Title: Schmidt v. Wachovia Bank

State: virginia

Issuer: Virginia Supreme Court

Document:

PRESENT: Hassell, C.J., Lacy, Keenan, Koontz, Kinser, and 
Lemons, JJ., and Stephenson, S.J. 
 
 
WILLIAM C. SCHMIDT, III, ET AL. 
 
v.  Record No. 050353 
OPINION BY JUSTICE ELIZABETH B. LACY
 
 
 
January 13, 2006 
WACHOVIA BANK, NATIONAL ASSOCIATION, 
 TRUSTEE, ETC., ET AL. 
 
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND 
Theodore J. Markow, Judge 
 
 
In this appeal, we decide whether any language in the 
wills of William C. Schmidt (Mr. Schmidt) and Wilhemine B. 
Schmidt (Mrs. Schmidt) (collectively "the Testators") 
indicated a clear intent to delay vesting of remainder 
interests in the trusts created by the wills. 
I. 
 
The parties stipulated to the facts.  Mrs. Schmidt died 
testate on July 24, 1951, survived by Mr. Schmidt, her 
husband, and by her two children, Louise A. Schmidt (Louise) 
and William C. Schmidt, Jr. (William, Jr.).  Mr. Schmidt died 
testate on July 1, 1957, survived by Louise and William, Jr. 
 
The Testators' wills each provided that the residue of 
their estates would be held in trust.  The wills directed the 
trustee to divide each of the Testators' residuary trust 
estates into two equal shares, one share for the benefit of 
Louise and the other share for the benefit of William, Jr. 
 
2
 
Mrs. Schmidt's will provided that Mr. Schmidt was 
entitled to receive any portion of the income from the two 
trusts she created until each of the children reached age 25 
years.  When each child reached age 25, any income not 
requested by Mr. Schmidt became part of the corpus of the 
trust established for the benefit of that child, and the child 
became entitled to the income from the trust for life.  Mrs. 
Schmidt's will further provided that Louise, when she attained 
age 25, was to receive $25,000 from the corpus of the trust 
established for her benefit.  Mrs. Schmidt's will also 
provided that William, Jr., upon attaining age 25, was to 
receive one-fourth of the corpus of the trust established for 
his benefit and that he was to receive one-third of the 
remainder of the corpus at age 35. 
 
Mr. Schmidt's will is virtually identical to Mrs. 
Schmidt's will, except that Mr. Schmidt's will provided for 
the distribution of trust income to begin when each child 
attained the age of 21 years.  Mr. Schmidt's will also did not 
provide for the payment to Louise of any of the corpus of the 
trust created for her benefit. 
 
Both wills provided that, upon the death of a child, the 
income from the trust created for that child's benefit was to 
be paid to the child's issue for a period of 21 years and 10 
months.  Both wills further provided that, if a child died 
 
3
without issue, the income from that child's trust would be 
paid to the surviving child for life. 
 
Both wills also contained the following provision:  "I 
expressly direct that neither the principal, nor any portion 
thereof, nor the income, nor any portion thereof, accruing to 
any beneficiary under these trust provisions, shall be 
assignable by such beneficiaries, nor subject to any liability 
of any such beneficiary."  In addition, both wills contained 
the following contingency clause: 
 
If any bequests or directions in this will be 
invalid under the laws of Virginia, or for any 
reason ineffectual, I direct that all of my property 
and estate whatever and wherever situated, which for 
any reason may not be sufficiently disposed of by 
this will, shall pass to and descend to my heirs at 
law, according to the statutes relating to descent 
and distribution in force at the date of my death. 
 
 
Louise died on January 8, 1992, without issue and 
survived by William, Jr. and her husband, James Findley 
Newcomb.  By her will, Louise devised her entire estate to her 
husband. 
 
Newcomb died testate on May 8, 1997.  He devised all of 
his estate, except his tangible personal property and $5,000, 
in equal shares, to his friends Farouk Chaabi and James O. 
Hobart, both of whom survived him. 
 
