Rose v. Third Nat. Bank

• Decision Date: 18 March 1944
• Citation: 183 S.W.2d 1,27 Tenn.App. 553
• Parties: ROSE v. THIRD NAT. BANK et al.
• Court: Tennessee Court of Appeals

183 S.W.2d 1

27 Tenn.App. 553

ROSE v. THIRD NAT. BANK et al.

Court of Appeals of Tennessee, Middle Section.

March 18, 1944

Certiorari Denied by Supreme Court July 1, 1944.

Rehearing Denied by Supreme Court Oct. 14, 1944.

Appeal from Chancery Court, Davidson County; J. C. Dale, Jr. Special Chancellor.

Bill by Mrs. Granville P. Rose, Jr., against Third National Bank and others, to establish and enforce plaintiff's rights as executrix and legatee of her deceased husband under a trust created by his mother, since deceased. From a decree in favor of complainant, the named defendant and William D. Rose appeal, and complainant moves to strike the bill of exceptions and affirm the decree.

Motion sustained to the extent of striking depositions from bill of exceptions, decree affirmed and cause remanded for further proceedings not inconsistent with opinion.

Garnett S. Andrews and Andrew Ewing, both of Nashville, for appellants.

Goodpasture & Carpenter, of Nashville, for appellee.

FELTS Judge.

Complainant filed the bill herein to set up her rights as executrix and legatee of her deceased husband, Granville R. Rose, Jr. under a trust created by his mother, Ella Virginia Rose, now deceased. The Third National Bank is trustee in this trust and is also executor of Mrs. Rose's will. The other defendants are her other two sons, William D. and James S Rose.

The trust was created by a deed dated May 25, 1926, signed by Mrs. Rose and her three sons, William, James, and Granville P. Jr., and also by the Fourth & First National Bank, which was named trustee. As shown by recitals in the deed, Mrs. Rose was the widow of G. P. Rose, who had died and left a will giving his wife and three sons each a one-fourth share of his estate; and the home conveyed to him and his wife had become hers at his death. The sons desired that 'their mother shall have an income sufficient for her every need so that she may live in the way and manner she has been accustomed to live during the lifetime of her deceased husband.' Her home and her share of her husband's estate was not enough, but had to be supplemented by $25,000 from the sons' shares, to provide her 'such an income'; and two of the sons, William and James, each gave her $12,500 from his share, the other son, Granville P. Jr., being unable to contribute any of his share because with part of it he had created a trust for the support of Ella Virginia Rose, an afflicted daughter of his by a former marriage. Mrs. Rose's home was worth $10,000 and her share of her husband's estate amounted to $83,885.05. By the deed she conveyed all of this and the $25,000 to Fourth & First National Bank, Trustee, all of the personalty being stocks and bonds.

The deed made it the trustee's duty to pay the taxes on all the property, to keep the home in repair, to permit Mrs. Rose to occupy it or use it as she chose, to sell it when she desired, to invest all the personalty in securities approved by her, to collect all the interest or income, and 'out of principal or interest as the necessities may require' to pay her, 'into her own hands and not into the hands of any other person,' $500 per month during her life, 'free from the claims of creditors and other persons,' without power on her part to anticipate, transfer, or assign any part of it; and, if she desired, the trustee was to pay her an additional $1,000 per year during her life, which was to be paid 'into her own hands at any time during each year as she may desire' and was to be cumulative. The trustee was to pay itself each year 5% of the gross income and was 'to credit the balance of said income, if any, into the principal of said trust property.'

The principal at the death of Mrs. Rose was disposed of by the deed as follows: (1) The trust was to terminate and the trustee was to pay James and William $12,500 each, with 4 1/2% interest thereon during the period of the trust; (2) the trustee was to pay to itself into a new trust for Ella Virginia Rose, granddaughter of Mrs. Rose and daughter of Granville P. Rose, Jr., the sum of $25,000; (3) the balance of the fund was to be paid to the three sons, William, James, and Granville P., Jr., one-third to each or to his legatees or distributees; and (4) the $25,000 in the trust for the granddaughter, after paying the income thereon to her or her guardian during her life, was to be paid to the three sons, one-third to each or his legatees or distributees.

