Court Opinion

ID: 7957903
Source: CourtListenerOpinion
Date Created: 2022-09-09 00:21:48.951698+00
Date Added: 2024-06-11T16:34:19.835017
License: Public Domain

Churchill, J.
(dissenting). On December 9, 1964, Henry Hartman and Caroline V. Hartman, husband and wife, conveyed a 160-acre farm in Osceola County by warranty deed to the Michigan Conference Association of Seventh-Day Adventists, the defendant herein. On the same day a "property trust agreement” between the Hartmans as trustors and the defendant as trustee was executed. Henry Hartman died May 28, 1965. Caroline V. Hartman died March 2, 1971. This is an action by the administrator of her estate seeking to set aside the deed or requiring the defendant to reconvey the farm. Caroline V. Hartman died intestate and her heirs, who would benefit if the estate recovers the property, are two adult grandchildren.
The plaintiff complains that (1) the deed and agreement are voidable because of circumstances surrounding their executing including undue influence, (2) the legal arrangement between the trustors and the trustee was intrinsically bad, and (3) even if the deed and trust agreement were valid in the first place, the defendant ought to be required to reconvey the property because of the manner in *205which it conducted itself in the administration of the trust.
At the conclusion of a nonjury trial the trial court filed a written opinion with findings of fact, dismissing the action. The plaintiff is entitled to a de novo determination of all issues by this Court on appeal.
On December 9, 1964, Henry Hartman was 87 years old and was in very poor physical health. He signed the deed and agreement with an "X”. Caroline V. Hartman was 77. She suffered from the normal infirmities of her age but her health and ability to function were much better than that of her husband. Neither of them were mentally incompetent. They lived on the farm and were dependent on social security benefits and annual pasture rent of $600. They had a good relationship with each of their grandchildren who had lived with them for a few years during their childhood following the death of their mother.
The Hartmans were faithful members of the Seventh-Day Adventist Church in Marion, Michigan. The pastor of the church made regular pastoral and sick calls on the Hartmans. During one such call in November 1964 one of the Hartmans told him that they were interested in making some plan for disposal of their property, remembering the church, and sought his counsel with respect thereto.
The defendant is a church trustee corporation organized pursuant to MCLA 450.159; MSA 21.160. It was the legal entity for the Michigan Conference of Seventh-Day Adventists. Both organizations, the association and the conference, shared a common president, a common treasurer, several common directors and a common office in Lansing. Elder Homer W. Trecartin was a salaried em*206ployee of both organizations. He was secretary of the corporation and the director of its department of trust services. For all purposes and issues in this suit, his acts were the acts of the corporation.
In response to the Hartmans’ statement of interest in making a property disposition the pastor arranged for Elder Trecartin to visit the Hartmans at their home on December 1, 1964, with him. After prayers Elder Trecartin asked the Hartmans what was in their heart. They informed him that they would like to turn over part or all of their property to the church and asked him how this might be done. He explained several ways that it could be done with emphasis on the advantages of a revocable trust. It is probable, although not certain, that he delivered to the Hartmans a church brochure encouraging gifts to the church and containing some information about how such gifts can be made. The Hartmans informed Elder Trecartin that they would go by the revocable trust method. Elder Trecartin left a sample trust agreement with the Hartmans, informing them that they were welcome to show it to an attorney if they wished.
On December 9, 1964, the local pastor, Elder Trecartin and another association officer, who was a notary public, went to the Hartman home. Elder Trecartin read the agreement to the Hartmans, whereupon the deed and agreement were executed. Henry Hartman signed with an "X”. In response to questions by the Hartmans Elder Trecartin made some statements about their rights under the trust which standing alone were inaccurate but which, considering the conversation in its entirety, were not misleading.
The deed was absolute in form, containing no reference to the trust, and no reservation of rights. *207The trust agreement refers to the deed and provides that the trustors shall have all possessory and income rights during their lifetime and requires the trustors to pay the costs of ownership such as taxes, insurance and maintenance. It provided that the right of revocation was personal to the trustors and that in the event that the trustors were unable to make said request because of illness, incapacity or incompetency, then the trustee would supplement the trustors’ funds to enable them to maintain their customary standard of living, and to accomplish such purpose the trustee had authority to rent or sell the land. It further provided that upon the death of the surviving trustor the trustee would pay the expenses of last illness and burial of the surviving trustor, in excess of the trustors’ personal estate, and that the residue of the trust estate would then be transferred to the conference to be used for its religious, educational and charitable work. The agreement protected the trustee against paying out funds in excess of the trust estate.
Although the trust agreement was somewhat ambiguous with respect to the right of withdrawal of the surviving trustor, a fair construction of the instrument would be that the surviving trustor would be entitled to exercise and enforce all of the rights of the trustors, and further that the right of withdrawal was absolute, at least until the trustee became obligated by terms of the trust to make financial advances.
Henry Hartman died a few months after execution of the deed and trust agreement. The trustee paid his funeral expense and medical expenses. Beginning soon after his death and continuing until her death on March 2, 1971, the defendant made advances for taxes, insurance and her sup*208port, and following her death the trustee paid her funeral expenses. The total advances made by the trustee were $8,963.49. Upon her death Caroline Hartman had personal estate of approximately $3,000 and it is undisputed that at no time was the trustee required to make any payments by terms of the trust. She voluntarily accepted the benefit of advances made by the trustee and we infer that she believed that her right of withdrawal was contingent on repayment of advances.