4
 
James O. Hobart died testate on April 20, 2003, survived 
by his wife, Lee J. Edmands.  He devised his entire estate to 
his wife. 
 
William, Jr. died on October 3, 2002, survived by his 
wife, Gladys S. Schmidt, and his two children, William C. 
Schmidt, III and Christina M. Schmidt (the Grandchildren).  
William, Jr. also was survived by two grandchildren and two 
great grandchildren. 
II. 
 
The Testators' wills did not contain provisions 
explicitly providing for the disposition of the trusts' 
remainders after the provisions for the payment of the income 
therefrom were satisfied.  Consequently, the trustee of the 
trusts, Wachovia Bank, National Association (Wachovia), filed 
a bill of complaint seeking the aid and direction of the 
court.  Specifically, Wachovia asked the court to determine 
the ownership interests in the remainders of the two trusts 
that were created for Louise's benefit.  The parties agreed 
that the resolution of this issue will also apply to the 
trusts created for William's benefit. 
The trial court concluded that the contingency clauses of 
the wills disposed of the ownership interests in the trust 
remainders and that the early vesting rule applied to the 
phrase "my heirs at law."  Accordingly, the trial court held 
 
5
that the remainder interests vested in Louise at the time of 
the Testators' deaths and therefore, Chaabi and Edmands each 
had a one-fourth interest in the remainders of Louise's 
trusts. 
 
We awarded the Grandchildren this appeal.  Chaabi and 
Edmands are the appellees of record.1 
III. 
 
The parties agree that the Testators' wills, although 
purporting to dispose of their entire estates, did not 
specifically dispose of the remainder interests in the trusts 
created by the wills.   The contingency clauses contained in 
each will describe how to identify the persons entitled to the 
remainder interests, but do not indicate when those persons 
are to be identified.2 
                     
1 On appeal, Wachovia argued in support of the trial 
court's ruling.  Wachovia, however, received the aid and 
guidance that it had sought in the trial court and, therefore, 
does not have standing to so act.  Moreover, a trustee cannot 
litigate the claims of one set of legatees against the others.  
Thus, we will dismiss Wachovia as an appellee.  See Shocket v. 
Silberman, 209 Va. 490, 492-93, 165 S.E.2d 414, 417 (1969). 
 
2 The Grandchildren originally assigned error to the trial 
court's application of the contingency clauses and argued on 
brief that the contingency clauses did not apply because the 
intent of the Testators as shown in the wills required 
disposition of the remainder interests to the Grandchildren, 
the direct blood lineage of the Testators. At oral argument, 
counsel agreed that the contingency clauses in the wills 
applied, while still maintaining that the Testators' intent 
was sufficiently shown in the wills to avoid the application 
of the early vesting rule. 
 
6
Under these circumstances the law is quite clear. 
 
In this jurisdiction early vesting of estates 
is favored, and devises and bequests are to be 
construed as vesting at the time of [the] 
testator's death, unless the intention to delay 
the vesting is clearly indicated by the 
language of the will.  If it appears from the 
instrument that [a] testator intended that 
vesting be postponed to a time or upon the 
happening of an event subsequent to his death, 
effect must be given to that intent.  Where the 
testator's intent may be determined from the 
language of the will, rules of construction are 
not to be employed. 
 
First National Exchange Bank of Roanoke v. Seaboard Citizens 
National Bank of Norfolk, 200 Va. 681, 687, 107 S.E.2d 408, 
413 (1959).  Applying these principles to this case, the 
remainder interests in the trusts' corpus vested in the 
Testators' heirs at law under the intestacy statutes at the 
time of the Testators' respective deaths, "unless the 
intention to delay the vesting is clearly indicated by the 
language of the will."  Id. 
The Grandchildren argue that the provisions in the wills 
prohibiting Louise from assigning the principal of the trusts 
created for her benefit and the spendthrift provisions  
indicate a clear intent to delay vesting of the remainder 
interests until the death of the Testators' last surviving 
child, William, Jr., thereby vesting such interests in the 
Grandchildren.  However, these provisions do not apply solely 
 
7
to Louise.  They apply to all trust beneficiaries.3  Therefore, 
applying the grandchildren's rationale would require the 
deferral to extend to a point at which the remainder interest 
would not vest in any trust beneficiaries, including the 
Grandchildren. 
 
