Opinion
Nos. 39812 and 39813.
April 21, 1947.
1. HUSBAND AND WIFE: Trusts: Fraud: Transfer in Fraud of Widow's Marital Rights. A few months before his death the husband made a transfer to trustees of most of his property, said transfer being made voluntarily and without consideration, in contemplation of death, for the purpose of defeating the marital rights of the widow. Such transfer was in fraud of such marital rights and should be set aside as to the widow's one-third interest in the estate.
2. HUSBAND AND WIFE: Trusts: Fraud: Estoppel: Transfer in Fraud of Widow's Marital Rights: Widow Not Estopped. The widow was not estopped to deny the validity of the trust agreement, as its execution was concealed from her during her husband's lifetime and she never accepted any benefits of the trust.
3. APPEAL AND ERROR: Husband and Wife: Trusts: Wills: Testamentary Issue Not Raised in Trial Court. While the trial court at one time stated in a memorandum that the trust instrument was testamentary in character, that issue was not raised by the pleadings and such finding was withdrawn before judgment was entered. This issue will not be ruled upon appeal.
4. HUSBAND AND WIFE: Trusts: Fraud: Transfer in Fraud of Widow's Rights: Partial Invalidity. A trust in fraud of the widow's rights is not necessarily void as to the rights of other beneficiaries, but the trust may be set aside as to the widow and left in full force as to all others.
Appeal from Circuit Court of St. Louis County. — Hon. Amandus Brackman, Judge.
AFFIRMED.
James E. Higgins, Harry G. Neill, Robert T. Hensley and Marvin Krause for appellants John C. Kappel, Jr., Martha Raney and Mutual Bank Trust Company, Trustees.
(1) The court erred in rendering its decision and judgment for plaintiff and against defendants John C. Kappel, Jr., Martha Raney and Mutual Bank Trust Company, trustees, which among other things was a finding to the effect that the personal property conveyed to these defendants under the trust indenture was conveyed in fraud of plaintiff's rights as widow of the grantor of the trust, because there was no clear and convincing proof of a fraudulent intent on the part of the grantor. Sims v. Brown, 252 Mo. 58, 158 S.W. 624; Davis v. Rossi, 326 Mo. 911, 34 S.W.2d 8; Merz v. Tower Grove Bank Trust Co., 130 S.W.2d 611; Coon v. Stanley, 230 Mo. App. 524, 94 S.W.2d 96; 41 C.J.S., sec. 19, p. 415; 26 Am. Jur., sec. 198, p. 617. (2) The court erred in its judgment and finding that the trust agreement of 2 February, 1943 was testamentary in character because the grantor had no testamentary control over the property at the time of his death, since there was no finding that the property belonged to the grantor at the time of his death. Sec. 323, R.S. 1939, and authorities cited under Point (1). (3) The court erred in its judgment and finding that the trust agreement of 2 February, 1943, was testamentary in character because there was no foundation or basis for such finding and judgment, and no clear, cogent and convincing as well as positive evidence to support such finding. Restatement of the Law of Trusts, sec. 57, (1) and (2); Sims v. Brown, 252 Mo. 58, 158 S.W. 624; Davis v. Rossi, 326 Mo. 911, 34 S.W.2d 8; Coon v. Stanley, 230 Mo. App. 524, 94 S.W.2d 96; Merz v. Tower Grove Bank Trust Co., 130 S.W.2d 611; In re Estate of Soulard, 141 Mo. 642. (4) The court erred in its judgment and finding because the court erred in failing to find that plaintiff was estopped to deny the validity of the trust indenture, as plaintiff actively participated as co-trustee in a previous trust which conveyed the same personal property as the trust in question, and further recognized the trust by her acts and conduct after the death of her husband. Cranson v. Cranson, 4 Mich. 230, 66 Am. Dec. 534; Pollman v. Schaper, 258 Mo. 710, 167 S.W. 953; 31 C.J.S., sec. 108, p. 341.
Bernard J. Huger and Edw. V.P. Schneiderhahn for appellants Reverend Father Anselm Secor, C.P., Pastor of St. Ann's Catholic Church of Normandy.
