Chamberlin v. Wong , 134 Cal. App. 3d 292 ( 1982 )

Opinion

KAUFMAN, Acting P. J.

The primary question on appeal is whether the decedent Muriel Eddy (Mrs. Eddy) effectively exercised in her will a general discretionary power of appointment given her by the will of her predeceased husband Everett Eddy. The trial court concluded she had and that the appointive property was subject to disposition in her estate. We conclude she did not and that the property is not subject to disposition in her estate.

In 1968 Everett Eddy and Muriel Eddy were husband and wife. Each had been married before. Mr. Eddy had a son by a previous marriage, William E. Eddy. Mrs. Eddy had no children but she did have a sister, Brenda Hemming. During her earlier marriage she also had a stepson, Floyd E. Chamberlin.

On March 18, 1968, Mr. and Mrs. Eddy executed their respective wills, drafted by the same law firm and witnessed by the same persons.

Mr. Eddy’s will purported to dispose of all of his own property, both his separate property and his half of the community property, as well as Mrs. Eddy’s half of the community property. His will provided that if Mrs. Eddy should elect to take under the will, all said property, both separate and community, was to be divided in half and distributed into two trusts, trust “A” and trust “B.” Mr. Eddy’s son, William E. Eddy, was named as trustee of both trusts and Mrs. Eddy was named as the beneficiary of both trusts for her lifetime. Upon the death of Mrs. Eddy, trust “B” was to terminate and the property be distributed to Mr. Eddy’s son, William E. Eddy. With respect to trust “A” it was provided that if Mrs. Eddy‘s sister, Brenda Hemming, survived Mrs. Eddy’s death, the trust was to continue for the benefit of the sister for her lifetime and upon her death the remainder, if any, be distributed to Mr. Eddy’s son, William E. Eddy.

However, Mr. Eddy’s will also provided: “If my said wife shall survive me, she shall have the power to appoint, by Will or Codicil thereto, all or any part of the principal and undistributed income of Trust ‘A,’ free of the trust, in favor of her estate, or any persons whom she shall designate. The power shall be deemed to have been exercised only if by specific reference thereto in her Will or Codicil, my said wife shall express her intention to exercise the same.” (Italics added.)

Mrs. Eddy’s will provided that Mr. Eddy should receive all of her property if he survived her death but thereafter provided in pertinent part: “If my said husband does not survive me, then all of the property I own, including, but not by way of limitation, any property over which I have a power of appointment, shall go as follows:

“a. If my sister, Brenda Hemming, does not survive me, then all of said property shall go to my husband’s son, to-wit, William E. Eddy.

“b. If my said sister does survive me, then all of said property shall go to William E. Eddy as trustee. The beneficiary of said trustee shall be my sister, Brenda Hemming ....

“c. .. . Upon the death my said sister, the trust herein created shall ipso facto cease and the trustee shall convey in fee all of the remaining corpus of said trust and any accumulated income, to my said husband’s son, to-wit, William E. Eddy.” (Italics added.)

Mr. Eddy died on May 19, 1973, survived by Mrs. Eddy and his son, William E. Eddy. His will was duly admitted to probate, and Mrs. Eddy elected to take under his will. By decree of distribution dated May 1, 1974, the assets of his estate were distributed to William E. Eddy as trustee and trusts “A” and “B” were funded. There is no issue in this appeal concerning trust “B” or its assets.

William E. Eddy served as trustee until the date of his death on November 9, 1977. His will named Beverly Anne Wong as executor, and after his death' she was appointed successor trustee of the trusts.

On April 18, 1979, Mrs. Eddy died. Brenda Hemming, her sister, predeceased her. Mrs. Eddy’s will was admitted to probate and, her nomination of William E. Eddy as executor having failed because of the latter’s earlier death, Floyd E. Chamberlin, her former stepson, was appointed administrator of her estate with the will annexed.