Likewise, the fact that Louise received a fixed dollar 
amount of the trust's corpus in Mrs. Schmidt's will while 
William, Jr. received a fractional portion of the corpus is 
not an indication that the Testators intended to defer 
vesting.  Overall, there is no meaningful distinction between 
the Testators' treatment of the two children regarding 
disbursal of trust funds that supports a conclusion that the 
Testators intended to delay vesting because they did not want 
Louise to have any control of the trusts' corpus. 
 
The Grandchildren also rely on Boyd v. Fanelli, 199 Va. 
357, 99 S.E.2d 619 (1957), for the proposition that because a 
spendthrift trust is inconsistent with early vesting, it is 
sufficient evidence of an intent to delay vesting.  This is an 
overly broad reading of Boyd.   
                     
3 Article II, paragraph 8 of Mrs. Schmidt's will and 
Article III, paragraph 5 of Mr. Schmidt's will state:  "I 
expressly direct that neither the principal, nor any portion 
thereof, nor the income, nor any portion thereof, accruing to 
any beneficiary under these trust provisions, shall be 
assignable by such beneficiaries, nor subject to any liability 
of any such beneficiary." 
 
8
In Boyd, the testator divided the residue of her estate 
into five shares, each going to a specific beneficiary.  See 
id. at 358-59, 99 S.E.2d at 620-21.  For one of those 
beneficiaries, the testator established a spendthrift trust 
and provided that "at [the beneficiary's] death the principal 
of said fund shall pass to my next of kin, per capita."  Id. 
at 358, 99 S.E.2d at 621.  The question before the Court was 
whether determination of the testator's next of kin was made 
as of the testator's date of death or at the death of the 
beneficiary.  Id. at 359, 99 S.E.2d at 621.  The Court stated 
that applying the early vesting doctrine would be inconsistent 
with the spendthrift trust because it would allow the 
beneficiary, subject to the spendthrift provisions, to dispose 
of at least a portion of the remaining trust principal.  Id. 
at 361, 99 S.E.2d at 622-23.  But in concluding that the early 
vesting rule did not apply, the Court stated that the phrase 
directing that the principal of the fund pass to the 
testators' next of kin, per capita, "when considered along 
with other pertinent parts of the will, makes it quite clear 
that [the] testatrix intended to defer the vesting of what was 
left of the corpus of the trust fund until the life tenant's 
death."  Id. at 362, 99 S.E.2d at 623.  The Court's decision 
did not rest solely on the existence of a spendthrift trust. 
 
9
In the instant case, no phrase such as that in Boyd 
identifies an event or time at which the remainder interests 
in question were to vest.  The only similarity between the two 
cases is the existence of a spendthrift trust.  Neither Boyd 
nor any other case has held that the existence of a 
spendthrift trust alone is sufficient to show a clear intent 
to delay vesting. 
While the intent of the testator to defer vesting 
reflected in the will must be given effect, we have said that 
such intent must be clearly indicated by language contained in 
the will.  First Nat'l Exch. Bank, 200 Va. at 687, 107 S.E.2d 
at 413.  Accordingly, in the past we have imposed delayed 
vesting only when the will contained some actual language 
directing or supporting deferral.  See, e.g., Maiorano v. 
Virginia Trust Co., 216 Va. 505, 510-11, 219 S.E.2d 884, 887-
88 (1975) (trust principal to be divided, per stirpes, among 
the testator's issue then living "[a]t the expiration of the 
period of twenty-one years after the death of [William 
Sitterding]."); First Nat'l Exch. Bank, 200 Va. at 687-88, 107 
S.E.2d at 413-14 ("Should either of my said nieces die before 
the final settlement of my estate, leaving issues, then 
living, such issues shall be entitled to their mother's share" 
means interest vested in living issue at time of mother's 
death, not testator's death.); Cheatham v. Gower, 94 Va. 383, 
 
10
384, 26 S.E. 853, 853 (1897) ("I give to my nephew, T. M. 
Cheatham, during his life, my mansion house, . . . and at his 
death to his surviving children.").  No such language appears 
in the wills at issue in this case.  In the absence of such 
language, the doctrine of early vesting applies to these 
wills. 
For these reasons, we will affirm the judgment of the 
trial court. 
Affirmed. 
SENIOR JUSTICE STEPHENSON, dissenting. 
 