(1) This case was laid in fraud and the proof failed completely on that point. (2) The petition is a copy of the petition in the case of Merz v. Tower Grove Bank and Trust Co., 130 S.W.2d 611. But the facts in the Merz case and in the instant case are radically different as to circumstances of health and the knowledge respecting it and the purposes of the instrument of trust. (3) The obvious frauds denounced by the Supreme Court in other cases where the husband sought to rid himself of his property by conveying to his children or others while expecting death and for the purpose of impoverishing his widow have no application here. (4) If the case of Davis v. Rossi, 326 Mo. 911, 34 S.W.2d 8, and the case of Sims v. Brown, 252 Mo. 58, are still the law, then the decision of the lower court in the instant case cannot stand. Thomas S. McPheeters and Bryan, Care, McPheeters McRoberts for appellant Minette McFarland.
(1) The court erred in entering a judgment and decree in favor of respondent on the ground that the trust was testamentary in character when no such basis of recovery was pleaded in respondent's petition. (2) The court erred in adjudging and decreeing that the conveyance was testamentary in character. Davis v. Rossi, 326 Mo. 911, 34 S.W.2d 8; Sims v. Brown, 252 Mo. 58, 158 S.W. 624; Coon v. Stanley, 230 Mo. App. 524, 94 S.W.2d 96; Scott on Trusts, secs. 57.1, 57.6; Restatement of the Law of Trusts, sec. 57 (d). (3) The court erred in holding that the conveyance in trusts was in fraud of the wife's marital rights because the record in this case affirmatively shows that the provision made for the wife in the trust indenture was greater in value than her marital rights. (4) Kappel, as executor, after filing his answer and taking the position at the trial that the trust was good in its entirety, cannot, after judgment and decree, reverse that position and ask the court to declare the trust void in its entirety. The same party cannot take two completely inconsistent positions at and before a trial and subsequent thereto. (5) In the event that the court should affirm the judgment in favor of the widow respondent in the principal cause, which declared that she was entitled to receive one-third of the trust estate, the trust can and should be still left in full force as to all other parties, all of whom in their pleading and at the trial asserted the full validity of the trust in its entirety. Wanstrath v. Kappel, 190 S.W.2d 241.
McDonald, Bartlett Muldoon, Daniel Bartlett and Thomas F. Muldoon for respondent Gertrude Wanstrath.
(1) The evidence in this case establishes the right of the widow to have the trust indenture set aside as to one-third of the property thereby conveyed, to which share (equivalent to a child's share) she is absolutely entitled. Merz v. Tower Grove Bank Trust Co., 344 Mo. 1150, 130 S.W.2d 611. (2) The trust indenture was testamentary in character. Merz v. Tower Grove Bank Trust Co., supra; Rice v. Waddill, 168 Mo. 99, 67 S.W. 605; Tucker v. Tucker, 29 Mo. 350; Sec. 323, R.S. 1939; Messersmith v. Messersmith, 264 Mo. 610, 175 S.W. 914; Davis v. Davis, 5 Mo. 183; In re Bernays Estate, 344 Mo. 135, 126 S.W.2d 209; Newton v. Newton, 162 Mo. 173, 61 S.W. 881; Straat v. O'Neill, 84 Mo. 68; Tucker v. Tucker, 32 Mo. 464; Stone v. Stone, 18 Mo. 389; Dyer v. Smith, 62 Mo. App. 606; Sims v. Brown, 252 Mo. 58, 158 S.W. 624; Burnet v. Guggenheim, 288 U.S. 280; Restatement of the Law of Trusts (Am. Law Inst.), sec. 57, subdiv. 2. (3) The husband retained control of the trust property until the moment of his death and did not in good faith divest himself of ownership, so that the property at his death is subject to widow's statutory rights. Newman v. Dore, 275 N.Y. 371, 9 N.E.2d 966, 112 A.L.R. 643. (4) The transfer by the trust indenture was in fraud of the widow's statutory marital rights. Merz v. Tower Grove Bank Trust Co., supra; Newman v. Dore, supra; Newton v. Newton, supra; Secs. 323, 1892, R.S. 1939; Wigmore on Evidence (3rd Ed.), secs. 286, 2243, 2340. (5) Under all the evidence and the pleadings in the case, the widow is not estopped from claiming her statutory marital rights in the "Trust" property. Sec. 323, R.S. 1939; Messersmith v. Messersmith, supra; 19 Am. Jur., Estoppel, sec. 42-3. (6) The decree entered in this case was just and proper, and is within the jurisdiction and power of a court of equity. The pleadings only sought the setting aside of the trust indenture as to one-third (the widow's statutory share) of the trust property, and did not seek the setting aside in toto of the indenture. A court of equity, having once acquired jurisdiction, will retain it to the end to administer full and complete justice, within the scope of the pleadings and the evidence, between the parties. Hence there is no occasion here to set aside the trust indenture in toto, or, if so, there is no occasion to direct the delivery of the widow's share of the trust property to the executor. Merz v. Tower Grove Bank Trust Co., supra; 30 C.J.S., sec. 67; 19 Am. Jur., secs. 127, 128, 129, 197; Nodaway County v. Alumbaugh, 348 Mo. 354, 153 S.W.2d 74; Stierlin v. Teschemacher, 333 Mo. 1208, 64 S.W.2d 647, 91 A.L.R. 121; Peer v. Aschauer, 102 S.W.2d 764; Siegle v. First Natl. Co., 338 Mo. 417, 90 S.W.2d 776, 105 A.L.R. 181; Restatement, Law of Trusts, sec. 167.
