Commerce Union Bank v. Warren County

• Decision Date: 24 March 1986
• Docket Number: No. S,S
• Citation: 707 S.W.2d 854
• Parties: COMMERCE UNION BANK, Trustee, and C. Dorris Rippy, Trustee, and Charles C. Trabue, Jr., Trustee, Plaintiffs-Appellees, v. WARREN COUNTY, Tennessee, Defendant-Appellee, v. Charles Magness COWDEN, John S. Cowden, Frederick Eugene Cowden, Ernest Smallman, III, Elizabeth Smallman Fisackerly, William Magness Smallman, Defendants-Appellants, v. The SALVATION ARMY, Defendant-Appellee. /C 85-12-I
• Court: Tennessee Supreme Court

Page 854

707 S.W.2d 854

COMMERCE UNION BANK, Trustee, and C. Dorris Rippy, Trustee, and Charles C. Trabue, Jr., Trustee, Plaintiffs-Appellees, v. WARREN COUNTY, Tennessee, Defendant-Appellee, v. Charles Magness COWDEN, John S. Cowden, Frederick Eugene

Cowden, Ernest Smallman, III, Elizabeth Smallman

Fisackerly, William Magness Smallman, Defendants-Appellants, v. The SALVATION ARMY, Defendant-Appellee.

No. S/C 85-12-I

Supreme Court of Tennessee at Nashville.

March 24, 1986.

Bob Lynch, Jr., Jane Ann Whitson, Nashville, for the Cowdens.

Michael Galligan, McMinnville, for the Smallmans.

William W. Berry, Jay S. Bowen, Nashville, Robert W. Boyd, McMinnville, for Warren County.

Charles C. Trabue, III, Nashville, for Commerce Union Bank.

Richard M. Riebeling, Nashville, for The Salvation Army.

OPINION

DROWOTA, Justice.

This action was instituted to obtain the construction of a testamentary trust created by the Will and Codicil of William H. Magness, deceased. Permission to appeal was granted by this Court solely on the issue of the application of the Rule against Perpetuities in this case. The Appellants, Defendants and Cross-Claim Plaintiffs below, are the heirs of William H. Magness. The Appellees are Warren County, Tennessee, a Defendant and trust beneficiary, and the trustees, who were the Plaintiffs below. The Salvation Army, as the beneficiary of a trust created by the residuary clause, is also an Appellee. No dispute exists as to the facts of the case.

The Will was executed by Mr. Magness on April 11, 1928, with the Codicil subsequently executed on December 18, 1934. The Will and Codicil of William H. Magness were probated on February 21, 1936. This Will provides, in pertinent part, that:

I give and bequeath the sum of fifty thousand dollars ($50,000) to be used in establishing and maintaining a home for the aged and indigent people of Warren County, Tennessee, to be known as the Elizabeth J. Magness Home for the Aged and Indigent, as a memorial to my mother, of this sum twenty thousand dollars, or so much thereof as may be necessary, shall be used, as determined by the Warren County Court, for acquiring lands and constructing and equipping buildings, the title to be taken in the County of Warren. The balance of said fund shall be taken, held and administered as a permanent trust fund by the Commerce-Union Bank of Nashville, Tennessee, and its successors in trust, the income therefrom to be paid over to the Trustee of Warren County to be expended upon order of Commissioners appointed by the Quarterly County Court of Warren County upon nominations made by the Board of Directors, or Trustees, of the W.H. and Edgar Magness Community House and Library, for the maintenance of inmates of said institution: My object is that this institution shall take the place of the present Poor House of Warren County and that the persons maintained therein shall have greater comfort and enjoyment of living in their declining years; and I hope and desire that the County Court may make sufficient supplemental appropriations that this purpose shall be well accomplished. This gift is made upon condition that it shall be accepted, upon all the aforesaid terms and conditions, by the Quarterly County Court of Warren County, by resolution adopted at a regular session; and if it is not so accepted, upon all its terms and conditions, then and in that event none of it shall take effect and the said sum of fifty thousand dollars shall become a part of the residue of my estate, to be disposed of as hereinafter provided.

All the rest and residue of my estate I give and bequeath to the Commerce-Union Bank of Nashville, Tennessee, and its successors, in trust, to be safely invested and maintained as an endowment fund, the income therefrom to be paid over semi-annually to the treasurer of the Salvation Army of Nashville, Tennessee, to be used in carrying on the work of the Salvation Army in Nashville and surrounding towns and communities.

Should any one of the charitable or religious institutions named as beneficiary in this will cease to exist or to carry on its work, the sum herein given to it or set aside for its benefit shall revert to my estate and go to my heirs, and the trust pertaining to it shall cease.

