Cross v. Cross

WASSERSTROM, Judge,

dissenting.

I respectfully dissent from the principal opinion for the following reasons: (1) The will of Mary Forbes Cross in my opinion is not ambiguous. (2) Section 347 Restatement of the Law of Property, is not in my opinion applicable to the facts of this case. For those reasons, it is my conclusion that Matthew Forbes Cross did not effectively exercise the power of appointment granted to him by his aunt Mary.

I.

The legal principle stands established beyond any possible question that a donor of a power of appointment may effectively restrict the manner in which that power may be exercised. That well settled proposition is in no way challenged by the respondents in this case nor by the principal opinion. Indeed, the principal opinion admits that it *211“is clear that the first inquiry must be as to the intent of the donor as to the scope and manner of exercise of the power.”

In this case, the donor Mary did restrict the manner in which the power could be exercised by specifying that Matthew’s testamentary document had to make “specific reference to the power and to this will.” The respondents concede that Matthew’s will did not comply with that requirement. Thus, in their brief, respondents state: “We must frankly concede that the Last Will and Testament of Matthew Forbes Cross * * * does not, as such, specifically refer to the will of testator’s aunt, Mary Forbes Cross.” That concession (except for the contention of equitable aid to remedy the defective execution, discussed under Point II of this dissenting opinion), should end the matter. Holzbach v. United Virginia Bank, 216 Va. 482, 219 S.E.2d 868, l.c. 872 (1975) is directly in point and so holds. In that case, the donor’s will provided that the power of appointment could be exercised “by specific reference to the powers granted herein” and the donee attempted to exercise the power in a bequest of all her “estate, be it real, personal or mixed, or in which I may have a power of appointment of whatsoever nature, kind or description * * The Virginia Court found that the attempted exercise just quoted did not meet the requirement of specific reference and that non-compliance by the donee with the requirement wholly defeated the exercise of the power. In reaching this conclusion the court held:

“When a donor imposes such a requirement [specific reference], a donee, who enjoys no title to donor’s property, can make no valid appointment affecting that property unless he complies with donor’s requirement.
“Pursuing his right to dispose of his property as he saw fit, donor created a power of appointment and selected the conduit through which it should pass. Upon the exercise of that power, he imposed a lawful requirement that his do-nee manifest on the face of her will an intent to exercise the power by making specific reference to the power created in his will. While donee’s will makes general reference to powers of appointment, it makes no specific reference to donor, to his will, or to the power created by his will. We hold that donee’s will failed to comply with donor’s requirement and, therefore, failed to make an effective appointment of donor’s property.”

See also for a very similar holding, although on somewhat different facts, Leidy Chemicals Foundation, Inc. v. First National Bank of Maryland, 276 Md. 689, 351 A.2d 129 (Md.App.1976).

The principal opinion however, unlike the respondents themselves, refuses to concede that the attempted exercise of the power by Matthew was defective. To the contrary, the principal opinion argues that Mary did not in fact lay down a hard and fast requirement for a “specific reference” and that it should suffice to show that Matthew subjectively intended to exercise the power of appointment by his use of the blanket “all powers” clause of his will. In order to make this argument, the principal opinion concedes that, “[i]t must be conceded that before any construction of the will of Mary may be undertaken, an ambiguity, latent or patent, must be present requiring the construction of that instrument.”

The principal opinion claims to find the requisite ambiguity by reason of the first sentence of paragraph C of Mary’s will which provides that with respect to the powers of appointment granted therein, the Trustees “may” rely on any instrument admitted to probate in any jurisdiction as the last will of the donee of the power. It should be noted in passing that to make this argument, the principal opinion transmutes the permissive “may” which appears in paragraph C, to a mandatory term “are directed” which appears in the principal opinion’s discussion. More importantly, the first sentence of paragraph C does not conflict, as the principal opinion supposes, with the specific reference clause. The former provision simply goes to the validity as a whole of a paper writing purporting to be a will and does not undertake in any way to deal with the interpretation of or enforeea-*212bility of any particular provision contained in such instrument. Recognition by the trustees of the document probated as Matthew’s will in no way controls whether or not that document effectively exercised the power of appointment in question.

The principal opinion seeks to bolster its finding of ambiguity by suggesting that one of the purposes of the specific purpose clause in Mary’s will was “the possible easing of the uncertainty of the distributor of her estate.” Accepting that as being one of the motivating reasons for including this clause, it is apparent that the way in which the task of the trustees was to be eased was to create an objective test, thereby eliminating the necessity for factual investigations bearing on the donee’s subjective intention, arguments with the heirs and litigation in the courts. The interpretation reached by the principal opinion defeats that purpose.

