Loring v. Karri-Davies

• Decision Date: 16 November 1976
• Docket Number: KARRI-DAVIES
• Parties: , 94 A.L.R.3d 884 Augustus P. LORING et al., trustees, 1 v. Anneet al., trustees 2 (and a companion case 3 ).
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 11

357 N.E.2d 11

371 Mass. 346, 94 A.L.R.3d 884

Augustus P. LORING et al., trustees, ¹

v. Anne KARRI-DAVIES et al., trustees ² (and a

companion case ³).

Supreme Judicial Court of Massachusetts, Suffolk.

Argued March 5, 1976.

Decided Nov. 16, 1976.

Samuel B. Potter, Boston, for Augustus P. Loring and others, trustees.

William N. Swift, Boston (John C. Thomson, Boston, with him), for Jean G. Wadsworth and others.

Before HENNESSEY, C.J., and REARDON, QUIRICO, BRAUCHER, KAPLAN and WILKINS, JJ.

QUIRICO, Justice.

In each of these two cases brought in the Probate Court pursuant to G.L. c. 231A, the plaintiffs as trustees under the will of Ruth G. Foster (the donee), seek a declaration that the donee's attempted exercise, by separate provisions of her will, of two powers of appointment granted to her by her late father, William A. Gaston (the donor), was valid. The first case involves a power granted by the donor to the donee by his will, and the second a power granted by the donor to the donee by an indenture of trust. Named as defendants in each of the two cases are the four children of the donee, and the surviving trustees of each of the two trusts. ⁴

A judge of the Probate Court reserved and reported each case without decision to the Appeals Court on the pleadings and a statement of agreed facts (G.L. c. 215, § 13), and we then allowed the plaintiffs' application for direct appellate review of both cases. G.L. c. 211A, § 10(A). We hold that there has been no valid exercise by the donee of the two powers of appointment granted to her by the donor and that the property subject to such powers therefore has passed to those persons whom the donor designated to take in default of appointment.

We summarize the pertinent portions of the two statements of agreed facts signed by counsel for the plaintiffs and for the three defendants who filed answers to the complaints. The donor '(a)t all times relevant to this proceeding . . . was an attorney in Boston, Massachusetts, and a senior member of Gaston, Snow, Saltonstall and Hunt, a firm active in many areas of the practice of law, including the drafting of wills and similar instruments and matters relating thereto. In addition to his practice, Mr. Gaston was a businessman (for example, president of Boston Elevated Railway 1897--1901), a banker (president National Shawmut Bank 1907--1918), and a politician.'

On June 16, 1915, the donor executed an irrevocable indenture of trust (inter vivos trust) for the benefit of the donee which provided in pertinent part that the trustees thereunder were '(t)o pay the whole of the net income of the Trust Estate in semi-annual payments to the said (donee) during her life . . .; and upon the decease of said (donee), upon the further trust to pay over the said Trust Estate . . . discharged and free from trust, to and among her children or issue as she may by her last will and testament appoint, and in default of appointment in equal shares to her children and to the issue of any deceased child by right of representation . . .' (emphasis supplied).

The donor died on July 17, 1927. Under article Seventeenth of his will, which was executed on December 2, 1926, he set up another trust (testamentary trust) for the benefit of the donee, providing in pertinent part as follows: 'I give and bequeath to my trustees hereinafter named the sum of Two Hundred and Fifty Thousand (250,000) dollars but in trust nevertheless, to hold, manage, invest and reinvest the same and to pay the income quarterly or oftener to . . . (the donee) for life, and upon her death to pay over and convey the principal of the trust property to and among her issue as she may by will appoint, and in default of appointment to her issue then surviving, in equal shares by right of representation' (emphasis supplied).

The donee died on August 22, 1974, leaving a will dated December 8, 1969. By articles Fifth and Sixth of her will she attempted to exercise the two powers of appointment which had been granted to her by the donor as above described by appointing the trust property in further trust to the trustees of two new trusts created by her will. Both of the two new trusts provide that the net income be paid to her children or the issue of her deceased children. Each of these new trusts is to continue until the happening of a particular event prescribed therein, at which time it is to terminate and the trust property is to be distributed to her children or issue as more particularly prescribed in her will.

The trust property held under the donor's testamentary trust had a value of $3,700,199.55 on September 6, 1974, and that held under the inter vivos trust had a value of $200,895.71 on August 22, 1974, when the donee died.

