Love v. St. Louis Union Trust Company

FINCH, Chief Justice

(dissenting).

I must respectfuly dissent.

This case was heard originally in Division One which adopted an opinion written by Commissioner Higgins. That opinion held that Article IX of the Trust Indenture specifically required the trustee to pay that fraction of death taxes which equalled the proportion that trust assets bore to the taxable estate, and that such provision could be altered or amended only by written notification “executed by the Grantor and delivered to the Trustees,” pursuant to Article VI of the Indenture. In so holding, the opinion used this language : “This reservation of the power to alter, amend, or revoke the trust and the manner of accomplishment of such purpose is also clear, complete and unambiguous; and, under such provision, Mr. Love could alter, amend, or revoke his trust only by written instrument executed and delivered by him while living to his Trustee.” Consequently, concluded the opinion, testator’s will could not amend or modify the trust or change the tax burden specified in the trust.

After a motion for rehearing was filed, this case was ordered transferred to the Court en Banc for reargument. Counsel were directed to and did file supplemental briefs in which they responded to these three questions:

“What was the purpose of the clause which restricted the way in which the trust agreement could be changed ? Was it to prevent destruction or substantial diminution of the trust unless done in a particular way, or was it to prevent any sort of change, even a benefit or addition to the trust?

“Is it consistent to say that a person is entitled to make a will in Missouri and yet not give effect to the provisions of a will which specifies how estate taxes are to be paid ?

“What is the legal significance of the fact that the will was the latest document in terms of time if there is a conflict between the will and the trust agreement as to payment of estate taxes?”

*162I conclude, after studying the briefs and arguments, that the correct answer to the first question posed by the Court is that Article VI of the Trust Indenture was not intended to hinder or prevent a benefit or addition to the trust. Article VI made the trust irrevocable after ten years (or after grantor’s death, if that occurred earlier), but within said ten-year period grantor reserved a power to alter, amend or revoke the agreement, or to free money, securities or property from the trust. Grantor could do these things if during his lifetime he delivered written notification thereof to the trustees. The thrust or emphasis of action by grantor was on acts taking away from the trust or revoking or altering its terms. I find nothing in such reservation to indicate that such power contemplated or included a limitation on grantor’s part of a right to add to or confer benefits on the trust. Such a conclusion is consistent with the provisions of Article V of the Indenture, which gave grantor a right to turn over additional property to the trustees, thereby adding to the trust, without requiring any written amendment thereof.

My answer to the second question propounded to counsel is that it would not be consistent to say to a person that he is entitled to make a will but that effect will not be given to provisions therein which specify how estate taxes are to be paid. Even when statutes expressly provide where the burden of death taxes shall rest, decided cases recognize that a testator by will may shift the incidence of that burden. Old Folks Home v. St. Louis Union Trust Company, 313 S.W.2d 671 (Mo. 1958); In re Wheeler’s Estate, 65 Ill.App.2d 201, 213 N.E.2d 35 (1965).

Such a conclusion is supported by what occurred during oral argument of this case before the Court en Banc. Counsel for plaintiff was asked what the situation would have been if the Eleventh clause in the will in directing payment from general assets of all estate and inheritance taxes on the estate had included words such as “including the taxes which would be assessed against the property in the trust which I have created.” Counsel respondent to this question by saying that he thought such a clause would be fully effective, and that if it had been present in this instance, it would have resulted in taxes on the trust property being paid by the executors from the residuary probate estate. In response to additional questions, counsel went on to concede that he thought a will could amend this trust and could confer a benefit on the trust, and this would be true even though there would not have been a separate written instrument of the character specified in Article VI of the Trust Indenture. Counsel concluded, however, that the language in the Eleventh clause of the will was too general and indefinite to amount to such a directive and therefore was insufficient to produce such a result in this case.

Thus, in oral argument, counsel for plaintiff did not adhere to or urge the rigid position enunciated in the divisional opinion whereby the only way to alter or amend the trust instrument, including a change in the burden of taxes, would have been by a written instrument which grantor executed and delivered to the trustees in his lifetime. Indeed, counsel for plaintiff expressly conceded that the real question before the Court in this case is one of proper interpretation of the language in the Eleventh clause of the will. Thus, the issue presented for decision is not whether grantor had executed a separate written instrument changing the burden of taxes which he delivered to the trustees, but rather whether the language in the Eleventh clause of the will sufficiently disclosed an intention on the part of testator that the executor should pay out of the residuary estate such inheritance and estate taxes as were imposed in connection with property in the trust estate.

This latter question, recognized by counsel for plaintiff as the critical issue in the case, is not addressed or answered in the divisional opinion. Such opinion, in deciding the case, relies on the proposition that *163the trust could be altered only in the manner specified in Article VI, that this was not done, and hence the inheritance and estate taxes must be paid pursuant to the terms of the trust instrument rather than under the Eleventh clause of the will.

Unfortunately, the majority has seen fit to adopt with only slight modification the opinion which was written in Division One, even though it takes no cognizance of the subsequent briefs and oral argument before the Court en Banc, including the recognition by counsel that the real issue is what is a proper interpretation of the language in the will. In view of the foregoing, I do not believe that the principal opinion adequately or properly disposes of the issues now before this Court.

