decreased.
We don't have either of those things.
-: So on that first point,
reading through the committee report behind the legislation,
it seemed like there
were actually two financial circumstances
that they were focused on.
One, the one you raised,
that you wanna manage for growth, et cetera.
Tracy: Exactly.
-: But secondly, that top-performing companies
simply aren't paying dividends very often anymore.
And in fact, even if you don't make a change
in the investments,
investments that may have been held for a long time
are just no longer yielding dividends.
So is there a basis in the act
that the trustee would have to have actually changed?
You're claiming that the trustee
would've had to change the investment allocation.
Is there a basis for that in the statute?
-: I'm basing that on,
yes, the section that says
that they are complying with the Prudent Investor Act,
and they have to make a showing,
the trustee has to make a showing,
the trustee has to keep records
as to how his changes in investment strategy,
or even to give Your Honor's argument its due,
that principal increased by X amount
over the course of the years.
-: Well, Counsel, I'm going to interrupt you
before we lose you
because I know you might disagree
as to whether or not the co-trustee did any of this.
I read it in the record
that he had made these determinations
about the investments
and as to why he did the allocations the way he did.
I'm trying to kind of zero in on what your point is.
Is it that summary judgment was wrong here
because there's a factual dispute
or because you claim the judge made an error of law?
-: I claim the judge made an error of law, Your Honor,
and that she completely ignored Section 3A
of the MPIA.
She didn't even get there. -: So what are we to do
with your saying that there was a counterfactual affidavit
from your client saying,
"I heard all of this stuff from my mom,"
that she had done well
and that the concerns of the co-trustee about reallocating
because of her personal circumstances weren't founded?
-: I don't think we even need to get there, Your Honor,
because I think the crux of the argument is,
the lower court ignored Section 3A,
they had a misreading of Article 7
because the court didn't understand
that that language pertained
to trust accounting principals
that were in effect at the time,
which have now changed
with the inaction of the MPIA.
-: Okay. -: Thank you very much.
-: Thank you, Your Honors.
-: Okay, Attorney Lindstrom.
-: All right, (throat clearing) good morning.
Thank you, Christopher Lindstrom
on behalf of the appellees and trustees.
So we have two issues presented on this appeal.
First, being whether the probate and trial court, (coughing)
probate and family court found that Attorney Friedman
had the right, the authority to adjust
as between principal and income
under the Principal and Income Act.
And secondly, if he did have that power,
was there any evidence in the record
to show that he abused that discretionary power?
-: Why do we keep thinking of this as a,
or at least you do, I think,
that the trustee can act unilaterally?
I didn't see that in the will.
I thought that this was a testamentary trust
that appointed multiple trustees,
and it did not say,
I didn't see a provision
and no one cited me to one
that says that each trustee
can act unilaterally.
Is there one?
-: But there was that provision
if you are a beneficiary and co-trustee,
that you're accepted out.
-: Correct.
So the trust sets forth
that it is intended to have at least two trustees
at any given time.
But then as Justice Georges points out,
there is the separate provision, Article 8th,
which states that if you are a beneficiary,
you are not to make a decision that may impact you.
-: Okay, and so-- -: And therefore
the co-trustee excused herself from this decision.
And Attorney Friedman, as the unbiased trustee,
made the decision on his own.
-: And he does so based on the fact
that the principal has gone up a lot, right?
And that the income is not rising accordingly.
Is that a fair statement of that?
'Cause I'd like you to finish your point
about why is this right,
'cause I don't think it's right
because of the tax provision flexibility,
and nor does it appear that you think it's right,
'cause it's your last argument.
So tell me why (laughing) the judge got it right,
besides that.
-: Sure.
Respectfully, Judson's entire appeal here
is premised on a fundamental misunderstanding
of what the power to adjust
under the Principal and Income Act really is.
Judson appears to be equating the power to adjust
to the power to invade principal,
which is when a trustee
looks to the circumstances of the income beneficiary
and decides to, quote-unquote, invade the principal
to make a distribution
based on current needs,
emergencies of the income beneficiary.
The power to adjust is a completely separate tool.
It's well recognized now
in the trust and estates community
that permits trustees to correctively adjust
as between principal and income
when investment strategies
have led to comparative allocations between the two
that no longer treat the principal beneficiaries
and the income beneficiaries the same.
-: So Article 7 of the will
expressly gives the trustee the power to adjust
between principal and income for tax purposes.
So I'm with you to that point.
And then what happens under the MPIA?
-: The MPIA is clear
that if there is no language
speaking to whether the trustee
has the power to adjust,
then the trustee has the power to adjust.
In other words, there needs to be--
-: But there is language in Article 7.
And so...
I get it when there's no language,
then the MPIA gives the power to adjust.
When there is language,
for tax purposes, let's just say,
what happens?
