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In re Markham’s Estate

District Court of Appeals of California, Second District, Third Division
Apr 20, 1945
158 P.2d 62 (Cal. Ct. App. 1945)

Opinion

Hearing Granted June 18, 1945.

Appeal from Superior Court, Los Angeles County; Wm. R. McKay, Judge.

Proceeding in the matter of the estate of William F. Markham for the construction of a testamentary trust, wherein the Christian Science Benevolent Association filed a petition for an order requiring Harlan G. Palmer, Sr., the trustee, to pay installments of an annuity which were in arrears. From a judgment denying the petition, the petitioner appeals.

Judgment reversed. COUNSEL

Lindstron & Bartlett, of Los Angeles, for appellant.

Harlan G. Palmer, Sr., and Guy S. Pratt, both of Los Angeles, for respondent.


OPINION

SHINN, Justice.

This is an appeal by the successor in interest of a life beneficiary from a judgment construing a testamentary trust and denying a petition for an order requiring the trustee to pay installments of an annuity which are in arrears.

William F. Markham died testate April 30, 1930. He left the family home and furnishings to his wife during her lifetime, with remainder to the children of Harlan G. Palmer, Sr., and Ethelyn Hunkins Palmer. The balance of his estate was left to his wife, as trustee, the pertinent terms of the trust being as follows:

‘From the gross income received or derived from the trust estate, or from the principal thereof, if the Trustee deem that necessary or advisable, there shall first be paid and discharged all taxes, assessments, costs, attorney fees, charges and expenses incurred in the care, administration, distribution and protection of the trust estate and the protection of this trust and its defense against legal or equitable attack by any person, both during and after probate administration upon my estate.

‘From the net income of said estate, shall be by said Trustee paid, the following: [(1) To a daughter, Maud L. O’Brien, $250 a month during her natural life; (2) to a son, Leigh H. Markham, $250 a month during his natural life; (3) to a sister, Louise Markham, $100 a month during her natural life; (4) to ‘a friend and chum, Ben S. Sprague, now residing with me,’ $250 a month during his natural life; (5) to his gardner, Ed Jenkins, the sum of $150 a month while employed by the executrix or trustee; (6) to a niece, Isa Markham, $150 a month during her natural life; (7) to his friend and foreman, E. S. Roe, $150 a month during his natural life.]

‘(8) To my wife, Blanche C. Markham, such part of the remaining income as she may desire to use for any or all of the following purposes: for the maintenance, care and protection of the homestead; for her personal pleasure, support, maintenance and enjoyment of the best of clothing, automobiles, travel and luxuries contributing to her happiness and comfort.

‘All of the above bequests are payable as soon after my death as funds are available.

‘I direct that my said Trustee shall accumulate, during her natural life, any income from trust moneys or trust property not applicable under any of the trusts, powers, or provisions herein contained, by investing the same, and all the resulting income thereof, from time to time, in or upon any such stocks, funds or securities as are hereinbefore authorized for investments, for the benefit of the children of the union of Harlan G. Palmer, Sr., and Ethelyn Hunkins Palmer, share and share alike.

‘Upon the death of my wife and Trustee, Blanche C. Markham, I direct that Harlan G. Palmer, Sr., shall succeed her as trustee and that he shall hold of my estate such part as may be approved by court as ample to provide income for the payments directed in subdivisions one (1) to (7) in this ‘Fourth’ clause, and shall distribute, free from this trust, the balance of the estate, together with any undistributed net income, to the children of the union of Harlan G. Palmer, Sr., and Ethelyn Hunkins Palmer, share and share alike.

‘Upon the completion of all the trusts mentioned in clauses one (1) to eight (8) in this ‘Fourth’ clause, I direct that the remainder of my estate, together with any undistributed net income thereon, be given free from this trust, to the said Palmer children, share and share alike.’

There are four children of the union of Harlan G. Palmer, Sr., and Ethelyn Hunkins Palmer. They are not related to the testator.

Blanche C. Markham served as executrix until her death in August, 1937, when she was succeeded by the public administrator, as administrator with will annexed. He served until the estate was distributed to Harlan G. Palmer, Sr., the present trustee, in 1940. In the years 1933-1936, inclusive, Louise Markham was paid on her annuity $1420 less than she would have received at the rate of $100 per month. She died on or about August 12, 1940. By her will she left her claim against the trustee in said amount to appellant, Christian Science Benevolent Association, and certain individuals, and appellant now owns the claim by virtue of assignments from the other legatees and a decree of distribution in the Louise Markham estate.

