Winters National Bank & Trust Co. v. Riffe

194 N.E.2d 921, 93 Ohio Law. Abs. 171, 27 Ohio Op. 2d 261, 1963 Ohio Misc. LEXIS 215

• Court: Montgomery County Probate Court
• Decided: January 11, 1963
• Docket: No. 158229-53
• Status: Published

Opinion

Ziegel, J.

Testator’s surviving spouse has exercised her statutory right to take under the statute of descent and distribution, rather than under the will of her deceased consort. As a result of such election, the executor, being in doubt as to how the assets of the estate are to be distributed, has brought this action in declaratory judgment for instructions.

Item II of testator’s will provides: “I give and bequeath all of the stock that I own, issued by American Telephone & Telegraph Company, at the time of my death, to THE WINTERS NATIONAL BANK & TRUST COMPANY of Dayton, Ohio, as Trustee, in trust nevertheless, for the use and benefit of my good friend and business associate, FLORENCE M. G-RAF. ...” In Item III, he gave, devised, and bequeathed the balance of the rest and residue of his estate to the same trustee for the use and benefit of his wife. The trustee was directed to pay the income from this trust to the widow in quarterly installments, with power to invade the principal if necessary. Upon the death of the wife, the trustee was directed to hold the balance of the principal and any undistributed accrued income as a scholarship fund for certain of testator’s relatives, the same to be held for ten years or until the fund is exhausted. At the end of the ten year period any balance remaining is to be distributed to the Dayton Museum of Natural History. The Will also provided that at the death of Florence G-raf, the principal of that fund was to pass under Item III. Testator had no children.

WMle the executor seeks instructions on eight separate matters, the principal issue revolves around Item II, counsel for the executor submitting and counsel for Florence M. G-raf contending that the widow’s election should not in any way affect that item. The widow’s guardian asserts that his ward is entitled to her share out of the AT & T stock as well as out of the residuary assets.

The key to resolving this controversy rests on the case of Barlow v. Winters National Bank & Trust Co., 145 Ohio St., 270, 61 N. E. (2d), 603, which held in paragraph 1 of its syllabus that “Where the relict of a deceased husband elects not to take under his will, she takes her share not by way of a distributive share in money, but by way of inheritance as though it came to her from her deceased husband as an inheritance under Section 10503-4, General Code (now Section 2105.06, Revised Code), limited by the provisions of Section 10504-55, General Code (now Section 2107.39, Revised Code).” Section 2107.-39, Revised Code, provides that “if such spouse elects to take under.... (the statute of descent and distribution), such spouse shall take not to exceed one half of the net estate. ...” In commenting on that section, Judge Hart, writing the opinion of the Supreme Court, pointed out that “the statute .... limiting the share which the relict of a deceased husband or wife may elect to take in the estate of such deceased husband or wife under the statute of descent and distribution, does not make such share one-half of the net value of such estate, but one-half of the net estate. Hence, there is nothing to indicate that the surviving spouse shall be paid a distributive share in money rather than one-half of the real estate and one-half of the net personal estate after the payment of debts.”

Counsel contend that since the Barlow case was concerned only with real estate and the rentals therefrom, and since in that case there were no specific legacies as in Item II of the testator’s will in the case at bar, the case should be limited to its facts and applied only to the small amount of real estate involved here. Neither the syllabus, as quoted above, nor its rationale, however, limits its rule to real estate. Further there is nothing in the statute of descent and distribution (Section 2105.06, Revised Code), nor in the election statute (Section 2107.39, Revised Code), that makes any distinction between real estate and personal property. If the law as pronounced in the Barlow case is valid with regard to real estate, it must likewise be applied with regard to personalty.

The situation, therefore, of a surviving spouse who elected not to take under her deceased consort’s will is the same as if that deceased consort had died intestate. As far as she is concerned there is no will. She is not bound in any respects by any will, and her rights are the same as if she were an heir of an intestate.

Section 2105.06, Revised Code, the statute of descent and distribution, begins: “When a person dies intestate having title or right to any personal property or to any real estate or inheritance in this state, such personal property shall be distributed and such real estate shall descend and pass in parcenary. ...” Personal property is distributed and real estate descends and passes in parcenary — no distinction. An estate in parcenary, or in coparcenary, is defined as one which arises where several take by descent from the same ancestor as one heir, all coparceners constituting but one heir and having but one estate, and being connected by unity of interest and of title. 86 C. J. S., 361, par. 3. It is said that there is now no distinction between an estate in parcenary, and an estate as tenants in common. See 17 Ohio Jurisprudence (2d), 527, par. 198.

