Court Opinion

ID: 9529015
Source: CourtListenerOpinion
Date Created: 2023-08-07 03:46:23.996051+00
Date Added: 2024-06-11T13:27:34.915934
License: Public Domain

SCHAUER, J.
I dissent.
The majority opinion, as its controlling premise, announces that “The rule is and should be that a provision that payments shall be made from the net income of the trust property compels the conclusion that neither the corpus nor income in future years may be used unless there is a clear expression to the contrary in the trust instrument.” (Italics added.) Without now debating the accuracy or soundness of such announced *80rule of construction so far as concerns “income in future years,” or the efficacy of the authorities cited in support thereof, it seems sufficient to show, as I believe the ensuing discussion does, that in the trust instrument here involved “there is a clear expression to the contrary.”
As a further basis for its conclusion the majority opinion declares the proposition that “the Palmer children . . . were the chief objects of his [the testator’s] bounty.” With this proposition I take issue. It seems obvious to me, from a reading of the will, that the testator never contemplated that his wife or the other beneficiaries might be reduced to want over a period of years in order to preserve and augment the estate for the residuary legatees. Rather, does it seem that he wanted the residuary legatees to take only after the provisions for the others (whatever those provisions may mean) had been paid in full. It seems apparent that the testator never in reality contemplated that the net income from his large holdings would be insufficient to discharge all bequests. In other words, he intended that all bequests should be paid in full.
It is my view that in construction of the will it should be born in mind that such document was prepared by the present trustee, the respondent herein (who was the personal attorney for the testator and who is the father of the principal residuary beneficiaries), from a “written memorandum in Mr. Markham’s handwriting” (O’Brien v. Markham (1940), 37 Cal.App.2d 381, 392 [99 P.2d 583]). The scrivener of the will, as succeeding trustee and father of the principal residuary beneficiaries, was not a wholly disinterested person, and certainly is not in a favorable position to claim that any ambiguities in the language in which the trust structure is phrased are to be resolved in favor of him or his children.
In language which seems reasonably clear the will directs that the small annuity with which this appeal is concerned shall be paid “From the net income of said estate ... (3) To my sister, Louise Markham, . . . $100.00 a month during her natural life.” One hundred dollars a month “during her natural life” seems to me to establish that it was the testator’s intent that his sister should receive from his estate $100 for each and every month she lived after his demise. To now construe the reference to payment from net income as amounting to a proviso or exception to the effect that the net income of the estate should be permanently relieved from liability *81for such payments as accrued during periods when there was a deficiency of net income but that the corpus should be augmented for the benefit of the residuary legatees by any surpluses of net income during prosperous years, seems to me to amount to a departure from the testamentary plan. Under this theory the immediate beneficiaries, the relatives of the testator including his widow, who were the natural objects of his bounty, could have gone hungry during many years to the end that the residuary legatees should eventually receive an augmented principal. I think we should not, in construing the will, attribute that intent to the testator unless it unmistakably appears. Under the circumstances of this case we are not bound by. the construction given the will by the trial court. (See Estate of Platt (1942), 21 Cal.2d 343, 352 [131 P.2d 825].)
It appears to me, further, that the statement in the trust clause of the will that “all of the above [trust] bequests are payable as soon after my death as funds are available” indicates an awareness by the testator that the details of administering so large an estate as he expected to leave would in all probability be complex and consume an extended period of time, and an intention on his part that the trust beneficiaries should be entitled to the cumulative payment in full during continuance of the trust, of the respective amounts specified, “as soon ... as funds are available” with which to pay. Moreover, the remaindermen—strangers in blood to the testator—are, by his specific direction, to take only “upon the completion of all the trusts.” The trusts, I think, cannot properly be regarded as “completed” until payment has been made in full, from the net income of the estate, of the cumulated monthly income benefits. Consequently if, for any reason, it is impossible to keep the monthly payments up to date at all times, such deficiencies as occur should be met out of subsequently available net income. The further direction that “Upon the death of my wife and Trustee, . . . Harlan G. Palmer, Sr., shall succeed her as Trustee and . . . shall hold of my estate such part as may be approved by court as ample to provide income for the payments directed in . . . this . . . [trust] clause, and shall distribute, free from this trust, the balance of the estate, together with any undistributed net income, to the [Palmer] children” (italics added) also demonstrates that the testator’s prime concern was to provide for the trust beneficiaries and that the Palmer children were to *82take only after ample provision had been made to meet the trust annuities.
