414 Pa. 347 | Pa. | 1964
Opinion by
These appeals raise four questions:
Resolution of the first two questions depends upon a construction of the last will of Jane O. Thaw (testatrix), who died, a New Hampshire resident, on November 28, 1958, leaving assets in New Hampshire of upwards of $580,000, and assets in Pennsylvania of upwards of $1,600,000.
An examination of testatrix’ twelve-paragraph lawyer-prepared will must be made. The first six paragraphs provide for disposition of certain personalty, disposition of testatrix’ home in Dublin, New Hampshire and personalty connected therewith, for payment of twenty specific-dollar-amount legacies totalling $588,-000, and directions for testatrix’ burial. The last
The Seventh paragraph, crucially important in this litigation, provides: “All the rest, residue and remainder of [her] property, real and personal, wherever situate, and all property over which [she had] any power of appointment” the testatrix gave to named trustees in trust for the utilization of the net income, in part or whole, for the support of testatrix’ aunt during her lifetime; upon the aunt’s death, the trustees were directed to distribute the principal, undisbursed income and “all other property” of testatrix in the following manner: to pay twenty-eight specific-dollar legacies, totalling $420,000, to certain named persons, charitable institutions, foundations, etc. (Paragraph Seven, (1) to (28), inclusive), and to distribute “the entire balance of said trust fund” to Pittsburgh University (University), as a memorial to testatrix’ husband to be used for research in blood diseases, particularly leukemia "(Paragraph Seven, (29)).
In Paragraph Eight, (h), testatrix directs “. . . that so far as possible all taxes which may be payable with respect to any legacy given by this will shall be paid out of the residue of [her] estate.” (Emphasis supplied). In Paragraph Nine, (a), testatrix directs that, if her estate is insufficient to pay the testamentary bequests, all bequests other than those given in Paragraph Seven shall be paid in full and that each bequest in Paragraph Seven shall abate proportionately. Paragraph Nine, (c), provides that if “any legatee or devisee ... is not alive at the time of [testatrix’] death, the bequests, legacies and devises to such legatee or de
At audit, the University presented a petition for an apportionment of the federal estate tax in the amount of |347,764.97 among all twenty-nine legatees under Paragraph Seven. Resolution of this question, raised by the University, initially depends upon a construction of testatrix’ intent as expressed in Paragraph Eight, (h), of her will, wherein she directs that “all taxes . . . payable with respect to any legacy given by this will shall be paid out of the residue of [testatrix’] estate.” (Emphasis supplied)
The University’s position is that the testatrix’ language “residue of my estate” in Paragraph Eight, (h), refers to Paragraph Seven in its entirety and that the twenty-nine legatees named therein, all sharing in this “residue”, must each bear a proportionate share of the federal tax liability. Appellants’ position is that Paragraph Seven of the will “creates a general residue and within that an ultimate residue”, i.e., that the ultimate and real “residue” is the “balance” of the general residue given to the University, and that it was testatrix’ intent that this ultimate “residue” bear the burdens and take the benefits incident to such “residue” and, therefore, the burden of payment of the federal estate tax liability should fall upon the ultimate legatee of such “residue”, i.e., the University. Appellants’ second, and alternative, position is that, even if the word “residue” be construed to mean Paragraph Seven in its entirety, nevertheless, such federal tax liability would ordinarily fall on the “balance” given to the University under Paragraph Seven, section 29, because such tax liability, has, in effect, been paid by the executors out of the general residuary fund and out of this fund, reduced by the tax payments, the residuary legatees who are to receive specified amounts must first
The court below concluded that, when testatrix in Paragraph Eight, (h), referred to “residue of [her] estate”, she referred to the entire estate disposed of in Paragraph Seven and not simply to that portion of the estate disposed of in the 29th section of Paragraph Seven. In reaching such conclusion, the court below relied on the language of Paragraph Nine (a) and (c), on its own construction of Paragraph Seven and, inferentially, on the fact that testatrix and her husband were Pittsburgh natives and the court’s own belief that the University was intended to be the principal beneficiary of testatrix’ bounty. We shall demonstrate that each premise upon which the court below reached its result does not support such result.
Testatrix has identified the source from which all death taxes, “payable with respect to any legacy”, shall be paid, and her direction is that the residue of her estate shall pay such taxes. To what did testatrix refer by the use of the word “residue” — Paragraph Seven in its entirety or only the 29th Section thereof?