Thus, the interest of the electing surviving spouse here in the net personal estate, and each individual item thereof, as well as in the real estate, is that of a tenant in common: she has an undivided interest therein. This is what Judge Hart meant in the Barlow case when he stated, as quoted above, that the share of the electing surviving spouse is not “one-half of the net value of such estate, but one-half of the net estate.” To deny in this case that Sammie Riffe, the surviving spouse, had any interest in the AT & T stock mentioned in Item II of decedent’s will, and to require that her entire share of this estate be paid from the residue would be the same as reducing her interest to a money value, and would do violence to the positive wording of the statute as well as to the principle of law announced in the Barlow case.

It follows that The Winters National Bank & Trust Company, the executor nominated by decedent’s will, is both an executor and an administrator. As to the electing surviving spouse who takes by way of an inheritance, not by legacy or devise, it is an administrator; but as to the other beneficiaries named in the will and to the creditors, it is an executor. The will still applies to that portion of the estate which does not belong to the electing surviving spouse. Thus, for example, if it is necessary to liquidate any items of personal property in order to acquire funds for the payment of debts, taxes, expenses of administration, etc., items not specifically bequeathed will be sold first. Section 2113.40 (B), Revised Code.

When the “net estate” is determined after the payment of expenses of administration, fees, debts, widow’s set off and year’s allowance, and the Federal Estate Tax, Davidson v. Trust Co., 129 Ohio St., 418, 2 Ohio Opinions, 404, 195 N. E., 845; Campbell v. Lloyd, 162 Ohio St., 203, 55 Ohio Opinions, 102, 122 N. E. (2d), 695, both the surviving spouse, who takes by way of inheritance, and the trustee here who takes a distributive share under the will, may receive distribution, either in cash or in kind, Section 2113.53, Revised Code, or may demand distribution, either in cash or in kind, Section 2113.54, Revised Code (see also Section 2113.40 (C), Revised Code), to the extent of their respective shares. While the interest of the surviving spouse here in the various items of personal property is an undivided one, if distribution in kind is in order, Section 2113.55, Revised Code, and the item sought to be distributed in kind, such as the shares of AT & T stock, is subject to division, her interest, as well as that of the other legatee, may then be set oft by the Court in severalty — partitioned, as it were. If the item for which distribution in kind is sought, is not subject to division, and no agreement between the parties in interest can be reached, it may be ordered sold and the cash money obtained therefrom distributed, or under Section 2113.55, Revised Code, the court might make such other order as the situation required. This is not an unusual situation, and may occur in any intestacy or even where a will leaves an indivisible item to more than one person.

Obviously, the conclusion hereinabove reached, standing along, cuts the corpus of the trust created in Item II of decedent’s will for the benefit of Florence Graf in half. As a “disappointed legatee,” is the trustee entitled to anything to compensate for its loss, and if so, from what source ? It is well settled that a surviving spouse who elects to take under the statute of descent and distribution cannot also take under the will and keep the provisions therein made for her. This renounced provision is ordinarily used to compensate the disappointed legatees. See 56 Ohio Jurisprudence (2d), Wills, §846, and cases cited thereunder, particularly Jennings v. Jennings, 21 Ohio St., 56.

Item III of the will created a trust for the benefit of decedent’s wife for life, with the income from this trust to be paid to her in regular installments, and the trustee being authorized to invade the principal in an emergency. By taking under the law the widow renounced these provisions. Prior to 1953 it appears that it would have been possible to sequester this life interest of the refractory donee to compensate the “disappointed legatee.” Kenyon College v. Cleveland Trust Co., 130 Ohio St., 107, 3 Ohio Opinions, 141, 196 N. E., 784. While generally under the common law a remainder interest took effect upon the termination of an intervening life estate, which was held to be the case where a surviving spouse who had been given a life interest under the deeeasd consort’s will elected not to take under that will, the doctrine was a rule of construction based upon the presumed intention of the testator. Where it appeared that testator’s intention would be defeated by applying that doctrine of acceleration, it was not applied and the life interest was sequestered. Holdren v. Holdren, 78 Ohio St., 276, 85 N. E., 537. In 1953, however, the election statute, Section 2107.39, Revised Code, was amended to include the following: “. . . . unless the will shall expressly provide that in case of such election that shall be no acceleration of remainder or other interest bequeathed or devised by the will, the balance of the net estate shall be disposed of as though such spouse had predeceased the testator.” The will in question does not expressly provide anything of the sort. The scholarship trust fund for certain of testator’s relatives provided for in Item II to take effect upon the death of the wife and to run for ten years or until the fund is exhausted now takes effect upon her election. Therefore, sequestration of this life interest as such in order to compensate the “disappointed legatee” is not possible.