Henry Ebenhoh and Walter S. Berkman for appellant John C. Kappel, Jr.
(1) When an instrument has been declared to be testamentary in character, it is of no force or effect for any purpose. Gooddale v. Evans, 172 S.W. 370; Thorp v. Daniel, 99 S.W.2d 42; Merz v. Tower Grove Bank Trust Co., 130 S.W.2d 611; Goins v. Melton, 121 S.W.2d 821. (2) Claim for a child's share must be presented to the probate court, since the amount of a child's share can only be ascertained upon a final settlement of an estate after a full accounting by the administrator. Howard v. Strode, 146 S.W. 792; In re Bernays' Estate, 126 S.W.2d 209. (3) Exclusive original jurisdiction to administer and distribute assets of deceased's estate is vested in the probate court and not in the circuit court. Art. 6, Sec. 34, Constitution of Missouri; Hax v. O'Donnell, 117 S.W.2d 667; Kock v. Meacham, 121 S.W.2d 279; Smith v. Oliver, 157 S.W.2d 558. (4) Circuit court is without jurisdiction to administer and distribute assets belonging to a decedent's estate pending in the probate court. Kock v. Meacham, supra; Smith v. Oliver, supra. (5) It is the duty of an executor to collect and preserve all assets of an estate for the benefit of all persons interested in it and to collect inheritance and estate taxes. Secs. 575, 579, R.S. 1939; State ex rel. Madden v. Sartorius, 163 S.W.2d 987; Odom v. Langston, 173 S.W.2d 826. (6) When deceased's estate is open and pending in the probate court and a trust executed by deceased has been held to be testamentary in character, and therefore void, circuit court should order all assets of said void trust to be delivered to the executor of deceased's estate for purposes of administration and distribution. Smith v. Oliver, supra. (7) When an executor may be subjected to conflicting orders or judgments made by the circuit and probate courts, he is an aggrieved party within the meaning of the statutes relating to appeals and has the right to appeal. Sec. 1184, R.S. 1939; State v. Oliver, supra; State ex rel. St. Louis Union Trust Co. v. Sartorius, 164 S.W.2d 356. (8) When assets of an estate are insufficient to pay debts and claims for taxes, the executor is an aggrieved party and has the right to appeal from a decree of the circuit court which affects his duties to bring assets into the estate to pay claims and make distribution upon final settlement. Sec. 1184, R.S. 1939; Love v. White, 154 S.W.2d 759.
John A. Nolan for guardian ad litem.
(1) If the decree be construed as declaring the trust void as testamentary, it must be held erroneous because no such issue was before the court under the pleadings and no evidence was offered to sustain such a finding; and no such finding was necessary to sustain plaintiff's petition. (2) The decree of the trial court may be sustained by this court, without disturbing the trust as to the remaining two-thirds and the executor has no right to ask this court to declare the trust void in toto on grounds not pleaded or tried in the trial court.
This is an equitable action by Gertrude Wanstrath, widow of George J. Wanstrath, deceased, to establish her widow's right to a child's share or one-third of certain personal property placed in trust by her husband before his death. She seeks to have the trust set aside as to her child's share, and to have the trustees turn it over to her subject only to proportionate deduction for debts. Sec. 323, R.S. 1939, Mo. R.S.A. The defendants are the trustees of the trust, executor of Wanstrath's estate, those interested in Wanstrath's estate, and beneficiaries of the trust estate.
