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Wills--general power of appointment--residuary clause--trust assets
Even though the general rule is that specific reference must be made to a power of
appointment before the power may be exercised, the trial court erred in concluding decedent's
will had no effect on the disposition of decedent's trust because the residuary clause of
decedent's will exercised the general power of appointment reserved by him in the pertinent trust
since: (1) a power of appointment upon which no restrictions are imposed is exercised by a
residuary clause; (2) the will does not indicate any intent not to exercise the power of
appointment reserved by the trust; and (3) the trust does not indicate that decedent was required
to refer to the reserved power in order for it to be exercised.
Tate, Young, Morphis, Bach & Taylor, by Wayne M. Bach and
Kevin C. McIntosh, for plaintiff-appellee First Union National
Bank.
Sigmon, Clark, Mackie, Hutton & Hanvey, P.A., by William R.
Sigmon and Stephen L. Palmer, for defendant-appellant Frances
Y. Ingold.
Patrick, Harper & Dixon, by Stephen M. Thomas, for defendant-
appellees Phoebe Ingold Spratt, Alice S. Herman, Barney M.
Spratt, Dr. C. Jean Spratt, W. Andrew Spratt, Debbie Darling
Spratt as guardian ad litem of Thomas A. Spratt (a minor), and
Jennifer H. Warren.
Shirley H. Anthony, Guardian Ad Litem for the minor and unborn
issue of defendant Phoebe Ingold Spratt, who did not otherwise
have a guardian.
HUNTER, Judge.
Defendant Frances Y. Ingold (“appellant”) appeals the judgment
of superior court wherein it determined F. Bernard Ingold's(“decedent”) last will and testament (“will”) had no effect on the
administration of a trust agreement (“Ingold Trust”) executed by
decedent. We reverse, concluding that a general power of
appointment was reserved by decedent in the Ingold Trust and it was
exercised by the residuary clause in his will.
The present action was instituted by First Union National Bank
(“plaintiff”) as executor of the decedent's estate seeking
declaratory judgment under Article 26 of the General Statutes of
North Carolina. Plaintiff alleged in its complaint that a trust
executed by the decedent, when construed in conjunction with his
will, created uncertainty as to the distribution of the trust
assets. Appellant filed an answer also requesting construction of
said documents, and requested that the court find that “the Last
Will and Testament of F. Bernard Ingold [disposed] of the Ingold
Trust Estate, thereby devising all the assets comprising said Trust
Estate to Frances Y. Ingold.” The remaining defendants filed a
separate joint answer requesting that the court “enter judgment
construing the trust agreement . . . according to its terms.” The
matter came on for hearing on 3 December 1998. On 15 January 1999,
the court entered judgment wherein it stated that the decedent's
trust should continue in force as if his will had no effect.
The evidence submitted to the court indicates that paragraph
2B of the Ingold Trust states in part:
Upon the death of the Grantor without his
having provided for disposition of the Trust
Estate by will and contrary to the provisions
of this Agreement, the net income of the Trust
Estate shall be paid to his wife, Frances Y.
Ingold, in quarterly installments.
Under the trial court's ruling, this section would remain in forceand appellant would only receive the net income of the trust estate
in quarterly installments. The residuary clause in decedent's will
provides:
I will, devise and bequeath all of my property
of every kind, sort and description, both real
and personal, unto my wife, Frances Y. Ingold,
absolutely and in fee simple.
Appellant contends this devise exercised a power of appointment
reserved by the decedent in paragraph 2B, resulting in the entire
trust estate being devised to her. We agree.
The standard of review of a judgment rendered under the
Declaratory Judgment Act is the same as in other cases. N.C. Gen.
Stat. § 1-258 (1996). Thus, where a declaratory judgment action is
heard without a jury and the trial court resolves issues of fact,
the court's findings of fact are conclusive on appeal if supported
by competent evidence in the record, even if there exists evidence
to the contrary, and a judgment supported by such findings will be
affirmed. Insurance Co. v. Allison, 51 N.C. App. 654, 277 S.E.2d
473, disc. review denied, 303 N.C. 315, 281 S.E.2d 652 (1981).
Therefore, a judgment supported by findings based on any competent
evidence must be affirmed.
Under our statutory code:
A general devise of the real estate of
the testator, or of his real estate in any
place or in the occupation of any person
mentioned in the will, or otherwise described
in a general manner, shall be construed to
include any real estate, or any real estate to
which such description shall extend, as the
case may be, which he may have power to
appoint in any manner he may think proper;
and shall operate as an execution of such
power, unless a contrary intention shall
appear by the will; and in like manner a
bequest of the personal estate of thetestator, or any bequest of personal property,
described in a general manner, shall be
construed to include any personal estate, or
any personal estate to which such description
shall extend, as the case may be, which he may
have power to appoint in any manner he maythink proper, and shall operate as an
execution of such power, unless a contrary
intention shall appear by the will.
N.C. Gen. Stat. § 31-43 (1999) (emphasis added). N.C. Gen. Stat.
§ 31-43 “is identical with § 27 of the English Wills Act of 1837 (7
Wm. IV & 1 Vict., Ch. 26).” Trust Co. v. Hunt, 267 N.C. 173, 178,
148 S.E.2d 41, 45 (1966). The effect of both § 27 of the English
Wills Act and N.C. Gen. Stat. § 31-43
is that a general devise or bequest shall be
construed to include any real or personal
property which the testator may have power to
appoint in any manner he may think proper and
shall operate as an execution of such power
unless a contrary intention appears in the
will. A power to appoint in any manner the
donee may think proper is a power upon which
no restrictions are imposed -- a general
power.
