IN RE: the Estate of Laura B. ARMSTRONG (1961)

Roy E. Bolstad, one of two persons slated to share equally in the residue of the above named estate, knowing that it had been reported, in the final account, that almost $15,000 was on hand for distribution, was understandably aggrieved by the order that decreed that the entire sum was to be devoted to the payment of death taxes. Contending that the burden of the taxes should have been prorated between those that took under a trust and those that took under the will, and not made to fall entirely upon the latter, as they were ordered to do, the disappointed beneficiary appealed. We have concluded that the probate court correctly interpreted the will as providing that the entire burden should fall upon the probate estate, and are affirming the order settling the account and directing that the cash on hand, in the estate, be used for the taxes.

The terms of the order were, no doubt, a disappointment to the beneficiary, but cannot be said to have surprised him, for he was also the executor of decedent's will, and knew of the reference in the will to a trust established by her and her husband at Wells Fargo Bank ‘* * * by virtue of the terms of which all of the assets comprising said trust will go and be distributed to my said nieces upon my death.’ In his Fourth and Final Account and Petition for Instructions [and] Distribution the executor made these two statements, at different places: ‘Inasmuch as the within estate did not contain sufficient assets to permit payment of both Federal Estate and California Inheritance taxes, there was advanced from Wells Fargo Bank, from the inter vivos trust created by the testatrix prior to her death, entitled ‘Laura B. Armstrong Trust No. 3350’, on or about August 12, 1957, a check in the amount of $29,179.42 payable to Director of Internal Revenue, covering a partial payment of the Federal Estate tax due from the within estate. * * *

‘The balance on hand for distribution, as shown in the within accounting, is the sum of $14,744.17. Inasmuch as the sum of $29,179.42 was advanced by Wells Fargo Bank on behalf of the within estate, in payment of the Federal Estate tax, as shown on page 2 of the within Petition, said balance on hand for distribution should therefore be distributed to Wells Fargo Bank, as trustee of the Laura B. Armstrong Trust No. 3350, subject to any proration of taxes as prayed for herein.’

In the order appealed from the probate court found ‘* * * that all of the allegations of said petition are true; * * * that the decedent by her will has directed that all estate and inheritance taxes be paid out of her probate estate, without proration of said taxes among both testamentary and nontestamentary beneficiaries;’ and so it ordered and decreed: ‘that inasmuch as the sum of $29,179.42 was advanced by Wells Fargo Bank American Trust Company (successor by merger to Wells Fargo Bank) in its capacity as trustee under that certain intervivos trust created by Joseph M. Hooker and Laura B. Hooker (also known as Laura B. Armstrong) on March 27, 1926, as amended, on behalf of the within estate, in payment of Federal Estate tax due from the within estate, it is hereby ordered that the balance of cash remaining in said estate, after payment of said extraordinary fees of attorney, together with the property hereinafter described, and all other property belonging to said estate, whether described herein or not, be and the same is hereby distributed to Wells Fargo Bank American Trust Company (successor by merger to Wells Fargo Bank) in its capacity as trustee under that certain intervivos trust created by Joseph M. Hooker and Laura B. Hooker (also known as Laura B. Armstrong) on March 27, 1926, as amended.’

We go along with the appellant in the first steps he takes in his argument. He makes no point that the distribution to Wells Fargo was not the correct order for the probate court to make, provided its conclusion was sound that the probate estate should bear the entire burden of the death taxes (employing the term generically). Appellant contends, however, that the death tax burden should have been spread, and in support of his contention argues: (1) Section 970 of the Probate Code provides, generally, that death taxes are to be prorated; (2) the section recognizes that a testator may otherwise direct, in his will, but the direction, to be effective, must be clearly expressed; and (3) the provision in the will governing this case does not ‘otherwise direct.’

Section 970 was added to the Probate Code in 1943. It reads: ‘Whenever it appears upon any accounting, or in any appropriate action or proceeding, that an executor, administrator, trustee or other fiduciary has paid an estate tax to the Federal Government under the provisions of any Federal estate tax law, now existing or hereafter enacted, upon or with respect to any property required to be included in the gross estate of a decedent under the provisions of any such law, the amount of the tax so paid, except in a case where a testator otherwise directs in his will, and except in a case where by written instrument executed inter vivos direction is given for apportionment within the fund of taxes assessed upon the specific fund dealt with in such inter vivos instrument, shall be equitably prorated among the persons interested in the estate to whom such property is or may be transferred or to whom any benefit accrues.’

Plainly, unless the will in this case ‘otherwise directs,’ the order appealed from was in error in that it placed the whole tax burden on the probate estate, to the obliteration of any residue. Editorially, as a part of a lengthy annotation in 37 A.L.R.2d 7 beginning at page 7, the statement is made (at page 28): ‘* * * it is often said that an intention to shift the burden of taxation must clearly appear, and that in case of doubt as to the meaning of the will the tax burden must be left where the law places it.’ We find the court, in Estate of McAuliffe, 1955, 132 Cal.App.2d 476, 479, 282 P.2d 541, 544, saying that to take a case out of the proration provision of section 970 ‘* * * no specific language or formula is necessary. Any language that clearly shows that the testator does not intend proration is sufficient.’