-: It only bolsters argument
that the settlor's intent
was to provide the trustees the discretionary authority
to adjust or allocate when circumstances
made it necessary to treat everyone equitably.
Now, remember, as--
-: So are you under 3B now?
I'm confused as to where
the MPIA-- -: Which 3A subsection
do you believe this case falls under?
-: That it is a default act
unless there is contrary language in the trust.
Scott: Why isn't the-
-: So that's 3... -: extraordinary circumstances
language applicable?
I'm confused by that,
'cause you're allowed to do this
if there's extraordinary circumstances.
But isn't that implicitly
that you're not allowed to do it
if there's not extraordinary circumstances?
-: Well, respectfully, I disagree.
-: I just don't know the answer.
I'm not putting a position out.
-: Within your question,
you say, "The ability to do this,"
and what I'm saying is,
there are two different thises.
-: There's the power to distribute
through an invasion of the principal
when there are these special circumstances,
these emergencies, these dire circumstances.
That's different than here,
the power to adjust
under the Principal and Income Act.
The power to adjust is a reallocation
based on, as you pointed out earlier,
investment decisions under the Prudent Investor Rule
that have grown principal
in a way where income is not.
Now, remember, when this-- -: So grown principal
is not invaded principal?
When principal grows, you're not invading it?
Is that clear?
Again, I'm not a trusted estate expert
(laughing) by any means, so.
-: It is clear in the comments
to not only the Massachusetts Principal and Income Act,
but also the Uniform-- -: But, Counsel, the comment,
oh, sorry, go ahead.
-: And that's actually how she uses it in her trust, right?
In her will.
She separates between distribution of principal,
which is only for emergency situations,
and reallocation as between principal and income
for tax purposes.
Christopher: Correct, yes.
-: But the example that has been cited
specifically contemplates,
I forget what number it is,
Example 4 or something,
specifically contemplates that a trustee will,
and admittedly, it includes the 6%,
in that hypothetical ceiling of 6% distribution,
but it contemplates that a trustee
will actually keep track
of how much the current beneficiaries have lost out
as a result of the investment strategy.
And Mr. Friedman's affidavit here
does not contain any of that information.
It just simply says, in a conclusory fashion,
"I have been investing as a prudent investor
and the income has not kept pace.
So I'm giving her approximately 1% more."
Do you think that that, (laughing)
it doesn't seem to exactly with the level of detail
contemplated by the act.
-: Well, first of all, the Comment Number 4,
which you're exact on the number,
I'd just like to point out
that that absolutely shows that Attorney Friedman
had this power to allocate,
'cause in that comment,
it clearly distinguishes
between the power to invade for distributions,
and even if there is a limitation on the power to invade,
the comment states that the trustee
still has the power to do this power of adjustment
under the MPIA,
or in that case, the Uniform Principal and Income Act.
To your point,
the 6% is the key. -: Can I ask one?
I just wanna make sure I understand--
-: Can we have an answer
to Justice Georges' question first though, please?
-: So to me, the 6% is the key,
because we don't have that similar situation.
All we have-- -: But sorry,
can I just change it out as a hypothetical?
So he's asserted that he's managing as a prudent investor,
say it's actually all invested (laughing) in, I don't know,
it's not invested for growth
in a way that has resulted
in massive reduction in income while it's growing.
We don't know that because there are no facts on the record.
And so we don't know if this 1%
actually at all corresponds
with the investment strategy that's been pursued.
-: I guess another way of saying this is that,
is it sufficient on summary judgment
for the trustee to simply say,
"I complied with the act,
I considered the factors
and I made my adjustment
in accordance with the MPIA"?
Because that's in essence
the bare-bones affidavit that's here.
It did give a percent,
it did give one piece of information
about the amount of capital growth
and it did give one relative piece of information of,
I mean, one piece of information
about relative increase in income
in terms of income distribution
to the income beneficiary,
but doesn't give anything more than that.
And the question is, is that sufficient
even if it's not opposed to entitle the trustee
to summary judgment on the question
on whether the trustee
complied with the provisions of the MPIA?
-: Yes. -: Okay.
So what's your legal authority for that?
-: The legal authority there is,
that is the burden on the objector
to show there was an abuse of discretion.
-: Okay, so-- -: And there's nothing
in Mr. Judson's affidavit
that states that Attorney Friedman
abused his discretion.
All he speaks about
are statements from the other trustee
and income beneficiary, Denise Joy Levy,
that we have no idea that Attorney Friedman
ever heard those statements.
We have no idea if Attorney Friedman
had knowledge of her specific means
that may be higher than he may have expected,
according to Mr. Johnson. -: And the summary judgment
motion was made before there was discovery,
is that correct?
Christopher: Correct.
-: Can you tell me whether the adjustment in this case
occurred simultaneously with the distribution,
or even if there was a distribution?
