Title: In Re Reynolds'will

State: north-dakota

Issuer: North Dakota Supreme Court

Document:

85 N.W.2d 553 (1957) Matter of the Trust Created by the WILL of Charles Grandlson REYNOLDS, Deceased. SECURITY-FIRST NATIONAL BANK OF LOS ANGELES, Trustee, Plaintiff and Appellant, v. NORTH DAKOTA CHILDREN'S HOME SOCIETY, Defendant and Respondent. No. 7694. Supreme Court of North Dakota. October 21, 1957. Rehearing Denied November 5, 1957. *555 Duffy & Haugland, Devils Lake, and Lawler, Felix & Hall, Los Angeles, Cal., for plaintiff and appellant. Conmy & Conmy, Fargo, for defendant and respondent. MORRIS, Judge. Charles Grandison Reynolds a resident of the state of California, died testate December 15, 1928. His estate included nine parcels of land in North Dakota and a number of notes secured by mortgages on North Dakota real estate. His will and two codicils were admitted to probate by the Superior Court of the state of California in and for the county of Los Angeles. The testator's son Frederic P. Reynolds survived him. After providing for certain bequests the testator left the residue of his estate, which included the North Dakota lands and mortgages, to a trustee for the benefit of Frederic during the latter's lifetime. The trust was to terminate on Frederic's death and the residue of the trust estate was then to be distributed two-thirds to Frederic's issue if any he had and one-third to the North Dakota Children's Home Society. If Frederic died without issue the entire residue of the estate was to go to the Society. Frederic P. Reynolds died without issue on September 8, 1952, at which time he was a resident of California. On January 4, 1931, Frederic P. Reynolds was appointed testamentary trustee in the place of the Security-First National Bank of Los Angeles. He served as trustee until his death under the jurisdiction of the Superior Court which retained continuing jurisdiction over the trust. Sec. 1120, West's Annotated California Probate Codes. Ancillary probate proceedings were had in the County Court of Towner County, North Dakota, which resulted in a Final Decree of Distribution dated August 20, 1936, which vested title to the nine parcels of North Dakota real estate in Frederic P. Reynolds as trustee under the last will and testament of Charles Grandison Reynolds, deceased. Pursuant to the terms of the will, the Superior Court of Los Angeles County entered a "Decree of Partial Distribution" on December 7, 1929, directing the executor of the will of Charles Grandison Reynolds, deceased, to transfer and convey the residuary estate to Security-First National Bank of Los Angeles in trust in accordance with the terms of the will. It provided that the trust should terminate upon the death of Frederic P. Reynolds at which time the trustee should transfer and deliver all of the trust property as follows: It will be noted that paragraph (c) of the above decree is contrary to the terms of the will which provided that in event Frederic P. Reynolds should die without issue the whole of the residuary estate should go to the North Dakota Children's Home Society. This departure from the terms of the will was the result of a California statute prohibiting bequests or devises to any charitable or benevolent society or corporation or to any person or persons in trust for charitable uses in excess of one-third of the estate where the testator left surviving issue. See Calif. Civil Codes, Sec. 1313, as amended, West's Ann.Cal.Prob.Code, § 41. While the California court had jurisdiction the record does not show any personal appearance or participation on the part of the North Dakota Children's Home Society in the proceedings which resulted in the Decree of Partial Distribution. After the death of Frederic P. Reynolds the Farmers and Merchants National Bank of Los Angeles was appointed trustee under the will of Charles Grandison Reynolds in the place and stead and as the successor to Frederic P. Reynolds. During the administration of the trust by Frederic P. Reynolds six of the nine parcels of North Dakota land owned by Charles Grandison Reynolds at the time of his death were sold and the proceeds amounting to $10,820.75 taken to California by the trustee and invested in securities. In 1954 the successor trustee rendered a detailed account and report in the Superior Court of California and asked the court to instruct it with respect to the distribution of the trust. On October 18, 1954, an order was entered settling the successor trustee's account and report and instructing the trustee as to the distribution of the estate which included the proceeds of North Dakota lands that had been sold and the North Dakota lands to which title remained in the trustee consisting of three parcels of land of which Charles Grandison Reynolds had died seized together with other land to which the trustee had acquired title through the foreclosure of mortgages after the death of the testator. At a hearing held upon the account and report of the successor trustee the North Dakota *557 Children's Home Society appeared by a firm of California attorneys and participated in the hearing. The order of the Superior Court directed the trustee to distribute the trust estate including the North Dakota lands one-third to the North Dakota Children's Home Society and two-thirds in accordance with the will of Frederic P. Reynolds, son of the original testator. After the order of the Superior Court of Los Angeles County had become final under the laws of the state of California, the successor trustee filed in the District Court of Towner County, North Dakota a petition for the administration of the trust to which was attached an itemized inventory giving the description, location and estimated value of North Dakota property embraced in the trust. The petition recited that the will of Charles Grandison Reynolds had been admitted to probate by the Superior Court