Case Title: In Re Estate of Sutcliffe

Citation: 199 Kan. 686, 433 P.2d 389

Docket Number: 44,827

State: kansas

Court: Kansas Supreme Court

Date: 1967-11-13T00:00:00Z

Document:
199 Kan. 686 (1967)
433 P.2d 389
In the Matter of the Trust Estate of Joe H. Sutcliffe.
JOSEPH G. LEWIS and CLARK M. FLEMING, Appellees,
v.
DALE DEAN SUTCLIFFE, DONALD LLOYD SUTCLIFFE, RONALD FLOYD SUTCLIFFE and TERRY JOE SUTCLIFFE, Appellees, and VELMA SUTCLIFFE, Appellant.
No. 44,827

Supreme Court of Kansas.
Opinion filed November 13, 1967.
William L. Rees, of Topeka, argued the cause and Jack A. Quinlan, of Topeka, was with him on the brief for the appellant.
Charles Forsyth, of Erie, argued the cause and was on the brief for appellees Joseph G. Lewis and Clark M. Fleming, Trustees.
Joe F. Balch, of Chanute, was on the brief for Dale Dean Sutcliffe, Donald Lloyd Sutcliffe, Ronald Floyd Sutcliffe and Terry Joe Sutcliffe, Appellees.
The opinion of the court was delivered by
FROMME, J.:
This appeal requires construction of an express trust *687 and, more specifically, of provisions relating to final disposition of the trust property. The trust was established for the purpose of carrying out the terms of a property settlement agreement entered into between Joe H. Sutcliffe and Velma E. Sutcliffe, his wife.
The following facts were developed during a trial in the court below. Marital difficulties arose between the parties and a separation occurred. The couple owned considerable property. Some of the real estate was held in joint tenancy. The husband had difficulty carrying on his business because of inability to get his wife to sign deeds and other papers. The wife experienced difficulty in obtaining money for living expenses. The parties by their respective attorneys carried on lengthy negotiations for a property settlement. On January 24, 1963, both parties signed a written agreement. The parties agreed to make full settlement of their property rights. In the agreement Joe was to pay $55,000 to purchase an annuity insurance policy on the life of Velma. She was to receive a monthly income therefrom. Velma was to receive a building site in the city of Chanute. Joe was to pay $18,000 toward construction of a house thereon. Velma was to receive household goods and an automobile. Joe was to have a reasonable time to finance these payments. The balance of the property was to belong to Joe.
Joe experienced difficulty in raising $73,000.
On February 21 and March 29, 1963, two deeds were executed by the parties. The names of grantees were left in blank. The deeds covered all of the property owned by the parties.
On March 29 the following trust agreement was signed and acknowledged by Joe H. Sutcliffe as trustor and by Joseph G. Lewis and Clark M. Fleming as trustees.
Below the signatures and acknowledgment appeared the following:
This statement was signed by Velma E. Sutcliffe and attested by her attorney.
The deeds and the trust agreement were accepted by the trustees. Attached to the trust agreement was a list of the descriptions of real property covered by the deeds and a copy of the property settlement agreement signed by Joe and Velma Sutcliffe. On April 23, 1963, the trustee who was attorney for the husband wrote a letter to the attorney for the wife. In this letter he outlined what he believed to be the understanding of the parties and asked that the attorney and the wife approve a copy of the letter and return the same to him if it was satisfactory. The third paragraph of that letter read as follows:
The letter was approved by the attorney but was returned without the signature of the wife.
On April 30, 1963, the trustees purchased the life insurance annuity and Velma E. Sutcliffe receives monthly payments under this contract. On December 1, 1964, the trustees made final payment of the $18,000 on the house.
*690 On January 28, 1965, Joe H. Sutcliffe died. His will was admitted to probate in Neosho county, Kansas. Omitting the attestation clause it reads:
Joe and Velma Sutcliffe had four sons. Two of the sons were appointed and qualified as executors of the will. The widow filed an election to take under the laws of descent and distribution and not under her husband's will. No further action has been taken in the probate court.
The trustees filed a petition for instructions in the district court of Neosho county, Kansas, which gives rise to the present appeal. In the petition the trustees outlined facts necessary to show the trust had been performed except for final disposition of the property. They alleged, except by the terms of the will, Joe H. Sutcliffe made no written designation as to a final transfer of the real estate remaining in the trust. They requested the court notify the parties and direct disposition of the property.
The appellant, Velma E. Sutcliffe, filed an answer admitting the allegations in the petition except she alleged the property held by the trustees belonged in the estate of her husband. She further alleged the probate court had acquired original jurisdiction over all controversies affecting disposition of this property.