-: That is not in the record?
I assume there was a distribution
after the adjustment,
or else that's why you make the adjustment.
But it's not in the record.
-: Can I follow up on just Justice Wendlandt's point earlier?
So Article 7 gives you the power
to adjust for tax purposes.
I get that you can adjust for tax purposes.
You can't invade principal
unless there are extraordinary circumstances.
You can adjust, you say,
because Article 7 says, "For tax purposes,"
but can you adjust for any other purposes,
or does that mean it's an invasion principal?
I still don't get that yet.
-: That's why we have the statute,
that's why the statute was passed in 2006.
-: But when the will actually says,
"You have the power to adjust for tax purposes,"
is there a necessary implication
that you do not have the power
to adjust for any other purposes?
Scott: Yeah, that's my question.
-: No, in order for the Principal and Income Act
not to apply,
there needs to be clear language
that takes away the power to adjust.
-: So this negative implication is not enough?
-: The statute itself even says,
"If there are some limitations
on the power to allocate or adjust within the trust,
that's not sufficient to take it outside of the statute."
Dalila: Now, what section is that?
-: That's Section F, 4F.
Dalila: 4F, okay, thank you.
-: So there needs to be a clear intent
that the trustee has no power to adjust whatsoever.
-: So can we go back to my very initial question?
So you think this falls under,
which subsection of 3A
do you believe this particular testamentary trust falls?
Christopher: 3A3.
-: Okay, so the objector thinks it's 3A2
and you think it's 3A3.
-: I guess if it did fall within 3A2,
I still think we would prevail,
because if we are saying that the trust is,
if the trustee was given
a discretionary power of administration,
then he would have this power as well.
I'm not sure it matters, but.
Dalila: So two, you win, three you win?
(Justices laughing)
-: Yes, but I don't think two applies.
So I don't wanna advocate for that whatsoever.
-: Can you explain to me the distinction
between the power to adjust
and the ability to make distributions?
Because one is clearly tied to extraordinary circumstances,
the other is not.
-: So the power to make distributions,
otherwise known as the power to invade,
is the situation that is spoken to in the trust.
This is when the income beneficiary,
here, the daughter of the settlor,
needs the money,
if there's dire circumstances,
then the trustee has the power to,
(throat clearing) excuse me,
invade the principal
no matter what the investments have done.
Whereas the power to adjust is,
again, this newly-found power
in the trust and estates community, passed in 2006,
which is a recognition
that investment strategies have changed.
-: Which will result in distributions.
-: They result in (laughing) an adjustment or allocation-
Frank: Which result in a distribution.
-: which may have the same effect as a distribution,
but- -: Well, it does to the person
who's complaining.
-: it's the basis of the power that's different
than the power to invade,
and it's also the factors that the trustee weighs.
We have to remember that in 1977
when this trust was put together,
interest rates were 7% to 8%.
Now they're not. (Frank laughing)
Stocks issued dividends on a regular basis.
Now they don't.
The stock market's 40 times higher than it was then.
This is a situation where the language of the trust,
as seen in Article 7th,
even if you disagree
that that is a more general allocation principal,
but the language of the trust is,
if there are situations where an allocation or adjustment
needs to be made to be fair and equitable
to all the beneficiaries,
then the trustee should do that.
And so therefore there's no reason
why the power to adjust under the MPIA
doesn't apply here.
-: Going back to justice Gaziano's question,
am I correct in assuming
that if an adjustment took place,
and let's just talk about this one,
and it goes up to $90,000,
and then that were paid out
to the present beneficiary,
that would be accounted for on the books
as a payment of income to the beneficiary, correct?
-: I presume so, yes. -: Okay.
So there actually isn't a distribution of principal
following an adjustment?
-: No, it is considered income, correct.
-: Right, so you move it from one column to another,
and then say, "I'm taking it outta the other."
-: Right, and remember, this can go both ways.
So say we have a stock market crash
like we did in '87 or '08,
the trustee could decide
to move income to principal
if it's fair to all beneficiaries.
-: You had said that it was the petitioner,
Mr. Jebson's burden to show
that the trustee abused his discretion.
What is the legal authority for that?
Is that in your brief?
If it is, I'll find it, but.
-: Not as clear as it could be, but it's in there.
I can give it to you right now.
So Section 3 of the act
states that a decision by the trustee
is presumed to be fair and reasonable
to all of the beneficiaries.
And then you'll also have Section 5 of the act,
which discusses judicial review of trustees' decisions,
and it states that the burden
is on the party objecting to the trustee's action.
Now, the procedural posture
considered in that Section 5
is slightly different than ours,
so I don't wanna mislead you in that,
but the principal should be the same,
that it is the objector
that has to show use of discretion,
especially where we have Section 3
that says it's presumed to be fair and reasonable.