of the state of California, County of Los Angeles, and a trust established thereunder and that on October 18, 1954, an order was made by that court instructing the trustee as to the distribution of the trust estate, a copy of which order was attached to the petition. Named in the petition were the beneficiaries alleged to be interested in the trust property including the North Dakota Children's Home Society and the persons named as devisees or legatees under the will of Frederic P. Reynolds. It then asked that the real estate situated in North Dakota be vested in accordance with the order of the Superior Court of Los Angeles County and prayed that the District Court of Towner County supervise the administration of the trust and confirm the distribution of the trust estate and make such other and further order as may be proper. In answering the petition the North Dakota Children's Home Society alleges that the order of the California court under which the trustee seeks to make distribution is not valid or binding upon the courts of North Dakota as to real estate located therein and alleges that the real estate was by decree of the County Court of Towner County, North Dakota dated August 20, 1936, conveyed to a predecessor trustee under the last will and testament of Charles Grandison Reynolds, and that the present trustee is required to convey all of the real estate to the North Dakota Children's Home Society as provided in the will and prays for an order directing the trustee to convey all of the inventoried real estate to it and to require the trustee to pay to it two-thirds of the amount collected on the sale of real estate belonging to the estate in North Dakota as a conditon for granting any relief. After a trial of the issues the District Court of Towner County reached the conclusion that all of the North Dakota land owned by the testator at the time of his death or the proceeds thereof should be distributed according to the terms of the will of Charles Grandison Reynolds free of the limitations of the California law with respect to bequests to charitable institutions or for charitable purposes. He decided that the California court was without jurisdiction and its decree was wholly void with respect to North Dakota land owned by the testator at the time of his death. He further held that North Dakota land acquired after the testator's death through mortgage foreclosures was governed by the California decree. The latter determination is not challenged on this appeal. Under the decision of the trial court the North Dakota Children's Home Society would be entitled to all of the proceeds of the six parcels of land owned by the testator at the time of his death and sold by Frederic P. Reynolds as trustee during his administration of the trust. The Society would also be entitled to the net proceeds of the sales of the three parcels owned by the testator at the time of his death and remaining unsold at the time of the termination of Frederic's trusteeship together with the net rentals received from these parcels and all mineral rights in these lands retained by the trust. *558 The interested parties desired to convert the North Dakota land into cash pending the final determination of this controversy and stipulated that the trustee might sell the land and deposit the net proceeds with the Clerk of the District Court until the rights of the parties should be determined. All of the land has now been sold. Some of the mineral rights are still retained by the trust. The appellant herein, Security-First National Bank of Los Angeles, trustee, is the present successor to the Farmers and Merchants National Bank of Los Angeles. The second and last codicil of the will of Charles Grandison Reynolds in part provides: It is the contention of the appellant trustee that the above provisions worked an equitable conversion of the North Dakota land from the date of the death of the testator and that the land and all proceeds thereof must be considered as personal property within the jurisdiction of the California court subject to California laws with respect to distribution and that the order of the Superior Court of California in Los Angeles County is therefore binding upon the courts of North Dakota with respect to the distribution of the res of the trust situated in North Dakota. Section 30-2132, NDRC 1943, provides: In Section 209.1, The Conflict of Laws, Joseph H. Beale, it is said: *559 Section 56-0522, NDRC 1943, provides: This statute was considered in Penfield v. Tower, 1 N.D. 216, 46 N.W. 413, wherein it was said: The doctrine of equitable conversion arose as a means of implementing the maxim that equity "regards that as done which ought to be done." In this case the will set up a trust for the benefit of Frederic P. Reynolds during his lifetime and upon his death the residue was to be distributed. How it was to be distributed was contingent upon whether he left issue. He died leaving no issue and under the terms of the will the residue was to go to the North Dakota Children's Home Society. The trustee of this trust was at no time under a direction to convert real property into personal property. It merely had a power of sale which under the authorities does not work an equitable conversion. But it is argued that the direction to the North Dakota Children's Home Society contained in the second codicil with respect to the establishment and maintenance of a ward for certain children brought about such a conversion because it would be necessary to sell the real property in order to carry out the instructions of the testator. To carry out those instructions it undoubtedly would be necessary to sell some of this property but not necessarily all of it. The instructions given in connection with this devise are not sufficiently definite and specific with respect to the disposition of the North Dakota land to require the court