Alleging the foregoing facts, appellant filed a petition May 5, 1944, for an order directing the trustee to pay the arrearage of the Louise Markham annuity, with interest. The trustee answered, asserting the following defenses: (1) that the net income in each of the years 1933-1936 was insufficient to pay the annuities in full and that the deficiency in annuity payments for a given year did not carry over as a charge against income received in future years; (2) that he then had no funds of the trust with which to pay the claim or any part thereof; (3) that each of the annual accounts of the executrix in the years when the deficiencies occurred was approved, and constituted an adjudication that Louise Markham had received in each such period all she was received under the terms of the trust; (4) that the issues here presented were tried and determined against the estate of Louise Markham when her executor filed certain objections to the first account of the present trustee; (5) that petitioner’s claim is barred by the statute of limitations, and (6) that the trust as to the annuities was a spendthrift trust and that any sums which might have been due or unpaid to Louise Markham were not subject to disposition by will.

After a hearing in the instant proceeding, the court made findings and conclusions sustaining each of the several defenses. There were two conclusions, and findings of the same import, which illustrate the court’s understanding of the will. They read: (1) ‘That all payments of annuities which the will of William F. Markham, Deceased, provided should be made to M. Louise Markham during her lifetime, were made to her, and that there were no sums due, or owing, or unpaid to her at the time of her death.’ (2) ‘That by reason of the fact that the Will of said William F. Markham, Deceased, does not make any provision for having any deficiency in annuity payments arising during any current account year made a charge on income subsequently received, future net income from said trust estate cannot be charged with any prior deficiency.’ The first conclusion is broad enough to include the second. The court was evidently of the opinion that the annuities were payable only out of net income, that the income was to be computed annually, and that the annuities should be reduced if the net income for any year was insufficient to pay them in full, that Louise Markham received in each year her full proportion, and that deficiencies in any year could not be charged against income received in subsequent years.

It is appropriate at this point to state the question which is the real basis of the controversy between the annuitants and the remaindermen, namely, whether it was the intention of the testator that the annuities would be paid in full, in all events, or that they would be paid in part or in full, only from such income as might remain after payment from gross income of ‘all taxes, assessments, costs, attorney fees, charges and expenses incurred in the care, administration, distribution and protection of the trust estate and the protection of this trust and its defense against legal or equitable attack by any person, both during and after probate administration upon my estate.’ This question arose at the inception of the administration and it has been a problem of the executrix, the administrator, and the trustee in every accounting which they have made. It has been directly or indirectly presented for decision upon several former occasions but never decided. There has been need for a comprehensive interpretation of the will by the court ever since the administration was commenced in 1930. No instructions in the matter were ever applied for or given to the executrix, the administrator or the trustee. Ever since 1933 an actual controversy has existed between two of the annuitants, Leigh Markham, a son, and Louise Markham and her estate on the one hand, and the remaindermen on the other. Leigh Markham’s claim is not asserted in the instant proceeding but, like the Louise Markham claim, it is for the unpaid balance of an annuity. In the years 1933-1936 the executrix failed to pay the annuitants in full; in some calendar years they were paid 70 percent, in others 50 percent of their respective annuities. The excuse for failure to pay them in full, as reported to the cort in the annual accountings, has been that the net income was insufficient to pay any greater portion of the annuities than had been paid. They had been paid in full in the years 1930, 1931 and 1932 and they have been paid in full ever since 1936. During all of this time it has remained an open question whether the several monthly payments could be made only from such income as remained after the payment of taxes and all other expenses and charges enumerated in the paragraph of the will first hereinbefore quoted. As a consequence of the failure to have this question decided in the probate court, the course that has been followed has been illogical and inconsistent, in that in some years the annuities have been paid only in part, while in other years they have been paid in full although it was necessary to pay taxes and other charges out of principal. To illustrate: on the death of Mr. Markham a liability attached for state and federal inheritance and estate taxes and the estate was confronted with the ordinary and, as it developed, extraordinary expenses of administration. These materially reduced the corpus of the estate. The state inheritance tax alone amounted to more than $146,000. A larger sum than this was borrowed upon real estate security for the payment of this tax and other expenses and there still remains unpaid of this debt a balance of some $124,000. The first borrowing was of $150,000. It was paid down to $125,000 but was increased by the public administrator to $150,000 in order to pay the annuities. The trustee has not expressly consented to the uses that have been made of capital nor has he registered objection, although he has considered that he has had grounds for objection. His position was stated to the court in the instant proceeding as follaws: ‘In other words, the principal of the estate has shrunk a total of $250,000 from date of death, due to expenditures made under the provision of the will for administration, taxes, the protection of the body of the estate, the defense of the will and litigation, and all other expenses, plus the sums which were, I contend, unlawfully paid or at least paid against the provisions of the will as annuities to the annuitants named in the will; * * * the annuitants are owing the estate, if there is any such thing from the standpoint of owing, rather than the estate owing the annuitants. That is the statement of our position without argument on it.’ This has been his position whenever application has been made to the court for payment of the Louise Markham claim. In the accountings that have been before the court upon these occasions, it has never appeared that there was net income on hand for use in the payment of annuities and for this reason the court in each instance has declined to order the claim paid. It appears to have been assumed during the administration of the executrix that she had a broad discretion in the matter of the payment of annuities— that she could pay them in full out of income or that she could use the income for other purposes, even to the extent of depriving the annuitants of from 30 to 50 percent of their full payments. At times, as we have stated, she paid the annuities in full even though other charges and expenses necessarily had been paid from principal. While the trustee has paid the annuities in full ever since he took control, it has always been with the reservation that such payments were and are discretionary with him until the principal has been restored to its original value and there is enough net income to make annuity payments.

