Case Title: COFFEE (FORMERLY WOLFE) v WOLFE

Citation: 

Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1977-07-26T00:00:00Z

Document:
No. 13163 I N THE SUPREME COURT O F THE STATE O F M O N T A N A 1977 MARILYN J O COFFEE, formerly MARILYN J O WOLFE, P l a i n t i f f and Respondent, DELOIT RAY WOLFE, Defendant and Appellant. Appeal from: D i s t r i c t Court of t h e Fourth J u d i c i a l D i s t r i c t , Honorable Edward Dussault, Judge p r e s i d i n g Counsel of Record: For Appellant: Worden, Thane, Haines and Williams, Missoula, Montana Ronald Bender argued, Missoula, Montana For Respondent : Ilulroney, Delaney, Dalby & Mudd, Missoula, Montana Dexter L. Delaney araued, Missoula, Montana F i l e d : Submitted: June 2 , 1977 ~ecidea\:l\. 2 6 I / ? C l e r k M r . J u s t i c e John Conway Harrison delivered the Opinion of the Court. This i s an appeal from an order disallowing a loan i n a termination of a t r u s t proceeding. O n August 24, 1961, p l a i n t i f f was granted a divorce from defendant. Two children of the marriage Melinda Sue, age 4, and Deloit Ray, age 3, were placed i n p l a i n t i f f ' s custody. A property settlement agreement provided defendant was t o pay $200 per month f o r the support and maintenance of the children, plus a $10,000 l i f e insurance policy on defendant's l i f e . De- fendant agreed t o pay a l l the premiums incident thereto and the beneficiary of the policy was t o be the F i r s t National Bank of Missoula, a s trustee. I n the event of defendant's death the proceeds were t o be paid t o the bank t o be used f o r the care, education and support of the children with the provision t h a t any amount remaining when the youngest child became 25 years of age would be payable t o the children i n equal shares. O n December 4 , 1964, following p l a i n t i f f ' s remarriage, the p a r t i e s entered into a new agreement modifying the terms of the 1961 agreement as t o support f o r the children. Under the new agreement defendant paid $50 per month f o r child support of the minor children and $150 per month was t o be paid i n t o a fund t o be used f o r the future use of the children's education. This money was deposited i n the Southside National Bank of Missoula and time savings c e r t i f i c a t e s were purchased. I n November 1974, defendant borrowed $2,743.63 a t 4% i n t e r e s t on the l i f e insurance policy so that he could purchase a $13,000 Federal Land Bank bond which would n e t approximately 3% i n t e r e s t to the t r u s t fund. To make t h i s purchase defendant also put i n h i s own funds, along with t h a t borrowed on the l i f e insurance policy. The bond was f o r the benefit of the children. O n June 6 , 1975, Melinda Sue became 18 years of age and p l a i n t i f f petitioned the court f o r an order t o have an accounting of the funds which had been accumulated and s e t aside f o r the children's education and t o pay over t o Melinda Sue "one-half of the proceeds of t h a t fund f o r her use and benefit i n connection with defraying her future education expenses." Defendant f i l e d h i s accounting and petitioned t h e court f o r an order authorizing payment of one-half of the proceeds of the t r u s t fund, together with accumulated i n t e r e s t and dividends, t o Melinda Sue i n four equal annual payments beginning i n 1975. The accounting revealed a t o t a l fund of $21,953.41. Defendant deducted from t h a t amount $2,743.63 the loan he made from the insurance policy and $3,963.55, the amount he contributed t o purchase the Federal Land Bank bond. That l e f t a n e t value i n the account of $15,246.23 a t the date of the hearing. The court entered an order approving the accounting i n a l l regards, except the deduction of the loan made t o defendant by the insurance company and further denied defendant's request f o r the d i s t r i b u t i o n t o Melinda Sue i n four annual payments. I n addition, the court ordered Melinda Sue was e n t i t l e d t o one-half of the cash surrender value of the l i f e insurance policy p r i o r t o the securing of the loan thereon and ordered defendant t o d i s t r i b u t e t o Melinda Sue the sum of $8,994.93. Defendant r a i s e s f o r t h i s Court's consideration four issues on appeal: I. Whether the triaL court >5xred i-n ordering payment or one-half the cash surrender value of the policy when such r e l i e f was not sought i n p l a i n t i f f ' s p e t i t i o n ? 2. Whether the t r i a l court had the power t o modify a prior p r o p e r t y settlement agreement? 3 . Whether there i s s u f f i c i e n t evidence t o support the t r i a l c o u r t ' s finding t h a t defendant must pay one-half of the cash surrender value of the l i f e insurance policy p r i o r t o securing the loan thereon? 