Gillam v. Gillam

On his death in December of 1973, Harold C. Gillam left a will which was duly admitted to probate. In pertinent part, the will provided:

"ITEM TWO: I give, bequeath, and devise all of my farm property, and my farm livestock and equipment to my son, Wilford E. Gillam, of South Vienna, Ohio, in trust, nevertheless, upon the following terms and conditions and for the following uses and purposes:

"My said trustee shall have full power and authority to manage and operate my said farm property, making all necessary decisions therefor, and shall pay over the net income therefrom quarterly or oftener [sic] to my wife, Alma L. Gillam, for and during her natural life. In the event, however, that it should become either desirable or necessary to sell my said farm property during the life of my said wife, I then direct that my said trustee shall have the privilege of sale without any order of court and upon the terms and conditions which, on consultation with my said wife, he may deem most suitable. After all costs and expenses of any such sale shall first have been met, I then direct that the proceeds therefrom shall be distributed as follows:

"A one-third part to my said wife, Alma L. Gillam, to be hers absolutely.

"The remaining two-thirds part thereof to my children, Helen E. Gerard of Jamestown, Ohio, Wilford E. Gillam, of South Vienna, Ohio, and Lois J. Hanson of Atlanta, Georgia, to be theirs absolutely, share and share alike.

"ITEM THREE: In the event that my said real property has not been sold during the life of my said wife, Alma L. Gillam, on her death, I then direct that my said trustee shall sell all of my said farm property, together with any remaining livestock and equipment, in the same manner and with the same powers as already provided for herein, and distribute the proceeds thereof to my children, Helen E. Gerard, Wilford E. Gillam, and Lois J. Hanson, share and share alike. My said trust estate shall then terminate."

Alma L. Gillam, plaintiff-appellee, was the second wife of the testator and the aunt of the testator's three children, Wilford E. Gillam, Lois J. Hanson and Helen E. Gerard, defendants-appellants. Appellee, finding that her income pursuant to Item Two of her husband's will was paid irregularly and was inadequate for her needs, requested Wilford E. Gillam, as trustee, to sell the farm pursuant to his power to do so under said Item Two. He advised her that in his opinion such sale was neither desirable nor necessary and refused her request.

Appellee then commenced this action, praying the Court of Common Pleas of Clinton County for a sale of the property pursuant to R. C. 5303.21, the disentailment statute. After hearing, the trial court found that the sale of said real estate would be to the benefit of appellee, Alma Gillam, the person holding the first and present estate, and that such sale would not do substantial harm to appellants, the remaindermen. The court ordered the premises sold "pursuant to the provisions of Section 5303.21 et seq. of the Ohio Revised Code." Appellants thereupon appealed to this court assigning as error that the judgment was contrary to law and against the manifest weight of the evidence.

R. C. 5303.21 provides:

"In an action by the tenant in tail or for life, or by the grantee or devisee of a qualified or conditional fee, or of any other qualified, conditional or determinable interest, or by a person claiming under such tenant, grantee, or devisee, or by the trustee or beneficiaries, if the estate is held in trust, courts of common pleas may authorize the sale of any estate, whether it was created by will, deed, or contract, or came by descent, when satisfied that such sale would be for the benefit of the person holding the first and present estate, interest, or use, and do no substantial injury to the heirs in tail, or others in expectancy, succession, reversion, or remainder. This section does not extend to estates in dower."

The issue, then, is whether the evidence supports the conclusion of the trial court that the sale of the farm would be "for the benefit of" appellee and "do no substantial injury to" appellants.

The evidence was uncontradicted, except for Alma Gillam's opinion that the sale would be of great benefit to her and not injure appellants and Wilford E. Gillam's opinion that the sale would do substantial injury to appellants and be of slight, if any, benefit to appellee. The farm had been valued in the testator's estate at $150,000, and, according to expert testimony, was at the time of hearing worth approximately $200,000. Land values in the area had been steadily increasing and were expected to continue to do so. According to one expert, income from farm properties tended to be low in relation to the value of the land, and income losses were always possible.

During the three and one-third years that the trust had been in existence, income payments to appellee had been irregular. They totalled $16,200, or an average of approximately $5,000 per year. If a sale of the farm netted $200,000, the proceeds could be invested by a bank trust department at six and three-quarters percent interest, or $13,500 per year. The trustee (appellant Wilford E. Gillam) was unable to pay income quarterly because the income from the farm came in irregularly. Since the trustee lived out of town, it was necessary for him to employ an agent, at a ten percent commission, to collect the rent from the farm house and to oversee repairs. The land itself was sharecropped on a fifty-fifty basis.

Concluding as we do, for the reasons hereinafter set out, that appellee is entitled to the income for life from the proceeds of the sale of the premises, she would obviously benefit from regularizing and doubling her income; and, the trial court so found. As noted, R. C. 5303.21 also requires a finding that the sale would do no substantial injury to appellants.

