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BIELEY v. BIELEY
Case Summary: Alfred D. Bieley v. Peggy M. Bieley, No. 79-1941 (Fla. 3d DCA May 12, 1981)
Factual and Procedural Background
In 1972 Alfred and Peggy Bieley created an irrevocable trust for the benefit of their son, Harlan C. Bieley, specifying that the trust would terminate on November 30, 1983, or upon Harlan's death, whereupon the corpus would be distributed to Alfred and Peggy. Article Fourteen of the Declaration declared the trust irrevocable and the settlors waived rights to alter or revoke it.
In 1977, the Bieleys' marriage was dissolved. The Final Judgment of Dissolution incorporated provisions amending the Harlan trust to permit invasion of the corpus for the beneficiary's education and included an exhibit in which Alfred and Peggy acknowledged they had no joint or individual interests in the Harlan trust assets. Alfred refused to execute documents necessary to effectuate invasion of the corpus as required by the Final Judgment, and Peggy sued to compel him to permit invasion in the amount of $1,943.10. Alfred counterclaimed, alleging that Peggy, while sole trustee, had wasted trust assets (including by purchasing an automobile for Harlan and by making rent payments and other automobile maintenance expenditures).
During the enforcement action, Harlan filed an affidavit approving the trust amendments and supporting their enforcement. The trial court found that the dissolution judgment had amended the trust to permit invasion of the corpus for education, found the trust income (approximately $2,700) inadequate for its purpose, found the amendments beneficial to the beneficiary, rejected Alfred's waste claim, and ordered Alfred to execute documents permitting invasion of the corpus. Alfred appealed the judgment.
Legal Issues Presented
- Whether a trial judge in a dissolution proceeding may, by a Final Judgment of Dissolution, amend provisions of an existing irrevocable trust created by the parties for the benefit of their son (i.e., whether an irrevocable trust may be amended without the beneficiary's consent when the settlors surrender rights in favor of the beneficiary).
- Whether the trial court erred in rejecting the appellant's claim that the appellee committed waste of trust assets and in refusing to reopen the trial for the admission of documentary evidence (checks) on that issue.
Arguments of the Parties
Appellant's Arguments (Alfred D. Bieley)
- The trial court in the dissolution proceeding lacked authority to amend the irrevocable trust because not all parties to the trust were before the court: the Bieleys did not appear in their capacities as co-trustees and their son, Harlan, was not a party to the dissolution proceeding.
- No emergency existed to justify modification of the trust in the dissolution judgment; accordingly, the trust could not properly be amended in that proceeding (appellant cited Pentland v. Pentland, 113 So.2d 872 (Fla. 1959)).
- Peggy, as sole trustee, wasted trust assets (allegedly by purchase of a car and by certain rent and maintenance expenditures) and the trial court erred in rejecting that waste claim.
Appellee's Arguments (Peggy M. Bieley)
- Although an irrevocable trust generally cannot be modified to the detriment of a beneficiary without the beneficiary's consent, the settlors (Alfred and Peggy) may surrender or relinquish their rights in favor of the beneficiary; if the surrender benefits the beneficiary, the beneficiary's consent is not required.
- The settlors released their reversionary/remainder interests in the trust assets as reflected by the exhibit incorporated into the Final Judgment of Dissolution; thus, the dissolution judgment's amendment was valid and enforceable against Alfred individually and as trustee.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Pentland v. Pentland, 113 So.2d 872 (Fla. 1959) | Cited by appellant to argue that no emergency existed to justify modification of the trust in the dissolution proceeding. | The opinion records the citation by appellant but does not rely on Pentland to rule against the appellee's position; the court's holding does not adopt Pentland as controlling for the result reached. |
| Boyd v. United States, 34 F.2d 488 (D.C.Conn. 1929) | Authority for the proposition that a settlor could reduce net income from an irrevocable trust payable to the settlor because the remainderman's rights were enhanced (example of settlor surrender benefitting beneficiary). | Listed among authorities guiding the court to conclude that a settlor's surrender of privileges in favor of a beneficiary can validate an amendment without beneficiary consent. |
| Hines v. Louisville Trust Co., 254 S.W.2d 73 (Ky. App. 1952) | States that a settlor may modify the trust agreement by surrendering privileges, but may not modify the trust to the prejudice of beneficiaries without their consent. | Used as supporting authority for the proposition that settlors may surrender rights to benefit beneficiaries but cannot impair beneficiaries' existing interests. |
| In re Central Homes Trust Co., 61 N.J. Super. 109, 160 A.2d 186 (1960) | Holds that an amendment disposing of a settlor's reversionary interest in corpus without adversely affecting beneficiaries' rights should be declared valid. | Cited as supporting authority for validating settlor relinquishment of reversionary rights when beneficiaries are not prejudiced. |
| In re Harwood, 113 N.Y.S.2d 587 (S.Ct. 1952) | Holds that a settlor's transfer of a trust reversion did not require all parties to consent. | Relied upon as authority that settlor transfers of reversionary interests may be effective without consent of all trust parties. |
