United Building & Loan Ass'n v. Garrett

• Decision Date: 12 February 1946
• Docket Number: No. 529.,529.
• Parties: UNITED BUILDING & LOAN ASS'N v. GARRETT et al. (TEXAS-ARKANSAS FUND, Inc., et al., Intervenors).
• Court: U.S. District Court — Western District of Arkansas

64 F. Supp. 460

UNITED BUILDING & LOAN ASS'N v. GARRETT et al. (TEXAS-ARKANSAS FUND, Inc., et al., Intervenors).

No. 529.

District Court, W. D. Arkansas, Fort Smith Division.

February 12, 1946.

Pryor, Pryor & Dodds, of Fort Smith, Ark., for plaintiff.

Abernathy & Abernathy, of Shawnee, Okl., for defendants Troy Garrett, et al.

Fred Quillin, of Mena, Ark., for defendant Buena V. Garrett, and individual intervenors.

U. A. Gentry, of Little Rock, Ark., for intervenor Texas-Arkansas Fund, Inc.

JOHN E. MILLER, District Judge.

Specific findings of fact and conclusions of law, separately stated, have been made and filed as required by Rule 52(a), Federal Rules of Civil Procedure, 28 U.S. C.A. following section 723c, and reference to such facts will be made in this discussion only as is necessary to a clear understanding of the material issues.

The plaintiff, United Building & Loan Association, filed its bill of interpleader, invoking the jurisdiction of the court under 28 U.S.C.A. § 41, subdivision 26, on the ground that it held as stakeholder certain funds of a value in excess of $500 which were subject to identical adverse claims by numerous parties residing in Arkansas, Texas, Oklahoma, Kansas and Missouri. The bill named as defendants Troy Garrett, successor trustee under a certain Declaration of Trust executed by Presley G. Garrett, the beneficiaries under the said Declaration of Trust, Buena V. Garrett, individually and as administratrix and surviving widow of Presley G. Garrett, deceased. Plaintiff alleged its willingness to pay the fund into the registry of the court, and asked to be discharged of further responsibility.

Subsequently, the intervenor, Texas-Arkansas Fund, Inc., filed its intervention in which it adopted the allegations as to the residence of the parties defendant and the respective claims of the defendants to the proceeds of two certificates of beneficial interest issued by its predecessor, The Arkansas Fund, Inc., to Presley G. Garrett.

Answers were filed by Troy Garrett, as successor trustee, acting on behalf of the beneficiaries of the Declarations of Trust, and by Buena V. Garrett, both as administratrix and also in her individual right, setting out their respective claims to the certificates or their proceeds.

An intervention was filed by Louise Hounsel Howe and J. N. Hounsel, in which the individual intervenors alleged that they are the daughter and son, respectively, of Cora Garrett Hounsel, a daughter of Presley G. Garrett, deceased, and who predeceased the said Presley G. Garrett. They further alleged that they are heirs of the said Presley G. Garrett, and as such are entitled in law to their distributive share of their deceased mother's interest in the estate of Presley G. Garrett.

By agreement of all parties the court entered an order directing that the plaintiff liquidate the certificate issued by it, and that the intervenor, Texas-Arkansas Fund, Inc., liquidate the certificates of beneficial interest issued by it, and pay the funds into the registry of the court to abide the final judgment of the court. At the same time, the court directed that the costs incurred by the plaintiff and the said intervenor, including an attorney's fee in favor of the plaintiff and of the intervenor each in the sum of $250, be paid by the clerk of the court out of the said funds.

On February 23, 1940, plaintiff issued to Presley G. Garrett its Certificate No. 104 for 45 shares of par value of $100 each, and thereafter on April 11, 1941, Presley G. Garrett executed an instrument entitled "Declaration of Trust", which was duly acknowledged and subsequently filed with the plaintiff. On the back of said certificate was typed the following endorsement: "This Certificate is subject to a Declaration of Trust in favor of William Garrett, et al., made by Presley G. Garrett on the 11th day of April, 1941, a copy of which is attached hereto. United Building And Loan Association, By F. N. Dyke, President. Attest: Nathaniel Dyke, Jr., Sec'y."

The Declaration of Trust was attached to the said certificate and reads as follows:

"That I, Presley G. Garrett * * * hold one United Building and Loan Association Full-Paid Share Certificate, No. 104, dated February 23, 1940, for 45 shares of the par value of $100.00 each, * * * in my name, as Trustee, for the use and benefit of: (naming nine beneficiaries). Hereby expressly reserving as long as said Certificate stands in my name as Trustee the right and power to sell, assign, transfer, set over and deliver said Certificate, or any part thereof, and to collect and use the dividends and proceeds therefrom for the use and benefit of myself. The exercise of the right and power hereinabove reserved to me shall be conclusive on the beneficiaries herein named.

