CHAMBERLIN v. WONG

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Court of Appeal, Fourth District, Division 2, California.

ESTATE OF Muriel EDDY, Deceased. Floyd E. CHAMBERLIN, Petitioner, Administrator and Respondent, v. Beverly Anne WONG, Claimant and Appellant.

Civ. 25060.

Decided: September 01, 1981

Kellner, Mitten & Ybarrondo and James C. Mitten, Hemet, for claimant and appellant. Paoli & Paoli and Sylvia Paoli, Tustin, for petitioner, administrator and respondent.

I

STATEMENT OF THE CASE

Floyd E. Chamberlin, Administrator with Will Annexed in the estate of decedent, Muriel Eddy, brought a Petition Determining Interests on Estate in Trust, pursuant to Probate Code section 1080, seeking court determination that a certain Trust “A,” created under the Will of Everett Eddy, deceased, was a part of and should be distributed to the Estate of Muriel Eddy, deceased. The trial court, by the Honorable Gerald F. Schulte, found in favor of the estate, and ordered said Trust “A” distributed to said estate. From that order dated June 30, 1980, and entered on July 28, 1980, the claimant has appealed.

II

SUMMARY OF THE FACTS

Everett L. Eddy (hereinafter referred to as Everett) and Muriel Eddy (hereinafter referred to as either Muriel or the decedent) were husband and wife. Everett had a son from his previous marriage named William E. Eddy (hereinafter referred to as William). Muriel had a step-son from her previous marriage named Floyd E. Chamberlin. Muriel also had a sister named Brenda Hemming.

Everett and Muriel had “companion” wills drawn up by the same law firm back in March of 1968. Both wills were executed on March 18, 1968. The same witnesses witnessed both wills.

Everett died on May 19, 1973, and was survived by his wife, Muriel, and by his son William. The will of Everett was duly admitted to probate and his son, William, was named as executor of the will. The will of Everett provided for the creation of two trusts, trust “A” and trust “B.”

Trust “A” named Muriel as income beneficiary for her lifetime. The trust provided as follows:

“If my said wife shall survive me, she shall have the power to appoint, by Will or Codicil thereto, all or any part of the principal and undistributed income of TRUST ‘A,’ free of trust, in favor of her estate, or any persons whom she shall designate. The power shall be deemed to have been exercised only if by specific reference thereto in her Will or Codicil, my said wife shall express her intention to exercise the same.” (Emphasis added.)

Trust “A” further provided that upon the death of Muriel, if she was not survived by her sister, Brenda Hemming, trust “A” would terminate, and “the trustee shall convey, in fee, all of the remaining corpus of said TRUST ‘A,’ and any accumulated income, to my said son, WILLIAM E. EDDY.” (Brenda Hemming did not survive Muriel.)

By Decree of Distribution in the estate of Everett, dated May 1, 1974, the assets of the estate were distributed to William as trustee and the trusts “A” and “B” were funded. The assets of the trusts consisted of Everett's separate property and all the community property held by Everett and his wife, Muriel. (The disposition of the assets which were considered as a part of trust “B” is not a part of this appeal.)

William served as trustee for trust “A” continuously from the date of his appointment on May 1, 1974, until the date of his death on November 9, 1977. The will of William named the appellant, Beverly Anne Wong, as executor.

Muriel had elected to take under Everett's will and she, therefore, became the income beneficiary of trust “A.”

When Muriel died testate on April 18, 1979, she was a resident of Riverside County. Her will was admitted to probate on July 9, 1979, and the respondent Floyd E. Chamberlin who was her step-son, was appointed Administrator with Will Annexed (Administrator CTA). He qualified as Administrator CTA on July 9, 1979.

Most of the assets of Muriel's estate were a part of the marital trust created under the aforementioned will of her predeceased husband, Everett, which will had granted to Muriel a power of appointment over the corpus of trust “A,” and specifically required a reference to that power of appointment before it could be validly exercised. The companion will of Muriel did make reference to “a power of appointment,” and she included all property over which she had such a power of appointment in her devise of her estate.

All beneficiaries named in the will of decedent Muriel had predeceased her. Those beneficiaries were her husband, Everett, his son, William, and her sister, Brenda Hemming.

On April 7, 1980, the respondent, Floyd E. Chamberlin (as Administrator CTA of the estate of Muriel) filed a Petition for Decree Determining Interests on Estate in Trust requesting that the assets of the trust under the will of Everett be determined to be a portion of the estate of Muriel. The contention of Chamberlin, in support of his petition, was that Muriel, in her will validly exercised the power of appointment given her under the will of Everett, by the following language:

“If my said husband does not survive me, then all of the property I own, including, but not by way of limitation, any property over which I have a power of appointment, shall go as follows:

“a. If my sister, BRENDA HEMMING, does not survive me, then all of said property shall go to my husband's son, to-wit, WILLIAM E. EDDY.” (Emphasis added.)

