Hund v. Holmes, 6

• Decision Date: 25 November 1975
• Docket Number: No. 6,6
• Parties: Mildred A. HUND et al., Plaintiffs-Appellants v. Madeline E. HOLMES, and the Detroit Bank and Trust Company, Executor of the Will of Helen M. Hund, Defendants-Appellees. 395 Mich. 188, 235 N.W.2d 331
• Court: Michigan Supreme Court

Page 331

235 N.W.2d 331

Mildred A. HUND et al., Plaintiffs-Appellants v. Madeline E. HOLMES, and the Detroit Bank and Trust Company,

Executor of the Will of Helen M. Hund,

Defendants-Appellees.

No. 6.

395 Mich. 188, 235 N.W.2d 331

Supreme Court of Michigan.

Nov. 25, 1975.

Dahlberg, Mallender & Gawne, Birmingham (Henry L. Woolfenden and Clarence J. Boldt, Jr., Birmingham, of counsel), for plaintiffs-appellants.

Norman P. Burau, Detroit, for Madeline Holmes.

LINDEMER, Justice.

This lawsuit originated in Probate Court of Oakland County as a Petition for Construction of the Last Will and Testament of Helen M. Hund. The petition was brought by the executor of Mrs. Hund's estate, The Detroit Bank and Trust Company, in order to determine whether testatrix had, by the language of the residuary clause in her will, exercised a testamentary power of appointment. The Probate Court determined that there had been a valid exercise of the power of appointment. Both the Circuit Court and the Court of Appeals affirmed that decision. This Court granted leave to appeal in order to consider the application of M.C.L.A. § 556.114; M.S.A. § 26.155(104), to the facts of this case.

Testatrix's husband, Herbert L. Hund, died August 31, 1955. By the terms of his will, Mr. Hund placed his estate into two testamentary trusts, a 'Marital Trust' and a 'Residuary Trust'. During her lifetime, Mrs. Hund was to receive the income from both trusts. Additionally, Mrs. Hund was

'. . . given the unrestricted right and authority to direct the disposition of the corpus of said 'Marital Trust' by the terms of her Last Will and Testament, to her estate or to such person or persons, and in such manner as she alone may elect.'

Mr. Hund's will also contained an express gift in default, providing that if his wife failed to exercise this power of appointment, the corpus of the Marital Trust was to be combined with that of the Residuary Trust and distributed to his residuary beneficiaries.

Mrs. Hund died October 30, 1970. She left a will dated November 28, 1955, disposing of her entire estate through the following residuary clause:

'All the rest, residue and remainder of my estate shall be divided by my Executor into eight (8) equal parts, according to the value thereof as finally determined for Federal Estate Tax purposes, and as modified by the increase or decrease in value thereof of any marketable securities or other assets, from the date of my death to the time of distribution, which valuation shall rest solely in the discretion of said Executor and which entire residuary estate is hereb given, devised and bequeathed as follows . . .'

No express reference to the power of appointment or to any portion of the corpus of the marital trust appears in her will.

The dispute is between appellants, the residuary beneficiaries of Mr. Hund who would benefit by nonexercise of the power, and appellees, the residuary beneficiaries of Mrs. Hund who would benefit by an exercise of the power.

Under the common law, if the donee of a power of appointment, without expressly referring to the power, executes a general residuary clause in his will, the power is not exercised unless a contrary intention to exercise the power can be sufficiently proven.

The Supreme Court of Connecticut, a state which follows the common law, has said:

'Under this rule, a testator will not be considered as having executed or having intended to execute a testamentary power of appointment unless the will contains 'a reference to the power itself or to the subject of it, (or) unless the intention to execute (the power) is manifest from the fact that the will would remain inoperative without the aid of the power, or is so clearly demonstrated by words or acts . . . that the transaction is not fairly susceptible of any other interpretation." Morgan Guaranty Trust Co. v. Huntington, 149 Conn. 331, 344, 179 A.2d 604, 612 (1962).

Octer statements in accord are found in 15 A.L.R.3d 346 and 62 Am.Jur.2d, Powers, § 51, p. 151.

The burden of proving intent is upon the party claiming exercise and it is generally accepted that in order for a will to exercise a power of appointment, the intent to exercise the power must be so clear that no other reasonable intent can be imputed to the testatrix under the will. Republic National Bank of Dallas v. Fredericks, 155 Tex. 79, 283 S.W.2d 39 (1955); Blagge v. Miles, Mass.F.Cas.No.1479 (1841).

