First Nat. Bank of Cincinnati v. Tenney

• Decision Date: 31 October 1956
• Docket Number: No. 34558,34558
• Citation: 165 Ohio St. 513,138 N.E.2d 15,60 O.O. 481,61 A.L.R.2d 470
• Parties: , 61 A.L.R.2d 470, 60 O.O. 481 The FIRST NATIONAL BANK OF CINCINNATI, Ex'r, et al., Appellees, v. TENNEY, Appellee; Simrall et al., Appellants.
• Court: Ohio Supreme Court

Page 513

165 Ohio St. 513

138 N.E.2d 15, 61 A.L.R.2d 470, 60 O.O. 481

The FIRST NATIONAL BANK OF CINCINNATI, Ex'r, et al., Appellees, v. TENNEY, Appellee Simrall et al., Appellants.

No. 34558.

Supreme Court of Ohio.

Oct. 31, 1956.

Syllabus by the Court.

1. An inter vivos trust speaks from the date of its creation.

2. An inter vivos trust which reserves to the trustor the income for life and an absolute power to revoke during his lifetime, with a remainder over at his death, creates in the remainderman a vested interest subject to defeasance by the exercise of the power to revoke.

3. Such vested defeasible interest may be bequeathed by the remainderman, and the legatee takes such interest subject only to the same limitations and possibility of defeasance as were imposed upon the interest held by the testator.

On February 7, 1947, Mary E. Monfort entered into a trust agreement with the First National Bank of Cincinnati, whereby she transferred and delivered to it certain property, the title to which it accepted and agreed to hold in accordance with the terms of the agreement. The agreement contained, among others, the following provisions pertinent to this appeal:

'A. During the lifetime of trustor, all of said net income shall be paid to trustor, in quarterly instalments or such other instalments as may be agreed upon.

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'C. Upon the death of trustor all the assets then on hand in the trust estate, together with any accumulated income, after the payment of the trustee's charges and any obligations of the trustee growing out of any of the terms of this instrument, shall be paid over and distributed to trustor's sister, Adelaide M. Iredell.

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'Second: Trustor shall have the power at any time during her life, to amend, alter, revoke, or terminate this agreement in whole or in part, by an instrument in writing delivered to the trustee thirty (30) days in advance of the proposed amendment, alteration, revocation, or termination * * *.'

No alternate beneficiary was named, in the event Adelaide M. Iredell was not living at the death of the trustor and the power of revocation was not exercised by the trustor. Adelaide M. Iredell predeceased the trustor, and appellee Virginia Tenney is the residuary legatee under her will.

A few months after executing this trust agreement, Mary E. Monfort executed her will by which she bequeathed and devised all her property to her sister, Adelaide M. Iredell. As in the trust agreement, no alternate beneficiary was named, in the event Adelaide M. Iredell was not living at the death of the testator.

The First National Bank, in its three capacities as executor and trustee of the estate of Adelaide M. Iredell, as executor of the estate of Mary E. Monfort and as trustee under the trust agreement with Mary E. Monfort, brought an action in the Probate Court of Hamilton County to secure the direction and instruction of the court in the performance of its duties in the aforementioned capacities.

The Probate Court held that the corpus and accumulated, but undistributed, income of the trust should be distributed to the estate of Adelaide M. Iredell, but that the devise in Mary E. Monfort's will to her sister, Adelaide M. Iredell, had lapsed and that the estate therein should be distributed to the heirs-at-law of Mary E. Monfort.

The heirs of Mary E. Monfort perfected an appeal to the Court of Appeals for Hamilton County from that part of the lower court's ruling concerning the trust property. The Court of Appeals affirmed the judgment of the Probate Court.

The cause is before this court upon the allowance of a motion to certify the record.

Cottle, Campbell, Druffel & Hogan and William H. Kite, Cincinnati, for plaintiff appellees.

Sanford Headley, Charles E. Stevenson and Paul L. Westerfield, Cincinnati, for defendant appellee.

Pogue, Helmholz, Culbertson & French, Cincinnati, Kirk & Pinkerton, Sarasota, Fla., and John C. McCarthy, Cincinnati, for appellants. BELL, Judge.

