Case Name: Glynn W. REYNOLDS v. Margaret Susan Romero REYNOLDS
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1979-11-01
Citations: 388 So. 2d 1135
Docket Number: No. 63936
Parties: Glynn W. REYNOLDS v. Margaret Susan Romero REYNOLDS.
Judges: MARCUS, J., dissents, being of the opinion that the judgment of the court of appeal is correct.
Reporter: Southern Reporter, Second Series
Volume: 388
Pages: 1135–1151

Head Matter:
Glynn W. REYNOLDS v. Margaret Susan Romero REYNOLDS.
No. 63936.
Supreme Court of Louisiana.
Nov. 1, 1979.
On Rehearing Sept. 3, 1980.
Dissenting Opinion Oct. 6, 1980.
J. Minos Simon, J. Minos Simon, Ltd.; Lafayette, for defendant-applicant.
Charles S. Weems, III, Gold, Little, Simon, Weems & Bruser, Alexandria, for plaintiff-respondent.

Opinion:
SUMMERS, Chief Justice.
Minnie Smith, widow of W. H. Sledge, executed her last will and testament on January 8, 1957. Her will created a spendthrift trust in which she bequeathed her farm consisting of 640 acres in Vermilion Parish, together with its improvements, to C. H. Brookshire as trustee. The will stipulated the trustee was to hold the property in trust for her grandchildren who survived her and until her youngest grandchild attained the age of twenty-one. The trustee was directed to hold, process, manage and control the trust estate with full power to alienate and encumber the trust estate.
At her death in 1959, Minnie Smith's will was probated and by a judgment in her succession on January 9, 1962 Brookshire was recognized as trustee under her will and, as legatee and trustee, recognized as "owner" and placed in possession of decedent's interest in the farm in Vermilion Parish. The judgement further decreed that the property be vested in the trustee and to continue until such time as the youngest of decedent's grandchildren shall attain the age of twenty-one years. The trustee was then to deliver the entire estate to the beneficiaries in equal proportions and in full ownership.
Thereafter, while the property was still held in trust, one of the grandchildren Margaret Susan Romero married Glynn W. Reynolds on July 9,1966. During the existence of the marriage the wife received as distributed trust income the sum of $11,-913.85. These funds were deposited in a checking account in the Kaplan State Bank under her exclusive control. At trial the parties stipulated that from this account the wife expended the sum of $9,660.26 on items of clothing for herself and the children and for household expenses. On February 6, 1970 Margaret and Glynn were judicially separated. Upon dissolution of the community a balance of $555.18 remained of this distributed trust income. And on February 6, 1970 when the community was dissolved there existed the sum of $11,434.80 in the account of the trustee, representing undistributed earnings of the trust estate in which Margaret owned an interest.
The wife did not execute and record an affidavit of paraphernality pursuant to Article 2386 of the Civil Code which provides:
"The fruits of the paraphernal property of the wife, wherever the property be located and however administered, whether natural, civil, including interest, dividends and rents, or from the result of labor, fall into the conjugal partnership, if there exists a community of acquets and gains; unless the wife, by written instrument, shall declare that she reserves all of such fruits for her own separate use and benefit and her intention to administer such property separately and alone. The said instrument shall be executed before a Notary Public and two witnesses and duly recorded in the Conveyance Records of the Parish where the community is domiciled.
"If there is no community of gains, each party enjoys, as he chooses, that which comes to his hand; but the fruits and revenues which are existing at the dissolution of the marriage, belong to the owner of the things which produce them.
On July 5, 1971 the trust was terminated and the share of the trust property to which she was entitled was transferred by the trustee to Margaret Susan Romero. On August 21, 1972 the parties were divorced.
An agreement was entered into bétween the husband and wife on December 6, 1977 in which they settled the bulk of the community property. The only property, the status of which remained in dispute, was the $555.18 distributed to the wife by the trustee and the $11,434.80 in the account of the trustee representing undistributed earnings of the trust estate.
