# FILED
September 14, 1998 Cecil W. Crowson Appellate Cou rt Clerk 

### IN THE COURT OF APPEALS OF TENN ESSEE

AT NASHVILLE

SHERRY BROWN, as next friend ) and natural mother of her minor ) children, AMANDA DAN ETTE ) MCMULLIN and ADAM MCMULLIN, ) ) Plaintiff/Appellee, ) ) Appeal No. ) 01-A-01-9710-CH-00561 VS. ) ) Lawrence Chancery ) No. 6489-93 DORRIS MCMULLIN, LARRY ) MCMULLIN, HELEN MCMULLIN, ) and THE ESTATE OF EUGENE ) MCMULLIN, ) ) Defendants/Appellants. )
APPEALED FROM THE CHAN CERY COUR T OF LAWRENCE COU NTY AT LAWRENCEBURG, TENNESSEE THE HONORABLE JAMES L. WEATHERFORD, JU DGE

JANE M. JENNINGS 231 Mahr Avenue Post Office Box 794 Lawrenceburg, Tennessee 38464 Attorney for Plaintiff/Appellee J. DANIEL FREEMON Freemon, Hillhouse & Huddl eston 327 West Gaines Street P. O. Box 787 Lawrenceburg, Tennessee 38464 Attorney for Defendants/Appellants

AFFIRMED AND REMAN DED

BEN H. CANTRELL, JUDGE CONCUR: TODD, P.J., M.S. CAIN, J. 

## O P I N I O N- 2 - The dispositive question in this appeal is whether a successor tr ustee of a revocable savings account trust has the power after the d eath of the original trustee to revoke the trust and c laim the trust assets as hi s own. The Chancery court of Lawrence County order ed the trust assets paid into the Clerk and Master’s Office to be held for the origin al beneficiar ies. We affirm.

I.

The essential facts

have been stated in a

former opinion of this Court. We quote from that opinion:

The proceeds of a policy of insur ance on the lifeof Donnie McMullin were pai d to his mother, Edith McMu llin, t he na med beneficiary, who, joi ntly with her husband , Eugene McM ul lin, deposited these funds in a trust account, having first executed a Discretionary Revocable JointTrustee Agreement which designated them as joint trusteesof the funds of their grandchildren, Amanda and Adam McMullin (children of their son, Donnie McM u llin, the insured decedent) as beneficiaries. Edithand Eugene McMullin had two other sons, Larry and Dorris McMulli n. Sixyears later, Edith Mc Mullin died and Eugene McMullin continued to s erve as trustee. The trust funds remained intact and productive until O ctober 21, 1993, when they were paid o u t by the depository bank under unusual circumstances. The surviving

trustee, Eu gene McMul lin, became mortallyill. He was being transported to a hospital on Octo ber 21, 1993 [one week before h is death] by Larr y McMullin and Helen McMullin (wife of Do rris), whenthey stopped en route

at the depository bank. Eugene was too ill to leave the car. Larry and Helen entered the bank and prevailed upon the bankers to change the benefici aries of the trust from Adam and Amanda McMullin (both minors) to Larry and Dorris McMullin, the brothe rs of the minors’ deceased father. Not the least lacking in cooper ation, the bank issued two cashiers checks, each in the amount of $49,945.53 to Larry and Dorr is McMullin. It is not disputed that Eugene McMullin,the trustee, did not en ter the bank on October 21, 1993, and did not communicate with a banker. He signed no instruments of any kind. The reco rd offers little explanati on of the somewhat

remarkable banking practice evidenced from the foregoing recitation. Brown v. McMullin , No. 01A01-9603-CH-00113 (Nashville, August 16, 1996).- 3 - The o pin ion dealt with only one narrow issue: that Lar ry and Helen McMullin had no authority to rev oke the t rust. Th e court aff ir med the lower court’s judgment on that issue and remanded the cause for further proceedings.

