Stacey v. Saunders

• Decision Date: 01 July 1983
• Citation: 437 So.2d 1230
• Parties: James D. STACEY, et al. v. Harris SAUNDERS. 82-469.
• Court: Alabama Supreme Court

Page 1230

437 So.2d 1230

James D. STACEY, et al. v. Harris SAUNDERS.

82-469.

Supreme Court of Alabama.

July 1, 1983.

Rehearing Denied Sept. 2, 1983.

Ralph E. Coleman and Ralph E. Coleman, Jr., Birmingham, for appellants.

William Bew White and Samuel H. Franklin of Bradley, Arant, Rose & White, Birmingham, for appellee.

JONES, Justice.

Appellants/Plaintiffs James D. Stacey and Virginia King initiated this cause, individually and as executors of the estate of their mother, Grace Morrison Saunders, against their stepfather, Harris Saunders, alleging: 1) fraudulent misrepresentation by Saunders of his net worth prior to execution of an ante-nuptial agreement with Mrs. Saunders; 2) breach of that same ante-nuptial agreement; 3) that Plaintiffs were third-party beneficiaries of the ante-nuptial agreement between Mr. and Mrs. Saunders; and 4) that Mr. Saunders breached an oral agreement with Mrs. Saunders to make irrevocable a trust instrument created pursuant to terms contained in the ante-nuptial agreement.

Mr. Saunders filed a motion to dismiss that portion of Plaintiffs' complaint alleging fraud. ¹ The crux of the motion to dismiss was that the fraud claim did not survive the death of the decedent, Grace Saunders. This motion was granted. He then filed a motion for partial summary judgment as to the remaining aspects of Count I of Plaintiffs' complaint. Mr. Saunders asserted that he was entitled to partial summary judgment on the basis of the clear and unambiguous language of the ante-nuptial agreement and the trust instrument subsequently executed by him.

Mr. Saunders also alleged that his revocation of the trust, subsequent to Mrs. Saunders's death, was entirely consistent with the anti-nuptial agreement, which, according to Mr. Saunders, provided that Mrs. Saunders would become entitled to the trust proceeds only if she should survive Mr. Saunders. Mr. Saunders contended that Plaintiffs' allegation that he had entered into an oral agreement with Mrs. Saunders to make the trust irrevocable, violated the statute of frauds and the parol evidence rule. Additionally, he maintained that Plaintiffs were not third-party beneficiaries under the ante-nuptial agreement because the agreement was intended, at most, for their "incidental," and not for their "direct," benefit.

From the trial court's order granting the motion for partial summary judgment (subsequently made final), Plaintiffs appeal. We affirm.

FACTS

Grace Morrison, mother of Plaintiffs James D. Stacey and Virginia King, executed an ante-nuptial agreement on May 25, 1973, with her then husband-to-be, Harris Saunders. ² The ante-nuptial agreement Pursuant to terms of the ante-nuptial agreement, set forth below, Mr. Saunders agreed to establish an inter vivos trust, with a corpus of $350,000 current value:

recognized that property owned by Mr. Saunders was worth approximately, $1,300,000.

"A. In the event of the marriage of the parties hereto, Mr. Saunders agrees that he will cause to be created an inter vivos trust with a corpus of $350,000 current value; such trust will be drawn in such a manner as to enable the trust to qualify for the 'marital deduction' in his estate and will result in no present gift taxes. It will give, after his death, all of the income of such trust as defined by the federal estate tax statutes, to Mrs. Morrison for her lifetime and will further give to her a power to appoint by will to her estate, or to such persons as she may elect, the entire corpus and any undistributed income of the trust." (Emphasis added.)

In return for Mr. Saunders's agreeing to set up the inter vivos trust, Grace Morrison Saunders agreed to make no claim to any portion of his estate as his surviving wife, other than that provided in the ante-nuptial agreement contract. Additionally, she specifically waived any dower, homestead, widow's election, widow's award, or other statutory or equitable right to property owned or thereafter acquired by Mr. Saunders.

Grace Morrison and Harris Saunders were married shortly after execution of the ante-nuptial agreement. On June 20, in accordance with the ante-nuptial agreement, Mr. Saunders executed an Indenture and Declaration of Trust with Harris Saunders, Jr., John R. Saunders, and Plaintiff James D. Stacey, as trustees.

The following articles of the instrument of trust are significant for our consideration:

Article One provided that the income therefrom would be paid to Harris Saunders.

Article Five provided that, in the event Mrs. Saunders survived Mr. Saunders, she would receive the income of the trust during her life and be given a general testamentary power of appointment.

