Fiduciary Trust Co. v. First Nat. Bank of Colorado Springs, Colo.

• Decision Date: 16 March 1962
• Citation: 181 N.E.2d 6,344 Mass. 1
• Parties: FIDUCIARY TRUST COMPANY, trustee, v. The FIRST NATIONAL BANK OF COLORADO SPRINGS, COLORADO, trustee, et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 6

181 N.E.2d 6

344 Mass. 1

FIDUCIARY TRUST COMPANY, trustee, v. The FIRST NATIONAL BANK OF COLORADO SPRINGS, COLORADO, trustee, et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Jan. 4, 1962.

Decided March 16, 1962.

Warren G. Reed, Boston, guardian ad litem, pro se (Jackson W. Wright, Jr., Cambridge, with him).

George H. Kidder, Boston (Arnold W. Hunnewell, Jr., Boston, with him), for respondent First National Bank of Colorado Springs, Colorado, trustee, and another.

Before WILKINS, C. J., and SPALDING, WILLIAMS, CUTTER and KIRK, JJ. KIRK, Justice.

The petitioner is successor trustee of property held by it under an inter vivos trust created on May 6, 1930, by Alice H. Ware, late of this Commonwealth. The petitioner seeks the instructions of the court as to whether a testamentary power of appointment given in the Alice H. Ware Trust (the Trust) to Francis C. Ware (Francis) late of Colorado Springs, Colorado, was duly exercised by the residuary clause in the will of said Francis.

The case comes to us on appeal by the guardian ad litem for unascertained persons from the decree, later referred to, entered by the judge of the Probate Court. We have before us the pleadings, the trust agreement and its three amendments, the will of Francis, and a voluntary 'Report of Material Facts' based on a statement of agreed facts, supplemented by a stipulation by all parties as to additional admitted facts.

There is no dispute that the question is to be determined by the law of this Commonwealth and not by the law of Colorado. Boston Safe Deposit & Trust Co. v. Painter, 322 Mass. 362, 363, 77 N.E.2d 409, and cases cited.

Under the terms of the Trust, as amended, the trustee was to pay certain income to Alice (the creator of the Trust and the donor of the power) during her lifetime, and, on her death, to pay certain income to her son Stephen if he survived her, during his lifetime, and the balance of the income in equal shares to Alice's other surviving children, or to the widow or issue of deceased children. Paragraph 3 of Article I of the Trust, as amended, required the trustee on the death of Stephen to divide the property 'into equal shares, one being set apart for each child of the Donor * * * then living, and one such share being set apart in the case of each child of the Donor (including said Stephen) who is then deceased leaving a widow or issue then living or who is then deceased having died after the Donor and not more than two years prior to the said division into shares.'

Paragraph 6 of Article I of the Trust, as amended, provides in part: 'Each share set apart in the case of a deceased child of the Donor at the time when the trust is divided into shares as hereinabove provided shall be disposed of as such child shall by will direct to or for the benefit of such child's widow or his issue then or thereafter living or any one or more of such widow and issue, and in default of such direction shall be paid to such child's widow then living. * * *'

Paragraph 7 of Article I of the Trust, as amended, provides in summary that 'any unappointed principal payable under paragraph 6 to the widow of a deceased child of the Donor shall be retained in trust for her and her issue, instead of being distributed to her outright.'

Alice H. Ware died April 1, 1937. Her son Francis died April 7, 1951, in Colorado Springs, Colorado. Her son Stephen died December 11, 1959. Division of the trust property was not made until Stephen's death. Surviving Francis were his widow and two sons, Francis, Jr., who is married and has two minor children, and Loring who is unmarried.

Francis's will, drawn by a Colorado attorney, was executed by him March 13, 1951, during his last illness while a patient in a Colorado Springs hospital. There is no specific reference in Francis's will to any power of appointment nor to any property over which he had a power of appointment. There are two dispositive clauses in the will. By the first clause Francis left certain personal effects to his son Francis, Jr. The second clause provides: 'I give, devise and bequeath the entire remainder of my estate of whatever kind or nature and wheresoever the same may be situated' to The First National Bank of Colorado Springs, Colorado, in trust to pay $100 per year from the income to his friends Hurley Begun and Jeannette Begun, or to the survivor of them, such payments to continue for a period of ten years, to pay the balance of the income to the use of his widow and his two sons for their joint lives and the life of the survivor and, on the death of the last survivor of his widow and sons, to distribute the principal to the then living issue of his son Francis, Jr., and, in default of such issue, to distribute the principal among his (i. e. Francis, the testator) brothers and their wives and issue.

The trust established by Francis in the residuary clause of his will had an inventory value of $88,033.06 and a market value on December 31, 1960, of $109,960.