| New York Trust Co. v. Weaver, 298 N.Y. 1, 80 N.E.2d 56 (1948) | Holds that a beneficiary's consent to revocation was not required where the revocation disposed of the settlor's reversionary interests. | Used to support the court's conclusion that a beneficiary's consent is unnecessary where the settlors' actions merely dispose of their own reversionary interests for the beneficiary's benefit. |
| In re Jackson's Trust, 351 Pa. 89, 40 A.2d 393 (1945) | Holds that a life tenant's consent to extinguishment of a power of appointment was unnecessary because her trust interest was not affected. | Cited as an analogous authority supporting modification without the beneficiary's consent when the beneficiary's substantive interest is not prejudiced. |
| 89 C.J.S. Trusts § 87 (1955) | Encyclopedic treatise authority cited for the proposition that settlors may surrender privileges to the benefit of beneficiaries. | Referenced as supporting secondary authority for the court's view that settlors' surrender of privileges may validate amendments benefitting the beneficiary. |
| Akins v. Taylor, 314 So.2d 13 (Fla. 1st DCA 1975) | Authority regarding trial court discretion to reopen a case for additional evidence; cited in connection with abuse of discretion analysis. | The court relied on Akins to conclude that the trial court abused its discretion by refusing to permit the appellant to reopen the case to introduce checks evidencing alleged waste; this required reversal and remand on the waste issue. |
Court's Reasoning and Analysis
The court began by identifying the operative trust provisions: the trust was irrevocable, provided for termination on November 30, 1983 (or upon the beneficiary's death), and provided for distribution of the corpus to Alfred and Peggy upon termination. The Final Judgment of Dissolution incorporated an agreement that the trust be amended to permit invasion of the corpus for the beneficiary's education and included written acknowledgments by Alfred and Peggy that they had no individual or joint interests in the trust assets.
The court reasoned that the dissolution judgment operated as an amendment to the trust to the extent it waived or relinquished the settlors' remainder rights in favor of the beneficiary for the purpose of permitting invasion of the corpus for education. The court construed the settlors' waiver and relinquishment as applicable specifically to invasion of the corpus for educational purposes and observed that the amendments were clearly beneficial to the beneficiary.
Relying on authorities from other jurisdictions and on an established treatise, the court held that an irrevocable trust may be amended without the beneficiary's consent where the settlor(s) surrender privileges or rights in favor of the beneficiary and the beneficiary's substantive interests are not prejudiced. The court cited several out-of-state decisions that support the principle that settlors may relinquish reversionary interests or privileges without the beneficiary's consent when the effect is to benefit or not harm the beneficiary.
Applying these principles to the facts, the court found: (1) the dissolution judgment amended the trust to permit invasion of corpus for education; (2) the amendments benefited Harlan; (3) Harlan's consent was therefore unnecessary; and (4) the trial court correctly enforced the trust amendment and ordered Alfred to execute necessary documents to effectuate the invasion of trust corpus. The court also noted that trust income of approximately $2,700 was inadequate to effect the trust's educational purpose, supporting the need for invasion.
Separately, on the issue of waste, the court determined that the trial judge erred in refusing to allow Alfred to reopen the case to introduce documentary evidence (checks) that he claimed established waste by Peggy while she served as trustee. The trial court itself recognized that payment of rent should not have been made under the terms of the trust, but nevertheless denied reopening. Applying the standard for abuse of discretion and citing Akins v. Taylor, the appellate court concluded that the refusal to reopen was an abuse of discretion. As a result, the court reversed the judgment insofar as it disposed of the waste claim and remanded for additional testimony and evidence on that issue.
Holding and Implications
Affirmed in part, reversed in part, and remanded.
Holding:
- The appellate court held that an irrevocable trust may be amended without the beneficiary's consent when the settlors surrender privileges or reversionary rights in favor of the beneficiary and the amendments are beneficial to the beneficiary. Applying that principle, the court affirmed the trial court's enforcement of the Final Judgment of Dissolution as amending the Harlan trust to permit invasion of the corpus for educational expenses and ordered that Alfred must execute documents necessary to effectuate the invasion.
- The appellate court held that the trial court abused its discretion by refusing to permit the appellant to reopen the case to introduce documentary evidence pertinent to the claim of waste; accordingly, the court reversed the judgments concerning waste and remanded for further proceedings on that issue.
Implications:
- Direct effect on the parties: the enforcement of the dissolution judgment's amendment of the Harlan trust stands as to permitting invasion of corpus for education, and Alfred was ordered to execute the required documents; the question whether Peggy committed waste remains unresolved and will be retried (or reopened) with opportunity for additional evidence.
