## Facts

- A 1906 express trust held Minnesota iron ore/taconite lands and related assets subject to long-term royalty leases.
- Trust income was paid to certificate holders (income beneficiaries) through negotiable certificates widely held and publicly traded.
- The trust instrument authorized trustees to sell trust property, invest proceeds, and distribute proceeds to certificate holders.
- The instrument provided that upon termination all remaining cash would go to income beneficiaries and all remaining non-cash property would revert to the settlor or its successor (Burlington Northern).
- As termination approached, trustees sought judicial instructions regarding whether they must convert trust assets (including ore lands characterized as “wasting assets”) into cash before termination.
- Income beneficiaries argued trustees should convert assets to cash to maximize distributions to certificate holders, which would leave little or no property for the reversioner.
- Burlington Northern argued trustees must protect the reversionary interest and could not use trust powers to eliminate it.
- On remand from an earlier appeal, the district court instructed that trustees had authority and a duty to convert all trust assets to cash, effectively extinguishing the reversionary interest.

## Issues

1. Whether the trustees had a duty to convert all trust assets to cash before termination even if doing so would eliminate the reversionary interest.
2. Whether the trustees’ sale and distribution powers were discretionary and limited by a fiduciary duty of impartiality between income beneficiaries and the reversioner.

## Decision

- The Minnesota Supreme Court reversed the district court’s instruction and remanded for entry of proper instructions.
- The trustees possessed discretionary power to sell or convert assets to cash and distribute proceeds to certificate holders.
- The trustees were constrained by a duty of impartiality between income beneficiaries and the reversioner.
- The trustees had no duty to exercise sale and distribution powers unless required to serve both income and reversionary interests.
- An instruction compelling liquidation of all assets, thereby destroying the reversion, conflicted with the trust’s structure and the court’s prior recognition of a valid reversionary interest.

## Legal Principles

- A grant of broad trustee powers to sell or convert trust property does not, without more, create a mandatory duty to liquidate the trust corpus to the maximum extent.
- Trustees administering successive interests must act impartially between income beneficiaries and remaindermen/reversioners; discretionary powers may not be exercised to unjustifiably prefer one class by effectively nullifying the other’s interest.
- The characterization of trust property as a “wasting asset” does not justify administration that contradicts the trust instrument’s allocation of benefits at termination.
- Courts construing trustee powers must effectuate the expressed distribution scheme at termination, including any meaningful reversionary interest.

## Conclusion

The court held that although trustees could sell and distribute trust assets, they were not required to liquidate all assets before termination and could not do so in a way that unfairly favored income beneficiaries by eliminating the reversion; trustee discretion was bounded by impartiality toward both interests.


In re Trust Known as Great Northern Iron Ore Properties, 263 N.W.2d 610 (Minn. 1978)