Four months and eight days before his death Wanstrath transferred to himself and Mrs. Raney, his confidential secretary and bookkeeper, as co-trustees, the major portion of his property consisting of bonds, notes, deeds of trust, shares of stock and $29,418.29 in cash on deposit, with the right to add additional property and securities from time to time. Wanstrath reserved the right to amend the terms of the trust, to revoke it in whole or in part, and to withdraw from the trust any sums of money, securities or other property as he wished at any time. The trustees were given the full powers of management and investment of [329] the trust property. The entire income was payable to Wanstrath during his life. After his death the trust provided that one-half of the corpus should be held in trust for the benefit of Wanstrath's daughter with the income payable to her for her life. The other half was held in trust for Wanstrath's widow, the plaintiff, with the income payable to her until her death or remarriage. Upon Wanstrath's death defendants Kappel and the Mutual Bank and Trust Company were named as successor trustees in Wanstrath's place to act with Mrs. Raney.
At the time he created the trust Wanstrath was seventy-five years old, his wife about thirty years younger. They had been married for nine years. Wanstrath was suffering from a chronic heart condition described by one doctor as a "coronary heart condition and angina pectoris" and was seeking medical advice from a number of doctors.
On the same day Wanstrath created the trust he executed his will. There we find some light on Wanstrath's purpose for creating the trust. He recites in his will that he has transferred practically all of his property to trustees, and that the trust instrument has provided for the distribution of his estate. The will continues "but I am anticipating that the said trust agreement may be attacked by my wife, my son, or my daughter herein named, and if it shall be determined, as a result of any such attack, that any of the property deposited thereunder was mine on the date of my death, then I do hereby direct that the same be distributed by my hereinafter named executors in accordance with the provisions of said indenture of trust."
The trust estate was valued at approximately $402,000, Wanstrath's decedent's estate under administration at about $10,000.
The trial court in its decree found that Wanstrath at the time he created the trust was ill and knew that he was suffering from a serious heart ailment from which he died after a few months, that the trust was made while Wanstrath was conscious of impending death, and for the purpose of depriving his surviving widow of her marital interest in the personal property transferred in trust, and in fraud of the widow's marital interest. The trial court further found the widow never knew of or agreed to the creation of the trust and was not estopped from attacking its validity. It ordered the trust set aside as to one-third of the corpus and that the widow recover as her absolute property such portion from the trustees subject to deduction of one-third of the amount of taxes paid and claims allowed.
It is our opinion that the decree was proper under the evidence and must be affirmed.
The decisions on this subject are not uniform and courts have differed on the effect of a disposition of property by one spouse in which the other would be entitled to share if held at the death of the first spouse. "However many cases have taken the view that a purported disposition of such property by one spouse, which is not a good faith transaction, but merely a device to retain actual ownership, use, and enjoyment of the property until death, and at the same time to defeat the right and interest of the other spouse under the law of descent and distribution in such property at death, is fraudulent and not effective against such right and interest of the other spouse. The determination, however, of what is a good faith transfer or a merely colorable transaction attended by facts indicative of fraud on such right within the rule cannot be determined by any definite test. Each case must be considered in the light of the special facts and the law of the jurisdiction where decided." 26 Am. Jur., Husband and Wife, sec. 201. For a discussion of the various rules followed in the decisions of the several jurisdictions see cases and annotations in 64 A.L.R. 463, 112 A.L.R. 643, 157 A.L.R. 1164.
The rule was early announced in this state that although dower is given in personal estate by our statute, yet it was not thereby intended to restrain the husband's absolute control of it during his life, to give and dispose of as he wishes; provided it be not done without consideration, in expectation of death, and with a view to [330] defeat the widow's dower. Stone v. Stone, 18 Mo. 389, 392. And to the same effect see Dyer v. Smith, 62 Mo. App. 606, Straat v. O'Neil, 84 Mo. 68, Newton v. Newton, 162 Mo. 173, 61 S.W. 881. Davis v. Davis, 5 Mo. 183, Tucker v. Tucker, 29 Mo. 350 and 32 Mo. 464; Rice v. Waddill, 168 Mo. 99, 67 S.W. 605.