The chancellor o r dered the defendants to pay the money they had withdrawn from the trust into the office of the Clerk and Mast er. In subsequent proceedings, the

chancery court decreed that the funds should be held by the Clerk and Master for the benefit of the orig inal beneficiaries and thatwithdrawals w ould be made only for income tax pay ments or emergency expenses.

II.

The document creating the trust was entitled, “Discretionary Revocable Trust Account” and it prov ided that (1) The trustees are authorize d to hold, mana ge , invest, and reinvest

said funds in their sole dis cretion; (2) The undersigne d gr antors reserve the ri ght to revoke said trust in part o r in full at any time, and any partial or complete withdraw al by the origin al trustees, if they be both of the grantors, shall be a revocation to the extentof such withdrawal, but no other revocation shall be valid unless written notice by both of such trust e es is given to the institution named o n the reverse side of the card; (3) In the ev ent o f the death, resignation, remov al or incompetence of both of said trustees, DORRIS McMULLIN is appointed successor trustee . . . and such successor

trustee shall have the powers of the origi nal trustees; (4) This trust, subject to the ri ghtof revocation, shall continue forthe life of the grantors and thereafter until the benefici a ry

is TWENTY-FIVE years of age and then the proceeds shall be deliv ered to the beneficiary; . .

. .
Sim ilar trus ts have been upheld against a charge that they are testamentary in nature and invalid bec ause they do not comply w ith th e Wills Act

. Leader Federal S & L Association v. Hamilton , 330 S.W .2d 33 ( Tenn. App. 1959);- 4 -

Peoples Bank v. Baxter

, 298 S.W.2d 73 2 (Tenn. App. 1956). And in Bumbaugh v. Burns , 635 S.W.2d 518 (Ten n. App. 1982) this court held that the corpus of a savings accounttrust, described as a “j oint discreti onary revocable tru st,” did not become a part of the settlor/trustee’s es tate at her death and, absent some provision in the trust itself,the trust could not be re vo ke d b y t he sett lo r/ tr uste es ’ wil l. We think these cases lead to the inescapable conclusion that the trust created by a sa v ings account instrument

is a continuingtrust and that upon the death of the settlor(s ) the beneficial interest in the remaining funds vests in the beneficiaries according to the trust’s terms. In this case, the beneficial interest s of Ad am and Amanda McMullin vest ed at the death of Eugene McMullin, the last surviving grantor.

This conclusion is supported by two separ ate statementsof the general law. The first is the Restatement of Trusts § 58 which provides: Tentat ive tru sts of savings deposit: “Where a person makes a deposit in a savings ac count in a bank in hi s own name as trustee for

another person, i ntendin g to reserve a power towithdraw the w hole or any part of

the deposit at any time dur ing his l ifetime , and to u se as his o wn whatever

he may withdraw, or otherwise t o revoke the trust, the intended trust is enforceable by the beneficiary upon the death of the depositor as t o a ny remaining on deposit on his death if he has not r evoked the trust.”

The second is a part of our banking law, Tenn. Code Ann. § 45-2-704. It provides in part:

(a)(1 ) W henever any deposit shal l be made in any bank byany person in trust for another, and no other or further notice of the existence and term s of a legal and valid trust shall have been given in w riting to the

bank, the bank is entitled to deem the following w ith respect to

su ch deposit, that: (A) The person designated as trustee is the owner of the deposit account; (B) The owner

retains the right during the owner’s lifetime to withdraw, assign or pledge the balance of such deposit account, in whole or in part, as though no survivor beneficiary had been nam ed, and to delete or change a survivor beneficiar

y; and (C) The interest of a person designa ted as beneficiary shall not vest until the death of the owner, or- 5 - in the case of joint owners, until the death of the last surviving owner, and such interest shall be subject to any lien, assign ment, pl edge, r ight of o ffs et orother claim which the bank could have asserted against the owner. (2) No change in the designation of the survivor benefici aryis valid unless executed on a form and in a manner prescribed by the bank. (3) The following terms shal l be deemed to apply to such account, unless the owner notifies the bank otherwise : (A) The interest of the beneficia ryin the account vests, only if the beneficiary survives the la st su rviving owner; (B) Multiple beneficiaries surviving the last surviving owner shall be entit led to equal shares of the account; and (C) I f no b eneficiary survives, the account shall remain in the estate of the last surviving owner;

