Goulding v. Bank of America, N.A.

Citations: 340 S.W.3d 114; 2010 Mo. App. LEXIS 1601; 2010 WL 4823230Docket: WD 71446

Court: Missouri Court of Appeals; November 30, 2010; Missouri; State Appellate Court

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John P. Goulding, Jr. appeals a summary judgment by the Missouri Court of Appeals confirming that Bank of America, N.A., as Trustee, properly distributed income from the Trust established by his great aunt, Margaret P. Galbraith. The Trust, created on July 8, 1946, and modified in 1958, designated specific income beneficiaries and their respective shares. Key beneficiaries included Emma Flanagan, Mary Goulding, John P. Goulding Sr., Minnie Scully, and Isabel Goulding, with provisions for distribution upon their deaths. 

The Trust specified that upon the death of a named beneficiary, their share would accrue to surviving beneficiaries or their lawful issue. Following the deaths of several beneficiaries from 1960 to 1996, the income was redistributed according to these terms. Notably, after Minnie Scully's death in 1973, her share was distributed per stirpes to the lawful issue of John P. Goulding Sr., which included John Jr. and Patrick Goulding. Subsequently, the Trustee adjusted distributions, resulting in John Jr. receiving 23.085% of the net income following Minnie's death. The court affirmed the Trustee's interpretation and execution of the Trust's distribution provisions.

John Sr. passed away on April 5, 1974, and under the Trust, his share was designated to accrue per stirpes to his lawful issue, specifically his sons Patrick and John Jr. The Trustee initially distributed John Sr.'s 22.67% share without dispute, allocating it as follows: Mary 22.66%; Isabel 8.5%; Patrick 34.42%; and John Jr. 34.42%. However, after Patrick's death on September 21, 1982, John Jr. contended that distributions were not made according to the Trust's terms. Following Patrick’s passing, his 34.42% share was distributed to his children, affirming their status as lawful issue under the Trust, as established in Traders Bank of Kansas City v. Goulding. The subsequent distributions allocated Mary’s share to John Jr. and Patrick's children, and Isabel's share was similarly divided following her death. In 2005, John Jr. initiated a breach of trust action, arguing that he was entitled to half of Patrick's share based on the Trust’s language regarding deceased beneficiaries' shares accruing to lawful issue. John Jr. sought an additional 1.635% of the Trust's net income since Patrick's death. The Bank opposed this by asserting proper distribution to Patrick's children, aligning with the Trust's intent. The Circuit Court ruled Patrick was an 'other named beneficiary,' affirming that his share should have been distributed per stirpes to John Sr.'s issue. The Court concluded that the Bank’s distribution of income shares was inconsistent with the Trust provisions, denying the Bank's motion for summary judgment.

The Circuit Court's 2007 Order provided John Jr. with an additional 1.635% of net income, reflecting his per stirpital share of Patrick's 3.25%, with an equal share to Patrick's Children. On January 4, 2008, John Jr. filed a Third Amended Petition asserting that "former share" in the Trust Agreement includes not only Patrick's 3.25% but also an additional 31.17% of net income distributed to Patrick prior to his death. He claimed that following Patrick's death, the Bank should have distributed half of Patrick's income from the Trust to him and half to Patrick's Children. Both John Jr. and the Bank moved for partial summary judgment, with the Bank admitting a prior misdistribution but arguing that the Trust's income allocation was fixed and only the beneficiaries changed over time. The Bank contended that upon Patrick's death, his remaining income should go to his Children as the rightful heirs. In December 2008, the Court ruled in favor of the Bank, stating that "former share" referred only to the 3.25% specified in the Trust Agreement, validating the distribution to Patrick's Children. John Jr. later filed a Motion for Reconsideration, suggesting he might be entitled to all income from a 17% provision and from Mary’s share at her death in 1984, claiming he was the last surviving member of the per stirpital class. The Court denied this motion and certified its previous judgments for appeal. John Jr. appealed, arguing the Circuit Court misinterpreted the Trust's language regarding income distribution after Patrick's death, asserting he was entitled to 17.21% of Patrick's Trust income, with the remainder going to Patrick's Children. The appeal centers on the interpretation of the Trust language in light of the Settlor's intent, with the court reviewing the matter de novo.

Immediately after Patrick's death, John Jr. was entitled to receive 51.63% of the Trust income, which included the 34.42% he was receiving prior to Patrick's death plus an additional 17.21% from Patrick's income share. In contrast, Patrick's issue were entitled to only 17.21% of the Trust income. The 34.42% share consisted of a 3.25% specifically assigned to Patrick as a named beneficiary and a 31.17% share derived from a 17% provision and former shares from John Sr. and Minnie.

