## Facts

- James Williams’s will created a trust and named three trustees: Robert Williams, Margaret Linstroth, and Norwest Bank Minnesota, N.A. (Norwest).
- By 1980, stock in Borden, Inc. made up almost 100% of the trust’s value.
- By 1989, the trustees sold about 60% of the Borden stock to diversify the trust’s holdings.
- Robert later moved to sell additional Borden shares, but Linstroth and Norwest voted against the proposal and overruled him by majority vote.
- After the trustees decided not to sell more shares, the market value of the remaining Borden stock dropped substantially, reducing the trust’s overall value.
- In 1996, Linstroth and Norwest filed a petition seeking court approval of their administration of the trust’s assets for the years 1990–1995.
- Robert objected to the petition and sought a surcharge against Norwest, alleging that Norwest, as corporate trustee, was responsible for the trust’s losses tied to retaining Borden stock.
- Norwest relied on an exculpatory clause in the will stating that a trustee would not be liable for the acts of another trustee or for good-faith errors in judgment.
- The district court dismissed Robert’s surcharge claim against Norwest, and Robert appealed.

## Issues

1. Whether an exculpatory clause stating that trustees are not liable for “good faith errors in judgment” can bar a beneficiary’s surcharge claim based on a corporate trustee’s investment decision to retain a concentrated stock position.
2. Whether a corporate trustee may invoke such an exculpatory clause to avoid liability absent a showing of bad faith or other conduct outside the clause’s protection.

## Decision

- The Court of Appeals affirmed the dismissal of the surcharge claim.
- The court concluded that the will’s exculpatory language protected trustees from liability for good-faith errors in judgment and that the claim against Norwest, as pleaded, was barred because it did not establish conduct outside that protection.
- The court rejected the argument that Norwest’s status as a corporate trustee, by itself, prevented it from relying on an otherwise valid exculpatory clause.

## Legal Principles

- Exculpatory clauses in trust instruments are construed narrowly, but they are enforceable when the settlor’s intent to limit trustee liability is stated clearly.
- An exculpatory clause that protects “good faith errors in judgment” can preclude a surcharge based on investment losses if the trustee’s conduct falls within the clause’s good-faith standard.
- Such clauses do not protect trustees from liability for bad faith, intentional misconduct, or similar serious wrongdoing.
- A corporate trustee is not automatically excluded from the protection of an exculpatory clause; enforceability turns on the clause’s wording and the nature of the trustee’s conduct.
- A surcharge claim premised on hindsight disagreement with an investment decision is insufficient where the governing instrument limits liability to situations involving conduct beyond good-faith judgment.

## Conclusion

In re Trusteeship of Williams held that a will’s exculpatory clause shielding trustees from liability for “good faith errors in judgment” barred a beneficiary’s surcharge claim against a corporate trustee for losses arising from the trustees’ decision to retain a concentrated stock holding, where the claim did not establish bad faith or other misconduct outside the clause’s protection.


In re Trusteeship of Williams, 591 N.W.2d 743 (1999)