Beverly Anne Wong, the claimant and appellant herein, had not only been named as the Executrix of the estate of William, as was mentioned above, but subsequently, on July 5, 1979, she was also named as the trustee of the trust under the will of Everett. (She was also the principal beneficiary under the will of William but has no interest in the estate of Muriel except through the trust or that portion of the trust passing through the estate of William.)

Beverly Anne Wong (as trustee of the trust under the will of Everett), filed Objections to Petition for Decree Determining Interests on Estate in Trust. She took the position that the language in the will of Muriel was not sufficient to satisfy the requirements of Civil Code section 1386.2 with regard to the exercise of the power of appointment granted under the will of Everett. Therefore, William, the remainderman, held a vested remainder interest in the corpus of trust “A,” subject to defeasance upon the exercise of the power held by Muriel, and that power not having been exercised, the corpus of trust “A” would remain in the trust and ultimately be distributed through the estate of William rather than through the estate of Muriel.

III

THE RULING BY THE TRIAL COURT

The matter was heard and argued on June 27, 1980, before the Honorable Gerald F. Schulte. On June 30, 1980, he ruled that the provisions of Civil Code section 1386.2 did not defeat the exercise of the power of appointment because the will of the donor (i. e., Everett) required only a reference to the power and not to the instrument and that, therefore, the decedent, Muriel, had validly exercised the power of appointment given to her over the corpus of trust “A” in the will of her predeceased husband, Everett. The court further found that the provisions of Civil Code section 1389.3, subdivision (c) were applicable to the case at hand and that accordingly, all income and principal of trust “A” passed to the estate of Muriel.

An order embodying the court's minute order was duly filed and entered on July 28, 1980. It is that order which is the subject of this appeal.

IV

CONTENTIONS OF THE PARTIESA. Contentions Of The Appellant(1) Interpretation Of Applicable Statutes

The appellant contends that Civil Code sections 1385.1, 1385.2, and 1386.2 required Muriel to make a specific reference to the power of appointment which she was exercising through the language contained in the residuary clause of her will rather than simply a general reference by Muriel, as the donee, to all powers which she may have possessed.

(2) Donor's Intent

The appellant contends that it was the apparent intention of the donor of the subject power of appointment, that upon the death of his wife, Muriel, that the proceeds of trust “A” should be delivered, free of trust, to his son, William, subject to the power of appointment granted to his wife, to defeat the gift over to William as to one-half of his estate as defined as trust “A” if she properly exercised such power of appointment.

Appellant also argues that because both Everett and Muriel had their respective wills drawn by the same law firm and also because they each executed the respective will at about the same time, that the two wills were drawn in a coordinated effort to create an agreed upon testamentary plan and that each of them must have known the contents of the other spouse's will. Appellant argues further that Everett must have been aware of the fact that Muriel had no heirs-at-law and that if she died intestate, her estate would escheat to the state.

Appellant contends that it is inconceivable that the two spouses would have knowingly entered into a joint testamentary plan wherein the power of appointment granted to Muriel by Everett's will could be inadvertently exercised, thereby placing the assets of one-half of the estate of Everett into her estate under conditions wherein the sole beneficiaries named in her will were deceased (i. e., her husband Everett, Brenda Hemming, and William E. Eddy) and wherein she had no heirs-at-law so as to avoid escheat to the state.

(3) Donee's Intent

As was observed above, the appellant contends that because the two wills of Everett and Muriel were prepared by the same attorney, were executed on the same date, and witnessed by the same witnesses, that the two wills were the result of a common plan of testamentary disposition. If the appellant's assumption is correct, then it would follow that the intent of the donee, Muriel was the same as the claimed intent of the donor, Everett, that all of the assets of their joint estate were to go to Everett's son, William, subject to the power of appointment as to one-half of the estate, which was represented by the corpus of trust “A.”

(4) Proper Disposition Of The Corpus Of Trust “A”

Everett provided in Paragraph Fourth B, 3 of his will that:

“If at the time my wife dies, as aforementioned in this Paragraph, she is not survived by her sister, BRENDA HEMMING, this TRUST ‘A’ shall ipso facto cease and terminate, and the trustee shall convey, in fee, all of the remaining corpus of said TRUST ‘A,’ and any accumulated income, to my said son, WILLIAM E. EDDY.” (Emphasis added.)

As was noted above, Brenda Hemming did not survive Muriel. Therefore, the appellant contends that the vested remainder interest that was created in William, should have taken effect at the time of the death of Muriel because of Muriel's failure to properly exercise her power of appointment. Under the provisions of Civil Code sections 781 and 1389.3 subdivision (a), the appellant argues that the subject property which consists of the corpus of trust “A” should pass to the person named by the donor Everett as the taker in case of default, namely, the estate of his son, William. The subject property should then be distributed in accordance with the will of William and the decree of distribution in his estate rather than as part of Muriel's estate.

B. Respondent's Contentions.

(1) Interpretation Of Applicable Statutes

Respondent contends that Civil Code section 1385.2, in stating that the power of appointment referred to in the creating instrument must be referred to specifically in order to be exercised, if so required by the creating instrument, clearly indicates that the required reference may be either “to the power” or “to the instrument that created the power.” In the will of Everett he only required that “my said wife shall express her intention to exercise the same.” He did not require her to refer to the instrument that created the power, which he could have specifically required had he intended that the exercise of the power would only be valid if there was such a reference to the creating instrument.

