Court Opinion

ID: 3690963
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:33:24.898953+00
Date Added: 2024-06-11T15:32:57.246412
License: Public Domain

Owing to our system of rotation of cases, the responsibility for the opinion in this case rests with one of my associates. However, it is deemed advisable by me informally to state briefly my own reasons for my decision.
On October 2, 1913, Thomas H. White executed and delivered to The Cleveland Trust Company a so-called trust agreement by the terms of which he conveyed and transferred to the trust company real and personal *Page 357 
property of a value in excess of two million dollars. The many parcels of real estate were enumerated in a schedule attached to the agreement. The stocks, bonds and securities were also listed in a schedule attached to the agreement and closing with an omnibus clause worded to comprehend those then possessed as well as those to be thereafter possessed including monies then or thereafter on deposit in banks. On October 17, 1913, and October 24, 1913, additions were made to the trust estate in the hands of the trust company upon the same terms and conditions recited in the trust agreement.
Thomas H. White died June 22, 1914, less than one year after the date of the execution of the trust agreement.
On the same day, October 2, 1913, said Thomas H. White executed a last will and testament in which The Cleveland Trust Company was named as executor and by the provisions of which all property of which he may die seized or possessed shall pass to The Cleveland Trust Company to be held, managed and distributed in accordance with the terms and directions of the trust agreement contemporaneously executed.
This action was instituted in the lower court by The Cleveland Trust Company as trustee, against the various defendants named herein for instructions with respect to certain items and provisions of the trust agreement about which it is said there may be some ambiguity or uncertainty in meaning and intent. By the pleadings filed by the various parties to this action the outstanding issue for determination arose in respect to the exact nature and character of the trust agreement and will. It is contended by the plaintiff that the trust agreement evidences and constitutes a completed giftinter vivos and is legally valid. It is contended by certain defendants that the trust agreement is necessarily incorporated in the last will and *Page 358 
that the legal effect of the execution of the trust agreement and the will is testamentary.
As stated during the hearing, it has always been my understanding of the law generally that the execution of a trust agreement by the terms of which present possession, title and dominion of property is passed to a trustee that such transaction constitutes a valid gift inter vivos although the settlor reserves a beneficial interest and reserves a right of revocation, the exercise of which is dependent upon the happening of a subsequent contingency at his election. Excepting the rights of creditors, he is merely doing with his property during his lifetime as he pleases. His right to revoke is personal to him. No heirs at law or next of kin as such have any vested interest in the property of an ancestor while he is living. The right to alienate is an attribute of the complete ownership of private property. If he elects to give it away by passing absolute title and dominion with a string tied to it during his life to guarantee his own security, it would seem that he is only doing with his property what he pleases.
This general proposition seems to be sustained by the greater weight of authority as announced in Restatement of the Law of Trusts:
"Sec. 57. (1). Where by the terms of the trust an interest passes to the beneficiary during the life of the settlor, the trust is not testamentary merely because the settlor reserves a beneficial life estate or because he reserves in addition a power to revoke the trust in whole or in part and a power to modify the trust."
It is safe to say that able and eminent lawyers of this bar who have to do with such affairs, have for years recognized a family settlement trust agreement as legal and valid when properly executed accompanied with present delivery of title and control although containing reservations as in this restatement recited. No case involving a trust agreement so complicated as the one at bar and by its terms not to be fully executed *Page 359 
for many years after the death of the donor has been before the Supreme Court so that the legal status of a truly family settlement trust agreement may be fixed and determined. In the principal cases cited the trust agreement terminated upon the death of the donor. Such an agreement as in the case at bar may present additional and different considerations.
The defendants deny that this general proposition is controlling in the case at bar. Two cases are cited upon which chief reliance is placed. Worthington, Admr., v. Redkey, Exr.,86 Ohio St. 128, 99 N.E. 211; Union Trust Co. v. Hawkins,Admr., 121 Ohio St. 159, 167 N.E. 389, 73 A.L.R., 190.
The Worthington case was decided in 1912. This decision announced the rule that the legal title must pass from the creator of the trust as well as dominion and control to the trustee in order to constitute a valid gift inter vivos and it seems to hold that the reservation of a right of revocation defeats the theory of relinquishment of title and dominion and defeats the gift.
At the time the Worthington case was decided, Section 8617, General Code, read as follows:
"All deeds of gifts and conveyances of goods and chattels, made in trust to the use of the person or persons making them, shall be void and of no effect."
This section was amended, effective in August, 1921, by which amendment the remainder of the section was added and the entire section caused to read:
"Sec. 8617. All deeds of gifts and conveyance of real or personal property made in trust for the exclusive use of the person or persons making the same shall be void and of no effect, but the creator of a trust may reserve to himself any use of power, beneficial or in trust, which he might lawfully grant to another, including the power to alter, amend or revoke such trust, and such trust shall be valid as to all persons, except that any beneficial interest reserved to such creator shall be subject to be reached by the *Page 360 
creditors of such creator, and except that where the creator of such trust reserves to himself for his own benefit a power of revocation, a court of equity, at the suit of any creditor or creditors of the creator, may compel the exercise of such power of revocation so reserved, to the same extent and under the same conditions that such creator could have exercised the same."
It is to be observed that the White trust agreement was executed in October, 1913, approximately eight years prior to this amendment.
The Hawkins case was first decided in May, 1928, and the first decision, from the language of the syllabus, followed theWorthington case in principle. This case was reviewed and decided a second time upon rehearing in 1929, in which decision the former holding was reversed and the court deemed it necessary to take a contrary view by reason of the application of the amendment to Section 8617, General Code.
The first and second paragraphs of the syllabus of the first decision are almost synonymous with the first and second paragraphs of the second decision.
