Penn v. Keller

16 S.E.2d 331, 178 Va. 131, 1941 Va. LEXIS 151

• Court: Supreme Court of Virginia
• Decided: September 10, 1941
• Docket: Record No. 2324
• Status: Published

Opinions

Browning, J.,

delivered the opinion of the court.

This case involves the disposition of a trust fund of $2,000.00 and some accrued interest. We first learn of it through the will of a man named Abram T. Litchfield, who was born in Virginia, but who was a resident of the state of Missouri at the time of the execution of the will and at the time of his death.

Clause 5 of the will comprises two paragraphs, which are as follows:

“5. I will and bequeath to my sister Mrs. John D. Cosby the sum of Two Thousand Dollars, in trust however, the interest only to be used in keeping in repair ‘Litchfield Hall’ on the campus of ‘Martha Washington College’ for young ladies, located at Abingdon, Virginia, and being the property of the Methodist Episcopal Church, South.

“If my sister should not be living at my death, then said sum of Two Thousand dollars shall he paid to the trustees, curators or other persons having the legal management and control of said Martha Washington College for young ladies, or who may be legally authorized to receive said trust fund, to be held and used for the purpose aforesaid.”

The testator revoked this clause by a codicil and made Miss Emma Reed, his sister-in-law, his residuary legatee, so that the fund of $2,000.00 descended to her absolutely. Soon after Mr. Litchfield’s death, which was in March, 1919, Miss Reed conceived the laudable idea of devoting a like sum, of her own, to the purpose indicated in the will, but which the testator had declined to effectuate, though it was his original notion. She paid over the sum of $2,000.00 to Mrs. John D. Cosby to be held in trust and administered in accordance with the provisions of section 5 of the will of Litchfield. Mrs. Cosby placed this money in the First National Bank of Abingdon, Virginia, which thereafter sent the interest thereon to Mrs. Cosby, who, in turn, paid it to the trustees of Martha Washington College.

Mrs. Cosby died in 1921. Her daughter, Mrs. Penn, the complainant, then acted as trustee of the fund, until 1934. The latter collected the interest on the money and paid it over to the trustees of Martha Washington College until it closed. '

In 1934, upon the motion of Mrs. Pehn, Irven M. Keller was appointed as trustee of the fund. Mrs. Penn then borrowed a portion of these funds from the trustee, giving to him her notes therefor, secured by a deed of trust on her real property.

Keller, as trustee, paid the interest received on the trust fund to Emory arid Henry College, the successor in title to the properties of Martha Washington College. Mrs. Penn told him that it was agreeable to her to so pay the interest, but not to pay out ariy of the principal. Mrs. Penn made no claim to the fund uritil shortly prior to the institution of this suit in 1938.

If Abram T. Litchfield were' the creator of the trust we would be favored with the precise words which were employed, but Miss Reed occupies this relation. Her act is the genesis of the fund and it was a verbal transaction, so that we must look to what she did, and what she said in doing it, in order to determine its significance.

Litchfield Hall, referred to in the quoted clause of Mr. Litchfield’s will, is located on the campus of Martha Washington College in Abingdon, Virginia. It does not appear just when it was erected, but certainly many years before the Litchfield will was made. It was named in memory of some of the Litchfield aricestors, who were Virginians and lived in Wáshington county, Abingdon being the county seat.

Martha Washington College was established, operated and owned by the Methodist Episcopal Church, South. It was devoted to the education of young ladies and it was successfully conducted for a long time. But the vicissitudes of fortune overtook it so that in the year of 1931, which was the beginning of the disastrous period of the thirties, it closed its doors as an institution of learning and was unoccupied until 1937, when it was leased for a period of 25 years to the Barnhill Hotel Corporation. It has been since and is now operated as a hotel. The physical aspects of the property are about the same as they were originally. It has been much improved by being put in thorough repair and order, but the stateliness of the buildings and the beauty of the grounds are retained.