I respectfully dissent.  When the wills are read as a 
whole, I conclude that the Testators never intended to vest 
Louise with the corpora of the trusts established for her 
benefit. 
When construing a will, a court's object is to determine 
what the testator meant by the language used.  If the meaning 
of the words used is plain, a court must not resort to rules 
of construction.  In determining a testator's intent, the will 
as a whole should be considered, and, if possible, effect 
should be given to all provisions of the will in order to 
ascertain the testator's general plan and purpose.  Boyd v. 
Fanelli, 199 Va. 357, 360, 99 S.E.2d 619, 622 (1957).  Thus, 
while the law favors early vesting of estates, "if it appears 
from the language of the will that testator intended that the 
 
11
vesting of an estate be deferred to a time or event subsequent 
to his death, that intent must be given effect."  Id. at 360-
61, 99 S.E.2d at 622. 
 
In the present case, the Testators were very careful to 
avoid the result reached by the majority.  Each will 
prohibited Louise from assigning the principal of the trust 
created for her benefit.  Each will also contained a 
spendthrift provision that provided that the principal would 
not be subject to any liability Louise might incur.  Moreover, 
each will did not make periodic distributions of corpus to 
Louise as were made to William, Jr. 
 
Clearly, the Testators intended that Louise was to have 
no control over the corpora of the trusts established for her 
benefit.  Indeed, it defies logic and reason that the 
Testators would create spendthrift trusts and, at the same 
time, intend to vest Louise with the corpora thereof.  Such an 
inconsistency was recognized in Boyd when we said the 
following: 
 
In construing the will to determine whether it 
was the intent of the testatrix that the remainder 
vest upon her death or upon the death of the life 
tenant, it must be kept in mind that paragraph C 
sets up a spendthrift trust. 
 
. . . . 
 
 
This provision is inconsistent with the idea 
that the testator intended that the remainder vest 
upon her death . . . .  An anomalous situation would 
 
12
exist if the beneficiary under the spendthrift trust 
who now receives income for life . . . is . . . also 
the owner of a vested interest in one-third of the 
remainder of the corpus of the trust estate. 
 
Id. at 361, 99 S.E.2d at 622-23.∗ 
 
It is equally clear, given the Testators' "general plan 
and purpose," that their estates should stay in their family.  
This is accomplished by finding that the corpora of the trusts 
shall be divided between the Grandchildren determined as of 
the date of the death of William, Jr., the Testators' last 
surviving child. 
For the foregoing reasons, I would hold that the 
Testators did not intend that the remainder interests in the 
trusts created for Louise's benefit should vest at the time of 
their deaths, but that vesting should be deferred until the 
death of William, Jr.  I would further hold that the remainder 
interests are vested in the Grandchildren.  Accordingly, I 
would reverse the trial court's judgment, enter final judgment 
in favor of the Grandchildren in whom the remainder interests 
would be vested, and remand for a distribution of the corpora 
and interest consistent with the views expressed herein. 
                     
∗ The majority distinguishes Boyd and the other cases it 
cites on their facts.  The present case, however, is governed 
by its own facts because no two wills are alike.  As we have 
said, " 'little aid can be derived in the construction of 
wills from adjudged cases.' "  Aldridge v. Rodgers, 183 Va. 
866, 870, 33 S.E.2d 654, 656 (1945) (quoting Cole v. Cole, 79 
Va. (4 Hans.) 251, 255 (1884)).