Larsell's Estate, In re

• Decision Date: 13 June 1972
• Citation: 495 P.2d 57,9 Or.App. 61,94 Or.Adv.Sh. 754
• Parties: In the Matter of the ESTATE of Leo D. LARSELL, Deceased. Robert LARSELL, Respondent, v. Joyce CLARKE et al., Appellants.
• Court: Oregon Court of Appeals

Page 57

495 P.2d 57

9 Or.App. 61

In the Matter of the ESTATE of Leo D. LARSELL, Deceased.

Robert LARSELL, Respondent, v. Joyce CLARKE et al., Appellants.

Court of Appeals of Oregon, Department 1.

Argued and Submitted Jan. 24, 1972.

Decided March 23, 1972.

Rehearing Denied April 18, 1972.

Review Granted June 13, 1972.

Bartlett F. Cole, Portland, argued the cause for appellants. With him on the briefs was Paul Gerhardt, Portland.

Douglas H. Stearns, Portland, argued the cause and filed the brief for respondent.

Before SCHWAB, C.J., and FOLEY and THORNTON, JJ.

SCHWAB, Chief Judge.

This will contest concerns the distribution of the assets in the estate of Mrs. Leo Larsell. On October 4, 1963, Mrs. Larsell executed her last will which provides in part:

'FIFTH: I give, devise and bequeath unto my son, Robert Larsell, all of my real property and/or interest in real property that I own situated in Wasco County, Oregon, and all of my interest, being all of the vendor's interest, in a contract of purchase and sale between myself and husband as Sellers and my son, Robert Larsell, and his wife as Buyers including all payments due thereunder, which contract is dated the 15th day of July, 1963.'

The question presented is whether the gift described in the fifth paragraph of Mrs. Larsell's will was adeemed by extinction.

The 1963 land sale contract referred to in Mrs. Larsell's will provided Robert Larsell was to pay the purchase price of $65,000 as follows: $6,500 at the time of the execution of the contract and the balance of $58,500 in non-interest bearing annual installments of $6,500. Robert Larsell made the required annual payments each year between 1964 and 1967, inclusive.

In early 1967, Mrs. Larsell's health and mental faculties began to deteriorate, and Robert Larsell was appointed conservator of her estate on February 20, 1967, by the Multnomah County circuit court.

Later that same year, because of financial difficulties, Robert Larsell found it necessary to borrow against his equity in the Wasco County property. To do this it was necessary for him to obtain clear legal title. Therefore, on December 15, 1967, Robert Larsell individually paid to Robert Larsell as conservator of his mother's estate the full balance then due under the land sale contract, i.e., about $32,500.

Robert Larsell as conservator then deposited this money in a savings account for his mother. None of this money was ever expended for Mrs. Larsell's care; all of it is directly traceable from the property transaction to the savings account.

All parties agree that in December 1967, Mrs. Larsell lacked testamentary capacity, and that she never regained such capacity before her death on March 24, 1969.

Subsequently, Robert Larsell, as executor of his mother's estate, filed a petition for an order of distribution in which he sought to distribute to himself about $32,500 in satisfaction of the devise provided in the fifth paragraph of the will, on the theory that this gift had not been adeemed under these circumstances. Objectors, who include the residual legatees whose shares of the estate would thereby be reduced, opposed such a distribution. The trial court ruled in favor of the executor, concluding the gift to Robert Larsell was not adeemed, and allowed him $26,000 in satisfaction of it, which is the amount he would have owed under the land sale contract at the time of his mother's death had he continued to make annual payments until that time. Objectors appeal from that decision.

As a threshold problem, the parties are in disagreement about what law governs the question of ademption in this case. Objectors insist ORS 126.495 is controlling. It provided: ¹

'In case of the sale or other transfer by a guardian of the estate of any real or personal property specifically devised or bequeathed by the ward, who was competent to make a will at the time he executed the will but was not competent to make a will at the time of the sale or transfer and never regained such competency, so that the devised or bequeathed property is not contained in the estate of the ward at the time of his death, the devisee or legatee may at his option take the value of the property at the time of the death of the ward with the incidents of a general devise or bequest, or the proceeds of such sale or other transfer with the incidents of a specific devise or bequest.'

The executor argues there is a body of common law which together with ORS 126.495 or separate from that statute governs this issue.

We read Biss v. Parrish et al., 232 Or. 26, 374 P.2d 382 (1962), as indicating ORS 126.495 is a codification of the common law on this issue. Although that opinion does not specifically mention ORS 126.495 its reference to two of the leading common law cases on ademption ² as persuasive seems to indicate the Supreme Court felt our statute and the common law were the same. In any event, we believe ORS 126.495 and the common law produce the same result when applied to the facts of this case.