Counsel contend that the uncompensated loss resulting from the election to take against the will should fall upon a residuary estate in preference to the specific legacy, citing in support Dunlap v. McCloud, 84 Ohio St., 272, 95 N. E., 774; National Bank v. Linn (Prob. Ct., Tuscarawas County), 22 Ohio Opinions, 195. The question in both of these cases, however, concerned which part of the assets of the decedent’s estate should be used to pay the electing surviving spouse her share. They proceeded on the now erroneous assumption that a renouncing spouse “does not take an intestate share in the same manner as if the decedent had left no will, bnt that snch sponse has a distributive share equal to one half of (or one-third of, as the case may be) the ‘net estate.’ ” National Bank v. Linn, supra, at pg. 197. In Dunlap v. McCloud, supra, for example, the Supreme Court held that where a surviving spouse elects not to take under a will, she must be compensated from undevised realty, before resorting to realty that is devised, a point of view that is definitely contrary to Barlow v. Bank & Trust Co., supra. While Supreme Court in the Barlow case did not refer to the Dunlap case, it must be considered that that case was overruled.

In the case at bar, on the authority of the Barlow case, it has already been decided in the fore part of this opinion that the surviving spouse takes an undivided interest in all of the assets of this estate available for distribution, both real and personal. At this stage of the proceedings, therefore, the question is not whether the surviving spouse shall be paid her share from the residue, but rather whether the residue trust created in Item III of testator’s will must contribute to the loss already sustained by the specific trust created in Item II.

Except for some cases decided prior to the Barlow case, and upon a theory rejected by that case (see for example, Kenyon College v. Cleveland Trust Co., supra), no authority has been found and none has been cited authorizing any kind of contribution in a case like that at bar. The statute on contribution, Section 2107.54, Revised Code, covers only that situation where “real or personal property, devised or bequeathed, is taken from the devisee or legatee for the payment of a debt of the testator.” As pointed out, the election of a surviving spouse to take against the will creates a right of inheritance, not a debt. Further, that statute anticipates a situation in which real or personal property is taken from one legatee or devisee for the payment of a debt of a testator, while the property bequeathed or devised to other legatees or devisees is left intact. Therefore, the statute in such a case provides that “the other devisees and legatees must contribute their respective proportions of the loss to the person from whom such payment was taken so that the loss will fall equally on all the devisees and legatees to the value of the property received by each of them.” Here, since the electing surviving spouse takes by way of inheritance she receives an undivided interest in all of the distributable property of tbe estate, and thus tbe loss does fall equally on all tbe devisees and legatees.

The case of Blackford v. Vermillion, 107 Ohio App., 26, 7 Ohio Opinions (2d), 350, 156 N. E. (2d), 339, answers tbe contribution question fully. In that case tbe testatrix in Item III of ber will directed that a specific farm be sold and tbe proceeds divided among ber named grandchildren. In Item IV she directed that the rest and residue of ber property, both real and personal, be sold and tbe net proceeds divided among ber named children. Her surviving spouse elected to take under tbe statute of descent and distribution. Tbe question raised was whether tbe legacies to tbe children under Item IV (tbe residue) alone must be reduced to bear tbe burden of tbe elective share of tbe surviving spouse, or whether the legacies to tbe grandchildren under Item III (a specific bequest) must also be reduced proportionately. In deciding that Item III must also be reduced proportionately, tbe Hancock County Court of Appeals followed tbe Barlow case, supra, bolding that tbe electing surviving spouse took an undivided interest in tbe real estate, and extended the Barlow case, as has been done here, by bolding that tbe electing surviving spouse (pg. 30) “was further entitled, upon distribution of said estate, to an undivided one-tbird interest in and to all tbe personal property of tbe estate (including profits and income from said personal property and profits and income from tbe other undivided two-tbirds interest in and to tbe real estate received after tbe death of testatrix).”

