Opinion
Oct. 14, 1970.
Editorial Note:
This case has been marked 'not for publication' by the court.
Where profit-sharing trust provided that, upon death of employee, distributions would be made to such living beneficiaries as employee had designated in writing and that upon failure of designated beneficiaries to survive distribution date, distribution would be made to employee's estate, upon death of employee, his wife, who was primary beneficiary, held vested interest in trust share to extent she survived any distribution dates, and upon her death employee's brother, as secondary beneficiary, held vested interest in distributions on same basis.
Page 636
Williams, Erickson & Wallace, Wayne D. Williams, Denver, for plaintiffs in error.
Harold L. Meadoff and Charles S. Vigil, Denver, for defendant in error.
DUFFORD, Judge.
This case was originally filed in the Supreme Court of the State of Colorado and was subsequently transferred to the Court of Appeals under the authority vested in the Supreme Court.
Of the parties constituting the plaintiffs in error, Sturgeon Electric Company was the settlor of a profit sharing trust for the benefit of its participant employees. Ralph E. Johnson, Ellis B. West, Dwight L. Johnson and Central Bank and Trust Company were the administering 'Trustees' of the trust. Carl H. Mills was the brother of George A. Mills, which latter person was a participating employee under the trust prior to his death. George A. Mills was also the husband of Gertrude A. Mills, also now deceased, and her executrix is the defendant in error here. The positions of the parties were reversed in the trial court.
The profit sharing trust in question was established by Sturgeon Electric during the year 1953 for the benefit of its participating employees. Under the terms of the trust, a specified percentage of Sturgeon Electric's profits for each fiscal year, subject to limitations fixed by the Internal Revenue Code, were to be paid into the trust fund. The trust agreement provided for distribution of the share of any participating employee upon attaining the age of 65 years, or upon death or disability. It was expressly provided in the trust document that distributions under its terms would be made to the employee if he were living and, if not, then to such 'living beneficiary or beneficiaries as he shall have designated in writing.' The trust document specified that, in the absence of a designated beneficiary 'or upon the failure of designated beneficiaries to survive the distribution date' (emphasis ours), distribution would be made to an employee's estate. The time and manner of distributions under the trust were governed by a proviso that distributions would be spread 'approximately evenly over a period of ten (10) years by installment payments made not less frequently than annually; provided however, that the Trustees may make such distribution in full, or may from time to time accelerate such distributions in whole or in part' as Sturgeon Electric might determine in its sole discretion.
In compliance with the trust agreement, George A. Mills had executed a designation of beneficiary, naming as beneficiaries: First, his wife, Gertrude, and then his brother Carl H. Mills. Following the designation of these named beneficiaries, the designation of beneficiary instrument specified that to the extent 'said beneficiaries May fail to survive to receive distributions' (emphasis ours) under the trust, distributions would be made to the estate of George A. Mills.
It is undisputed that George A. Mills was a qualified participant employee under the trust agreement, and that at the time of his death was receiving monthly payments from his share in the trust. Immediately after the death of George A. Mills, Sturgeon Electric through its president advised the Trustees by letter, with a copy going to George's widow, Gertrude, that the trust share of George A. Mills had reverted to Gertrude Mills, that she desired to continue the monthly payments, and that Sturgeon Electric as the settlor was agreeable to such a distribution plan. A total of eight monthly payments were made to the widow, six of which were made prior to her death and two of which were paid after her death, but without knowledge of her death on the part of the Trustees. Upon learning of her death, the Trustees determined that, under the provisions of the trust agreement and the designation of beneficiary executed by George A. Mills, monthly payments should thereafter be made to the brother, Carl H. Mills, and payment was commenced on such basis.
This action was then brought by the executrix of the estate of Gertrude A. Mills, the widow, claiming, in effect, that the Gertrude A. Mills estate was entitled to receive the entire trust share of George A. Mills on the theory that ownership of the entire share vested in Gertrude A. Mills upon the death of her husband. Upon completion of the evidence, the trial court concluded that under the terms of the trust agreement and the designation of beneficiary it was only necessary that Gertrude, as the first named beneficiary, be living as of the date of the employee's death, and that if she was living on that date the entire trust share of George A. Mills became her property and consequently a part of her estate. It is from this decision that this appeal was brought.
In its posture before us, there is no dispute or conflict of evidence in this case, and the sole problem is the construction of specific written instruments. It is our opinion that the legal construction given to the written instruments by the trial court is not correct. From the terms of the controlling instruments, we conclude that it was a condition to a taking by either of the named beneficiaries that she or he be living as of the actual distribution date. Our Supreme Court in Burden v. Colorado National Bank, 116 Colo. 111, 179 P.2d 267, considered and interpreted 'then living' language appearing in the testamentary trust document before it, and held that such language created a vested interest, subject to defeasance upon the happening of a condition subsequent. It was then ruled in that case that upon the happening of the condition; that is, the failure to survive, the interest terminated. In our opinion, the instant case is controlled by that rule set forth in the Burden case. Applying that rule here, we conclude that the wife held a vested interest in the trust share to the extent she survived any distribution dates. To the extent she failed to survive distribution dates her interest was divested with the remainder then going to the brother on the same basis. To the extent the brother might fail to survive actual distribution dates the remainder would pass to the employee's estate.
The judgment of the trial court is reversed, and this cause is remanded for the entry of further orders consistent with the conclusions of law reached here.
SILVERSTEIN, C.J., and COYTE, J., concur.