FOSTER v. FOSTER

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Docket Number

No. 05-92-02491-CV.

Attorney(S)

John D. Hill, Sherman, for appellant. Robert E. Richardson, Jr., Sherman, for appellee.

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Smart Summary

Factual and Procedural Background

Bryant Foster died on August 24, 1985, leaving a will dated March 24, 1985, which appointed his brother, Billy Foster, as executor. The will bequeathed one dollar to each of Bryant's two sons and granted Billy Foster the power to divide the remainder of the estate "equally as he sees fit." William Foster, another brother, was not mentioned in the will. Billy Foster filed for probate of the will and requested a declaratory judgment to construe the will as granting him a general power of appointment. Before the court ruled on this request, Billy Foster executed an "Exercise of Power of Appointment" on November 23, 1985, appointing one-half of the estate's assets to William Foster, but this document was never filed with the court. The court later issued a declaratory judgment on February 5, 1986, confirming that Billy Foster held a general power of appointment over the residuary estate.

Subsequently, Billy Foster filed accountings showing partial division of estate assets between himself and William Foster, but later allocated all remaining assets to himself in a final settlement. William Foster filed an application for partition and distribution of the estate, claiming entitlement to one-half of the assets based on the November 23, 1985 exercise of power of appointment. The trial court approved Billy Foster's final settlement and denied William Foster's application, concluding that the November 23 document was premature, required ratification, and was effectively revoked by non-ratification.

Legal Issues Presented

Whether the document signed by Billy Foster on November 23, 1985, was a valid and enforceable exercise of the power of appointment granted under Bryant Foster's will.
When the power of appointment vested in Billy Foster—whether at Bryant Foster's death or upon the court's declaratory judgment.
Whether William Foster had standing to file an application for partition and distribution of the estate based on the exercise of the power of appointment.
Whether William Foster's claim was barred by limitations for failure to assert it within four years of the exercise document's date.

Arguments of the Parties

Appellant's (William Foster's) Arguments

The power of appointment vested in Billy Foster immediately upon Bryant Foster's death, pursuant to Texas Probate Code section 37.
The November 23, 1985 document met the criteria established in Republic National Bank v. Fredericks for a valid exercise of power of appointment.
William Foster, as an appointee by virtue of the exercise, had standing as an "interested person" under Texas Probate Code section 3(r) to file for partition and distribution.
William Foster's claim was not barred by limitations because a breach of contract claim accrues upon breach, not upon signing, and section 298 of the Probate Code does not apply to claims regarding final division of estate assets.

Appellee's (Billy Foster's) Arguments

The power of appointment did not vest until the court's declaratory judgment on February 5, 1986, thus the November 23, 1985 document was premature and ineffective until ratified.
Failure to ratify the November 23 document operated as a revocation of it.
The document was invalid because it was never filed with the probate court.
William Foster lacked standing as he was not a beneficiary under the will once the power was declared general and vested in Billy Foster.
William Foster's claim was barred by limitations under section 298(c) of the Texas Probate Code for not asserting it within four years of the document's date.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Republic National Bank v. Fredericks, 155 Tex. 79, 283 S.W.2d 39 (1955)	Criteria for validating an exercise of a power of appointment: (1) reference to the power, (2) reference to property subject to the power, and (3) instrument would be ineffectual except as execution of the power.	The court applied these criteria and held that the November 23, 1985 document met all requirements to be a valid exercise of the power of appointment.
Mercer v. Bludworth, 715 S.W.2d 693 (Tex.App. Houston [1st Dist.] 1986, writ ref'd n.r.e.)	Standard of review for conclusions of law and legal conclusions drawn from facts.	The court reviewed the trial court's legal conclusions de novo and reversed because the trial court misapplied the law.
Shumway v. Horizon Credit Corp., 801 S.W.2d 890 (Tex. 1991)	Overruled some aspects of prior precedent but reaffirmed standards for reviewing legal conclusions.	Cited for the standard of review of legal conclusions.
City of San Antonio v. Aguilar, 696 S.W.2d 648 (Tex.App. San Antonio 1985)	Reversal of trial court's legal conclusions only if no other legal theory supports judgment.	The court found no alternative legal theory to uphold the judgment and reversed.
G.A.C. Halff Found. v. Calvert, 281 S.W.2d 178 (Tex.Civ.App. San Antonio 1955)	Definitions of donor, donee, and appointee in the context of powers of appointment.	Used to clarify roles in the power of appointment context.
TEX.PROB.CODE ANN. § 37	Vesting of estate and powers of appointment immediately upon testator's death.	Held that the power of appointment vested in Billy Foster at Bryant Foster's death, supporting validity of November 23, 1985 document.
TEX.PROB.CODE ANN. § 3(r)	Definition of "interested persons" entitled to participate in probate proceedings.	Determined William Foster had standing as an interested person due to his property right under the exercise of the power.
TEX.PROB.CODE ANN. § 298	Claims against estate and limitations on claims.	Held that section 298 does not bar William Foster's claim as it does not apply to claims regarding final division among devisees.
Hoover v. Gregory, 835 S.W.2d 668 (Tex.App. Dallas 1992, writ denied)	Accrual of breach of contract claims occurs upon breach, not signing.	Applied to reject Billy Foster's limitations argument regarding the November 23, 1985 document.