(2) Intent of Decedent-Donee

Respondent contends that Civil Code section 1386.1 states that “(a) The exercise of a power of appointment requires a manifestation of the donee's intent to exercise the power,” and then goes on to indicate three situations where such a manifestation of intent by her was evidenced by all three of the illustrations in that code section.

Muriel declared that she was making a bequest of any property (1) over which she had a power of appointment; (2) by so doing she was transferring the property which would ultimately be included in trust “A” at such time as trust “A” came into existence, and without which power she would not be able to transfer said property; and (3) since the will of Everett purported to dispose of all property of the parties, including their community property, if Muriel did not make a valid exercise of her power of appointment, then, in fact, she had virtually nothing in the way of property to dispose of.

(3) Effect Of Failure By Muriel To Make An Effective Appointment

Respondent contends that Muriel apparently intended to devise all of the property that would be hers at the time of her death, by her failure to specify any certain property in her will. Thus, she effectively asserted her ownership of the property over which she had a power of appointment. Because of the failure of any of her appointees to survive her, the property subject to the power of appointment, just as the other property belonging to her at the time of her death, passes into the residue of her estate, for distribution under the intestate succession laws of the State of California.

Respondent indicates that the problem of what happens to property which was subject to a power of appointment when the appointment is ineffective is covered by Civil Code sections 1389.1 et seq. Civil Code section 1389.3, which refers to a discretionary power such as that possessed by Muriel, provides in subdivision (a) that the property subject to the appointment generally reverts to the donor except when appointment is to a trustee (which is covered by Civ.Code, s 1389.3, subd. (b)), and another exception which is covered by Civil Code section 1389.3 subdivision (c) which he contends is applicable to the situation in the case at bench.

V

ISSUES ON APPEAL

A. Did the trial court err in ruling that the provisions of Civil Code section 1386.2 did not defeat the exercise of the subject power of appointment by the donee, Muriel, because the donor's will required only a reference to the power and not to the instrument and, therefore, the donee, Muriel, had validly exercised said power of appointment?

B. Did the trial court err in finding that the provisions of Civil Code section 1389.3, subdivision (c) were applicable to the facts in the case at bench so that all income and principal remaining in trust “A” should pass to Muriel's estate rather than revert back to estate of the donor, Everett?

VI

DISCUSSION

The basic question before this court is whether Muriel, as the donee of the subject general power of appointment, properly and validly exercised same by the residuary clause of her will. To answer this question requires a review of (1) the language of the creating instrument to see what requirements were imposed on the donee, (2) the language of all applicable statutes (for the same reason), and (3) the language of Muriel's will to see if she complied with the requirements of the creating instrument and all applicable statutes.

The instrument which created the power of appointment in question was the will of Everett. That will provided in pertinent part as follows:

“If my said wife (MURIEL) shall survive me, she shall have the power to appoint, by Will or Codicil thereto, all or any part of the principal and undistributed income of TRUSE ‘A,’ free of the trust, in favor of her estate, or any persons whom she shall designate. The power shall be deemed to have been exercised only if by specific reference thereto in her Will or Codicil, my said wife shall express her intention to exercise the same.” (Emphasis added.)

Based on the statutory definitions contained in Civil Code sections 1381.2 subdivision (a) and 1381.3, it appears that the type of power that Everett granted to Muriel was a “testamentary” power which was “general” in nature. The power was “testamentary” because Muriel could only exercise it in her will or codicil. See Civ.Code, s 1381.3.) The power was “general” rather than “special” in that Muriel was granted the power to appoint all or any part of the principal and undistributed income of trust “A” free of said trust, in favor of her estate or any persons whom she might designate. (See Civ.Code, s 1381.2, subd. (a).)

Even though Muriel was granted a general power of appointment, that power was subject to several restrictions. Those restrictions were: (1) Muriel could only exercise the power by her will or a codicil thereto; (2) the power was limited to all or any part of the principal and undistributed income of trust “A” ; (3) the power could only be exercised if Muriel made a specific reference thereto in her will or codicil; and (4) Muriel had to express her intention to exercise the power.

In addition to the above-mentioned restrictions that were imposed by the creating instrument, there are also some statutory provisions that may be applicable to said power. Those statutory provisions are Civil Code sections 1385.1, 1385.2, and 1386.2 and they read as follows:

Civil Code section 1385.1

“(a) Except as otherwise provided in this title, if the creating instrument specifies requirements as to the manner, time, and conditions of the exercise of a power of appointment, the power can be exercised only by complying with those requirements.

“(b) Unless expressly prohibited by the creating instrument, a power stated to be exercisable by an inter vivos instrument is also exercisable by a written will.” (Emphasis added.)