The issue thus presented for decision by this court in the present cases is whether the two special powers of appointment granted to the donee, one by the donor's inter vivos trust and the other by his testamentary trust, were validly exercised by the provisions of articles Fifth and Sixth of the donee's will purporting to appoint the property in question in further trusts. ⁵

The resolution of this issue 'is a matter of determining the intention of the donor, for it is he who creates the power and he who can broaden or narrow the manner of its exercise.' 5 American Law of Property § 23.48 (A. J. Casner ed. 1952). Hooper v. Hooper, 203 Mass. 50 58, 89 N.E. 161 (1909). In determining such intention, we regard as particularly significant the language used by the donor viewed in light of the rule of law in effect in these circumstances at the time the powers in question were created. We believe that 'it is fair to suppose that the (donor) in using the language which appears in the (powers of appointment) had in mind the interpretation of similar words and clauses in cases decided in this Commonwealth.' Proctor v. Lacy, 263 Mass. 1, 8, 160 N.E. 441, 443 (1928). Davis v. Hannam, --- Mass. ---, ---, ^a 336 N.E.2d 858 (1975). Cape Cod Bank & Trust Co. v. Cape Cod Hosp., --- Mass.App. ---, ---, ^b 327 N.E.2d 902 (1975).

The very issue now presented to us in these cases was considered and decided by this court in Hooper v. Hooper, 203 Mass. 50, 89 N.E. 161 (1909). That case involved two special powers of appointment, one of which was in language virtually identical in pertinent part to the language used by the donor in these cases in creating the power in the testamentary trust and substantially similar to that used by him in creating the power in the inter vivos trust. The donor in the Hooper case gave a power of appointment to her granddaughter which provided that on the death of the granddaughter ". . . after . . . her arriving at the age of twenty-five years, . . . her portion of said trust fund and its accumulations is to be by said Trustee paid over and conveyed to such of . . . her children, if any, and in such proportions as . . . she may, by any instrument in the nature of a will, executed in the presence of two or more witnesses, direct . . ." (emphasis supplied). Id. at 53--54, 89 N.E. 161. The granddaughter subsequently attempted to exercise that power in her will by appointing the property in question in further trust for the benefit of her children. We held (at 59, 89 N.E. at 162) that in the circumstances of the Hooper case the granddaughter, as the donee of the special power, 'is simply to select the persons among the class designated, and is to determine the proportion each one shall take. This language evidently implies a termination of the trust and an absolute estate in the distributees. There is no hint of any other kind of estate, nor any indication of a power in the donee to create new trusts. . . . In view of the general nature of the deed, the fact that the power (of appointment) in the donee is limited to stating the proportions in which this property should be paid over and conveyed, we are of opinion that the attempt of the donee to create equitable life estates was not warranted by the power, and that there has been no valid exercise of the power.' Similarly, in the present cases, there is no indication whatsoever from the language used in creating the two special powers that the donor intended to vest in the donee powers to create new trusts or to appoint any kinds of estates other than absolute estates in the beneficiaries.

While the plaintiffs readily acknowledge the obvious similarity of the Hooper case to the present cases, they nevertheless urge in effect that we decline to follow the Hooper decision and that we adopt instead as the law of the Commonwealth in these circumstances the provisions of the Restatement of Property § 358(e) (1940), which all parties apparently concede would authorize the donee's appointments in further trust in the present cases. Section 358 provides: 'If, but only if, the donor does not manifest a contrary intent, the donee of a special power can effectively . . . (e) appoint interests to trustees for the benefit of objects.'

We decline to adopt the rule stated in Restatement of Property § 358(e) (1940) as applicable to the present cases. Rather, we elect to adhere to our decision in the Hooper case and thus to give effect to what we presume to have been the intention of the donor in creating the two special powers of appointment in the manner which he did. We are unwilling, in the circumstances of these cases, to attribute to the donor the intention which the plaintiffs would have us presume and which we are not persuaded was possessed by the donor himself when he granted the powers.

The cases decided by this court since our decision in Hooper v. Hooper, 203 Mass. 50, 89 N.E. 161 (1909), and relied on by the plaintiffs in their brief have in no way detracted from the authority of that case, and they do not require a result different from that which we reach in the circumstances of the present cases. In North Adams Nat'l Bank v. Commissioner of Corps. & Taxation, 268 Mass. 42,...