No. 13163
I N THE SUPREME COURT O THE STATE O M N A A
F F O T N
1977
MARILYN J O COFFEE, f o r m e r l y
MARILYN J O WOLFE,
P l a i n t i f f and Respondent,
DELOIT RAY WOLFE,
D e f e n d a n t and A p p e l l a n t .
Appeal from: D i s t r i c t C o u r t of t h e F o u r t h J u d i c i a l D i s t r i c t ,
H o n o r a b l e Edward D u s s a u l t , J u d g e p r e s i d i n g
Counsel o f Record:
For Appellant:
Worden, T h a n e , H a i n e s a n d W i l l i a m s , M i s s o u l a ,
Montana
Ronald B e n d e r a r g u e d , M i s s o u l a , Montana
For Respondent :
I l u l r o n e y , D e l a n e y , Dalby & Mudd, M i s s o u l a , Montana
D e x t e r L. D e l a n e y a r a u e d , M i s s o u l a , Montana
Submitted: June 2 , 1977
~ecidea\:l\2
. 6 I / ?
Filed:
Clerk
M r . J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion of t h e
Court.
T h i s i s an a p p e a l from an o r d e r d i s a l l o w i n g a l o a n i n a
t e r m i n a t i o n of a t r u s t proceeding.
On August 24, 1961, p l a i n t i f f was g r a n t e d a d i v o r c e from
defendant. Two c h i l d r e n of t h e marriage Melinda Sue, age 4 ,
and D e l o i t Ray, age 3 , were placed i n p l a i n t i f f ' s custody.
A p r o p e r t y s e t t l e m e n t agreement provided defendant was t o pay
$200 p e r month f o r t h e s u p p o r t and maintenance of t h e c h i l d r e n ,
p l u s a $10,000 l i f e i n s u r a n c e p o l i c y on d e f e n d a n t ' s l i f e . De-
f e n d a n t agreed t o pay a l l t h e premiums i n c i d e n t t h e r e t o and t h e
b e n e f i c i a r y of t h e p o l i c y was t o be t h e F i r s t N a t i o n a l Bank of
Missoula, a s t r u s t e e . I n t h e event of d e f e n d a n t ' s d e a t h t h e
proceeds were t o be p a i d t o t h e bank t o be used f o r t h e c a r e ,
e d u c a t i o n and s u p p o r t of t h e c h i l d r e n w i t h t h e p r o v i s i o n t h a t
any amount remaining when t h e youngest c h i l d became 25 y e a r s of
age would be payable t o t h e c h i l d r e n i n e q u a l s h a r e s .
On December 4 , 1964, following p l a i n t i f f ' s r e m a r r i a g e , t h e
p a r t i e s e n t e r e d i n t o a new agreement modifying t h e terms of t h e
1961 agreement a s t o support f o r t h e c h i l d r e n . Under t h e new
agreement defendant p a i d $50 p e r month f o r c h i l d s u p p o r t of t h e
minor c h i l d r e n and $150 p e r month was t o be p a i d i n t o a fund
t o be used f o r t h e f u t u r e u s e of t h e c h i l d r e n ' s e d u c a t i o n . This
money was d e p o s i t e d i n t h e Southside N a t i o n a l Bank o f Missoula
and time s a v i n g s c e r t i f i c a t e s were purchased.
I n November 1974, defendant borrowed $2,743.63 a t 4% i n t e r e s t
on t h e l i f e i n s u r a n c e p o l i c y s o t h a t h e could purchase a $13,000
F e d e r a l Land Bank bond which would n e t approximately 3% i n t e r e s t
t o t h e t r u s t fund. To make t h i s purchase defendant a l s o p u t i n
h i s own funds, along w i t h t h a t borrowed on t h e l i f e insurance
policy. The bond was f o r t h e b e n e f i t of t h e c h i l d r e n .
O June 6 , 1975, Melinda Sue became 18 y e a r s of age and
n
p l a i n t i f f p e t i t i o n e d t h e c o u r t f o r an o r d e r t o have an
accounting o f t h e funds which had been accumulated and s e t
a s i d e f o r t h e c h i l d r e n ' s education and t o pay over t o Melinda
Sue "one-half of t h e proceeds o f t h a t fund f o r h e r use and b e n e f i t
i n connection w i t h d e f r a y i n g h e r f u t u r e e d u c a t i o n expenses."
Defendant f i l e d h i s accounting and p e t i t i o n e d t h e c o u r t
f o r an o r d e r a u t h o r i z i n g payment of one-half of t h e proceeds of
t h e t r u s t fund, t o g e t h e r w i t h accumulated i n t e r e s t and d i v i d e n d s ,
t o Melinda Sue i n f o u r e q u a l annual payments beginning i n 1975.
The accounting revealed a t o t a l fund of $21,953.41. Defendant
deducted from t h a t amount $2,743.63 t h e loan he made from t h e
insurance p o l i c y and $3,963.55, t h e amount he c o n t r i b u t e d t o
purchase t h e F e d e r a l Land Bank bond. That l e f t a n e t v a l u e i n
t h e account of $15,246.23 a t t h e d a t e of t h e h e a r i n g .
