Estate of Rozell v. Betty Rozell Revocable Trust

2013 OK CIV APP 35, 299 P.3d 500, 2012 WL 7990536, 2012 Okla. Civ. App. LEXIS 127

• Court: Court of Civil Appeals of Oklahoma
• Decided: November 30, 2012
• Docket: No. 109,331
• Status: Published

Opinions

BRIAN JACK GOREE, Judge.

1 1 Plaintiff/Appellant, Estate of Donald R. Rozell by its personal representative, Sharon K. Hudgins-Rozell, sued Defendant/Appellee, The Betty Rozell Revocable Trust by its trustee, Earl Rozell, to recover Donald's share of the distribution from the trust of his late mother, Betty Rozell,. The trial court granted judgment in favor of Earl, We hold that pursuant to the language of the trust agreement, Donald's share vested upon the division date and did not divest upon Donald's death. His interest passed to his estate. We reverse and remand with instructions to grant judgment in favor of Sharon as the personal representative of Donald's estate.

12 On October 1, 2002, Betty executed a revocable trust agreement, which provided in part:

2.04 Division of Trust and to Shares upon My Death, Division Date Defined: Upon my death, the Co-Trustee, Earl Ro-zell, shall immediately divide the trust principal into separate shares for the benefit in equal seven (7) shares for [sic] Watts Rozell, Jr., Ann Rozell Day, Don Rozell, Roger Rozell, John Rozell, Naney Orr and Earl Rozell, per stirpes. This date shall be called the "Division Date". Each share set aside for a child or more remote descendant of mine shall constitute a separate and distinct trust. The person for whose benefit a share is created ... is the primary beneficiary of that share.

2.05 Distribution of Income and Principal to My Descendants After the Division Date: After the Division Date, the Co-Trustee shall have the discretionary power to pay all or any portion of the income and principal of each share of each independent trust to or for the benefit of Watts Rozell, Jr., Aun Rozell Day, Don Rozell, Roger Rozell, John Rozell, Nancy Orr and Earl Rozell, per stirpes. If any beneficiary shall be deceased at the time of distribution, their share shall be distributed to their children so long as they have obtained the age of 25 years or older. Any heir not of the age of 25 years shall have their share held in trust until such time as they reach the age of 25 years.

2.06 Termination of Trust: The share or proportionate part thereof of the trust principal set aside for each primary beneficiary shall be held and eventually distributed and paid over free and clear of trust . within three years of the death of Betty Rozell,

13 Betty died on December 25, 2008. Donald died on February 14, 2009, leaving a surviving spouse but no children. Sharon brought the action below seeking to recover Donald's share of the trust for his estate. The parties tried the matter to the court on November 4, 2010. On December 16, 2010, the trial court entered its judgment against Sharon and in favor of Earl, ruling the trust agreement provided that in order for Donald to benefit under the trust, he not only had to be alive at his mother's death, but also when the distribution was made. The trial court ruled Donald was not alive when distribution was made, and because he had no children, the bequest to him lapsed.

4 Sharon moved for new trial. After the trial court denied her motion, she filed this appeal from both orders.

T5 Sharon contends the trial court erred in holding Donald had to survive until final distribution of the Trust property in order to receive his share. She argues Donald's share vested upon Betty's death based upon the Trust provision directing Earl to divide the Trust into seven separate shares, each of which would constitute a new and separate trust as of the division date. Sharon argues the Trust contained no survivor-ship, contingency, or residuary disposition clauses requiring Donald to survive Betty for a specific period of time. She contends Donald possessed the vested right to the one-seventh share held in trust for him, and that right passed to his estate when he died.

T6 Sharon contends the trial court erred in finding the bequest to Donald lapsed when he died without issue. She argues the trust provided that the beneficiaries' share would pass to their children under certain conditions, but made no provision for a beneficiary who dies without issue. She points out the Trust acknowledged a beneficiary's estate could receive distributions from the Trust in Paragraph 5.08, which provided for income due to a deceased beneficiary to be paid to the beneficiary's estate.

T7 In response, Earl argues the Trust contains a specific requirement of survival to the date of distribution in the language stating, "If any beneficiary shall be deceased at the time of distribution, their share shall be distributed to their children so long as they have obtained the age of 25 years or older." Earl argues the language of the Trust establishes that a deceased beneficiary's portion could be distributed only to the children upon reaching the age of twenty-five years, and because Donald did not have children, his interest lapsed when he died.

18 The interpretation of an unambiguous trust agreement is a question of law which we will review de novo. Corr v. Corr, 2001 OK CIV APP 31, 21 P.3d 642, 644. In construing a trust agreement, our primary purpose is to ascertain and give effect to the trustor's intent. If the language of the agreement is unambiguous, we must ascertain the intent of the trustor from the terms of the agreement as a whole. Id.

19 We find no ambiguity in the language of the trust agreement in this case. Contingent rights vest when the contingency is removed. Randolph v. Board of Regents of Oklahoma Colleges, 1982 OK 75, 648 P.2d 825, 827. Pursuant to the trust agreement, the contingent beneficiaries' rights in the trust vested upon the trustor's death. The trustor directed the co-trustee to establish separate and distinct trusts for the benefit of each beneficiary upon her death, establishing that date as the Division Date. As of that date, the contingency was removed and the beneficiaries' interests vested.

110 A trust's terms may postpone vesting of a beneficiary's interest to the happening of some future event, such as survival to a distribution date. Hulett v. First Nat. Bank and Trust Co. in Clinton, 1998 OK 21, 956 P.2d 879, 884-885. See also Sivia v. Snyder, 1978 OK CIV APP 8, 517 P.2d 812, 814 (approved for publication by the Oklahoma Supreme Court) (the trust language provided that if any beneficiary was not living on the distribution date, then that person's share would go to her issue per stirpes, or if she had no surviving issue, it would be divided among the other beneficiaries.) Trust language may also provide for the interest of the beneficiary to be divested upon the happening of a condition subsequent. REstatEmENt (SEcomnp) or Trusts § 129 emt. e.

{11 Betty's trust is an example of the latter rather than the former. The trust agreement did not use any language establishing a distribution date. Paragraph 2.06 sets a three-year deadline for distributions so that the trust can be terminated, but it does not specify a distribution date. Paragraph 2.05 provides for a beneficiary's share to be divested upon the conditions subsequent that the beneficiary is deceased and has living children. With respect to Donald's share, both conditions were not met. Donald was deceased but he had no children. Therefore, his interest, which vested upon Betty's death, was never divested. It passed to his estate upon his death.¹

112 The trial court erred in granting judgment in favor of Earl as the trustee of Betty's trust. The judgment is REVERSED and this matter is REMANDED with instructions to grant judgment in favor of Sharon as the personal representative of Donald's estate and to direct Earl to distribute Donald's share of the trust to his estate.

JOPLIN, V.C.J., concurs.

1 . The trusts construed in the Dimick and Sivia cases, cited by the dissent, contained language providing for an alternative distribution of the share of a beneficiary who died without issue prior to distribution. Betty omitted this language from her trust. The language she included providing for the establishment of separate and distinct trusts for the benefit of each beneficiary upon her death is absent from the Dimick and Sivia trusts. Therefore, we are unable to conclude that Betty intended the same result reached in those cases.