In Armstrong Estate, 347 Pa. 23, 25, 31 A. 2d 528, we said: “It is well settled that where a testator manifests an intent to dispose of everything not otherwise disposed of by the mil, the dispositive clause is regarded as residuary; no technical mode of expression is necessary: [citing cases]”. (Emphasis supplied). See also: Yeisley Estate, 358 Pa. 200, 202, 56 A. 2d 205; Bricker’s Estate, 335 Pa. 300, 303, 6 A. 2d 905. In Carson’s Estate, 130 Pa. Superior Ct. 133, 140, 196 A. 527, 530, the Court stated: “ ‘ “The residue” of a man’s estate, in testamentary language, means whatever is not specifically devised or bequeathed, and in whatever part of a will it may happen to be found it ought to have that meaning, unless the whole will taken together shows clearly that it was not so intended. A will be
Paragraph Seven of this will commences with words customarily and ordinarily employed to describe a residuary estate — “All the rest, residue and remainder of my property” — and, in such estate, testatrix created a trust whereunder the aunt-life tenant was to receive part or all of the net income as her needs required and, upon the aunt’s death, the principal was to be distributed initially by the payment of twenty-eight specific-dollar legacies and then the “entire balance of said trust fund” was to be given to the University. This testamentary provision clearly created in Section 29 “a residue of a residue”. In Slater Estate, 377 Pa. 285, 288, 105 A. 2d 59, we said: “A testator, in disposing of his residuary estate, may carve therefrom portions of the residue and devise and bequeath such por-, tions to designated persons or uses, and then pass that which remains to others. This is a typical situation of a ‘residue of a residue’ ”. Carson’s Estate, supra, is illustrative of “a residue of a residue”. In Carson, the testator, after providing for payment of debts and funeral expenses, the payment of a cash sum to his wife, a devise to his wife of a life interest in realty and the payment of certain bequests, gave “all the rest, residue and remainder of his estate” in trust for certain purposes: (a) to pay $100,000 to $125,000 annually to his wife for life, (b) to give his wife the power of appointment as to $500,000 of the trust principal, (c) to pay annuities of $6,000 to each of testator’s brothers
In disposing of the ultimate “residue” (Paragraph Seven, (29)) of the “residue” (Paragraph Seven, first paragraph, (1) to (28), inclusive,) the testatrix referred to that portion of her estate which was to be given to the University as the “entire balance of said trust fund.”
It is testatrix’ dispositive language that is of vital importance, and we must determine from such lan
Paragraph Eight, (h), clearly reveals an intent on testatrix’ part that all the legacies under the will should be, if possible, tax free. When testatrix desired to draw a distinction between the treatment to be accorded to what the court below called “preresiduary legacies”, i.e., the bequests other than in Paragraph Seven, and to what the court below called the “residuary legacies”, i.e., the bequests contained in Paragraph Seven, she did so as illustrated in Paragraph Nine, (a). Moreover, Paragraph Eight, (h), reveals testatrix’ intent that all taxes with respect to any legacies should be tax free. The use of the all-embracive word “any”
The construction by the court below of the impact of Paragraph Nine, (a) — dealing with the abatement
The court below relied also on Paragraph Nine, (c), dealing with lapsed legacies. Thereunder, testatrix directed that a lapsed legacy should “become part of the residue of [her] estate”. Therefore, the court below reasoned, since the word “residue” refers to Paragraph Seven in its entirety, it would be a “strange and illogical conclusion” to hold that such lapsed legacies were intended to enlarge the University’s share and “not the whole residue of the estate”, i.e., the twenty-eight pecuniary legacies plus that of the University. The most cursory examination of Paragraph Seven contraindicates such reasoning. Each of the twenty-eight legatees in Paragraph Seven are given speeific-dollaramount legacies. Under the rationale of the court below, for instance, testatrix’ bequest of $50,000 to the Animal Rescue League of Boston would be increased, in the event of a lapsed legacy, by its proportionate share of such lapsed legacy. That would be contrary to testatrix’ direction; the testatrix gave the League $50,000 and no more. Cf. Grier Estate, 403 Pa. 517, 523, 170 A. 2d 545. To adopt the rationale of the court below would be to negate testatrix’ express direction
From the testamentary language, testatrix’ plan is clear beyond question. The University, under Section 29, was to receive only that part of testatrix’ estate which remained after payment of the estate obligations, whether debts, expenses, taxes or legacies. Testatrix clearly intended that all the legacies, so far as possible, were to be tax free and, when testatrix referred to the “residue” of her estate as the source of payment of such taxes on these legacies, she referred to the ultimate or second “residue” of her estate as contained in Section 29 and not to Paragraph Seven in its entirety.
The result of the conclusion reached by the court below is that the twenty-eight legatees, who were given specific-dollar amounts under Sections (1) to (28), inclusive, would have their legacies reduced by approximately 31% and what was taken from them would be given to the University. Such a result is contrary to testatrix’ intent so manifestly evident from an examination of her will in its entirety and, particularly, the language contained in Section 29 of Paragraph Seven.
