Union Planters Trust and Investment Management v. Bank of America
| Decision Date | 15 October 2003 |
| Docket Number | No. 3-614/02-1474.,3-614/02-1474. |
| Parties | UNION PLANTERS TRUST AND INVESTMENT MANAGEMENT, As Fiduciary Trustee of the RENA I. SIMPSON TRUST AGREEMENT, Plaintiff-Appellee, v. BANK OF AMERICA, As Executor of the Estate of OCALA TRITES, Defendant-Appellant, BARBARA HOWELL FRENCH, PHYLLIS FUSCO, TEVIS C. REYNOLDS, ROY BARON, ROY HOWELL, JR., COLLEEN H. BOWER, DEBORAH SORRENTINO, JESSIE LOU ESBECK, JANICE LANNING HUBBS, LINDA WALKER, KIMBERLY BECKER, BRIDGET JENSEN, LOUISE PODERSON and WILLIAM LANNING, Defendants. |
| Court | Iowa Court of Appeals |
Appeal from the Iowa District Court for Black Hawk County, George L. Stigler, Judge.
Executor Bank of America appeals the district court's declaratory judgment decree.
AFFIRMED IN PART AND REVERSED IN PART.
John Harding of Harding Law Firm, Des Moines, for appellant.
Robert Kohorst of Kohorst, Early, Gross & Louis, Harlan, and Leroy Redfern, Cedar Falls, for appellee.
Considered by Sackett, C.J., and Miller and Hecht, JJ.
The focal issue in this appeal from a declaratory judgment decree by the Bank of America as executor of the Estate of Ocala Trites is whether, as the executor advances, Ocala Trites, at the time of her death, had a vested forty percent interest in the trust of her deceased sister, Rena I. Simpson, so that Ocala's interest should be paid to her estate; or, as the district court determined, Ocala's interest was contingent and under the terms of the trust it should have been distributed to Ocala's descendents. We affirm in part and reverse in part.
The facts are basically without dispute. In 1975 Rena executed a written document creating the Simpson trust. She transferred assets to the trust. The trust provided for distributions of income and corpus under certain terms and conditions. It first addressed distribution during Rena's life and provided that under specified conditions distribution could be made to Rena and her husband. It then addressed distribution after Rena's death and provided that under certain circumstances the trust could make payments to her estate. Then in the same paragraph it said, "Subject to this paragraph, after my death the Trustee shall hold and dispose of the trust property as follows: . .". (Emphasis supplied). Following this language there were two numbered paragraphs providing for payment in the trustee's discretion of net income and principal to Rena's husband should he survive her, which he did. The third numbered paragraph provided, "Upon the death of my husband or if he does not survive me, the remaining trust fund shall be divided among the following persons in the following shares: . . .". (Emphasis supplied). Subparagraphs a through g which followed then allocated percentages to seven named beneficiaries including Rena's sister, Ocala,1 who was given forty percent of the trust fund. Following the percentage distribution the agreement provided, "In the event Kala [Ocala] . . . does not survive me, then her 40% share shall be redistributed as follows:. . . ." Three subparagraphs reallocated the forty percent.
Rena died on May 26, 1976, survived by both her husband and Ocala. Her husband survived her and died on December 16, 2000. Ocala died testate on March 14, 1999. She survived Rena but predeceased Rena's husband.
Ocala's estate's position is basically that our inquiry should end here because at the death of Rena the forty percent share vested in Ocala subject to Rena's husband's interest, and now that Rena's husband is dead, forty percent of the trust should be paid to Ocala's estate. The trust disagrees, contending that Ocala received only a contingent remainder that was defeated by her failure to survive Rena's husband. It also contends Ocala's failure to exercise a power of appointment as to the trust resulted in the estate's claim being defeated by subsequent language in the trust document providing,
Upon the death of any beneficiary hereunder the Trustee shall distribute his2 trust, . . . as he appoints and directs by will specifically referring to this power of appointment. To the extent that he does not effectively exercise his power of appointment, upon his death the Trustee shall distribute his trust to his then living descendants, per stirpes.
The trust argues that this language dictates the forty percent share should not go to Ocala's estate but should, as the district court found, go to Ocala`s living descendants, per stirpes.
A declaratory judgment is an action in which a court declares the rights, duties, status or other legal relationships of the parties. Iowa R. Civ. P. 1.1101; Fox v. Polk County Bd. of Sup'rs, 569 N.W.2d 503, 507 (Iowa 1997); Dubuque Policemen's Protective Ass'n v. City of Dubuque, 553 N.W.2d 603, 606 (Iowa 1996). Ordinarily whether a declaratory judgment action is a legal or equitable proceeding is determined by the pleadings, relief sought, and the nature of the case. Junkins v. Branstad, 421 N.W 2d 130, 132 (Iowa 1988). We will review de novo. See In re Estate of Severson, 459 N.W.2d 473, 474 (Iowa 1990).
The purpose of a trust governs its administration and enforcement. Eldred v. Merchants Nat. Bank of Cedar Rapids, 468 N.W.2d 221, 222-23 (Iowa 1991); Hanson v. Minette 461 N.W.2d 592, 594 (Iowa 1990); Anderson v. Telsrow, 237 Iowa 568, 575, 21 N.W.2d 781, 785 (1946). The purpose is determined by examining the language of the trust instrument and the surrounding circumstances. Hanson, 461 N.W. 2d at 594; First Nat'l Bank of Dubuque v. Mackey, 338 N.W.2d 361, 363 (Iowa 1983).
The general rules of construction apply when interpreting wills and trusts. In re Work Family Trust, 260 Iowa 898, 901, 151 N.W.2d 490, 492 (1967); Barron v. Snapp, 468 N.W.2d 841, 843 (Iowa Ct. App. 1991). We resort to technical rules or canons of construction only if the language of a trust is ambiguous or if the settlor's intent is for any reason uncertain. Barron, 468 N.W.2d at 843. Where we find the terms of a trust unambiguous, we are precluded from interpreting those terms. Id. (citing In re Estate of Kiel, 357 N.W.2d 628, 630 (Iowa 1984)).
Courts seek the intention of the settlor. Work, 260 Iowa at 901,151 N.W.2d at 492. In so doing we construe the language of the trust instrument as a whole. Id.; In re Estate of McCulloch, 243 Iowa 449, 457, 52 N.W.2d 67, 72 (1952).
The estate's first argument is that Ocala's share vested once she survived Rena and that Ocala did not need to survive both Rena and her husband to take a share of the trust. It argues that there was no specific language providing that Ocala had to survive both of them to take. The trust argues to the contrary that Ocala only had a contingent remainder.
In modern law, there is a dislike for contingent interests because they are thought to restrict alienability. In re Estate of Ruhland, 452 N.W 2d 417, 419 (Iowa 1990). As a result interests are construed as vested rather than contingent whenever possible. Id; see also Fulton v. Fulton, 179 Iowa 948, 951, 162 N.W. 253, 254 (1917); Schrader v. Schrader, 158 Iowa 85, 93, 139 N.W. 160, 163 (1912).
Yet the dominant rule of construction is that the intent of the settlor, as it is fairly gathered from the trust agreement, must prevail. See Ruhland, 452 N.W.2d at 419; see also Henkel v. Auchstetter, 240 Iowa 1367, 1375, 39...
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