The c o u r t e n t e r e d an o r d e r approving t h e accounting i n a l l
r e g a r d s , except t h e deduction of t h e loan made t o defendant by
t h e insurance company and f u r t h e r denied d e f e n d a n t ' s r e q u e s t f o r
t h e d i s t r i b u t i o n t o Melinda Sue i n f o u r annual payments. In
a d d i t i o n , t h e c o u r t ordered Melinda Sue was e n t i t l e d t o one-half
of t h e cash s u r r e n d e r v a l u e of t h e l i f e i n s u r a n c e p o l i c y p r i o r
t o t h e s e c u r i n g of t h e loan thereon and ordered defendant t o
d i s t r i b u t e t o Melinda Sue t h e sum of $8,994.93.
Defendant r a i s e s f o r t h i s C o u r t ' s c o n s i d e r a t i o n f o u r
i s s u e s on a p p e a l :
I. Whether t h e triaL c o u r t >5xred i-n o r d e r i n g payment o r
one-half t h e c a s h s u r r e n d e r v a l u e of t h e p o l i c y when such
r e l i e f was n o t sought i n p l a i n t i f f ' s p e t i t i o n ?
2. Whether t h e t r i a l c o u r t had t h e power t o modify a p r i o r
p r o p e r t y s e t t l e m e n t agreement?
3. Whether t h e r e i s s u f f i c i e n t evidence t o s u p p o r t t h e
t r i a l c o u r t ' s f i n d i n g t h a t defendant must pay one-half o f t h e
c a s h s u r r e n d e r v a l u e of t h e l i f e i n s u r a n c e p o l i c y p r i o r t o
s e c u r i n g t h e loan t h e r e o n ?
4. Whether t h e l o a n on t h e i n s u r a n c e p o l i c y i s a proper
charge a g a i n s t t h e t r u s t funds?
I s s u e 1. This i s s u e i s directed t o t h e c o u r t ' s ordering
a d i s t r i b u t i o n of one-half t h e v a l u e of t h e i n s u r a n c e p o l i c y when
such r e l i e f was n o t sought by t h e p e t i t i o n .
Defendant a r g u e s t h e l i f e i n s u r a n c e p o l i c y was n o t a p a r t
of Che m u s t fund b u t was a p r o v i s i o n of t h e p r o p e r t y s e t t l e -
ment a t t h e time of t h e d i v o r c e i n 1961, and t h a t t h e i n s u r a n c e
p o l i c y was t o cover t h e c h i l d r e n ' s m i n o r i t y i n c a s e he d i e d .
F u r t h e r , t h a t t h e t r u s t fund came i n t o b e i n g l a t e r , i n 1964,
when he p e t i t i o n e d t h e c o u r t t o lower t h e c h i l d s u p p o r t payments
t o $50 p e r month and he be allowed t o p u t $150 p e r month i n t o a
t r u s t fund f o r t h e c h i l d r e n ' s e d u c a t i o n .
The p e t i t i o n f i l e d by p l a i n t i f f on June 5 , 1975, s t a t e d :
"AND WHEREAS, MELINDA SUE W L E h a s p r e s e n t l y a p p l i e d
OF
f o r and been a c c e p t e d a t an i n s t i t u t i o n of h i g h e r
e d u c a t i o n and i s i n need of and e n t i t l e d t o t h a t s h a r e
of t h a t fund,
"NOW, THEREFORE, t h e P l a i n t i f f p e t i t i o n s t h e
Court f o r i t s Order r e q u i r i n g t h e Defendant
" I ) t o make a f u l l accounting of t h e funds which
have been accumulated and s e t a s i d e f o r s a i d p u r p o s e s , and,
"2) t o pay over t o t h e s a i d MELINDA SUE W L E OF
one-half of t h e proceeds of t h a t fund f o r h e r use and
b e n e f i t i n connection w i t h d e f r a y i n g h e r f u t u r e edu-
c a t i o n a l expenses."
N e f f o r t was made t o modify t h e o r i g i n a l p r o p e r t y s e t t l e m e n t
o
w i t h regard t o t h e l i f e insurance p o l i c y and defendant argues
no evidence was shown t h e l i f e insurance p o l i c y was considered
a p a r t of t h e t r u s t fund c r e a t e d i n 1964.
P l a i n t i f f c o u n t e r s t h e s e arguments by n o t i n g they a r e n o t
only misleading b u t avoid t h e i s s u e . She a l l e g e s h e r p e t i t i o n
sought a f u l l accounting of t h e funds which had been accumulated
and s e t a s i d e f o r Melinda S u e ' s e d u c a t i o n a l expenses. Also, t h a t
t h e language o f t h e o r d e r concerning t h e insurance p o l i c y proceeds
i n d i c a t e d i t was f o r t h e purpose of h e l p i n g t o d e f r a y t h e educa-
t i o n a l expenses of t h e c h i l d r e n .
