Court Opinion

ID: 9644383
Source: CourtListenerOpinion
Date Created: 2023-08-22 20:54:41.738859+00
Date Added: 2024-06-11T12:47:49.482882
License: Public Domain

SOPER, Circuit Judge
(dissenting).
Existence of Trust.
If careful consideration is given to all the relevant provisions of the Richardson will for the purpose of determining whether the testator intended to create a trust for the benevolent causes of the church, it is seen at once that neither the language of the will nor the circumstances satisfy the rule that an intention to create a trust must be shown with at least reasonable certainty. The fifth paragraph of the will, quoted in the opinion of the court, bequeaths an eight one-hundredths interest in the Vick Chemical Company to the testator’s wife and then contains the following disposition: “At the death of my said wife it is my desire that of the said eight one-hundredths interest so devised to her, three one-hundredths thereof shall be and become absolutely the property of the Trustees of the First Presbyterian Church, and the profits or dividends arising therefrom shall be used by the said trustees for the benefit of Home and Foreign Missions and the benevolent causes of the church, in such proportion as the Trustees deem best.”
Only one phrase in this bequest indicates in any way that a trust is intended, that is, the words “in such proportion as the trustees deem best”; but the effect of this phrase is much weakened when it is known that under the North Carolina Code, §§ 3568-3571, the legal title of church property is held by trustees subject to the control of the church. The bequest to the trustees of the church in this case was therefore in effect a bequest to the church, as the testator, who was very familiar with the organization of the Presbyterian Church, well knew. The direction to use the income for the benevolent causes of the church did not of itself establish a trust, for it is settled in North Carolina and elsewhere that a bequest to a charitable corporation to use the income for corporate purposes creates an absolute gift and not a gift in trust. St. James Parish v. Bagley, 138 N.C. 384, 50 S.E. 841, 70 L.R.A. 160; Williams v. Thompson, 216 N.C. 292, 4 S.E. 2d 609; Art Students’ League v. Hinkley, D.C., 31 F.2d 469; Hinkley v. Art Students’ League, 4 Cir., 37 F.2d 225, and cases cited.
The direction that the income be used for the benevolent causes of the church in such proportion as the trustees deem best, if taken alone, seems to confer discretionary powers upon the trustees; but, as a practical matter, it means much the same as a direction to the church to distribute the income as it deems best; for the trustees, as representatives of the church and custodians of its property, would be expected to follow the wishes of the church in accordance with the state statutes. Actually the trustees did so with respect to the very sale of stock now under consideration, for although in their individual capacities they were among the most successful and competent men in the community, they regarded themselves bound to follow the will of the church in the disposition of the stock.
Offsetting any argument in favor of the trust relationship based upon the apparent discretion of the church trustees, is the explicit direction that the stock should “be and become absolutely the property of the trustees”, &c. One does not give property to another absolutely when one intends to give it to him as trustee. The use of the phrase “trustees of the First Presbyterian Church” merely identified the persons who *866held the legal title to the church property and signified that the church was the object of the testator’s bounty.
The testator knew the kind of language to use- when he desired to set up a trust, as in the eighth and ninth paragraphs of the will where he said:
“Eighth. I give and bequeath all of my real estate, stocks, bonds and' money of which I may die seized and possessed (Other than the bequests hereinbefore named) to my sons, J. H. S. Richardson and Lunsford Richardson, Jr., and my wife, Mary Lynn Richardson, in trust for my wife during her life. All of the rents, profits and income annually arising from this portion of my estate shall be by the said trustees turned over to my said wife, Mary Lynn Richardson, to her sole use and benefit, and to so continue until her death, without any accounting on her part.”
“Ninth. Upon the death of my said wife it is my wish and desire, and I hereby direct my said Trustees to distribute all of my real estate, stocks, bonds, mortgages, etc. herein placed under their charge equally among my children hereinbefore named, share and share alike. In the event of the death of any child or children, then his or her share shall descend as provided for in paragraph six above.”
No one interested in the establishment of a trust in this case satisfactorily explains why the testator did not use language of the same unmistakable clarity in the fifth paragraph of the same document, if there also he intended to leave property in trust and not to make an absolute gift. In case of doubt it is obligatory to examine the whole instrument, as Judge Connor pointed out in St. James Parish v. Bagley, 138 N.C. 384, SO S.E. 841, 70 L.R.A. 160, where property was conveyed to a church for its charitable objects. He said (page 389 of 138 N.C., page 842 of SO S.E., 70 L.R.A. 160) : "It must be conceded that it is not necessary for the valid declaration of a trust that any peculiar language be used. Bispham Eq. 71. When it is doubtful whether language in the grant operates as the declaration of trust, the court will examine the entire deed, the relation of the parties, etc., to enable it to gather the intention of the grantor. ‘The effect of a deed must depend upon the effect of the language used. A grantor can impose conditions, and can make the title conveyed dependent upon their performance. But if he does not make any condition, but simply expresses the motive which induces him to execute the deed, the legal effect of the granting words cannot be controlled by the language indicating the grantor’s motive.’ ”
Very close to the case at bar are the facts disclosed in Williams v. Thompson, 216 N.C. 292, 4 S.E.2d 609, wherein the court again set ■ out the principles to be applied when the question arises whether property devised to a church for one of its purposes was given to it absolutely or in trust. The testator left a residence property to his niece for life and then provided: “ * * * After her death I give and bequeath the said lot with all improvements and hereditaments to the Methodist Episcopal Church in this place, to be used by the stewards or legal representatives of the said Church in the Town of Plymouth as a parsonage for the minister and for no other purpose, in order to secure the possession of my burying ground to the aforesaid Church and to its keeping and care.”
