Estate of Ehrenfel, In re

• Decision Date: 30 March 1966
• Docket Number: CROCKER-CITIZENS
• Court: California Court of Appeals Court of Appeals
• Parties: In re ESTATE of Camille J. EHRENFELS, Deceased.NATIONAL BANK, Petitioner and Respondent, v. Allan F. CROCKET et al., Objectors and Appellants, and California Alumni Foundation, Objector and Respondent. Civ. 22690.

Page 358

50 Cal.Rptr. 358

241 Cal.App.2d 215

In re ESTATE of Camille J. EHRENFELS, Deceased.

CROCKER-CITIZENS NATIONAL BANK, Petitioner and Respondent, v. Allan F. CROCKET et al., Objectors and Appellants, and California Alumni Foundation, Objector and Respondent.

Civ. 22690.

District Court of Appeal, First District,

Division 1, California.

March 30, 1966.

Hearing Denied May 25, 1966.

Raymond B. Haizlip, Charles Cline Moore, Haizlip, Moore & Ring, San Francisco, for appellants.

Thelen, Marrin, Johnson & Bridges, Max Thelen, Jr., William F. Hoefs, Graham G. Campbell, San Francisco, for respondent California Alumni Foundation.

Morrison, Foerster, Holloway, Clinton & Clark, San Francisco, for respondent Crocker-Citizens Nat. Bank.

MOLINARI, Justice.

Appellants, some of the legatees under the will of Camille Ehrenfels, appeal from the trial court's 'Decree Determining Interests in Estate,' which decree determined in part that the various bequests in decedent's will of shares of common stock of Standard Oil Company of New Jersey (hereafter referred to as Standard Oil) be satisfied out of shares of common stock of Diversification Fund, Inc., one the basis of 2.008 shares of the latter stock for each bequeathed share of Standard Oil stock. The sole contention of appellants is that this determination by the trial court was erroneous because the bequests of Standard Oil stock constituted general legacies and, accordingly, appellants are entitled to either Standard Oil stock in kind or to the cash equivalent of this stock as of the date of decedent's death or, alternatively, the date on which appellants could first petition the court for preliminary distribution of their stock.

Camille Ehrenfels died on April 25, 1963, leaving a will dated July 28, 1955 and two codicils dated August 9 and November 25, 1955. By the terms of articles third, fourth, and fifth of decedent's will and the November 25, 1955 codicil decedent bequeathed varying amounts of shares of Standard Oil common stock to appellants and to other designated individuals and organizations, these bequests totalling 466 shares. ¹ Many of these stock bequests were coupled with bequests of specific items of decedent's jewelry and personal property and bequests of varying sums of money. Decedent's will also contained the following provision in relation to the bequests of Standard Oil stock: 'The bequests of shares of stock of Standard Oil Company of New Jersey are intended to be said shares as presently constituted. In the event that prior to my death said shares be changed by splitting or otherwise said legacies shall be satisfied with the changed shares representing and being the equivalent of the presently outstanding shares.' Be article tenth of her will decedent bequeathed the residue of her estate to respondent California Alumni Foundation.

After the execution of decedent's will and codicils and prior to her death various events occurred which ultimately brought about the instant controversy. These consisted of the following: On February 10, 1956 Standard Oil split its common stock on a three-for-one basis. As a result of this stock split the 1,212 shares of Standard Oil stock which decedent owned on the date of the split and which she had owned at the time of executing her will and codicils were increased to 3,636 shares. On February 3, 1958, upon the petition of Virginia Williams, decedent's niece, the Kern County Superior Court adjudged decedent to be an incompetent and appointed Mrs. Williams as the guardian of decedent's estate. Pursuant to this order Mrs. Williams took possession of the assets of decedent's estate, including the 3,636 shares of Standard Oil stock. On March 10, 1961 Mrs. Williams petitioned the Kern County Superior Court for authority to exchange all of the common stock in decedent's estate, including the entire 3,636 shares of Standard Oil stock, for shares of common stock of Diversification Fund, Inc., a new mutual fund. On March 27, 1961 the court ordered the exchange and on July 27, 1961 this exchange was consummated, Mrs. Williams acquiring 9,502 shares of Diversification Fund, Inc., common stock and giving up all of the Standard Oil stock in decedent's estate. On the date of the exchange the Standard Oil stock was valued at $45.18 per share and the Diversification Fund, Inc., stock at $22.50 per share. Accordingly, each share of Standard Oil stock in decedent's estate was exchanged for 2.008 shares of Diversification Fund, Inc. stock.