4. Whether the loan on the insurance policy i s a proper charge against the t r u s t funds? Issue 1. This issue i s directed t o the c o u r t ' s ordering a d i s t r i b u t i o n of one-half the value of the insurance policy when such r e l i e f was not sought by the p e t i t i o n . Defendant argues the l i f e insurance policy was not a p a r t of Che m u s t fund but was a provision of the property s e t t l e - ment a t the time of the divorce i n 1961, and t h a t the insurance policy was t o cover the children's minority i n case he died. Further, t h a t the t r u s t fund came i n t o being l a t e r , i n 1964, when he petitioned the court t o lower the child support payments t o $50 per month and he be allowed t o put $150 per month i n t o a t r u s t fund f o r the children's education. The p e t i t i o n f i l e d by p l a i n t i f f on June 5, 1975, stated: "AND WHEREAS, M E L I N D A SUE W O L F E has presently applied for and been accepted a t an i n s t i t u t i o n of higher education and i s i n need of and e n t i t l e d t o t h a t share of t h a t fund, "NOW, THEREFORE, the P l a i n t i f f p e t i t i o n s the Court for i t s Order requiring the Defendant "I) t o make a f u l l accounting of the funds which have been accumulated and s e t aside f o r said purposes, and, "2) t o pay over t o the said M E L I N D A S U E W O L F E one-half of the proceeds of t h a t fund f o r her use and benefit i n connection with defraying her future edu- cational expenses." N o e f f o r t was made t o modify the o r i g i n a l property settlement with regard t o the l i f e insurance policy and defendant argues no evidence was shown the l i f e insurance policy was considered a p a r t of the t r u s t fund created i n 1964. P l a i n t i f f counters these arguments by noting they a r e not only misleading but avoid the issue. She alleges her p e t i t i o n sought a f u l l accounting of the funds which had been accumulated and s e t aside f o r Melinda Sue's educational expenses. Also, t h a t the language of the order concerning the insurance policy proceeds indicated it was f o r the purpose of helping t o defray the educa- t i o n a l expenses of the children. While defendant makes much of h i s argument t h a t no evidence was introduced concerning the l i f e insurance policy a t the hearing, t h i s is contested by p l a i n t i f f and defendant did not demand a record. P l a i n t i f f argues, and we agree, t h a t defendant is making an argument on the f a c t s , but he has f a i l e d t o provide a record of the hearing. Absent the record, and considering the case on the b a s i s of the court f i l e s , we find the court properly exercised i t s discretion i n determining the nature of the corpus of the t r u s t . S i t t i n g a s a court of equity, the d i s t r i c t court had f u l l j u r i s - diction t o look i n t o the contributions made by defendant f o r the benefit of h i s children and determine what each child was en- t i t l e d t o upon attaining majority. Thisted v. Country Club Tower Corp., 146 Mont. 87, 405 P.2d 432; Dutton v. Rocky Mtn. Phosphates, 151Mont. 54, 438 P.2d 674. Issue 2. Under the f a c t s i t u a t i o n before the Court i n t h i s case we find the d i s t r i c t court did not change the property settlement agreement a s argued by defendant. The court was s i t t i n g i n equity and had jurisdiction t o consider t h e f a c t s before it. Here defendant, when the children were young, took out a l i f e insurance policy t o insure t h e i r support and education during the period of t h e i r minority i n the event he should die. That period, a s t o Melinda Sue, is now over and one of the purposes f o r which t h e policy was taken out, her education, has arrived. The very needs defendant anticipated have occurred and the court properly included Melinda Sue's i n t e r e s t i n the policy a s p a r t of her educational fund. Issues 3 and 4. For the purposes of t h i s opinion we combine Issues 3 and 4 , because they r e l a t e t o the loan made t o defendant from the insurance policy t o purchase the Land Bank bond. Defendant argues there was insufficient evidence before the court t o support i t s finding t h a t he pay one-half of the cash surrender value p r i o r t o securing t h e loan. Without a record o r a memorandum opinion of the d i s t r i c t court on i t s reasons, we a r e a t a l o s s t o understand the c o u r t ' s rationale. What the court f i l e reveals i s t h a t defendant i n November 1974, was allowed by the court t o borrow from the policy t o be invested i n a b e t t e r i n t e r e s t paying bond so t h a t the children's educational fund would be enhanced. The cash surrender value of the policy as of June 28, 1975, the time of the accounting, including the outstanding loan, amounted t o $3,017.33. I f the loan were deducted from t h a t figure the cash surrender value of the policy would be $193.11. I n denying the amount of the loan charge against the t r u s t corpus the court added $2,824.22 t o the cash surrender value of the policy p r i o r to the loan and defendant was required t o use a s the cash surrender value of the policy the sum of $5,841.55. I n e f f e c t , the t r i a l court in denying the loan on the insurance policy a s a proper debt against the t r u s t property requires defendant t o repay the loan out of h i s own funds. I n doing so the court cormitted e r r o r f o r defendant had already paid once i n complying with the court order t o d i s t r i b u t e one- half of the cash surrender value p r i o r t o the securing of the loan. W e find the loan incurred by defendant a s t r u s t e e of the educational fund was a proper charge against the fund. The judgment of the t r i a l court i s affirmed i n p a r t and remanded t o the court f o r compliance with t h i s opinion a s t o the remaining part. Justices.