Dies, Harry Porter

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University of Kentucky

Kentucky Law JournalVolume 24 | Issue 2 Article 71936Powers of Appointment--Residuary ClauseHarry Porter DiesUniversity of KentuckyFollow this and additional works at: https://uknowledge.uky.edu/kljPart of the Estates and Trusts CommonsRight click to open a feedback form in a new tab to let us know how this document benefitsyou.This Note is brought to you for free and open access by the Law Journals at UKnowledge. It has been accepted for inclusion in Kentucky Law Journal byan authorized editor of UKnowledge. For more information, please contact UKnowledge@lsv.uky.edu.Recommended CitationDies, Harry Porter (1936) "Powers of Appointment--Residuary Clause," Kentucky Law Journal: Vol. 24 : Iss. 2 , Article 7.Available at: https://uknowledge.uky.edu/klj/vol24/iss2/7206 KnTucmY LAw JouRAiPOWERS' OF APPOINTMENT-RESIDUARY CLAUSEIn the recent Federal case of Old Colony Trust Co. v. Commis-sioner of Internal Revenue,' T had a general testamentary power ofappointment over two trust funds. At the time he made his will, hehad little property of his own. In his will were three clauses of im-portance. The first one provided: "I give, bequeath, and devise one-half (1) of all my property of whatever kind, and wherever situ-ated, owned by me at the time of my death to my wife", etc. Thesecond provided: "If the total value of all personal property and realestate, of whatever kind, and wherever situated, owned by me at thetime of my death, shall equal the monetary value of not less than onehundred thousand dollars ($100,000), I give to my Aunt", etc., certainsmall specific legacies. The last provided: "I give, bequeath anddevise, after all my just debts and expenses of Administration havebeen paid, all the rest, residue and remainder of my property, of what-ever kind and wherever situated, owned by me at the time of mydeath, and which has not already been given, bequeathed, and devisedby and under this will, to K."!The question in the case was whether a residuary bequest incommon form in T's will operated as an execution of the powers ofappointment which he had over the two trust funds. The court, ap-plying the Massachusetts law, held that the will was an execution ofthe powers. The court said that for many years it has been the set-tled law in Massachusetts that a general residuary devise operates asan execution of a power of appointment by will, unless there is some-thing in the will, when read in the light of surrounding circumstances,to show that such was not the intention of the donee of the power.Here, this presumption of executing the power was not overcomeby the fact that certain smaller bequests were made on the conditionthat the total value of T's property be not less than one hundredthousand dollars.The Massachusetts rule represents a decided contrast to the com-mon law rule which Is still the law in many states today. The com-mon law rule on the execution of a power of appointment under aninstrument is: that the intention to execute a power of appointmentmust always appear in its execution, either by express terms or re-citals, or by necessary Implications, so that the transaction is notfairly susceptible of any other construction, and if such an intentiondoes not appear the power is deemed to be exercised.2 Three classes173 Fed. (2nd) 970 (1934).2 Blagge v. Miles, 3 Fed. Cases No. 1, 479; 1 Story 426 (1841);Harrison v. Lee, 3 Fed. (2d)' 796 (1925); Lee v. Simpson, 134 U. S. 572,33 L. Ed. 1038 (1890); Hollister v. Shaw, 46 Conn. 248 (1878); UnionTrust Co. v. Bartlett, 99 Conn. 246, 122 AtI. 105 (1923); Emery v.Emery, 325 Ill. 212, 156 N.E. 364 (1927) ; Mutual Benevolent Society v.Clendinen, 44 Md. 429, 22 Am. R. 52 (1876); Patterson v. Wilson, 64Md. 193, 1 At. 68 (1885); Andrews v. Brimfield, 32"Miss. 107 (1856);Ackerman v. Ackerman, 81 N. T. Eq. 437, 86 AUt. 542 (1913); BurleighSTuDn Nomsof cases have been held to be sufficient demonstrations of an intendedexecution of the power. (1) Where there has been some reference inthe will, or other instrument, to the power,3 or (2) a reference to theproperty, which is the subject matter of the power,' or (3) where theinstrument, executed by the donee of the power, would otherwise beinoperative to its purported extent.5The common law rules of evidence as to the only ways in whichan intention on the part of the donee to exercise the power, could beshown, in many cases, actually defeated the intention of the doneeinstead of siding it. Courts and writers were outspoken in their cri-ticism of the rule. As a result of such dissatisfaction, Massachusetts*as early as 1863 in the case of Amory v. Meredith,7 broke away fromthe common law rule and adopted the rule that the donee in makinga will or other instrument is presumed to pass all his