For a proper comprehension of the purpose and reason for the use of the “specific reference” clause, some explanation of the practical background should be given. In recent years the power of appointment device has come to be increasingly used by draftsmen of wills. As a direct result of that, there has grown up a concomitant use of the so-called “all power” clause by which a testator undertakes to make a blanket exercise of any and all powers of appointment which he may have from any source. Because of the widespread use of this blanket clause by routine copying, many objectionable consequences have resulted. Thus, for example, 2 Appleman, Basic Estate Planning, 714-15 (1957) states:

“A blind exercise of unknown powers may, and often has, led to such unhappy results as these, which could be avoided if the facts were known: incurring unnecessary estate taxes; giving the property to the wrong people; making a disposition of the property which is either clearly invalid or of doubtful validity, thus causing complicated and expensive litigation.”

A similar comment concerning the blanket exercise of powers of appointment appears in Casner, “Estate Planning-Powers of Appointment” 64 Harv.L.Rev. 185, l.c. 202 (1950).

Undertaking to cope with this problem, many estate planners have recommended that a will setting up a power of appointment also contain a requirement that the power can be exercised only by making specific reference to the donor’s will. Some of the many texts recommending this specific reference clause in order to avoid the pitfalls of blind exercise and to avoid litigation over the effectiveness of a purported exercise are W. Schwartz, Future Interests and Estate Planning, Sec. 31.8 (1965); R. Wormser, Guide to Estate Planning 60 (1958); J. Johnson, A Draftman’s Handbook for Wills and Trust Agreements 30; Mann-heimer, “Marital Deduction” in 2 Basic Estate Planning 659, 684 (J. Appleman ed. 1957); Stein, “How to Provide for a Marital Deduction by Trust or Power of Appointment” in 1 Estate Tax Techniques 116.9, 134 (J. K. Lasser Tax Institute ed. 1973); W. Huff, “How to Use Trusts Under the Estate Tax Marital Deduction Provisions” in P-H Successful Estate Planning Ideas and Methods par. 5003.3 at 5064 (1969); Effland, “Power of Appointment-The New Wisconsin Law” 1967 Wis.L.R. 583, 585.

These specific reference clauses therefore have a definite, well reasoned purpose which is to insure a considered and intentional, rather than an inadvertent, exercise of the power. That purpose is accomplished by requiring a specific mention by the do-nee of the donor’s will and the power, which serves as an objective test. To do as the principal opinion desires, and to permit the substitution of subjective intention in place of the objective test specified by the donor, would largely defeat the very purpose for which these clauses are used. Moreover, such an interpretation opens up a far ranging factual inquiry in each case similar in nature to the “staggering administrative problem” which the Missouri Supreme Court in a somewhat analogous situation thought it desirable to avoid. Fabick and Co. v. Schaffner, 492 S.W.2d 737, l.c. 745 (Mo.1973).

*213, A very recent opinion by one panel of the North Carolina Court of Appeals, First Union National Bank v. Moss, 32 N.C.App. 499, 233 S.E.2d 88 (1977), has reached a result somewhat supporting the argument of the principal opinion. In that case, a husband and wife executed concurrent wills. That of the husband created a marital trust granting a power of appointment conditioned on the exercise making “specific reference” to the power. The wife’s will contained a blanket exercise of “all powers.” The court determined the term “specific reference” to be ambiguous and therefore to open the questions as to whether the wife had made a conscious, intentional exercise and whether that met the husband’s intention.1 Some factual differences could be mentioned distinguishing the Moss case from the one at bar, but essentially I disagree with the Moss decision. It is at war with Holzbach v. United Virginia Bank, supra, which Moss does not even cite; nor does Moss cite or discuss any of the other pertinent authority covered at length in both the principal opinion and the dissent in this case. To treat a requirement for “specific reference” as ambiguous is to devalue words to meaninglessness. Significantly, no one in this case has ever suggested that the requirements here of “specific reference to the power and to this will” (note that the underlined requirement was not present in Moss) is ambiguous.

In fact, it never occurred to anyone connected with this case, until the writing of the principal opinion in division, that the specific reference requirement of Mary’s will was ambiguous in any respect. None of the trustees thought so; the trial court did not so find; and not even the appointees under Matthew’s purported exercise of the power ever made any such suggestion. It seems a bit strange, if the will is in fact ambiguous, that such an important fact had never been detected by the appointees, the ones who would directly benefit from such a determination, or by their extremely able counsel.2

Mary’s will is, in my opinion, unambiguous. It calls for a specific reference in order for the power of appointment granted to be exercised. Concededly there was none. Accordingly the power of appointment was not effectively exercised.