- Legal implication articulated by the court: the court announced and applied a principle—guided by out-of-state decisions and authority—that settlors of an irrevocable trust may surrender their reversionary or other privileges in favor of a beneficiary, and when such surrender unambiguously benefits the beneficiary (and does not prejudice the beneficiary's existing rights), the beneficiary's consent is not required to effect the amendment. The court relied on that principle to validate the dissolution judgment's amendment of the trust.
- The opinion remands only the waste question for additional testimony and does not disturb the enforcement of the trust amendment permitting invasion for education.
Disposition: Affirmed in part (enforcement of trust amendment), reversed in part (refusal to reopen evidence on waste), and remanded for further proceedings on the waste claim.
BASKIN, Judge.
Whether a trial judge in a dissolution proceeding may amend provisions of an existing irrevocable trust established by the parties for the benefit of their son is the question presented in this appeal. In an action brought to enforce the trust amendment, the court ordered invasion of the trust corpus in order to gain additional funds for the beneficiary's education. We hold that the court correctly enforced the amendment; however, we find error in the court's ruling pertaining to the claim of waste. We therefore affirm in part and reverse in part.
In 1972, Peggy Bieley and Alfred Bieley created a trust designed to provide a fund for their son Harlan's educational expenses. A termination provision stated:
ARTICLE FOUR: TERMINATION PROVISIONS
On the 30th day of November, 1983, or upon the death of our son, HARLAN C. BIELEY, whichever occurs first, all then accumulated yet undistributed income is to be paid and distributed to our son HARLAN or to his estate should he not be living, free from any trust. This Trust is to terminate upon the occurrence of that event, whereupon the corpus of it is to be paid and distributed to us as Co-Trustees or to either one of us as surviving sole Trustee or to the estate of the predeceased Co-Trustees or Trustee, that is should we, Declarants have both died by the time of termination hereinbefore stated, either simultaneously or successively.
The trust was declared irrevocable.
ARTICLE FOURTEEN: IRREVOCABILITY
This Trust is to be irrevocable and we hereby expressly waive any and all rights and powers, whether alone or in conjunction with any other person, to alter, amend or revoke the same, neither in whole nor in part nor as to any of its terms.
In 1977, the marriage of Peggy and Alfred Bieley was dissolved. In the Final Judgment of Dissolution, both the Harlan Bieley Trust and that of his sister were amended.
The status of the Lily Beth Bieley Trust was not challenged in these proceedings.
7. The trusts shall be deemed amended so as to permit invasion of the corpus for the purpose of securing an education and as provided in said trusts for the beneficiary of each Trust, and the parties are hereby directed to execute such instruments as may be necessary to accomplish this result.
Incorporated in the Final Judgment of Dissolution, by reference, an exhibit provided:
Alfred and Peggy Bieley agreed in writing to release their interests in the trust assets.
Alfred D. Bieley and Peggy Bieley do each acknowledge that they have no joint and/or individual interests in and to the foregoing titled . . . "Harlan Bieley Trust Assets."
When Alfred Bieley refused to execute documents necessary to permit invasion of the trust corpus as required by the Final Judgment of Dissolution, Peggy Bieley instituted an action to require him to permit invasion of the corpus in the amount of $1,943.10. Alfred Bieley counterclaimed charging Peggy Bieley had wasted trust funds during the time she served as sole trustee. During the pendency of the action to enforce the provisions of the Final Judgment of Dissolution, Harlan Bieley filed an affidavit stating he approved the trust amendments and supported efforts to enforce the amendments.
The court also found that Alfred Bieley had between March, 1978 until March of 1979 temporarily removed himself as co-trustee.
The trial court found that the Agreed Final Judgment of Dissolution contained provisions amending the trust and that the trust income of approximately $2,700 was inadequate to carry out its purpose. In addition, the court found that Alfred and Peggy Bieley were settlors, co-trustees and remaindermen. The court concluded:
2. That the Final Judgment entered in Case No. 77-9175 dissolving the marriage of the parties was agreed to by both the Plaintiff and the Defendant and has the effect of a property settlement agreement as well as a Final Judgment;
3. That the provisions of the Final Judgment of Dissolution of Marriage entered in Case No. 77-9175, Circuit Court Eleventh Judicial Circuit, insofar as it pertains to amendment of the HARLAN C. BIELEY Trust is fully enforceable against ALFRED D. BIELEY both individually and as Trustee;
4. That the said Final Judgment entered in Case No. 77-9175 amended the Declaration of Trust dated November 29, 1972 created for the benefit of HARLAN C. BIELEY so as to permit invasion of the corpus to effect the purpose of the trust and so as to constitute a waiver and relinquishment of the remainder rights of ALFRED D. BIELEY and PEGGY M. BIELEY in favor of the beneficiary HARLAN C. BIELEY;
5. That said amendments were all clearly beneficial to the interests of the beneficiary. . . .
The court entered judgment in favor of Peggy Bieley and ordered Alfred Bieley to execute documents necessary to effect invasion of the trust corpus. Alfred Bieley's contention that the purchase of a car for Harlan from trust funds depleted the corpus by $2,700, reduced its income, and constituted waste was rejected by the trial court. The court also rejected arguments that rent payments of $195 a month along with other automobile maintenance costs wasted trust assets. This appeal ensued.
