Morey v. Everbank & Air Craun, Inc.

• Decision Date: 24 July 2012
• Docket Number: No. 1D11–1401.,1D11–1401.
• Citation: 93 So.3d 482
• Parties: Kevin A. MOREY, as personal representative of the estate of Carlton W. Morey, Jr. and as trustee of the amended and restated revocable trust of Carlton W. Morey, Jr. dated October 1, 2004, Appellant, v. EVERBANK and Air Craun, Inc., Appellees.
• Court: Florida District Court of Appeals

93 So.3d 482

Kevin A. MOREY, as personal representative of the estate of Carlton W. Morey, Jr. and as trustee of the amended and restated revocable trust of Carlton W. Morey, Jr. dated October 1, 2004, Appellant,

v.EVERBANK and Air Craun, Inc., Appellees.

No. 1D11–1401.

District Court of Appeal of Florida, First District.

July 24, 2012.

Michael S. Drews of the Law Offices of Michael S. Drews, P.A., Jacksonville, for Appellant.

David H. Peek and James H. Cummings of Smith, Gambrell & Russell, LLP, Jacksonville, for Appellee Everbank.

BENTON, C.J.

As trustee of the Carlton W. Morey, Jr., Revocable Trust, Kevin A. Morey (Trustee), appeals the trial court's ruling that life insurance proceeds payable to the trust were not, by virtue of the provisions on the subject in the trust instrument, exempt from the claims of creditors of the estate of his brother, Carlton W. Morey, Jr. (decedent), and also appeals the denial of a supplemental petition which sought reformation of the trust. We affirm.

The decedent executed the original trust declaration ¹ on January 19, 2000. The following month, he applied to Nationwide Life Insurance Company for two life insurance policies, each with death benefits in the amount of $250,000. His application for insurance named “Carl W. Morey–Trust” as the beneficiary of the “Traditional Life Policy” pertinent here.² On October 1, 2004, he amended and restated the trust declaration to provide:

ARTICLE I. NAME AND REVOCABILITY OF THE TRUST

... This Trust may be referred to as “THE CARLTON W. MOREY, JR. REVOCABLE TRUST”....

....

ARTICLE V. DISPOSITION OF TRUST BALANCE SUBSEQUENT TO THE DEATH OF SETTLOR

Upon the death of Settlor ..., the Trustee shall pay over and distribute the trust estate as the same shall then consist as follows:

A. The Trustee shall pay to the domiciliary Personal Representative of the Settlor's estate from time to time such sum or sums as such Personal Representative may certify to be required to pay the Settlor's “death obligations” and such other obligations required to be paid under Florida law, which includes without limitation, the following:

1. The expenses of the Settlor's last illness and funeral ... and the expenses of administering the Settlor's estate....;

2. All of the Settlor's enforceable debts, excluding, however, debts secured by life insurance or real or personal property....

B. .... the Settlor's estate, inheritance, succession and other death taxes....

C. After providing for the foregoing, the Trustee shall distribute to the Settlor's Personal Representative ... such general cash bequests in such amounts as the Settlor may effectively bequeath by the Settlor's Will. The Trustee shall also deliver to the Settlor's Personal Representative any property in the Trust which is effectively specifically bequeathed or devised by the Settlor's Will.

....

E. The balance of the Trust shall be disposed of in accordance with the below provisions.

....

G. Notwithstanding any provision in this Trust to the contrary: (1) After payment of all matters discussed above, the balance of the principal and undistributed income (the “residue”) shall be paid in trust for the benefit of Settlor's children, NICOLE MOREY, AMANDA MOREY, AND DANIELLE MOREY (collectively, the “Beneficiaries” or “Beneficiary” as the context requires) under the terms and provisions of this sub-trust, which shall be known as the, “MOREY FAMILY TRUST.” The successor trustee of this Trust Agreement shall be the trustee of the MOREY FAMILY TRUST.

Among other things, the 2004 amendment and restatement created a new entity, the Morey Family Trust (as a subtrust of the Carlton W. Morey, Jr., Revocable Trust).³ The decedent did not, however, change the beneficiary of the life insurance policy, which remained the “Carl W. Morey–Trust.”

I.

After his brother's death, the Trustee filed a petition requesting a determination that life insurance proceeds payable to the trust were exempt from all “death obligations” and unavailable to Mr. Morey's estate or its creditors. Here, as below, the Trustee relies on this language in section 222.13(1), Florida Statutes (2008):

Whenever any person residing in the state shall die leaving insurance on his or her life, the said insurance shall inure exclusively to the benefit of the person for whose use and benefit such insurance is designated in the policy, and the proceeds thereof shall be exempt from the claims of creditors of the insured unless the insurance policy or a valid assignment thereof provides otherwise.