There are many points of similarity in the trust agreement in the Hawkins case and the trust agreement in the case at bar. However, the trust agreement in the Hawkins case terminated upon the death of the donor. The Hawkins trust agreement was sustained but its validity was expressly grounded upon the amendment of the statute in 1921 as evidenced by the third paragraph of the syllabus. The Hawkins agreement was modified, or supplemented subsequent to the date of the amendment and its validity sustained as of that date.
It is urged that the law of the Worthington case and the law of the first decision of the Hawkins case necessarily controls the case at bar for the reason that the agreement was executed in 1913, eight years prior to the amendment of the statute. These two cases *Page 361 
receive rather extended discussion in 40 Ohio Jurisprudence, 178, Section 39, under the title "Trusts."
If this be correct, then the appellant cannot prevail. The transaction of the trust agreement and the will must be held to be testamentary in character. The charitable bequests are void because executed within one year of his death.
However, assuming that the general rule of the above restatement be eventually pronounced to be the law of Ohio, did the settlor by the terms of the agreement place his affairs within the protection of the rule? Was such dominion and control passed or was the trustee merely the managing agent for the donor during his life?
Mr. White, at the time of the execution of the trust agreement, executed deeds of conveyance and delivered same to The Cleveland Trust Company. He transferred his certificates of stock duly endorsed. He did not transfer his bank accounts. Although the language of the trust agreement transferred everything at once, over one hundred thousand dollars of property remained in his possession at his death. To what extent the settlor transferred title, dominion and control to and over the property placed in trust can best be determined by reference to the agreement itself and the rights expressly reserved by him. He did reserve a beneficial life estate as well as a power of revocation.
Notwithstanding the rights reserved by the donor in the trust agreement, do the terms of the agreement constitute a valid gift inter vivos or is the same defeated by the other conditions and provisions of the instrument itself? It is not so much what the donor and trustee did in pursuance of the executed agreement. Much more is dependent upon the potential powers reserved as expressed by the agreement.
Paragraph three of the so-called trust agreement by *Page 362 
its terms granted full power to the trustee to invest and handle the assets of the trust in such manner as it deems best, "subject however to the power reserved during my lifetime as hereinafter provided." Paragraph 14 required the trustee to pay the net income to the donor in quarterly installments or oftener during his life and in addition such further sums from the principal as it may deem proper or necessary for his needs.
By the terms of paragraph 15, the donor reserves the free use and enjoyment of the real estate. It is provided that he will see to the payment of taxes, maintain the properties and look after the insurance. Upon request the trustee shall vest in the donor the voting powers upon the stocks held in the trust.
By paragraph 16 the trustee is required to secure the written approval of the settlor to any sale of property and securities, investments and re-investments. The trustee shall not sell any stock of The White Company or The White Sewing Machine Company unless approved in writing by the donor.
By paragraph 17 the donor relieves the trustee of any duty or responsibility for making tax returns upon the property held in the trust and assumed and retained that responsibility himself.
By paragraph 18 the right of revocation is reserved either in whole or part as well as the right to modify in any or all respects the terms of such settlement.
To whatever extent the settlement is revoked it becomes the duty of the trustee to transfer and deliver such portion of the property withdrawn by the revocation.
By the terms of paragraph 10 of the instrument, the trustee is granted full right to make advances or to borrow money either before or after death, to pay the debts of the donor. It is immaterial whether the debts existed at the time of the settlement or were subsequently created. By reserving the right to create *Page 363 
subsequent debts the power of indirect control is expressly retained over the corpus of the trust estate. While by the terms of paragraph 18 the approval of the board of directors of the trust company is required to effect a revocation of the trust, yet the unlimited power to create subsequent debts, with the express provision in paragraph 10 that the same must be paid by the trustee may have the effect of nullifying and terminating the trust estate at the will of the settlor during his lifetime.
It seems to me that the terms and conditions of this trust instrument examined by its terms and provisions alone, without reference to the conduct of the settlor during his lifetime and the trust company as trustee with respect thereto, that the relation of the settlor and the trust company is more nearly expressed and comprehended within another paragraph contained in Restatement of the Law of Trusts, as follows:
"Sec. 57. (2) Where the settlor transfers property in trust and reserves not only a beneficial life estate and a power to revoke and modify the trust but also such power to control the trustee as to the details of the administration of the trust that the trustee is the agent of the settlor, the disposition so far as it is intended to take effect after his death is testamentary and is invalid unless the requirements of the statutes relating to the validity of wills are complied with."
Mr. White retained his bank books. They were delivered to the trustee after his death. He made deposits and withdrawals as he did before the agreement although transferred by it as part of the trust estate.
He retained the voting rights of his stocks. His written approval should be secured for sales of or investments in properties and securities. The trustee held the certificates duly endorsed. He retained further control.
He transferred legal title to his real estate by deeds. He made tax returns, paid the taxes and insurance. *Page 364 
He retained free use and enjoyment of his real estate. It is very probable that he handled the property after the same as before.
By paragraph 3 full unrestricted power to manage all property is given the trustee as if it were the absolute owner thereof and thereafter in the same instrument he proceeds to take all that power away, leaving to the trustee little more than the bare legal title.
It is said that such rights reserved are justified in a careful effort to protect his income for life. Such claim runs contra and rebuts any theory of a gift inter vivos.
Without repeating, it seems to me that the donor constituted the trustee his agent more nearly than any other relation. He said, here is my real estate and here are my securities. You have legal title thereto. However, during my lifetime I shall retain my say in the management and handling thereof. He retained such power to control the discretion and judgment of the trustee as to details of the administration of the trust that it was the administration thereof by the settlor, rather than that of the trustee.
The trial court so concluded. The decree herein should hold the entire transaction of trust agreement and last will to be testamentary. *Page 365