Opinion
No. 34648
Decided June 20, 1956.
Trusts — Construction of trust instrument and termination date of trust — Trustee's action for declaratory judgment to determine — Appeal — Trustee as party appellant — Not aggrieved party, when — May appeal in representative capacity, when.
1. Where a trustee is a mere stakeholder, with no duty to perform other than to pay out funds to various claimants as ordered by a proper court, he has no right to appeal from such order even though he may think the court erred in making it. In such an instance he is not an aggrieved party.
2. Where a judgment affects or threatens the existence, validity or continuance of a trust or prevents the trustee from discharging his duties thereunder, or where such judgment threatens to defeat the purpose of the trust, the trustee, although having no personal interest in the litigation, is not a disinterested party, is aggrieved by the judgment and may appeal therefrom in his fiduciary or representative capacity.
CERTIFIED by the Court of Appeals for Lucas County.
On July 17, 1953, The Toledo Trust Company, trustee, hereinafter designated trust company, instituted an action against Emma Farmer, a.k.a. Emma C. Farmer, Margaret Blasie, a.k.a. Margaret Hartman, Mary Farmer Williamson, a.k.a. Eleanor Williamson, Nellie Hinde, Lillian Hinde Taylor, Hazel Hinde Crosby, Esther Hinde Smith, Bob Farmer, a.k.a. Edward H. Farmer, William Hinde, Jr., Robert Hinde, and Russell Hinde.
In its petition the trust company says that its action is for a declaratory judgment and is brought under the provisions of Section 12102-1 et seq., General Code, for a declaration of its rights, obligations and duties with respect to the administration of the inter vivos trust of which it is the trustee, and, in particular, for a construction of the trust instrument as to the date of the termination of the trust.
The prayer of the petition is that the court enter a declaratory judgment determining the rights, obligations and duties of the trust company with respect to the termination date of the trust and advise and instruct the trust company as to the date upon which the trust shall be terminated, and for all further relief as may be lawful, just and proper.
The facts of the case are stipulated.
On December 31, 1930, Henry J. Hinde and his wife, Jennie E. Hinde, each created a separate irrevocable inter vivos trust, naming the trust company as trustee.
In the trust created by Jennie E. Hinde, designated trust No. 619, she transferred to the trust company certain property described in schedule A attached to the trust instrument, designated trust instrument No. 619, and in the instrument appointed an advisory committee of three to advise and jointly act with the trust company after her death in the management of the trust, instructing the trust company to consult with and procure from such advisory committee its advice and instruction concerning not only all transactions affecting the property but, likewise, the interpretation of the trust instrument.
The trust instrument provides that during the life of Jennie E. Hinde's husband, Henry J. Hinde, the entire net income from the trust property is to be paid to him; that, upon the death of the husband and during the lifetime of the wife, the trust company shall divide the entire net income into five equal parts and distribute three-fifths in equal shares to William Hinde, Emma Farmer and Ella Hinde Powell, the brother and sisters of Jennie E. Hinde's husband; that upon the death of any of the three beneficiaries the three-fifths shall be distributed in equal shares to the survivor or survivors of them; and that, in the event they all predecease the husband, the income shall be distributed in accordance with paragraph B of the instrument.
Paragraph B provides that the trust company shall distribute the remaining two-fifths in equal shares to six nieces and five nephews of Jennie E. Hinde's husband, and that upon the death of any such beneficiaries the income payments to her or him shall cease and the net income shall continue to be distributed in equal proportions to the surviving nieces and nephews.
The trust instrument provides further that, after the death of Jennie E. Hinde, the trust company is to hold and manage the trust property for a period of 10 years and to continue to distribute the entire net income therefrom in equal proportions to the beneficiaries named, and at the end of such 10-year period the remaining trust property, including undistributed net income, is to be distributed to the then survivors of the beneficiaries to whom the income was distributed, and in the same proportion.
In the trust created by Henry J. Hinde, designated trust No. 620, he transferred to the trust company certain property described in schedule A attached to the trust instrument, designated trust instrument No. 620, and appointed an advisory committee of three to advise and jointly act with the trust company after his death in the management of the trust, instructing the trust company to consult with and procure from such advisory committee its advice and instruction concerning not only all transactions affecting the property but, likewise, the interpretation of the trust instrument.
The trust instrument provides that, during the life of Henry J. Hinde, $2,000 shall be paid monthly to Jennie E. Hinde from the net income of the trust property, giving the trustee uncontrolled discretion to increase or decrease such monthly payment.
The trust instrument provides for payments to certain beneficiaries and then provides that the remaining income added to the income provided for in trust No. 619 shall be distributed in accordance with the provisions thereof.
A further provision of trust instrument No. 620 is that, upon the death of Jennie E. Hinde, the entire trust property, including undistributed net income, shall be transferred to trust No. 619 and held, managed and distributed in accordance with the provisions thereof, and thereupon trust No. 620 shall terminate.
The advisory committees appointed for both trusts consisted of the same persons.
