Messer Trust, In re
| Decision Date | 10 January 1939 |
| Citation | 579 N.W.2d 73,457 Mich. 371 |
| Parties | In re Frances Williams MESSER TRUST, Dated |
| Court | Michigan Supreme Court |
We granted leave in this case to determine whether the remainder beneficiaries of an inter vivos trust are entitled to a jury trial in probate court of the issues whether the trustee acted in good faith, with ordinary diligence, and with prudence while maintaining the trust corpus. We hold that the remainder beneficiaries are entitled to a jury trial on all factual issues except the issue of the trustee's prudence, because that determination is properly left to the probate court. The Court of Appeals is reversed in part and this case is remanded to the Kent County Probate Court for a jury trial on any remaining factual issues.
On January 10, 1939, a trust agreement was established between Frances Williams Messer, the grantor, the Michigan Trust Company, as the corporate fiduciary, and Maurice A. Lambie, as the individual trustee. Old Kent Bank, the appellant herein, is the successor corporation to the Michigan Trust Company and was the sole trustee during the period relevant to this law suit. 1
An inter vivos trust 2 was established for the benefit of the settlor's son, John Messer, to provide income during his lifetime. The trust also provided that upon John Messer's death, the trust was to terminate and the remainder of the trust corpus was to be divided among his three children. John Messer died in 1991 and his children, the appellees herein, are the remainder beneficiaries.
Frances Messer initially funded the trust with notes, mortgages, bonds, stocks, and cash in the amount of $107,468.61. Part of the stock funding included 1,085 shares of E. Tyden A B, Inc., valued at nearly $57,000. 3 The Tyden Corporation was founded by Frances Messer's father and a Mr. Tyden. The trust agreement contained a restriction that prohibited the trustee from selling any Tyden stock without the prior consent of Frances Messer's son-in-law. When the son-in-law died, the absolute restriction was replaced by a provision in the trust agreement in which the settlor expressed a nonbinding preference for the retention of her industrial stocks. 4
Between 1981 and 1989, in five separate transactions, the trustee sold portions of the Tyden stock back to the corporation, allegedly to reduce the proportion of trust assets represented by the Tyden stock. Evidently, the price of each sale was dictated by Tyden and ranged from thirty-five to sixty percent below the book value of the stock.
In April, 1991, John Messer died. The trustee soon thereafter distributed the remaining assets to John Messer's children, the remainder beneficiaries, pursuant to the terms of the trust agreement. The trustee also rendered a final accounting, petitioned the Kent County Probate Court to approve the accounting, and requested to be discharged from further obligations in relation to the trust.
The remainder beneficiaries objected to the trustee's accounting and claimed the trustee should be surcharged for imprudent management of the trust assets. In addition to filing their objections, the remainder beneficiaries filed a jury demand as well. The trustee argued that the remainder beneficiaries had no right to a jury trial because inter vivos trusts were based on equitable principles and, therefore, no right to a jury trial existed. The probate court struck the jury demand because it held factual issues in an equitable proceeding were governed by the laws of equity and therefore were to be resolved by the trial court as the trier of fact. Following a bench trial, the probate court ruled that the trustee acted with reasonable prudence in handling the Tyden stock portion of the trust assets. It then entered an order both approving the trustee's final accounting and granting its request to be discharged.
The remainder beneficiaries appealed and claimed the probate court erred by denying their demand for a jury trial and by not finding error in the trustee's management of the trust. The Court of Appeals reversed the decision of the probate court and remanded the case for a jury trial. It held, under In re Allwardt's Estate, 278 Mich. 80, 270 N.W. 223 (1936), that trust beneficiaries have the right to a jury trial regarding whether the trustee acted imprudently when dealing with trust assets. 5 Applying In re Allwardt's Estate to the facts of this case, it concluded that the remainder beneficiaries provided sufficient evidence to allow a jury to decide whether the trustee acted imprudently. The trustee appealed, and we granted leave. 6
The first Probate Code of this state was enacted by the Legislature in 1838, the year after the state was founded. During the first one hundred and forty years after its enactment, the Probate Code was the subject of several major revisions and modifications. Some of these revisions, both the remainder beneficiaries and the trustee contend, determine the outcome of this case. In order to fully comprehend the parties' arguments as they relate to the issues in this case, it is necessary to understand the Probate Code both as it existed in 1838, and as it exists today following its various amendments.