The wife contends that the distributed trust income and her proportionate share of the undistributed trust income constitutes her separate property. She asserts also that she is entitled to restitution of the $9,660.26 expended from those separate funds for the benefit of the community. It is the husband's position that the distributed and undistributed income constitute "fruits" of the paraphernal property of his former wife, which, because she did not execute and record the affidavit of para-phernality required by Article 2386 of the Civil Code, formed part of the community of acquets and gains which existed between them. Therefore, the husband contends that the wife's demand for restitution of the $9,660.26 should be rejected. He should be awarded, he asserts, judgment against his former wife for half of the distributed trust income on deposit at the time of the dissolution of the community, the sum of $277.59; and half of his former wife's proportionate share of the undistributed income amounting to $1,429.25 which he contended is also part of the community which existed between them.
The trial court decided that both the distributed and undistributed trust income belonged to the separate estate of the wife. The decision was based upon the theory that the fruits of the trust estate did not belong to the wife's separate estate because she was not the owner of the property which produced them. Instead, the court held, during the existence of the trust the corpus of the trust belonged to the trustee. The decision was based upon Section 1781 of Title 9 of the Revised Statutes to the effect that "[a] trustee is a person to whom title to the trust property is transferred to be administered by him as a fiduciary." (emphasis added).
Although concluding that the distributed income was the separate property of the wife, the trial judge denied her claim for restitution. He was of the opinion that that expenditure was free and voluntary and that money was apparently spent for gifts and contributions without any expectation of anything in return. There was no proof, he held, that those expenditures enhanced the community.
On appeal to the Third Circuit the wife complained that she was improperly denied restitution of the funds she alleged she expended for the community. The husband answered contending that the trial court erroneously denied his claim that the funds at issue were community property.
The Third Circuit reasoned that "on the date of their marriage the wife, as a beneficiary under the trust, was vested with an interest in the corpus of the trust, which interest formed part of her separate estate. Therefore, not having executed and recorded the declaration of paraphernality required by Article 2386, the fruits of her separate estate fell into the community of acquets and gains. These fruits were the distributed income.
The Court of Appeal also decided that the undistributed income as well was "fruits" of her separate property and for the same reason fell into the community.
In arriving at this result the Court of Appeal rejected the trial court's holding that the trustee was the owner of the trust corpus during the existence of the community between the parties and therefore the fruits of the property held in trust did not fall into the community. The appellate court was of the opinion that the wife as beneficiary of the trust was the owner of the corpus of the trust, compelling the conclusion that the fruits of that separate property inherited from her grandmother fell info the community because of the wife's failure to execute the affidavit of paraphernality.
It was primarily to settle these issues and reconcile the decision of United States v. Burglass, 172 F.2d 960 (5th Cir. 1949) with the decision in Dunham v. Dunham, 174 So.2d 898 (La.App.1965) that we granted this writ on the wife's application. 365 So.2d 530 (La.App.).
"A trustee is a person to whom title to the trust property is transferred to be administered by him as fiduciary." (emphasis added). La.Rev.Stat. 9:1781.
That the title transferred to the trustee in the case at bar was intended to vest ownership in the trustee is made manifest by the meaning of the word "title". Perhaps the most common use of the word in the law is in the sense of ownership of property. 86 C.J.S., Title p. 907. It is therefore contrary to well accepted principles of statutory construction to disregard the clear meaning and letter of the statute under the pretext of pursuing its spirit. La.Civil Code art. 13. Words of a law are generally to be understood in their most usual signification. La.Civil Code art. 14. When ownership is vested in the trustee with full powers as such it cannot be said that the beneficiary of the trust then has rights in the property which entitle her to its fruits unless, as in this case, the trustee willed it so. "The ownership of a thing is vested in him who has the immediate dominion over it, and not in him who has a mere beneficiary right in it." La.Civil Code art. 489.