Nine miles away, in the same county, there is a coeducational institution of fine repute, named Emory and Henry College. It, likewise, is owned and operated by the Methodist Episcopal Church, South. In June, 1919, the trustees of Martha Washington College conveyed the property to Emory and Henry College, though, the deed was not recorded until 1929. Emory and Henry assumed the payment of the Martha Washington College indebtedness of $168,000.00, which happily, at the time of the taking of the testimony in this case, had been reduced to about $53,000.00!. At one time both institutions were managed and controlled by the same board of trustees and were closely affiliated in other respects.

We gather from the evidence that Litchfield Hall is much the same as it was. It is in the high state of preservation that is enjoyed by the rest of the plant. It is still Litchfield Hall. It is on the same campus that it occupied in 1915, the date of the Litchfield will. It is in the town of Abingdon, Virginia, and it is the property of the Methodist Episcopal 'Church, South. The rent derived from the lease of Martha Washington College is expended for the repair, upkeep and restoration of the property. Thus with the onus of the indebtedness lifted and the physical status of the property in shipshape its embarkation upon a future educational career will be an auspicious one if the church again elects for it such-activity.

The -only reason for bringing the will and its terms into the picture is that Miss Reed, the settlor of the trust, said that she was just carrying ont Mr. Litchfield’s wishes, that she thought it was “a nice thing to do” and it would perpetuate the Litchfield name, and she sent the money, $2,000.00, to Virginia, she didn’t remember to whom, to be used “for the benefit of ‘Litchfield Hall’.”

This is a portion of her examination in chief:

‘ ‘ Q.37. What did you intend at the time that you used the $2,000.00 to create this trust?

“A. I didn’t create it.

‘ ‘ Q.38. Well, you sent it back—as you say, you let them have it?

“A. Just because it said so in the will. He wanted it to go to Litchfield Hall and I paid no attention to it.

“Q.39. And your sole reason for letting them have it was to carry out the intention expressed in his will?

“A. Yes.”

On cross examination she testified, in part, as follows:

“Q.82. But is it not a fact that Mr. Abram Litchfield was interested in schools for young women?

“A. Not especially.

“Q.83. Don’t you think he was interested in the Martha Washington College because it was a College for young women?

“A. No; just because it was in Abingdon.

“Q.84. You think it was just because it was in Abingdon?

“A. That is what I think.

“Q.85. You, personally, Miss Reed, in making this gift of $2,000.00 back in 1921—did you have in mind at all that it was being used for a school for young women for educational purposes?

“A. Yes.

“Q.86. Did it make any difference to you whether the money was used for the upkeep of a building or for general educational purposes for young women?

“A. I thought it was to perpetuate the Litchfield name. ’ ’

It will be noted that Mr. Litchfield, if Clause 5 of his will had remained intact, never made Martha Washington College as such the object of his testamentary aid and solicitude. The college did not bear his name. He was doubtless urged by pride in the family name—one of those ruling passions that are even strong sometimes in death. It found expression, for the while, in a desire to preserve intact and form what he had long known as “Litchfield Hall.” Where was it? “On the campus of Martha Washington College for young ladies, located at Abingdon, Virginia, and being the property of the Methodist Episcopal Church, South.” He not only located “Litchfield Hall” by apt words of description but told of its ownership, another probable element evoking pride. Of course “Litchfield Hall” is a part of the college property and was used in that connection.

The above is, we think, a fair interpretation of the application of the language of the revoked clause. The language of the second paragraph does not, we think, impair or weaken this interpretation. It is strengthened by the words of one who was in a better position to speak authoritatively than anyone else. Miss Reed was, for a time, a member of Mr. Litchfield’s household. She was his sister-in-law. She was his residuary legatee. She said that his interest was in “Litchfield Hall”; that he was not especially interested in schools for young women; in effect, that if he had any interest in Martha Washington College it was because it was in Abingdon and when she was asked if it made any difference to her if the money was used for the upkeep of a building- or for general educational purposes for young women, she replied that she thought it was to perpetuate the Litchfield name.