Civil Code section 1385.2

“If the creating instrument expressly directs that a power of appointment be exercised by an instrument which makes a specific reference to the power or to the instrument that created the power, the power can be exercised only by an instrument containing the required reference.” (Emphasis added.)

Civil Code section 1386.2

“A general power of appointment exercisable at the death of the donee is exercised by a residuary clause or other general language in the donee's will purporting to dispose of property of the kind covered by the power unless:

“(a) The creating instrument requires that the donee make a specific reference to the power or to the instrument that created the power; or

“(b) The donee manifests an intent, either expressly or by necessary inference, not to so exercise the power.” (Emphasis added.)

A review of the three statutes quoted above has caused us to conclude that in general, they simply require a donee of a power of appointment to comply with any requirements imposed in the creating instrument as to the manner, time, and conditions of the exercise of a particular power of appointment. (Civ.Code, s 1385.1.) A donor is also permitted to require an express reference to the power to assure a conscious exercise by the donee. In such a case, the specific reference to the power is a condition to its exercise. (Civ.Code, s 1385.2.) Finally, unless the creating instrument requires that the donee make a specific reference to the power or to the instrument that created the power or the donee manifests an intent (either expressly or by necessary inference) not to so exercise the power, a general power of appointment (exercisable at the death of the donee) is deemed to be exercised by a residuary clause (or other general language in the donee's will which purports to dispose of the property of the kind covered by the power). In other words, despite the absence of a manifestation of intent by the donee to exercise the power, a residuary clause exercises a power under the circumstances stated. (Civ.Code, s 1386.2.)

Having reviewed the pertinent language of the creating instrument and also of the applicable statutes, we now review the specific language that forms a part of the residuary clause of Muriel's will. That language in pertinent part reads as follows:

“If my said husband does not survive me, then all of the property I own, including, but not by way of limitation, any property over which I have a power of appointment, shall go as follows:

“a. If my sister, BRENDA HEMMING, does not survive me, then all of said property shall go to my husband's son, to-wit, WILLIAM E. EDDY.” (Emphasis added.)

We now proceed to determine whether Muriel complied with all four (4) of the above requirements imposed on her by Everett's will and the statutes mentioned above.

A review of the above-quoted provisions of Muriel's will has caused us to conclude that she clearly satisfied the first condition in the creating instrument. She did not attempt to exercise her power by any inter vivos instrument but only through her last will.

As to the second condition, Muriel did not specifically mention trust “A” or the property that was subject to that trust but she did mention “any property over which she had a power of appointment” as being the subject of the residuary clause of her will. Consequently, she did not attempt to exercise her power of appointment over any property that had not been made subject to her power of appointment.

Skipping over to the fourth condition, Muriel did not indicate in exact words that she intended to exercise her power. However, she did use other language which indicates that she intended to dispose of all of her property including “any property over which I have a power of appointment.” We find that the language Muriel used did satisfy the fourth condition.

Returning to the troublesome third condition, it is apparent that Muriel did not make a specific reference in her will to “the power of appointment” which she received from Everett's will (which the appellant contends she had an obligation so to do). However, Muriel did make a general reference to “a power of appointment” which she had (which the respondent contends was sufficient for a proper exercise of Muriel's power).

The question then is whether the language that Muriel used in her will satisfied the requirements of both the creating instrument and Civil Code section 1385.2?

The appellant concedes that the language used by the draftsman of Muriel's will, or language very similar thereto, has long been in standard usage in the drafting of wills to insure that the residuary clauses would encompass property which was subject to a power of appointment where such power did not require specific reference to the power or to the particular instrument which created the power in order to properly exercise the power. She has also pointed out that prior to the enactment of Civil Code section 1386.2 in 1969, the additional language “... any property over which I might have a power of appointment” was often included in the residuary clauses as an element of caution and good draftsmanship.

The appellant, however, contends that because the donor, Everett, placed the above-mentioned conditions and restrictions on the exercise of the power of appointment that he had granted to his wife, Muriel, as the donee, that the three statutes quoted above, plainly interpreted, require a specific reference to the power of appointment. She, therefore, argues that there is an implication that the power to which the reference was being made should be identified as a particular power just as the portions of Civil Code section 1385.2 which require specific reference to the instrument (which created the power), would seem to require that the particular instrument be identified.

The appellant contends that a mere general reference by a donee of a power of appointment to all powers which the donee possesses or to all instruments under which the donee may have a power of appointment is not sufficient to satisfy the aforementioned statutory requirements.

Does Civil Code section 1385.2 require a specific reference by a donee of a power of appointment to “the power” as appellant contends or merely to “a power” as the respondent contends?

The official comments by the Law Revision Commission to Civil Code section 1385.2 indicate that this statute “permits a donor to require an express reference to the power to assure a conscious exercise by the donee. In such a case, the specific reference to the power is a condition to its exercise. This condition precludes the use of form wills with ”blanket“ clauses exercising all powers of appointment owned by the testator. The use of blanket clauses may result in passing property without knowledge of the tax consequences and may cause appointment to unintended beneficiaries ...” (See also 3 Witkin, Summary of Cal.Law (8th ed.) pp. 1988-1989.)

