New England Trust Co. v. Faxon

• Decision Date: 05 December 1961
• Parties: NEW ENGLAND TRUST COMPANY, trustee, v. Edith Bremer FAXON and others.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 488

178 N.E.2d 488

343 Mass. 273

NEW ENGLAND TRUST COMPANY, trustee, v. Edith Bremer FAXON and others.

Supreme Judicial Court of Massachusetts, Norfolk.

Argued Oct. 5, 1961.

Decided Dec. 5, 1961.

Augustus W. Soule, Boston, stated the case.

Richard Wait, Boston, for Harvey H. Bundy, executor.

John E. Rogerson, Boston (Ralph S. Brown, Jr., Cambridge, with him), for Edith Bremer Faxon and others.

Before WILKINS, C. J., and SPALDING, CUTTER, KIRK and SPIEGEL, JJ.

CUTTER, Justice.

This is a petition for instructions by the trustee under an irrevocable ¹ trust indenture of Sarah F. Bremer, dated July 27, 1905. The 1905 indenture directed the trustee to pay the income to Sarah during her life and at her death to transfer the trust fund '[A ² to such person or persons * * * as * * * Sarah may appoint * * * by any last will * * *. [B] But in default of such appointment * * * then to transfer * * * the same to * * * [Sarah's] issue * * *. [C] But if no child of * * * Sarah nor issue of any survive her, then to transfer * * * [the trust fund] to and among [D] the same persons who would have been entitled thereto [E] if * * * Sarah had held the same in her own right at the time of her decease and had died unmarried [F] and these presents had never been made.'

Sarah died on July 6, 1958, unmarried and leaving no children or issue of deceased children. Sarah's last will, admitted to probate, had been executed on December 31, 1947. Article 22 gave the residue, 'specifically excluding any property over which I have a power of appointment under' the 1905 indenture, in 'equal shares * * * to such of the following four persons [her nieces, Edith, Mabel, Ruth, and Barbara] * * * as shall survive me, but if any of them shall predecease me leaving issue surviving me, such issue shall take by right of representation * * *.'

All four named nieces did survive Sarah. Edith, Mabel, and Ruth (daughters of Sarah's then deceased brother, S. Parker Bremer) and the settlor's then surviving brother, J. Lewis Bremer (who has died since the settlor's death and whose executor is the appellant), were the settlor's heirs at law at the time of her death. Barbara is described elsewhere in the will as the adopted daughter of J. Lewis Bremer.

Sarah by her 1947 will (arts. 20, 21, and 23) exercised in part her testamentary power of appointment reserved in the 1905 indenture (see clause [A] of the quotation from that indenture, supra). In art. 20, Sarah provided that certain small gifts made earlier in her will should 'be deemed to be in exercise of the power of appointment.' By art. 21, Sarah directed that in a stated contingency certain death taxes should be paid from the 1905 trust fund. By art. 23, Sarah exercised the power with respect to 36/60 'of the balance of the' 1905 trust fund remaining after the appointments by arts. 20 and 21, 'specifically not exercising * * * [the] power over the remaining * * * 24/60 * * * of * * * [the] balance.'

On the same day that she executed her 1947 will, Sarah executed and delivered (in a manner complying with G.L. c. 204, §§ 27-36, inserted by St.1943, c. 152; see Newhall, Settlement of Estates [4th ed.] § 370) a partial release of her testamentary power reserved in the 1905 indenture. In the release she recited (a) the precise terms of the 1905 general testamentary power (see clause [A] quoted, supra), the only relevant 1905 trust provision within any usual concept of a power of appointment, and (b) that she desired to relinquish that power 'with respect to those portions of the [trust] property * * * over which, in my * * * will * * * I do not provide for exercising said power and control.' In the operative provision of the release, ³ Sarah irrevocably released 'that portion of said power and control, the exercise of which I have not provided for in my * * * last will * * * a copy of which is attached * * * and * * * covenant[ed] with * * * [the trustee] that * * * [she would] always recognize the validity of this release and * * * never attempt to exercise that portion of said power and control released hereby, in whole or in part.'

It was stipulated that at Sarah's death the value of the gross estate coming into the hands of Sarah's executors (i. e. her probate estate) was approximately $140,000. The value of the corpus of the 1905 trust on that date was substantially larger.

