Woodruff v. Trust Co. of Georgia, 29116

• Decision Date: 29 October 1974
• Docket Number: No. 29116,29116
• Citation: 210 S.E.2d 321,233 Ga. 135
• Parties: Frances WOODRUFF v. TRUST COMPANY OF GEORGIA.
• Court: Georgia Supreme Court

Page 321

210 S.E.2d 321

233 Ga. 135

Frances WOODRUFF v. TRUST COMPANY OF GEORGIA.

No. 29116.

Supreme Court of Georgia.

Oct. 29, 1974.

Alex McLennan, Atlanta, for appellant.

King & Spalding, Jack H. Watson, Jr., James M. Sibley, John A. Wallace, Arthur K. Bolton, Atty. Gen., Atlanta, for appellee.

Verner F. Chaffin, Athens, amicus curiae.

Syllabus Opinion by the Court

JORDAN, Justice.

This is an appeal from the denial of the appellant's motion for summary judgment and involves the construction of a trust instrument.

The trust was created in 1960 when the appellant Mrs. Frances Woodruff executed a trust agreement naming the appellee Trust Company of Georgia as the trustee.

Item I of the trust gave the settler, Mrs. Woodruff, the right to alter, amend, or revoke the trust at any time. In 1962 Mrs. Woodruff amended the trust by striking Item I and inserting a new Item I which reads as follows: 'Donor reserves the right to alter, amend, modify or revoke this trust in whole or in part at any time and from time to time by instrument in writing signed by donor and delivered to trustee, but only with the written consent and approval of the trustee. This trust shall be irrevocable except with the written consent and apprval of the trustee.'

Item II of the trust provided that during the life of the donor the net income from the trust be paid to her and that 'Upon Donor's death, all property remaining in this trust, whether corpus or income, shall be payable to her personal representative.' Item II further authorized the trustee from time to time to encroach on the corpus 'in such amounts as Donor may request or, if Donor is unable because of illness or other causes to act for herself in such amounts as Trustee in its discretion may deem necessary to provide for the proper support of Donor.'

In 1967, Mrs. Woodruff was adjudged incompetent, and guardians were appointed for her person and her property. On October 1, 1973, the guardian for her person was discharged. Subsequent to November 6, 1973, Mrs. Woodruff's competency was restored, and the Trust Company was discharged as guardian of her property. The Trust Company, as guardian of the property of Mrs. Woodruff, employed a law firm to represent it in opposition to the proceedings initiated by Mrs. Woodruff for the restoration of her competency.

On January 8, 1974, Mrs. Woodruff requested that the Trust Company encroach upon the principal of the trust by selling a certain amount of stock, and placing the proceeds in her checking account. She also requested that sufficient stock be sold to pay her attorney who represented her in the competency proceedings. The Trust Company refused these requests.

On February 1, 1974, the Trust Company filed a petition for Declaration of Rights against Mrs. Woodruff as a defendant, asking for direction on the following questions:

'(1) Whether plaintiff has a discretion to pay funds from principal of the subject Trust for the support of defendant, or whether plaintiff must pay out any and all funds from principal which may be requested by defendant;

'(2) whether defendant has the right to revoke the subject Trust Agreement without the consent of plaintiff;

'(3) whether plaintiff may use trust assets for the payment of fees and expenses incurred by plaintiff's attorneys who were employed by plaintiff in its former capacity as guardian of the property of defendant for the purpose of aiding the Court in determining defendant's capacity to manage her own financial affairs;

'(4) whether the amount of the aforesaid legal fees owing _ _ for services rendered to Trust Company as guardian of defendant's property, is reasonable and proper.'

In her answer to the petition for Declaration of Rights, Mrs. Woodruff alleged that the trust agreement had been revoked and terminated by a letter from her on February 5, 1974. She denied that the attorneys for the Trust Company as guardian had rendered any beneficial service to her by opposing her restoration of competency, and contended that the Trust Company could not legally encroach on the corpus of her trust fund for the payment of fees to said attorneys. She further attacked the constitutionality of Ga.L.1973, p. 844 et seq., as it applied to her.