We interpret the fifth paragraph of Mrs. Larsell's will as being a gift of an interest in real property. ³ A vendor's interest in a contract of sale is property which may be devised. See, 94 C.J.S. Wills § 81 pp. 787--788. Specifically, Mrs. Larsell devised the interest she retained in the Wasco County property After the 1963 land sale contract had been signed. See, Mee v. Cusineau, Executrix, 213 Ark. 61, 209 S.W.2d 445 (1948). As so interpreted it is a specific devise, and as such is subject to ademption. See, Skousen, Adm. v. Roelfs, 209 Or. 521, 307 P.2d 324, 64 A.L.R.2d 773 (1957).

When a person makes a will which includes a specific devise and subsequently disposes of the property so devised while comptent, courts approach the question of ademption by extinction in two different ways. The early English rule, still followed by a minority of American courts, is known as the 'intent theory,' i.e., the gift is adeemed if the testator so intended. Warren, The History of Ademption, 25 Iowa L.Rev. 290 (1940). However, the great majority of American courts now follow the 'identity theory':

"* * * The theory that ademption by extinction depends on the intention of the testator has generally been discarded or forgotten; and the test of ademption is on whether or not the thing which was bequeathed is in existence at testator's death and belongs to him at that time.' Page, Ademption by Extinction * * * 1943 Wisc.L.Rev. 19, 20 * * *.' 232 Or. at 32--33, 374 P.2d at 385.

See, generally, 6 Page, Wills 266, § 54.15 (Bowe-Parker rev. ed. 1962); Note, 74 Harv.L.Rev. 741 (1961).

Completely different considerations come into play, however, when the testator becomes incompetent and a conservator then deals with the incompetent ward's property in such a way that property which was specifically devised by the ward is no longer in existence when the ward dies. In such situations a majority of courts hold that no ademption occurs. Wilmerton v. Wilmerton, 176 F. 896 (7th Cir.), cert. denied, 217 U.S. 606, 30 S.Ct. 696, 54 L.Ed. 900 (1910); Walsh v. Gillespie, 338 Mass. 278, 154 N.E.2d 906, 28 L.R.A. (ns) 401 (1959); In Re Mason's Estate, 62 Cal.2d 213, 42 Cal.Rptr. 13, 397 P.2d 1005 (1965); Our Lady of Lourdes v. Vanator, 91 Idaho 407, 422 P.2d 74 (1967); Lewis v. Hill, 387 Ill. 542, 56 N.E.2d 619 (1944); In Re Estate of Bierstedt, 254 Iowa 772, 119 N.W.2d 234 (1963); Grant v. Banks, 270 N.C. 473, 155 S.E.2d 87 (1967); In Re Cooper, 95 N.J.Eq. 210, 123 A. 45, 30 A.L.R. 673 (1923); See, generally, Annotation, 51 A.L.R. 770 (1927); 6 Page, Wills 271, § 54.18 (Bowe-Parker rev. ed. 1962); Note, 45 Harv.L.Rev. 710 (1932). ⁴

There is a simple rationale for the different ways in which courts approach the subject of ademption depending upon whether the testator is competent or incompetent when the specifically devised property ceases to be part of his estate. In the former situation the identity theory avoids difficult problems of proof concerning the testator's intent; and, in any event, the competent testator can always change his will following changes in the property which he owns. When, however, specifically devised property was removed from a testator's estate during incompetency, application of the identity theory seems unjust. It would result in a disruption of the dispositive scheme of the testator because of fortuitous circumstances beyond his control, and the testator, being incompetent, would have no opportunity to change his will to restore or revise his estate plan.

In the competent-testator situation, the most common example of ademption is when the testator sells property which is the subject of a specific devise in an existing will. See, e.g., Pape v. United States Nat. Bank, 135 Or. 650, 297 P. 845 (1931). Thus, if Mrs. Larsell while she was competent had sold her interest in the Wasco County property to her son or anybody else, under the identity theory approved in Biss v. Parrish, supra, the devise of her interest in the property would be adeemed.

The same result would be reached if Mrs. Larsell had specifically devised an indebtedness, e.g., her right to receive payments under an installment contract, and then had collected the amount due before her death and while competent. Moreover, it would make no difference if Mrs. Larsell collected a debt then due and owing, or accepted prepayment of a debt not then due; in either situation the thing devised, i.e., the indebtedness, would not be in existence or owned by her at her death. See, Biss v. Parrish, supra; Estate of Haberli, 41 Wis.2d 64, 163 N.W.2d 168 (1968) (will cancelled debt owed to testatrix; subsequently testatrix cancelled debt as part of a transaction involving conveyance of real property; held, under identity theory gift was adeemed).

In the incompetent-testator situation most of the cases also involve sales of property, although by a conservator rather than by the testator. But the rule is not limited to...