Lastly, was the University intended as the principal beneficiary of this estate? A reading of the will indicates that the principal object of testatrix’ concern was her aunt, Mrs. Goodale (Paragraph One, (f), Paragraph Three, Paragraph Seven (opening paragraph), Paragraphs Two and Three of Codicil). Uppermost also in testatrix’ mind was her friend, Eleanor A. Humphrey, to whom she gave jewelry (Paragraph One,
The death taxes in this estate must be borne by the “residue” or “entire balance” of the estate given to the University under Section 29.
The next question is whether the legatees under Paragraph Seven, Sections (1) to (28), inclusive, are entitled to the payment of interest on their legacies for delay in payment. Preliminarily in its discussion as to interest, the court below was concerned as to whether interest should be allowed in accordance with the 6% rate of New Hampshire, the 3% rate of Pennsylvania, or the rate of interest earned by the estate.
In denying the claims of the pecuniary legatees under Paragraph Seven to interest,
It is to be noted that the court below divided the accumulated administrative income, which remained after payment of interest to the “preresiduary legacies”, pro rata among all the beneficiaries under Paragraph Seven, including the University. Such was erroneous. The University would take only such portion of the accumulated administrative income as remains after payment of interest to all testatrix’ legatees, if any such portion remains.
Under Paragraph Seven, (5), testatrix provided a legacy: “To the Koussevitzky Music Foundation of Washington, D. C., the sum of Fifty Thousand Dollars ($50,000.00)”. Seeking payment of this bequest were two claimants, the Koussevitzky Music Foundation, Inc., a New York corporation, and the Serge Koussevitzky Music Foundation in the Library of Congress,
On this appeal, the Board contends that, by reason of the Act of March 3, 1925, C. 423, §5, 43 Stat. 1108, as amended, 2 U.S.C. §161, it is exempt from all Federal taxes on gifts or bequests to it. In calculating the amount of the taxable estate in the case at bar, the legacy under Paragraph Seven, (5), was deducted and, to such extent, the gift was exempted from taxation. However, the court below held that the Board was not exempt from bearing a proportionate share of the federal estate tax, the payment of which was imposed by testatrix on the “residue” of her estate. Such a ruling was premised on the conclusion that all of the pecuniary legatees under Sections (1) to (28), inclusive, of Paragraph Seven were proportionately liable for payment of the federal estate tax.
Since we have determined that such a conclusion was erroneous and that the burden of paying the tax is on the University to whom the ultimate “residue” of this estate was given, it is unnecessary to consider either the question of the Board’s standing to take this appeal or its exemption from a tax on the bequest.
Decree reversed. Costs on Estate.
The Barbour, Humphrey, Ehlermann Estate and Conrad appeals raise the first two questions and the United States of America and Koussevitzky Music Foundation appeals raise all four questions.
The “residue” is that which remains after a part is taken: France’s Estate, 75 Pa. 220, 224; Fisher’s Estate, 302 Pa. 516, 521, 153 A. 736; Rettew’s Estate, 142 Pa. Superior Ct. 335, 339, 16 A. 2d 322; Berger v. Burnett, 95 N.J. Eq. 643, 123 A. 879, 880; Stevens v. Underhill, 67 N.H. 68, 36 A. 370, 372.
“It may be true that tbe word ‘balance’ in tbe sense of residue or remainder is not considered elegant English, but in this country it is very often used in that sense, and there is no difficulty in understanding what the testator meant by the phrase ‘balance of my estate’ Lopez v. Lopez, 23 S.C. 258, 269. The “balance” is equivalent to “rest, residue, what remains or is left over”: Owens v. Bank of Glade Spring, 195 Va. 1138, 81 S.E. 2d 565, 569; Bricker’s Estate, 335 Pa. 300, 303, 6 A. 2d 905; Bunnell v. Beam, 86 N.J. Eq. 101, 97 A. 494; Plumly’s Estate, 261 Pa. 432, 435, 104 A. 670.
Hoffmann Estate, 399 Pa. 96, 100 (footnote), 160 A. 2d 237.
“It seems clear from the definition of a residuary gift in Armstrong’s Estate, 347 Pa. 23, and from the discussion in Brieker’s Estate, 335 Pa. 300, that these provisions of the Wills Act, [§14, (9), (10)] refer to the general or ultimate residuary clause and not to gifts of the ‘residue’ of particular property or a specified sum”. Bregy, Intestate, Wills and Estates Acts of 1947, p. 3310.
If it bears tbe impact of tbe death taxes, tbe University, in addition to its $200,000 legacy, will receive approximately $362,000 or a total of $562,000. If tbe taxes are apportioned among all tbe legatees under Paragraph Seven, tbe University, in addition to its $200,000 legacy, would receive approximately $524,000 or a total of $724,000.
The court below allowed 6% interest on all legacies other than those given under Paragraph Seven.
Established by the Act of March 3, 1925, C. 423, §1, 43 Stat. 1107, 2 U.S.C.A. §154.