Both parties filed motions for summary judgment. After a hearing, the trial judge entered an order and opinion which denied both motions for summary judgment. The trial court held as a matter of law that the trust is revocable only with the written consent and approval of the trustee; that the Trust Company has a discretionary power to grant or deny requests for trust encroachment; and that if the trier of fact determined that the Trust Company, as guardian of the person of Mrs. Woodruff, acted in good faith in opposing her restoration of competency, then the Trust Company was entitled to use trust assets for the payment of attorney fees. In a subsequent order the court also held that Ga.L.1973, p. 844 et seq. (Code Ann. § 108-111.1), was constitutional as applied to this case.

On appeal Mrs. Woodruff contends that she can revoke the trust without the trustee's consent; that Ga.L.1973, p. 844 et seq. (Code Ann. § 108-111.1), is unconstitutional as applied to her, and that the question of the liability of the Trust Company for legal expenses incurred as guardian of Mrs. Woodruff's property should not be determined in this action. Held:

1. First, we conclude that under the terms of this trust, Mrs. Woodruff occupies the status of settlor-sole beneficiary since at no time during the existence of the trust has she named any beneficiary, contingent or otherwise, of the trust other than herself or her personal representative. The settlor of a trust is 'the sole beneficiary where he transfers property in trust to pay the income to himself for life and on his death to pay the principal to his estate . . .' So also, the settlor is the sole beneficiary where he transfers property in trust to pay the income to himself for life and on his death to convey the principal as he may by deed or will appoint. Restatement, Trusts 2d § 127.

The threshold question here is whether such a settlor-sole beneficiary has the right to terminate the trust regardless of the provisions for revocability or irrevocability in the trust instrument itself.

In our opinion this question was answered in the affirmative in Moore v. First National Bank & Trust Co. Of Macon, 218 Ga. 798, 130 S.E.2d 718. In that case we clearly held that a settlor-sole beneficiary of an inter vivos trust could terminate that trust even though the trust was by its terms irrevocable. This right of the settlor-sole beneficiary to terminate his own trust is not a right derived from the terms of the trust agreement, but an inherent right which exists outside of and extraneous to the trust agreement. See Scott on Trusts, (3d Ed.) § 339. The nature of a settlor-sole beneficiary trust embraces this right simply because no one else has any interest in the trust. Who would have any standing to object to the ending of the trust? The trustee has no vested right to insist upon the continuance of the trust, for as we said in Moore, supra (p. 802, 130 S.E.2d p. 721), '(t)he incidental benefit which the trustee may derive from future commissions is not of such a character as gives it a vested right to the continuance of the trust.' The trustee as such is not the beneficiary of the trust. Restatement, Trusts, 2d, p. 159, § 337, Comment (b).

Because we conclude that Moore, supra, is dispositive of this issue we quote, Headnote 3, the relevant portion of that case. 'Did Mrs. Moore have a right to terminate the trust she created in 1957 for her own life benefit and for the benefit of 'such other persons after her death as she may by deed or will designate?' The trial judge held that she did not; but, as to this, we think he erred. While it is true that the instrument she executed expressly states that it is irrevocable, it is also true that she is the only person named by it as a beneficiary and the record shows that she has not since the date of its execution designated any other person as a beneficiary of the trust she created. In these circumstances, she is the only person interested in the trust she created (Scott on Trusts, 2d Ed., 908, § 127.1; Restatement, Trusts, 2d Ed., 272, § 127, Comment b); and being such, she, as the settlor thereof, unquestionably had a right to terminate it, even though the trust instrument specifically provides that it shall be irrevocable. Scott on Trusts (2d ed.), 2481, § 339; Restatement, Trusts (2d ed.) 171, § 339, Comment a; 89 C.J.S. Trusts § 88e, page 907; Doyle v. Bank of Montclair, 9 N.J.Super. 586, 76 A.2d 41. Since Mrs. Moore, as the settlor of this trust, and the only person presently interested in it, desires to retake her property and manage it herself, we are of the opinion she should be permitted to do so. The instrument was her voluntary act; it was without consideration; and, as we have said, it presently affects no one but herself . . . If she had a right, as we hold she did, to terminate the trust agreement, she certainly had a right to revoke the declaration that it is 'irrevocable. " Accordingly, if Mrs. Moore's right to terminate included the right to...