To understand the objective the Legislature had in mind when it enacted this statute in 1969 (operative July 1, 1970), we shall explore the history behind this statute and its companion statutes. (I. e., Title 7, Civ.Code, s 1380.1 et seq.)

It has long been the general rule in California that it is not necessary for a donee of a power of appointment to explicitly refer to a power of appointment in the exercise thereof. (See 50 Cal.Jur.3d, s 18, pp. 402-404.) Thus, in the absence of any such requirement in the instrument creating the power, a will need not refer to a power of appointment in order to exercise the power. (See Estate of Carter (1956) 47 Cal.2d 200, 204, 302 P.2d 301; Estate of Cox (1970) 8 Cal.App.3d 168, 192, 87 Cal.Rptr. 55; Estate of Erdman (1968) 264 Cal.App.2d 335, 70 Cal.Rptr. 774.)

Consistent with the foregoing general rule, the Probate Code provides in section 125 that (except as specifically provided by the Civil Code sections which relate to powers of appointment), a devise or bequest of all the testator's real or personal property in express terms, or in any other terms denoting his intent to dispose of all his real or personal property, passes all the real or personal property which he was entitled to dispose of by will at the time of his death. This has been construed to include bequests of personal property as well as devises of real property. (Childs v. Gross (1940) 41 Cal.App.2d 680, 107 P.2d 424.) The foregoing statutory provision (both prior to and after its amendment in 1969, has been held to include the exercise of a power of appointment. (See United California Bank v. Bottler (1971) 16 Cal.App.3d 610, 615-616, 94 Cal.Rptr. 227), as interpreted by the California Supreme Court in the Estate of Carter case.)

Prior to 1969 (based on Probate Code section 125), it had been the law in this state that a devise or bequest in general terms of all of the testator's property was a sufficient manifestation of the donee's intent to exercise a power of appointment so that such general language would constitute an exercise of the power, even though the testator did not intend to do so. (See 3 Witkin, Summary of Cal.Law (8th ed.) p. 1990; 50 Cal.Jur.3d, s 18, pp. 402-404, “Powers”; Estate of Carter, supra, 47 Cal.2d at pp. 204-205, 302 P.2d 301; United California Bank v. Bottler, supra, 16 Cal.App.3d at p. 615, 94 Cal.Rptr. 227; California Trust Co. v. Ott (1943) 59 Cal.App.2d 715, 140 P.2d 79; and Childs v. Gross, supra, 41 Cal.App.2d at p. 687, 107 P.2d 424.)

However, in 1969, the California Legislature amended Probate Code section 125 and added Title 7 to the Civil Code entitled “Powers of Appointment” (i. e., Civ.Code, ss 1380.1 through 1392.1).

Prior to 1969, Probate Code section 125 read as follows:

“A devise or bequest of all the testator's real or personal property, in express terms, or in any other terms denoting his intent to dispose of all his real or personal property, passes all the real or personal property which he was entitled to dispose of by will at the time of his death, including property embraced in a power to devise. (Stats.1931, c. 281, p. 594, s 125.)”

As the result of the 1969 amendment, this particular statute now reads as follows:

“Except as provided by Sections 1386.1 and 1386.2 of the Civil Code relating to powers of appointment, a devise or bequest of all the testator's real or personal property, in express terms, or in any other terms denoting his intent to dispose of all his real or personal property, passes all the real or personal property which he was entitled to dispose of by will at the time of his death. ...” (Amended by Stats.1969, c. 155, p. 409, s 3, operative July 1, 1970.)

The official comments of the Law Revision Commission regarding the 1969 amendment to Probate Code section 125 indicate that the amendment now makes it clear that this section does not operate with respect to powers of appointment. Therefore, since 1969, a provision in a will devising or bequesting all of the testator's real or personal property operates with respect to powers of appointment only to the extent provided in Civil Code sections 1386.1 and 1386.2.

It should be noted that the companion wills of Everett and Muriel were both executed on March 18, 1968, which was over two years before July 1, 1970, the effective date of all of the new statutes discussed above which substantially changed the law regarding powers of appointment.

When the Legislature enacted Title 7 of the Civil Code in 1969, it specifically provided that if a power of appointment created prior to July 1, 1970, was valid under the law at the time of creation, it remains valid. However, if the law existing at the time of creation differs from the law existing at the time of the release or exercise of the power or at the time of the assertion of a right provided by statute, the law existing at the time of such release, exercise or assertion of a right controls. (See Civ.Code, s 1380.2.) This means in effect that issues regarding the validity of the creation of a power that was created prior to July 1, 1970, are determined by the law existing at that time. If a release is executed, or a power is exercised or a right is asserted after July 1, 1970, any issues arising therefrom are to be determined pursuant to the new statutes. (See Law Revision Com.Comm. to Civ.Code, s 1380.2.)

Even though the power in question was created prior to July 1, 1970, it was not exercised until 1979, which was long after July 1, 1970. Therefore, any issues as to the exercise of the power are required to be determined by the law that was in effect in 1979.

