Harrison v. City National Bank of Clinton, Iowa

• Decision Date: 11 October 1962
• Docket Number: Civ. No. 2-484.
• Parties: Jane W. HARRISON, as Administratrix and as Ancillary Administratrix of the Estate of Fred E. Ware, Deceased, and Jane W. Harrison, Individually, Plaintiffs, v. CITY NATIONAL BANK OF CLINTON, IOWA, Defendant.
• Court: U.S. District Court — Southern District of Iowa

210 F. Supp. 362

Jane W. HARRISON, as Administratrix and as Ancillary Administratrix of the Estate of Fred E. Ware, Deceased, and Jane W. Harrison, Individually, Plaintiffs, v. CITY NATIONAL BANK OF CLINTON, IOWA, Defendant.

Civ. No. 2-484.

United States District Court S. D. Iowa, Davenport Division.

October 11, 1962.

COPYRIGHT MATERIAL OMITTED

Harlan J. Thoma, Sherwin J. Markman and Heinrich C. Taylor, Jr., (of Brody, Parker, Roberts, Thoma & Harris), Des Moines, Iowa, for plaintiffs.

Edward C. Halbach and David F. Halbach (of Halbach & Halbach) and Glenn T. Cousins, Clinton, Iowa, for defendant.

STEPHENSON, Chief Judge.

This matter was tried to the Court without a jury. Jurisdiction is based upon diversity. Plaintiff is a citizen of California and defendant, a national bank, has its principal place of business in Iowa. The matter in controversy exceeds the sum of $10,000 exclusive of interest and costs.

In 1914 one Edward M. Ware transferred to the Peoples Trust & Savings Bank of Clinton, Iowa, as trustee (succeeded by the defendant, City National Bank of Clinton, Iowa) certain properties to be held by it in trust for the use and benefit of said Edward M. Ware during his lifetime, and upon his death to continue for the benefit of his children, Fred E. Ware and Kate Ware (later his daughter was known as Kate Ware Hiecke and then Jane M. Hiecke and now is known as Jane W. Harrison, plaintiff herein). Following the death of Edward M. Ware, and pursuant to the terms of the trust, the income therefrom was paid equally to Fred E. Ware and the plaintiff. When said children each reached the age of 30, they were each to receive one-half of the trust corpus.

Fred E. Ware was married in the early 1930's to Ann C. Ware. This marriage lasted until their deaths in 1960.

In April, 1938, just prior to reaching the age of 30, Jane M. Hiecke and Fred E. Ware transferred their entire interest in the trust established for them by their father to the defendant as trustee for a period of 15 years. The defendant was to pay both the plaintiff and Fred E. Ware $400 per month if there was sufficient income to warrant it. At the expiration of the 15 year period the principal of the trust, plus any accumulated unpaid income, was to be distributed to the plaintiff and Fred E. Ware in equal shares. The trustee also had the discretion to pay either party any additional sum it deemed necessary for their comfort, maintenance and support, provided the payment of such additional sum did not invade the trust corpus.

In 1948, Fred E. Ware executed a trust agreement wherein he transferred all of his interest in the 1938 trust (which was to terminate in 1953) to the defendant as trustee, to be held by it in trust.

The 1948 agreement provided in part as follows:

"Par. 4. The trustee shall pay to the trustor, Fred E. Ware, so long as he shall live, the sum of $400.00 each month if there is sufficient income in said trust at the time said payments become due to warrant the same being made, and may pay to said trustor such further sums from time to time as the trustee may deem necessary or advisable for the comfort and support of the trustor or for any other purpose, but under no condition shall the trustee pay to any beneficiary hereunder any part of the principal of said trust estate.

"Upon the decease of the trustor, the trustee shall thereafter pay the net income of said trust estate to Ann C. Ware, wife of the trustor, if surviving, so long as she shall live, and upon her decease shall pay, transfer, and assign the entire trust estate as the same shall then be to whomsoever she may, by her last will and testament, designate and in default of such designation, then to the administrator of her estate, but if the said Ann C. Ware shall pre-decease the trustor, then in that event, upon the death of the said trustor, the trustee shall pay, transfer and assign the entire trust estate as the same shall then be to whomsoever he may, by his last will and testament, designate and in default of such designation, then to the administrator of his estate."

The 1948 agreement further provided it was irrevocable. It also contained a "spendthrift" provision in that the income and principal could not be assigned or alienated by the beneficiaries and was not subject to their debts.