We think it is quite clear from the will that Mr. Markham intended that the members of his family and other annuitants would have first claim upon his estate. He made a special provision for payment of the annuities from the commencement of the administration. After listing the annuities, including the provision for his wife, he directed that ‘All of the above bequests are payable as soon after my death as funds are available.’ To unmistakable meaning of this provision is that he wished the payment of annuities to be commenced as soon as possible. He had in mind the period for which the estate would be in administration and the direction was intended to apply to that period. He must have known that if inheritance taxes and all of the ordinary and extraordinary expenses of administration should be paid out of income before the annuitants received anything, it might be several years before their payments would commence. This was the very thing he did not intend to have happen and his direction that they should be paid as soon after his death as funds were available meant that they were to be paid by the executrix as soon as she could lawfully pay them. In the eighth paragraph provision was made for the ‘personal pleasure, support, maintenance and enjoyment’ etc. of Blanche C. Markham, wife of the testator, but she was placed in no better position than the other life beneficiaries. Her support, like that of the others, would have been payable out of net income, except for the provision that it was payable as soon as funds were available, and other provisions to be hereafter mentioned. Clearly there was no intention that the widow or the other life beneficiaries should go without support unless it could be provided out of net income. The other annuities also were intended to provide support and maintenance. While these words were not used, the purpose was plainly expressed. The trusts were spendthrift trusts, made so by an unusually comprehensive provision against encumbrance or alienation. The primary purpose of a spendthrift trust is to provide security for the beneficiary by protecting him against the consequences of his mistaken judgment or improvidence. It was said in Estate of DeLano, 1944, 62 Cal.App.2d 808, 814, 145 P.2d 672, 675: ‘In the absence of any other purpose stated in a will or other instrument creating a spendthrift trust, it is to be presumed that it was created for the maintenance and support and, in some cases, the education of the beneficiaries.’ The estate was appraised at $1,826.051.42; there was no substantial amount of indebtedness; the first sums received by the executrix could have been paid to the annuitants without preventing the payment of the other obligations of the estate. Mr. Markham wanted the payments to commence as soon as possible, whether the money on hand belonged to principal or to income. Ample funds were always available and it was the duty of the executrix to pay the annuities in full as they fell due. The public administrator paid them in full during his administration, although it is conceded that due to other uses of the income the annuities were sometimes paid, at least in part, out of principal.

It may be noted in passing that when the estate was distributed to the trustee in 1940, Louise Markham and Leigh Markham sought to have their claims for deficiencies ordered paid; they sought an interpretation of the provision which called for the payment of the annuities as soon after the testator’s death as funds were available, and they alleged that there were funds on hand from which the claims could be paid. The trustee answered, denying that there was then any net income, and alleging that sums had been paid from principal which should have been paid from income in an amount of more than $280,000. No interpretation of the annuity provisions of the will was given by the decree of distribution and the petition of Legal markham and Louise Markham was denied without prejudice. This could have been done, logically, only on the theory that no funds were shown to be available at that time and that the court could order the sum paid at some future time if funds became available.