A more recent case and one with the fact so similar to the instant one that its decision is pat on the question of the widow's right to recover is Merz v. Tower Grove Bank and Trust Company, 344 Mo. 1150, 130 S.W.2d 611. There we said: "The general rule of law (long in effect in this states is that a conveyance of property by the husband without consideration and with the intent and purpose to defeat his widow's marital rights in his property, is a fraud upon such widow and she may sue in her own right, and set aside such fraudulent conveyance, and recover the property so fraudulently transferred, to the extent of her interest therein. . . . We adhere to the rule as applied by this court. We hold that the general rule with reference to voluntary transfers of property in contemplation of immediate death, and with the intent and purpose to defeat, and therefore to defraud, the widow of her marital rights, applies to the transfer of property by the trust instrument in this case."
In the case before us the evidence clearly and sufficiently shows and the trial court so found that Wanstrath made a transfer of his property, voluntarily and without consideration, in contemplation of death, for the purpose of defeating the widow of her marital rights and therefore in fraud of such rights.
As was also held in the Merz case, and we hold here that the cases of Davis v. Rossi, 326 Mo. 911, 34 S.W.2d 8, Sims v. Brown, 252 Mo. 58, 158 S.W. 624 and Coon v. Stanley, 230 Mo. App. 524, 94 S.W.2d 96, relied on by appellants, are distinguishable on the facts and are not apposite.
We find nothing in the record of this case which sustains appellants' claim that the widow was estopped to deny the validity of the trust instrument. While it is true that she had participated as a cotrustee under two previous trusts with different provisions created by Wanstrath, that fact certainly does not affect her right to attack an instrument fraudulent in law as to her, which she had no connection with or even any knowledge of its provisions. It even appears that the execution of the trust instrument was concealed from her during her husband's lifetime. She never accepted any benefits of the trust.
The executor of Wanstrath's estate has filed a separate appeal in addition to joining all the other defendants in their joint appeal. In his separate appeal he raises the issue that the trust must be declared void in toto because it is testamentary in character instead of being held void only as to the widow's child's share on the ground of being in fraud of her rights. The petition does not charge the trust is testamentary. It seeks to free from the trust only the widow's child's share. The executor in his answer and at the trial sought to uphold the trust in its entirety. In a memorandum the trial court expressed the view the trust was testamentary in character, but it is well settled that such memorandum has no binding effect on an appellate court. Such is particularly true in the light of subsequent events in this case. Some days later a decree was entered which also held the trust was testamentary in character. Thereafter the executor filed a motion asking the trial court to modify the decree by declaring the trust void in toto. This was the first time this issue was raised. The trial court overruled this motion and on its own motion modified the decree by eliminating the finding that the trust was testamentary.
The executor relies on the Merz case, supra, in support of his position. There the trial court held the trust was void as to the widow's share only but this court on appeal held the trust was void in toto. But that issue was raised by the pleadings in that case. This court found `the petition attacks the entire conveyance as fraudulent and as testamentary in character." A defendant in his answer and cross bill charged the conveyance in trust was void in toto. There was also the issue in that case that the trust company had imposed on the creator of the trust and the trust instrument was executed under mistake and [331] misapprehension. Accordingly it is clear that case, because of the difference in facts, does not support the executor's contention in this case. He is now attempting to raise a new issue that was not raised by the pleading and was not before the trial court at the trial.
Merely because the trust is void as to the widow's rights does not necessarily make it void as to the rights of other beneficiaries. We considered this same trust in a preliminary phase in Wanstrath v. Kappel, 354 Mo. 565, 190 S.W.2d 241. We observed there: "On proof of such allegations the trust could be set aside as to the widow and left in full force as to all others." And in Straat v. O'Neil, 84 Mo. 68 this court, discussing cases of this kind, said that the relief granted by courts of equity in such cases has been to set aside the fraudulent conveyance in so far as it affects the rights of the widow. We find in Bolles v. Toledo Trust Co., 144 Ohio St. 195, 58 N.E.2d 381, 157 A.L.R. 1164 a specific ruling that such a trust in that case was valid except as to the statutory rights of the widow. And see Scott on Trusts, sec. 57.5.
The judgment is affirmed. All concur.