In 1953, the 1938 trust terminated and the assets comprising Fred E. Ware's interest in it were transferred to the 1948 trust. Thereafter, on April 20, 1959, Fred E. Ware and Ann C. Ware executed a document entitled "SUPPLEMENTAL TRUST AGREEMENT"¹ wherein they purported to modify the 1948 trust by providing that after the death of the survivor of Fred and Ann Ware, if Elizabeth A. White (Fred E. Ware's mother) survived them, the trust income should be paid to said Elizabeth A. White and that upon her death the net income should be distributed "for such charitable purposes as said trustee may in its sole discretion determine to be to the best interest and advancement of the community and the general welfare of the people of the City of Clinton, Iowa." (Trustee also had sole discretion to distribute any and all principal of the trust estate for such charitable purposes). The 1959 instrument was witnessed as is required for the proper execution of wills in both California and Iowa.²

Ann C. Ware died June 5, 1960, and Fred E. Ware died on June 10, 1960. They never had any children. Elizabeth A. White had died in 1959 subsequent to the execution of the 1959 instrument. The estate of Fred E. Ware was opened in California and plaintiff was appointed administratrix. She was also appointed ancillary administratrix by the District Court of the State of Iowa, in and for Clinton County.

Individually and as administratrix and ancillary administratrix, plaintiff made demand on defendant for distribution of the 1948 trust corpus. The defendant expressly refused to do so, and thereafter this action was instituted. Plaintiff contends she is entitled to all of the assets comprising the 1948 trust alleged by plaintiff to have a fair market value in excess of $1,500,000.

Plaintiff contends she is entitled to a distribution of all of the assets comprising the 1948 trust for the following reasons:

1. By the 1948 trust, Fred E. Ware created contingent, beneficial and remainder interests in the next of kin and heirs of himself and his wife, without the consent of whom, the 1948 trust could not be amended, modified or terminated to their prejudice except by the valid last will and testament of the survivor of Fred E. and Ann C. Ware.

2. The 1948 trust created by Fred E. Ware, a confirmed alcoholic, could not be amended, modified or terminated by him, even with the consent of all beneficiaries while such alcoholic condition continued to exist.

3. The 1959 instrument was not intended to be and did not constitute the Last Will and Testament of Fred E. Ware and Ann C. Ware.

4. The 1959 instrument is invalid because Fred E. Ware was legally incompetent to execute it; because its execution resulted from undue influence; because its execution was obtained by economic duress and over-reaching by the defendant; and that said 1959 instrument was executed as a result of the confidence reposed by Fred E. Ware in his Fiduciary, the defendant, and therefore the burden is cast upon the defendant to establish by clear, satisfactory and convincing evidence that it was executed by the cestui, Fred E. Ware with freedom, intelligence and full knowledge of all the facts.

The defendant contends that the 1948 trust could be amended by Fred E. and Ann C. Ware; that the 1959 instrument is a valid and effective amendment to the 1948 trust agreement. In the alternative that the 1959 instrument was a valid testamentary disposition of the trust estate.

Defendant contends the subject 1959 instrument is a valid testamentary disposition. Since the 1948 trust provided that the trust corpus could be disposed of by the last will and testament of Fred E. Ware, defendant's contention in this regard should be examined first. The parties have stipulated that aside from this 1959 instrument, Fred E. Ware died leaving no other instrument testamentary in form and character. Under the Erie rule, the Court must follow the Iowa conflict of laws rule. Klaxon Co. v. Stentor Electric Mfg. Co., 1941, 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477. In determining whether there exists a valid will as respects real property Iowa law appears to be in accord with the general rule that the law of the situs of the realty is controlling and not that of the testator's residence or domicile. In re Estate of Barrie, 1949, 240 Iowa 431, 35 N.W.2d 658, 9 A.L.R.2d 1399, cert. denied, Hodge v. First Presbyterian Church, etc., 338 U.S. 815, 70 S.Ct. 55, 94 L.Ed. 493; Olson v. Weber, 1922, 194 Iowa 512, 187 N.W. 465, 27 A.L.R. 1370. The general rule is just the opposite with respect to personal property. See 94 C.J.S. Wills § 150, page 934. Iowa apparently follows this distinction. See Jackman v. Herrick, 1917, 178 Iowa 1374, 161 N.W. 97; In re Estate of Barrie, 1949, 240 Iowa 431, 35 N.W.2d 658, 9 A.L.R.2d 1399 (dissenting opinion), cert. denied, 338 U.S. 815, 70 S.Ct. 55, 94 L.Ed. 493. Fred E. Ware being a domiciliary of California and the trust comprising entirely personal property, California law is controlling in determining whether or not the 1959 instrument can be given effect as the last will and testament of Fred E. Ware.

It is fundamental that all testamentary instruments must be executed with testamentary intent. In re Tillman's Estate, 1955, 136 Cal.App.2d 313, 288 P.2d 892; In re Taylor's Estate, 1953, 119 Cal.App.2d 574, 259 P.2d 1014. "The term testamentary intent can only mean that the testator's frame of mind or intent is that the instrument or disposition of property which he makes shall pass no interest in the property until his death and that the act or instrument shall take effect only upon his death." 1 Page on Wills § 5.6 at...