Case Title: WELCH v. CROW

Citation: 

Docket Number: 104914

State: oklahoma

Court: Oklahoma Supreme Court

Date: 2009-03-31T00:00:00Z

Document:
WELCH v. CROW  WELCH v. CROW 2009 OK 20 206 P.3d 599 Case Number: 104914 Decided: 03/31/2009 THE SUPREME COURT OF THE STATE OF OKLAHOMA DYLAN WELCH and HILLARY WELCH, Plaintiffs/Appellants, v. MARY KAY CROW, GARY V. MORGAN and JEAN ANN MORGAN, TRUSTEES OF THE BETTY J. NEIGHBORS REVOCABLE TRUST DATED APRIL 12, 1995 Defendants/Appellees. CERTIORARI TO THE COURT OF CIVIL APPEALS, DIVISION IV Honorable Bruce Sewell, Trial Judge ¶0 On April 12, 1995, Betty J. Neighbors created the Betty J. Neighbors Revocable Trust and executed a pour-over will. Neither the will nor the Trust made any provision for Neighbors' deceased son, Martin Welch. On March 31, 2006, Welch's children, Dylan and Hillary Welch, brought an action seeking an order that either they were entitled to a share of the Trust as pretermitted heirs or that the Trust was illusory. The trial court granted summary judgment in favor of the trustees on July 5, 2007. The Welches filed their petition in error, and we assigned the cause to the Court of Civil Appeals, which affirmed the trial court. On certiorari, we affirm and hold that: 1) Oklahoma's pretermitted heirs statute, CERTIORARI PREVIOUSLY GRANTED; COURT OF CIVIL APPEALS OPINION VACATED; TRIAL COURT AFFIRMED. George M. Miles, Tulsa, Oklahoma, for Plaintiffs/Appellants. Ron Wright, Muskogee, Oklahoma, for Defendant/Appellee Mary Kay Crow. Craig W. Hoster, Julie Stanley, Tulsa, Oklahoma, for Defendants/Appellees Gary V. Morgan and Jean Ann Morgan. KAUGER, J.: ¶1 The issues presented are whether: 1) FACTS ¶2 On April 12, 1995, Betty J. Neighbors (Neighbors) created the Betty J. Neighbors Revocable Trust (the Trust), of which she was the sole trustee and only vested beneficiary during her life. Upon its creation, some of her property was conveyed into the Trust. ¶3 Neighbors also executed her Last Will and Testament on April 12, 1995. The will recognized that Neighbors had four children: Jean Ann Morgan, Mary K. Crow, Jerry Welch, and Martin Welch. Martin Welch was deceased at the time of the will's execution. Dylan and Hillary Welch (collectively, the grandchildren), the appellants in this cause, are Martin Welch's children. The will provided that at the time of her death, the entirety of her estate was to be distributed to the Trust. ¶4 Neighbors died on May 19, 2000. In a separate probate action filed in Wagoner County, a March 31, 2006, order admitting the will to probate determined that Jean Ann Morgan, Mary K. Crow, Jerry Welch, and the grandchildren were Neighbors' heirs-at-law and that the grandchildren were pretermitted heirs as defined by ¶5 On June 7, 2006, the grandchildren filed a petition in Wagoner County District Court, asking the court to determine that either they had a statutory share in the Trust and were entitled to an accounting by the trustees or, in the alternative, that the Trust was illusory. On September 29, 2006, the grandchildren moved for summary judgment. Gary Morgan and Jean Ann Morgan responded to the grandchildren's motion for summary judgment and moved for summary judgment on October 17, 2006. Mary K. Crow also responded to the grandchildren's motion for summary judgment and moved for summary judgment on October 23, 2006. ¶6 On June 5, 2007, the trial court held a hearing on the motions for summary judgment. The trial court entered its journal entry of judgment granting the trustees' motions for summary judgment and denying the grandchildren's motion for summary judgment on July 5, 2007. ¶7 On August 6, 2007, the grandchildren filed their petition in error. We assigned the cause to the Court of Civil Appeals on August 29, 2007. The Court of Civil Appeals affirmed the trial court on October 19, 2007, and the grandchildren petitioned for certiorari on November 8, 2007. We granted certiorari on January 7, 2008 to address the first impression question of whether naming a contingent beneficiary satisfies the requirement that a trust may not have the same person as sole trustee and sole beneficiary. The cause was assigned to this office on January 7, 2009. ¶8 THE TRIAL COURT DID NOT ERR BY GRANTING SUMMARY JUDGMENT TO THE TRUSTEES BECAUSE: 1) ¶9 Summary judgment is properly granted when there are no disputed questions of material fact and the moving party is entitled to judgment as a matter of law.8 When summary judgment involves only legal questions, we test a trial court's grant of summary judgment by a de novo review standard.9 ¶10 This cause presents issues of statutory construction, which are questions of law that we review de novo and over which we exercise plenary, independent, and non-deferential authority.10 The primary goal of statutory construction is to ascertain and follow the intent of the Legislature.11 The words of a statute will be given their plain and ordinary meaning unless it is contrary to the purpose and intent of the statute when considered as a whole.12 We presume that the Legislature expressed its intent and intended what it expressed, and statutes are interpreted to attain that purpose and end, championing the broad public policy purposes underlying them.13 A. Title ¶11 The grandchildren argue that as pretermitted heirs, they are entitled to a statutory share in the Trust under 84 O.S. 2001 §132.14 The trustees respond that §132 applies only to wills, and not to trusts. Our recent opinion in In re Estate of Jackson, 2008 OK 83, 194 P.3d 1269, is dispositive of the question. There, we held that §132 "unambiguously pertains only to wills. It does not encompass a situation where a child is omitted from a trust, and we decline to extend its reach to revocable inter vivos trusts."15 In the instant cause, the grandchildren are not entitled to a statutory share in the Trust. B. Because It Provided for Contingent Beneficiaries, The Trust Was Valid. ¶12 It is an issue