BROCK v. HALL (1948)

This is an appeal by plaintiff Mildred Hall Brock from a judgment on an order sustaining without leave to amend a demurrer to her complaint for distribution to herself of the entire estate remaining in the hands of the trustee of a certain trust. On stipulation the trustor, her father Elbert J. Hall, was substituted as defendant for the trustee, against whom the action was originally brought and who continues the administration of the estate.

The trust deed, appended to the complaint, shows that on March 20, 1924, the trustor transferred to the trustee a sizable amount in bonds in trust for the benefit of his then minor daughters, Mildred Miriam, the appellant, and Carolyn Mary. It was provided that each of the two beneficiaries would from the age of eighteen to the age of thirty-five receive half of the income of the trust and on the reaching of the age of thirty-five one-half of the corpus absolutely. In the case of death of beneficiaries the trust agreement contains the following provisions, the interpretation of which is decisive of this appeal:

‘In the event of the death of said Mildred Miriam Hall, or said Carolyn Mary Hall, the portion of said trust property or of the income thereof belonging to such deceased shall, if such deceased shall have married and leave issue, go to and vest in such issue, or if such deceased shall be married and leaving her surviving a husband but no issue, then one-half of her respective share of said trust property shall go to such surviving husband absolutely and discharged of these trusts, and the remaining one-half * * * to the survivor of said Mildred Miriam Hall and Carolyn Mary Hall; or if either of the last mentioned persons shall die, never having married, then the share of such deceased in said trust property shall * * * go to and vest in the other of them surviving.’

The complaint alleged further in substance that appellant reached the age of thirty-five and that as to her portion of the trust estate the trust then terminated but that it continued as to the portion of her younger sister Carolyn; that said sister married James Grover, who subsequently died in the year 1945, and that some months later, on October 2nd, 1945, said Carolyn Hall Grover died leaving no children.

The court below held that the complaint did not state a cause of action as the contingency alleged to have occurred was not one giving plaintiff under the trust agreement the right to her sister's share of the trust estate. As there was no ambiguity in the words ‘never having married’ the court declined to add a provision which the trustor had not written in the trust.

Appellant concedes that the words of the separate provisions of the trust instrument are not ambiguous and that the words ‘never having married’ do not cover the situation alleged in the complaint, towit, that deceased had been married but died without husband or issue surviving. However she argues that if all the provisions of the trust are read together, a gift to her in that situation must by necessary implication be found, either from the four corners of the instrument, or on the basis of extrinsic evidence to be introduced by her. She claims that the words ‘never having married,’ though an inadequate expression, were intended to mean ‘without husband or issue surviving.’ The grounds for this contention will be detailed later. Respondent claims that as trustor he did not dispose of the trust estate in the events which actually have occurred; that therefore there was a constructive trust in his favor and that as matter of law he, not the appellant, is entitled to the trust estate under the facts alleged. He denies that the doctrine of implied gifts applies to inter vivos trusts; and that there is no basis for the proposed implication in the instrument in this case.

