Schroeder v. Herbert C. Coe Trust, s. 16103
| Decision Date | 11 October 1988 |
| Docket Number | Nos. 16103,16104 and 16117,s. 16103 |
| Citation | 437 N.W.2d 178 |
| Parties | Herman SCHROEDER, Jr., and William B. Schroeder, Plaintiffs and Appellees, v. HERBERT C. COE TRUST; Farmers State Bank Trust Dept. of Winner, S.D., Trustees; Rosebud Lumber and Coal Co., Inc.; Leo Post, Inc., Receiver, Winner, Tripp County, S.D.; Estate of Herbert C. Coe, a/k/a Herbert Curtis Coe, Deceased, Vickie Coe, Administratrix; Estate of Lelah Mildred Coe, a/k/a Mildred Coe, Deceased, Vickie Coe, Administratrix De Bonis With the Will Annexed; Mildred Coe Elerding; Max Kreinbuhl; Lyle Boerner; El Riad Shrine; Irene Vanneman; Leonard Konvalin; Defendants and Appellants. . Oral Argument |
| Court | South Dakota Supreme Court |
John J. Simpson, Winner, for plaintiffs and appellees.
Lee Tappe, Platte, for defendant and appellant Vickie Coe.
Donald E. Covey of Covey Law Office, Winner, for defendant and appellant Rosebud Lumber and Coal Co., Inc.
Marvin K. Bailin of Christopherson, Bailin & Anderson, Sioux Falls, for defendant and appellant El Riad Shrine.
J.M. Grossenburg of Day & Grossenburg, Winner, for defendant and appellant Mildred Coe Elerding.
Robert J. Maule, Winner, for defendant and appellant Herbert C. Coe Trust.
Steven K. Rabuck, Chamberlain, for defendant and appellant Irene Vanneman.
Max Kreinbuhl, Lyle Boerner and Leonard Konvalin, pro se.
This appeal stems from disputes arising over a trust executed by Herbert Coe. Several issues are appealed from the trial court's decision. We affirm in part and reverse in part.
1. Were the beneficiaries of the trust sufficiently certain? We hold they were.
2. Did the trial court properly include property in or exclude property from the trust? We hold the trial court did, in part, and did not in part.
3. Did Herbert Coe revoke the trust? We hold he did not.
4. Was the trial court clearly erroneous in holding the trustee acted properly and in awarding fees to the trustee? We hold the trial court was not.
5. Are Herman Schroeder, Jr., and William B. Schroeder (appellees) entitled to attorney fees from the trustee? We hold they are not.
6. Is appellant Vickie Coe entitled to a new trial? We hold she is.
A lengthy summation of the facts is necessary because of the persons involved and numerous events affecting this case. On March 17, 1981, Lelah M. Coe, mother of Herbert Coe and Mildred Elerding, died. In her will she left her entire estate to Herbert, stating that she had already provided for her daughter Mildred. Disputes arose between Herbert and Mildred concerning his management of the Rosebud Lumber and Coal Company (Mildred and Herbert each held equal shares in the lumber company, and Herbert served as president) and whether some property belonged to the lumber yard or was included in their mother's estate. In 1982 Mildred filed a derivative shareholder's action against Herbert alleging fraud and mismanagement in his operation of the lumber yard and sought to place the business in receivership.
Following his mother's death and disputes with his sister, Herbert's drinking increased and his health deteriorated. An irrevocable trust was drafted for Herbert and signed by him on October 22, 1982, which named himself and two employees of the lumber yard, Herman Schroeder, Jr., and William Schroeder, as lifetime beneficiaries. On November 3, 1982, Herbert properly revoked this trust.
A second trust, the subject of this appeal, was drafted and signed by Herbert on November 17, 1982. The November 17, 1982, trust, an irrevocable trust, also named Herbert Coe, Herman Schroeder, Jr., and William Schroeder as lifetime beneficiaries.
Now subject to much dispute, the trust's dispositive provision directed the trustee to distribute the entire sum then held in trust "as I may subsequently appoint by my Will or a Codicil to my Will among any person or persons from the following class ..." Seven people were named in the class. Herbert Coe, however, never specified in his will who should receive the assets from the trust. Instead, he attempted to revoke the trust, both during his lifetime and in his will. His attempts to revoke the trust began after he married Vickie Kreinbuhl, who was formerly married to his best friend, Max Kreinbuhl. Previously a bachelor, Herbert married Vickie on April 13, 1984, and on February 26, 1985, while in the hospital, he executed a will in which he stated his intent to revoke the trust and give most of his estate to Vickie.