The Circuit Court's 2007 Order determined that the 3.25% share should accrue 50% to John Jr. and 50% to Patrick's issue, as Patrick was considered an "other named beneficiary." This aspect is not contested on appeal. The appeal primarily concerns the distribution of the 31.17% balance of Patrick's income share. John Jr. argued that this 31.17% share vested in Patrick and should thus be distributed similarly to the 3.25%, split between himself and Patrick's issue. In contrast, the Bank contended that this share should go entirely to Patrick's lawful issue.

The Circuit Court sided with the Bank, ruling that while the 3.25% share accrued 50% to John Jr. and 50% to Patrick's issue, the 31.17% share was not part of Patrick's "former share" and was intended to transfer entirely to Patrick's lawful issue upon his death. John Jr. contended that the court misinterpreted the terms of the Trust, arguing that the 31.17% should have been considered part of Patrick's former share and thus distributed per stirpes.

The court emphasized that the Settlor's intent is paramount and should be derived from the Trust Agreement as a whole, with the terms interpreted in their ordinary meaning. The court found that John Jr.'s interpretation incorrectly assumed the additional income accrued to him and Patrick, contrary to the Trust's stipulation that the "former share" of an "other named beneficiary" should pass to John Sr. or, if he was not living, per stirpes to his lawful issue. Thus, the court concluded that the language of the Trust did not support John Jr.'s claims.

The courts cannot create a new will or interpret a testator's intent beyond the words used in the will. John Jr. cannot claim that distributions to "the lawful issue of John Sr." specifically included him and Patrick, despite being the lawful issue at the time of certain beneficiaries' deaths. Therefore, their shares did not increase from the former shares of John Sr. and Minnie. Instead, when John Sr. and Minnie died, their former shares accrued to a 17% provision designated for "lawful issue of John Sr.," thereby increasing the Trust income available under that provision.

The Settlor's intent is further clarified by the specific treatment of Emma's former share, which was allocated to named beneficiaries—John Sr., Minnie, and Mary—resulting in an increase of their shares from 17% to 22.67%. This demonstrates the Settlor's intention for certain shares to benefit specifically named beneficiaries, while shares from deceased beneficiaries were directed to John Sr.'s lawful issue only if he was not alive. 

If John Sr. had survived another beneficiary's death, his share would have increased. However, if he had predeceased them, the share would not have been treated as an increase to John Jr. and Patrick's shares, indicating the Settlor did not intend for them to benefit directly. The terms "former share" and "respective former share" refer to amounts received by specifically named beneficiaries, not their incidental receipts from the 17% provision. Consequently, Patrick's former share remains at 3.25% and does not include any additional income from the 17% provision.

Patrick, designated as an 'other named beneficiary,' had a 'former share' of 3.25% that accrued per stirpes to the lawful issue of John Sr. This share is subject to distribution among John Sr.'s lawful issue living at each monthly distribution. Upon Patrick's death, his lawful issue became part of John Sr.'s lawful issue, leading to a division where 50% of Patrick's former share is payable to John Jr. and 50% to Patrick's lawful issue. However, these amounts are derived from the 17% provision rather than direct distributions of Patrick's former share.

Additionally, the 31.17% share Patrick was receiving, which was not part of his former share but paid as a lawful issue of John Sr., also became payable to Patrick's lawful issue upon his death. The 17% provision specifies that income is distributed to the 'lawful issue of [John Sr.] who shall be living at the time of each monthly distribution' without necessitating a per stirpital requirement.

While the 'former shares' of 'other named beneficiaries' accrue per stirpes, the practical effect of the distribution resembles that of a per stirpes division due to the identical outcomes it produces. The term 'lawful issue' must be interpreted according to its ordinary meaning, as established by statute. Consequently, upon Patrick's death, his lawful issue replaces him as a lawful descendant of John Sr., meaning John Jr. and Patrick's lawful issue are entitled to distributions as lawful lineal descendants. The distribution under the 17% provision, therefore, does not differ from a per stirpital distribution, achieving the same outcome through its language without explicitly requiring a per stirpital structure.

The Circuit Court determined that Patrick's 31.17% share of income, which included per stirpital shares from John Sr. and Minnie, became payable to his lawful issue upon his death. This meant that Patrick's lawful issue also became lawful issue of John Sr. at the time of distribution. The court rejected John Jr.'s argument that the Trust's directive for 'former shares' to 'accrue to the lawful issue of John Sr.' implied that shares vested in the living lawful issue (John Jr. and Patrick). It clarified that Patrick and John Jr. did not accrue 'former shares' directly; instead, these shares accrued to the 17% provision. The court supported this conclusion with a contextual interpretation of 'accrue,' distinguishing it from 'vest,' and emphasized that the Settlor intended for 'accrue' to mean 'to accumulate or be added periodically,' not to fix the right to receive income shares permanently. The court affirmed that the Bank's distribution of assets was correct and aligned with the Settlor's intent for equitable distribution of Trust income to John Sr.'s lawful issue.