In the spring of 1970 Edward Simmonds and his wife, Arlene, who were strangers to Caroline Hartman, visited and inquired if it was possible to purchase the farm. She informed them that she would sell it for $25,000 reserving a life estate. The Simmonds were interested in buying it but had to work out financing. They came back a few weeks later and found her home alone and ill in bed. After obtaining help for her, they left without discussing business. In late summer or early fall the Simmonds returned to discuss terms of purchase. She then told them that she would have to contact Elder Trecartin, whom she referred to as her attorney, and that the Simmonds would be contacted.
Sometime in the summer of 1970 a party, unidentified in the testimony, contacted Elder Trecartin about purchasing the land. Trecartin informed this prospective purchaser that the farm was not for sale because Caroline Hartman had only a life estate.
On October 15, 1970, Elder Trecartin visited Caroline Hartman. She informed him that she was interested in accepting the Simmonds offer of $25,-000 with a reservation of a life estate. He discouraged her from making this sale, and, for the first time, informed her that others were interested in buying the farm.
*209On November 16, 1970, Elder Trecartin wrote to the Simmonds informing them that "We have not considered selling the property as long as she wishes to live there”, and informing them that eventually they and other prospective purchasers would be contacted.
In January 1971 the Simmonds again went to the farm to see Caroline Hartman, at which time the letter of November 16, 1970, was read to her. She acted surprised, and with reference to the portion of the letter that the farm was not for sale she said this was not the truth. Caroline Hartman then, referring to the church, said, "I think they have got plans for this property”, and she told the Simmonds "when the weather breaks, we will get this straightened out”. She died a few weeks later.
The plaintiff claims that a fiduciary relationship existed between Elder Trecartin and the Hart-mans at the time of execution of the deed and trust agreement, and that a presumption arises that the deed and trust agreement were obtained by undue influence. In re Wood Estate, 374 Mich 278; 132 NW2d 35 (1965). The trial court found that a fiduciary relationship did not exist at the time of execution of the instruments but that even if it did, the resulting presumption of undue influence was overcome by the evidence. We agree with this latter conclusion and make no finding with respect to the existence of a fiduciary relationship. We find that the Hartmans understood the nature of the legal relationships created. The deed and agreement were validly procured.
Fairly construed the Hartmans had the beneficial right of ownership or the right of support, and the arrangement did accomplish their original purpose of transferring a substantial portion of the survivors’ estate to their church. We therefore *210reject the plaintiffs claim that the arrangement was unconscionable and therefore void.
The plaintiff claims that the trust agreement is in violation of MCLA 450.148; MSA 21.149, which prohibits trustee corporations from having any personal interest in or title to any part or portion of the trust property. This section provides that "trustee corporations shall be governed by the provisions of this act except as speciñcally otherwise provided(Emphasis supplied.) MCLA 450.161; MSA 21.162 specifically provides that the trustees of trustee church corporations may hold property transferred to them for the use and benefit of the parent religious denomination, and in the management thereof shall be governed by the terms of the instrument by which such property shall be given to them. The trust created by the Hartmans was within the scope of this statute.
I would affirm the trial court’s judgment but for the negotiations and communications concerning the possible sale of the farm in 1970 and 1971. The trial court rejected such negotiations and communications as a basis for relief because she did not ask to terminate the trust and because she did not state a desire to have her grandchildren take her estate instead of the church. These fact findings, with which I have no disagreement, do not answer the questions of whether the trustee breached its duty in the administration of the trust.
Every trustee owes a duty to the beneficiary of loyalty, good faith and restraint from use of its position to promote self interest. Waddell v Waddell, 335 Mich 498; 56 NW2d 257 (1953); Sloan v Silberstein, 2 Mich App 660; 141 NW2d 332 (1966); In re Culhane’s Estate, 269 Mich 68 (1934); 54 Am Jur, Trusts, §§ 311-315.
These principles have special significance where, *211as here, the trustee itself is in a position to acquire the entire trust estate by restraining or discouraging the trustor’s absolute right of revocation.
" 'Where a trustee places itself in a position where self-interest conflicts with duty, its acts will be scanned with closer scrutiny than if made in the usual course of business.’ Culhane, supra. ” Waddell v Waddell, supra, p 509.
The trustee gave misleading information to a prospective buyer about the nature and extent of Caroline Hartman’s interest in the land. The trustee withheld from her the fact of the inquiry. The trustee wrote a misleading letter to her own prospective buyer.
It is my inescapable conclusion of fact that the trustee did these things to minimize the risk that she would exercise her right to terminate the trust.
In these ways, the trustee breached its duty to Mrs. Hartman. She discovered the breach herself and resolved to do something about it. Because of her age, the weather and her frail state of health she was deprived of the reasonable opportunity to take corrective action by her own death.
The only possible equitable remedy for a breach of trust is to make sure that her estate is not diminished thereby and that the trustee’s alter ego, the parent denomination, is not enriched thereby. The fact that she did not express a desire for her heirs to receive her estate is irrelevant when, as here, she died intestate.
Accordingly the defendant should be required to reconvey the real estate to the plaintiff.
The defendant should have a lien therein to secure reimbursement of $8,963.49 advanced with *212interest from the date of each advance to the date of final repayment.
The judgment of the trial court should be reversed and the action should be remanded to the trial court for further proceedings consistent herewith.