Court Opinion

ID: 6920699
Source: CourtListenerOpinion
Date Created: 2022-07-23 23:00:26.84768+00
Date Added: 2024-06-11T16:06:47.573288
License: Public Domain

TANZER, J.,
dissenting.
I agree with the majority that the life estate and remainder interests cannot merge even though held by the same beneficiaries because the trust in this case is active. Termination of the trust, therefore, is not possible. It does not necessarily follow, however, that the petition failed to state cause for lesser relief and that the court below erred in overruling the personal representatives’ demurrer.
Equity courts have a primary duty to effectuate the intent of the settlor and in order to do so they may modify the terms of a trust. U.S. Nat. Bank v. First Nat. Bank, 172 Or 683, 142 P2d 785, 143 P2d 909 (1943); Bogert, Trusts and Trustees, § 561, pp 129, 133 and § 994, p 435 (2d ed 1959). In determining the settlor’s intent we should look to all of the provisions of the creating document. In re Edwards’ Estate, 153 Or 696, 58 P2d 243 (1936); Williams v. Morris, 144 Or 620, 25 P2d 135 (1933). We do so here to the extent alleged in the petition.
The trust involved here directs that $600 per year *308be paid from both the interest and principal to Rudolpho during his lifetime or until the assets of the trust are exhausted and then, on Rudolpho’s death, to Marco for his lifetime or, again, until the assets are exhausted. This direction clearly contemplates that the yearly payment would be made at least partially from the corpus of the trust which, accordingly, would be used up over time. The direction that the principal is to be used shows a recognition that the assets could well be exhausted either during Rudolpho’s lifetime or during Marco’s. Finally, no successor beneficiaries are named.
The anticipation of interest reflects that the trustor intended that there be an investment of the corpus and a return of interest. The petition alleges that investment at 8 per cent would yield $2,000 per year whereas the trustee is only required to pay out $1,200 per year or, as we calculate it, at $50 per month, $600, plus a one-time payment of $2,000. The result would be an annual increase in the corpus, contrary to the trustor’s contemplation that the beneficiaries be paid from principal as well as interest and that the corpus be exhausted.
This examination of the trust, in my opinion, indicates that Alfonso Melone intended that Rudolpho and Marco would enjoy the benefits of both the income and the principal over the course of their lifetimes and that the principal would be largely, if not completely, exhausted within that same period. The $600, then, was only meant to estimate an amount, the payment of which would result in the use of the principal being spread over the course of the two lifetimes. If the trust is not modified to increase the rate of payment, then Rudolpho and Marco will not enjoy substantially *309all the benefits of both the income and principal and Alfonso’s intent will be defeated.
I recognize that while equity courts have the power to modify trusts, that power is said to apply only to administrative, and not to dispositive provisions of the trust. Bogert, Trusts and Trustees, § 561, p 133 (2d ed 1959). Those two categories, however, are not discrete. They may well overlap, as they do here, and serve therefore as guides in the ultimate judicial task of effectuating the trustor’s intent.
Ordinarily, the amount of periodic payments to a beneficiary is treated as a dispositive provision and will not be modified. Where, however, the intent of the trustor is that the beneficiaries will eventually receive the entire income and corpus, the amount of periodic payments to be made in the meantime is more accurately characterized as an administrative provision because it affects only the timing of the benefits and the rate of exhaustion of the corpus. If, in such a case, the periodic payments are too large or too small to effectuate the primary intent of the settlor, they can properly be modified by a court of equity. See Bogert, Trusts and Trustees, § 561, p 131 (2d ed 1959). Since Rudolpho and Marco, as the sole heirs of Alfonso, also hold vested remainder interests in the principal of the trust, this is precisely the situation presented in this case.
The petition stated adequate cause for modification and requested such relief as the court below believed equitable. The demurrer, therefore, was correctly overruled but the court then erred in terminating the trust. I would remand for proceedings consistent with this opinion.