property, includ-ing that which he owns under a power of appointment, unless a con-trary intention clearly appears in the donee not to exercise thepower.8 New Hampshire' was the only state to follow the Massachu-setts rule by judicial decision.The action taken by the Massachusetts court was prophetic ofV. Clough, 52 N. H. 267, 13 Am. R. 23 (1872); Arthur v. Odd FellowsBeneficial Assn., 29 Ohio St. 557 (1876); Hupp v. Union Coal Co., 284Pa. 529, 131 Atl. 364 (1925); Wetherill v. Wetherill, 18 Pa. 265 (1852);Bilderback v. Boyce, 14 S. C. 528 (1880); Arnold v. Sou. Pine LumberCo., 58 Tex. Civ. App. 186, 123 S. W. 1162 (1909).3 Blake v. Hawkins, 98 U. S. 335, 25 L. Ed. 139 (1878); Lee v.Simpson (supra, note 2); Solomon v. Wixon, 27 Conn. 520 (1858)(Power to sell); Whit v. Holly, 80 Conn. 438, 68 Atl. 997 (1908);Wright v. Syracuse, 0. & N. R. R. Co., 92 Hun. 32, 36 N. Y. S. 901(1895).' Blagge v. Miles, Supra note 2. Funk v. Eggleston, 92 Ill. 515, 34Am. R. 136 (1879); Hoff v. Pensenhafer, 190 Ill. 200, 60 N. E. 110(1901); Henriott v. Cood, 153 Ky. 418, 155 S. W. 701 (1913); LoringV. Wilson, 174 Mass. 132, 54 N. E. 502 (1899); Munson v. Berdan, 35N. J. Eq. 376 (1882); Bishop v. Remple, 11 Ohio St. 277 (1860);Drusadow v. Wilde, 63 Pa. St. Rep. 170 (1869).5 Lee v. Simpson, Supra note 2; Gossen v. Ladd, 77 Ala. 223(1884); Reed v. Hollister, 44 Cal. App. 533, 186 Pac. 819 (1919); Hart-ford.Conn. Trust Co. v. Thayer, 105 Conn. 57, 134 At. 155 (1926);Henriott v. Cood, Supra note 4; Paul v. Paul, 99 N. J. Eq. 498, 133 Atl.868 (1926); Denson v. Pine State Creamery Co., 191 N. C. 198, 131S. E. 581 (1926); Bishop v. Remple, Supra note 4; Moran v. Cornell,49 R. L 308, 142 Atl. 605 (1928).G Ames v. Ames, 238 Mass. 270, 130 N. E. 681 (1921); Bangs v.Smith, 98 Mass. 270 (1867); Cumston v. Bartlett, 149 Mass. 243, 21N. E. 373 (1389); Hassam v. Hazen, 156 Mass. 93, 30 N. E. 469 (1892);Russell v. Joys, 227 Mass. 263, 166 N. E. 549 (1917) ; Sewall v. Wilmer,132 Mass. 131 (1882); Williad v. Ware, 10 Allen (Mass.) 263 (1865).17 Allen (Mass.) 397 (1863).sAndrews v. Brimfield, suggested the rule adopted by Massachu-setts as early as 1856. See Supra note 2.'Emery v. Haven, 67 N. H. 503, 35 Atl. 940 (1894); Fitts v. FreeBaptist Society, 75 N. H. 608, 77 Atl. 484 (1910).KENTcKY LAW JouRNA,the legislation that was certain to follow. Several states enactedstatutes providing for the same rules on intention as the rule estab-lished by judicial decision in Massachusetts and New Hampshire."For the most part these statutes apply only to general powers,1'and make provisions for a contrary intention.13 In substance theyprovide that a general power will be exercised by a general will,'and they extend to personal as well as real property.1' A residuaryclause makes a will general."The passage of such a statute does not leave the problem withoutits difficulties. It must be remembered that under the latter rule thedonee in making a will or other instrument is only presumed to passall the property he has, including that over which he holds a power ofappointment, and this presumption may be rebutted by showing a con-trary intention on the part of the donee not to exercise it. However,it is not necessary that the contrary intention provided for by statuteshould be expressed; in fact, no cases have been found where it wasso expressed. This contrary intention may be implied from the surround-ing circumstances, and the fact that only a very few cases have beenfound were such an intention existed seems to support the soundnessof the decisions in Massachusetts and New Hampshire and the statuteswhicli have been enacted in the other states.In an interesting Maryland case the court found a contrary in-"Kentucky, Maryland, Michigan, Minnesota, Montana, North Caro-lina, North Dakota, New York, Pennsylvania, Rhode Island, Utah, Vir-ginia, West Virginia, and Wisconsin.1 Greenway v. White, 196 Ky. 745, 246 S. W. 137 (1922); Speir v.Benvenuti, 197 App. Div. 209, 189 N. Y. S. 885 (1921); Trust Co. v.Livingston, 133 N. Y. 125, 30 N. E. 724 (1892); Hollister v. Hollister, 85Ore. 316, 166 Pac. 940 (1917); Neill's Estate, 222 Pa. 142, 70 Atl. 942(1908); In re South's Estate, 248 Pa. 165, 93 Atl. 954 (1915); Thomp-son Y. Wanamaker, 268 Pa. 203, 110 Atl. 770 (1920); Harlow v. Duryea,42 R. 1. 