Swayze's Estate, Dean v. Bennett

This is a proceeding to determine heirship under the holographic will of Mary Swayze. Her will is as follows:

"Sheridan, Montana, Nov. 27, 1944.

"I, Mary Swayze being of sound mind and memory do make and execute this my last will and testament, hereby revoking all wills by me previously made. I nominate and appoint Lyman H. Bennett, Jr., executor of this Will, and I direct that he cause my remains to be suitably buried, on the left hand side as you come down the steps, from the `Rock Haven' gate at the property where I reside. I give devise and bequeath unto Warren H. Merritt of Nome, Alaska my home ranch about 160 acres and all of my interests in the placer mining property, he to maintain my home and the surroundings thereof in their present condition in all respects as a memorial to me.

"I direct my executor to reduce sufficient of my estate to cash, such cash to be utilized for the erection and maintenance of a modern hotel at Virginia City, Montana, where no intoxicating liquors are to be sold at any time, said hotel to be maintained as a memorial to me, and I direct my executor to cause the formation of a corporation to be known as the Mary Swayze Memorial Hotel Company, to which corporation said hotel is to be conveyed, and by which it is to be maintained and operated.

"Mary Swayze."

The trial court held that the last paragraph of the will was void for uncertainty. The court said:

"1. The hotel provision is so indefinite and uncertain and lacking in definiteness and certainty that the said executor could have no way of knowing or determining with any reasonable certainty what portion or part of said estate should be used and devoted to the purchase of a hotel site, or to the cost of the erection of a hotel building; or of the nature or cost of the furnishings of the building; and said executor would furthermore have no way of knowing or determining what part or portion of said estate should be separately, or otherwise, set aside and used for the purpose of the maintenance of said hotel when erected and furnished; and would have no way of determining what should be done with the proceeds or profits, if any, from the operation of said hotel.

"2. * * * The executor would have no way of determining what was the purpose and intent of the testatrix * * *

"3. * * * This Court has no way of determining what the intent of the testatrix was in respect thereto and could not direct the executor as to the manner, method and means of carrying out said hotel provision. * * *

"9. The intended trust fails because of the failure to indicate the beneficiaries with reasonable certainty in that the beneficiary could not be deemed to be any group, class, or the public at large, in the absence of a charitable purpose, and the absence of a direction that the hotel shall not be run at a profit, and in the absence of a direction that less than reasonable prices shall be charged to all patrons. It is the duty of every trustee unless otherwise directed by the trust instrument to administer his trust profitably."

Judgment was entered distributing the property under the specific legacies and the remainder of the estate was ordered distributed as if decedent had died intestate. This appeal is from that judgment.

The general rule is that if a person makes a will he must[1, 2] declare his wishes in specific terms and not leave it in wide and uncertain terms for another to make his will for him. 69 C.J. 358. And when a trust is created by a will it is essential to its creation and validity that it be materially certain in its material terms and parts. 54 Am. Jur., Trusts, sec. 37.

Accordingly the subject matter of a trust must be designated with reasonable certainty from facts existing at the time of the creation of the trust. Sec. 7884, Rev. Codes of Montana 1935; Restatement of Trusts, sec. 76.

And the beneficiary must also be designated with reasonable certainty. Sec. 7884, Rev. Codes; 54 Am. Jur., Trusts, sec. 39; Restatement Trusts, sec. 124.

The trial court's conclusions of law above quoted point out the uncertainties in the hotel provision that violate these fundamental rules.

The intended trust was also held invalid because it was the trial court's opinion that the absolute power of alienation was suspended for a period greater than permitted by section 6705, Revised Codes.

Section 6705 provides: "The absolute power of alienation cannot be suspended, by any limitation or condition whatever, for a longer period than during the continuance of the lives of persons in being at the creation of the limitation or condition, except in the single case mentioned in section 6734." (Contingent remainder on a remainder in fee to be determined during the minority of the first remainderman.)

