Also known as: cautio · cautions · cautioned · cautioning · cautioner · cautioners · cautionry · suretyship · surety
Written by attorneys — see sources below.
The element of the prudent-person standard that requires a trustee to proceed deliberately and avoid undue risk when administering a trust in light of its purposes, terms, distributional requirements, and other circumstances.
Cobalt Energy sues a former consultant for breach. During discovery the consultant withholds internal memos prepared after receiving a demand letter. The court denies Cobalt's motion to compel because the memos were created in anticipation of litigation and Cobalt has not shown substantial need or undue hardship in obtaining equivalent information elsewhere.
Canyon Construction serves as trustee of a family trust whose instrument stresses long-term preservation. Ignoring expert advice to limit timber harvests, Canyon authorizes aggressive cutting to increase immediate distributions. Beneficiaries sue, and the court finds Canyon breached the duty of prudent administration by failing to exercise reasonable care and caution.
Clifford Cox sells mortgaged land to Cascade Manufacturing. The deed recites assumption of the debt but the mortgagee gives no express release. Cox remains personally liable on the note because the transfer alone does not discharge the original obligor under suretyship principles.
Carmen Choi orally promises a supplier that she will pay the debt of her friend's business if the friend defaults. When the business fails, the supplier sues Choi. The court dismisses the claim because the oral promise to answer for the duty of another falls within the statute of frauds and is unenforceable without a signed writing.
Compass Logistics, trustee of a pension trust, hires an outside firm to manage all asset allocation. The trustee selects the firm after checking credentials, documents the scope of authority consistent with the trust's conservative goals, and reviews quarterly reports. Beneficiaries later challenge losses. The court holds the trustee satisfied its duty of care in delegation.
A city ordinance restricts extended family members from living together in a single home. The Court strikes the ordinance, noting that while substantive due process requires caution and restraint, arbitrary limits on family living arrangements lack sufficient justification under history and tradition.
In early 1973, Mrs. Inez Moore received a notice of violation from the city of East Cleveland. The notice stated that her grandson John Moore, Jr., was an illegal occupant of her home. It directed her to comply with the housing ordinance. Mrs. Moore lived in her East Cleveland home together with her son Dale Moore, Sr., and her two grandsons Dale Moore, Jr., and John Moore, Jr. John came to live with her after his mother's death when he was less than one year old. When she failed to remove John from the home, the city filed a criminal charge against her. Mrs. Moore moved to dismiss the charge. She claimed that the ordinance was constitutionally invalid on its face. Her motion was overruled. Upon conviction she was sentenced to five days in jail and a $25 fine. The East Cleveland ordinance limited occupancy of a dwelling unit to members of a single family. The ordinance defined family to include only a husband or wife of the nominal head of the household, unmarried children of the head or spouse provided they have no children residing with them, a parent of the head or spouse, or not more than one dependent child of the head or spouse along with that child's spouse and dependent children. The Ohio Court of Appeals affirmed the conviction after giving full consideration to her constitutional claims. The Ohio Supreme Court denied review of the case. The United States Supreme Court noted probable jurisdiction of her appeal.
View caseA trustee must administer the trust as a prudent person would by considering the trust's purposes, terms, distributional requirements, and other circumstances, while exercising reasonable care, skill, and caution.
No. The trustee must also exercise reasonable care, skill, and caution in defining the scope and terms of the delegation and in monitoring the agent's performance over time.
A trustee may partition, sell, or exchange trust assets when doing so is consistent with the prudent-administration standard and the trust's purposes, even if the instrument is silent on investment restrictions.
…history of the Fourteenth Amendment in its reliance on the "compelling state interest" test. See Weber v. Aetna Casualty & Surety Co. , 406 U. S. 164, 179 (1972) (dissenting opinion). But the Court adds a new wrinkle to this test by transposing it from the legal considerations associated with the Equal Protection…