II.

As already stated, the respondents conceded in their brief that the requirement for a valid exercise of a power of appointment, that is a specific reference to the will and the power, was not met. However, they seek to escape the consequences of that failure by resorting to Sec. 347 of the Restatement of the Law of Property which provides:

“Sec. 347. SUFFICIENCY OF APPOINTMENTS DEFECTIVE WITH RESPECT TO FORMALITIES.
Failure of an appointment to satisfy formal requirements imposed by the donor does not cause the appointment to be ineffective in equity if
(a) the appointment approximates the manner of appointment prescribed by the donor; and
(b) the appointee is a wife, child, adopted child or creditor of the donee, or a charity, or a person who has paid value for the appointment.”

The principal opinion, impliedly recognizing the tenuousness of its argument concerning the alleged ambiguity in Mary’s will, adopts the Sec. 347 argument as an alternative route to an affirmance.

*214I have no quarrel with Sec. 347.3 It merely codifies an old equity rule expressed in opinions from many jurisdictions and with which no jurisdiction disagrees.4 The only trouble is that Sec. 347 and the equity rule on which it is based have no application to the facts of this case.

Section 347 has two major requirements for present purposes: (a) The defective exercise of the power must relate to a mere formality, not a matter of substance. 2 Pomeroy’s Equity Jurisprudence Sec. 590, p. 595; 62 Am.Jur.2d Powers of Appointment and Alienation Sec. 102, p. 202; 72 C.J.S. Powers Sec. 48, p. 460. (b) The appointees under the power must be more “meritorious” than those who would take if the power is not given effect. 2 Pomeroy’s Equity Jurisprudence Sec. 589, p. 593; 72 C.J.S., supra; V American Law of Property Sec. 23.44, pp. 576-77; American Freehold Land Mortgage Co. v. Walker, 31 F. 103 (Cir.Ct. S.D.Ga.1887).

With respect to the first of those requirements, the cases do not lay down any definition by which a formality can be readily marked off from a matter of substance. The only pattern which can be deduced from the cases is that the courts have sought to determine the seriousness and importance of the purpose designed to be served by the restriction. Many factors in the present situation go to indicate that the purpose of this restriction is quite serious and important. The background and basic reason for these specific purposes clauses have already been discussed at some length in Section I of this dissenting opinion and need not be repeated.

The importance of these clauses has been recognized in unmistakable fashion by two state legislatures. Both New York and Wisconsin adopted statutes which dispensed with formalities and explicitly defined the methods by which power of appointment might be exercised. Experience and uncertainty created among the legal profession convinced the legislatures of those states that there should be no interference with continued effective use of specific reference clauses, and both states thereupon amended their respective statutes to so provide. N.Y. EPTL Sec. 10-6.1(b) (McKinney 1967); Wis.Stat.Ann.Sec. 702.03 (West Special Supp.1974). It is more than interesting to note that one of the leading writings in this field cited by the principal opinion, Rabin, “Blind Exercises of Powers of Appointment,” 51 Cornell L.Q. 1, l.c. 14-16 (1965), in discussing statutes of this type, predicted that other states having legislation similar to the original New York and Wisconsin statutes would not construe those statutes to strike down this valuable drafting tool consisting of the specific purpose clause. That prediction proved true in Virginia. Holzbach v. United Virginia Bank, supra.5

That case squarely considered the interplay of a specific purpose clause and an attempted exercise by an all powers clause. *215The Holzbach case already has been cited and quoted under Section I of this dissenting opinion. Although the Holzbach opinion does not mention Sec. 347 of the Restatement, nevertheless it should be noted that Virginia does follow the equitable principle codified by Sec. 347. Justis v. English, 30 Gratt. (71 Va.) 565 (1878). If the Virginia Supreme Court had considered the specific purpose clause to be in the nature of a mere formality, it surely would have applied the equity rule on which Sec. 347 is founded and which has for so long been a part of the Virginia law. Probably the reason that the Holzbach opinion makes no reference to either Sec. 347 or the old equitable principle is that the basic doctrine is now substantially covered by a special Virginia statute, Code 1950 Sec. 64.1-50, which cures noncompliance with an “additional or other form of execution or solemnity” other than those which would be required to dispose of the donee’s own property. The Virginia Supreme Court specifically held the specific reference clause “is not within the intendment” of that statute.