When Everett and Muriel executed their companion wills on March 18, 1968, the Legislature had not yet amended Probate Code section 125 nor enacted Title 7 of the Civil Code (i. e., Civ.Code, ss 1380.1 through 1390.4). It was, therefore, clearly the law then (that pursuant to Probate Code section 125, as interpreted by the courts), that a devise or bequest of all the testator's real or personal property, in express terms, or in any other terms denoting his (her) intent to dispose of all his (her) real or personal property, passes all the real or personal property which he (she) was entitled to dispose of by will at the time of his (her) death, including property embraced in a power to devise. (See Estate of Carter, supra, 47 Cal.2d at p. 204, 302 P.2d 301; United California Bank v. Bottler, supra, 16 Cal.App.3d at p. 615, 94 Cal.Rptr. 227; Estate of Cox (1970) 8 Cal.App.3d 168, 192, 87 Cal.Rptr. 55; California Trust Co. v. Ott, supra, 59 Cal.App.2d at p. 717, 140 P.2d 79; Childs v. Gross, supra, 41 Cal.App.2d at p. 687, 107 P.2d 424.)

In commenting on the state of the law in California prior to 1969 relative to the exercise of power of appointments, Witkin in his authoritative work entitled Summary of California Law (8th ed.) indicates in effect (at p. 1990) that prior to the amendment of Probate Code section 125 and the enactment of Civil Code section 1386.1, subdivision (a) by the Legislature in 1969, that California courts, applying Probate Code section 125, held that a devise or bequest in general terms of all of the testator's property “would constitute an exercise of the power, even though the testator did not intend to do so.”

To prevent the inadvertent exercise of powers of appointment through the use of such general terms in wills, the Legislature enacted Civil Code section 1386.1, subdivision (a) which provides that a devise or bequest in general terms of all of the testator's property is not a “manifestation of the donee's intent to exercise the power.” Rather, such general terms now constitute the exercise of a general power of appointment unless: (1) The donor has required that the donee make a specific reference to the power or to the instrument that created it: or (2) The donee “manifests an intent, either expressly or by necessary inference, not to so exercise the power.” (See Civ.Code, s 1386.2.)

Presumably the lawyer who drafted the companion wills of Everett and Muriel in 1968 was aware of the fact that the California Supreme Court in the case of Estate of Carter, supra, 47 Cal.2d at p. 204, 302 P.2d 301, had interpreted Probate Code section 125 to mean that a residuary clause, which did not mention the intention to exercise general testamentary power, nevertheless exercised the power despite the donee's specific intent not to exercise the power. (See also Childs v. Gross, supra, 41 Cal.App.2d at p. 687, 107 P.2d 424, which had construed Probate Code section 125 to apply to both realty and personalty.)

One way of eliminating the potential trap for the unwary that defeated the donee's clearly provable intent in the Estate of Carter case was for a donor of a power of appointment to make it a requirement in the creating instrument that the donee either make a specific reference to the power or to the creating instrument before it could be validly exercised. (This particular safeguard was made a matter of statute in 1969 when the Legislature amended Probate Code section 125 and enacted Civil Code section 1386.2.)

Therefore, no doubt the major purpose that the draftsman had in mind in including in Everett's will the requirements (1) that Muriel make a specific reference in her will or codicil to the power of appointment that he had granted to her and also (2) that she express her intention to exercise said power, was to avoid the potential problems caused by the Estate of Carter decision.

It can also be presumed that the draftsman of Muriel's will was very familiar with the requirements imposed on Muriel by Everett's will and that he employed language in her will which he felt would satisfy the legal requirements established by Everett's will.

Inasmuch as this case is apparently a case of first impression here in California, Respondent's counsel has called our attention to an out of state appellate case in which the facts were very similar to our case and where the court was called upon to decide virtually the same basic issue that is before us in this appeal. In the North Carolina case of First Union National Bank v. Moss (1977) 32 N.C.App. 499, 233 S.E.2d 88, the North Carolina Court of Appeals was called upon to decide whether a wife in her will, by devising the remainder of her estate “including any property or estate over which I have or may have any power of appointment ” (emphasis added), effectively executed the power of appointment given to her by her husband in his will, which required that “she appoint and direct in an effective will or codicil specifically referring to this power of appointment.” (Emphasis added.)

The North Carolina Court upheld the decision by the trial court which had concluded that the wife in her will had effectively exercised her power of appointment over a marital deduction trust that had been created by the husband's will. The reviewing court held that the wife, by devising the remainder of her estate including any property or estate over which she had any power of appointment, effectively executed the general power of appointment given her by her husband in his will, even though his will required that she appoint and direct in an effective will or codicil “... specifically referring to this power of appointment.” (Emphasis added.)

In support of its decision in the First Union case, the North Carolina court stated at page 92 of 233 S.E.2d that:

“(t)he will of the donor of a power of appointment and the will of the donee must be construed together. (Citations.) Joint construction is particularly appropriate in the present case since the two wills were executed on the same date before the same witnesses, one of whom was an attorney, appoint the same executor and contain very substantially identical language except for the dispositive provisions.”

