Mercantile Trust Co., N.A. v. Mercantile Trust Co., N.A., s. 46328

• Decision Date: 24 July 1984
• Docket Number: 46378,Nos. 46328,s. 46328
• Citation: 677 S.W.2d 343
• Parties: MERCANTILE TRUST COMPANY, N.A., and Norman E. Wilson, Respondents, v. MERCANTILE TRUST COMPANY, N.A., et al., Appellants.
• Court: Missouri Court of Appeals

Page 343

677 S.W.2d 343

MERCANTILE TRUST COMPANY, N.A., and Norman E. Wilson, Respondents, v. MERCANTILE TRUST COMPANY, N.A., et al., Appellants.

Nos. 46328, 46378.

Missouri Court of Appeals,

Eastern District,

Division Five.

July 24, 1984.

Motion for Rehearing and/or Transfer to

Supreme Court Denied Sept. 18, 1984.

Brackman, Copeland, Oetting, Copeland, Walther & Schmidt, William J. Oetting, Clyde C. Farris, Jr., Steven W. Garrett, Clayton, for appellants.

Carmody, MacDonald, Hilton & Wolf, P.C., Donald R. Carmody, John E. Hilton, Clayton, for respondents.

FLOYD McBRIDE, Special Judge.

This is a consolidated appeal from a judgment construing the will of Alvin L. Saeks. Appellants contend the Probate Division of the Circuit Court of St. Louis County erred in determining a trust provided for under the will should be funded for the benefit of respondents. Respondents cross-appeal the portion of the court's decision allocating taxes as to the trust. We affirm.

Testator died April 5, 1980 in St. Louis County. His will was admitted to probate May 6, 1980. Mercantile Trust Company and Norman E. Wilson, executors of the estate, petitioned the court to construe the will.

In his will, testator established two trusts, Trust A and Trust B. Trust A, a marital deduction trust, was established to benefit his wife, Mae M. Saeks, and was to be funded with assets qualifying for marital deduction treatment under the Internal Revenue Code. The will also provided for encroachment on the principal to ensure Mrs. Saeks would receive annual payments of $25,000. Mrs. Saeks also was granted an exclusive power of appointment over any assets remaining in Trust A.

The will directed the executors to pay all taxes generated by testator's death from the residuary trust, Trust B. The will provided that upon the death of the testator and his wife, any taxes incurred on the remaining assets of Trust A would be paid out of Trust A. The net income of the remaining balance of Trust A then was to be paid to testator's daughter, Norma Jean Zachritz, with a remainder interest in the corpus to pass to her children upon her death. Norma Jean Zachritz and her children, Kathleen Dressler (nee Zachritz), Kimberle Alayne Zachritz and Walter Howard Zachritz (a/k/a Howard Zachritz), are the respondents and cross-appellants (hereinafter "respondents").

Mrs. Saeks was also the income beneficiary of Trust B, a residuary trust. Upon her death, the corpus of Trust B (less certain specific bequests) was to be divided equally among testator's brothers and sister who are Sam L. Saeks, Reuben Saeks and Jeanne Grisseau, are the appellants and cross-respondents (hereinafter "appellants").

Mrs. Saeks died February 13, 1980. Testator died less than two months later. The executors of Mr. Saeks' estate, in response to objections raised by appellants, petitioned the court to construe Mr. Saeks' will. The executors stated the provisions as to Trust A were unclear because Mrs. Saeks had predeceased testator. Appellants filed an answer and counterclaim. Respondents filed an answer to the executors' petition and an answer to appellants' counterclaim.

The probate division entered its order August 20, 1982. The court ordered that Trust A be funded to the benefit of respondents. The court held the amount of Missouri inheritance taxes on Trust A assets that would have been paid out of Trust B if testator's wife had survived him should be paid out of Trust A. The Missouri inheritance taxes generated by the transfer of assets into Trust A that would not have accrued if testator's wife had survived him were ordered paid by the parties receiving Trust A assets. The court invoked the doctrine of equitable apportionment as to federal estate taxes and held the parties would have to pay their respective taxes on the assets they receive from each of the trusts.