On April 25, 1963 decedent died without ever having regained competency. At no time prior to her death had she consented to the exchange of Standard Oil stock for stock in Diversification Fund, Inc. On June 7, 1963 decedent's will and her two codicils were admitted to probate the Crocker-Anglo National Bank was appointed executor of decedent's will. On June 25, 1964 the executor filed in the trial court a petition to determine heirship. This petition set out the above-noted facts and requested the court to determine what interest those persons and organizations to whom decedent had bequeathed shares of Standard Oil stock possessed in decedent's estate. ² Specifically, the executor requested the court to determine (1) whether the bequests of Standard Oil stock were specific, demonstrative, or general; (2) whether the bequests had been adeemed; and (3) if not adeemed, the proper method of satisfaction of the bequests. Appellants and respondent filed their respective statements of interest, appellants taking the position that the bequests of Standard Oil stock were general bequests and that the court should order the executor to satisfy these bequests, aggregating 1,398 shares as a result of the three-for-one stock split, by purchasing the corresponding number of shares of Standard Oil stock out of the general assets of the estate; respondent, on the other hand, took the position that the legacies of Standard Oil stock were specific bequests which had failed and that accordingly the court should order that the specific legatees of this stock take nothing under decedent's will.

After a hearing on the executor's petition, the trial court drew conclusions of law from its findings of fact to the effect that the bequests of Standard Oil stock were specific; that the guardian's conduct did not adeem these bequests; and that decedent's intent could best be carried out and given effect by distributing to the stock legatees the proceeds of the Standard Oil stock in changed form, namely by giving them the equivalent number of shares of Diversification Fund, Inc. The trial court thereupon entered its decree determining interests in estate, which decree stated that the bequests of Standard Oil stock were specific legacies to be satisfied out of the common stock of Diversification Fund, Inc.; that for purposes of this satisfaction, the valuation date of the securities was July 27, 1961 ³ on which date the Standard Oil stock was valued at $45.18 per share and the Diversification Fund, Inc. stock at $22.50 per share; that each share of Standard Oil stock bequeathed queathed 'shall be adjusted for the 3-for-1 split-up of said stock and, as so adjusted, shall be satisfied with 2.008 shares of Diversification Fund, Inc.' The instant appeal is from this decree. ⁴

Appellants urge that the trial court's determination was erroneous on the basis that the subject legacies were general legacies and that, accordingly, appellants are entitled to the Standard Oil stock in kind or the cash equivalent thereof either as of the date of decedent's death or as of the date when appellants could first petition the court for preliminary distribution. In urging that the trial court's determination should be upheld respondent sets forth two theories upon which the trial court could properly determine that the bequests of Standard Oil stock contained in decedent's will should be satisfied out of the stock of Diversification Fund, Inc. The first of these is that the Standard Oil stock bequests were specific legacies which should be traced into their changed form, the act of decedent's guardian in disposing of these shares of stock not having the effect of an ademption. As an alternative theory respondent argues that regardless of the particular characterization of these stock bequests as specific or general, decedent intended that these bequests be satisfied by tracing the Standard Oil stock to the Diversification Fund, Inc. stock for which it was exchanged.

By statutory provision, 'Legacies are distinguished and designated, according to their nature' as specific, demonstrative or residuary and they include an annuity. (Prob. Code, § 161.) ⁵ 'All other legacies are general legacies.' (§ 161, subd. (5).) In the instant case we are not concerned with whether the subject legacies are demonstrative or residuary or whether they constitute an annuity. The crucial issue is whether they are specific legacies. A specific legacy is defined as the 'legacy of a particular thing, specified and distinguished from all others of the same kind belonging to the testator * * *.' (§ 161, subd. (1).) Accordingly, if the subject legacies do not come within this designation they must be deemed to be general legacies. It is generally settled that a legacy which is general is satisfied out of the decedent's estate generally, that is by delivering to the legatee that portion of the decedent's estate which corresponds with the legacy or devise in value or in general description. In other words, a general legacy is not charged upon any specific property in the decedent's estate. A specific legacy differs from a general legacy in that it is not intended by the decedent to be paid out of his estate generally, but is to be paid solely by delivering to the legatee the specific thing given by the will, as distinguished from a designated value or quantity. (6 Page, Wills (Bowe-Parker Rev. 1962) §§ 48.2, 48.3, pp. 7, 11, 12--13; Estate of Buck, 32...