Let it be borne in mind that this was the settlor’s construction of the origin of her own act. She was past 90 years old when she was informed by the appellant that there was no Martha Washington College; that Emory and Henry College was claiming the money. She knew nothing of Emory and Henry—nothing of the relations between the two institutions of learning. She lived in Kansas City, Missouri, and if she knew anything of the conditions in Virginia connected with the matters involved here the record does not disclose it. She knew of Martha Washington College and she knew of Litchfield Hall- in a general way. She had years before made the provision which she thought would be “a nice thing to do”, in that it would perpetuate the Litchfield name. She had settled and established this private trust and had almost forgotten about it. This latter suggestion is justified because she said that she sent the money back here and thought no more about it. She was not advised that the appellant had borrowed a part of the fund and that her residence in Abingdon was the security for its repayment. It was natural enough when the appellant wrote to her as she did and asked her for the money, which a stranger was claiming, that her generosity should again express itself in assent to the importunities. This question to Miss Reed and her answer is largely the basis of the position we are taking:.

“Q.9A When you had Mr. Major send this $2,000.00 to Mrs. Cosby back in 1919, or soon after, the death of Mr. Litchfield, did you ever expect to get it back at that time?

“A. No, I never thought about it. It never occurred to me. You don’t need to put this down.

“Mr. Barker: Yes, put it down. That is all right.

“A. (continuing) I never thought about it one way or the other. I had forgotten all about the $2,000.00 until she told me it couldn’t be used for ‘Litchfield Hall’ because there was no.college and could she have it, and I said ‘Yes’, but I said ‘Don’t bother me about it.’ ”

She added that she wanted Mary Penn to have it because she needed it and had asked her for it.

This desire to help one in need—to do a kindly and generous thing—was a characteristic of Miss Reed. She signed and acknowledged two papers assigning her interest in the fund to the appellant. The second paper was prepared by the appellant’s attorney and sent from Virginia to Miss Reed in Missouri and it contains the opinion of the affiant that the trust had been cancelled and dissolved because Martha Washington College was no longer being operated as a college.. The wording and phraseology of this assignment bear a significance which is at hopeless odds with Miss Reed’s testimony which was subsequently taken at her home in Kansas City.

But all of this is of no legal avail.

To say that there is not a lack of harmony of judicial expression and opinion on the question of the settlor’s right to revoke a trust would be to withhold frankness. But we do say that, in our opinion, the better reasoned and the weight of authority is that it cannot be done without the consent of those in interest, that is, the beneficiaries, which latter term we adopt as being preferable, though equal in precision, to the old Norman phrase cestuis que trustent. Nowhere is this doctrine more pronounced than in Virginia.

The most recent enunciation of it is to be found in the case of Bottimore v. First & Merchants Nat. Bank of Richmond, 170 Va. 221, 226, 196 S. E. 593, where it is said, through Eggleston, J.:

“It is well settled that where a valid and effective voluntary trust has been created, and no power of revocation has been reserved, it can not be revoked by the creator without the consent of the beneficiaries thereunder. If any of the beneficiaries are not in being-, or are not sui juris, and hence can not consent, the trust agreement can not be revoked. Skipwith’s Ex’r v. Cunningham, 8 Leigh (35 Va.) 271, 31 Am. Dec. 642; Schroeder v. Woodward, 116 Va. 506, 526, 527, 82 S. E. 192; Russell’s Ex’rs v. Passmore, 127 Va. 475, 497, 103 S. E. 652; 38 A. L. R. 941, note; 91 A. L. R. 103, note, citing-numerous cases.”

In the case of Russell’s Ex’rs v. Passmore, 127 Va. 475, 497, 103 S. E. 652, the following quotation from 1 Perry on Trusts (6th ed.), sec. 104, is quoted with approval :

“It is true, as said in 1 Perry on Trusts (6th ed.), sec. 104: ‘A completed trust without reservation of power of revocation can only be revoked by consent of all the cestuis. If a voluntary trust for the benefit, wholly or partly, of some person or persons other than the grantor, is once perfectly created, and the relation of trustee and cestui que trust is once established, it will be enforced, though the settlor * * * has attempted to revoke it by making’ a second voluntary settlement of the same property, or otherwise, or if the estate, by some accident, afterwards becomes revested in the settlor. In all these cases the first perfectly created trust will be upheld, with all its consequences * * * . A trust once created and accepted without reservation of power can only be revoked by the full consent of all parties in interest; if any of the parties are not in being, or are not sui juris, it cannot be revoked at all.’ ”