Mrs. Rose occupied her home until her death. The Fourth & First National Bank, trustee, managed the trust until 1931, when Mrs. Rose, having reserved in the deed the power to appoint another trustee, appointed the Third National Bank as trustee and it has acted as trustee ever since. It is also executor of Mrs. Rose, who died July 30, 1938.

The Third National Bank as trustee paid Mrs. Rose the amounts stipulated in the deed until July, 1932. But by that time the great economic depression had so depreciated the securities and the income that it was obvious that if the trustee continued to pay her these amounts it would soon deplete the corpus and defeat the purposes of the trust. So in this emergency, to conserve the corpus and protect the trust, Mrs. Rose agreed for a limited time to accept 'only the net income,' and signed a letter to the trustee on July 18, 1932, in which she said:

'This is to state that for a limited time I agree to accept as the monthly allowance only the net income accruing from said Trust Fund.

'I do this for obvious reasons, and am aware that such voluntary action on my part obligates me to receive less than I have been accustomed to receive during the previous existence of this fund.'

But she and the trustee continued under this agreement, it paying and she receiving and accepting only the net income, about $350 per month, until July 21, 1938--nine days before her death. On June 29, 1938, her son, Granville P., Jr., died and left a will stating, as his daughter had already been provided for, he bequeathed to his wife, the complainant, all his property, including his interest in the trust property. His will was probated July 2, 1938. On July 21, 1938, Mrs. Rose's son, William, had prepared for her three documents, which she signed. By the first she undertook to revoke the trust in toto; by the second she added to her will a codicil to dispose of all the trust property, directing that $12,500, with 4 1/2% interest from May 25, 1926, be paid to each of her sons, William and James, that $20,000 be put into a trust for her granddaughter, Ella Virginia Rose, and that the balance be equally divided between William and James; by the third paper, which was a letter to the trustee, she called on it to deliver to her enough of the trust property to equal the sum of the reductions in the payments to her, plus $1,000 per year, during this six-year period--that is, the difference between what she had received and what she could have demanded if she had not agreed to the reductions She was then nearly 84, blind, ill, and died July 30. Later that day the trustee segregated from the trust property certain stocks worth $16,207.75, to represent this difference Mrs. Rose had called for, and set up on its books a list of these stocks.

Complainant's bill charged that as Mrs. Rose had reserved no power to revoke the trust, her attempt to do so could not affect the rights of the other beneficiaries; that her letter of July 18, 1932, and her course of conduct pursuant thereto, constituted an acceptance of the income as the amounts due her, a waiver of the balance she otherwise could have demanded, and an estoppel upon her later to call for the difference; and that the letter of July 21, 1938, calling for such difference was not her own free and voluntary act because she was then mentally incompetent and was induced to sign that letter by the undue influence of her son, William. The prayer was that the Third National Bank be enjoined from transferring these segregated stocks from itself as trustee to itself as executor of Mrs. Rose's will and that complainant's rights in the property be declared and enforced.

The answer of the Third National Bank, trustee, admitted Mrs. Rose's attempt to revoke the trust was a nullity. It stated that by her letter of July 18, 1932, she agreed for a limited time merely to accept as the monthly allowance only the net income, without giving up her right to the balance to which she was entitled by the terms of the trust; and that this agreement was without consideration and not binding, and was neither a waiver of the difference between what had been paid her and what was due her ($500 per month plus $1,000 per year) nor an estoppel later to call for such difference. This answer denied the charges that Mrs. Rose was incompetent and had been induced to sign the letter of July 21, 1938, by undue influence. The trustee's answer was adopted by the other two defendants, and William D. Rose's answer amplified his denials of the charges of incompetency and undue influence.

Some six months later the Third National Bank filed a petition in this cause stating that, because of complainant's suit, it could not transfer the segregated securities from itself as trustee to itself as executor of Mrs. Rose's estate and could not administer them as part of her estate; that the market was uncertain and there was danger that these securities would fall in value; and that complainant ought to be required to give a bond to indemnify petitioner and the others interested against loss from shrinkage in value of the securities.

Upon this petition the chancellor entered a consent decree directing petitioner as trustee to hold one-third of the segregated securities (plus a small amount to cover costs) to transfer to itself as exe...