On March 13, 1985, a petition was filed in circuit court to revoke the Herbert Coe trust. Vickie Coe appeared in court on behalf of Herbert, who was allegedly too ill to appear. The trial court refused to decide the matter until Herbert personally appeared and stated his reasons why the court should order the trust revoked.
Herbert Coe died on June 15, 1985, never having appeared in court, and leaving several parties to extensively litigate whether his trust or will should control the disposition of property placed in trust. Throughout 1986 and 1987, a declaratory judgment action regarding Herbert's estate was tried in various stages. Several issues are now appealed from the decisions made by the trial court. We examine each separately.
Appellant, Vickie Coe, contends that the beneficiaries of the trust were uncertain because Herbert Coe never chose who should take from the class. Her contention is without merit. Vickie Coe bases her argument upon the provisions of the dispositive portion of the trust. It provides in relevant part:
At my death, I direct my trustee to make payment of claims against my estate, then to distribute the entire sum then held in trust as I may subsequently appoint by my Will or a Codicil to my Will among any person or person from the following class: Lyle Boerner, El Riad Shrine, Mildred Coe Elerding, Leonard Konvalin, Max Kreinbuhl, Herman Schroeder, Jr., William Schroeder and Irene Vanneman. Such appointment may be made for life or such other estate as I may determine, in trust or otherwise, and it may be made subject to lawful spendthrift provisions. It is my intention that any such Last Will or Codicil be executed by me only in the presence of my attorneys and a trust officer of the Farmers State Bank and immediately thereafter filed with the Circuit Court in supervision of this trust to be kept confidential in all respects.
The day after Herbert Coe signed the trust, attorney Tom Tobin sent him a letter urging Herbert to draw up a will as soon as possible in which he would name the persons from the class who would be beneficiaries of the trust residue. Herbert Coe never drafted a will naming beneficiaries of the trust.
The trial court held that the class of beneficiaries was sufficiently definite and that because Herbert Coe failed to select among the class of beneficiaries, the trust property should be divided in equal shares among the members of the class living when Herbert Coe died. We affirm.
Restatement (Second) of Trusts Sec. 120 (1959) provides: "The members of a definite class of persons can be the beneficiaries of a trust." Comment c to Sec. 120 adds that this is true even though "the trustee or another person is authorized to select which of the members of the class shall take and in what proportions." Comment a to Sec. 120 provides a complete answer to Vickie Coe's contention: "A class of persons is definite within the meaning of the rule stated in this Section if the identity of all the individuals comprising its membership is ascertainable."
No problem with identity exists here. Each member of the class was clearly identified by name. Identity problems arise only when the language of the trust is so nebulous in naming beneficiaries that the beneficiaries are unascertainable, and the trust, as a result, violates statutory restraints on the alienation of property. SDCL ch. 43-5. We hold the members of the class of beneficiaries were clearly ascertainable.
Vickie Coe contends that even if the beneficiaries were ascertainable, the trust fails because Herbert Coe failed to name anyone from the class of beneficiaries to receive the trust property. This contention is also without merit. "If the trustee or other person having a power of selection among the members of a definite class fails to exercise it, the trust property will be divided in equal shares among the members of the class, as determined at the time of the expiration of the power, unless the transferor properly manifested a different intention." Restatement (Second) of Trusts Sec. 120, comment e (1959). We believe this statement of the law applies to the trustor, Herbert Coe. Therefore, all members of the class, living at Herbert Coe's death, share equally in the trust property.
Vickie Coe contends alternatively that in his will, Herbert Coe selected beneficiaries from the class and designated the property they were to take. In the will, Herbert Coe made specific bequests to certain beneficiaries of the trust. Vickie contends that the remainder of the trust reverts to the estate and passes under the will.
This contention also fails. Herbert Coe clearly stated in his will an intention to revoke the trust. To hold that he selected beneficiaries to take under the trust would be inapposite to his stated intention to revoke the trust. Bequests made in the will pass under the terms of the will and property covered by the will. All property placed in trust passes under the terms of the trust.
The respective parties in this case either contest the trial court's decision to include certain property in the trust or to exclude other property from the trust. Excluded property subject to dispute is as follows: all capital stock of Rosebud Lumber and Coal Company (Rosebud Lumber) in either Herbert or Lelah Coe's name, three contracts for deed, bank accounts, any antiques not included in the...
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