While the mere fact that life insurance proceeds are payable to a trust, rather than directly to a natural person, does not deprive them of their exempt status,⁴section 733.808(1), Florida Statutes (2008), makes it clear that life insurance proceeds payable to a trust “shall be held and disposed of by the trustee in accordance with the terms of the trust as they appear in writing on the date of the death of the insured.”

We therefore consider the provisions of the Carlton W. Morey, Jr. Revocable Trust, at all times the designated beneficiary of the life insurance policy, as they existed on the date of the decedent's death. As the learned trial judge concluded, the terms of the trust (and of the insurance policy) are straightforward and unambiguous:

7. ... It is undisputed by the parties, and it is apparent from the face of the Nationwide Policy, that the sole named beneficiary of the Nationwide Policy is the Morey Trust. In turn, Section V of the Morey Trust provides an express priority and order of distribution and payment of trust assets, mandating the payment of the Estate's expenses and obligations before the distribution of the residue, if any, to the sub-trust known as the Morey Family Trust for the benefit of the Morey daughters.

8. The Court further finds that on December 19, 2005, the Decedent executed the First Amendment To The Carlton W. Morey, Jr. Amended And Restated Revocable Trust, expressly re-affirming the Decedent's intent that his children named under Article V(G) of the Morey Trust would be residuary beneficiaries as described in the Morey Trust and the sub-trust created thereunder.

(Boldface deleted). While life insurance proceeds are not payable directly to the estate or subject to obligations of the estate ⁵ merely by virtue of being directed to a grantor trust, here the clear and explicit terms of the trust make the policy proceeds available to satisfy obligations of the estate, pursuant to section 733.808(1).

A.

Conceding that section 733.808(1) provides “[s]ome support for the Trial Court's ruling,” the Trustee contends nevertheless that, because section 733.808(1) does not mention section 222.13, “there is no indication by the Legislature that the terms of Section 733.808(1) override an exemption statute such as Section 222.13.” The two statutory provisions are not, however, in conflict. Section 222.13(1) makes an exemption from the decedent insured's creditors available for life insurance policy proceeds, but does not require the policy's owner to take advantage of the exemption.

In other words, the exemption rendering life insurance policy proceeds unavailable to satisfy estate obligations can be waived. The very statute that creates the exemption makes this clear:

Notwithstanding the foregoing, whenever the insurance, by designation or otherwise, is payable to the insured or to the insured's estate or to his or her executors, administrators, or assigns, the insurance proceeds shall become a part of the insured's estate for all purposes and shall be administered by the personal representative of the estate of the insured in accordance with the probate laws of the state in like manner as other assets of the insured's estate.§ 222.13(1), Fla. Stat. (2008). Section 222.13(1) does not prohibit life insurance proceeds' paying the insured's estate's debts and other “death obligations,” nor does it prohibit directing payment of policy benefits to a trust for that purpose.

An insurance policy is a contract. The right to select the beneficiary of a life insurance policy is an aspect of the freedom to contract. The statutory exemption does not purport to restrict that freedom. The owner of an insurance policy may waive the section 222.13 exemption merely by designating the insured or one or more of the insured's creditors as a beneficiary or beneficiaries, by naming the insured's estate as a beneficiary of the policy or, as here, by naming as beneficiary a trust whose terms direct distribution of the trust assets to the personal representative, if requested.

B.

The Trustee also argues that the “general direction for payment of ‘death obligations' in Article V(A) of the Trust ... does not trump the express exemption provided in Section 222.13.” But the Carlton W. Morey, Jr. Revocable Trust declaration contains more than a “general direction for payment of ‘death obligations.’ ” The entire structure of the trust bespeaks payment of “death obligations” as a primary purpose. Only once the personal representative's demands have been met and only as to any residuum then remaining does the trust instrument give rise to the residuary subtrust of which the decedent's daughters are named beneficiaries.

In construing the trust instrument, the document as a whole should be considered.⁶See Bryan v. Dethlefs, 959 So.2d 314, 317 (Fla. 3d DCA 2007) (Interpretation of a trust instrument “is ascertained from the four corners of the document through consideration of ‘all the provisions of the [trust] taken together, rather than from detached portions or any particular form of words. This rule prevails whether the entire [trust] or some specific clause or part of it is being construed.’ ” (quoting Sorrels v. McNally, 89 Fla. 457, 105 So. 106, 109 (1925))); Roberts v. Sarros, 920 So.2d 193, 195 (Fla. 2d DCA 2006) (“In determining the settlors' intent, the court should not ‘resort to isolated words and phrases'; instead, the court should construe ‘the...