Although it was the duty of the executrix to pay the annuities in full in each year, it is necessary to see whether there is anything in the will which would prevent the payment of deficiencies which had occurred in former years. We find nothing which stands in the way of making up arrears. At the trial respondent relied upon Estate of Platt, 1942, 21 Cal.2d 343, 131 P.2d 825, in support of his contention that the income for each year must be considered separately, without any carrying over, and he says in his brief that the case is squarely in point. In Estate of Platt it was held that a deficiency of income payable to the widow in a given year was not payable out of income in future years because the testator intended that each annual accounting period should be treated separately. That was the plan of the Platt trust. The widow was to receive $250 per month income, then the son was to receive up to $250 and any sum above $500 was to be equally divided between them. This necessitated periodic computations and divisions of total income. But the scheme of the Markham will is entirely different; the annuities were to be paid monthly and there is no provision for the division of all of the net income periodically or otherwise. The statements in Estate of Platt, supra, upon this point, are not applicable.

There is nothing in the will to prevent the payment of arrears in the annuities. The trustee contends that the annuities, including provision for the wife, were made payable only out of net income, except when he exercises the discretion given him to pay them out of principal. This is undoubtedly a correct construction of one of the provisions but that provision, we think, is not controlling. It has to be construed with the one we have first discussed and which we regard as intended to charge principal, as well as income, with the eight specific bequests to the annuitants and the wife.

If the two provisions should be in conflict the one which provided support and maintenance for the wife, the relatives and close friends should prevail. A construction favorable to relatives of the blood will be preferred to one which favors strangers. Estate of Owens, 1944, 62 Cal.App.2d 772, 775, 145 P.2d 376; Estate of Boyd, 1938, 24 Cal.App.2d 287, 289, 290, 74 P.2d 1049; Estate of Hartson, 1933, 218 Cal. 536, 539, 540, 24 P.2d 171; Estate of Wilson, 1924, 65 Cal.App. 680, 689, 225 P. 283.

The direction to the executrix to commence the payments promptly should be given effect throughout the administration of the trust. Mr. Markham must be deemed to have wished the annuities to be paid in full in the later stages, as well as in the earlier stages, of the administration, unless the will evidences a different intention. We believe the general provisions for administration of the trust tend to prove that he wished the annuitants and his wife to be paid in all events. The only provision in the will for disposition of surplus income reads as follows: ‘I direct that my said Trustee shall accumulate, during her natural life, any income from trust moneys or trust property not applicable under any of the trusts, powers, or provisions herein contained, by investing the same, and all the resulting income thereof, from time to time, in or upon any such stocks, funds or securities as are hereinbefore authorized for investments, for the benefit of the children of the union of Harlan G. Palmer, Sr., and Ethelyn Hunkins Palmer, share and share alike.’ This indicates that while Mr. Markham expected that the income would be more than sufficient to pay the annuities in full and to provide amply for his widow, he nevertheless did not intend that income should be accumulated and invested for the benefit of the remaindermen until the annuities had been paid in full. Nor did he intend that any accumulated income, or even principal, should be distributed by the trustee to the remaindermen except, as the will stated, ‘upon the completion of the trusts mentioned in sections one (1) and eight (8) of this fourth clause’ etc. Furthermore, we think the paragraph first quoted in the opinion is significant; taxes, assessments, costs, attorney’s fees and other carrying charges and expenses were to be paid out of gross income, but if the trustee should deem it necessary or advisable, he was authorized to pay them out of principal. Charges and expenses such as those enumerated would have to be paid out of the principal if no income was available to meet them. The testator therefore contemplated that the principal would be resorted to if it should be deemed necessary or advisable to do so in the circumstances, even though there was income on hand which could be applied to such payments. It is obvious that he was not giving the trustee authority to pay taxes, etc., out of principal when income was available, in order to preserve the income for the payment of future taxes, etc. It would be ‘necessary’ to pay them out of principal whenever the income was insufficient, and it would become ‘advisable’ to pay them out of principal only in the event the money was needed to pay the annuities and to provide support for the widow. These several provisions indicate that the testator did not intend that the annuitants should suffer by reason of the depletion of income due to the payment of sums which, for the protection of the estate, would have to be paid from principal if the available income should prove insufficient. The last-quoted provision, especially, appears to have been intended to serve as a protection to the annuitants, and with other mentioned provisions, indicates to us that the testator was more concerned that the annuitants should be paid in full than that the principal should be preserved intact for the benefit of the remaindermen.

