Cowden v. Sovran Bank/Central South

• Decision Date: 16 September 1991
• Docket Number: No. 01S019011PB00095,01S019011PB00095
• Parties: Charles Magness COWDEN, John A. Cowden, and Frederic Eugene Cowden, Plaintiffs-Appellees, v. SOVRAN BANK/CENTRAL SOUTH, Trustee, Southern Adventist Health and Hospital Systems, Inc., Kentucky-Tennessee Conference Association of Seventh-Day Adventists, Inc., Ernest Smallman, III, Co-Trustee, and C.K. McLemore, Co-Trustee, Defendants-Appellants.
• Court: Tennessee Supreme Court

Page 741

816 S.W.2d 741

Charles Magness COWDEN, John A. Cowden, and Frederic Eugene

Cowden, Plaintiffs-Appellees, v. SOVRAN BANK/CENTRAL SOUTH, Trustee, Southern Adventist

Health and Hospital Systems, Inc., Kentucky-Tennessee

Conference Association of Seventh-Day Adventists, Inc.,

Ernest Smallman, III, Co-Trustee, and C.K. McLemore,

Co-Trustee, Defendants-Appellants.

No. 01S019011PB00095.

Supreme Court of Tennessee,

at Nashville.

Sept. 16, 1991.

Robert J. Warner, Jr., Davis W. Turner, Nashville, for appellants, Sovran Bank, Tennessee, trustee, and C.K. McLemore, co-trustee.

Douglas E. Jones, Helen S. Rogers, Nashville, for appellant, The Kentucky-Tennessee Conference Ass'n of Seventh-Day Adventists, Inc.

Frederic E. Cowden, Jr., Laura L. Chastain, Nashville, for plaintiffs-appellees.

OPINION

ANDERSON, Justice.

We granted the defendants' application for permission to appeal in order to determine whether the testator intended a charitable trust to terminate upon the merger of the original-named beneficiary into a successor charitable institution that carries on the same work as the named beneficiary. The plaintiffs' action alleges that a testamentary trust established by the will of William H. Magness (the "testator") had terminated under its terms, and thus reverted to the testator's estate for distribution to the plaintiffs as his heirs at law. Three of the remaining defendants, Sovran Bank, Southern Adventist Health & Hospital Systems, Inc., and Kentucky-Tennessee Conference Association of Seventh-Day Adventists, filed motions for summary judgment, all of which were sustained by the trial court. The plaintiffs dismissed their claims against the other named defendants by motion.

The Court of Appeals reversed the trial court and sustained the plaintiffs' motion for summary judgment. Because we find that the testator did not intend that such a merger should terminate the charitable trust, we reverse the judgment of the Court of Appeals and reinstate the summary judgment of the trial court in favor of the defendants.

FACTS

In April 1928, the testator, William H. Magness, executed his last will and testament. In the will, the testator bequeathed various sums of money to "Commerce-Union Bank of Nashville, Tennessee" (Commerce Union) and its successors as trustee for the benefit of several charities. The will included the following provision:

Should any one of the charitable or religious institutions named as beneficiary in this will cease to exist or 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.

On December 18, 1934, the testator executed a codicil creating a bequest of $50,000 in trust "for the use and benefit of the Nashville Agricultural and Normal Institute [NANI], a corporation of Madison, Tennessee, the income therefrom to be paid over to it semi-annually to aid it in carrying on its work."

On February 21, 1936, the testator's will and codicil were probated in the County Court of Davidson County, Tennessee. At that time, NANI was operating a non-profit corporation in accordance with its charter of incorporation of August 4, 1905. The general purpose of NANI as set forth in the charter was as follows:

The founding of an agricultural and normal school and sanitarium at Madison, Tennessee and if desired at other points in the State of Tennessee and elsewhere in the United States of America. For the teaching and training of missionaries, teachers and farmers who are willing to devote at least a certain portion of their lives in unselfish, unremunerative missionary labor for the glory of God, and the benefit of their fellow men. The institution so to be established shall be undenominational and unsecterian, in so far as that any worthy and approved person or persons may be accepted as students. But it shall be secterian [sic] and denominational to the extent that the religious doctrines taught and inculcated shall be those of the Seventh Day Adventist Church.

When the testator's will was probated, NANI was operating a college for the training of missionaries, teachers, and farmers. In addition, NANI operated a medical sanitarium or hospital called Madison Hospital. In 1937, the NANI school was renamed Madison College. There is no indication in the will that the testator intended the bequest to NANI to benefit either the college or the hospital solely.

