Cilley, In re
| Decision Date | 30 June 1960 |
| Citation | 163 A.2d 302,400 Pa. 567 |
| Parties | In re CILLEY. In re Life Insurance Trust, Between Osborn H. Cilley, Donor, and the Fulton National Bank of Lancaster, Trustee. Appeal of William C. STORB, Guardian ad litem of Kenneth Lesley Baer. |
| Court | Pennsylvania Supreme Court |
William C. Storb, Stein, Storb & Mann, Lancaster, for appellant.
Brown & Zimmerman, B. M. Zimmerman, Lancaster, for appellee.
Windolph, Burkholder & Hartman, F. Lyman Windolph, Lancaster, for Donald L. Cilley, one of the Remaindermen.
Before CHARLES ALVIN JONES, C. J., and BELL, MUSMANNO, BENJAMIN R. JONES, COHEN, BOK, and McBRIDE, JJ.
This appeal presents for our determination the question whether the words 'lawful issue' in a certain life insurance trust agreement include a child adopted by the settlor's daughter subsequent to the execution of the agreement in 1936 but prior to the settlor's death in 1958.
On May 19, 1936 Osborne H. Cilley (herein called Cilley) was the father of two children, Donald L. Cilley, then aged 24 years, and Ruth E. Cilley, then aged 19 years, both children having been born of a marriage between Cilley and Blanche E. Cilley. The record indicates that Cilley was married twice; first to Blanche E. Cilley, now an incompetent, and later to Frances A. Cilley. 1
On May 19, 1936 Cilley turned over to the Fulton National Bank of Lancaster (herein called Bank), under the terms of a written life insurance trust agreement, seven policies of life insurance on his, Cilley's, life with various life insurance companies in the total amount of $36,500. 2 This agreement provided, inter alia; that: (1) the Bank was to hold the insurance policies 'without any obligation of any nature in respect thereto, other than the safekeeping thereof' until the policies became payable by reason of Cilley's death; (2) on Cilley's death, the Bank was to receive the proceeds of the insurance and divide them into two parts: a one-third part was to be paid outright to Blanche E. Cilley, if she were then living, and a two-thirds part to be held as a trust fund; 3 (3) the Bank was to pay the net income from the trust fund in regular installments to Donald L. Cilley and Ruth E. Cilley until 'their arrival at the age of thirty (30) years, respectively', when each child was to be paid one-half of the principal of the fund; (4) in the event that either Donald L. Cilley or Ruth E. Cilley, or both of them, died before the time of distribution of their shares 'leaving lawful issue to survive either or both of them', said 'lawful issue' would take per stirpes the share of the parent and, if either child died without 'lawful issue to survive', then the entire fund would go to the surviving child; (5) if both children died before the time for distribution of this fund without leaving lawful issue to survive, then the balance of the fund was to be distributed 'among the lawful heirs of [Cilley], in accordance with the Intestate Laws of the State of Pennsylvania, the same vesting as of the date of the death of Blanche E. Cilley * * * if she shall survive [Cilley]'; (6) Cilley retained the 'full right to exercise any benefit, option or privilege' under the policies except as to Blanche Cilley's share the provision for which was 'declared to be irrevocable'; (7) it was 'distinctly understood and agreed that [the agreement] shall be revocable at any time during his life by [Cilley], except as to the provision in favor of Blanche E. Cilley * * *, which shall be irrevocable, and that no interests of any kind shall vest in any parties * * * until the date of the death of [Cilley]' and Cilley reserved the right to 'revoke, alter or modify' the agreement, in whole or in part.
On January 2, 1948, Cilley, in writing, withdrew from the Bank two-thirds of the proceeds of one matured life insurance policy and revoked the agreement insofar as it related to another life insurance policy.
Cilley died April 15, 1958. Donald L. Cilley survived his father, but Ruth E. Cilley (then Ruth C. Baer) predeceased her father, having died on December 28, 1955. Of Ruth E. Cilley's marriage to Kenneth F. Baer no children were born, but on November 13, 1953--approximately two years prior to her death and approximately four and one-half years prior to Cilley's death, she and her husband adopted a child, known now as Kenneth L. Baer and now aged approximately seven years. Subsequent to his daughter's death Cilley made no change whatsoever in the trust agreement but did make a new will the effect of which was to exclude the adopted child from sharing in that portion of his estate which would pass by will.