Act 180 of 1979 to become effective January 1, 1980, enacts Article 477 of the Civil Code to explicitly embody in its provisions principles which have heretofore been part of our Civil Code by implication. See Articles 488 and 491. The new article provides:
"Ownership is the right that confers on a person direct, immediate and exclusive authority over a thing. The owner of a thing may use, enjoy, and dispose of it within the limits and under the conditions established by law." See also 3 Planiol et Ripert, Traite pratique de droit civil francais 220 (2d ed. Picard, 1972).
No statute in Louisiana confers upon a trust beneficiary the ownership of the corpus of the trust; the interest of the beneficiary referred to in Sections 1971 and 1972 of Title 9 of the Revised Statutes is an interest in the trust, not in the corpus. Likewise, no Louisiana case (Succession of Stewart, 301 So.2d 872 [La.1974] and St. Charles Land Trust v. St. Amant, 217 So.2d 385 [La.1969], in particular) confers upon the beneficiary a right of ownership in the corpus of the trust.
There are other factors which persuade us to conclude that the trustee acquired and exercised ownership of the corpus of the trust during the tenure of the trust. The very language of the trust instrument is explicit in this respect. When the testator gave the property to the trustee "to have and to hold" she transferred ownership to the trustee
"[t]o hold, possess, manage, [and] control the said trust estate and every part thereof, with full power to lease for a period which may extend beyond the terms of the trust, and to sell, transfer, convey, and dispose of the said property, upon such terms and in such manner and for such prices as the trustee shall deem reasonable and proper."
While this ownership remained in the trustee the fruits of the property could not fall into the community between the beneficiary wife and her husband. Dunham v. Dunham, 174 So.2d 898 (La.App.1965).
The beneficiary of this trust had no right to administer the trust property; the full authority in that respect was vested in the trustee. As beneficiary she could not sell, mortgage, lease or otherwise alienate or encumber the trust property. She was without even the slightest indicia of ownership so long as the trust endured. She could not demand any action on the part of the trustee, not even the trust income or the monies which the trustee chose to deposit in her bank account. The discretion granted the trustee in this regard was "absolute and not subject to be questioned by any of the beneficiaries of the trust."
Thus the funds transferred to the wife as beneficiary of the trust prior to the dissolution of her marriage were not the fruits of her property. The funds were, instead, "property" which she received from the income of the trust corpus owned by the trustee. If however, these funds, once transferred to the wife's account, had produced revenues in the form of interest or otherwise, that interest would have become "fruit" of her separate property and as such would fall into the community existing between the parties. But there is no evidence that these funds produced interest or other income subject to classification as community property. Therefore the failure of the wife to execute the affidavit of parapher-nality had no effect on this property for it had produced no fruits. To the contrary she utilized these funds to purchase gifts for her family and for herself.
For the reasons assigned by the trial judge we are also of the opinion that the wife is not entitled to be reimbursed for the funds she claims she spent for the benefit of the community from the distributed trust revenues.
This same result, although somewhat differently postured factually, pertains to the undistributed trust revenues. Only the trustee had the right to order these revenues paid to the grandchildren beneficiaries and then for the purpose of their maintenance and education in his discretion during the existence of the trust. So long as the trustee retained them, they remained the property of the trust. Dunham v. Dunham, supra.
The settlor of the trust plainly did not intend that the beneficiaries of the trust acquire administration or control of the corpus or undistributed revenues of the trust until the trust was terminated. At that time the corpus of the trust and its remaining revenues were to be delivered to her grandchildren, the beneficiaries. Until that time the beneficiaries could not invoke Article 2386 with respect to property and its revenues owned by the trustee.
These reasons result in this Court's approval of Dunham v. Dunham, supra, and our decision not to consider United States v. Burglass, 172 F.2d 960 (5th Cir. 1939) authoritative in Louisiana State courts.
The other issues resolved by the trial judge are approved.
For the reasons assigned, the judgment of the Court of Appeal is reversed and set aside, and the judgment of the trial court is reinstated and made the judgment of the court.
MARCUS, J., dissents, being of the opinion that the judgment of the court of appeal is correct.
DENNIS, J., dissents and assigns reasons.
BLANCHE, J., dissents, being of the opinion that the judgment of the court of appeal is correct.