Article Six provided that, effective at the death of the survivor of Harris Saunders and Grace Saunders, the trustees would be possessed of the then trust principal of the trust estate, and should thereafter apportion it with 60% to James D. Stacey and 40% to Virginia M. King.

Article Nine reserved the right in the grantor, Harris Saunders, to amend, modify, or revoke the trust in whole or in part, by delivering such an instrument in writing to the trustees. Simultaneously with the execution of the trust, Mr. Saunders delivered a number of promissory notes with principal amounts totaling $350,000 to the trustees in fulfillment of his obligations under the ante-nuptial agreement.

Grace Morrison Saunders died of a heart attack on June 27, 1981. On July 6, 1981, Harris Saunders revoked the Indenture and Declarations of Trust in the manner specified in the trust agreement.

PLAINTIFFS AS THIRD-PARTY BENEFICIARIES

In this State, one must establish that a contract was intended for his direct, as opposed to incidental, benefit, in order to qualify as a third-party beneficiary. Holley v. St. Paul Fire and Marine Insurance Co., 396 So.2d 75 (Ala.1981).

Paragraph 7-H of the ante-nuptial agreement reads as follows:

"H. This Agreement shall be binding upon, and shall inure to the benefit of the parties hereto and the heirs, executors, administrators, devisees, legatees, successors and assigns and all other successors in interest of the parties hereto."

According to Plaintiffs, the aforementioned language clearly indicates a desire that the ante-nuptial agreement inure directly to their benefit. Consequently, Plaintiff says, once it is established that one is a third-party beneficiary, that person is fully entitled to enforce the promise made for his benefit.

Defendant, while conceding that Plaintiffs have standing to bring this action as executors of Grace Saunders's estate, opposes any attempt by Plaintiffs to sue individually as third-party beneficiaries, arguing that the ante-nuptial agreement was never intended to benefit them directly in their individual capacities.

Giving effect to the clear intentions of the parties, we hold that the ante-nuptial agreement inured only to the benefit of Mrs. Saunders directly. Had Mrs. Saunders survived Mr. Saunders, which, according to its unambiguous terms, she was required to do in order to receive any benefit from the ante-nuptial agreement, then any possible benefit that might have inured to Plaintiffs would have been dependent upon the discretionary exercise by Grace Saunders of her then power to appoint by will. While we cannot speculate as to what course Mrs. Saunders might have pursued, we cannot totally discount the possibility that she may have exercised her power of appointment so as to afford Plaintiffs no benefit whatsoever from the agreement.

In Logsdon v. Logsdon, 412 Ill. 19, 104 N.E.2d 622 (1952), the Illinois Supreme Court held that grown children by a previous marriage were not third-party beneficiaries to an ante-nuptial agreement entered into by their parent, despite the fact that they were specifically mentioned therein. The Court stated:

"We are of the opinion that the children of [the deceased spouse] acquired no rights under this instrument as third-party beneficiaries. It was not entered into for their direct benefit." 104 N.E.2d at 626.

Any benefit to Plaintiffs under the ante-nuptial agreement was, if anything, merely incidental, and depended solely upon Grace Saunders's discretionary power of appointment by will. Thus, they were not third-party beneficiaries capable of enforcing unaccrued benefits under the agreement. ³

INTERPRETATION OF THE ANTE-NUPTIAL AGREEMENT

As both parties concede, the crucial consideration in deciding whether the trial court properly granted summary judgment is the ambiguity vel non of the ante-nuptial agreement. Plaintiffs recite numerous principles concerning the construction of ambiguous contracts. If the agreement is not ambiguous, however, its proper construction is to be determined by the court as a matter of law. Wheeler v. First Alabama Bank of Birmingham, 364 So.2d 1190, 1194 (Ala.1978). The trial court, subject to appellate review, determines whether a contract is ambiguous; and, if it is not, the court then determines the force and effect of the terms of the contract as a matter of law. Wigington v. Hill-Soberg Co., Inc., 396 So.2d 97 (Ala.1981). Once a court determines that no facial ambiguity is present in a contract, it cannot proceed to examine extrinsic evidence. Quick v. Campbell, 412 So.2d 264, 266 (Ala.1982).

The central issue before us, then, is whether the trial court properly found that the ante-nuptial agreement clearly and unambiguously required that Mrs. Saunders survive Mr. Saunders to become entitled to the trust proceeds. In paragraph "A" of the ante-nuptial agreement, Mr. and Mrs. Saunders agreed that Mr. Saunders would thereafter create an inter vivos trust with a corpus of $350,000 current value. The parties further provided in that paragraph that the trust was to be drawn "in such a manner as to enable the trust to qualify for the 'marital deduction' in his estate and will result in no present gift taxes." The final sentence in paragraph "A," which Plaintiffs correctly call the "key" one, and which t...