"This trust shall terminate one year after my death, and the trust estate shall thereupon pass and be transferred to said Beneficiaries according as their interest may appear. (Then are inserted provisions for succession of interest of beneficiaries who predecease the termination of the trust, provisions for the appointment of successor trustees, and a statement of their duties.)

"The right to revoke this trust, either in whole or in part, at any time before said trust is otherwise terminated under the foregoing provisions hereof, is hereby expressly reserved to me. Such revocation shall be made in writing signed by me, and an original and copy thereof delivered to United Building & Loan Association."

On February 8, 1940, the intervenor, through its predecessor, The Arkansas Fund, Inc., executed and delivered to Presley G. Garrett its beneficial certificate No. 836, which had a value of $4,800, and on the same date Garrett executed and delivered to the Arkansas Fund, Inc., an instrument designated "Declaration of Trust". On the face of the certificate was stamped and written the following endorsement: "This certificate is subject to a declaration of trust executed by the within named Presley G. Garrett dated February 8, 1940, a copy of which has been filed with the undersigned and any transferee shall be bound by the provisions thereof."

The Declaration of Trust was dated February 8, 1940, was signed and acknowledged by Presley G. Garrett, and endorsed by the issuer, certifying that the original of the declaration was filed with the Arkansas Fund, Inc., on February 12, 1940. This instrument provided as follows: "That I, Presley G. Garrett * * * do hereby declare that I have subscribed for a $4800.00 Arkansas Fund Certificate * * *; that I hold Certificate No. 836 in my name, as Trustee, for the use and benefit of: (naming the same beneficiaries as before)" The next paragraph reserving to the settlor-trustee the power to sell, assign, etc. is identical with the earlier Declaration set out above. The termination of this trust, however, is fixed as follows: "This Trust shall terminate upon maturity of said Arkansas Fund Certificate No. 836, and the Trust estate shall thereupon pass and be transferred to said beneficiaries. * * * Should all of said beneficiaries die prior to the termination of said Trust, then said Trust estate shall vest in me and be distributed, unless otherwise disposed of, as a part of my estate."

The remaining provisions of this Declaration are substantially the same as the earlier one set out above, including the reservation of a power to revoke the trust by written notice to the Arkansas Fund, Inc. On the back of the certificate, however, there is an endorsement in blank of the Form of Assignment.

On March 29, 1941, the Arkansas Fund, Inc., issued its beneficial certificate No. 1012 of the then value of $1,200 to Presley G. Garrett who executed and delivered a "Declaration of Trust" relative to the said certificate, containing the same provisions as the Declaration executed in connection with certificate No. 836, and certificate No. 1012 was endorsed on the face in the same manner as No. 836. The Form of Assignment on the back of No. 1012 was unexecuted.

Presley G. Garrett died intestate June 11, 1944, a resident of Polk County, Ark. Defendant Buena V. Garrett, the widow of deceased, was duly appointed administratrix of the estate by the Probate Court of said County on June 13, 1944, and is now the duly qualified and acting administratrix of said estate. Presley G. Garrett left surviving him his widow, a second wife, the individual intervenors, Louise Hounsel Howe and J. N. Hounsel, as only surviving heirs of Cora Garrett Hounsel, a deceased daughter, and the defendants, Troy Garrett, et als., sons and daughters of deceased by his first marriage. Troy Garrett is successor trustee under each of the "Declarations of Trust."

In her answer and cross-complaint, the widow and administratrix denies that the purported trust agreements are sufficient at law to constitute valid trusts; that if the purported agreements have any standing at law, they constitute wills which as to her and to heirs of the deceased, not named therein, are void.

The individual intervenors by answer and cross-complaint make substantially the same allegations as the administratrix, claiming their interest as pretermitted heirs of the deceased, electing to renounce the documents they allege are wills, and electing to take their interest in the estate according to the law of Arkansas.

The defendants, beneficiaries under the Declarations, answer and file cross-complaint averring the validity of the instruments as declarations of trust.

The court has jurisdiction of the parties and subject matter under 28 U.S. C.A. § 41, subd. 26. In determining the legal interests and rights created by the "Declarations of Trust," the law of Arkansas controls. Bingen et ux. v. First Trust Co. of St. Paul et al., 8 Cir., 103 F. 2d 260, 264; United States v. Pierce, 8 Cir., 137 F.2d 428, 431, 148 A.L.R. 1228. The settlor-trustee was a resident of Arkansas; the alleged trust estate was created and held in Arkansas; and the...