Answer was filed by the four sons. They and the trustees are appellees herein. The sons admitted the allegations of the trustees' petition except they requested the trust be continued until the probate court could determine if the property belonged in the estate of the decedent.
After a trial in the district court judgment was entered directing the trustees to convey the property remaining in the trust to the *691 four sons. The basis for this judgment was set forth in a memorandum decision made a part of the journal entry. It recited:
In this memorandum decision the court found Joe H. Sutcliffe held a power of appointment (as distinguished from a right or power to designate persons to whom the trustees must convey legal title). The court further found the making of the will was a part of the whole chain of events constituting a settlement with the wife and the husband's dominant purpose in making the will was to exercise the power of appointment reserved in the trust. The court determined title to the property passed under the instruments creating the power of appointment and therefore the property remaining in the trust estate was not part of the estate of Joe H. Sutcliffe. The widow appeals from this judgment.
A distinction is generally made between powers of appointment and powers authorized in a trust. (See 41 Am. Jur., Powers § 3; 72 C.J.S., Powers § 1.)
Much confusion appears in the case law concerning construction of powers, for they are construed in separate areas of law covering real and personal property, wills, estates and trusts. In each of these various areas the subject is discussed. It is generally agreed the subject of powers has received more technical disquisition regarding construction than any single subject in the law. (See 72 C.J.S., Powers § 20.)
Construction of a power is governed by principles of the common law as these principles may have been changed by statute. We find no Kansas statute relating to powers of designation. (See K.S.A. 58-2401, et seq.)
In the instant case a trust inter vivos was created. The trustees held legal title to the trust property. The trustor (settlor) could not dispose of the trust property by his own separate instrument of transfer. So long as the trustees hold legal title they must transfer the trust property. The interest retained by the trustor was not a power of appointment as generally understood. He reserved a mere right or power to designate the person, firm or corporation to whom the trustees might sell, mortgage or convey. The power of appointment (power to effect a transfer of legal title) was created in the trust instrument.
*692 With this in mind let us consider some of the rules of construction to be applied.
In the construction of trust agreements if their text is plain and unambiguous the intention of the trustor (settlor) will be ascertained from the language used. (Bayless v. Wheeler-Kelly-Hagny Trust Co., 153 Kan. 81, 109 P.2d 108; In re Estate of Hauck, 170 Kan. 116, 223 P.2d 707.) Where construction is necessary the court must put itself in the situation of the trustor when he made the trust instrument and from consideration of the language used in the entire instrument determine the intention of the trustor. (Dyal v. Brunt, 155 Kan. 141, 123 P.2d 307; In re Estate of Hauck, supra.) The cardinal rule is that the intention of the trustor as gathered from the whole instrument must control unless contrary to settled principles of law. (Calkin v. Wallace, 160 Kan. 760, 165 P.2d 224; In re Estate of Hauck, supra.)
The situation present when the trust instrument was made is expressed therein. The family was split by discord and a separation of husband and wife had occurred. The general purpose was to carry out the terms of a property settlement agreement. When the money was raised and paid the balance of the property was to belong to the trustor, Joe H. Sutcliffe. It was to be conveyed by the trustees to the person, firm or corporation designated by him. This would include himself. The trust instrument does not turn over possession and management of the real estate to the trustees. Their duties related only to raising $73,000 and completing the terms of the property settlement agreement. When the money was raised the trustees could have completed the final transfer required. The $73,000 was raised a year and nine months before the trustor died. The final transfer could have been completed well within that period of time.
Was it the intention of the trustor on the date of the trust agreement to exercise this right to designate in his will? This court holds that it was not and we will set forth our reasons.
The trust instrument did not specify that the designation was to be made by will. No specific manner of designation was outlined. The record does not indicate how the designation was made to enable the trustees to sell or mortgage property to raise the $73,000 but this was not by will. The rights of designation relating to both the sale of property and to the final disposition of the corpus are identical in wording. The trust was for a living purpose as distinguished *693 from a testamentary purpose. The will of Joe H. Sutcliffe did not refer to trust property and the four sons were not specifically designated as parties to receive the corpus of the trust. The will merely disposed of the decedent's estate in one general item covering the entire estate.