Jennie E. Hinde, the trustor in trust No. 619, died August 24, 1943, and Henry J. Hinde, the trustor in trust No. 620, died December 16, 1947.
On August 7, 1952, after extended tax litigation, the assets of trust No. 620 were transferred to trust No. 619, to be administered, managed and distributed in accordance with the provisions thereof, and trust No. 620 was thereupon terminated in accordance with the provision thereof that upon the death of Jennie E. Hinde the entire trust property of trust No. 620 shall be transferred, held, managed and distributed in accordance with trust No. 619. It is said that approximately $1,500,000 now reposes in trust No. 619.
The Court of Common Pleas held that the trust shall be administered by the trust company for a period of 10 years after the death of the survivor, as between Jennie E. Hinde and Henry J. Hinde, or until December 15, 1957, and that on December 16, 1957, the trust company shall distribute the trust estate, under the provisions of the trust agreement, to the persons entitled thereto.
An appeal was taken by the trust company to the Court of Appeals, which court affirmed the judgment of the trial court but certified the cause to this court for review and final determination because of conflict between the judgment agreed upon by the judges of the Court of Appeals and a judgment pronounced on the same question by the Court of Appeals for Darke County in the cases of Beachler v. Ford, 77 Ohio App. 41, 60 N.E.2d 330, in which cases motions to certify the records to this court were overruled on May 23, 1945.
Messrs. Shumaker, Loop Kendrick and Mr. Charles W. Peckinpaugh, Jr., for appellant. Messrs. Reams, Bretherton Neipp and Messrs. Fuller, Harrington, Seney Henry, for appellees.
Two questions are presented to this court, one, is the judgment of the trial court correct in fixing the distribution date of the trust as 10 years after the date of the death of the survivor of Henry J. Hinde and Jennie E. Hinde? and, two, was the Court of Appeals correct in its judgment affirming the judgment of the trial court, upon the ground that the trust company was not aggrieved by that judgment and, therefore, had no right to appeal?
As we have stated, the trial court adjudged that there shall be no distribution of the corpus of the trust until December 16, 1957, 10 years after Henry J. Hinde's death.
The Court of Appeals was of the opinion that the trial court was in error in entering such a judgment, but that, since the trust company was not an aggrieved party and since no one of the beneficiaries appealed from the judgment of the trial court, it must be affirmed.
We are of the opinion that the Court of Appeals was correct in its conclusion that the Court of Common Pleas was in error with reference to the date for the termination of the trust.
It will be observed that in trust instrument No. 619 it is provided that after Jennie E. Hinde's death the trust company shall hold and manage the trust property for a period of 10 years, and that at the end of that 10-year period the corpus of the trust shall be distributed to the then survivors of the groups to whom the income was being distributed, and in the same proportion. That provision would have required the distribution of the corpus of the trust on August 24, 1953, since she died 10 years before that date.
In trust instrument No. 620, it is provided that upon the death of Henry J. Hinde's wife the entire trust property shall be transferred, held, managed and distributed in accordance with trust instrument No. 619, and that trust No. 620 shall thereupon terminate.
It follows that upon the death of Jennie E. Hinde on August 24, 1943, the entire trust property in trust No. 620 was required to be transferred to the trust company and held, managed and distributed in accordance with trust No. 619, and trust No. 620 thereupon terminated.
Although the corpus of trust No. 620 was not transferred to trust No. 619 until 1952, because of protracted tax litigation, nevertheless it had been transferred and become a part of trust No. 619 before the expiration of 10 years from the date of the death of Jennie E. Hinde. There remained no trust No. 620; it had merged with trust No. 619; and since, by the provisions of trust No. 619, it was to terminate 10 years after Jennie E. Hinde's death, its termination date was August 24, 1953.
Some of the defendants contend that, since trust instrument No. 619 provides that the net income shall be paid to Henry J. Hinde during his lifetime, if he had lived for more than 10 years after the death of his wife it would have been impossible to terminate trust No. 619 at the end of the 10 years, thereby creating an irreconcilable conflict and showing an intention that the trust should not terminate until 10 years after the death of the survivor of the husband and wife. The answer to that contention is that such a situation creating the conflict did not occur, since Henry J. Hinde died in just a little more than four years after the death of his wife.
The provision in trust instrument No. 619 that the income from the trust shall be paid to Henry J. Hinde during his lifetime raises no question as to what would have been the situation if he had survived his wife for more than 10 years, for the simple reason that he did not so survive her. See Bear v. Millikin Trust Co., 336 Ill. 366, 168 N.E. 349, 73 A.L.R., 173.
It is a rule of law that, where there is a temporary impossibility for the fulfillment of directions in a trust, making the performance of a condition temporarily impossible, the trustee is under the duty to fulfill the condition after the temporary impossibility is removed. See Restatement of the Law of Trusts, 408, Section 165; and 2 Scott on Trusts, 832, Section 165.