to invoke the doctrine of equitable conversion. We would further point out that the appellant trustee has assumed an inconsistent position with reference to the equitable conversion of a two-thirds interest in the North Dakota land. Even under its theory an equitable conversion of this interest in the land could only occur as the result of a valid bequest to the Society. The trustee denies the validity of that bequest as to two-thirds of the property. It cannot treat the bequest as valid for purposes of conversion and invalid for purposes of distribution. The conversion, if such it may be called, is contingent upon title vesting in the North Dakota Children's Home Society subject to an obligation to sell the land and use the proceeds in establishing and maintaining the children's ward. The happening of that contingency the trustee seeks to prevent by invoking the California statute limiting charitable bequests. Tiffany Real Property, 3d Ed., Sec. 297. Among the cases cited in support of this text is Penfield v. Tower, supra. Having determined that there has been no equitable conversion of the North Dakota real estate owned by Charles Grandison *560 Reynolds at the time of his death the validity and effect of his testamentary disposition of this property is governed by the laws of this state without regard to the residence of the decedent unless the devisee under the will as the beneficiary under the trust thereby created is estopped from asserting its claim to this property. Sec. 30-2132, NDRC 1943; Hohn v. Bidwell, 27 S.D. 249, 130 N.W. 837; In re Hills' Estate (Hills v. Hansen), 176 Cal. 232, 168 P. 20, 57 Am.Jur., Wills, Sec. 1039; 11 Am.Jur., Conflict of Laws, Sec. 178. See Conflict of Laws, Beale, Secs. 249.1, 249.2. The order of the Superior Court for Los Angeles County of October 18, 1954, settling the successor trustee's first and final account and report of administration, instructing the trustee as to distribution of the trust estate and allowing fees to the trustee and attorneys, was entered after a hearing had at which the North Dakota Children's Home Society appeared and in which it participated. No appeal was taken from the order and after it became final the trustee proceeded with the distribution of the residue of the trust in California pursuant to the order. On February 14, 1955, the North Dakota Children's Home Society receipted for $15,837.04 in cash being one-third of the cash on hand as of the date of the order instructing distribution together with one-third of various stocks and bonds ordered to be distributed as a part of the residue of the trust estate. This receipt states that the cash and other assets therein were: On May 4, 1955, the North Dakota Children's Home Society executed another receipt to the trustee for 1,000 shares of F. W. Woolworth Company stock that contained the same recitation concerning the order of distribution that was set out in the former receipt. These two receipts cover one-third of all the trust estate except the North Dakota lands. The appearance of the North Dakota Children's Home Society at the hearing before the California court and its participation therein unquestionably gave to that court jurisdiction over the Society in personam. The Society argues that although that be true the land being situated in North Dakota, jurisdiction over the land remains in North Dakota courts and jurisdiction over it cannot be conferred by consent or appearance in the California court. There is respectable authority supporting that contention. See Williams v. Sherman, 36 Idaho 494, 212 P. 971; Clarke v. Clarke, 178 U.S. 186, 20 S. Ct. 873, 44 L. Ed. 1028; Appeal of Clarke (same case), 70 Conn. 195, 39 A. 155. In Taylor v. Taylor, 192 Cal. 71, 218 P. 756, 758, 51 A.L.R. 1074, it is said: On the other hand in Freeman on Judgments, 5th Ed., Sec. 1384, it is said: In Sec. 1385 we find that: The question with which we are now confronted is whether the Society by participating in the proceedings which resulted in the California decree and in accepting the benefits of the distribution made by the California court under and in accordance with California law is estopped from asserting in the courts of this state that the California court had no jurisdiction over North Dakota land. A true appraisal of the Society's position in this case requires a consideration not only of the California statute restricting charitable and benevolent devises and bequests, but also the construction placed upon it by the California courts. In re Dwyer's Estate, 159 Cal. 680, 115 P. 242, 245, the court considered whether the restriction provided by the statute applied to such estate of the testator as was located within California regardless of property located elsewhere or to his entire estate wherever located. Noting the general rule that dispositions to charity are looked upon with favor the court determined that the legislative intention was not to declare the policy of the state relative to charitable dispositions by will but to protect the interests of the heirs at law of the testator and that the term "estate of the testator" as used in the statute: The California decision cites Paschal v. Acklin, 27 Tex. 173, which involved the application of a statutory restriction upon the power of parents to deprive their children by will of more than one-fourth of their estates and it was held that in applying that statute regard must be had to the whole of the estate of the testator *562 wherever situate and not merely to so much of it as might be in Texas. Subsequent to the decision In re Dwyer's Estate, supra, the Court of Appeals of New York had before it the question of the application of a statute prohibiting certain persons from leaving over half of their estate to charitable societies. A resident of New Jersey died seized of real estate in both New York and New Jersey. In determining the rule that