On January 10, 1980, Floyd E. Chamberlin filed a creditor’s claim in Mrs. Eddy’s estate for $42,500 or the total estate, whichever was greater. The alleged basis for the claim was the care of and personal services rendered to Mrs. Eddy from the summer of 1978 until her death on April 18, 1979.¹

On April 7, 1980, Floyd E. Chamberlin as administrator with the will annexed of the estate of Mrs. Eddy filed a petition to determine heir-ship pursuant to Probate Code section 1080 requesting that the assets of trust “A” created by the will of Mr. Eddy be determined to be a portion of the estate of Mrs. Eddy. The contention was that Mrs. Eddy had validly exercised the power of appointment over the property comprising the corpus of trust “A” by the language in her will, “all of the property I own, including, but not by way of limitation, any property over which I have a power of appointment, shall go as follows:...” (Italics added.)

After hearing, the court issued an order determining that Mrs. Eddy had indeed validly exercised the power of appointment and that all the income and principal of trust “A” passed to the estate of Mrs. Eddy pursuant to subdivision (c) of Civil Code section 1389.3. (All statutory references will be to the Civil Code unless otherwise specified.)

Beverly Anne Wong as successor trustee of the trust appeals.

To the extent there is any difficulty involved in the disposition of this appeal, it lies in the fact that the controlling statutory law is different now (more technically, April 18, 1979, the date of Mrs. Eddy’s death) from what it was when Mr. and Mrs. Eddy’s wills were executed in 1968.

In 1968, Probate Code section 125 provided: “A devise or bequest of all the testator’s real or personal property, in express terms, or in any other terms denoting his intent to dispose of all his real or personal property, passes all the real or personal property which he was entitled to dispose of by will at the time of his death, including property embraced in a power to devise.'" (Stats. 1931, ch. 281, § 125, p. 594; italics added.)

In 1969, however, the statutory provision was amended to read: “Except as provided by Sections 1386.1 and 1386.2 of the Civil Code relating to powers of appointment, a devise or bequest of all the testator’s real or personal property, in express terms, or in any other terms denoting his intent to dispose of all his real or personal property, passes all the real or personal property which he was entitled to dispose of by will at the time of his death.” (Stats. 1969, ch. 155, § 3, p. 409; italics added.)

On the date of death of the decedent, section 1386.2 read: “A general power of appointment exercisable at the death of the donee is exercised by a residuary clause or other general language in the donee’s will purporting to dispose of the property of the kind covered by the power unless: [¶] (a) The creating instrument requires that the donee make a specific reference to the power or to the instrument that created the power, or [¶] (b) The donee manifests an intent, either expressly or by necessary inference, not to so exercise the power.” (Stats. 1969, ch. 155, § 1, p. 405.²) (Italics added.)

In addition, section 1385.2 enacted in the same chapter as section 1386.2 (Stats. 1969, ch. 155, § 1, p. 404) provides: “If the creating instrument expressly directs that a power of appointment be exercised by an instrument which makes a specific reference to the power or to the instrument that created the power, the power can be exercised only by an instrument containing the required reference.”

Appellant contends that by the terms of Mr. Eddy’s will, the power of appointment given Mrs. Eddy could be exercised only by specific reference to the power and that the language in Mrs. Eddy’s will, whether or not it was sufficient to exercise the power at the time the two wills were drawn and executed,³ was insufficient to constitute a valid exercise of the power of appointment under sections 1385.2 and 1386.2 (subd. (a)) which constitute the applicable law. Appellant is plainly correct.

Preliminarily, there can be no question but that the 1969 version of section 1386.2 and section 1385.2 are applicable to this decision notwithstanding that Mr. and Mrs. Eddy’s wills were executed in 1968. Section 1380.2, enacted as part of the same statute that enacted sections 1385.2 and 1386.2 (Stats. 1969, ch. 155, § 1, p. 402) provides in pertinent part: “If the law existing at the time of the creation of a power of appointment and the law existing at the time of the release or exercise of the power or at the time of the assertion of a right given by this title differ, the law existing at the time of the release, exercise, or assertion of a right controls.” Although Mrs. Eddy’s will was executed in 1968, insofar as the purported exercise of the power is concerned, it speaks as of the date of her death, March 18, 1979, long after July 1, 1970, the effective date of the 1969 enactments.