By a formal resolution on April 6, 1936, the Quarterly Court of Warren County (the County) accepted the bequest on the terms and conditions stated in the Will. After purchasing land and constructing facilities, during the years from 1936 to May 28, 1982, the County operated the Elizabeth J. Magness Home for the Aged and Indigent (the Home), using both its own funds and the income paid from the trust. As permitted by the Will, twenty-thousand dollars of the bequest was spent on the erection and equipping of the Home; the remaining thirty-thousand dollars was held by the trustees and was administered according to the terms and conditions of the trust. The County expended the funds it received from the trust in the maintenance and operation of the Home.

When the Home ceased operations in 1982, the trustees sought a construction of the Will and Codicil in the Chancery Court for Davidson County, Tennessee, filing the complaint on May 12, 1983. Both the County and the heirs of William H. Magness were joined as defendants. The Chancellor ordered that the Salvation Army, the beneficiary of the residuary trust, also be made a party defendant. The Magness heirs filed a cross-claim against the County on issues not now before this Court. On January 9, 1984, the County sought summary judgment against the Magness heirs, arguing that the reversionary interest of the heirs violated the Rule against Perpetuities and thus the trust res would pass in trust under the residuary clause for the benefit of the Salvation Army. The Cowden branch of the Magness heirs filed a cross motion for summary judgment on May 24, 1984. On June 1, 1984, the Salvation Army filed its motion for summary judgment, adopting the position of the County. Subsequently, on August 15, 1984, the Chancery Court held that the interest of the Magness heirs was void under the Rule against Perpetuities and thus the trust corpus passed under the residuary clause in trust for the benefit of the Salvation Army, granting the County's motion for summary judgment. Upon the Cowdens' motion to alter or amend the judgment, the Chancellor reaffirmed his holding that the interest of the Magness heirs was barred by the Rule against Perpetuities. The Magness heirs appealed to the Court of Appeals for the Middle Section, which affirmed the trial court's judgment. An application pursuant to Rule 11, T.R.A.P., was timely filed and this Court granted permission to appeal.

I

We note from the beginning that this Will and Codicil demonstrate that the testator carefully planned the disposition of his substantial estate. Seven separate testamentary trusts for the benefit of individuals as well as of various educational, charitable, and religious institutions were created by the instrument. The testator specifically provided for legacies to his family (two of which were to be held in trust with remainders over), to other relatives, and to a number of friends. He made a bequest to a church on the condition that the church change its name as a memorial to his father. A scholarship fund, to be known as the "Magness Scholarship Fund," was also left to the Cumberland Mountain School in Crossville. By the Codicil, Mr. Magness created a contingent remainder in a life estate in a trust fund for the benefit of a servant and instructed the executors of his estate to purchase and convey a home in fee simple to this servant as well. The testator also provided that "[u]pon the death of [this servant] the trust fund shall revert to my estate," preserving a reverter upon the death of the beneficiary. Lapses of the legacies flowed into the residuary clause. The Codicil also revoked a specific legacy, which then became part of the residue of the estate. Throughout the Will and Codicil, the testator revealed that he fully understood and distinguished such concepts as reversionary interests, remainders, conditional bequests, lapse, and residuary disposition to develop a sophisticated scheme for the distribution of his property. After all legacies, expenses, and taxes, the residue of his estate and any lapses of specific legacies passed through the residuary clause into a trust for the benefit of the Salvation Army.

While the bulk of this Will and Codicil is not at issue here, we have remarked on this broad and comprehensive testamentary scheme because of the light it sheds on the testator's intent. Particularly in such a case as this, in which the testator has conceived in detail the disposition of his estate, but also more fundamentally on the general rule regarding the construction of wills, we construe the instrument as a whole to ascertain and give as complete effect to this intent as is possible. "That intention is to be ascertained from the particular words used, from the context and from the general scope and purpose of the instrument." Bell v. Shannon, 212 Tenn. 28, 367 S.W.2d 761 (1963). " Third National Bank v. First American National Bank, 596 S.W.2d 824, 828 (Tenn.1980). Therefore, before we determine the application of the Rule against Perpetuities to the interests created, we will restate the bequests and then classify the estates created. Cf. Harris v. Bittikofer, 541 S.W.2d 372, 374 (Tenn.1976); Eager v. McCoy, 143 Tenn. 693, 701, 228 S.W. 709, 711 (1920) (Restatements of the devises to demarcate the legal classification of the estates).

1. The bequest of thirty-thousand dollars in trust to the county is subject to dual conditions:

(a) as a condition precedent, that the County accept by formal resolution of the Quarterly Court the terms and conditions imposed by the bequest, and

(b) as a continuing condition that the trust would endure only so long as the income from the trust was used for...