Our legislature enacted a statute modifying the common law doctrine, creating a presumption in favor of an exercise of a power of appointment by the general language of a residuary clause. This statute, taken nearly verbatim from the State of New York, was the statute in effect at the time Mrs. Hund executed her will. It read:

'Lands embraced in a power to devise, shall pass by a will, purporting to convey all the real property of the testator, unless the intent that the will shall not operate as an execution of the power, shall appear expressly, or by necessary implication.' M.C.L.A. § 556.53; M.S.A. § 26.143

This statute applies to both real and personal property. See Hutton v. Benkard, 92 N.Y. 295 (1883). That construction was considered by the courts below.

M.C.L.A. § 556.53; M.S.A. § 26.143 was repealed by 1967 P.A. 225, which in turn was amended by 1970 P.A. 195. This pertinent successor statute, M.C.L.A. § 556.114; M.S.A. § 26.155(104), which was in effect at the time Mrs. Hund died, reads:

'Unless otherwise provided in the creating instrument, an instrument manifests an intent to exercise the power if the instrument purports to transfer an interest in the appointive property which the donee would have no power to transfer except by virtue of the power, even though the power is not recited or referred to in the instrument, or if the instrument either expressly or by necessary implication from its wording, interpreted in the light of the circumstances surrounding its drafting and execution, manifests an intent to exercise the power. If the creating instrument explicitly directs that no instrument shall be effective to exercise the power unless it contains a reference to the specific power, an instrument which lacks such reference does not validly exercise the power. Subject to the foregoing, if there is a general power exercisable by will with no express gift in default in the creating instrument, a residuary clause or other general language in the donee's will purporting to dispose of all of the donee's estate or property operates to exercise the power but in all other cases such a clause or language does not in itself manifest an intent to exercise a power exercisable by will.'

Which statute applies? It is the express intention of the legislature that M.C.L.A. § 556.114; M.S.A. § 26.155(104) must apply. M.C.L.A. § 556.132; M.S.A. § 26.155(122) reads:

'The provisions of this act are applicable to any power existing on the effective date of this act, as well as a power created after that date.'

By the provisions of her husband's will the power of appointment could not be exercised except by will. There is a general rule that a will speaks from the time of death, Kinney v. Kinney, 34 Mich. 250 (1876). The power of appointment was in existence and subject to 1970 P.A. 195. Even in the absence of express legislative intent, it has been held that the law in effect at the time of the exercise of a power of appointment controls its exercise, rather than the law in effect at its creation. Rhode Island Hospital Trust Co. v. Dunnell, 34 R.I. 394, 83 A. 858 (1912).

M.C.L.A. § 556.114; M.S.A. § 26.155(104) is a statutory rule of construction. It is important to remember that in an action for construction the sole objective is to ascertain and effectuate the intent of the testator as it appears from the language of the will. Resort to rules of construction is not permitted when the testator's intent is clearly expressed on the face of the will. However, if for some reason there is an ambiguity in the language utilized, and the intent of the testator is unknown or uncertain, courts must apply the rules of construction in their attempt to ascertain that intention.

Construction often requires an examination of the language of a will in light of extrinsic facts and circumstances surrounding a testator at the time he executed his will. When admitting extrinsic evidence, it is imperative that courts remember they may not venture beyond construing language in the will in order to discover intent. The use of extrinsic evidence of facts and circumstances is limited to interpreting the words and phrases in the will.

It is readily apparent that M.C.L.A. § 556.114; M.S.A. § 26.155(104), embodies these well accepted principles. The statute, when stripped of language which is not applicable to this case, reads:

'. . . an instrument manifests an intent to exercise the power if. . . the instrument . . . by necessary implication From its wording, interpreted in the light of the circumstances surrounding its drafting and execution, manifests an intent to exercise the power. . . . Subject to the foregoing. . . a residuary clause . . . does not in itself manifest an intent to exercise a power exercisable by will.' (Emphasis supplied.)

This statute restricts the use of extrinsic evidence to circumstances surrounding the drafting and execution of the instrument and prohibits the introduction of such evidence unless it explains or clarifies some 'wording' of the instrument. It also declares that when the donor has provided for an express gift in default, the language of a residuary clause does not manifest the intent to exercise a power. The Probate Court purported to give effect to an intent not reflected in the wording of Mrs. Hund's will.

Appellees strongly argue that sufficient surrounding circumstances existed to support the Probate Court's finding that testatrix intended, by the use of a residuary clause, to exercise her power of appointment. However, appellees'...