Although the doctrine of implied gifts was developed mainly with respect to wills, there is no reason why it should not be applied to inter vivos trusts and it has been so applied. The principle is that the intention of the testator must be ascertain from his will as a whole, and that when the whole will shows without doubt the intention to make a certain disposition, while is not declared in express or adequate words, the courts will carry such intended disposition into effect by implication. 2 Page on Wills, sec. 930; 57 Am.Jur. 782, Wills, sec. 1192; Estate of Franck, 190 Cal. 28, 31, 210 P. 417, quoted by this court in Estate of Weber, 76 Cal.App. 723, 725, 726, 245 P. 776. As the purpose is better to approximate the intention of the grantor, the doctrine seems especially appropriate as to trusts, which are cognizable in equity, which always endeavors to ascertain the intention of the grantor. Lemmon v. Wilson, 204 S.C. 50, 28 S.E.2d 792, 799. The court may also have some more latitude in effectuating the intentions of the trustor in an inter vivos trust as there one of the reasons which restrict the freedom of interpretation of wills is not present; the necessity to uphold the certainty of written instruments and the parol evidence rule apply equally to wills and inter vivos trusts, but the additional reason given as to wills ‘that the testator's lips have been sealed’ (Symonds v. Sherman, 219 Cal. 249, 256, 26 P.2d 293) has no application. Although we did not find in our State any cases in which the principle of implied gifts was applied to inter vivos trusts there are such cases in other jurisdictions, for instance First Nat. Bank & Trust Co. of Yonkers v. Palmer, 261 N.Y. 13, 184 N.E. 477; Manufacturers Trust Co. v. Chase National Bank, 171 Misc. 49, 11 N.Y.S.2d 895, affirmed 282 N.Y. 790, 27 N.E.2d 202; Bank of New York v. Vanneck, Sup. 68 N.Y.S.2d 226, 234; See also In re Scott's Trust, 322 Pa. 1, 184 A. 245, and compare the Restatement, Property, sec. 115a (with Appendix p. 16 et seq.), where the implication of cross-remainders is even held applicable to real property deeds, which are even more strictly construed than wills. 57 Am.Jur. 716. We hold that the fact that the instrument to be construed is an inter vivos trust agreement does not exclude the possibility of finding an implied gift.

The court below was of the opinion that the rule that ordinarily only the intention which has found expression in the instrument determines the nature and extent of its provisions (Chater v. Carter, 238 U.S. 572, 584, 35 S.Ct. 859, 59 L.Ed. 1462; Moxley v. Title Ins. & Trust Co., 27 Cal.2d 457, 165 P.2d 15, 163 A.L.R. 838; Title Ins. & Trust Co. v. Duffill, 191 Cal. 629, 642, 218 P. 14), was in itself sufficient to decide the case against appellant. However, this universally accepted rule has as its complement that the intention of the grantor need not have been expressed by specific words, but may be derived from the entire instrument as a whole, from its general scheme, or from informal language used, by necessary implication, i. e., implication not based on conjecture, but so strong that a contrary intention cannot be supposed to have existed in his mind. Estate of Blake, 157 Cal. 448, 466, 467, 108 P. 287; Estate of Heard, 25 Cal.2d 322, 326, 327, 153 P.2d 553; Estate of Franck and Estate of Weber, supra.

A classic statement of both rules combined was given by Gray, C. J., in Metcalf v. Framingham Parish, 128 Miss. 370, 374 as follows:

‘The decision of this question doubtless depends upon the intention of the testator as manifested by the words that he has used, and an omission to express his intention cannot be supplied by conjecture. But if a reading of the whole will produces a conviction that the testator must necessarily have intended an interest to be given which is not bequeathed by express and formal words, the court must supply the defect by implication, and so mould the language of the testator as to carry into effect, so far as possible, the intention which it is of opinion that he has on the whole will sufficiently declared.’