Trust Co. v. Hunt, 267 N.C. at 181, 148 S.E.2d at 46-47 (emphasis
in original) (citation omitted). Citing N.C. Gen. Stat. § 31-43,
this Court has stated: “In North Carolina and a minority of other
states, a power of appointment upon which no restrictions are
imposed is exercised by a residuary clause.” In the Matter of:
First Citizens Bank & Trust Co. v. Fleming, 77 N.C. App. 568, 570,335 S.E.2d 515, 517 (1985). It is uncontroverted that the
decedent's will contained a residuary clause. Accordingly, our
inquiry will focus on whether or not a general power of appointment
is contained in paragraph 2B of the Ingold trust.
Appellees contend that paragraph 2B of the trust does not
contain a power of appointment. Generally, a power of appointment
is the power to dispose of property by deed or will. 62 Am. Jur.
2d Powers § 2 (1990). While “[t]he donor and donee of a power of
appointment cannot be the same person, . . . it is not uncommon for
a trust settlor to reserve to himself a power of appointment to be
exercised by his own will at a later time.” 62 Am. Jur. 2d Powers
§ 32 (footnotes omitted). Powers are ordinarily categorized as
either general or special.
General powers of appointment are those
authorizing the donee of the power to appoint
anyone, including himself or his estate, and
his creditors, although the mere fact that a
donee of a power is free to select the
beneficiary does not make the power a general
one, where it does not appear that he may
exercise the power during his lifetime for his
own benefit. A power of appointment is said
to be general when there is no restriction as
to its exercise (except as to manner), the
persons in whose favor it is to be exercised,
or the amounts to be given to such persons.
. . .
Special or limited powers of appointment
are those in which the donee of the power is
restricted to passing on the property to
certain specified individuals, or to a
specific class of individuals -- other than
himself or his estate -- or to any
beneficiaries except those specifically
excluded, or in which the donee can exercise
the power only for certain named purposes, or
under certain conditions. Stated another way,a special power is one limited by excluding
certain persons from taking under the power of
disposition given the donee.
62 Am. Jur. 2d Powers § 11 (1990) (footnotes omitted). “'A power
is general where no restriction is imposed upon the donee as to the
person or persons to whom he may appoint or the amount which each
person shall receive.'” Trust Co. v. Hunt, 267 N.C. at 176, 148
S.E.2d at 43 (citations omitted). Under the laws of this state, a
power of appointment may be created not only by express words, but
also by implication of law and, further, no technical language need
be used. In Re Grady, 33 N.C. App. 477, 480, 235 S.E.2d 425, 428
(1977). The polar star which must serve as the guide for
determining whether certain language creates a power of appointment
is the intent underlying the settlor's inclusion of such language
in the document:
“An instrument, such as a deed or will,
creating a power of appointment is to be
interpreted so as to ascertain the intention
of the donor and to give it effect unless some
rule of law prevents. Effect should, if
possible, be given to every word or clause in
the instrument, so long as they are not
inconsistent with the general intent of the
instrument as a whole.” 41 Am. Jur., Powers,
§ 9, p. 812.
Howell v. Alexander, 3 N.C. App. 371, 376, 165 S.E.2d 256, 260
(1969).
In paragraph 2B of the Ingold Trust, the decedent in the
present case specifically provided that he may appoint the entire
trust estate by will and contrary to the trust provisions. The
decedent imposed no restrictions on this reserved power.
Therefore, the power reserved by the decedent was a general powerof appointment. Looking at the four corners of the document, it
does not reveal any contrary intent. Paragraph 10 of the trust
states:
During his lifetime the Grantor may, by
written instrument filed with the Trustee,
revoke this trust in whole or in part upon
paying the sums due to the Trustee for its
services hereunder or may by testamentary
disposition revoke said trust in whole or in
part.
Thus, it is evident that the decedent specifically intended the
trust to be revocable during his life or by testamentary
disposition. The intent in this paragraph coincides with the
intent to reserve a general power of appointment in paragraph 2B.
As stated earlier, a power of appointment upon which no
restrictions are imposed is exercised by a residuary clause. In
the Matter of: First Citizens Bank & Trust Co. v. Fleming, 77 N.C.
App. at 570, 335 S.E.2d at 517. The will does not indicate any
intent not to exercise the power of appointment reserved by
decedent in the Ingold Trust. Likewise, the Ingold Trust does not
indicate that the decedent was required to refer to the power
reserved in paragraph 2B in order for it to be exercised. Thus,
the rule that “in order to exercise a power of appointment calling
for specific reference to the power before the power may be
exercised, some reference to the power must be made,” In the Matter
of: First Citizens Bank & Trust Co., 77 N.C. App. at 571, 335
S.E.2d at 517, is inapplicable to the present case.
Based on the foregoing, we hold that the residuary clause of
the decedent's will exercised the general power of appointmentreserved by him in the Ingold Trust. Our review indicates that no
competent evidence supports any other conclusion. Due to our
holding, we need not reach appellant's second assignment of error.
Reversed and remanded.
Chief Judge EAGLES and Judge JOHN concur.
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