That the above stated view as to the relative place of the Palmer children in the testamentary plan Avas entertained by the District Court of Appeal in passing on related litigation is evidenced by the following passage: “In regard to the matter of the testator’s intention to execute a will, we find that on January 25, 1930, Palmer received a letter written by Blanche C. Markham, at her husband’s dictation. This letter stated, in effect, that for some three or four months past he and his wife had been considering the disposition of their property, and suggested that Palmer call upon them at his convenience and discuss with them the preparation of a will. Thereafter, one evening Mr. and Mrs. Palmer went to the Markham home in Glendale, where Mr. and Mrs. Markham, in the presence of Mr. and Mrs. Palmer discussed their will, and where Mr. Markham then told Mr. and Mrs. Palmer that the Markhams had decided to dispose of their property so as to take care of their friends and relations, with the remainder to the four Palmer children.” (Italics added.) (O’Brien v. Markham (1940), supra, 37 Cal.App.2d 381, 385.) If the will is to accomplish the object which Mr. Markham, in the presence of Mrs. Markham, declared to Mr. and Mrs. Palmer —“to dispose of their property so as to take care of their friends and relations, with the remainder to the four Palmer children”—it should not be so construed as to “take care of” the Palmer children in any event but of “their friends and relations” in prosperous years only. I cannot escape the belief that the majority opinion strains both recognized rules of construction and the whole testamentary plan of the will in so holding.
Of course, it is possible that the testator may have altered his object; he executed the will as drafted for him (from his notes prepared subsequent to the conversation Avith Mr. and Mrs. Palmer) and made its language his own. If that language explicitly requires the conclusion reached by the majority then such conclusion must be held to be the revised and final intent of Mr. Markham and should be given effect. But if the language used does not explicitly require such conclusion then it should be interpreted in the light of Mr. Markham’s prior declaration of objective. I am convinced that the language of the Avill and its general plan, taken as a whole, admit more reasonably of a construction consistent, than of one in*83consistent, with the purpose and intent which he evidenced when declaring his objective (and that of Mrs. Markham) to Mr. and Mrs. Palmer.
The holding in the Estate of Platt (1942), supra, 21 Cal.2d 343, 351, that “each accounting period must be regarded separately and the net amount earned by the trust property in each year paid to the beneficiaries as provided by the will” is relied upon as controlling the construction and operation of the annuity provisions in the will now before us. But the' language of the will construed in the Platt case, as well as the testamentary plan there set up, differs substantially from that now before us and that case seems to me to be not controlling here on this issue. If there be a repugnancy in the provisions we are to construe, it is code law that “Repugnancy in a contract must be reconciled, if possible, by such an interpretation as will give some effect to the repugnant clauses, subordinate to the general intent and purpose of the whole contract.” (Civ. Code, § 1652.) The rale is equally applicable in the construction of wills. Giving effect both to the direction that the annuity shall be paid out of net income and to the direction that it shall be in amount “($100.00) a month during her natural life, ’ ’ appears to require the conclusion that deficiencies in annuity payments because of inadequacy in net income during any accounting periods should be made up out of net income during periods of greater earnings or smaller expenditures.
In the Platt case one of the two trust beneficiaries was the testator’s widow and the other was his son, whereas the remaindermen here are complete strangers in blood to the testator. Further, the issue presented in the Platt case arose upon a provision for the immediate division of income between the two beneficiaries, while in the present case the issue arises between the claimant to an immediately payable annuity and remaindermen who seek the cumulation of net income in prosperous years to be added to corpus, even though the immediate trust beneficiaries have not been paid in full during abnormally low net income periods.
