Title: JEWISH COMMUNITY ASS'N OF CASPER v. COMMUNITY FIRST NAT'L BANK

State: wyoming

Issuer: Wyoming Supreme Court

Document:

JEWISH COMMUNITY ASS'N OF CASPER v. COMMUNITY FIRST NAT'L BANK2000 WY 1326 P.3d 1264Case Number: 99-42Decided: 06/07/2000Supreme Court of Wyoming
 
JEWISH COMMUNITY ASSOCIATION OF CASPER,

a Wyoming non-profit 
corporation, Appellant (Plaintiff), 

v.

COMMUNITY FIRST NATIONAL 
BANK, Appellee (Defendant). 

Appeal from the District 
Court of Natrona County, The Honorable Dan Spangler, Judge. 

Representing 
Appellant: Keith P. Tyler and Peter 
C. Nicolaysen, Casper, WY. Argument by Mr. Nicolaysen.Representing 
Appellee: No appearance.

Before 
LEHMAN, C.J., and THOMAS, MACY, GOLDEN, and HILL, JJ.

LEHMAN, Chief 
Justice.

[¶1] The Jewish 
Community Association of Casper appeals the summary judgment decision of the 
district court that the Association's outgoing Board of Directors had the power 
to place Association assets into an irrevocable trust outside the control of any 
future Board of Directors. We conclude the conveyance of assets without approval 
of the Association's membership rendered the trust void ab initio. We therefore 
reverse.

ISSUES

1. Whether the 
District Court erred in construing the Irrevocable Trust as an 
investment.

2. Whether the 
District Court erred in determining that the conveyance of property to the 
Irrevocable Trust was consistent with the language of the corporation's 
Bylaws.

3. Whether 
Wyoming law prohibits the transfer of property by a corporation to an 
irrevocable trust where the transfer was not in the corporation's usual course 
of business and done without shareholder approval.

4. Whether the 
District Court erred in determining that the Irrevocable Trust was properly 
funded.

FACTS

[¶2] The parties 
stipulated to the essential facts in the district court. In 1983, a Casper 
philanthropist made a $100,000 gift to the Jewish Community Association of 
Casper. In 1994, the Association and Norwest Bank Wyoming, N.A.1 entered into a Management Agency 
Agreement, and the Bank began management of the $100,000 amount. Income 
generated from the invested funds was periodically withdrawn by the Association 
and used according to its bylaws, which provide that the principal of the fund 
"shall be utilized solely for the purpose of generating income to subsidize the 
Temple Beth El operating budget and perpetual care 
accounts."

[¶3] On May 12, 
1997, the Association's then Board of Directors and the Bank entered into a 
Trust Agreement placing the $100,000 fund into an irrevocable trust. The Board 
approved the terms of the Trust Agreement. Unbeknownst to the Bank, the 
Association's general membership never voted to approve or ratify the Trust 
Agreement.

[¶4] The Trust 
purports to transfer the funds to the Trustee and gives the Trustee the option 
to pay the trust income to the Association or to accumulate the income for the 
benefit of the remainderman. The Trustee has sole discretion to establish what 
is net income. If the Association dissolves or ceases to be a charitable 
organization, the Trustee is to distribute the principal to the Wyoming 
Community Foundation. The Trust is irrevocable.

[¶5] Six days 
later, on May 18, 1997, the Association elected an entirely new Board of 
Directors. The new Board demanded that the Bank return the funds in the Trust to 
the Association's agency account. After failed settlement negotiations, the Bank 
requested that the Association seek court clarification of the legality of the 
trust and the status of the funds.

[¶6] On June 1, 
1998, the Association filed a declaratory judgment action against the Bank. In 
December 1998, the district court issued summary judgment in favor of the Bank, 
finding that the Trust was valid and legal. This appeal timely 
followed.

STANDARD OF 
REVIEW

[¶7] Summary 
judgment is appropriate when no genuine issue as to any material fact exists and 
the prevailing party is entitled to have a judgment as a matter of law. Kahrs v. 
Board of Trustees for Platte County Sch. Dist. No. 1, 901 P.2d 404, 406 (Wyo. 
1995); see also W.R.C.P. 56(c). A genuine issue of material fact exists when a 
disputed fact, if it were proven, would have the effect of establishing or 
refuting an essential element of the cause of action or defense which has been 
asserted by the parties. Adkins v. Lawson, 892 P.2d 128, 130 (Wyo. 1995). We 
examine the record from the vantage point most favorable to the party who 
opposed the motion, and we give that party the benefit of all favorable 
inferences which may fairly be drawn from the record. Jack v. Enterprise 
Rent-A-Car Co. of Los Angeles, 899 P.2d 891, 893 (Wyo. 1995). We evaluate the 
propriety of a summary judgment by employing the same standards and by using the 
same materials as were employed and used by the lower court. Adkins, 892 P.2d  at 
130. We accord no deference to the district court's decisions on issues of law. 
Kahrs, 901 P.2d  at 406.