Although counsel during argument indicated that the trial court's entry was unclear, it is apparent that the court's conclusion, that a sale would do no substantial injury to appellants, was based on its interpretation of the will and its conclusion that, under the provisions of R. C. 5303.26, 5303.27 and 5303.28, the proceeds of the sale would be paid over to Wilford E. Gillam, as trustee, with the income from the trust payable to appellee for life and the principal distributed to the appellants upon her death. This is the only rational basis for the court's finding that a sale would do no substantial injury to the appellants as remaindermen. It defies reason to conclude that where the remaindermen are to completely inherit a steadily appreciating asset on the death of an 82-year-old life beneficiary, they would not suffer substantial injury if the property were sold, prior to the death of the life beneficiary, so that they then received only two-thirds of the proceeds.

The trial court must have concluded, as we do, that a sale under court order pursuant to R. C. 5303.21 results in a mere substitution of assets. Such is the purpose of the statute. As stated in Schneider v. Wolf (1929), 120 Ohio St. 524, 528-529, in its analysis of the predecessor to the present statute:

"* * * The plain, manifest policy of the Legislature was to provide a means, safe to all interested, of changing the character of the property entailed from real estate into money or its equivalent through a judicial sale, duly made and confirmed by the court, to the end that all interests might be segregated, preserved, and enjoyed by the several owners thereof, not in defiance of the provisions of the will, but strictly in accord with the terms of the will, and the statute imposes upon the court, in the most emphatic terms, duties that must be observed by the court in accomplishing these results, so as to safeguard the interests of all. The money takes the place of the property, while the title to the property is freed from the entanglements which may otherwise embarrass its sale and transfer for years to come. * * *"

Furthermore, R. C. 5303.26 mandates that the proceeds of the sale be treated no differently than the land itself. R. C.5303.26 provides as follows:

"All money arising from a sale of an estate described in section 5303.21 of the Revised Code, for purposes of descent, succession, reversion, or remainder, has the same character and is governed by the same principles as the estate sold, and passes according to the terms of the deed, will, or other instrument creating the estate."

We conclude, as the trial court must have, that it was the testator's intent, under Item Two of the will, to divide his property so that his wife received one-third of the proceeds and so that his children received the remaining two-thirds, only in the event that his son, as trustee, exercised his privilege to voluntarily sell the property. Item Two does not contemplate a forced sale or a sale by order of court; it contemplates only a voluntary sale by the trustee, when he deems such sale desirable or necessary, from the point of view of all parties.

Item Two of the will provides that in the event the trustee deems it either desirable or necessary to sell the farm, he has the privilege of doing so without any order of court and, after consultation with the testator's wife, on such terms as he deems suitable. Item Two goes on to state that "* * * [a]fter all costs and expenses of any such sale * * * have [first] been met, I then direct that the proceeds therefrom shall be distributed * * *" (emphasis added) so that his wife receives one-third and his children receive two-thirds.

The sale ordered herein by the trial court was not "such sale," but a forced sale, which is analogous to a sale under threat of eminent domain or a taking by eminent domain. Hence, the proceeds of the sale under the court's order in this case are not the proceeds "therefrom," as provided for in Item Two. The provisions of Item Two, then, relating to distribution, are not applicable to the proceeds of the sale in this case. Under the provisions of R. C. 5303.21 et seq., the proceeds of the sale must be held by the trustee, just as the land originally was, with the income payable to appellee for life and the remainder, on her death, to appellants.

The only evidence of any substantial injury to appellants by the sale of the farm was the trustee's legally erroneous conclusion that a sale would result in the loss to appellants of one-third of the principal. The trial court, having apparently concluded that this was legally erroneous, was justified in its finding that a sale would do no substantial injury to the appellants.

For these reasons, we find that the assignment of error is not well taken and affirm the judgment of the trial court.

Our brother, Judge Black, in his dissent, concludes that the legislature did not intend R. C. 5303.21 to be applied to trusts, where the trustee has a power of sale. While respecting his historical analysis of the purpose of disentailment statutes generally, we find no language in R. C. 5303.21 on which such a distinction can be grounded. The statute simply states that the action may be brought "* * * by the trustee or beneficiaries, if the estate is held in trust, [and that the] courts of common pleas may authorize the sale of any estate, whether it was created by will, deed, or contract, or came by descent * * *."

Additionally, this court specifically held in State, ex rel.Ehmann, v. Schneider (1946), 78 Ohio App. 27, 32, that the power of a Court of Common Pleas to authorize a sale of the property, as is set forth in G. C. 11925 et seq. (G. C. 11925 is the predecessor of the present disentailing statute), "* * * is expressly made to extend to real estate held in trust created by will."

We recognize the importance of settlors and testators possessing the right to repose confidence in trustees; but, we doubt that vesting a power of sale in the Court of Common Pleas, when that court determines that a sale would benefit the life tenant and do no injury to the remaindermen, will have the dire results anticipated by the dissent. In any case, the legislature has given the Court of Common Pleas that power.

Judgment affirmed.

KEEFE, P. J., concurs.