The final decree entered in the Probate Court declared that the second (residuary) clause of Francis's will 'was a valid and effective exercise by the said Francis C. Ware of the power of appointment given him under paragraph 6 of Article I of the Alice H. Ware Trust, as amended, insofar as the trust thereby created is for the benefit of his widow, * * * Harriet Eleanor Ware, his sons, * * * Francis C. Ware, Jr., and Loring Ware, and the issue of his said son, Francis C. Ware, Jr.'

From this decree the appeal was taken.

We approach the case unaffected by the decision of the probate judge. The case is before us, as it was before him, solely on documentary evidence and a statement of agreed facts. Pitman v. Pitman, 314 Mass. 465, 475, 50 N.E.2d 69, 150 A.L.R. 509, and cases cited. Fiduciary Trust Co. v. Mishou, 321 Mass. 615, 631, 75 N.E.2d 3. Stamper v. Stanwood, 339 Mass. 549, 551, 159 N.E.2d 865.

Referring to a general power of appointment, Chief Justice Gray in Sewall v. Wilmer, 132 Mass. 131, 134, citing earlier cases, said 'it has been adjudged that the mere facts that the will relied on as an execution of the power does not refer to the power, nor designate the property subject to it, and that the donee of the power has other property of his own upon which his will may operate, are not conclusive against the validity of the execution of the power; but that the question is in every case a question of the intention of the donee of the power, taking into consideration not only the terms of his will, but the circumstances surrounding him at the time of its execution, such as the source of the power, the terms of the instrument creating it, and the extent of his present or past interest in the property subject to it. * * *' The Sewall case is but one of a long line of cases starting with Amory v. Meredith, 7 Allen 397 (which cites and discusses earlier authorities) holding that, in deciding whether a general testamentary power of appointment has been exercised, the overriding consideration is whether an intention to exercise the power can be ascertained from an interpretation of the donee's will. Worcester Bank & Trust Co. v. Sibley, 287 Mass. 594, 598-599, 192 N.E. 31. Gorey v. Guarente, 303 Mass. 569, 575, 22 N.E.2d 99. Frye v. Loring, 330 Mass. 389, 394, 113 N.E.2d 595. From the inception, as an aid in deciding this question where an intent to exercise the power does not clearly appear from the terms of the will, there has developed a rule of construction, dealing with the exercise of a general testamentary power of appointment, which has been repeatedly affirmed. 'Since the decision in Amory v. Meredith, 7 Allen 397, it has been a settled canon of construction that a general residuary clause will operate as an execution of a general testamentary power unless a contrary intent is shown by the will. See Willard v. Ware, 10 Allen 263, 267; Garfield v. State Street Trust Co., 320 Mass. 646, 656-657, 70 N.E.2d 705, 169 A.L.R. 719; Boston Safe Deposit & Trust Co. v. Painter, 322 Mass. 362, 366, 77 N.E.2d 409, and cases cited.' Second Bank-State Street Trust Co. v. Yale University Alumni Fund, 338 Mass. 520, 524, 156 N.E.2d 57, 60. New England Trust Co. v. Faxon, Mass, 178 N.E.2d 488. ^a

The power of appointment given to Francis under the Trust, however, was not a general testamentary power but a special or limited testamentary power of appointment. By the terms of the power, Francis could not appoint to his estate or for the benefit of his creditors. He could, in fact, appoint only to his widow and his issue. Prescott v. Wordell, 319 Mass. 118, 120, 65 N.E.2d 19. Restatement: Property, §§ 320(2), 326. We are, therefore, faced with the question whether the canon of construction applied to general testamentary powers is also applicable to special powers of appointment. In other words, are we now to say that a general residuary clause in a will operates as an execution of the special testamentary power unless a contrary intent is shown by the will?

Heretofore it has been unnecessary for us to answer the question (see Stone v. Forbes, 189 Mass. 163, 169, 171, 75 N.E. 141; Worcester Bank & Trust Co. v. Sibley, 287 Mass. 594, 598, 192 N.E. 31; Pitman v. Pitman, 314 Mass. 465, 475, 50 N.E.2d 69, 150 A.L.R. 509; Frye v. Loring, 330 Mass. 389, 394-395, 113 N.E.2d 595) although there was a rather strong intimation in Stone v. Forbes, 189 Mass. 163, 168-169, 75 N.E. 141, that the answer should be in the affirmative. The question was left open when most recently referred to. See Frye v. Loring, 330 Mass. 389, 395, 113 N.E.2d 595. Now, however, being squarely confronted with the question, we must decide it. Having had the benefit of argument by counsel and having given full consideration to the reasoning which underlies the canon applied to general testamentary powers we hold that the canon should not apply to cases involving special testamentary powers of appointment.

As was said in ...