That Court then continued: “This leaves available to tbe executor only an undivided two-tbirds interest in tbe real estate described in Item III to be sold to satisfy tbe legacies to tbe grandchildren, and thereby serves to reduce tbe amount which said legatees would have received bad tbe surviving spouse elected to take under tbe will. It also leaves available to tbe executor only an undivided two-tbirds interest in tbe balance of tbe .... property .... remaining after tbe payment of all debts and charges against tbe estate to go toward tbe satisfaction of tbe residuary legacies to tbe children named in Item IV and thereby serves to reduce tbe amount which said children would have received bad tbe surviving spouse elected to take under tbe will.” Interpolating here, there is thus only an undivided one-balf interest in tbe AT & T stock left for tbe executor to satisfy the trust created in Item II of tbe instant testator’s will and only an undivided one-balf interest in tbe rest and remainder of the property to satisfy tbe trust created in Item III of bis will.

Concluding, tbe Court in Blackford v. Vermillion, supra, stated its rule of law as follows: “It is our opinion, in tbe absence of a showing tbat tbe testator intended tbat the effect of an election of a surviving spouse to take against tbe will should be borne to tbe contrary, tbat when tbe election results in tbe executor being deprived of property, or interests in property, to such extent and in such manner, tbat tbe property or interests in property remaining available for distribution to different classes of legatees named in different items of tbe will would, if so distributed, cause tbe reduction resulting from said election to be borne equitably, but not necessarily equally or proportionately, between aid classes, distribution shall be made accordingly without further adjustment or contribution between tbe classes.” In tbe case at bar, this Court does not find tbat there has been any showing tbat tbe testator intended tbe effect of tbe election to be borne any other way than pro rata. As indicated in tbe Blackford case, tbe creation of different classes of legatees is not such a showing.

Tbe questions asked by plaintiff-executor in its petition may therefore be answered as follows:

1. Tbe legacy under Item II is a specific one, but this is immaterial insofar as tbe surviving spouse is concerned.

2. Tbe electing widow receives an undivided one-balf interest in tbe net estate, both real and personal, net estate being tbat property available for distribution after tbe payment of debts, fees, and other charges and expenses of administration.

3. Tbe bequest contained in Item II must be reduced to tbe extent of tbe widow’s undivided one-balf interest therein.

4. Tbe other assets of tbe estate are not to be contributed to Item II to make up for tbat lost by tbe widow’s election, since tbe other assets have also suffered their own pro rata loss.

5. Since tbe surviving spouse’s interest is tbat of an undivided one-balf in all property of tbe estate, whether liquid or otherwise, a money valuation of that property at any particular time is immaterial. Her undivided one-half interest includes income received by the executor after its appointment.

6. The provisions of the trust created in Item III, providing educational benefits for certain persons, are accelerated by reason of the widow’s election, and the ten year period for the application of such educational benefits begins to run as of the date of the widow’s election.

7. Since, upon the widow’s election, the balance of the net estate by statute (Section 2107.39, Revised Code), is “disposed of as though such spouse had predeceased the testator,” those persons designated in Item III who are eighteen years of age or older on the date of the widow’s election, or who become eighteen years of age during the ten year existence of this trust, are eligible to participate in its benefits. Incidentally, this question is being answered outside of the record since its answer concerns the trustee, not the plaintiff-executor.

8. Distribution shall be made to the widow in due course of events as in any other case where a person receives an intestate interest in an estate.

The foregoing conclusions are not only in accord with rational interpretation of the election statute, but are also in accord with ordinary reasoning. In the first place, the presumption exists that a testator in drawing his will possesses knowledge of existing statutes which may affect the devolution of his estate. Flynn, Admr. v. Bredbeck, 147 Ohio St., 49, 33 Ohio Opinions, 243, 68 N. E. (2d), 75. Therefore, whenever a married person makes a will, unless there is a valid antenuptial contract involved, that person does so with full knowledge that the surviving spouse may exercise her statutory right, renounce the will, and take under the statute of descent and distribution. The will should therefore be drawn accordingly, and it may logically be concluded that, in the absence of specific clarification in the will as to the disposition to be made of the estate in the event the surviving spouse renounces the will, the testator intended that his estate should pass as if the intestate share of the surviving spouse was not there. In the second place, it is my opinion that the term “disappointed legatee” as used in many of the cases is a misnomer. How can there be any disappointment to anyone named in a will as legatee or devisee if tbe surviving spouse makes a choice which she is authorized by law to make, which right of choice is presumably well known to all concerned?

Counsel for the surviving spouse may prepare an entry in accordance with this opinion.