The life tenant conveyed her life estate to another, and a few days later the trustees of the church conveyed to him the remainder and subsequently his heirs contracted to convey the land in fee to a purchaser. The question arose whether the language of the will had the effect of impressing a trust upon the land for use as a parsonage so as to restrict its alienation by the church. It was held that the church took an absolute estate in the remainder under the rule stated as follows in Pomeroy’s Equity, § 1016: “In order that a trust may arise from the use of precatory words, the court must be satisfied from the words themselves, taken in connection with all the other terms in the disposition, that the testator’s intention to create an express trust was as full, complete, settled and sure as though he had given the property to hold upon a trust declared in express terms in the ordinary manner.”
There is no legal distinction between a gift of property to be used for the benevolent causes of a church and of property to be used for a parsonage, for both are within the corporate purposes. It was doubtless in view of this fact and of the established state law that competent counsel, learned in the law of North Carolina, advised the church in 1923 that the sale of the stock by the church was within its rights. The decisions of the highest court of North Carolina should govern us in this case.
*867Limitations.
Even if a trust was created by the will, the North Carolina statutes of limitations (Consolidated Statutes §§ 441, 445), present a complete defense to this suit; and the circumstances of the case dissipate the usual reluctance of a court to rest its decision on this ground. Express power to sell the shares of stock was given by the seventh paragraph of the will to all of the legatees of the testator’s interest in the Chemical Company, including the trustees of the church. The transfer in this case was made quite publicly, after an open discussion in a meeting of the congregation, and was known to literally hundreds of people, including, beyond doubt, those members of the local church especially devoted to its benevolent causes. There was a complete absence of concealment or fraud, as the District Judge correctly held. The members o'f the Richardson family were devoted to the church, as Mrs. Richardson’s father and one of her brothers had been its ministers. During the period subsequent to the transfer of 1923, the family’s gifts to the local church totaled one million dollars. Under these circumstances the persistence of the plaintiffs in this case, who are the present trustees of the local church, and certain benevolent corporations affiliated with the Presbyterian denomination, in returning to the charge of fraud in this court is, to say the least, incomprehensible.
But it is said that limitations did not begin to run until the life estate of Mrs. Richardson terminated with her death in 1940, less than three years before the institution of the suit, because under the North Carolina decisions a remainderman is not entitled to possession until the death of the life tenant, and is therefore under no legal obligation to sue at an earlier date, although he has the right to invoke the aid of the court at any time to prevent or remedy a violation of the trust. See, Wooten v. Wilmington & W. R. Co., 128 N.C. 119, 38 S.E. 298, 56 L.R.A. 615; Joyner v. Futrell, 136 N.C. 301, 48 S.E. 649; Baker V. Atlantic C. L. R. Co., 173 N.C. 365, 92 S. E. 170, L.R.A.1917E, 266; Pritchard v. Williams, 175 N.C. 319, 95 S.E. 570; Baggett v. Lanier, 178 N.C. 129, 100 S.E. 254.
This argument, however, ignores the patent fact that Mrs. Richardson voluntarily put an end to her life estate in 1923 when she and the trustees, as they had the power to do under the will, joined in a conveyance of the stock to her children intending to give them an absolute title. In practical effect, Mrs. Richardson gave her life estate. to the church for she gave it the entire proceeds of sale. It is true that the transaction took the form of a conveyance of the church’s remainder interest to Mrs. Richardson, followed by a conveyance by her of the entire interest in the stock to the purchasers; but can it be said that the legal result would have been different if she had first transferred her life estate to the church and it had then transferred the stock to the purchasers, or if Mrs. Richardson and the church had joined in a single instrument of assignment? To ask this question is to expose the artificial character of the reply to the plea of limitations. There is no need to appeal to the technical rules of merger, primarily applicable to real property, when the owners of both estates intend to unite them in one person and, with power to do so, take effectual steps to that end. If the transfer of the stock and the disposition of the proceeds of sale constituted a breach of trust and gave rise to a constructive trust impressed upon the stock in the hands of the purchasers, it took place in 1923 when they acquired it and the purchase price was used to aid in the building of a new church; and limitations began to run in that year.
Limitations as to the Executors.
So far as the defendant executors are concerned, the defense of limitations rests upon the North Carolina statutes as interpreted in Edwards v. Lemmond, 136 N.C. 329, 48 S.E. 737. In that case the court decided that under § 1488 (now § 150) of •the North Carolina Code an executor is forbidden to hold after two years from his qualification more of the estate than amounts to his necessary charges; and that § 1402 (now § 109) of the Code affords any one interested in the estate a right to compel a final settlement in two years; and that under § 158 (now § 445) of the Code, an action for relief against an executor must be filed within ten years after the action accrues. The court said that at the end of two years the law makes the demand and puts an end to the express trust, although no express demand is made by any interested party upon the executor in default, and an action will then lie at the instance of any one entitled to a settlement of the estate.
It is not sufficient to say in answer to this decision that Mrs. Richardson did not die until 1940. Even if we assume that her *868life estate did not terminate and the church was not entitled to possession of the stock until her death, a right of action for the distribution of the estate accrued to the remaindermen at the end of two years after the executors qualified. The church then had the right to demand that the three hundredths interest of the testator in the Chemical Company be segregated from his estate by a transfer of the stock evidenced by the issuance of a stock certificate to Mrs. Richardson as life tenant with remainder to the church. This right accrued to the church as well as to Mrs. Richardson, and the latter’s right of possession of the stock during her life in no way qualified the duty of the executors to divest themselves of all interest in the stock so as to comply with the purpose of the North Carolina statutes that the estate of a decedent be finally distributed within two years.