While defendant makes much of h i s argument t h a t no evidence
was introduced concerning t h e l i f e i n s u r a n c e p o l i c y a t t h e h e a r i n g ,
t h i s i s c o n t e s t e d by p l a i n t i f f and defendant d i d n o t demand a
record. P l a i n t i f f a r g u e s , and we a g r e e , t h a t defendant i s
making a n argument on t h e f a c t s , b u t he h a s f a i l e d t o provide a
record of t h e h e a r i n g .
Absent t h e r e c o r d , and c o n s i d e r i n g t h e c a s e on t h e b a s i s
of t h e c o u r t f i l e s , we f i n d t h e c o u r t p r o p e r l y e x e r c i s e d i t s
d i s c r e t i o n i n determining t h e n a t u r e of t h e corpus of t h e t r u s t .
S i t t i n g a s a c o u r t of e q u i t y , t h e d i s t r i c t c o u r t had f u l l j u r i s -
d i c t i o n t o look i n t o t h e c o n t r i b u t i o n s made by defendant f o r t h e
b e n e f i t of h i s c h i l d r e n and determine what each c h i l d was en-
t i t l e d t o upon a t t a i n i n g m a j o r i t y . T h i s t e d v . Country Club
Tower Corp., 146 Mont. 87, 405 P.2d 432; Dutton v. Rocky Mtn.
Phosphates, 151Mont. 54, 438 P.2d 674.
I s s u e 2. Under t h e f a c t s i t u a t i o n b e f o r e t h e Court i n t h i s
c a s e we f i n d t h e d i s t r i c t c o u r t d i d n o t change t h e p r o p e r t y
s e t t l e m e n t agreement a s argued by defendant. The c o u r t was s i t t i n g
i n e q u i t y and had j u r i s d i c t i o n t o c o n s i d e r t h e f a c t s b e f o r e i t .
Here defendant, when t h e c h i l d r e n were young, took o u t a l i f e
insurance p o l i c y t o i n s u r e t h e i r support and education d u r i n g
t h e p e r i o d o f t h e i r minority i n t h e event he should d i e . That
p e r i o d , a s t o Melinda Sue, i s now over and one of t h e purposes
f o r which t h e p o l i c y was taken o u t , h e r e d u c a t i o n , h a s a r r i v e d .
The very needs defendant a n t i c i p a t e d have occurred and t h e
c o u r t p r o p e r l y included Melinda S u e ' s i n t e r e s t i n t h e p o l i c y a s
p a r t of h e r e d u c a t i o n a l fund.
I s s u e s 3 and 4. For t h e purposes of t h i s opinion we combine
I s s u e s 3 and 4 , because they r e l a t e t o t h e loan made t o defendant
from t h e insurance p o l i c y t o purchase t h e Land Bank bond.
Defendant argues t h e r e was i n s u f f i c i e n t evidence b e f o r e
t h e c o u r t t o support i t s f i n d i n g t h a t he pay one-half of t h e
cash s u r r e n d e r v a l u e p r i o r t o s e c u r i n g t h e loan. Without a record
o r a memorandum opinion of t h e d i s t r i c t c o u r t on i t s r e a s o n s ,
we a r e a t a l o s s t o understand t h e c o u r t ' s r a t i o n a l e .
What t h e c o u r t f i l e r e v e a l s i s t h a t defendant i n November
1974, was allowed by t h e c o u r t t o borrow from t h e p o l i c y t o be
i n v e s t e d i n a b e t t e r i n t e r e s t paying bond s o t h a t t h e c h i l d r e n ' s
e d u c a t i o n a l fund would be enhanced. The c a s h s u r r e n d e r v a l u e of
t h e p o l i c y a s of June 2 8 , 1975, t h e time of t h e accounting,
i n c l u d i n g t h e o u t s t a n d i n g l o a n , amounted t o $3,017.33. I f the
loan were deducted from t h a t f i g u r e t h e c a s h s u r r e n d e r v a l u e
of t h e p o l i c y would be $193.11. I n denying t h e amount o f t h e
loan charge a g a i n s t t h e t r u s t corpus t h e c o u r t added $2,824.22
t o t h e cash s u r r e n d e r value of t h e p o l i c y p r i o r t o t h e loan and
defendant was r e q u i r e d t o use a s t h e cash s u r r e n d e r v a l u e of
t h e p o l i c y t h e sum of $5,841.55.
I n e f f e c t , t h e t r i a l c o u r t i n denying t h e loan on t h e
insurance p o l i c y a s a proper debt a g a i n s t t h e t r u s t p r o p e r t y
r e q u i r e s defendant t o repay t h e loan o u t of h i s own funds. In
doing so t h e c o u r t c o r m i t t e d e r r o r f o r defendant had a l r e a d y
p a i d once i n complying w i t h t h e c o u r t o r d e r t o d i s t r i b u t e one-
h a l f of t h e cash s u r r e n d e r value p r i o r t o t h e s e c u r i n g of t h e
loan. W f i n d t h e loan i n c u r r e d by defendant a s t r u s t e e o f t h e
e
e d u c a t i o n a l fund was a proper charge a g a i n s t t h e fund.
The judgment of t h e t r i a l c o u r t i s a f f i r m e d i n p a r t and
remanded t o t h e c o u r t f o r compliance w i t h t h i s opinion a s t o
t h e remaining p a r t .
Justices.