The sole question raised by this appeal emanates from the holdings of the Probate Court and the Court of Appeals that, upon delivery of the property by Mary E. Monfort to the First National Bank, a vested equitable interest was transferred to Adelaide M. Iredell, subject to be divested by the happening of a condition subsequent, to wit, revocation by Mary E. Monfort in her lifetime; and that since the time for the happening of the condition had expired, and it had not happened, the estate which had vested in Adelaide M. Iredell, subject to be divested, had become absolute in the beneficiary named in her will.

It is conceded by appellants herein that the trust created on February 7, 1947, by Mary E. Monfort was a valid trust. This concession is a recognition that the much criticized rule of Worthington v. Redkey, 86 Ohio St. 128, 99 N.E. 211, has been properly, albeit not too peacefully, laid to rest in Ohio. Although it is unfortunate that, in bringing the law of Ohio into line with that of all the other states, reliance was placed on the supposed effect of an amendment to the statute of frauds rather than upon the sounder reasoning of Stone v. Hackett, 12 Gray 227, 78 Mass. 227, the interment is nonetheless complete. Union Trust Co. v. Hawkins, 121 Ohio St. 159, 167 N.E. 389, 73 A.L.R. 190; Cleveland Trust Co. v. White, 134 Ohio St. 1, 15 N.E.2d 627, 118 A.L.R. 475; Schofield v. Cleveland Trust Co., 135 Ohio St. 328, 21 N.E.2d 119; Central Trust Co. v. Watt, 139 Ohio St. 50, 38 N.E.2d 185; Bolles v. Toledo Trust Co. 144 Ohio St. 195, 58 N.E.2d 381, 157 A.L.R. 1164.

But appellants contend that since the named remainderman was not living at the time of the death of the life beneficiary a resulting trust arose in favor of the heirs of the trustor.

A resulting trust has been defined as 'one which the court of equity declares to exist where the legal estate in property is transferred or acquired by one under facts and circumstances which indicate that the beneficial interest is not intended to be enjoyed by the holder of the legal title.' 40 Ohio Jurisprudence, 240, Section 76. The device has historically been applied to three situations: (1) Purchase-money trusts; (2) instances where an express trust does not exhaust the res given to the trustee; and (3) express trusts which fail, in whole or in part. 2A Bogert on Trusts, 405, Section 451.

Obviously, the first of these has no application here. The second is applied where a trustor vests in a trustee or cestui quitrust a larger interest than the purposes of the trust require. Broadrup v. Woodman, 27 Ohio St. 553. The most frequent application is in those cases where contributions are made by several persons to a common unexhausted fund, which, in the absence of the possibility of the application of the cy pres doctrine, results in a holding of such fund in trust for the donors. See Boenhardt v. Loch, 198 N.Y. 631, 92 N.E. 1078; Walters v. Pittsburgh & Lake Angeline Iron Co., 201 Mich. 379, 167 N.W. 834, 1 A.L.R. 624; Coe v. Washington Mills, 149 Mass. 543, 21 N.E. 966, 74 A.L.R. 671. All parties concede that the trust was valid so there could be no resulting trust as a result of a failure of the trust.

But we are still confronted with a determination of the rights of the parties hereto in the light of events subsequent to the creation of the trust. Is the power of revocation reserved by the trustor to be treated as a limitation on the gift of the remainder or is it a condition subsequent? Or, in other words, did the remainderman take a contingent remainder, conditioned upon her survival as to the life beneficiary and upon the nonrevocation of the trust, or did she take a vested remainder subject to be divested by revocation?

A great deal of difficulty has beset courts and lawyers in interpreting this generally accepted terminology of 'contingent remainders' and 'vested remainders subject to be divested' or 'vested defeasible remainders.' A long step has been taken in Restatement of the Law of Property, Section 157, in reducing this confusion. The term, 'contingent remainder,' has been abandoned in the Restatement in favor of the term, 'remainder subject to a condition precedent.' Such change makes less likely confusion between an interest subject to a condition precedent and a vested defeasible interest subject to a condition subsequent. It serves also to point up the outstanding characteristic of the interest, namely, the existence of a condition precedent which must be fulfilled before anyone can enjoy the full benefits of the interest. Moreover, by eliminating the term, 'contingent,' as contrasted with 'vested,' we are able to call attention to the variety of interests which fall within the term, 'vested.'

Simes and Smith, in The Law of Future Interests (2 Ed.), Section 113, say:

'It is thus possible to indicate a number of typical situations which may create remainders subject to complete...