The Probate Code in its original form, 1838 C.L., part 3, tit. 1, chap. 4, § 3, provided jurisdiction in the probate court for all issues relating to
the probate of wills, and to grant administration of the estates of all persons deceased, ... and of all who shall die without the state, leaving any estate to be administered within such county; and also to appoint guardians to minors and others in cases prescribed by law.
This grant of jurisdiction encompassed only testamentary trusts, 7 decedent's estates, and guardianships. Inter vivos trusts, because they were not statutorily created, but were instead created by common-law principles, were not subject to the jurisdiction of the probate court. Section 21 provided for appeals from the probate court to the Supreme Court. Section 31 provided that if, during such an appeal, "any question of fact shall occur, that is proper for a trial by jury," the Supreme Court was to order a jury trial of those issues.
A similar provision was found in the Complied Laws of 1857. However, one substantial change did occur. Under 1857 CL 3631, any appeal from a probate court was no longer to be filed in the Supreme Court, but instead was to be filed in the circuit court. 1857 CL 3635 provided a right to a jury trial de novo regarding factual issues appealed from the probate court:
When such certified copy shall have been filed in the Circuit Court, with the evidence of filing the requisite bond, and of giving notice as aforesaid, such Court shall proceed to the trial and determination of the question according to the rules of law; and if there shall be any question of fact to be decided, issue may be joined thereon, under the direction of the Court, and a trial thereof had by jury.
Hence, after 1857, the circuit court, not the Supreme Court, had jurisdiction over an appeal from a disputed issue of fact as it related to a testamentary trust. No other substantive changes to the Probate Code that involved questions of fact occurred until 1971.
In 1970, the Legislature enacted the precursor to what is now M.C.L. § 600.857(1); M.S.A. § 27A.857(1). 8 The current section provides:
If a party to a proceeding in the probate court would have had a right before January 1, 1971 to demand a jury to determine a particular issue of fact in the circuit court upon a de novo appeal from that proceeding to the circuit court, that party shall on and after January 1, 1971 have the right to demand a jury to determine that issue of fact in the probate court proceeding.
This amendment applied only to testamentary trusts and not to inter vivos trusts. As is evident, the one change in the section was to extend the right to jury trials regarding questions of fact determinable in the circuit court to the probate court.
Finally, in 1978, the Revised Probate Code, M.C.L. § 700.1 et seq.; M.S.A. § 27.5001 et seq., was enacted. Pursuant to M.C.L. § 700.805; M.S.A. § 27.5805, for the first time, the probate court's jurisdiction was extended to include inter vivos trusts. M.C.L. § 700.805(1); M.S.A. § 27.5805(1) provides:
The probate court has exclusive jurisdiction of proceedings initiated by interested parties concerning the internal affairs of all trusts. Proceedings which may be maintained under this section are those concerning the administration and distribution of a trust, the declaration of rights, and the determination of other matters involving trustees and beneficiaries of a trust. [Emphasis added.]
This is significant because, as noted above, before this time, the probate court had jurisdiction over testamentary trusts only, not over inter vivos trusts. By combining the two, the Legislature granted exclusive jurisdiction to the probate court over the internal affairs of all trusts. The Legislature also retained the provision that allowed jury trials in probate courts. M.C.L. § 600.857(1); M.S.A. § 27A.857(1).
With this background in mind, we now apply the law, as the Legislature intended when it enacted the Revised Probate Code, to the facts of this case.
We wish to note that both parties have...
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