Appellant cites Estate of Emerson, 1934, 139 Cal.App. 571, 34 P.2d 800, 801, upon the point of construction as ‘directly in point and controlling on the case at bar.’ The terms of the Emerson trust did not resemble those of the Markham trust so closely as to justify the statement that the decision in that case is controlling, but the trusts were substantially the same in important particulars, namely, the annuities were to be paid out of income, were for support and maintenance, and were to be paid during administration of the estate in probate. In the Emerson trust, annuities were to be paid monthly to two beneficiaries and it was provided that like amounts should be paid them by the executors ‘during the probate of my estate, which allowances are for their maintenance and support.’ No provision was made in the trust for the payment of annuities out of the corpus, which was devised over without limitation. The income became insufficient to pay the annuities and the annuitants sought payment of the deficiencies out of corpus. In affirming an order directing that the annuities he paid from corpus, the learned author of the opinion said, 139 Cal.App. at pages 574, 575, 34 P.2d at page 802: ‘It is perfectly manifest from a reading of the will and codicil that it was the main and primary concern of the testatrix to take care of the two annuitants during their respective lives. The share of the remaindermen was postponed until the annuitants had been cared for during their lives. It is clear from a reading of the will and codicil that the testatrix was more solicitous about the welfare of the two annuitants than she was of the remaindermen. Her intent in this connection is plainly indicated by the terms of the codicil, for her executors were directed to pay such annuitants the amounts provided, during the probate of her estate, for their maintenance and support. There is no provision for the enjoyment of the corpus by the remaindermen until after both these proferred annuitants are dead. In short, the entire instrument shows conclusively the intent of the testatrix was that the annuitants should be maintained and supported, regardless of the source from which the funds for that purpose should come. There was no intent indicated to keep the corpus intact for the remaindermen. Comstock v. Herron, 6 Cir., 55 F. 803; Mulcahy v. Johnson, 80 Colo. 499, 252 P. 816.’ These statements are directly applicable to the provisions of the Markham will. The testator could scarcely have felt the same concern that the large principal of the trust should be kept intact for the remaindermen as that the annuitants should have the security afforded by the modest payments from his estate. We believe his wishes were clearly expressed. No doubt he would have been more explicit if he had suspected that the income would ever be insufficient to pay the annuities. Excluding the provision for the wife, the others amounted annually to less than one percent of the appraised value of the estate. It was not an unproductive estate; it was alleged by appellant, and not denied, that the gross income for 1943 was $111,101.66. We conclude, therefore, that the court was in error in holding that the annuity payments are payable only out of income.

The next point to be discussed is the finding that the questions here in issue were decided adversely to the claims of appellant by an order overruling objections of the executor of the will of Louise Markham to the first account current of the present trustee. That account was filed April 21, 1942. The executor filed objections on behalf of the Louise Markham estate, setting forth the bequest to Louise Markham of $100 per month during her natural life and quoting the provision of the will that ‘all of the above bequests are payable as soon after my death as funds are available.’ It alleged a total deficiency of $1420 in payments which fell due in 1933-1936, and that there were funds on hand to pay the amount. The trustee filed an answer, admitting the alleged deficiency and alleging that the net income had been insufficient to pay more than had been paid. The answer set out the first paragraph of the will herein quoted and alleged that the principal had been depleted in a net amount of over $125,000 by payments that should have been made from income. The matter came on for hearing on the account and the objections before Florence M. Bischoff, court commissioner in probate, sitting as a judge pro tempore, and an order was made reciting the fact of the hearing and reading in part: ‘Objections having been presented the court, after hearing the evidence, overruled said objections, and findings being hereby waived, settles and approves said account in the manner following: [Here an order settling the account and allowing the trustee $1500 for services rendered].’ It is this order which the trustee claims constituted a construction of the will against the present claims of appellant. It is contended that the objections to the account and the answer called for a construction of the will, and that the order was a decision upon the merits. Appellant contends, to the contrary, that the trustee claimed only that the principal had been depleted, that annuities had been paid out of principal and had thereby been overpaid, that in any event there had been no net income in the current year, and that no funds were on hand from which the sum claimed could be properly paid. It is pointed out that no evidence was taken except to prove the account, and that the hearing ended when it developed that the account showed no income on hand; and it is insisted that there was no decision on the merits, that no interpretation of the will was attempted, and that the order amounted to no more than a dismissal of the executor’s petition for payment of the claim. The contention that the order did not constitute an interpretation of the will must be sustained. This appears from the order itself and from the testimony that was given as to the proceedings before the judge pro tempore.