of first impression whether naming a contingent beneficiary satisfies the requirement that a trust may not have the same person as sole trustee and sole beneficiary. The right to dispose of property is an inalienable natural right that persists throughout a person's lifetime, but the right to control disposition of property after death is subject to statutory limitations.16 Oklahoma law permits an individual to dispose of property at death by trust.17 ¶13 The grandchildren argue that even if 84 O.S. 2001 §132 is only applicable to wills, the Trust was illusory and invalid because Neighbors was the Trust's sole trustee and sole beneficiary. The trustees counter that because the trust provided for Mary K. Crow and Jean Ann Morgan as contingent beneficiaries, it was valid. ¶14 When it is applied to the law of trusts, the so-called "merger doctrine" is the equitable concept that a valid trust must have a separation of the legal estate from the beneficial enjoyment, and that no trust can exist where the same person possesses both.18 Title 60 O.S. 2001 §175.6, without using the term "merger doctrine," codifies the principle that if a trustor is a beneficiary and the sole trustee, a valid trust also requires a beneficiary other than the trustor.19 Title 60 O.S. 2001 §175.3(K) defines a trust beneficiary as "any person entitled to receive from a trust any benefit of whatsoever kind or character."20 ¶15 The majority rule is that a trust is not illusory or invalid simply because the interests of its beneficiaries, other than the trustor, are contingent. The Restatement (Third) of Trusts §25, Comment b provides in pertinent part: (The) validity (of) an inter vivos trust is not affected by the fact that the interests of all beneficiaries other than the settlor do not take effect in possession or enjoyment before the settlor's death, or that they are contingent or subject to conditions subsequent, including the exercise of a power of revocation, withdrawal, amendment, or appointment reserved to the settlor, whether exercisable during life or by will.21 The reporter's note to Restatement (Third) of Trusts §25, Comment b provides in pertinent part: (C)ourts regularly and properly find valid trusts where settlors have retained complete control, and where other beneficiaries usually, if drafting is competent, have only future interests that are not only defeasible (by revocation or amendment) but also "contingent" upon surviving the settlor and maybe other events as well. . . . ¶16 Seven states have enacted statutes which explicitly provide that a trust which has the same person as sole trustee and sole present beneficiary is not invalid if it provides for a contingent or successor beneficiary.22 Nineteen states and the District of Columbia have adopted a version of the Uniform Trust Code, which provides at §402(b) that a beneficiary is definite if the beneficiary can be ascertained at the time of the creation of the trust or at some time in the future, subject to the rule against perpetuities. 23 The Uniform Comment to §402(a)(5) provides that the merger doctrine is not applicable to a trust with the same person as sole trustee and sole life interest beneficiary if another person is designated the remainder beneficiary.24 Two other states, which do not have a statute directly addressing the issue, have adopted the Restatement view in appellate court opinions.25 While there are a few state court decisions which take a view contrary to the Restatement, each of these decisions has been subsequently overruled by statute.26 A few other decisions appear to require a present, vested beneficiary other than the sole trustee, but, by using terms like "vested interest subject to divestment" to rename contingent interests, embrace the Restatement view for all practical purposes.27 Our research has not disclosed a viable case or statute contrary to the Restatement view on this issue. ¶17 In Thomas v. Bank of Okla., N.A., 1984 OK 41, ¶21, 684 P.2d 553 , this Court determined that a revocable inter vivos trust may not be employed to defeat a surviving spouse's forced share of an estate as provided by 84 O.S. 2001 §44. The Court held that such a trust was illusory as to the surviving spouse and set forth the method of determining the validity of a trust: (T)he test of the validity of a trust is whether the transfer is real or illusory; that the test is whether the settlor in good faith divested himself of the property ownership or simply made an illusory transfer as a mask for the effective retention of the property.28 Here, it is clear that the Trust was not an artifice for the effective retention of Neighbors' property. Instead, Neighbors employed the common estate-planning device of creating a revocable inter vivos trust and simultaneously executing a pour-over will to provide for her heirs at the time of her death.29 The Restatement view is persuasive and consistent with the definition of a trust beneficiary found at 60 O.S. 2001 §175.3(K).30 A trust is not illusory simply because it has the same person as the sole trustee and only vested present beneficiary if it provides for at least a contingent beneficiary. CONCLUSION ¶18 We determined in Estate of Jackson that 84 O.S. 2001 §132 unambiguously pertains only to wills and not to revocable inter vivos trusts. The grandchildren, as pretermitted heirs, are not entitled to a share of the Trust. The Trust is not illusory simply because Neighbors was the sole trustee and only vested present beneficiary during her life. Because the Trust provided for Mary K. Crow and Jean Ann Morgan as contingent beneficiaries, it was a valid trust. We affirm the trial court's grant of summary judgment to the trustees. CERTIORARI PREVIOUSLY GRANTED; COURT OF CIVIL APPEALS OPINION VACATED; TRIAL COURT AFFIRMED. EDMONDSON, C.J., TAYLOR, V.C.J., HARGRAVE, KAUGER, WATT, WINCHESTER, COLBERT, J.J., concur. OPALA, J., concurs in result. REIF, J., disqualified. FOOT