If Henry J. Hinde had lived for more than 10 years after his wife died, it would have been the duty of the trust company to terminate the trust immediately upon his death and not 10 years thereafter, since it could not be terminated on the date specified in the trust. However, as we have said, that contingency did not arise and there was nothing which prohibited the termination of the trust according to the terms of the trust instrument itself.
We come now to the second question, namely, was the Court of Appeals correct in its judgment affirming the judgment of the trial court, solely on the ground that it was without jurisdiction to entertain the appeal since the trust company was not aggrieved by the judgment below?
At the time of the institution of this action, Emma Farmer was the only survivor of the beneficiaries who were to receive three-fifths of the net income of the trust and three-fifths of the corpus thereof if she was surviving at the termination of the trust. Of the 11 nieces and nephews who were to receive two-fifths of the net income of the trust and two-fifths of the corpus at its termination, unless there were no survivors in the three-fifths class, in which case they were to receive the entire corpus, all but one are still living.
Emma Farmer was 80 years of age in 1953, 10 years after the death of Jennie E. Hinde, and will be approximately 84 years of age in 1957, 10 years after the death of Henry J. Hinde.
Three of the 10 persons in the two-fifths group are children of Emma Farmer, and those four contend that the trust terminated in 1953, for, if so, Emma Farmer is entitled to three-fifths of the corpus and her three children are each entitled to one-tenth of two-fifths of the corpus. The remaining seven persons in the two-fifths group contend that the trust does not terminate until 1957, at which time the division of the corpus will be the same as in 1953 if all the beneficiaries are then living, but if Emma Farmer should then not be living, the entire corpus will be divided among the 10 persons in the two-fifths group.
Obviously, it is the duty of the trustee to take a neutral position as between these contenders, and, if the matter involved herein were simply a dispute between them, the judgment of the Court of Common Pleas would stand since no one of them took an appeal from it.
However, there is a more serious question involved.
The trustee and a majority of the advisory committee feel that the judgment of the Common Pleas Court is directly contrary to the intent and the express provisions of trust No. 619, and, having the expenses of the appeal underwritten by the dissatisfied beneficiaries, the trustee appealed.
The general rule with reference to the right of a trustee to appeal is that where a trustee is a mere stakeholder, with no duty to perform other than to pay out funds to various claimants as ordered by a proper court, he has no right to appeal from such order even though he may think the court erred in making it. In such an instance he is not an aggrieved party. Estate of Ferrall v. Bank of America Natl. Trust Savings Assn., 33 Cal.2d 202, 200 P.2d 1, 6 A.L.R. (2d), 142; Musser's Estate, 341 Pa. 1, 17 A.2d 411.
However, a different rule governs where a judgment prevents the trustee from discharging his duties under the trust.
In 6 A.L.R. (2d), 152, the rule is stated as follows:
"Where the order or judgment affects or threatens the very existence, validity, or continuance of the trust, or prevents the trustee from discharging his duties under the trust, or threatens to defeat the purpose of the trust, or depletes the trust fund by allowance of unreasonable or unfounded claims against it, the trustee, though having no personal interest in the litigation, is not a disinterested party. In such case, he, in his fiduciary or representative capacity, is aggrieved by the judgment or order, and may appeal therefrom, whether the litigation is between the beneficiaries themselves or between the trust and third parties."
In support of the above statement, cases are cited from the courts of 14 states and Hawaii.
In the Ferrall case, supra, it was held that a trustee may appeal from an order terminating a trust or dissolving a spendthrift trust, even though all the beneficiaries consent to immediate distribution of the trust estate. See Fletcher v. Los Angeles Trust Savings Bank, 182 Cal. 177, 187 P. 425.
If a trustee may appeal from an order terminating a trust, it is a logical sequence to say that he may appeal from an order extending the date of termination of the trust.
The logic of the rule we have been discussing is that a trustee has a very personal interest in maintaining and executing the trust as directed by the trustor, and, regardless of any pecuniary effect upon the trustee, he is an aggrieved party where an order of the court affects the existence, validity or continuance of the trust, and where the order concerns matters of the trust apart from the duties of the trustee as a mere stakeholder.
In the present case the judgment of the Court of Common Pleas is not concerned with the question as to who the beneficiaries are, or in what proportion they benefit. Those matters are stipulated, and, if all parties survive, their interests will be the same whether the trust terminated in 1953 or will terminate in 1957. However, the continuance or termination of the trust is a vital matter affecting the very existence of the trust itself, and in such a matter the trustee has an appealable interest.
Therefore, the judgment of the Court of Appeals is reversed, and the trust is ordered terminated as of August 24, 1953.
Judgment reversed.
WEYGANDT, C.J., HART, ZIMMERMAN and BELL, JJ., concur.
MATTHIAS and TAFT, JJ., dissent.
Concurs in paragraph one of the syllabus but dissents from the judgment, for the reason that the "substantial rights" of the trustee, the only appellant before the Court of Appeals, were not affected by the judgment of the Common Pleas Court. See Section 2309.59, Revised Code (Section 11364, General Code.)
MATTHIAS, J., concurs in the foregoing dissenting opinion.