Considering first the order itself, it is apparent that if the position of the trustee on the appeal is correct, the order amounted to a decision against the executor of Louise Markham’s will as to all of the grounds or reasons which he might have relied upon in support of the validity of his claim and his right to have it paid, and it also would have the effect of a judgment establishing, by implication, all of the grounds and reasons which would have supported a decision in favor of the trustee. So construed, it would be an interpretation of the will which would deny the right of the annuitants to ever receive more than their proportionate shares of the income that remained in a yearly accounting period, after all other charges and expenses had been paid. And since there were no findings, and all intendments are in favor of the correctness of the order, it might even be construed as a decision favorable to the trustee upon the defense of the statute of limitations. We cannot believe that the able and experienced commissioner in probate who sat as judge pro tempore would have stated her decision of matters so important and so involved in the form of a mere recital that the objections had been overruled, nor can we believe that the able counsel on either side would have waived findings if the decision had involved an interpretation of the will. When the order is considered by itself, it is more reasonable to believe that it was intended as a dismissal of the objections than as an interpretation of the will. If there should be doubt about this, the extrinsic evidence which was received would overcome it.

In the trial of the instant proceeding, appellant sought to meet the defense of res judicata by proof that the 1942 hearing resulted in a dismissal, and not a decision on the merits. As the record did not disclose whether there had been a trial and decision of the same issues as those raised in the present proceeding, the court properly received evidence as to the proceedings had upon the former hearing. The attorney, Stanley F. Hahn, who represented the executor of the Louise Markham estate, testified as to his recollection of the proceedings. He testified that prior to the 1942 hearing two applications had been made for payment of the same claim, and that they had been denied without prejudice. He also testified:

‘A. 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. 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— I shouldn’t say available. There apparently was no net income, and I have 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? 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? 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 in part:

‘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 settled’; 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 recollection of that at all, not at all, and I don’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: 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.

‘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 the trial of the instant proceeding it was stipulated that the trustee had made before the judge pro tempore in the former hearing a statement covering the same information that he gave in the hearing under review as his opening statement. The statement was a narration of the history of the administration of the estate by the executrix and the trustee and it was stated that when Louise Markham was not paid in full it was because there was insufficient net income during the several periods, and that it was the position of the trustee that even when the annuities were being paid in full by the executrix and by the public administrator, they were paid in violation of the provision of the will that they should be paid from net income. The finding that the order made in the 1942 proceeding is a bar to the present proceeding cannot be sustained. It clearly appears from the extrinsic evidence, which is not inconsistent with the recital in the order, that the inquiry went only far enough to develop the fact, which apparently was shown by the account, that there was no net income on hand which could be ordered paid to the claimant. It did not become necessary for the court to decide whether it would be proper to order the claim paid if it should be shown at some future time that funds were available. The application was made for payment out of a particular fund, it appeared that there was no money in the fund at the time, and the evidence disclosed that the application was denied because it was deemed to have been made prematurely. Approval of the account was only a decision that it correctly reported the receipts, the disbursements and the estate which was on hand, and that the acts of the trustee, as reported, had been performed in accordance with his duties. The account was entirely negative in so far as the claims of the executor of Louise Markham’s will were concerned.

A judgment which does not decide the matters in issue on the merits does not operate as a bar or estoppel in another action. Goddard v. Security Title Ins. & Guarantee Co., 1939, 14 Cal.2d 47, 52, 92 P.2d 804; Campanella v. Campanella, 1928, 204 Cal. 515, 269 P. 433; Security Trust & Savings Bank v. Southern P. R. Co., 1931, 214 Cal. 81, 87, 3 P.2d 1015; Molen v. Bussi, 1931, 118 Cal.App. 482, 485, 5 P.2d 450. A dismissal is not a bar. Gonsalves v. Bank of America, 1940, 16 Cal.2d 169, 173, 105 P.2d 118; Goddard v. Security Title Ins. & Guar. Co., supra; Estate of Cook, 1928, 205 Cal. 581, 271 P. 1083.