The petition sought instructions about the following matters, and the answers summarized below were given by the decree of the Probate Court. (a) Did Sarah irrevocably release a power of appointment over any part of the 1905 trust fund? The decree stated that Sarah, by the 1947 release, effectively released her power of appointment with respect to 24/60 of the balance of the trust fund remaining after giving effect to arts. 20 and 21 of her 1947 will (but, of course, excluding the 36/60 of the balance appointed by art. 23). (b) Did Sarah fail to exercise a power of appointment over any portion of the 1905 trust fund? The decree stated that the 24/60 of the balance (mentioned above) of the principal of the 1905 trust fund passed in default of appointment directly to the persons named as Sarah's residuary legatees in art. 22 'and did not pass to them through * * * [Sarah's] probate estate.' (c) To whom should the 24/60 of the balance be distributed? The decree provided that this portion of the 1905 trust fund should be distributed 'equally among [Sarah's nieces] Edith * * * Mabel * * * Ruth * * * and Barbara.'

In answers to other questions, the decree provided that this distribution should be made, not through Sarah's executors, but directly to the beneficiaries, and that the portion of the 1905 trust fund passing by appointment under art. 23 of Sarah's will and the portion passing in default of appointment 'should each be determined only after payment from the entire trust fund of all counsel fees and other expenses of administration and distribution.'

The executor of the will of Sarah's brother, J. Lewis Bremer, appealed. He had stated in his answer that he was not concerned with the first question described in (a), supra, but contended (1) that Sarah had failed to exercise the power with respect to 24/60 of the balance of the 1905 trust fund, and (2) that this part of the fund should be distributed to Sarah's heirs and those claiming in the right of any such heir, with the consequence that he, as executor of J. Lewis Bremer's will, would receive one half of this 24/60 of the balance of the fund.

1. One crucial question is the proper interpretation of the gift made in the 1905 indenture in default of appointment. See clauses [B] through [F] in the trust provision quoted at the beginning of this opinion. This gift in default immediately follows the general testamentary power of appointment (clause [A]), and first provides a gift to any surviving issue of Sarah by right of representation. The most important words (see clauses [C] through [F]) are those which were to take effect if Sarah should not be survived by any child or other issue, in which event the trust fund, so far as not appointed, was to go 'to and among [D] the same persons who would have been entitled thereto [E] if * * * Sarah had held the same in her own right at * * * her decease and had died unmarried [F ⁴ and these presents had never been made.'

The present difficulty arises because the wording of the default gift (clauses [D]-[F], inclusive) is ambiguous. The ultimate distributees are not limited by express language to the persons (other than a husband) who would take as Sarah's heirs if she had died intestate. Such a specific provision is not unusual in an ultimate remainder gift of this type. Ordinarily, the reason for such an ultimate gift (frequently made to the settlor's or a life beneficiary's 'heirs at law,' or in terms of similar import) is that described by Mr. Justice Holmes in Whall v. Converse, 146 Mass. 345, 348, 15 N.E. 660, 661, viz., 'that the testator [or settlor] has exhausted his specific wishes by the previous limitations, and is content thereafter to let the law take its course.' See SECOND BANK-STATE ST. TRUST CO. V. WESTON, 342 MASS. ----, 174 N.E.2D 763^A.

Because Sarah died testate, the language of her ultimate gift in default of appointment, taken literally and by itself, can be interpreted as describing the persons who would take the residue of her estate under her will (art. 22). If resort to the rules of intestate succession to determine the ultimate distributees was in fact intended, it would have been prudent, and perhaps natural, for the 1905 draftsman to have inserted (at point [F] in the gift) the words 'and intestate.' The meaning would then have been wholly clear.

Two considerations tend to support the view that the ultimate default gift was in effect to Sarah's heirs, i. e., to those who would take her property if she were to die intestate. First, the words (at point [D]) 'the same persons who would have been entitled thereto' are similar to words which have been regarded as describing 'heirs.' See Restatement: Property, § 305, comment c; Powell, Real Property, § 372 at p. 196. Cf. O'Farrell v. American Trust Co., 149 Cal.App.2d 691, 700-701, 309 P.2d 60. Second, the ultimate gift follows Sarah's general testamentary power of appointment, and, if the decree in the Probate Court is correct, in a sense duplicates it by providing, in the default gift itself, a second opportunity ⁵ for Sarah to effect the disposition of the trust property by the residuary article of her will. It can be argued that the draftsman intended no such redundancy.

In 1905, when the trust was created, there was not so clearly a duplication of the provisions of the prior general testamentary power of appointment and of this ultimate gift (interpreted as in the Probate Court decree), based on the possibility that the eventual donees might be determined by Sarah's will. It was then possible that they would turn out to be...