Turning to the question whether the language in Mrs. Eddy’s will, “all of the property I own, including, but not by way of limitation, any property over which I have a power of appointment, shall go as follows,” is sufficient to constitute a specific reference to the power of appointment given her by Mr. Eddy, respondent first contends apparently that Mr. Eddy’s will did not require a specific reference to the power. He states: “In the Will of Everett Eddy, the testator only required that ‘my said wife shall express her intention to exercise the same.’ [Citation to clerk’s transcript omitted.] He did Not require her to refer to the instrument that created the power, which he could have specifically required if he intended the exercise of the power to only be valid if such a reference to that creating instrument was, in fact, made.” Respondent then invokes the provisions of section 1386.1 which provides that “[t]he exercise of a power of appointment requires a manifestation of the donee’s intent to exercise the power” and then lists a number of factors from which the manifestation of such intent may be found to exist. Respondent then argues that on the basis of the enumerated factors the language used in Mrs. Eddy’s will evidences her intent to exercise the power.

The fatal flaw in respondent’s argument is his failure to recognize a distinction between a requirement for a reference to the instrument creating the power and a reference to the power itself, a distinction expressly made in the statutory provisions. (E.g., §§ 1385.2, 1386.2, subd. (a) [1969 version, see fn. 2, ante, and accompanying text].) It is true that Mr. Eddy’s will did not require a reference to his will as a precondition to exercise of the power of appointment given Mrs. Eddy. It did, however, require a specific reference to the power of appointment, not just a general manifestation of intent to exercise the power. The language was: “The power shall be deemed to have been exercised only if by specific reference thereto in her Will or Codicil, my said wife shall express her intention to exercise the same.” (Italics added.)

Sections 1385.2, and 1386.2, subd. (a) (1969 version, see fn. 2, ante, and accompanying text) make it absolutely clear that if the creating instrument requires a specific reference to the power, the power may be exercised only by such specific reference to the power. The 1969 Law Revision Commission comment to the 1969 version of section 1386.2 states: “This section [1386.2] creates an exception to Section 1386.1.” (See West’s Ann. Civ. Code (1982 Supp.) p. 99.) Respondent’s reliance on section 1386.1 is, therefore, misplaced.

Finally, it is suggested that the language in Mrs. Eddy’s will, “all of the property I own, including, but not by way of limitation, any property over which I have a power of appointment,” does in fact constitute a specific reference to the power of appointment sufficient to comply with the requirement in Mr. Eddy’s will that the power be exercised only by specific reference to the power. We do not agree.

The quoted language in Mrs. Eddy’s will is not even a direct general reference to all powers of appointment she might have; it refers to property over which she has a power of appointment. Patently, that is not a specific reference to the power of appointment given her by Mr. Eddy, which is what Mr. Eddy’s will requires and what section 1385.2 and the 1969 version of section 1386.2, subdivision (a), expressly require. However, even if the quoted language in Mrs. Eddy’s will were generously construed to be a general reference to any and all powers of appointment she might have, it would not be sufficient under the applicable statutes. The 1969 Law Revision Commission comment to section 1385.2 reads in pertinent part: “This section permits a donor to require an express reference to the power to assure a conscious exercise by the donee. In such a case, the specific reference to the power is a condition to its exercise. This condition precludes the use of form wills with ‘blanket’ clauses exercising all powers of appointment owned by the testator.” (See West’s Ann. Civ. Code (1982 Supp.) p. 96, italics added.)

We are referred to a number of sister-state decisions said to bear upon the problem at hand. We find them of limited assistance because none involved statutes similar to ours and in most of them the problem was treated as one of ambiguity, requiring an interpretation of the will of either the donor or the donee or both and revolving around the question of intent. (E.g., First Union Nat. Bank v. Moss (1977) 32 N.C.App. 499 [233 S.E.2d 88]; Cross v. Cross (Mo.App. 1977) 559 S.W.2d 196; McKelvy v. Terry (1976) 370 Mass. 328 [346 N.E.2d 912]; Shine v. Monahan (1968) 354 Mass. 680 [241 N.E.2d 854]; cf. First Nat. Bank of McMinn County v. Walker (Tenn. 1980) 607 S.W.2d 469.) We do not find ambiguous the requirement in Mr. Eddy’s will that Mrs. Eddy exercise the power only by specific reference to the power. Moreover, there is nothing ambiguous about the language of the 1969 version of section 1386.2 or section 1385.2, and we have already noted that in view of the clearly stated statutory provisions applicable to this decision, we do not deem it necessary or appropriate to speculate about the intent of the parties or the drafter of the wills. (See fn. 3, ante.)

