Covenant Presbytery v. First Baptist Church
489 S.W.3d 153
Ark.2016Background
- Stanley D. Carpenter’s 1965 will created a testamentary trust: rents to four relatives for life; residue “in equal shares” to First Presbyterian Church (Osceola) and First Baptist Church (Osceola). Trustee instructed to sell real estate when permissible and distribute proceeds per the bequest.
- Carpenter died in 1967; National Bank (later SunTrust) administered the trust, paying life-rent beneficiaries and remnant proceeds to the two churches as remaindermen.
- First Presbyterian dissolved in 2004 and transferred its assets to Covenant Presbytery; Covenant then received the trust distributions formerly paid to First Presbyterian.
- SunTrust sought judicial instructions in 2011 after First Baptist contested payments to Covenant; First Baptist also counterclaimed for breach of fiduciary duty.
- The circuit court held the devise created a charitable trust, applied cy pres when First Presbyterian dissolved, and redirected First Presbyterian’s share to First Baptist; the trial court found no breach by SunTrust.
- The Arkansas Supreme Court (majority) reversed: it concluded the will created vested remainders (not a charitable trust), so cy pres did not apply; it also dismissed the cross-appeal as moot once Covenant was held the successor in interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the will created a charitable trust | First Baptist: devise to churches created a charitable trust; interests did not vest, so cy pres could be applied | Covenant: will created only an administrative testamentary trust; remainders vested at settlor’s death and were assignable | Held: Remainders vested on death; will did not create a charitable trust; cy pres inapplicable |
| Whether beneficiaries’ interests vested at settlor’s death | Covenant: remainder interests vested and were transferable, so First Presbyterian’s interest passed to Covenant on dissolution | First Baptist: interests were contingent/trust-held for charitable purpose and thus not vested | Held: The language created present vested remainder interests that vested at death |
| Whether cy pres could be used after First Presbyterian dissolved | First Baptist: cy pres appropriate because settlor intended to benefit local churches; substitute beneficiary (First Baptist) fits settlor’s intent | Covenant: no charitable purpose was identified in will, so cy pres cannot be invoked | Held: Cy pres unavailable because settlor did not create a charitable trust or identify a charitable purpose |
| Whether trustee breached fiduciary duty by paying Covenant | First Baptist: SunTrust breached by paying a non-named beneficiary (Covenant) | SunTrust/Covenant: Covenant was successor in interest to First Presbyterian; payments proper | Held: Cross-appeal dismissed as moot after holding Covenant the successor in interest; no decision on breach rendered |
Key Cases Cited
- Bailey v. Delta Trust & Bank, 359 Ark. 424 (2004) (primary rule: ascertain and effectuate settlor/testator intent when construing wills/trusts)
- Dickerson v. Union Nat’l Bank of Little Rock, 268 Ark. 292 (1980) (vested remainder defined; vested remainders are transferable)
- Kohn v. Pearson, 282 Ark. 418 (1984) (settlor must describe a charitable purpose to create a charitable trust)
- Curry v. Guaranty Loan Co., 212 Ark. 988 (1948) (charitable trust may be created where settlor states a general charitable purpose and delegates selection/details to trustees)
- Trevathan v. Ringgold-Noland Found., Inc., 241 Ark. 758 (1967) (statement of cy pres as doctrine of approximation to fulfill donor’s charitable intent)
- State ex rel. Att’y Gen. v. Van Buren Sch. Dist. No. 42, 191 Ark. 1096 (1936) (discussion of cy pres and courts’ role in approximating donor intent)
- In re Matter of Hamilton Living Trust, 2015 Ark. 367 (2015) (procedural note: when Supreme Court grants review, appeal considered as originally filed there)
- In re Estate of Thompson, 2014 Ark. 287 (2014) (standard of review for trust construction; de novo with deferential review of factual findings)
- Butt v. Evans Law Firm, P.A., 351 Ark. 566 (2003) (mootness doctrine; dismissal where issue becomes moot)