Goodrich v. City Nat. Bank & Trust Co. of Battle Creek

• Decision Date: 07 January 1935
• Docket Number: No. 84.,84.
• Citation: 270 Mich. 222,258 N.W. 253
• Parties: GOODRICH et al. v. CITY NAT. BANK & TRUST CO. OF BATTLE CREEK et al.
• Court: Michigan Supreme Court

270 Mich. 222

258 N.W. 253

GOODRICH et al.

v.CITY NAT. BANK & TRUST CO. OF BATTLE CREEK et al.

No. 84.

Supreme Court of Michigan.

Jan. 7, 1935.

Suit by Norris E. Goodrich, administrator with the will annexed in the matter of the Estate of George A. Johnson, deceased, and others against the City National Bank & Trust Company of Battle Creek and others. From a decree dismissing the bill of complaint, complainants appeal.

Affirmed.Appeal from Circuit Court, Calhoun County, in Chancery; Blaine W. Hatch, Judge.

Argued before the Entire Bench.

Verner W. Main and Henry F. Jacobs, both of Battle Creek, for appellants.

Charles L. Dibble, of Kalamazoo, for appellee Ella M. Brown Charitable Circle.

Craig C. Miller and L. W. Schroeder, both of Marshall, for other appellees.

FEAD, Justice.

George Johnson and Rose Goodrich were married in 1895. Each owned property. In 1897 each made a will with the other as sole beneficiary, subject only to possibility and survival of children. Johnson died in January, 1933, leaving his widow his sole heir at law. Mrs. Johnson died in October, 1933, leaving plaintiffs Goodrich as her heirs at law.

In 1931 Johnson lost the sight of one eye and the other was imperiled. He wanted to put some of his property in the hands of another to handle for him. He was concerned about his wife's intense devotion to a church, and was afraid she would make excessive donations to the denomination to her own disadvantage. He was not an adherent of the same religious body, and felt inclined toward other charities.

August 5, 1931, he executed a trust agreement with defendant City National Bank & Trust Company of Battle Creek, and, under it, turned over to the trustee certain bonds, stocks, and real estate mortgages, but no lands and not all of his personal property. The instrument was prepared by defendant's trust officer, delivered to Johnson, he retained it some days, submitted it to his attorney, and then it was executed by both parties, but was not witnessed.

Plaintiffs claim Johnson executed the instrument by mistake, under belief it was a will. The testimony shows he so referred to it, orally and in written notation, in a few instances. But we agree with the circuit court that the preponderance of the evidence demonstrates Johnson executed it as a trust agreement, intending it to have effect as such according to its terms. He was an intelligent man, an accountant with considerable ability, and he had had quite extensive experience in probate matters. It is inconceivable that he would execute a will without witnesses, or, after the care he exercised and legal advice he received, that he intended the agreement to be something different than it purported to be.

The important question is upon the legal effect of the agreement. Plaintiffs contend the instrument created only an agency, was testamentary in character, and, because not witnessed in conformity with the law of wills, was void; and therefore Johnson's property devolved upon his wife at his death and her heirs take through her. The court held the trust valid and entered decree dismissing the bill.

After declaring the purpose to create a trust for the benefit of the settlor and other parties, and the acceptance thereof by the trustee, the agreement proceeds:

‘First, that the settlor has assigned and transferred the mortgages, bonds and other property described in the schedule attached hereto, and has conveyed to the said trustee the lands described in said schedule.

‘Second, that the settlor may, from time to time, with the consent of the trustee, add furtherproperty, real, personal or mixed, to the trust estate, which shall thereupon be subject to all the terms of this trust.

‘Third, that the trustee shall, except as hereinafter provided, have full power and authority to mortgage or otherwise encumber, to lease, sell or otherwise dispose of the real property described in said schedule at such time and upon such terms as it may deem advisable, and shall have full power to manage and control said lands, to collect rents and other payments thereon and to pay taxes, water rates and special assessments, to make repairs to the buildings thereon, to insure and keep insured the same for such amount as it may deem necessary or advisable.

‘Fourth, that the trustee shall, except as hereinafter provided, have full power and authority to sell, exchange, assign or transfer, to institutute foreclosure proceedings thereon and to do all acts which may seem necessary or advisable for the benefit of the trust estate in connection with any personal property described in said schedule, and shall have full power to collect the interest, dividends and other payments due thereon.

‘Fifth, that the settlor reserves the right at any time, by written notice to the trustee and upon payment of all sums due it, to change any beneficiary; amend any provision hereof, to such extent as may be acceptable to the trustee; and/or revoke this trust in whole or in part, or withdraw all or any part of the trust estate. That during the lifetime of the settlor no changes or substitutions of any of the trust estate shall be made by the trustee without first obtaining the consent in writing of the settlor, and that all investments of funds which may be necessary from time to time during the lifetime of the settlor shall be made by the trustee at the direction of the settlor. This provision relating to the investment of trust funds may be waived at the option of the settlor, in which event the trustee shall invest said trust funds in such good income producing securities as it in its discretion deems advisable.’

It further provides that the net income from the estate be paid to the settlor during his lifetime; upon his death, to his wife for her lifetime; upon the death of both, $600 each to plaintiffs Phillip and John Goodrich or their children; the balance held in trust for the use and benefit of the Ella M. Brown Charitable Circle of Marshall, Mich.; the net income to be paid to the circle, but the trustee authorized to turn over any part of the principal to the circle if it be required for the erection of a new hospital building; and, in case the circle should cease to operate as a charitable organization or go out of existence, the balance of the trust fund be paid to the Old Ladies' Home at Marshall.

On July 29, 1932, an amendment was made substituting the Lane-Dulcenia Memorial Home of Charlotte for the Old Ladies' Home, as the ultimate contingent beneficiary, and declaring that in all other respects the trust agreement remain unchanged. Further:

‘Seventh: If the trustee deems the income payable hereunder not sufficient to provide for the proper support, maintenance and comfort of any beneficiary, it may as often as it deems necessary, pay to or apply for the use and benefit of such beneficiary such additional part up to and including the whole thereof, of the principal of the trust estate.

‘Eighth: The trustee may at its option at any time, in connection with its management of the trust estate or the collection of any moneys due or payable to it as trustee, compromise any claims existing in favor of or against the trust estate, and may loan or advance its own funds for any trust purpose to this trust upon the security of the entire trust estate, said loans to bear interest at the then current rate from date of advancement until repaid; but the trustee shall in no event be required to make any such loan or advancement.

‘Ninth: That the trustee shall have the authority to pay the funeral expenses of both the settlor,...