We agree with the analysis and reasoning of the court in Holzbach v. United Virginia Bank (1975) 216 Va. 482 [219 S.E.2d 868]. The opinion of the court reads in relevant part: “Holzbach insists that donee’s intent controls this question. Pointing to donee’s general reference to all powers and to the affidavit which indicates that she was aware of the particular power in question, Holzbach says that ‘it is clear that the donee intended to exercise the power of appointment in favor of her sister’. [¶] Holzbach applies the wrong test of compliance. The test is not whether donee intended to appoint but rather whether donee manifested her intent in the manner prescribed by donor, i.e., by making specific reference ‘in her will’ to the power granted by donor’s will....” (Id., at p. 871, italics in orig.)

Further: “On brief, the parties speculate as to donor’s motives in requiring donee to manifest her intent in the manner he prescribed. ... [¶] It is not necessary to our decision to guess which of these motives prompted donor .... The requirement imposed is not unlawful; it does not offend public policy . .:. When a donor imposes such a requirement, a donee . . . can make no valid appointment affecting that property unless he complies with donor’s requirement. [¶] Pursuing his right to dispose of his property as he saw fit, donor . . . imposed a lawful requirement that his donee manifest on the face of her will an intent to exercise the power by making specific reference to the power created in his will. While donee’s will makes general reference to powers of appointment, it makes no specific reference to donor, to his will, or to the power created by his will. .. . [D]onee’s will failed to comply with donor’s requirement and, therefore, failed to make an effective appointment of donor’s property.” (219 S.E.2d at p. 872; see also First Nat. Bank of McMinn County v. Walker, supra, 607 S.W.2d at pp. 474-475; cf. In re Estate of Schede (1967) 426 Pa. 93 [231 A.2d 135].)

Having concluded that Mrs. Eddy failed to make an effective appointment of the property comprising the corpus of trust “A,” it remains to be determined whether or not, as the trial court determined, the undistributed income and principal of trust “A” passes to the estate of Mrs. Eddy pursuant to section 1389.3, subdivision (c). We conclude it does not.

The parties are in agreement that the controlling statute is section 1389.3, the text of which as it read at the date of death of the decedent is set forth in the margin.⁴

Subdivision (a) of the 1969 version of section 1389.3, which provides that when the donee fails to appoint the property or makes an ineffective appointment, the property not effectively appointed passes to the person or persons named by the donor as takers in default or, if there are none, reverts to the donor, clearly pertains to the situation at hand unless it is made inapplicable by its introductory clause, “Except as provided in subdivisions (b) and (c).” Subdivision (b) is clearly not in point. However, as previously indicated the trial court found subdivision (c) applicable.

Subdivision (c) reads in relevant part: “Unless the creating instrument manifests a contrary intent, when the donee of a general power of appointment makes an ineffective appointment other than to a trustee upon a trust which fails, the appointive property passes to the donee or his estate if the instrument of appointment manifests an intent to assume control of the appointive property for all purposes.....” (Italics added.) While we can agree with the trial court that some of the language of subdivision (c) might seem to make it applicable, the introductory clause, “[u]nless the creating instrument manifests a contrary intent,” renders it inapplicable. The will of Mr. Eddy, the creating instrument, does manifest a contrary intent. It specifically provides in paragraph 3 on page four: “If at the time my wife dies, as aforementioned in this Paragraph, she is not survived by her said sister, Brenda Hemming, this Trust ‘A’ shall ipso facto cease and terminate, and the trustee shall convey, in fee, all of the remaining corpus of said Trust ‘A,’ and any accumulated income, to my said son, William E. Eddy.”

Thus, subdivision (a) of the 1969 version of section 1389.3 controls, and the property does not pass to the estate of Mrs. Eddy.