The above statement was quoted with approval by the United States Supreme Court in Robison v. Portland Orphan Asylum, 123 U.S. 702, 707, 8 S.Ct. 327, 31 L.Ed. 293 and in Young Women's Christian Home v. French, 187 U.S. 401, 412, 23 S.Ct. 184, 47 L.Ed. 233. When we try to apply these principles to the instrument before us we find expressed in it, as a whole, a clear intention and scheme to set apart the whole of the trust estate primarily for the benefit of the two daughters each for one-half. So little did the trustor think of the possibility that any part of such a portion should return to him that he speaks of such a portion as ‘belonging to such deceased,’ even when it has not yet vested in her absolutely. In case of death of either of the daughters he provides in the first place that if the deceased daughter leaves issue, this issue shall take the whole portion of the deceased to the exclusion of everybody else; next if the deceased leaves no issue but a husband surviving then the trustor does not give all of the portion of the deceased to her said husband but only half of it; the other half he does not wish to revert to himself but he gives it to the surviving sister over and above the portion given directly to her, showing in so doing that he does not intend to benefit himself from any part of the trust estate so long as it can benefit one of the principal beneficiaries. There remains one more contingency to provide for, namely that a daughter dies leaving neither issue nor husband surviving in which situation on the basis of the preceding provisions a gift of all the portion to the remaining daughter must be expected. There actually follows as a final provision a gift of all the portion of the deceased to her surviving sister, but instead of describing the final contingency as ‘if such deceased shall leave neither husband nor issue surviving’ it is described as if she shall die, ‘never having married,’ description probably induced by the unnecessary reference to the deceased having married in the two prior provisions, which provide for the issue or husband of the deceased. But whatever may have been the origin of the inadequate expression used, there can be no doubt reading all the provisions together that trustor intended to describe the remaining contingency, that the deceased would leave neither husband nor issue. If the last provision as written had stood alone we would have been compelled to hold that the gift to the surviving daughter was conditioned on her deceased sister never having married, but the provision directly preceding shows clearly that this was not what trustor intended as he there made a gift to the surviving daughter notwithstanding the fact that the deceased had married, a gift restricted to half of the portion because of the survival of the husband. It would be absurd to say that the trustor wished the surviving sister to take all if the deceased sister died unmarried, to take half if she died married and leaving only a husband but to take nothing if the deceased died married and not leaving anybody for whom provision should be made. Although appellant argued the absurdity of such construction at length, respondent trustor did not suggest any reason why he should have intended this irrational result. He contends that the fact that he is contesting appellant's construction shows sufficiently that his intention was not what appellant supposed it to be. This is not so. His attitude in these proceedings only shows his present desire. ‘The terms of the trust are determined by the intention of the settlor at the time of the creation of the trust, and not by his subsequent intention.’ 2 Scott on Trust 830. Too often a party to an instrument who has changed his mind tries to use involuntary omissions or inadequacies of language in the instrument as loopholes by which to avoid the consequences of his former intention, an attidue not to be encouraged by the courts by a too strict interpretation. We can find here a gift by implication in the contingency which occurred without any conjecture. Our choice is between a rational scheme of disposition implied in the trust agreement as a whole and an adherence to the express language only, resulting in an absurdity which respondent himself does not even try to explain. ‘When courts find it necessary to consider wills or contracts, it is usual to assume that the party promulgating the instrument acted upon rational considerations and to reasonable effects and ends.’ Cleveland Clinic Foundation v. Humphrys, 6 Cir., 97 F.2d 849, 857, 121 A.L.R. 163. Our statute does not require the express language to govern the interpretation of contracts, where it involves an absurdity. Civil Code sec. 1638; Bennett v. Potter, 180 Cal. 736, 741, 183 P. 156; Jackson v. Puget Sound Lumber Co., 123 Cal. 97, 100, 55 P. 788. There can here be neither doubt whether the trustor intended the surviving daughter to take in the contingency that happened nor what he intended her to take. There is no conjecture where there is only one reasonable possibility.

Respondent argues that implication cannot be used to add an unexpressed gift in one contingency in behalf of the same person to whom a gift is made by express words in an opposite contingency and distinguishes Estate of Blake, supra, on that ground. There is no merit in the distinction. To the contrary the fact that an express gift was stated for one situation has often been used together with other indicia from the whole of the instrument as basis for implying a gift in another situation for which it was not made by express words. In Re Selner's Estate, 261 App.Div. 618, 26 N.Y.S.2d 783, affirmed 287 N.Y. 664, 39 N.E.2d 287, an express residuary gift to testator's three sons was only made in the event his wife predeceased him; in case he left the wife surviving the residue was given in trust to the sons to pay the income to the wife for life without express disposition of the corpus of the trust. The wife survived and the court sustained by implication a bequest of the corpus to the sons stating, 26 N.Y.S.2d at page 786: ‘When a will does not contain a mention of particular property, or of an estate, or an express bequest or devise of such property or estate, in one contingency, then such property or estate may not be, in another contingency, the subject of a bequest or devise by implication through the medium of a construction of the testament. * * * If, however, the property or estate claimed to be bequeathed or devised by implication, in a contingency which has occurred, has been made the subject of an express bequest or devise in another contingency, which did not occur, then effect may be given to such bequest or devise by implication, in the contingency which did occur, if a reading of the entire will makes manifest that such was the intention of the testator.’ See for other applications of the same principle of implication in addition to an express gift to the same beneficiary: City Bank Farmers' Trust Co. v. Hentz, 107 N.J.Eq. 283, 152 A. 331; In re Lytell's Estate, 178 Misc. 996, 36 N.Y.S.2d 1004. First Nat. Bank & Trust Co. of Yonkers v. Palmer; Manufacturers Trust Co. v. Chase Nat. Bank and Bank of New York v. Vanneck, all mentioned supra as examples of implications of gifts in inter vivos trusts belong to this same class. In the first mentioned case for instance the trustor had instituted two identical trusts for the benefit of her husband, a sister of her husband and in each trust for one of her two sons. The income of each trust was to be paid as follows: During the life of the sister-in-law to her $1500 a year; the remaining income with certain deductions to the husband during his life. If the husband should die before his sister the income payable to him was to go to his son, or to the son's descendants. There was no express provision for the disposition of the income in the contingency which happened, to wit, that the husband would survive his sister and die before the son. The majority of the court raised a gift by implication to the son, although the trustor herself claimed the income. Three judges dissented. However in the later Manufacturers Trust case, supra, the Court of Appeals of New York was unanimous in upholding the raising of the gift by implication.