The eminent Dr. Wm. Minor Lile, late professor of law in the University of Virginia, in his Notes on Equity Jurisprudence, page 95, under the heading’, “Control of Charities,” makes this statement: “It would seem, however, that where there is a complete dedication, and hence no possibility of a resulting trust, the grantor himself, no longer having an interest in the trust, has no standing in court to have the trust enforced.” Clark v. Oliver, 91 Va. 421, 22 S. E. 175; Emory & Henry College v. Shoemaker College, 92 Va. 320, 23 S. E. 765; Wambersie v. Orange Humane Soc., 84 Va. 446, 5 S. E. 25; 6 Cyc. 968-71.

The much cited case of Clark v. Oliver, supra, involved the construction of a charitable trust and particularly with respect to the disposition and control of the fund therein. It was there said:

“The money was devoted to a charitable use. As we have said, the whole interest of the donors was divested. There remained in them no scintilla of right. How then can they he heard in a court of equity with respect to the disposition of it! There is no such thing as a resulting trust with respect to a charity. Where a fund has been devoted to a charity, which, if the charity fails, will go to others, those persons having hostile interests may, of course, assert any claim they may have in the subject, and show that the charitable use has for any cause failed and become inoperative and void; but where the donor has effectually passed out of himself all interest in the fund devoted to a charity, neither he, nor those claiming under him, have any standing in a court of equity as to its disposition and control.”

In the opinion in the above case this court, through its distinguished president, Judge Keith, distinguished the Clark-Oliver case from the case of Chambers v. Baptist Educational Society, 1 B. Monroe, page 215, because both the plaintiffs and defendants in the case then under review relied upon the Chambers v. Baptist Educational Society case. It was pointed out that in the latter case in which it was sought to recover from a contributor to the trust fund the amount of his contribution and a part of the fund which was loaned to him by the trustees, he resisted their collection by asking for a dissolution of the contract of contribution in the one instance and prayed to perpetuate an injunction which he had sued out against the collection of both judgments which had been recovered against him. The distinguishing features between the two cases was that in the Chambers v. Baptist Educational Society case the plaintiff charged acts of malfeasance and abuse of the corporate powers of the corporation and the misapplication of the fund, and that he had been induced to contribute by false representations and suppression of the truth in matters material to a correct understanding of the contract of subscription. After the enumeration of these charges this court said: ‘ ‘ Surely that case is not in any degree analogous to the case at bar.”

The court then,- in elaborating the differences between the case it was considering- and the case which had been relied upon, said that while- it could not concur in the view that a party, merely because-he had-subscribed to the found, could maintain a bill to control its disposition, still it thought the decree in the cited case “was eminently proper.” Of course this perfectly natural expression was unnecessary to the decision of the case in hand, and therefore obiter dictum. This expression was seized upon by the appellant to justify her position that the Clark v. Oliver case, supra, was not controlling or persuasive in the present case; employing an ambulatory process of reasoning suggestive of the Dr. Jekyll and Mr. Hyde incident.

After the use of the expression quoted the court said:

“In our opinion, where contributors have subscribed to a fund for a charitable purpose, and have paid it over to the hand by which it is to be received and applied, their interest in and control over it cease and determine, and whatever jurisdiction is thereafter entertained by the courts with respect to the disposition and control of this fund, must be called into active exercise either by the Attorney General, acting upon behalf of the public, or by the trustees charged with its-custody and administration, or by some person having a beneficial interest in the object of the trust.”

In the Clark v. Oliver case, supra, there were no charges of ugliness of conduct nor are there any in the present case.

