Frost National Bank of San Antonio v. Newton

Louise Cozby’s will established a trust to provide income for her husband and pay for the support and education of two great-nieces and a great-nephew through college, with a $1,000 bonus upon obtaining a degree. The will said that if the trust income was more than enough needed to cover the educational expenses, then the trustee had discretion to distribute the excess income to the beneficiaries. The will specified that the trust would continue throughout the lifetimes of Cozby’s husband and her two great-nieces and terminate when the last of them died. However, the will also directed that the trustee could terminate the trust early if at any point the income from it became insufficient to justify its continuance. Finally, the will directed that when the trust terminated, the remaining assets would be distributed to the surviving great-nieces or their children. Cozby’s husband died before she did, and her will appointed Frost National Bank of San Antonio (the bank) (plaintiff) as executor and trustee. The trust paid for the great-nieces’ and great nephew’s college educations as planned, including the $1,000 bonuses. After the last bonus had been paid, the bank brought a declaratory action to determine whether the trust should terminate or remain in effect until the great-nieces both died. The two great-nieces, Karolen Newton and Louise Purvis, and their children (defendants) entered an agreement urging the bank to terminate the trust and distribute the assets. The trial court found enough left in the trust to justify its continuance, but that the trust had served its primary purpose. The court ordered the trust terminated and the assets distributed to the great-nieces. The appellate court affirmed, reasoning that the trust had fulfilled its primary purposes and that terminating it would not subvert Cozby’s wishes. The bank appealed.