The judgment is reversed with directions to the trial court to make an order determining that the power of appointment was not effectively exercised and that the property is not subject to disposition in the estate of Muriel Eddy.

McDaniel, J., concurred.

1 The creditor’s claim was rejected by the court in a minute order dated July 7, 1980. No issue concerning that ruling is presented on this appeal.

2 Section 1386.2 as enacted by Statutes 1969, chapter 155, section 1, was repealed in Statutes 1981, chapter 63, section 1, which also enacted a new section 1386.2 reading: “A general residuary clause in a will, or a will making general disposition of all of the testator’s property, does not exercise a power of appointment held by the testator unless specific reference is made to the power or there is some other indication of intention to exercise the power.” (Stats. 1981, ch. 63, § 2, p. 118.) Subdivision (d) of section 10 of the 1981 statute, however, provided: “The repeal and addition of Section 1386.2 of the Civil Code as made by this act applies to any case where the donee dies on or after the operative date of this act.” Section 11 of the 1981 statute provided: “This act shall become operative on July 1, 1982.” Mrs. Eddy died April 18, 1979. Thus, the 1981 statute is inapplicable to this case.

3 Appellant also makes a rather persuasive argument that the testamentary scheme established by the wills of Mr. and Mrs. Eddy was to benefit Mrs. Eddy during her lifetime, thereafter her sister if she survived Mrs. Eddy and ultimately William E. Eddy, Mr. Eddy's son, and that the scheme could not have contemplated the language of Mrs. Eddy’s will operating to validly exercise the power of appointment under the terms of her will when all of the beneficiaries named in her will were predeceased. The result, she argues, would be an escheat to the state. We also observe that since the two wills were apparently drafted by the same law firm, if the drafter had intended the language of Mrs. Eddy’s will to constitute an exercise of the power, one would have expected a specific reference to the power inasmuch as he apparently also drafted the power itself which provided that it could be exercised only by such specific -reference.

However, we do not deem it necessary or appropriate to speculate on either the intentions of the drafter or the parties at the time the wills were drafted and executed. To the extent the actual intent of Mrs. Eddy is pertinent at all, it is her intent immediately preceding her death that would be significant. As to that there can be little question, because it is established without contradiction that some 15 months before her death Mrs. Eddy was informed by an attorney that the language in her will was insufficient to exercise the power because of the requirement for a specific reference to the power. The fact is, however, that under the language of section 1386.2 effective at the time of Mrs. Eddy’s death, her actual intent is irrelevant unless her representative were claiming that she intended not to exercise the power. (See § 1386.2, subd. (b), quoted in the text, ante.) Regardless of what might or might not have been intended, the statute provides that when the creating instrument requires specific reference to the power, the power can only be exercised by such specific reference to the power.

4 Section 1389.3 then read: “(a) Except as provided in subdivisions (b) and (c), when the donee of a discretionary power of appointment fails to appoint the property, releases the entire power, or makes an ineffective appointment, in whole or in part, the appointive property not effectively appointed passes to the person or persons named by the donor as takers in default or, if there are none, reverts to the donor.

“(b) Unless either the creating instrument or the instrument of appointment manifests a contrary intent, when the donee of a general power of appointment appoints to a trustee upon a trust which fails, there is a resulting trust in favor of the donee or his estate.

“(c) Unless the creating instrument manifests a contrary intent, when the donee of a general power of appointment makes an ineffective appointment other than to a trustee upon a trust which fails, the appointive property passes to the donee or his estate if the instrument of appointment manifests an intent to assume control of the appointive property for all purposes and not only for the limited purpose of giving effect to the expressed appointment.” (Stats. 1969, ch. 155, § 1, pp. 407-408.)

The foregoing version of section 1389.3 was amended in 1981 (Stats. 1981, ch. 63, § 5, p. 120) but the operative date of the amended section was postponed until July 1, 1982, and subdivision (a) of section 10 of the amendatory statute provides: “Sections 1389.3 and 1389.4 of the Civil Code as amended by this act apply to any case where the donee dies on or after the operative date of this act.” (Stats. 1981, ch. 63, § 10, p. 121.)