Court's Reasoning and Analysis

The court first analyzed the vesting of the power of appointment, concluding under Texas Probate Code section 37 that the power vested immediately upon Bryant Foster's death on August 24, 1985, rather than upon the later declaratory judgment. This established Billy Foster's authority to exercise the power as of November 23, 1985.

Applying the criteria from Fredericks, the court found the November 23, 1985 document valid because it explicitly referenced the power of appointment, identified the property subject to it, and would have no effect except as an exercise of the power. The court rejected Billy Foster's argument that the document's failure to be filed with the probate court invalidated it, noting no legal requirement for filing to validate such an exercise.

Regarding standing, the court determined that William Foster qualified as an "interested person" under Texas Probate Code section 3(r) because he claimed a property right in the estate via the exercise of the power of appointment. Thus, he had standing to file for partition and distribution.

The court also rejected the limitation defense, reasoning that a breach of contract claim accrues upon breach, not signing, and that section 298 of the Probate Code applies to creditor claims existing before death, not to claims among devisees or appointees regarding final estate division.

Based on these analyses, the court concluded the trial court erred in holding the November 23, 1985 document invalid and unenforceable and found no alternative legal theory to uphold the trial court's judgment.

Holding and Implications

The Court REVERSED the trial court's order approving Billy Foster's account for final settlement and denying William Foster's application for partition of assets, and REMANDED the case for further proceedings consistent with this opinion.

The direct effect of this decision is that the November 23, 1985 exercise of the power of appointment is recognized as valid and enforceable, entitling William Foster to an undivided one-half interest in the estate's assets. The court did not establish any new precedent beyond affirming the proper application of established Texas Probate Code provisions and the Fredericks criteria. No broader implications beyond the parties' rights in this estate administration were discussed.

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William Dee FOSTER, Appellant, v. Billy FOSTER, as Administrator with Will Annexed of the Estate of Bryant F. Foster, Appellee.

OPINION

KINKEADE, Justice.

William Dee Foster appeals from a trial court order approving the administrator's account for final settlement and denying his application for partition of assets. In two points of error, he argues that the trial court erred in concluding that a document signed by his brother, Billy A. Foster, was not a valid and enforceable exercise of a power of appointment granting him a one-half interest in the assets of the estate of his other brother, Bryant Foster. Because the trial court's conclusions that the document was not a valid and enforceable exercise of the power of appointment were incorrect, we reverse the trial court's judgment.

FACTUAL AND PROCEDURAL HISTORY

Bryant Foster died on August 24, 1985. He left a will dated March 24, 1985. Pursuant to the will, he appointed his brother, Billy Foster, executor of his estate. He left one dollar to each of his two sons. The rest of the estate was to be divided by Billy Foster "equally as he sees fit." The will did not mention Bryant Foster's other brother, William Foster. On September 12, 1985, Billy Foster filed an application in county court to probate the will. On October 7, 1985, he filed a request for a declaratory judgment in the same action, requesting the court to construe the will as granting him a general power of appointment to distribute the assets of his brother's estate.

After requesting the declaratory judgment but before the court acted on his request, Billy Foster consulted an attorney and signed an "Exercise of Power of Appointment" on November 23, 1985. That document provided:

I, BILLY A. FOSTER, the donee of a power of appointment given to me under the Last Will and Testament of Bryant F. Foster, dated March 24, 1985, which was admitted to probate in Cause No. 22566 styled "Estate of Bryant F. Foster, Deceased" in the Probate Court of Grayson County, Texas, Sitting in Probate, by Order dated September 27, 1985, hereby expressly exercise the aforesaid power by appointing one-half of the assets subject to it to my brother, William Foster, whose permanent address is Route 2, Box 275, West Monroe, Louisiana 71291.

The document was never filed with the court.

In response to Billy Foster's request for declaratory judgment, the court issued an order on February 5, 1986, construing the will. It held that the will created:

. . . a generally exercisable power of appointment of the residuary property of the Estate of Bryant F. Foster, Deceased, granted to Billy A. Foster as donee, in which Billy A. Foster shall have the current power to appoint all of such residuary estate to such persons, including himself, Billy A. Foster, and in such estate, interest and proportions as Billy A. Foster shall determine.