[¶8] The party 
moving for summary judgment bears the initial burden of establishing a prima 
facie case for a summary judgment. If the movant carries this burden, the party 
opposing the summary judgment must come forward with specific facts to 
demonstrate that a genuine issue of material fact does exist. Thunder Hawk By 
and Through Jensen v. Union Pacific Railroad Co., 844 P.2d 1045, 1047 (Wyo. 
1992). General allegations and conclusory statements are not sufficient. Board 
of County Comm'rs of County of Laramie v. Laramie County Sch. Dist. Number One, 
884 P.2d 946, 956 (Wyo. 1994). Our review is de novo upon the same record 
materials that were presented to the trial court. We afford no special deference 
to the ruling of the trial court on issues of law. Ahrenholtz v. Time Ins. Co., 
968 P.2d 946, 949 (Wyo. 1998)

DISCUSSION

[¶9] The 
Association contends that the district court committed an error of law by 
characterizing the irrevocable trust as an investment rather than a conveyance. 
We agree.

[¶10] This court 
has determined that "a trust is a fiduciary relationship in which one person is 
the holder of the title to property subject to an equitable obligation to keep 
or use the property for the benefit of another." Scotti's Drive In Restaurants, 
Inc. v. Mile High-Dart In Corp., 526 P.2d 1193, 1196 (Wyo. 1974). "The elements 
of a valid trust include a competent settlor and trustee, intent by the settlor 
to create a trust, ascertainable trust res, sufficiently ascertainable 
beneficiary or beneficiaries, a legal purpose, and a legal term." Hilbert v. 
Benson, 917 P.2d 1152, 1157 (Wyo. 1996) (citing McGinnis v. McGinnis, 391 P.2d 927, 933 (Wyo. 1964); Dallas Dome Wyoming Oil Fields Co. v. Brooder, 55 Wyo. 
109, 127-28, 97 P.2d 311, 318 (1939); State v. Underwood, 54 Wyo. 1, 25, 86 P.2d 707, 714 (1939)).

[¶11] By 
definition, the creation of a trust must involve a conveyance of property. See 
Restatement, Second, Trusts § 31 (1959) (if inter vivos conveyance is not 
effective to transfer the property, no trust is created). For a settlor to have 
the power to create a trust, he must own a transferable property interest or 
have a power of disposition over such property interest, or he must have the 
means of contracting with an owner or holder of such a power. George T. Bogert, 
Trusts § 9 (6th ed. 1987). Property which the settlor cannot transfer cannot be 
held in trust. Restatement, Second, Trusts § 79. In the context of an 
irrevocable inter vivos trust, this court has determined that a "person lacking 
capacity to make an ordinary transfer of property has no capacity to create an 
inter vivos trust." Hilbert v. Benson, 917 P.2d  at 1156 (citing Walton v. Bank 
of California, Nat'l Ass'n, 32 Cal. Rptr. 856, 865 (1963) (citing Restatement, 
Second, Trusts §§ 19, 333 see comment f, p. 151) (1959)); Harrison v. City Nat'l 
Bank of Clinton, Iowa, 210 F. Supp. 362, 371 (S.D.Iowa 1962). In Hilbert, this 
court was dealing with the concept of mental capacity, but the same logic 
applies to any form of legal capacity.

[¶12] In this 
case, it is apparent that in alienating the fund, the Board acted without 
appropriate authority. The bylaws mandate that the fund be used solely for 
operational expenses, yet the trust contains no similar restriction. And the 
Wyoming Nonprofit Corporation Act does not allow a corporation to convey 
substantially all of its property without a vote of approval by the members. 
Wyo. Stat. Ann. § 17-19-1202 (Lexis 1999). Since the Board had no authority to 
transfer or convey the property without membership approval, it follows that the 
Board had no authority to create this trust. The Board controlled no 
transferable property interest and so had no power to alienate this property. 
Therefore, the Board exceeded its authority and acted ultra 
vires.

[¶13] The Bank 
argues that the irrevocable trust was a permissible investment rather than an 
impermissible conveyance. The permanent and irrevocable nature of this trust 
refutes this argument. To constitute an investment, title and control must 
remain with the investor, even if the character of the property is changed. 
Duffield v. Rader, 6 N.E.2d 228, 231 (Ill.App. 1937). An irrevocable trust is a 
trust "that cannot be terminated by the settlor once it is created." Black's Law 
Dictionary at 1516 (7th ed. 1999). It is a living trust, an inter vivos trust 
"that is created and takes effect during the settlor's lifetime." Id. In the 
case at bar, legal title went to the Bank, the trustee. While it is true that 
equitable title remained with the settlor, this begs the question of control. 
Clearly, the irrevocable nature of the trust gave permanent control to the Bank. 
This delegation of control ultimately divides an investment from a 
conveyance.

[¶14] We hold 
that where a settlor has no legal authority to convey legal title to property, 
putting said property into an irrevocable trust is ultra vires and the 
ostensible trust created thereby is consequently void ab 
initio.

CONCLUSION

[¶15] Since 
there are no genuine issues of material fact, our resolution of the central 
legal issue resolves the entire cause of action. The judgment of the district 
court is reversed, and the case is remanded for entry of summary judgment in 
favor of the appellant.

Footnotes

1 Pursuant to 
W.R.A.P. 17.02 and this court's Order Allowing Substitution of Party dated 
September 24, 1999, Community First National Bank has replaced Norwest Bank 
Wyoming, N.A. as appellee and will be termed "the Bank" throughout this 
opinion.