## Facts

- On April 9, 1970, Frederick L. Way created an inter vivos “Florida trust” for the joint benefit of himself (for life) and Elaine J. Holly; Way and Holly were named co-trustees.
- Way also created a separate trust (often described as the “Massachusetts Fund” trust) in which his great-grandchildren were principal beneficiaries.
- The Florida trust provided that after Way’s death, Holly would be the sole lifetime beneficiary, and on Holly’s death any remaining Florida-trust assets would pass to the Massachusetts trust for the benefit of the great-grandchildren.
- The day after creating the Florida trust, Way executed a will directing that his residuary estate would pour over into the Florida trust.
- Way died on October 20, 1972. O. Ray Gussler replaced Way as Holly’s co-trustee, though the pleadings alleged that Holly handled most trust management and Gussler acted largely in name only.
- A distribution clause authorized the co-trustees, “in their absolute discretion,” to distribute principal (and income) as the co-trustees deemed necessary to maintain the standard of living to which Holly had become accustomed.
- Way’s great-grandchildren (remaindermen) sued Holly and Gussler seeking declaratory and equitable relief, including an accounting and removal of Holly as trustee.
- The remaindermen alleged that the trustees invaded principal beyond what was necessary to maintain Holly’s accustomed standard of living and failed to provide accountings, thereby wrongfully depleting the remainder.
- The trial court dismissed the amended complaint for failure to state a cause of action, reasoning that the “absolute discretion” clause eliminated any enforceable duty to act reasonably or to preserve assets for the remaindermen.
- The remaindermen appealed.

## Issues

1. Whether a trust clause granting trustees “absolute discretion” to distribute principal to maintain a life beneficiary’s accustomed standard of living makes the trustees’ decisions entirely immune from judicial review.
2. Whether remaindermen state a cause of action by alleging that trustee distributions exceeded what was necessary for the beneficiary’s accustomed standard of living and that the trustees failed to account.
3. Whether remaindermen may seek declaratory relief, an accounting, and potential removal of a trustee based on alleged abuse of discretionary powers before the remainder interest becomes possessory.

## Decision

- The District Court of Appeal of Florida, Second District reversed the dismissal and remanded.
- The court held that the amended complaint stated a cause of action; the “absolute discretion” language did not bar judicial review of the trustees’ exercise of discretion.
- The allegations of unreasonable invasions of principal and failure to account were sufficient at the pleading stage to require the trustees to respond and to permit the trial court to determine, on evidence, whether there was an abuse of discretion or other breach of trust.

## Legal Principles

- Even when a trust grants “absolute discretion,” trustees remain fiduciaries and must exercise discretionary powers in good faith and consistent with the trust’s purpose and stated distribution standard.
- A discretionary power to invade principal to “maintain the standard of living to which [the beneficiary] has become accustomed” is tied to that existing standard; it does not automatically authorize distributions that effectively set a new lifestyle level or ignore the remainder interest.
- A trustee who is also a beneficiary must still consider and protect the interests of other beneficiaries, including remaindermen, when administering and distributing trust assets.
- Remaindermen may seek equitable relief, including declaratory relief and an accounting, when they allege facts showing possible waste, mismanagement, or abuse of discretion that threatens their future interest.
- On a motion to dismiss, well-pleaded allegations are taken as true; if those allegations would support a finding of abuse of discretion or breach of fiduciary duty, dismissal is improper.

## Conclusion

Mesler v. Holly holds that labeling a trustee’s distribution power as “absolute discretion” does not eliminate fiduciary limits or prevent court review where remaindermen plausibly allege that principal invasions exceeded what was necessary to maintain the life beneficiary’s accustomed standard of living and that the trustees failed to account; the remaindermen’s amended complaint therefore stated a cause of action, and dismissal was reversed and remanded for further proceedings.


Mesler v. Holly, 318 So. 2d 530 (1975)