In 1963, the ownership and operation of Madison College and Madison Hospital were transferred by NANI to the Seventh-Day Adventist church. Madison Hospital became a Southern Conference of Seventh-Day Adventist Institution; Madison Academy, which consisted of a secondary and elementary school (and now a pre-school also), continued to operate under the new ownership of Kentucky-Tennessee Conference of Seventh-Day Adventists. Madison College ceased operation completely in 1964.

On April 10, 1976, the merger of NANI and a non-profit Florida Corporation, the Charlotte Hospital Association, Inc., with Southern Adventist Health and Hospital Systems, Inc. (now Adventist Health System/Sunbelt, Inc.) became effective. Southern Adventist was designated as the surviving corporation. The plan of merger which was adopted by the members of NANI on March 18, 1976, and by its Board of Directors on March 25, 1976, provided, in part, as follows:

ARTICLE I

On the effective date of the merger, ... NASHVILLE AGRICULTURAL AND NORMAL INSTITUTE shall merge into SOUTHERN ADVENTIST HEALTH AND HOSPITAL SYSTEM, INC., and the separate existence of ... NASHVILLE AGRICULTURAL AND NORMAL INSTITUTE shall cease. SOUTHERN ADVENTIST HEALTH AND HOSPITAL SYSTEM, INC. shall be the surviving corporation and shall continue its existence under Florida law under the name of SOUTHERN ADVENTIST HEALTH AND HOSPITAL SYSTEM, INC.

(Emphasis added.)

NANI failed to notify Commerce Union that it had merged with Southern Adventist. Commerce Union continued to make the semi-annual income distributions payable to NANI, and sent the payments to the former offices of NANI in Madison, Tennessee. The income was directed by that office to the support of Madison Academy.

In mid-November 1980, Commerce Union discovered that NANI had merged into Southern Adventist, but, pursuant to legal advice, Commerce Union continued payment of income from the trust. However, Commerce Union began to make payments directly to Madison Academy.

In May 1988, certain heirs of the testator learned that NANI had merged with Southern Adventist as of April 10, 1976, and requested that the trustee cease payment of income from the trust to Madison Academy and pay the plaintiffs the trust proceeds plus interest from March 1976. Commerce Union refused to comply with that request.

On September 30, 1988, the plaintiffs, Charles Magness Cowden, John S. Cowden, and Frederic Eugene Cowden, filed the petition to terminate the trust and prayed for a judgment for the money on deposit with Commerce Union on the date NANI merged with Southern Adventist plus pre-judgment interest. As noted above, based on the foregoing facts, the Court of Appeals reversed the trial court's summary judgment in favor of the defendants and granted summary judgment for the plaintiffs.

STANDARD OF REVIEW

Summary judgment is rendered in favor of a party upon a showing "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Tenn.R.Civ.P. 56.03. No presumption of correctness attaches to decisions granting summary judgments because they involve only questions of law. Thus, on appeal, we must make a fresh determination concerning whether or not the requirements of Tenn.R.Civ.P. 56 have been met. Hill v. City of Chattanooga, 533 S.W.2d 311, 312 (Tenn.App.1975). In doing so, we must consider the pleadings and the evidentiary materials in a light most favorable to the motion's opponent, and we must draw all reasonable inferences in the opponent's favor. Blocker v. Regional Medical Center, 722 S.W.2d 660 (Tenn.1987); Poore v. Magnavox Co., 666 S.W.2d 48, 49 (Tenn.1984); Jones v. Home Indemnity Ins. Co., 651 S.W.2d 213, 214 (Tenn.1983).

We agree with the courts below that this record presents no genuine issue of material fact. However, we decline to accept the statement of the legal issue as framed by both parties and by the Court of Appeals. The question is not whether, as a matter of Tennessee corporate law, a corporation ceases to exist after a merger. Instead, we think the question presented is whether the testator intended the charitable trust to terminate upon a merger of the named beneficiary into a successor charitable institution which carries on the same work.

CONSTRUCTION OF A REVERSIONARY CLAUSE IN A WILL CREATING A

CHARITABLE TRUST

"The cardinal and basic rule in the construction of wills is that the court shall seek to discover the intention of the testator, and will give effect to it unless it contravenes some rule of law or public policy. 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, 766 (1963). Coincidentally, this is not the first time that provisions of the Magness will have been construed by this Court. In Commerce Union Bank v. Warren County, 707 S.W.2d 854 (Tenn.1986), we considered whether a reversionary interest of the Magness heirs was barred by the rule against perpetuities. We made the following observations about the Magness will:

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.... Throughout the Will and Codicil, the testator revealed that h...