Section 6706, Revised Codes, declares that a future interest "which, by any possibility" violates the rule is void and continues, "Such power of alienation is suspended when there are no persons in being by whom an absolute interest in possession can be conveyed."

This rule against restraint of alienation is not a "rule of[3, 4] construction," but a peremptory command of the law. It is not, like a rule of construction, a test, more or less artificial, to determine intention. Its object is to defeat intention. Therefore every provision in the will or settlement is to be construed as if the rule did not exist, and then to the provision so construed the rule is to be applied. In re Murphy's Estate, 99 Mont. 114, 124, 43 P.2d 233, quoting from Gray's Rule Against Perpetuities, 3rd Ed., sec. 629.

The company founded in accordance with the direction of the will is only directed to operate and maintain the hotel. No power to alienate the property is granted. Since no power whatsoever is granted the trustee to alienate the property, there is a violation of sections 6705 and 6706 and the interest created is void. In re Hartwig's Estate, Mont., 175 P.2d 178.

Appellant has placed some reliance on the case of Lawrence v. Prosser, 89 N.J. Eq. 248, 104 A. 772, 773, and quotes: "Again, it is said that the bequest is void, because it violates the rule against perpetuities. The will directs the money to be appliednot for maintenance, but for construction and construction only. To the case of such a bequest the law of perpetuities can have no application unless the construction be postponed to a period exceeding a life or lives in being and 21 years. There is a palpable fallacy under-lying much of complainants' argument on this head. It is that, because a monument is likely to last beyond the legal period, the case is one of perpetuity. The same might be said of any structure likely to endure." (Emphasis added.) It is appellant's theory that since this is a memorial it is a valid trust.

The case cited is against the appellant's contention. The[5] executor is directed by the will to "reduce sufficient of my estate to cash * * * for the erection and maintenance of a modern hotel * * *" the hotel "to be maintained as a memorial" and the executor is directed to form a corporation by which the hotel is to be "maintained and operated." The distinction made in the cited case is pointed out in McCartney v. Jacobs, 288 Ill. 568,123 N.E. 557, 4 A.L.R. 1124, where the annotator has collected authorities declaring that a provision for the erection of a memorial and the maintenance thereof is void while a provision directing the immediate expenditure of money for the erection of such a memorial is not void. See 1 Scott on Trusts, sec. 124.5.

Therefore if the intended trust be deemed a private one it[6] fails for lack of certainty and because it would suspend the power of alienation for a period longer than lives in being.

However, special consideration is given to gifts for[7] charitable purposes and in such cases the courts have recognized that it is open to the testator to leave to trustees to select the way in which the charitable purpose is to be applied. And where a charitable purpose is established the lack of certainty in the method of carrying out the trust will be remedied by the court by some scheme to accomplish the charitable intent of the testator. Also, a charitable trust is valid although its execution extends beyond the period allowed by the rule against perpetuities or results in a suspension of alienation for a period of time greater than that permitted a private trust. Art. XIX, sec. 5, Mont. Const. But in order to establish the application of these two rules to the instant case, it must be first demonstrated that the trust to which they are applied is a charitable one. Section 374 of the Restatement on Trusts, says: "A charitable trust is created if it includes a purpose `the accomplishment of which is beneficial to the community.'"

The classic judicial definition of a charity was that of Lord[8] Macnaghten in Income Tax Commissioners v. Pemsel (1891), A.C. 531 at 583: "Charity in its legal sense comprises four principal divisions; trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community not falling under any of the preceding heads."

A definition of charity frequently quoted in this country is that of Justice Gray in Jackson v. Phillips, 14 Allen, Mass., 539, 556: "A charity, in the legal sense, may be more fully defined as a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing their minds or hearts under the influence of education or religion, by relieving their bodies from disease, suffering or constraint, by assisting them to establish themselves in life, or by erecting or maintaining public buildings or works or otherwise lessening the burdens of government. It is immaterial whether the purpose is called charitable in the gift itself, if it is so described as to show that it is charitable in its nature."

