Opinion
No. C8-99-2074.
Filed June 20, 2000.
Appeal from the District Court, Stearns County, File No. C0990629.
Martin H. Fisk, (for appellants Marguerite Cartin, James Harty, and Jean Harty)
Thomas A. Janson, (for respondent Vera Sitts)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1998).
UNPUBLISHED OPINION
Zapp National Bank of St. Cloud (n/k/a US Bank), as trustee for the late George E. Nolan, petitioned the district court for an interpretation of Nolan's trust documents. The district court ruled that the term "spouse" in Nolan's trust documents referred to Nolan's spouse at the time of his death, not at the time of execution of the trust. We reverse.
FACTS
On January 3, 1978, Nolan executed a revocable trust agreement, naming the First National Bank of Rochester as trustee. The trust provided that during his lifetime Nolan could withdraw assets from the principal or net income on his written request. The trust further provided that after Nolan's death, "[i]f [s]ettlor's spouse survives him," two trusts would be created: "Trust A" and "Trust B."
Trust A was to consist of the minimum amount of assets that would qualify for the federal estate tax marital deduction, and would pay all its net income to Nolan's "said spouse during her lifetime." Trust B was to consist of the remainder of the trust estate after Trust A was created. If Nolan's spouse predeceased him, Trust B would consist of the entire trust estate. Trust B was also to pay all its net income to Nolan's "said spouse during her lifetime." After "the death of [Nolan's] said spouse," or after Nolan's death if he survived her, except for small gifts to friends, churches and nursing homes, the assets in Trust B were to be distributed to Nolan's niece, appellant Marguerite Cartin, and nephew Donald Harty.
Grace Nolan, Nolan's spouse at the time he executed the 1978 trust agreement, died on December 18, 1979.
In 1988, Nolan met respondent Vera Sitts while both lived in Rochester. When Sitts moved to Clearwater, Nolan frequently traveled there by bus to visit her. After Sitts moved to Elk River, Nolan moved into an apartment above her. In the latter part of 1992, Nolan moved into Sitts's apartment.
On October 27, 1992, Nolan amended the 1978 trust to change the beneficiaries of Trust B. Nolan deleted the provision that paid the income of the trust to his "said spouse," and in place of the gifts to friends, churches and nursing homes in the prior version, he provided a $10,000 gift to Vera Sitts's son Larry. Nolan also added Vera Sitts to Cartin and Harty as equal recipients of the remainder of the trust.
On November 11, 1992, Nolan amended the 1978 trust again. This time he changed the trustee from First National Bank to Zapp National Bank. He also changed the provision that gave his "spouse GRACE O. NOLAN" the right to become a co-trustee at any time after Nolan's death. Instead, he gave that right to Larry Sitts.
Nolan and Sitts were married on August 31, 1995. Nolan died on September 27, 1998. Zapp National Bank petitioned the district court for an interpretation of Nolan's trust documents, asking the court whether the words "spouse" and "said spouse" referred to Grace Nolan or Vera Sitts. Proceeding on an agreed statement of facts, documentary evidence, and written briefs, the court held that the trust documents referred to Vera Sitts. By this interpretation, Trust A comes into existence, reducing the assets that go into Trust B. Cartin and appellants James and Jean Harty, who share Trust B with Sitts, appeal.
DECISION
The court's purpose in construing a trust is to ascertain the intent of the settlor. Northwestern Nat'l Bank of Minneapolis v. Simons, 308 Minn. 243, 242 N.W.2d 78 (1976). That intent is normally a fact issue, subject to the clearly erroneous standard. But where the material facts are not disputed, we review the interpretation of a trust de novo. In re Trust Created by Hill, 499 N.W.2d 475, 482 (Minn.App. 1993), review denied (Minn. July 15, 1993). We therefore review the district court's decision here de novo.
Whether language in a will is ambiguous is an issue of law that we review de novo. In re Estate of Zagar, 491 N.W.2d 915, 916 (Minn.App. 1992). A will is ambiguous if, on its face, it suggests more than one interpretation. In re Estate of Arend, 373 N.W.2d 338, 342 (Minn.App. 1985). Because its language suggests more than one interpretation — the word "spouse" may be read to apply either to Grace Nolan or to Vera Sitts — the trust is ambiguous.
When interpreting a trust, a court must attempt to ascertain "the donor's dominant intention as gathered from the instrument as a whole." In re Trusteeship Under Agreement with Mayo, 259 Minn. 91, 95, 105 N.W.2d 900, 903 (1960).
Cartin and the Hartys base their argument on a rule of construction that provides that when a will or trust refers to a "wife" or "spouse," it is interpreted to mean the person who held that status at the time the document was executed, not some later person: "It is the status at the time the will is executed and not that which obtains when the beneficiary's interest vests which ordinarily governs." In re Will of Dezell, 292 Minn. 179, 181, 194 N.W.2d 190, 192 (1972) (citing inter alia 4 Bowe-Parker: Page on Wills § 34.2). Applying this rule of construction, the terms "spouse" and "said spouse" in the 1978 trust would refer to Grace Nolan. Circumstances, however, may show that the settlor was referring to a later spouse. 4 W.J. Bowe D.G. Parker, Page on the Law of Wills § 34.2 (rev. ed. 1961).
One of Nolan's 1992 amendments to the trust documents also supports the conclusion he intended the terms "spouse" and "said spouse" to refer to Grace Nolan. When originally drafted, the terms of Trust B, set out in Article V of the trust, provided that Nolan's "said spouse" would receive the trust's net income "during her lifetime." But on October 27, 1992, Nolan amended Article V. He changed the gifts, deleting the original small gifts and substituting a $10,000 gift to Larry Sitts, and also added Vera Sitts as an equal beneficiary of the trust's remainder. But he also deleted the provision that granted the net income to his "said spouse during her lifetime."
If Nolan intended the terms "spouse" and "said spouse" to refer to any spouse he may later have had, nothing in the record explains why he decided in 1992 to change the structure of his trust and deprive his later-married spouse of the income from Trust B during her lifetime. If Nolan intended the terms "spouse" and "said spouse" to refer only to Grace Nolan, however, there was a logical reason for him to delete the lifetime income provision: Grace Nolan had died, making the provision unnecessary. As a result, Nolan's decision to delete the lifetime income provision of Trust B supports the conclusion that he intended that provision — like the remainder of the references to "spouse" and "said spouse" — to refer only to Grace Nolan.
The district court starts with the premise that by choosing the generic terms "spouse" and "said spouse," Nolan signaled his intention to benefit any person who might later hold that status, not only Grace Nolan. But that assumption violates the accepted rule of construction that the generic terms "spouse" and "said spouse" refer to the person who holds that status at the time the trust is executed. Though Sitts argues that circumstances demonstrate that that rule of construction does not apply, the circumstances she argues are at best no more persuasive than those that demonstrate that Nolan meant the terms "spouse" and "said spouse" to refer only to Grace Nolan.
The accepted rule of construction, along with the circumstances surrounding the execution and amendment of the trust — specifically Nolan's decision to remove that part of Trust B granting the net income of the trust to "my said spouse during her lifetime" — leads to the conclusion that Nolan intended the terms "spouse" and "said spouse" to refer only to Grace Nolan. Because Grace Nolan did not survive George Nolan, Trust A failed by its terms, and the entire trust estate passed into Trust B.