Alfred Bieley's appeal of the Final Judgment of Dissolution did not challenge the trust amendment provisions.
Appellant contends that the court in the dissolution proceeding lacked authority to amend the trust because it did not have all parties to the trust before it; in the dissolution proceeding, the Bieleys did not appear in their capacity as co-trustees, and Harlan was not a party to the dissolution. Appellant argues that no emergency existed to justify modification of the trust. Pentland v. Pentland, 113 So.2d 872 (Fla. 1959).
Appellee, on the other hand, argues that although a trust may be amended with the beneficiary's consent, Harlan's consent was not required because the trust settlors' actions benefited him. They surrendered their interests to him by releasing their reversionary rights. Boyd v. United States, 34 F.2d 488 (D.C.Conn. 1929); Hines v. Louisville Trust Co., 254 S.W.2d 73 (Ky. App. 1952); In re Central Homes Trust Co., 61 N.J. Super. 109, 160 A.2d 186 (1960); 89 C.J.S. Trusts § 87, p. 894 (1955). Appellee contends that although the trust could not be modified to the detriment of the beneficiary, the settlors could surrender privileges if the result were for his benefit. The court must determine whether the beneficiary's interests were prejudiced by the amendment.
Although Florida cases have not previously addressed this issue, we now hold that an irrevocable trust may be amended without the consent of the beneficiary when the settlor surrenders privileges or rights in favor of the beneficiary. In reaching this conclusion, we are guided by the law emanating from other jurisdictions. Boyd v. United States, supra (settlor could reduce net income from an irrevocable trust payable to settlor because remainderman's rights were enhanced); Hines v. Louisville Trust Co., supra (settlor may modify trust agreement by surrendering privileges but may not modify the trust to the prejudice of the beneficiaries without their consent); In re Central Home Trust Co., supra (amending disposing of settlor's reversionary interest in corpus without adversely affecting beneficiaries' rights should be declared valid); In re Harwood, 113 N.Y.S.2d 587 (S.Ct. 1952) (settlor's transfer of a trust reversion did not require all parties to consent); New York Trust Co. v. Weaver, 298 N.Y. 1, 80 N.E.2d 56 (1948) (holding that a son's consent to revocation of the trust under which he was beneficiary was not required when the revocation disposed of the settlor's reversionary interests); In re Jackson's Trust, 351 Pa. 89, 40 A.2d 393 (1945) (life tenant's consent to extinguishment of power of appointment unnecessary because her trust interest was not affected.
The Harlan Bieley Trust provided that the trust was to terminate on November 30, 1983 or upon the death of the beneficiary, whichever occurred first. When the trust terminated, the corpus of the trust was to be distributed to Alfred D. Bieley and Peggy M. Bieley. In the Final Judgment of Dissolution, the trial court ruled that the amendment constituted a "waiver and relinquishment of the remainder rights of Alfred D. Bieley and Peggy M. Bieley in favor of the beneficiary, Harlan C. Bieley." We construe the settlors' waiver and relinquishment of their remainder rights as applicable only to the invasion of the corpus for the purpose of the trust, to provide for Harlan's educational expenses.
The foregoing provisions clearly disclose that the amendments to the trust favored the beneficiary. The beneficiary's consent to the trust amendments was therefore unnecessary. The trial court correctly entered its final judgment enforcing the trust amendments.
Turning to the trial judge's ruling that Peggy Bieley, as sole trustee, was not shown to have committed waste of the trust assets, we find error. Appellant sought to introduce evidence proving that Peggy Bieley had wasted trust assets by improper rent expenditures through the introduction of checks establishing the amount wasted. Counsel failed to introduce documents and sought to have the case reopened so that they might be introduced. The court refused to permit the case to be reopened, although the court recognized that rent should not have been paid under the terms of the trust. We hold the trial court abused its discretion in refusing to permit appellant the opportunity of introducing the checks. Akins v. Taylor, 314 So.2d 13 (Fla. 1st DCA 1975). We therefore reverse the provisions in the Final Judgment pertaining to waste and remand for additional testimony on that issue.
The remaining points lack merit.
Affirmed in part, reversed in part, and remanded.
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