In its attempt to reconcile the confusion that has arisen around charitable trusts, the Restatement enumerates six charitable purposes: "(a) the relief of poverty; (b) the advancement of education; (c) the advancement of religion; (d) the promotion of health; (e) governmental or municipal purposes; (f) other purposes the accomplishment of which is beneficial to the community." Sec. 368.

It is to be noted that Lord Macnaghten's definition, and the Restatement, declare that the trust is valid as a charitable trust if it includes a purpose "the accomplishment of which is beneficial to the community" and Justice Gray arrives at the same conclusion in different language.

Therefore the definitions in themselves are not of a great[9] deal of benefit in applying the test as to whether or not the creation of a hotel trust and the building of a hotel in Virginia City is a charitable purpose. The character of a trust as public rather than private is not determined by any sharply defined formula. Sec. 368, Restatement, Trusts, Comment b. Each case must be determined on its own particular facts.

At the outset it must be remembered that while a charitable trust can be one whose purpose is beneficial to the community, every purpose beneficial to the community is not a charity. By simply reversing the statement the field is broadened so that many enterprises beneficial to the community in themselves and valuable in building the commercial or business welfare of members of the community would be classed as charities. In other words the benefit to the community is a necessary condition to every charitable trust but benefit standing alone is not enough to establish the trust as a charity.

This is illustrated by the line of cases discussed by Professor Austin W. Scott in 58 Harvard Law Review 548, in his article, "Trusts for Charitable and Benevolent Purposes," where trusts for charitable and "benevolent" or charitable and "liberal" or "worthy" or "philanthropic" or "humanitarian" or "deserving" or "public" purposes have failed for uncertainty because the alternative "benevolent" or "humanitarian," etc., purpose, while beneficial to the community and deserving of praise is not strictly charitable. See 163 A.L.R. 784 and Restatement of Trusts, section 398.

It is true that the modern trend of authority is to allow greater latitude in the application of the law of charitable uses and, as pointed out in the dissenting opinion's quotation from Ould v. Washington Hospital, 95 U.S. 303, 311, 24 L. Ed. 450, "new discoveries in science, new fields and opportunities for human action, the differing condition, character and wants of communities change and enlarge the scope of charity." In accordance with that concept the court in Todd v. Citizens' Gas Company, 7 Cir., 46 F.2d 855, held that the establishment of a gas plant for the purpose of supplying light, heat and power to the city created a charitable trust. Reliance was had on Justice Gray's definition quoted above.

Under the same definition, an older case, Doughton v. Vandever, 5 Del. Ch. 51, declared that a bequest to the Philadelphia Water Works was not to a public charity. However, even if a public utility may be the basis for a public charity, it does not follow that the doctrine of charitable purposes could be extended to business enterprises which were not public utilities.

What is the type of benefit to the community that is at the same time charitable? Certainly where there is a direct and tangible benefit to each member of the community the trust would be valid. The trust for the establishment of the gas plant might be sustained under this proposition. Gifts for parks, public halls, recreation grounds, bridges, etc., are other examples of such trusts.

The difficulty is where the benefit is intangible and no one member of the community directly benefits but in a large sense the whole community is aided. The test suggested by section 374 of the Trusts Restatement is whether the purpose is "of a character sufficiently beneficial to the community as to justify permitting property to be devoted forever to their accomplishment * * *." In Comment (a) the Restatement says: "The question in each case is whether at the time when the question arises and in the State in which it arises the purpose is one the accomplishment of which might reasonably be held to be for the social interest of the community." Thus the purpose must be for the general happiness of the community, to promote patriotism, social welfare, public benefit. The benefit to an individual member of the community is intangible but the benefit to the community itself is tangible and definite.

If a trust for the creation and maintenance of a hotel is valid, because there is no hotel in Virginia City, then a trust for the creation and maintenance of a restaurant is also valid. And if intangible benefit to individuals is to be the sole test then a trust for the establishment of a creamery or a canning factory or a pulp mill can also be considered charitable because of the indirect benefits that would inure to the residents as a result of the establishment of such industries.