Nowhere have we found a more satisfactory and enlightening- treatise on°the subject of trusts and trustees than is contained in the American and English Ency. of Law, 2d edition, volume 28, page 848 et seq. At page 889, section 5, under the heading, Consideration and Voluntary Trusts, is the following statement:’

“Where there is no fraud, and a trust has been actually created and the relation of trustee and cestui que trust established, it is irrevocable and will be enforced in. equity -without regard to the question whether it is -a voluntary trust or is founded on consideration ;***.”

Idem, page 899, under the head of Revocation, is this statement: “(1) Complete Trusts Irrevocable.—If a trust has been once perfectly created with an intelligent comprehension of the nature of the act, it is irrevocable, even though it be voluntary, and the subsequent acts of the settler or the trustee cannot affect it.”

Idem, page 949, under the heading Trust Not Terminated on Trivial Grounds.—“When a trust is clearly established a court of equity looks at the substance, and will not defeat it upon light and trivial grounds, but will accord to each party his just and lawful rights, preserving them according to the original contemplation of the parties. If the trust instrument obviously fails to conform to the intention of the settlor the court will sometimes modify it in conformity to the intention rather than set aside the trust.”

Idem, page 951, under the heading No Power of Revocation.—“One who makes a deed of real or personal estate in trust without reserving the authority to alter or revoke it, and an interest in the estate, passes to the beneficiaries, has no right to terminate the trust, nor to change its character, in the absence’’ of fraud, imposition, mistake, or misapprehension, without the consent of the beneficiaries. A trust thus established is not destroyed or in any manner impaired by the subsequent conveyance, settlement, or devise of the same property, or by any other conduct on the part of the settlor inconsistent with the trust. A conveyance by the settlor’s heir is equally inoperative.”

Among the cases cited as authority for the above statement is Skipwith’s Ex’or v. Cunningham, 8 Leigh (35 Va.) 271, 31 Am. Dec. 642.

It is at once seen that after the trust had been created by parol and had been paid over to the hand by which it was to be received and applied, the interest in and control over it by Miss Reed ceased and determined. It was beyond her power to revoke it and nothing that she thereafter said or did eonld affect or impair its being. The fund which she donated had been impressed with the trust. She had established it of her own volition, without any mental or other reservation of any sort.

We are urged that the trust terminated because the trustées of Martha Washington College had conveyed its property to Emory and Henry College and because the grantee had leased the property for a term to a hotel corporation to be operated as was said “for commercial purposes.” We do not accept this as a sound proposition, in any view of the case, but particularly in the light of the testimony of Miss Heed, the settler. She set apart the fund to be used in keeping in repair “Litchfield Hall”. She said that it was to perpetuate the Litchfield name, which was in conformity with the desire of her brother-in-law, Abram T. Litchfield; that he was not especially interested in schools for young women, and that if he was interested in the Martha Washington College it was not because it was an institution of learning for young* women but because it was in the town of Abingdon.

We do not think that the alienation of the school property to another school nearby, of a co-educational class, and its lease for a term to a commercial lessee, operate to terminate the trust. We are strengthened in this conclusion by the fact that the settlor was from the state of Missouri where courts of equity are clothed with the power, in upholding a trust, to employ a method of providing a subject upon which the trust is to operate, where there is at least a partial failure of the original beneficiary, which is in the nature of a substitution for the cy pres doctrine, which technically does not obtain in this country.

We may add that the trust we are considering had been completely created and fully and perfectly declared at least as early as 1921 and had been in operation ever since. The fund was held by a trustee and the interest was paid and received and applied as was contemplated by the settlor, during* all this time. This was with the knowledge, advice and cooperation of the appellant, who finally asked the court to appoint another trustee, so that she might borrow the money to which she now asserts ownership, and title. It is conceivable that if Emory and Henry College had not come to the rescue of Martha Washington, tottering as the latter was, under the burden of devastating indebtedness, there might not now be a “Litchfield Hall” to perpetuate the name of the gentleman who conceived the idea, at one time, of being* its benefactor.

The judge of the trial court delivered a clear and convincing* opinion, which was made a part of the record. To discuss it more at length would prolong this opinion, which is already too extended. We are in accord with his conclusions. The decree is affirmed.

Affirmed.