234, 107 Atl. 98 (1919) ; Machir v. Funk, 90 Va. 284, 18 S. E. 197(1893).12'Lafferty's Estate, 19 Pa. D. P. 504 (1923). The New Yorkstatute applies to all powers of appointment. "Real property em-braced in a power to devise passes by a will purporting to convey allthe real property of the testator, unless the intent that the will is notto operate as an execution of the power, appears, either expressly orby necessary implication." N. Y. Con. Laws (Cahill, 1930), c. 51, s. 176.Similar provisions as to personal property, c. 42, s. 18.is In some statutes there is no express provision for a contraryintention, "Real or personal property embraced in a power to devisepasses by a will purporting to devise all the real or personal propertyof the testator." Montana Rev. Codes (Choate, 1921), s. 7029. Pos-sibly the contrary intention could be made effective under the word"purporting.""4The common law rules of intention still apply to execution bydeeds. McCormick v. Security Trust Co., 184 Ky. 25, 211 S. W. 196(1919)."Hutton v. Benkard, 92 N. Y. 295 (1883).'R. I. Hospital Trust Co. v. Dunnell, 34 R. I. 394, 83 Atl. 858(1912).STuDT NoTEstentonYf In that case T's will contained a residuary clause whichgave all his property to his wife. Thereafter, he executed deeds con-veying leasehold properties to his wife for life, with specific remaindersto his children and a grandchild, subject to a life estate reserved tohimself, with full power of disposition. Then by a codicil to his willhe made a change in the executorship, but reaffirmed his will in allother respects. The court found a contrary intention from the factsthat the deeds came after the will, they cut down the interest givento the wife under the residuary clause, and included persons not pro-vided for in the will. If T had thought that the future effectivenessof the deeds depended upon a change in his will, he would not haveresorted to five elaborate deeds, when a change in his will would haveproduced the same result. He must have intended the deeds to super-sede the will.In view of the fact that the will was executed prior to the crea-tion of the power, the decision seems right although it is possible thatT had the provisions of the will in mind when he made the deeds.Certainly the contrary intent is not a necessary implication.A contrary intention on the part of the donee was found by thecourt in a late New York case.s There T conveyed certain securi-ties by a trust deed to the trustees to pay a part of the income annu-ally to certain named beneficiaries. The last clause of the deed pro-vided that all surplus income over these specific payments abovenamed, should be paid, in quarter-annual installments as long as thistrust shall continue, to the said grantor, or in case he dies before thetermination of the trust (the trust was to continue until the death ofthe survivor of the grantor or his wife) to those who may be entitledthereto by virtue of the will of said grantor, or in case he leaves nowill, to those who may at the time of his death be his next of kinunder the statute of distributions of New York. T thereafter made awill making certain specific devises and legacies and then the willcontained a residuary clause which purported to dispose of "all rights,powers, and Interest in, over and concerning property of every kind"belonging to T at the time of his death, to trustees for the benefit offour separate beneficiaries. Under the will the executors were givena large discretion as to what property of T's would be used for payinghis debts, expenses and legacies. After T's death the trust under thetrust deed still continued and a large surplus arose. The trusteeshaving no discretion as to what to do with the surplus, that Is to say,they could only do one of two things, turn it over to the executorsunder the will or to T's heirs at law, brought this action for instruc-tions by the court. The court held that the surplus under the trustdeed went to the heirs at law and did not pass under T's will. It saidthat the dispositions made by T under his will were by their veryIT Gassinger v. Thillman, 160 Md. 194, 153 At. 19 (1931).8 Guaranty Trust Co. v. Halsted, 245 N. Y. 447, 157 N. E. 739(1927).KENTUCKY LAW JouRNALnature so Inconsistent with the subject of the power under the deed,that by necessary implication T could not and did not intend that thewill should be an execution of the power.Considering the fact, as the court did, that the testamentary trus-tees had a discdetion in collecting T's estate for the payment of hisdebts, legacies, etc., whereas the trustees under the deed could onlypay the surplus thereunder to those appointed by T's will or to theheirs, also the fact that T could not have possibly supposed that ifthe executors had have chosen the surplus under the deed for the sumout of which the creditors were to be paid and that they would haveto wait for several years for their money, it seems that the court wasright in saying that T had no intention of his will being an executionof the power under the deed and hence the heirs were properly en-titled to the surplus.A very recent Massachusetts case," seems to be the only othercase in which a contrary intention has been found. T by his willmade several specific bequests. By the residuary clause of the will hegave to certain trustees the rest of the property for, inter alios' thir-teen named charities as