It is also noted the trust imposed no duties upon the trustees as to management and control of the property beyond December 1, 1964, when final payment was made on the new home, except to require final transfer of legal title. The intention of the trustor at the time of execution of the trust is controlling and not his intention at a later time when he makes a will. If it was his intention to permit naked legal title to remain in the trustees for the purpose of transferring title on his death, the trustees were to be mere agents of the trustor after December 1, 1964. In such case the trust would become passive and would result to the beneficiary.
In Bogert  The Law of Trusts and Trustees § 206 it is said:
In The American Law Institute, Restatement of the Law of Trusts, ch. 2, § 57, the rule is stated as follows:
K.S.A. 58-2413 provides:
This statute, although not controlling under the facts of the present case does indicate acceptance by this state of the common law rule as it applies to passive trusts. In case of a trust which becomes passive legal and equitable title passes to the beneficiary. The subject is relevant only to indicate the intention of the trustor.
*694 For these reasons it appears the trustor did not intend the right to be exercised in his will. A power to sell or convey property can be exercised only in the manner and subject to the express conditions specified in the instrument conferring the power. (See K.S.A. 58-2405.)
In Metropolitan Life Insurance Co. v. Hall, 191 Ga. 294, 12 S.E.2d 53, the court construed a trust deed which authorized trustees to convey the land to such persons as the beneficiaries severally might direct. That court stated: [p. 306]
The court then held the deed from the beneficiary did not convey title to the trust property. (See also Cameron v. Hicks, 141 N.C. 21, 53 S.E. 728.)
An even more compelling reason appears why this power of designation could not be exercised in the trustor's will. A power of designation is such a special and personal right it terminates generally on the donee's death. If not exercised during the lifetime of the holder it terminates unless the instrument creating the power of designation specifically provides for its exercise by the will of the holder. This rule was declared in Whisman v. McMullan's Executor, 312 Ky. 402, 227 S.W.2d 926, where that court said:
(See also C.J.S., Powers § 41; 21 R.C.L., Powers § 11, p. 783.)
Joe H. Sutcliffe reserved a right of designation which was not exercised before his death. The instrument creating the power of designation did not provide for its exercise by the will of the trustor. The trustor intended to exercise such right or power during his lifetime. The trustees held a power to convey limited by the power of designation retained by the trustor. On the death of Joe H. Sutcliffe the right of designation ceased and with its termination *695 the power to convey could not be exercised. The trust then resulted to Joe H. Sutcliffe, who was both trustor and beneficiary. Legal and equitable title to all of the property held in trust passed to the heirs, devisees and legatees of Joe H. Sutcliffe, deceased. The determination of those parties and interests is within the exclusive jurisdiction of the probate court of Neosho county, Kansas.
Under the provisions of K.S.A. 59-301 and the cases construing this statute the probate court holds exclusive jurisdiction of all matters incident and ancillary to the settlement and distribution of the decedent's estate. (Foss v. Wiles, 155 Kan. 262, 124 P.2d 438; Wright v. Rogers, 167 Kan. 297, 205 P.2d 1010; In re Estate of Weaver, 175 Kan. 284, 262 P.2d 818; Shields v. Fink, Executrix, 190 Kan. 17, 372 P.2d 252.)
A postnuptial agreement may cut off or enlarge the rights of those entitled to participate in an estate as heirs or devisees. The determination of such rights, however, remains a matter for probate jurisdiction. (In re Estate of Welch, 167 Kan. 97, 204 P.2d 714; McCormick v. Maddy, 186 Kan. 154, 348 P.2d 1007; In re Estate of Sterba, 193 Kan. 56, 392 P.2d 136.)
The trustees and their attorneys have rendered valuable services in protecting the property which is now determined to belong in the estate of Joe H. Sutcliffe. Claim for allowance of fees and expenses is a matter within the jurisdiction of the probate court. The non-claim statute is a statute of limitation (In re Estate of Wood, 198 Kan. 313, 424 P.2d 528) and may be tolled when a party is effectively precluded from pursuing a remedy until the outcome of pending proceedings. (See Price, Administrator, v. Holmes, 198 Kan. 100, 422 P.2d 976.)
The remaining errors specified need no further discussion.
Judgment is reversed.