It would be a cruel irony indeed if the courts were to treat an “all powers” clause as effectively exercising a power of appointment specifically drawn to require specific reference, for the very purpose of inclusion of the latter clause would be defeated. If the number of texts recommending such clauses is any indication, quite a number of estate plans would be vulnerable to unforeseen disruption. In light of the purpose of specific reference clauses, the attempt by Matthew to exercise the power by purporting to include “all property over which I have power of appointment” in his residuary clause should be deemed ineffective in that it fails to meet the requirement set up in the will of Mary Forbes Cross that an effective exercise must make “specific reference to the power and to this will.” The defect in execution should be treated as substantive and not merely formal, which renders inapplicable the equitable doctrine encompassed by Sec. 347 of the Restatement of Property.

Likewise, the second requirement for the application of Sec. 347 fails to be met by the facts of this case. True enough, the appointees named by Matthew are sons and grandchildren, so that they probably all qualify as “meritorious appointees,” traditionally favored by courts of equity. However, they are the very same ones who will take upon failure of the power of appointment. These very same individuals can be no more meritorious in one capacity than in the other. Inasmuch as the appointees are no more meritorious than those designated to take upon failure of the power, there is no basis upon which equity can make a preference.

This point was directly litigated in Rogers’ Estate, 31 Pa.Super. 620, 621 (1906), in which the court held, “The appointees here, who must ask the aid of equity, are mere volunteers, collateral relatives, in precisely the same class as, and having but equal equities with, those who will take in case the appointments fall. This being the situation, the defective execution of the power would not be aided, even if the donee’s transgression could be viewed as a matter of mere form and unsubstantiality. * * [Ejven supposing, for argument’s sake, that grandchildren fall under the same rule as children, there would be no reason for an interposition here, because in default of an appointment the estate would go to grandchildren, so that the equity of the contending parties would be equal.” Rather than invoke the power of a court to aid defective execution of a power, in a case such as this it constitutes the greater wisdom to heed the equitable maxim, “Where there is equal equity, the law must prevail.”

III.

Respondents contend that even if the power of appointment was not effectively exercised, nevertheless Kent Forbes Cross Rigsby cannot participate in the distribution because he is not within the class of Matthew’s heirs designated by Mary’s will as the distributees to take in default of appointment. They base their contention upon the fact that in 1962, Kent was adopted by his mother’s second husband and that *216he was therefore in effect removed from Matthew’s blood line by the time Matthew died in 1970.

The principal opinion does not reach and therefore does not decide that issue. Under my analysis, that issue is before the court for necessary decision. However, since the majority does not discuss the matter, it would be inappropriate and purely academic for this dissent to do so.

For the reasons stated, I would reverse the judgment.

TURNAGE, J., concurs in dissent.

. Incidentally, it should be noticed that Moss reaches its result in a marital deduction situation, thereby undercutting the insistence by the principal opinion here that a distinction should be made and strict interpretation applied in marital deduction wills, but not others.

. Respondents’ counsel, at the argument before this court en banc, did adopt an argument advanced in the divisional principal opinion that the term “deemed” as used in paragraph C of Mary’s will was ambiguous. That argument, however, has now been abandoned by the majority of this court, as it should be in light of Fabick and Co. v. Schaffner, 492 S.W.2d 737, l.c. 745 (Mo. 1973).

.The principal opinion lays considerable emphasis on Sec. 341 of the Restatement, which was adopted by Busch v. Dozier, 375 S.W.2d 27 (Mo. 1964). The principal opinion argues that “Section 341 cannot be adopted without, by implication, adopting Section 347.” Assuming without necessarily agreeing with the soundness of the quoted argument, it has no relevancy to and does not answer this dissent. Wholly apart from Sec. 341, I readily agree that Sec. 347 should be adopted in Missouri. Reference to Sec. 341 is unnecessary to that conclusion. Nor is reference to Sec. 341 necessary for the purpose of this dissent, as bearing on the do-nee’s intent to exercise the power, because this dissent is based on the donee’s failure to comply with the objective standard created by the specific power clause and does not reach the question of what the donee’s intent may have been.

. Comment a under Sec. 347 states: “Origin of the rule. The rule stated in this Section arose in the English Courts of Chancery and is still expressed as a rule that ‘equity will aid the defective execution of a power.’ Such aid is given only for the benefit of certain classes of persons traditionally favored by courts of equity.”

. The Massachusetts cases cited by the principal opinion are clearly distinguishable from the present case. Shine v. Monahan, 354 Mass. 680, 241 N.E.2d 854 (1968) presented a situation where the donee had adequately made the required specific reference. In McKelvy v. Terry, 346 N.E.2d 912 (Mass. 1976), no specific reference was required by the donor’s will and thus an exercise omitting such reference could not be defective.