should govern the application of the restrictive New York statute to the distribution of New York real estate the court said: Under the construction of the California statute indicated by these cases had the Society acquired title to or even claimed the North Dakota land prior to the Order Directing Distribution of the Entire Trust Estate the total distribution to the Society would have been limited to one-third of the entire estate by taking into account the property in North Dakota, but the Society apparently made no claim to all of the North Dakota land until it had received one-third of the property available for distribution in California. Thus the trustee was rendered powerless to carry out the mandate of the court under whose directions the trustee was acting or make distribution of the California property according to California law. Under Article IV, Sec. I of the Constitution of the United States full faith and credit must be given in each state to the public acts, records and judicial proceedings of every other state. In this case the California court had personal jurisdiction of the trustee and of the North Dakota Children's Home Society, but it did not have jurisdiction of the North Dakota land. The full faith and credit clause does not apply to the California judgment insofar as it directly affects the title to this land. Fall v. Eastin, 215 U.S. 1, 30 Sup.Ct. 3, 54 L. Ed. 65, 23 L.R.A., N.S., 924, 17 Ann.Cas. 853; Bullock v. Bullock, 52 N.J.Eq. 561, 30 A. 676, 27 L.R. A. 213, 46 Am.St.Rep. 528. The non-applicability of the full faith and credit clause is not determinative of the question of whether the Society is estopped from challenging any part of the California judgment by having accepted all of the benefits accruing to it under that judgment and by its acts rendering the trustee powerless to carry out the mandate of the court having jurisdiction and supervision of the trust. In First Bank of Strasburg v. Schmaltz, 61 N.D. 150, 237 N.W. 644, paragraph I of the Syllabus by the Court, it is said: It may be argued that this rule is applicable to judgments that are void for lack of jurisdiction in personam but does not apply where the judgment is void for a lack of jurisdiction of the subject matter. It is a general rule that parties cannot by consent or waiver give a court jurisdiction of subject matter of which it would otherwise not have jurisdiction. 14 Am.Jur., Courts, Sec. 184. The question here, however, is not, so far as the subject matter is concerned, one of consent or waiver of jurisdiction but rather one of estoppel by acceptance of the full benefits of a judgment that is void as to the subject matter. In Burgess v. Nail, 10 Cir., 103 F.2d 37, 44, the applicable rule is stated this way: In Bledsoe v. Seaman, 77 Kan. 679, 95 P. 576, 578, it is said: This statement is quoted in Freeman on Judgments, 5th Ed., Section 1438. The last two quotations involve the application of estoppel where the judgments were rendered in states other than the one in which the rule was applied. If the Children's Home were to receive all of the proceeds of the North Dakota lands it would be entitled only to so much of the California estate as would make up the difference between the proceeds of that land and one-third of the entire estate. Having accepted and retained one-third of the California estate, the Home is estopped from claiming more than one-third of the proceeds of the North Dakota land. While the appearance of the North Dakota Children's Home Society before the California court may not have conferred jurisdiction of the North Dakota land on that court the conduct of the Society, by participating in the hearing and accepting all of the avails and benefits accruing to it under the Order of Distribution to the detriment of the trust estate and in contravention of the duties of the trustee, estops it from challenging in the courts of this state a part of the same Order by virtue of which it received one-third of the property under the jurisdiction of the California court. It is therefore the duty of our district court to respect the order of that court and direct distribution of North Dakota property in accordance therewith. The trustee, in the District Court of Towner County, asked that it be allowed $800 compensation for ordinary services and $2,500 for extraordinary services. The court allowed only the request for $800 for ordinary services. The trustee asserts that it is entitled to pay for extraordinary services. Sec. 59-0421, NDRC 1943, provides that: Under this statute the allowance of compensation for services rendered by the trustee is primarily within the discretion of the district court. It does not appear that the court has abused its discretion in this instance and the allowance of compensation made by the trial court is therefore affirmed. The trustee challenges an allowance of attorneys' fees made by the court to the attorneys for the North Dakota Children's Home Society. Sec. 59-0421, NDRC 1943, provides for the allowance of reasonable attorneys' fees in connection with the administration of a trust. In this instance the fees allowed were not incurred on behalf of the trust but on behalf of a beneficiary who was seeking to control for its own benefit the action of the trustee in connection with the distribution of the trust estate. The beneficiary has been unsuccessful. Under such circumstances it is not entitled to attorneys' fees. The order appealed from is reversed with respect to the distribution of the trust estate in North Dakota and the allowance of attorneys' fees to the Society and the case is remanded to the district court of Towner County for further proceedings conformable to this opinion, including an allowance of additional attorneys' fees for services rendered to the trustee subsequent to the entry of that order. GRIMSON, C. J., and SATHRE, JOHNSON, and BURKE, JJ., concur.