Does the will clearly show that the testa trix did not intend proration? Our attention now centers on that which is designated the Second paragraph of the will. ‘I direct my executor or executrix to pay out of my estate all my just debts, funeral expenses, expenses of administration, and all estate and inheritance taxes which may become due by my death, without limitation to property passing under my will.’

We have gone along as far as we can with the appellant. Either of two possible avenues takes us to our conclusion that the trial court's order should be affirmed. First of all, we note that the appellant has brought us no record of the evidence that was received at the hearing. As stated in Estate of Kincaid, 1959, 174 Cal.App.2d 84, 86–87, 344 P.2d 85, 87: ‘Since this is essentially a judgment roll appeal, we would be justified in presuming that the evidence was sufficient to support the findings and that there was parol evidence which aided the trial court in arriving at its construction of the instruments involved. [Cases cited.] If we applied this presumption, there would be a basis for invoking the rule that an appellate court will accept or adhere to the interpretation of a written instrument adopted by the trial court—and not substitute another of its own—where parol evidence was introduced in aid of its interpretation. [Cases cited].’ The basic principle is, of course, established by a multitude of cases. See West's Calif. Digest, Appeal and Error, 907.

We prefer, however, to base our affirmance of the probate court's order on the merits. We are convinced that its interpretation of the will's Second paragraph was not only reasonable, but the only reasonable one possible. Quite clearly, this is a case where the testatrix has otherwise directed, and so section 970 does not govern.

Let use look analytically at paragraph Second of the will. Its opening words are: ‘I direct my executor * * * to pay out of my estate all my just debts, funeral expenses * * *.’ Plainly, so far, the testatrix was not talking about her ‘entire taxable estate’ as contrasted with her ‘probate estate.’ She was dealing exclusively with the latter. To say that she was giving a direction to her executor to pay her just debts out of the property held under the trust executed by her and her husband is just not within reason. She is giving directions to the executor of her will, not to the trustee, of the disbursements that he, the executor, is to make out of the estate over which he has responsibility, not out of an ‘estate,’ a part of which is beyond his control.

The ‘estate’ out of which he is directed to make payments does not change as the directions continue: ‘* * * pay out of my estate * * * all estate and inheritance taxes which may become due by my death * * *.’ Then follows the words ‘* * * without limitation to property passing under my will.’ Appellant argues, as indeed he must to uphold his interpretation, that what the testatrix has said in effect is: These various obligations are to be paid out of my estate, which estate is not limited to property passing under my will. Two reasons prevail against this interpretation. One is a rule of interpretation that we borrow from the field of statutes. Elbert, Ltd. v. Gross, 1953, 41 Cal.2d 322, 326–327, 260 P.2d 35, 37, refers to the established rule that “* * * a limiting clause is to be confined to the last antecedent, unless the context or the evident meaning of the statute requires a different construction.” The stronger reason, however, is that already considered: It is unrealistic to interpret the will as directing the testator to pay the expenses of administration, for one thing, out of funds, or the proceeds of property, not passing under the will, over which he had no control. It is reasonable to interpret the will as directing the executor to pay out of the probate estate, all estate and inheritance taxes which may become due upon the testatrix's death, ‘without limitation to property passing under my will,’ that is, whether they were measured by property in her probate estate, or, measured, as was the case, by some property not being administered by the executrix. Such a direction is ‘otherwise’ than section 970. If, as a result, there is no ‘rest, residue and remainder of my estate’ to go to the two beneficiaries, it is a matter of regret, but does not detract from the authority given to make expenditures that may reduce the remainder to nothing.

Many cases have been cited; more are reviewed in the annotation already referred to. (37 A.L.R.2d 7–149.) We do not pretend that we have read them all. Our attention was called to no California case that is in point, and we discovered none, and we know of none anywhere that disturbs our conclusion. We conclude by quoting from Estate of Hotaling, 1946, 74 Cal.App.2d 898, 903, 170 P.2d 111, 114: ‘Aughorities from outside jurisdictions have been cited by both sides as bearing upon the construction of this will but nothing will be gained by discussing them for the courts have repeatedly said that ‘each case depends upon its own peculiar facts * * * very little aid can be procured from adjudged cases in the construction of wills.’ Estate of Henderson, 161 Cal. 353, 119 P. 496, 498; Estate of Lawrence, supra [17 Cal.2d 1, 108 P.2d 893]; Estate of Axcelrod, supra [23 Cal.2d 761, 767, 147 P.2d 1.])'

The order is affirmed.

BISHOP, Justice pro tem.

SHINN, P. J., and VALLEÉ, J., concur.