The First Union court also stated at pages 92-93 of 233 S.E.2d that:

“Appellants concede that she (Mrs. Moss) possessed a general power of appointment. Mr. Moss did not give his wife the minimum power over the marital share that he could have in order to obtain maximum tax benefits. Rather he gave her broad powers over disposition, limited only to the requirement of a specific reference in her will, which powers indicate confidence and trust in her judgment and ability to manage her property. The fact that even if the power were exercised, Mr. Moss elsewhere in his will made generous provisions for his children, the other natural objects of his bounty, lends support to the conclusion that he had no intention to restrict his wife unduly in the disposition of the property subject to the power of appointment.”

The North Carolina court in First Union also put a great deal of weight on the fact that in the wife's will there was a distinction between the dispositive provisions if she predeceased him as opposed to those that were applicable if he predeceased her. The First Union court indicated (233 S.E.2d at p. 93) that such a distinction in the wife's will “... leads to the conclusion that she intended to exercise the power of appointment created in her husband's will ...” The First Union court then goes on to state (also at p. 93 of 233 S.E.2d) as follows:

“The fact that Mrs. Moss made reference to property under a power (of appointment) only in the event that her husband died first is evidence that she was concerned only with the power created in his will, and was thereby making special reference to it.... The language indicates an awareness by Mrs. Moss that only if her husband predeceased her would she possess two classes of property, (1) property under appointment and (2) her personal estate, and it demonstrates an intention to make a distinction between these two classes of property.”

We note that the same type of language and the same type of distinction was contained in Muriel's will in the case at bench.

The North Carolina court then went on to state (233 S.E.2d at p. 93) that:

“Circumstances attendant the execution of the wills resolve any ambiguity and compel the conclusion that the power was exercised. Both wills were executed on the same day, were witnessed by the same people, contain substantially identical language except for the dispositive provisions, and reveal similar concerns. It is reasonable to infer that the same person drafted the two wills to reflect the common interests and concerns of Mr. & Mrs. Moss, and (also) to infer that each spouse was aware of the contents of the other's will. The fact that a donee of a power was aware of the existence of a power of appointment at the time of the execution of the donee's will is a circumstance which supports the conclusion that ambiguous language in donee's will reflects an intention to exercise the power. 62 Am.Jur.2d, Powers of Appointment s 49 (1972). The fact that the provision will have no meaning unless it operates to exercise the power is also a circumstance which supports the conclusion that the donee thereby intended to exercise the power. 62 Am.Jur.2d, supra, s 51.” (Emphasis added.)

As we observed above, the wills of both Everett and Muriel were also drafted by the same lawyer, executed on the same day, witnessed by the same people, contained substantially identical language except for the dispositive provisions, and revealed similar concerns. It is also reasonable to assume that Everett and Muriel were also aware of the contents of each other's wills and that their common scrivener drafted their mutual wills in a manner that reflected their common interests and concerns.

Because of the great similarity between both the facts and legal issues in the First Union case and the case at bench, we find the holding of that case to be very persuasive as to the issues before us in this case.

It has been held that where a will is drawn by an experienced and competent lawyer, it is presumed that the legal terms embodied in the will are used in their legal sense. (See Estate of Carter, supra, 47 Cal.2d at p. 205, 302 P.2d 301, and the other citations contained therein.) It should also follow that where the same lawyer drafts companion wills for the donor and donee of a power of appointment, which wills are executed at the same time, that there is rebuttable presumption that any requirements imposed on the donee by the will of the donor were legally satisfied by the original language of the donee's will.

Considering the apparent purpose in 1968 for the inclusion in Everett's will of the above-mentioned requirements on Muriel to accomplish a valid exercise of her power of appointment, together with the statutory requirements which now apply to Muriel's purported exercise of her power, we have concluded that the language employed by Muriel in her will satisfies both the requirements contained in Everett's will and also the various statutory requirements.

Although the residuary clause in Muriel's will did not make a specific reference to the power of appointment that was granted her, she did refer to a power of appointment which she had. Her referral to “a power of appointment” satisfies Everett's apparent intention of avoiding the potential “Carter pitfall” of having Muriel inadvertently exercise her power of appointment (by merely disposing of all of her property in general terms in the residuary clause of her will), when she really did not intend to do so.

It has also been held that although the donee did not literally comply with the terms of the decedent-donor's will regarding the manner of exercise of a power of appointment (i. e., delivery to the decedent's trustee during the donee's lifetime), her compliance was reasonable because she made every effort to have the exercise of the power delivered through her conservator and attorney. (See Estate of Wood (1973) 32 Cal.App.3d 862, 881-884, 108 Cal.Rptr. 522.)

Having determined that Muriel validly exercised her power of appointment by the particular language that she employed in her will, the next question is whether she effectively exercised her power.