There has even developed an established rule that if an estate for life is given determinable upon marriage, with a gift over on the marriage but without any express gift over in case of death, a gift over to the same beneficiary is implied on death without marriage. In re Schriever's Estate, 221 N.Y. 268, 116 N.E. 995, 57 Am.Jur. 787; 122 A.L.R. 120.

In the case before us we also hold that on the face of the instrument as a whole a gift by implication to the surviving daughter is indicated in the contingency alleged to have occurred.

We are aware that the cases are not consistent and that cases can be found which in a situation comparable to the one before us, refuse to imply a gift on the ground that that would be making a will for the testator (or a trust agreement for the trustor). However, as suggested by Simes (Future Interests, Vol. 2, p. 255), if the instrument contains language sufficient to indicate an intention that the beneficiary take in the contingency which occurred, the gift is not made by the court, but by the trustor himself quite as effectively as if he did so in express words.

We are also aware that in this jurisdiction, although the principle of implied gift is expressly recognized, only a restricted number of cases actually applies it. However, it is said in Estate of Blake, supra, 157 Cal. at page 468, 108 P. at page 295: ‘the tendency of modern cases is rather to extend than narrow the rule of raising devises by implication’ and we think that such development is in line with the general progress to ‘flexible rationalism’ in interpretation seen by Wigmore (On Evidence, sec. 2461).

As we hold that the implied gift proposed can be found from the four corners of the alleged instrument we need not decide whether extrinsic evidence would be admissible to support such implication. However we wish to point out that trustor will still be entitled to support by such evidence the literal construction of the several provisions of the trust agreement by showing circumstances or relations under which a construction which seems absurd on the face of the instrument would obtain meaning. Such evidence would tend to sustain not to vary the instrument. Mahana v. Los Angeles E & M Co., 82 Cal.App. 710, 715, 256 P. 279. Evidently appellant would then be entitled to rebuttal.

The judgment is reversed.

I dissent.

The prevailing opinion cites First National Bank, etc. v. Palmer, 261 N.Y. 13, 184 N.E. 477, a four-to-three decision. The dissenting opinion in that case written by Judge Kellogg, concurred in by Judges Pound and Crouch, states the correct rule as I see it. Chater v. Carter, 238 U.S. 572, 35 S.Ct. 859, 59 L.Ed. 1462, is to the same effect. In Title Ins. & Trust Co. v. Duffill, 191 Cal. 629, 642, 218 P. 14, 18, our Supreme Court, in citing the Chater case says: ‘In seeking the true construction of a declaration of trust, the guiding principle must be the intention of the settlor—his intention as expressed. Not, what did he intend to say? but, What did he intend by what he did say? must be the test.’

I think the case was correctly decided in the trial court.

NOURSE, Presiding Justice.

DOOLING, J., concurs.