The Bank filed its First and Final Account on June 5, 1958 and the Orphans' Court of Lancaster County appointed the appellant as guardian ad litem to protect the interests of the adopted child. The court, at audit, held that the adopted child did not take the share which his adopted mother, Ruth Baer, would have taken had she survived her father. Exceptions to this decree nisi were dismissed and a final decree was entered from which this appeal was taken.
The court below considered that the agreement between Cilley and the Bank became effective on May 19, 1936, and, therefore, the Intestate, Wills and Estates Acts of 1947 4 (which, in the words of the court below, completed 'the grafting of adopted person upon the family tree of adopting parent and parents') were inapplicable in the construction of the agreement and that, at the time the agreement became effective, the law was settled that the word 'issue' did not include an 'adopted child'. Howlett's Estate, 366 Pa. 293, 297, 77 A.2d 390.
Prior to the passage of the Acts of 1947, supra, an adopted child was not considered to be embraced within the word 'issue'. 5 In Howlett's Estate, supra, the testator died in 1921 and, under his will--executed in 1907--, he created a trust with life estates to his children and then to a child's issue, or, in default of issue, to surviving children and the issue of deceased children. During the term of the trust a son died leaving no natural born children but a daughter who had been adopted in 1897. Ruling that this adopted daughter of the deceased son was not entitled to take as 'issue', this Court stated (366 Pa. at page 297, 77 A.2d at page 392): "Issue' is not synonymous with 'children'. 'Issue' means issue of the body, offspring, progeny, natural children, physicially born or begotten by the person named as parent. [Citing cases.] An adopted child is issue of his natural parents and not of his adopted ones. [Citing cases.]' 6 If the effective date of the conveyance under the 1936 agreement was prior to January 1, 1948--the date upon which the Estates Act of 1947, supra, became operative--then Howlett will control the constitution of the word 'issue'.
In determining the rights of inheritance of 'chosen' or adopted children we are bound by the statute of inheritance at the time the inheritance became effective and, in the case of a will, by the terms of the will itself. Howlett's Estate, supra Collins' Estate, 393 Pa. 195, 200, 201, 142 A.2d 178; Holton Estate, 399 Pa. 241, 159 A.2d 883. In the present situation however, we are dealing not with the rights of inheritance generally but with the rights of beneficiaries under the provisions of an unfunded life insurance trust agreement.
The present issue is not whether this 1936 agreement was testamentary or nontestamentary 7 nor whether under this agreement a conveyance was contemplated. By the Act of 1957, supra, the legislature has declared that this type of unfunded life insurance trust must be construed as nontestamentary and to that mandate our judicial construction must yield. By Section 1(2) of the Estates Act of 1947, supra, a conveyance has been defined as '* * * an act by which it is intended to create an interest in real or personal property whether the act is intended to have inter vivos or testamentary operation'. 20 P.S. § 301.1. The 1936 agreement did create certain legal interests--even though contingent--in the subject matter of the agreement and did contemplate that a conveyance would take place. This trust agreement gave rise to the creation of two separate interests: an interest in the Bank to receive from the insurance companies the proceeds of the policies as such matured upon the death of Cilley and an interest in the persons named in the trust agreement to receive from the Bank such proceeds. 8
Our problem is to determine when the conveyance contemplated by the agreement took place. If the conveyance became effective prior to January 1, 1948 then, under Howlett, supra, the word 'issue' excluded adopted children; if the conveyance became effective after January 1, 1948, then Section 14(3) of the Estates Act of 1947, supra, equating adopted and natural children--must control our construction of the word 'issue'. Section 14(3) provides: . (Emphasis added.) Our resolution must depend upon what Cilley intended and such intent is to be determined, if possible, by an examination of the language of the agreement. Swope's Estate, 383 Pa. 494, 119 A.2d 57; Rice v. Shank, 382 Pa. 396, 115 A.2d 210.
Cilley expressly retained the right to exercise any benefit, option or privilege given to him under the provisions of the insurance policies as well as the right to revoke the agreement, in whole or in part, 9 except as to Blanche Cilley's share. More important, however, than the reservation of these important rights was Cilley's self-directed construction of the language of the agreement 'that no interest of any kind shall vest 10 in any party * * * until the date of [his] death * * *.' More...
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