Gilliland

For the fourth time an appellate court is called upon to resolve a dispute concerning the Gilliland Testamentary Trust (the Trust), 1 established under the will of Elsinore Machris Gilliland, who died 12 Januaiy 1967. The Trust, funded on 31 October 1967 with assets appraised at $16,500,000, generates gross annual income in excess of $900,000. The will directs the trustees to pay out of net income $25,000 a year to each of five nieces and nephews of Mrs. Gilliland (the annuitants), a total of $125,000, and on the death of each annuitant (with one exception) to pay the same sum on a representational basis to the annuitant’s issue. The remainder of the trust income is payable equally to six named charities, which also will share equally in the corpus of the trust on the death of the last eligible annuitant.

The current controversy between the testamentary trustees (respondents) and four of the charities (Charities) presents the issue whether the trustees acted legally and prudently in deferring collection of certain promissory notes payable to the trust by Sky Harbor Ranchos and Estates (Sky Harbor), a closely held California land development corporation. After a lengthy…