It has been noted that all of the beneficiaries named in Muriel's will had predeceased her. That being the situation, it seems apparent that the exercise by Muriel of her general power of appointment was “ineffective” from a legal standpoint. Civil Code section 1389.3 provides as follows:

“Except as provided in subdivisions (b) and (c), when the donee of a discretionary power of appointment fails to appoint the property, releases the power, or makes an ineffective appointment, in whole or in part, the appointive property not effectively appointed passes to the person or persons named by the donor as takers in default or, if there are none, reverts to the donor.

“(b) Unless either the creating instrument or the instrument of appointment manifests a contrary intent, when the donee of a general power of appointment appoints to a Trustee upon a trust which fails, there is a resulting trust in favor of the donee or his estate.

“(c) Unless the creating instrument manifests a contrary intent, when the donee of a general power of appointment makes an ineffective appointment other than to a Trustee upon a trust which fails, the appointive property passes to the donee or his estate if the instrument of appointment manifests an intent to assume control of the appointive property for all purposes and not only for the limited purpose of giving effect to the express appointment.” (Emphasis added.)

The Law Revision Commission Comment to subdivision (c) of Civil Code section 1389.3 states as follows:

“The intent of the donee to assume control of the assets ‘for all purposes' is most commonly manifested by provisions in the instrument of appointment which blend the property owned by the donee with the property subject to the power. Thus, where the donee's will provides that ‘I devise and appoint all property that I own at my death or over which I then have a power of appointment to A,’ the blending of the owned and appointive assets shows an intent of the donee to treat the appointive assets as his own. Thus, if A predeceases the donee and the antilapse statute (Section 1389.4) does not dispose of the property, the appointive assets will pass into the donee's estate to be distributed to his statutory heirs or next of kin.” (Emphasis added.)

The Estate of Thorndike (1979) 90 Cal.App.3d 468, 473, 153 Cal.Rptr. 487, points out that “a general power of appointment is one which may be exercised in favor of anyone, including the donee, and is equivalent to a grant of absolute ownership.” (Emphasis added.)

It is apparent that Muriel intended to devise all of the property that would be hers at the time of her death, by her failure to specify any certain property in her will. Thus, she effectively asserted her ownership of the property over which she had a power of appointment and, upon the failure of any of her appointees to survive her, the property subject to the power of appointment, just as the other property belonging to her at the time of her death, passes into the residue of her estate, for distribution under the intestate succession laws of the State of California.

We, therefore, conclude that the determination by the trial court that the provisions of Civil Code section 1389.3, subdivision (c) were applicable to the facts in the instant case was proper so that his ruling that all of the income and principal remaining in trust “A” should pass to Muriel's estate rather than revert back to the estate of the donor, Everett, is affirmed.

This case is then remanded back to the trial court for further proceedings consistent with this decision.

I respectfully dissent.

Civil Code section 1385.2 provides: “If the creating instrument expressly directs that a power of appointment be exercised by an instrument which makes a specific reference to the power (of appointment) or to the instrument that created the power, the power can be exercised only by an instrument containing the required reference.”1

The Law Revision Commission Comment to Civil Code Section 1385.2 reads in relevant part: “This section permits a donor to require an express reference to the power to assure a conscious exercise by the donee. In such a case, the specific reference to the power is a condition to its exercise. This condition precludes the use of form wills with ‘blanket’ clauses exercising all powers of appointment owned by the testator.” (Emphasis added.)

In the case at bench the creating instrument expressly required a specific reference to the power as a condition to its exercise: “The power shall be deemed to have been exercised only if by specific reference thereto in her Will or Codicil, my said wife shall express her intention to exercise the same.” (Emphasis added.)

The language in Muriel's will held by the majority to satisfy the condition for specific reference to the power found both in the creating instrument and in Civil Code section 1385.2 reads: “If my said husband does not survive me, then all of the property I own, including, but not by way of limitation, any property over which I have a power of appointment, shall go as follows: ....” (Emphasis added.)

The conclusion that that language constitutes a specific reference to the power is incorrect and will cause much mischief as a result of uncertainty in the law. The language does not specifically refer to the power; at most it refers to all of the powers of appointment owned by Muriel.

As pointed out by the Law Revision Commission Comment to section 1385.2 quoted above, the very purpose of that statutory provision was to prevent “ ‘blanket’ clauses exercising all powers of appointment owned by the testator” from being construed as an exercise of a power of appointment with respect to which the creating instrument required as a condition to exercise of the power specific reference to the power. The result reached by the majority is diametrically opposite to the result commanded by the statutory language and purpose.

The order appealed from should be reversed.

FOOTNOTES

FOOTNOTE.  

1.  There can be no question but that Civil Code section 1385.2 is applicable notwithstanding that the creating instrument was executed in 1968. Civil Code section 1380.2 provides in pertinent part: “If the law existing at the time of the creation of a power of appointment and the law existing at the time of the release or exercise of the power or at the time of the assertion of a right given by this title differ, the law existing at the time of the release, exercise, or assertion of a right controls.” (Emphasis added.)

ZIEBARTH, Associate Justice.* FN* Assigned by the Chairperson of the Judicial Council.

McDANIEL, J., concurs.