It necessarily follows that my answer to the third question propounded to counsel would be that in deciding this case significance must be attached to the fact that the will was executed after the trust and that its clause with reference to payment of estate and inheritance taxes should be given effect. This conclusion is supported by two New York cases cited by defendants in their supplemental brief. In each of these New York cases there was a trust instrument which contained a clause directing apportionment of death taxes and a subsequently executed will which directed payment of all such taxes out of the residuary of the probate estate. In the case of In re Harbord’s Will, 197 Misc. 760, 95 N.Y.S.2d 407, 410 (Sup.Ct.1950), the court said:

“A further question arises by reason of the apparent conflict between the provisions of the will and the provisions of the trust indenture of 1939 with respect to the payment of estate taxes. As above set forth, such trust indenture contained explicit provision for the apportionment of any estate tax imposed by reason of the establishment of such trust. The trust indenture of 1930 contained no provision whatsoever relating to the apportionment or nonapportionment of estate taxes. The Court determines that the provisions of the will supersede the provisions of the trust indenture of 1939, with respect to any taxes imposed by reason of the establishment of such trust as well as to those taxes imposed by reason of any other nontesta-mentary disposition. In Matter of Weiskotten’s Estate, 167 Misc. 67, 3 N.Y.S.2d 810, it was held that the conflicting provisions of the will and of a trust indenture were controlled by the instrument later executed.”

Affirming in a memorandum opinion the foregoing decision, the Appellate Division said (281 App.Div. 850, 119 N.Y.S.2d 229) :

“The residuary legatees appeal from the decree settling the account insofar as said decree directs that estate taxes with respect to both testamentary and nontestamentary property be paid out of residuary and insofar as said decree adjudges that the provisions of the will with respect to estate taxes supersede the provisions of an inter vivos trust. Decree, insofar as appealed from, unanimously affirmed, with costs to all parties filing briefs, payable out of the estate.”

In the later case of In re Osborn’s Trust, 8 Misc.2d 859, 166 N.Y.S.2d 446, 452 (Sup. Ct.1957), the court said:

“Were one to assume that Article First of the trust agreement was clear and unambiguous thereby expressing a valid method of apportionment but in conflict with the provisions of Mrs. McKay’s will, the latter instrument, being later in time, would control. (Matter of Harbord’s Will, 197 Mise. 760, 95 N.Y.S.2d 407, affirmed 281 App.Div. 850, 119 N.Y.S.2d 229).”

The divisional opinion dismisses, without discussion, the fact that the will was a document later in time, saying this fact does not countermand the provisions of the trust instrument as to how a change is to be made in it. It does not analyze the language of the will to ascertain whether it disclosed a later intention that taxes imposed in connection with the trust estate *164should be paid out of the residuary estate. The case of In re Weiskotten’s Estate, 167 Misc. 67, 3 N.Y.S.2d 810 (Surr.Ct.1938), is persuasive as to what should be done. That case involved a trust, a subsequent will, and a subsequent modification of the trust, all made within four months time. The will contained a provision for payment of taxes which was in conflict with the tax clause in the original trust. However, the subsequent modification of the trust contained a clause where the grantor expressly ratified all the provisions of the original trust. Hence, the court gave effect to the latest instrument and did not apply the contradictory tax clause in the will. The court stated that if chronology was to be given weight, the controlling document would be the subsequent modification of the trust, being the latest declaration of the deceased. It should be noted that the court in In re Harbord’s Will, supra, so construed Weiskotten. Applying the doctrine of these New York cases to our case, the controlling document in this case would be the will.

When we proceed, then, to an interpretation of Article Eleventh of the will, it indicates, in my judgment, a clear intention of testator that all death taxes against his taxable estate were to be paid from the residuary portion of his estate. That clause states in part, as follows:

“ELEVENTH: I direct my Executor hereinafter named to pay out of the general assets of my estate all estate and inheritance taxes and succession duties assessed by the United States, or any state thereof, against my estate, including, but not by way of limitation, any insurance policies, joint property, and tenancies by the entirety which may be included as a part of my estate for tax purposes or against any gift, devise or bequest, excepting however, the bequests to my son provided for by Item Fifth of this will; and no such taxes shall be charged against or deducted from any such gift, devise or bequest. The said bequests under Item Fifth of this will shall bear their proportionate share of all such taxes which shall be paid out of or deducted therefrom. * * * ”

It is to be noted that in the above clause testator specifically provides that all estate and inheritance taxes and succession duties assessed against his estate shall be paid from general estate assets except for those pertaining to Item Fifth in his will. No other exclusion is stated. In my judgment, under the pertinent authorities, the “estate” as mentioned in said clause means the taxable estate, and, without question, this trust was a part of the taxable estate of the testator. As previously noted, the will was written some time after the trust was executed and it is controlling. Under such circumstances, I would reverse the judgment of the Circuit Court and would direct that the taxes based on the trust property should be borne by the general assets of the estate.