It can be seen that this Act plugs the gaps that remain (and with which the courts have had to

struggle), when a deposit is made in a bank in trust for a third party and there are no other provisions that govern how the bank may deal w ith the funds. Admittedly, the t rust inst rument in this case is more co mplete (i t allows revocation in who le or in part and it dir ects the remaining funds to be hel d until the benefici aries re ach the age of twenty-fiv e) but a gap still remai ns as to when the interest vests . The Act f ills that void by providing that the int erest vests in the beneficiary only if he/she survives the last surviving owner.

The only claim by the successor trustee named in the trust instrument is based on t he fact that t he trust provides that he shall have all the pow ers of the
o riginal trustees. He construes that provision as passi ng on to him the power to revoke the trust -- for his own benefit if he so decides. We think this construction of the trust would defeat the obvious intent of the settlors to provide a benef it for their grandchildren whose father pro vided the fund s through insurance on his life. It is true that the settlors reserved the right to encroach on the corpus of the trust -- and to that extenteffect a partial revocation -- but the remaining funds v ested in the beneficiaries- 6 -

at the death of the survivi ng settlor. The successor trustee’s powers coul d not then be exercised in a way to defeat the trust purposes.

In addition, we think

the su ccessor trustee’s contention amounts to a claim that some beneficial interest in the trust corpus passed to him at his father’s death. In our view, that result could only be accomplished by a valid will.

The provision giv

ing the successor trus tee the same p owers as the original trusteesshould be read as a part of the whole instrument. One of the r easons forhaving a successor trustee was the incompetence of the settlors. In that ev ent, while the settlors still lived, the succe ssor trust ee would have had the pow er of encroachment/revocation for their benefit . Bu t we are still of the opinion that a t the death of the last surviving grandparent the beneficial interest in the remaining funds vested in the children. Only the enjoyment of

the ben efit was postponed until they reached the age of twenty- five.

III.

After remand, the trial judge overruled a motion made by the successor trustee and the other family members to assert a claim agains t the bank. The trial judge reasoned that

any claim the original defendants had against the bank could be asserted in a separate action and shoul d not delay a final resoluti on of the issues in this case.- 7 - We think that whether

to add the ba nk as a party to this action was a decision resting within the discretion of the trial judge. The bank was not a necessary party in this act ion, Rule 19, Tenn . R. Civ. Pro ., and th e permiss ive joinder of a party is subject to the trial judge’s authority to “make other orders to pre vent delay or prejudice.” Rule 20.02, Tenn. R. Civ. Pro.

IV.

The appella nts also argue that the parties should be placed in status quo; that the trust should be reinstated instead of placingthe funds in the custody of the Clerk and Master. We think, howev er, that th e power of the chancery c ourt to
remove a trustee when the trustee has threatened to violate h is trust, Tenn. Code Ann. § 35-1-106(a)(2)(B), o r for other good cause, id. (2)(F), is authority for the court’s decision not to return to the status q uo. In add ition, the tria l court’s action is in substance a continuation of the trust wi th the Clerk and Master serv ing as the trustee. The only duty imposed on the t rustee is the investment o f the funds and the payment of the corpus to the beneficiaries when they reach the ag e of twenty-five.

The judgment

of the court below

is affirmed and the cause is remanded to the Chan cery Court of Lawrence C ounty fo r any furt her proce edings ne cessary. Tax the costs on appeal to the appellants.

____________________________ BEN H. CANTRELL, JUDGE

CONCUR:- 8 -

_______________________________ HENRY F. TODD, PRESI DING JUDGE MIDDLE SECTION

_____________________________ WILLIAM B. CAIN, JUDGE