Estate of Austin

Citation169 Cal.Rptr. 648,113 Cal.App.3d 167
CourtCalifornia Court of Appeals
Decision Date11 December 1980
PartiesEstate of Lucille Ann AUSTIN, Deceased. Betty GULDBERG, Intervenor and Appellant, v. SHRINE HOSPITAL FOR CRIPPLED CHILDREN, Intervenor and Respondent. Civ. 5274.
Paul A. Ginsburg, Torrance, for intervenor and appellant
OPINION

ANDREEN, Associate Justice.

The testatrix, Lucille Ann Austin, executed her will on March 9, 1977. Two specific bequests were made to a friend, Betty Guldberg, who is appellant herein. The first bequest was an oil portrait of the testatrix' mother and the other was as follows:

"4(L) The promissory note which I own and hold, made by GARY GRENZ, together with the deed of trust or mortgage securing said promissory note, I give to my friend, BETTY GULDBERG; providing that in the event BETTY shall predecease me or shall not survive distribution of my estate, then in that event said promissory note, together with the securing deed of trust, I give to BETTY's mother, DOROTHY GULDBERG, and should DOROTHY likewise predecease me or not survive the distribution of my estate, then such promissory note, together with the securing deed of trust, I give to the heirs of DOROTHY GULDBERG by right of representation."

The will is somewhat unique, in that it contains nine separate legacies ranging from $2,000 to $15,000 to individuals and organizations. In addition, there are three bequests; the two mentioned above and a dog. The remainder of the estate is given to the respondent Shrine Hospital for Crippled Children, which is also the beneficiary of a $5,000 legacy.

The case is before us because the Grenz note given to Betty Guldberg was paid in full on July 1, 1977, about four months after the will was executed. The payoff was $17,065.88 and was made contemporaneous with the sale of the property which was the underlying security. The note did not include a due on sale clause.

Five days after the payoff, the note proceeds were placed in a savings account which at that time had a balance of $7,727.67 (plus a small amount of accrued but unposted interest).

Thereafter, on August 9, 1977, the testatrix withdrew $20,000 from the account and loaned it to the Inmans. She received in return a promissory note secured by a deed of trust. The note was due in six months.

On January 14, 1978, about 10 months after the will was executed, the testatrix died without having changed her will.

The Inman note was paid off in full shortly thereafter, and the proceeds rest in an estate savings account.

The short trial had no testimony as to extrinsic evidence of the testatrix' intent.

The court below held that the legacy was specific and adeemed, so that it fell into the residue of the estate and thus went to the respondent hospital.

The scope of our review is delineated in Estate of Russell (1968) 69 Cal.2d 200, 213, 70 Cal.Rptr. 561, 444 P.2d 353. We are not bound by the trial court's construction of the will since there is no extrinsic evidence which is in conflict.

"The intention of the testatrix should be carried out as nearly as possible, and this is the basic rule of interpretation, to which all other yield...." (7 Witkin, Summary of Cal.Law (8th ed. 1974) Wills and Probate, § 159, p. 5674.)

The parties have cited numerous authorities which purport to assist one side or the other. We will discuss each of them.

The respondent hospital relies on Estate of Calori (1962) 209 Cal.App.2d 711, 26 Cal.Rptr. 281. The case is readily distinguishable. The testatrix bequeathed a promissory note secured by real property to appellant. There was no evidence as to the terms of the note, whether it was payable in installments or in a lump sum and whether the consent of the testatrix to its payment in full was required or given. There was no evidence identifying the cash as part of the estate at date of death. That is, the funds were not traceable into an account or another promissory note.

The trial court's finding of ademption was affirmed. The reviewing court found that there was nothing in the case to show that the bequest was general rather than specific. Of assistance to respondent here is the statement by the court that: "It is difficult to regard full payment of the note as a mere change in form ...." (Id., at p. 713, 26 Cal.Rptr. 281.)

Estate of Calori has rested on the shelves since 1962 without benefit of citation, except in Estate of Mason (1965) 62 Cal.2d 213, 42 Cal.Rptr. 13, 397 P.2d 1005. In the latter no ademption was found.

Respondent cites Estate of Peyton (1956) 143 Cal.App.2d 379, 299 P.2d 897. However, that too is distinguishable. In Peyton, the testator voluntarily sold his fractional interest in the land which was the subject of a specific bequest to his sons. In the case at bench, there was no voluntary sale.

Finally, respondent cites Estate of McLaughlin (1929) 97 Cal.App. 481, 275 P. 874 for the fact that if proceeds are commingled there is an ademption. However, in the instant case there was but one deposit into and one withdrawal from the account, so tracing is easy. (Hicks v. Hicks (1962) 211 Cal.App.2d 144, 27 Cal.Rptr. 307.)

We turn to an examination of appellant's cases.

Estate of Mason, supra, 62 Cal.2d 213, 42 Cal.Rptr. 13, 397 P.2d 1005 is distinguishable. The testatrix devised her home to appellant. Several years later, she became mentally incompetent and a guardian was appointed of her estate which sold the home and used all but $556.66 of the proceeds thereof for her support. The trial court held that there was a partial ademption to the extent that the funds had been spent, so only the remainder of the proceeds, the $556.66, be distributed to appellant. The remainder of the estate, $6,808.08, was ordered distributed to the residuary legatees. The high court reversed and held that the residuary legatees must contribute in full to satisfy the appellant's specific gift. To hold otherwise would permit the guardian to frustrate its ward's testamentary plan. The court found an analogy in the statutory rules governing abatement of testamentary gifts to satisfy debts and expenses during probate or for family allowance.

The case is significant, however, in that it sets a course away from the strict rules of ademption, and draws a clear distinction between an extinction of a legacy by some act of the testator and the act of a third person. If the testator has disposed of a specific legacy, it may be presumed that he intended that the gift fail. Where it is done by act of a third person, in Mason a guardian, no such intent can be presumed.

Estate of Ehrenfels (1966) 241 Cal.App.2d 215, 50 Cal.Rptr. 358 adds nothing to appellant's position. In it, a guardian exchanged Standard Oil stock for stock in a mutual fund. The trial court held there was no ademption and that the beneficiaries should receive the stock in the mutual fund. This was affirmed on appeal.

In Estate of Newsome (1967) 248 Cal.App.2d 712, 56 Cal.Rptr. 874, certain real property was devised to the testator's wife and other real property devised to his daughter. He then sold one of the parcels of real property which had been devised to the wife. At time of death, the proceeds were in a savings account. The court held that there was no ademption because there was no residuary clause in the will, evidencing an intent by the testator to dispose of all of his estate through the specified devises and bequests and not to cause any thereof to fail by his voluntary transmutation of the property. In the instant case, of course, there is a residuary clause.

Estate of Creed (1967) 255 Cal.App.2d 80, 63 Cal.Rptr. 80 involved a will which devised real property in trust for the testator's grandchildren. For estate tax purposes, a corporation was formed to hold the property, and the testator made inter vivos transfers of the stock to the grandchildren to the maximum allowed by the exemptions and exclusions under the federal gift tax law. The trial court held and the appellate court affirmed that the intent of the testator to have no ademption was manifest. There...

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