In the Platt ease the provision of the will which was construed is as follows: “If the income from said trust exceeds the . . . $250.00 . . . per month payable to my wife . . . then my trustee shall pay said surplus income up to the sum of . . . $250.00 . . . per month to my . . . son ... ; If there is any income in addition to the sums mentioned in the fore*84going subdivisions . . . the said surplus income over and above the sum of . . . $500.00 . . . per month shall be divided in equal shares between my . . . wife . . ., until she remarries, and my . . . son. ...” (P. 350 of 21 Cal.2d.) The important point to note is that the quoted provision made immediate division and distribution of all the income no matter how large it might be. There was no authorization for accumulation of any amount of net income for a remainderman. There never could be a surplus out of which deficiencies could be paid. Concerning this provision we said (p. 351 of 21 Cal.2d) : “The plan of the testator undoubtedly contemplated an accounting period, at which time the income of the estate, less the cost of administering the trust, would be computed and distributed. . . . And as he disposed of all income with no provision to meet any deficiency in the stated monthly payments to the wife, each accounting period must be regarded separately and the net amount earned by the trust property in each year paid to the beneficiaries as provided by the will.” (Italics added.) But in the case at bar the testator obviously contemplated that the aggregate of all the payments to the immediate beneficiaries would be less than the net income and that there would be surpluses of such net income which should be accumulated. Since he did not make disposition of all income as it accrued the controlling reason for the Platt case holding that the income distribution plan there set up necessarily presupposed the use of accounting periods and the final determination of the income distribution for each period as it occurred is nonexistent here. In the Platt case, as previously indicated, there never could be a surplus of net income in any accounting period because the total net income for each period was disposed of in that period. But in the case at bar it appears that there will normally be a surplus of net income in each period. No language in the will now before us has been pointed to which forbids the use of such surpluses for making up deficiencies which may occur in the payments of annuities during periods of inadequate net income. On the contrary, every provision of the will, when read and construed as a whole and in the light of the circumstances shown, is consistent with the view that the annuities shall be paid in full from net income “as soon ... as funds are available” regardless of the accounting period in which earned, and the will as a whole, in the light of the undisputed circumstances, is inconsistent with the view that the annuities for any accounting period need never be paid unless the net income for that *85particular period is adequate. The testator, it will he remembered, explicitly directed that the remaindermen shall take only “upon completion of all the trusts” and that the succeeding trustee “shall hold of my estate such part as may be approved by court as ample to provide income for the payments directed.” That direction surely was not intended by the testator to be interpreted as meaning merely sufficient to provide for such payments during prosperous years.
As a special defense to the petition for an order directing the trustee to pay accrued annuities, the trustee alleged “That the . . . Court has heretofore ruled and made its order that this Trustee does not owe the successors in interest of said M. Louise Markham, Deceased, for said alleged unpaid annuities . . . reference being hereby made to the Objections to First Account Current of Trustee and Bequest for Payment of Annuities, filed herein by . . . [the] Executor of the Will of Louise Markham, deceased, and the Answer to same filed by this Trustee, and the ruling and order made thereon by this Court on the 28th day of May 1942, overruling said objections, and said matter and the issues involved in the within petition . . . are Bes Adjudicata, pursuant to Sections 738 and 1908 of the Code of Civil Procedure . . . , said order above referred to having become final and no appeal having been taken therefrom.” The court decided in favor of the trustee on the issues raised by this defense. In my view of the case such decision cannot be sustained. That it cannot be sustained the majority opinion, by silence on the subject, apparently concedes but does not expressly so declare. I therefore point out the inadequacy of the evidence to support such defense.
The first account current of the trustee, referred to above, was filed April 21, 1942. The objections filed by the Louise Markham executor set forth the bequest to Louise Markham of $100 per month during her life, quoted the provision of the will that “all of the above bequests are payable as soon after my death as funds are available,” and alleged a deficiency of $1,420 in payments which became due in 1933-1936 and that funds were on hand to pay the deficiency. The trustee’s answer admitted the deficiency, alleged that the net income had been insufficient to pay more than had been paid, set out the first paragraph of the trust provisions of the will (as quoted in the main opinion herein), and alleged that the principal had been depleted in a net amount of over $125,000 *86by payments that should have been made from income. The account and the objections were heard before Florence M. Bischoff, court commissioner in probate, sitting as a judge pro tempore, who made an order which reads in part as follows : “ [Objections having been presented, the Court, after hearing the evidence, overrules said objections, and findings being hereby waived, settles and approves said account in the manner following: [Order made settling the account and allowing trustee’s fee.]” The trustee asserts that this order effected an interpretation of the will against payment from either corpus or subsequently earned net income, of the $1,420 deficiency. I hereby express no opinion concerning the issue as to the corpus; it may be assumed for the purposes of this discussion that the deficiencies are not payable from corpus and that the order made by the court commissioner as judge pro tempore so adjudicates. However, I am convinced that the described order did not adjudicate the question of right to payment of the deficiency from subsequently earned net income. Upon the record it is irrefragable that, as appellant contends, the trustee on that occasion claimed only that the principal had been depleted, that annuities had been paid out of principal and had thereby been overpaid, that there had been no net income in the current year, and that therefore no funds were then on hand from which the deficiency could properly be paid. It is to be noted in this connection that no evidence was taken except to prove the account and that the hearing was terminated when it became clear that the trustee had no net income on hand. These facts are established by the extrinsic evidence which was received (and properly so received in view of the fact that the record of the hearing preceding the described order did not disclose whether there had been a trial and decision of the same issues as here discussed) in the present proceeding.