We agree that the modern trend should be to encourage the establishment of charitable trusts. But the broad mantle of charity should not be stretched to cover such a private purpose as a hotel. Hospitals, colleges, research laboratories, art museums, churches, historical monuments, libraries, homes for the aged and indigent, yes and even public utilities can be construed to be charitable purposes. But to extend the meaning of charity to cover the establishment and maintenance of a hotel is to extend charitable purposes to such an extent that everything is included.

A hotel is a private business enterprise and "it is not[10] charity to aid a business enterprise." Cardozo, J., in Butterworth v. Keeler, 219 N.Y. 446, 114 N.E. 803, 804. Applying the test laid down in the Restatement, whether the purpose is of such benefit to the public that would warrant the people to devote the property to its use in perpetuity, it cannot be said that a hotel is a charity. Even assuming that Virginia City is without hotel facilities and recognizing, as we should, that it is a place of great historic importance to the people of Montana, a shrine for tourists of the state of Montana, and conceding that accommodations are needed by the public in carrying on the work of the courts in housing jurors and litigants and in caring for commercial travelers who make periodical visits to Virginia City, we cannot say that these purposes would warrant the setting aside of such a salutary rule as the rule against restraint of alienation, nor can we justifiably say that it would warrant the creation of a tax-free corporation to compete in the identical business with private corporations or private hotel owners.

If this is declared a charity, we are going to be faced with the contention that the estate is free from inheritance tax, that the corporation is exempt from property tax, and that the employees and trustees of the hotel so created are entitled to all the benefits we give employees of other charitable institutions, such as schools, hospitals and museums. Strong as is the policy of the law to carry out the intent of the testator, it does not justify the extension of the law of charitable uses to declaring a purely private enterprise to be a charitable one solely because the establishment of such an enterprise would give an intangible benefit to the community.

The proposition has been ably stated in 2 Bogert, Trusts and Trustees, sec. 365: "The law might conceivably have declared charitable any trust which produced a widespread social result, even though it brought about other results not at all charitable. But the courts have not taken such a position. To have done so would have opened the door too wide. It would have led to the disguise of a private enterprise in the form of charities. The courts have refused to recognize as charitable a trust in a mixed private and public nature, or one which is essentially private but has certain collateral, incidental public advantages."

Respondents herein are 21 first cousins, next of kin, and the administrator of another first cousin, now deceased. On July 26, 1945, 19 of the respondents filed written appointments designating the attorneys of record as their counsel to represent them. On the same day, under the authority of section 10370, Revised Codes, the court made an order appointing the attorneys of record as the attorneys for the 19 heirs and also as attorneys for the other two first cousins, non-resident heirs.

On October 11, 1945, the hearing on the petition of one of the cousins, Edward R. Hansen, to ascertain and declare the rights of all persons interested in decedent's estate was set for the 14th day of December 1945. On that date, October 11, 1945, the administrator of the deceased cousin filed an authorization for the attorneys of record to appear in his behalf.

Section 10325 provides: "All persons appearing within the time limited must file their written appearance in person or through their authorized attorney, such attorney filing at the same time written evidence of his authority to so appear, * * * and the court or judge shall, after the expiration of the time limited for appearing as aforesaid, enter an order adjudging the default of all persons for not appearing as aforesaid, who shall not have appeared as aforesaid."

It is appellant's contention that respondents filed their appearances prematurely.

There is no merit in this proposition. The written authority[11] of the respondents' attorneys was a matter of record in the case after July 26, 1945, and was never revoked. The attorneys authorized to appear did so on the day set for their appearance. The refiling of their written authority on December 14, 1945, would have been an idle act that the law does not require. Section 10325 requires that written evidence be filed at the same time if no written authority had previously been filed but the statute cannot be construed to mean that if the written authority is not filed on the precise day set for appearance the parties are in default.

The judgment is affirmed.

Associate Justices Choate and Gibson concur.