This appeal follows. Appellants claim the trial court's order was in error because the will had directed the executors to fund Trust A with assets that qualified for a marital deduction under the Internal Revenue Code. Appellants argue that because testator's wife had predeceased him, the marital deductions statute would not apply to any of the assets and the trust should not be funded.

The will provisions in dispute state:

Article Two. 2.03 I direct my Executor to set aside a portion of my estate having a value as will most closely equal (1) one-half ( 1/2) of the value of my adjusted gross estate ... as finally determined for Federal estate tax purposes, less (2) the value of all interests in property, if any, which pass or have passed to my wife under other provisions of the Will, or otherwise than under this Will, but only to the extent that such interests are for the purposes of the Federal Estate tax included in determining my gross taxable estate and are allowable as a marital deduction. The portion as so determined and set aside may be either in cash or in kind or both as determined by my Executor, in his sole and absolute discretion, but must consist of assets qualifying for said marital deduction valued at their fair market value on the dates of distribution. (emphasis added).

I give, devise and bequeath this portion of my estate to the Trustees hereinafter named, in trust nevertheless, to hold and administer as a separate trust as hereinafter provided.

(a) All the property given, devised and bequeathed under the provisions of Article Two, paragraph 2.03 of this, my Will, to the said Trustees, shall be held and administered by the said Trustees as a separate trust to be known as Trust "A".

* * *

* * * (f) Upon the death of the survivor of my wife, MAE M. SAEKS, and myself, any part or all of Trust A which is not distributed under the preceding provisions of this Article, shall be held, administered, and ultimately distributed as hereinafter provided.

* * *

* * *

(2) The entire net income from the then remaining balance of said Trust A shall be paid to my daughter, NORMA JEAN ZACHRITZ, in installments not less frequently than quarterly so long as she may live.

(g) Upon the death of the survivor of my said wife, my said daughter, and myself, the then remaining balance in Trust A shall be divided by the Trustees into as may equal shares as shall be required to allot one (1) share to each child of my daughter, ... then living, ....

In reaching a decision on the construction of testator's will, there are certain fundamental legal principles we find necessary to bear in mind. As our court in In Re Estate of Stengel, 557 S.W.2d 255, 258 (Mo.App.1977), stated before setting forth its holding in a case construing a will, "With respect to our function in reviewing the judgment of the Circuit Court we must review this case upon both the law and the evidence as in suits of an equitable nature, giving due regard to the opportunity of the Circuit Court to have judged the credibility of the witnesses."

The judgment of the trial court should be sustained unless it is against the weight of the evidence, unless it erroneously declares the law, or unless it erroneously applies the law; and the power to set aside a decree or judgment on the ground it is against the weight of the evidence should be exercised with caution and with a firm belief the decree or judgment is wrong. Id. at 258-59 citing Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976).

We note the "keystone of construction" in determining the meaning of a will is the intent of the testator, and this intent must be gathered from the whole will and not from single words, passages or sentences. Farkas v. Calamia, 373 S.W.2d 1, 2 (Mo.1963). A will should always be interpreted to carry out as far as possible the general scheme or intent as shown by the entire document. Mercantile Trust Company v. Sowell, 359 S.W.2d 719 (Mo. banc 1962).

Our review of Mr. Saeks' entire will plainly shows his general scheme and intent were to provide for his wife and then for their only child and grandchildren. He did so by establishing Trust A, an estate planning device whereby one-half of his adjusted gross estate could pass to his wife without the imposition of federal estate taxes. He also allowed his wife to encroach upon Trust B. Thus evincing his intent to care for her at the cost of reducing the assets of Trust B and preserve the assets of Trust A for her disposition to their child and grandchildren.

We do not see the provision that the trust be funded with assets qualifying for the marital deduction as being a "threshold requirement" to funding the trust, as appellants claim. Rather, we view the requirement as a way of carrying out the testator's intent to provide for his wife and, upon her death, for his daughter and grandchildren.

Mr. Saeks' will provided that Trust A be funded with assets qualifying for the marital deduction under the Internal Revenue Code. This requirement still can be met. Assets that qualify for the marital deduction under I.R.C. § 2056 (1978) ¹ are those that are non-terminable interests rather than...