Opinion ID: 1914700
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Heading: Mrs Pittman's Appeal

Text: A summary of the facts pertinent to this appeal is: Linda Pittman Johnson, and the decedent, James Bradford Pittman, were married in 1963. Two children were born of that marriage: Jennifer Bradford Pittman and Catherine Aubrey Pittman. In September 1969, a decree was entered dissolving the marriage between decedent and Mrs. Johnson. That decree incorporated an agreement of the parties which provided: 3. Respondent [James Pittman] shall make each minor child of the parties an irrevocable beneficiary of a $25,000.00 life insurance policy on the life of the respondent and respondent shall pay and become liable for such premiums thereof. After that judgment was entered, James Pittman caused an existing policy insuring his life for the sum of $50,000 to be converted into separate policies for the sum of $25,000 each, issued and naming as the irrevocable beneficiary of each, his sister, Maryon Pittman Allen, as trustee of the two trusts previously mentioned, for the benefit of Jennifer and Catherine Pittman. Later, the divorce decree was modified but left paragraph 3 of the original decree, supra, unchanged. Pittman died with the two $25,000 insurance policies in full force and effect. The proceeds of those policies were paid to the trustee subject to disposition according to the terms of those trusts. We note, as indicated above, the ore tenus rule does not apply to this case. This being true, we review the evidence de novo. Stiles v. Brown, 380 So.2d 792 (Ala.1980). The dispositive issue in Mrs. Pittman's appeal is whether the indentures of trust established by James Pittman for the benefit of his daughters complied with, or substantially so, the insurance requirements of the original decree of divorce. We opine that the trust indentures did substantially comply with the terms of the decree regarding the required insurance policies. We find appropriate to this question the maxim that equity looks through form to substance, and [an] equity court is interested in substantive justice rather than mere technicalities of procedure, United States Finance Co. v. Jones, 288 Ala. 238, 259 So.2d 264 (1972). The decedent, Pittman, on 13 January 1970, established two indentures of trust with his two daughters as beneficiaries, and his sister, Maryon Pittman Allen, as trustee. On 14 January 1970, the next day, Pittman converted the $50,000 insurance policy into two $25,000 policies and designated his sister, Mrs. Allen, as trustee, the beneficiary of each policy, the proceeds of each to be disposed of according to terms of trust instruments executed the day before. The deposition of Frederick E. Miller, as insurance agent, admitted as evidence under stipulation, shows that Pittman's reason for converting the life insurance policy, to make two of one, was to effectuate compliance with the divorce decree. That evidence creates a strong presumption that Pittman established the trusts and divided the insurance policy for the express purpose of complying with the agreement incorporated in the decree. There is no evidence in the record to the contrary anywise rebutting that presumption. Such an interpretation of, and conclusion from, that evidence is both logical as well as reasonable. Mrs. Johnson contends the trustee holding proceeds of the policies and title thereto, in trust for the benefit of the minor children, defeats the purpose of the insurance provision of the divorce decree by delaying time for payment of such proceeds to the children. The patent purpose for requiring Pittman to make each of his daughters irrevocable beneficiaries of life insurance policies was to ensure that in the event he suffered an untimely death, as he in fact did, the children would, in any event, be protected to the fullest extent possible with the proceeds of the insurance policies. Strict compliance with a literal reading of the insurance provision in the decree is not necessary if there is substantial compliance that effectuates the underlying purpose of that provision and the intent evidenced by it. Substantial compliance may be defined as actual compliance in respect to substance essential to every reasonable objective, of a decree giving effect to equitable principlesequityin the true meaning of that word. Application of Santore, 28 Wash.App. 319, 623 P.2d 702 (1981). Substantial compliance means compliance which substantially, essentially, in the main, for the most part, satisfies the means of accomplishing the objectives sought to be effected by the decree and at the same time does complete equity. See North Carolina Nat'l Bank v. Burnette, 297 N.C. 524, 256 S.E.2d 388 (1979). What constitutes substantial compliance is a matter dependent upon the particular facts of each case, none ever quite a clone of any other. See Trussell v. Fish, 202 Ark. 956, 154 S.W.2d 587 (1941). What greater protection could be provided than a trust administered by a trustee; a fiduciary circumscribed by law severely restricting waste, mismanagement or dissipation, of income and corpus of those trusts as opposed to immediate and full payment to their guardian or custodian? In the event the proceeds of the policies had been paid to the minor children, one would encounter a variety of troublesome statutorily required procedures, costly and time consuming. The beneficiaries, minors under eighteen years of age, may not be paid death benefits by a life insurer. § 27-14-25, Code 1975. Payment could be made only to the guardian, Mrs. Johnson. She, in order to receive the funds, would be required to increase the amount of her bond to the extent of $100,000, at a not inconsiderable additional premium. See § 26-3-1, Code 1975. She could only place those life insurance death benefits in investments authorized by statute or at her own peril except in very limited exceptional instances. See § 26-4-3, Code 1975. She would be required to provide an accounting of her management of the insurance proceeds in her wards' estates, at least once in three years, requiring a hearing in the court of probate, necessitating the appointment of a guardian ad litem, with the attendant fees, costs incident to all of these proceedings. See § 26-5-2, Code 1975, and Rule 17, ARCP. Should circumstances require invasion of the corpus of the wards' estates, it could only be done upon application to the court of probate; action of that court effective only after appointment of a guardian ad litem and a hearing. § 26-4-63, Code 1975. Final distribution to the wards of the entire estate of each is required when each attains full age (19) years), or upon the happening of contingencies stated in § 26-5-7, Code 1975. The details and requirements of guardianship proceedings contrast to the flexibility of those available to a trustee. Directions to the trustee are contained in paragraph 6A of the trusts. It provides: ... During the term of this trust, the Trustee shall spend such amount as she may in her sole wisdom, judgment and discretion deem to be for the best interest of said Beneficiary in the manner of supporting, maintaining, caring for and educating the said Beneficiary. The amount to be expended on the education of the Beneficiary is to be determined by the Trustee, she having due regard for the desire and aptitude of said Beneficiary for an education. Her judgment in this regard shall be definite and final. There is no prohibition against invasion of principal, should that become necessary, nor is there any requirement for judicial proceedings with their attendant costs and legal fees. Additionally, paragraph 7 of the instruments of trust establishes the trustee's powers and provides for investment of the trust estate without regard to statutes limiting the nature and kind of investment; subject only to the rules of law regarding prudence, and fiduciary responsibilities and liabilities. In light of all of these considerations Mr. Pittman is to be commended for exercising sound, protective judgment and foresight. The same conclusion was reached by the Civil Appeals Court of Texas in a case involving an analogous set of facts. Gray v. Bush, 430 S.W.2d 258, 265 (Tex.Civ.App. 1968). Analyzing the former wife's claim, in that case, that she was entitled to the trust established by the decedent, that court said: ... By the same token and as applied to the instant controversy, it would seem that where before his death Dr. Gray had provided for the separate estate of the Trust to fulfill the very obligation which was the objective to be accomplished by his original covenant in the property settlement agreement, such trust estate would under equitable principles properly be treated as having been created to fully accomplish and discharge the obligation which, but for the creation of the trust, would otherwise have continued to be that of his estate. What was done seems to have been the result of sound judgment on the part of the deceased, and that obviously was the conclusion of the trial court. Under the cited authorities, our review of the evidence de novo, and the rationale here employed, this court finds that James Pittman substantially complied with the agreement embodied in the divorce decree and therefore we are constrained to reverse the judgment in 81-116 and here enter judgment in that case in accord with this opinion.