Lieutenant Hahn, the attorney who represented the Louise Markham executor in the 1942 hearing, testified that prior to such hearing two applications had been made for payment of the same claim, and that they had been denied without prejudice. He stated further: “To the best of my recollection, the matter took place in Miss Bischoff’s office, and I believe Miss Bischoff, Judge Palmer and Mr. Thompson and myself were present. I had filed my petition some time before, as is shown in the file and as Judge Palmer related, and I alleged that there was sufficient income available to pay these deficient annuities.
*87“Upon the examination of the account at that time by Miss Bischoff and by Judge Palmer and myself, it was determined that there was not any net income available, there was no net income-1 shouldn’t say available. There apparently was no net income, and I had no reason, no facts, no evidence of any kind to believe that that wasn’t a very proper accounting.
“It is my recollection that Miss Bischoff therefore took the position that since under the terms of the will annuities were to be paid from net income, that there wasn’t money available to pay these and therefore the question wasn’t properly raised at that time. That is, in essence, my recollection of her ruling at that time.
‘ ‘ Q. Was that, as you recollect, the sole basis of the decision, Lieutenant ?
“A. My recollection is that Judge Palmer mentioned other facts that were in his petition, which I do not recall if they were at this time, but that that was the basis, that was the way I understood the basis of the court’s ruling.
“Q. Then, will you state whether or not you understood that this denial of your petition was a denial with or without prejudice f
“A. I took it certainly to be a denial without prejudice, because the merits of the matter, the legal issue of whether our clients were entitled to these delinquent annuities, had never been fully presented to the court, never been presented at all, to my knowledge.
“Q. Will you state whether or not that was the basis and reason for a waiver by you, if there was such a waiver, of written findings f The order recites findings were waived.
“A. I think that must have been why I waived findings at that time.
‘ ‘ Q. May I ask you, if it had been in your understanding a final and conclusive determination on the merits, would you have waived findings ?
“A. No, I would not have.”
Miss Bischoff testified: “. . . It wasn’t a very long hearing, as I remember it.
“When Lieut. Hahn spoke to me, asked me if I remembered it, and I looked at my notes before I knew that there had been an order, I had an idea there had been a stipulation and the order was made by stipulation; that was my first recollection, but of course my notes didn’t show that. I looked it up, and I had written down just ‘Objections overruled and account *88settled’; and I have no further recollection than that, except that I know it was a short hearing and there were no briefs presented to me, as far as I know, and I didn’t look up any law, because I made the decision right there.
‘ ‘ Q. By the Court : What was the nature of the hearing, Miss Bischoff?
“A. It was on the hearing of the account; and the objections to the account at the time, as I remember it, were mostly due to the fact that there were no funds available, which there were not, and I think it was practically conceded at the time, and that is the reason I thought it was a stipulated judgment, a stipulated order; but I don’t remember, there may have been testimony or law quoted with regard to the matter of the statute of limitations, but I have no recolleeion of that at all, not at all, and I didn’t have any on my little notes. I had destroyed my large notes and only had my little notebook, and it said nothing whatever about that or about any of the testimony that was taken; and, as I said, there have been so many things since then, I am very sorry that I can’t recollect anything more than that, except it was a short hearing in the little room.
“Q. By Mr. Bartlett [attorney for appellant] : May I ask, Miss Bischoff, if there was any practice or custom on your part, when sitting as judge in those matters where there was a decision on the merits, to make a notation of that fact in the order ?
“A. I usually did, I usually did on my own.
“Q. By the Court: Notes?
“A. Notes.
“Q. By Mr. Bartlett : From the absence of that notation in this order, would that suggest anything to you with reference to the merits ?
“A. Of course, we all slip. I couldn’t say, because while it is my custom—was always my custom to make notes, probably fuller notes than some of the others did, that may have been a day when I did not. I can’t say definitely, because I don’t recollect it.
“Mr. Bartlett: Cross examine.
“Examination by the Court: (Q.) In other words, when the matter came before you, Miss Bischoff, it was on a hearing on whether or not you should approve the account ?
“A. Yes.
“Q. And certain objections had been filed to that account?
“A. Yes; precisely.