A further defense which the court found to be valid was that the orders settling the several accounts of the executrix in the years when the deficiencies occurred amounted to judgments which barred all future claims for such deficiencies. This findings also is not sustained by the evidence. It is not contended that in any such year Louise Markham contested the account of the executrix or asserted her right to receive the unpaid balance of her annuity. The accounts usually reported that the net income had permitted the payment of the legacies ‘in part’ or had permitted payment of a certain percentage of each of them during the current year and asked credit for the payments that had been made. In no instance was it alleged that payment of less than the full amount constituted payment in full, under the terms of the will, for the period or periods in question. Some of the orders approving accounts contained no specific reference to the annuities paid; the orders that did refer to them merely approved the payments reported. In none of the years during which the deficiencies occurred was a question presented to the court as to the proper interpretation of the will with respect to annuity payments. The court was not asked to decide and did not decide whether the deficiencies were payable out of future income. The orders settling the accounts, so far as annuity payments were concerned, decided only that the net income for the particular period or periods had been sufficient to make such payments and had not been sufficient to pay any greater sums on account of the annuities. It may be noted also that the court approved the accounts when the annuities had been paid in full, and as the trustee contends, out of principal, but the trustee had not objected to the payments and no question of construction of the will was in issue or decided. An interpretation of a will in a proceeding where no issue is presented as to its meaning is not a bar to the decision of questions of interpretation which may arise later.

The defense of the statute of limitations is not sustained by the facts. It appears that the executrix did not question the right of Louise Markham to receive $100 per month out of income when it was available. It is not disclosed by the record that the executrix ever denied Louise Markham’s right to receive payment of the amount in arrears whenever, under the former’s construction of the will, funds were available. The statute of limitations does not commence to run against a beneficiary until there has been a repudiation of the trust. 16 Cal.Jur. 427, 428, and cases cited. There was no repudiation of the trust by the executrix or by the administrator with will annexed. Upon the contrary, as the trustee asserts, they even paid the annuities, at least in part, from principal in the years 1937 to 1940. The trustee has acted in good faith. He has disagreed with appellant and its predecessors, as to the proper construction of the will but he has not repudiated the trust. The claim therefore was not barred.

The final contention of respondent is that the trust as to Louise Markham was a spendthrift trust, that the moneys provided for her use were payable to her personally and could not be alienated, and that therefore the claim which she had for the balance of the annuities would not descend by operation of law and could not be disposed of by will. No authority has been cited which tends to support this position and we deem it to be unsound. The right to receive the annuities was a property right, as much so as would have been the right to the money after it had been received, and it was not forfeited by the terms of the will, or by operation of law, upon Louise Markham’s death. It is stated in Griswold on Spendthrift Trusts, 1936 Ed., p. 83, that: ‘In a few cases an issue has been made between the legatees of the beneficiary and his heirs or next of kin. The latter have contended that the inalienability of the interest deprived the beneficiary of power to transfer by will. This contention has, however, been uniformly rejected.’ The statement is borne out by the authorities. 65 C.J. 558 and cases cited. All of the rights which Louise Markham had to enforce her claim are now vested in appellant. Interest is payable on the annuity balances from the respective dates when they accrued. Estate of Platt, supra, 21 Cal.2d 343, 131 P.2d 825.

The judgment is reversed for further proceedings in accordance with the views herein expressed.

DESMOND, P. J., PARKER WOOD, J., concur.


Summaries of

In re Markham’s Estate

District Court of Appeals of California, Second District, Third Division
Apr 20, 1945
158 P.2d 62 (Cal. Ct. App. 1945)
Case details for

In re Markham’s Estate

Case Details

Full title:In re MARKHAM’S ESTATE. CHRISTIAN SCIENCE BENEVOLENT ASS’N v. PALMER.

Court:District Court of Appeals of California, Second District, Third Division

Date published: Apr 20, 1945

Citations

158 P.2d 62 (Cal. Ct. App. 1945)

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