Citizens Fidelity Bank & Trust Co. v. Schellberg

238 S.W.2d 142, 1951 Ky. LEXIS 803
Court of Appeals of Kentucky (pre-1976)·Decided March 23, 1951·Published·Cited by 3 cases

Opinion

LATIMER, Justice.

We are concerned here particularly with the third clause of the will of Anna M. Schneider:

“All the balance of my estate of whatever it consists, I give and bequeath to the Fidelity and Columbia Trust Company of Louisville, Kentucky, to be held by them as trustee for the benefit of Pauline Schellberg and Mary Julia Schell-berg, daughters of my niece, Mary Louisa Schellberg.
“I further give the Fidelity and Columbia Trust Company, my executor, the power and discretion to use this money for the education of Mary Julia Schellberg and Pauline Schellberg. I hereby appoint the Fidelity and Columbia Trust Company executor of this my last will with power in them to sell any real or personal property that I may leave, for the purpose of carrying out this my last will.”

This action was brought by the Citizens Fidelity Bank and Trust Company, Executor of, and Trustee under the will of Anna M. Schneider, deceased, under the Declaratory Judgment Act, to determine whether or not the trust created in the clause of the will above had become a dry or passive trust and further, to determine the rights of all the parties defendant. Among those named as defendants in the action were Pauline Schellberg, now Pauline Schellberg Kifer, and Mary Julia Schell-berg, who are named as beneficiaries in the residuary clause of the will above; August Ferdinand Schneider, a brother of the deceased Schneider who had disappeared many years before, and his heirs-at-law Ella Schneider Carle, Leona Getz, Mary Elizabeth Brown, William Frederick Schneider, Jr. and Clarence Byrne.

The court upon consideration of the matter adjudged:

“1. That August Ferdinand Schneider is dead and that the defendants, Ella Schneider Carle, Leona Getz, Mary Elizabeth Brown, William Frederick Schneider, Jr. and Clarence Byrne, are the heirs-at-law of said August Ferdinand Schneider.
“2. That the trust provided for in the will of Anna M. Schneider is not ended and plaintiff cannot be discharged as trustee under said will.
“3. That said trust created by the third clause of the will of the decedent, Anna *144 M. Schneider, is not a dry trust hut is an active trust.
“4. That the defendants, Mary Julia Schellberg and Pauline Schellberg Kifer are not entitled to receive the estate now in the hands of the plaintiff as trustee, as they are life tenants only and at the death of the survivor of them the remaining estate of Anna M. Schneider passes by intestacy to her heirs-at-law.
“5. That said estate of Anna M. Schneider, both real and personal, passes under the third clause of said decedent’s will; said third clause of the will is construed to mean that a life estate is given to Pauline Schellberg, now Pauline Schellberg Kifer, and Mary Julia Schellberg during their life time, and that on their death the remainder estate of Anna M. Schneider, both real and personal, passes to her heirs-at-law.
“6. That the defendants, Ella Schneider Carle, Leona Getz, Mary Elizabeth Brown, William Frederick Schneider, Jr. and Clarence Byrne, have no right at this time to share in the estate -of Anna M. Schneider.”

The Citizens Fidelity Bank and Trust Company prosecutes this appeal. The defendants and cross petitioners, Ella Schneider Carle, Leona Getz, Mary Elizabeth Brown, William Frederick Schneider, Jr. and Clarence Byrne, prosecute a cross appeal.

All parties are in agreement that the trust has now become dry and passive and that there is no reason for a continuation thereof since the purpose for which the trust was created has been accomplished.

It will be noted that the lower court held the trust created by the third clause of the will above to- be an active trust; that the two beneficiaries named in the third clause are not entitled to receive the estate now in the hands of the trustee because they are life tenants only; and that at the death of the survivor of them the remaining estate of the decedent passes by intestacy to her heirs-at-law.

The general rule is that if all the beneficiaries of a trust, none of whom is under an incapacity, consent thereto they can compel a termination of the trust unless the continuance thereof is necessary to carry out a material purpose of the trust. It is stated in American Law Institute, Trusts, paragraph 337, page 1021:

“(1) Except as stated in Subsection (2), if all of the beneficiaries of a trust consent and none of them is under an incapacity, they can compel the termination of the trust.
“(2) If the continuance of the trust is necessary to carry out a material purpose of the trust, the beneficiaries cannot compel its termination.”

In view of the language of the third clause of the will above and this general rule, we are of the opinion that the court erred in refusing to terminate the trust.

However, the serious contention arises when we reach the point where it becomes necessary to determine the rights of the parties defendant. Pauline and Mary Julia Schellberg take the position that upon the termination of the trust they become the sole beneficiaries of the residuary estate under the residuary clause above. The heirs-at-law of August Ferdinand Schneider, the brother who disappeared, take the position that upon the fullfillment and termination of the trust the property reverts to the estate of the deceased, Anna M. Schneider, and should then go according to the laws of descent and distribution.

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Citizens Fidelity Bank & Trust Co. v. Schellberg, 238 S.W.2d 142, 1951 Ky. LEXIS 803 (Ky. 1951).

238 S.W.2d 142 (Citizens Fidelity Bank & Trust Co. v. Schellberg) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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