*89“Q. You approved the account and overruled the objections ?
“A. That is all I did. My notes show that.
“Q. Other than that——
“A. I don’t remember anything. The only thing I can say is that if there had been any legal points involved, I wouldn’t have made my decision, I know that, I wouldn’t have made my decision right then and there, because I always read the law, I always took it under submission and read the cases and looked into it. I would never have made a decision without looking up and reading the cases; that has always been my custom, I am quite certain I would have done that. But I can’t say that there was nothing said about it, because I don’t know, I don’t remember it.”
In addition it was stipulated in the present proceeding that at the 1942 hearing described above the trustee gave an. oral history of the administration of the estate by the executrix and the trustee, and stated that Louise Markham had not been paid in full because there had been insufficient net income during the periods the deficiency had accrued and that the trustee • contended that during part of the time when the annuities were paid in full they were so paid in violation of the provision of the will that they should be paid from net income.
Thus the extrinsic evidence establishes clearly that at the 1942 hearing the court was not required to, and did not, decide whether or not the deficiency should be paid out of future net income, but determined only that the account correctly reported the receipts and disbursements of the estate and the property remaining in the trustee’s hands and that the trustee had properly performed his reported acts. The claim of the Louise Markham executor was overruled because it was represented that the estate had on hand no net income from which to pay the claim. Consequently, since the issue now presented was not decided upon the merits at the 1942 hearing, the order made at that time does not render such issue res judicata in the present proceeding. As observed by Mr. Justice Carter, speaking for the court in Stark v. Coker (1942), 20 Cal.2d 839, 843 [129 P.2d 390], “when it affirmatively appears that an issue was not determined by the judgment, it obviously is not res judicata upon that issue. A judgment is not an adjudication as to matters which the court expressly refrains from determining.” (See, also, Goddard v. Security Title Ins. & Guar. Co. (1939), 14 Cal.2d 47, 52 [92 P.2d 804]; Security *90T. & S. Bank v. Southern Pacific R.R. Co. (1931), 214 Cal. 81, 87 [3 P.2d 1015]; Campanella v. Campanella (1928), 204 Cal. 515, 520-521 [269 P. 433].)
The court in this proceeding determined also that the orders settling the accounts made by the executrix in the years when the deficiencies accrued constituted judgments which fully adjudicated the issue as to future payment of such deficiencies. Such determination is contrary to the evidence. The accounts usually stated that the net income had permitted that only a part of the annuities be paid during the current year and asked credit for such payments as had been made. In no case was it alleged that such part payments constituted payment in full under the terms of the will for the respective years. Some of the orders approving the accounts did not refer specifically to the annuities paid; orders that did refer to such annuities simply approved the reported payments. In no instance was the court requested to decide, nor did it decide, nor could it upon the issues before it properly have decided, the issue now under discussion, i. e., whether the deficiencies were payable from future net income. Moreover, the answer to the petition for an order directing the trustee to pay accrued annuities states in part as follows-. “admits that during the administration of said estate and before final distribution had been made, a deficiency of $1,420.00 in the payments of the annuities had occurred, but alleges that said deficiency was caused by insufficiency of net income to make the full amount of said payments as they became due.” Furthermore, the trustee did not object to payment in full of the annuities in periods during which, he now asserts, it was necessary to resort to corpus in order to make such payments, and no issue as to interpretation of the will was presented or decided. If we should apply to the orders (now final) approving accounts showing payments of the annuities in part out of corpus the res judicata effect as to construction of the will which the trustee now asks us to apply to the 1942 order we should have to hold that such orders rendered res judicata a construction of the will that the annuities were properly payable from corpus when the net income was insufficient.
It seems to me, from the entire record, to be established that the court did not adjudicate on the settlement of the first, or any other, account current, that the executrix or the trustee should be discharged from liability in futuro for the payment out of future net income of any arrearages due on the Louise Markham annuity. The settlement of the accounts was ob*91viously an approval of the trustee’s bookkeeping and reported transactions, not a construction of the will. The approval of expenses paid and mathematical determination that net income for the accounting period was inadequate to pay accruing annuities in full should not be enlarged into a determination that net income of the future should not be applied to payment of past due annuities. In my opinion the orders settling the accounts in question are not a bar to the present proceeding.
For adequate discussion of other issues raised reference is made to the opinion of Mr. Justice Shinn, speaking for the District Court of Appeal, reported in 158 P.2d 62.
The judgment should be reversed.
Spence, J., concurred.