Additionally, John Jr. contended that 'class closures' and 'vested remainders' hindered the distribution of Trust income to Patrick's lawful issue and claimed entitlement to a total of 34.42% of Trust income, including specific shares from Patrick and Mary's former shares.

John Jr. argues for an allocation of 82.79% of the Trust income to himself, leaving only 17.21% for Patrick's lawful issue. However, these claims were not presented in his Third Amended Petition, his motion for partial summary judgment, or his response to the Bank's summary judgment motion, and thus were not addressed in the Circuit Court's 2008 Judgment being appealed. John Jr. introduced these arguments for the first time in his reply suggestions supporting his motion for reconsideration. The Circuit Court's July 2009 Judgment, which denied this motion, rejected John Jr.'s new arguments but did not alter the 2008 Judgment, as those issues were not part of the earlier rulings.

The court expresses skepticism regarding whether John Jr.'s new arguments have been preserved for appeal, despite the Circuit Court certifying the 2009 Judgment for interlocutory appeal. Upon reviewing the 2009 Judgment, the court believes it primarily clarified the 2008 Judgment. Assuming authority to address these new issues, the court finds John Jr.'s arguments about vested remainders and class gifts largely irrelevant, noting that general rules apply only in the absence of clear contrary language in the Trust. The Trust Agreement explicitly indicates the Settlor's intent to keep the class of John Sr.'s lawful issue open until the Trust's termination and to determine beneficiaries monthly based on the 17% provision.

The Trust clearly identifies beneficiaries, including Patrick's lawful issue as descendants of John Sr. The court emphasizes that closing the class of heirs before the death of one son would disadvantage the descendants of the deceased son, which contradicts the Settlor's intent. Furthermore, the distribution of Mary's former share to John Sr. or his lawful surviving issue would also fall under the 17% provision, highlighting that the term "surviving" is redundant in this context. Consequently, upon Mary's death and given Patrick's prior death, Patrick's lawful issue became John Sr.'s lawful issue, entitled to half of Mary's former share.

Point II is denied. The Circuit Court's 2008 Judgment, which granted the Bank's partial motion for summary judgment while denying John Jr.'s competing motion, is affirmed, along with the July 2009 Order that denied John Jr.'s motion for reconsideration. The focus of Point I pertains to the time after Patrick's death and prior to the deaths of Mary and Isabel. John Jr. did not challenge the Bank's distributions concerning the former shares of Mary and Isabel in his Third Amended Petition, making the distribution of Patrick's share the sole issue in the motions for summary judgment. At Patrick's death, Mary and Isabel received 22.66% and 8.5% of the Trust income, respectively. Concerns regarding the distribution of Emma's former share post-death are dismissed, as the Circuit Court's judgment addressed the distributions adequately. The Trust’s provisions indicate that the former shares of beneficiaries, including John Sr., Minnie, Isabel, and Mary, are to accrue to John Sr.'s lawful issue, with the term "surviving" being legally insignificant in this context. The Circuit Court treated the former shares as part of a category that benefits John Sr.'s lawful issue, which is consistent with the Settlor's intent to have the shares accrue to them per stirpes. The intent is further supported by the Trust Agreement's specific beneficiary designations, indicating that John Jr. and Patrick's shares were meant to pass in the same manner as other sums distributed under the 17% provision. Ultimately, regardless of the method of distribution—whether through direct accrual to lawful issue or as part of the 17% provision—the practical effect remains the same: equitable distribution of Trust income to John Sr.'s lawful issue.

John Jr. asserts that following Patrick's death, he became the sole 'lawful issue' of John Sr. and the only eligible recipient of the 17% provision. He further claims that upon Mary's death, he is entitled to her entire 22.66% share. However, these assertions are not included in his first Point Relied On and are therefore not preserved for appellate review under Rules 84.04(e) and 84.13(a). Although John Jr. reiterates these arguments in his second Point, they lack merit because the definition of 'lawful issue' and the Settlor's intent indicate that all shares should accrue to the lawful issue of John Sr. Furthermore, the calculation of the 17% provision does not account for potential income that Patrick's lawful issue would receive from Isabel's former shares, leading to inconsistencies in John Jr.'s arguments across both points.