beneficiaries, subject however, to a life estatefrom the income to be paid to his wife. It then provided that 4t herdeath she was empowered to appoint.by her will the whole residuarytrust property only on the condition that she deemed the said chari-ties as having become unfit to receive the property. W left a will inwhich she had made certain specific bequests. By the residuary clause,she gave all the rest of her property in trust to . She made a specialprovision in it that under no consideration was her residuary prop-erty to fall below the sum of ten thousand dollars and that before itshould other legacies should abate to prevent it. She made no men-tion of the power under her husband's will. The question before thecourt was whether the residuary clause was an execution of the powerin view of the Massachusetts rule. The court said that she had acontrary Intention. and that the will was not an execution of thepower. Two reasons were given which the court says shows a con-trary intention. The first one was the fact that the charities namedhad not in fact become unworthy since her husband's death and thatit would be unreasonable to suppose that W considered them all un-worthy without mentioning it. The second reason was shown in thefact that W expressly provided that under no condition should herresiduary property fall below $10,000 which shows that she had inmind at the time her own property since that under the husband'swill at all times amounted to over $100,000.It seems to the writer that the court correctly found that W didhave a contrary intention, but it does not seem that it should havebeen necessary to inquire into this question. It will be rememberedthat W only had the power to devise the residuary property underT's will on the happening of the contingency that she deemed the"Worcester Bank & Trust Co. v. Sibley,-Mass.-, 192 N. E. 31(1934).STuDEN T Noms 211charities as having become unworthy of the property. Hence by T'swill the beneficiaries got a defeasible title to the property. Now asthe only way the contingency can arise is by W expressly saying thatshe deems the charities unworthy," and as she did not so state in herwill that they were, no power arises for her to execute, hence onlyher'own property passes by her will.It has been held that a contrary intention will not be implied fromthat fact that the testator may have been in doubt as to the amountof the income, which the property passing under the will, would pro-duce.n So In the principal case the fact that T made certain smalllegacies on the condition of the value of the estate not falling below$100,000 did not show a contrary intention not to exercise the power.The court properly suggested that probably T had in mind at thattime the fluctuations of the value of the property and was not re-ferring to his own small estate he had apart from that under thepower.H~ARY Poran DiEs.AGENCY-DISTINCTION BETWEEN "WITHIN THE COURSE OFEMPLOYMENT" AND "WITHIN THE SCOPE OFEMPLOYMENT"One Is faced with a somewhat confusing problem when trying todifferentiate, both in point of fact and in point of law, between theterms, "within the course of employment" and "within the scope ofemployment." Text-writers on agency and the courts in their de-cisions are pleased to use first one and then the other, until a studentor even a practitioner who is confronted with an agency problem, isultimately baffled as to the exact meaning and application of the twoterms as tests of the master's liability for the torts of his agent. Involume two, section 1879 of Mechem's work on Agency, Mr. Mechemselects the phrase "within the course of his employment" and uses itto mean and include, admittedly for the want of a better term, theseparate and distinct meanings of the two phrases, "within the courseof his employment" and "within the scope of his employment". Themeaning of the words in the former phrase is as that of those in the"Garman v. Glass, 197 Pa. 101, 64 AtI. 923 (1900). G devisedproperty to his wife for life, with remainder to others, with provisionthat, if they should not be obedient to her, he revokes the devise tothem and empowers her to devise the property. The court said thatthere must be an affrmative decision and declaration of their dis-obedience, to entitle her to exercise the power, and it is not shown bya devise by her of the "residue" of her property; and until determina-tion that the contingency on which the power may be exercised hadarisen. This is true notwithstanding a statute embodying the Massa-chusetts rule. The court said that the statute does not apply.2'Art's Student League of N. Y. v. Hinkley, 31 Fed. (2d) 469(1929).

Powers of Appointment--Residuary Clause

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Powers of Appointment--Residuary Clause

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