Billy Foster later filed a cumulative accounting of the assets of Bryant Foster's estate. The accounting showed that Billy Foster equally divided some but not all of the estate's assets between himself and William Foster. On January 8, 1992, William Foster filed an application for partition and distribution of the estate. He claimed that he was entitled to an undivided one-half of the assets of the estate under the exercise of the power of appointment signed by Billy Foster on November 23, 1985. Billy Foster moved for dismissal of the application. On April 24, 1992, Billy Foster filed an account for final settlement of the estate in which he exercised his power of appointment to give all the estate's remaining assets to himself.

The court entered an order on June 29, 1992, approving Billy Foster's cumulative accounting and his account for final settlement and denying William Foster's application for partition of assets. The court concluded that (1) the document signed by Billy Foster on November 23, 1985, was premature, (2) the court's declaratory judgment of February 5, 1986, declaring that Bryant Foster's intent was to give Billy Foster an unlimited power of appointment, required Billy Foster to ratify the November 23, 1985 document before that document became effective, (3) Billy Foster's failure to ratify the November 23, 1985 document operated as a de facto revocation of that document, and (4) any distributions made by Billy Foster to persons other than himself were gifts of the estate made pursuant to Billy Foster's unlimited power of appointment under the will as construed by the court.

POWER OF APPOINTMENT

In his first point of error, William Foster contends that the court erred in concluding that the document signed by Billy Foster on November 23, 1985, was not a valid and enforceable exercise of his power of appointment granted in the will. William Foster argues that Billy Foster's power of appointment under the will was created by the will and vested in Billy Foster when Bryant Foster died on August 24, 1985. He further argues that the November 23, 1985 document signed by Billy Foster met the criteria for exercising that power of appointment as set out in Republic National Bank v. Fredericks, 155 Tex. 79, 283 S.W.2d 39, 47 (1955). Since the power of appointment under the will was vested in Billy Foster at the time he signed the November 23, 1985 document and that document met the Fredericks criteria, William Foster concludes that the November 23, 1985 document was a valid assignment of an undivided one-half interest in the estate to him. We agree.

Standard of Review

William Foster attacks the trial court's legal conclusions as a matter of law. A conclusion of law is reviewable when attacked as a matter of law. Mercer v. Bludworth, 715 S.W.2d 693, 697 (Tex.App. — Houston [1st Dist.] 1986, writ ref'd n.r.e.), overruled on other grounds, Shumway v. Horizon Credit Corp., 801 S.W.2d 890, 894 (Tex. 1991). We review a legal conclusion drawn from the facts to determine whether the trial court properly applied the law to the facts. See id. If the trial court's conclusion is incorrect, we reverse only if the facts do not support another legal theory on which to uphold the judgment. See City of San Antonio v. Aguilar, 696 S.W.2d 648, 653 (Tex.App. — San Antonio 1985, writ dism'd w.o.j.).

Vesting of the Power of Appointment

We first address the issue of when the power of appointment granted to Billy Foster vested. When an individual delegates to another person the power of designating or selecting how that individual's property will be divided upon death, that individual has granted a power of appointment. See Fredericks, 283 S.W.2d at 46. The person granting the power, such as a testator through a will, is the "donor." See G.A.C. Halff Found. v. Calvert, 281 S.W.2d 178, 182 n. 1 (Tex.Civ.App. — San Antonio 1955, writ ref'd n.r.e.). The person receiving the power is the "donee." Id. Those who receive property from the donee are "appointees." Id.

Billy Foster argues that the power of appointment did not vest in him until the date the trial court construed the will as granting him a general power of appointment. Since that date was after the date he signed the exercise of the power of appointment, he argues the document was not effective until he ratified it, which he never did. Billy Foster's argument ignores the express language of section 37 of the Texas Probate Code. That section states:

When a person dies, leaving a lawful will, all of his estate devised or bequeathed by such will, and all powers of appointment granted in such will, shall vest immediately in the devisees and legatees of such estate and the donees of such powers . . . .

TEX.PROB.CODE ANN. § 37 (Vernon Supp. 1993) (emphasis added). Based upon section 37, Billy Foster was vested with the power of appointment granted to him in the will immediately upon Bryant Foster's death on August 24, 1985; therefore, he could and did exercise that power as of November 23, 1985.

Exercise of the Power of Appointment

We next address the issue of whether the November 23, 1985 document was a valid exercise of Billy Foster's power of appointment. In Fredericks, the Texas Supreme Court prescribed the following three criteria for determining if an instrument purporting to be an exercise of a power of appointment is valid:

(1) did the instrument reference the power,

(2) did the instrument reference the property subject to execution under the power of appointment, and

(3) would the provisions of the instrument executed by the donee otherwise be ineffectual; i.e., would have no operation except as an execution of the power.

Fredericks, 283 S.W.2d at 47. When we apply these three criteria, the November 23, 1985 document exercised Billy Foster's power of appointment under the will. The document referenced the power of appointment granted under Bryant Foster's will and stated that Billy Foster was expressly exercising that power. The document referred to the property subject to execution under the power of appointment and specifically stated that Billy Foster appointed one-half of the assets subject to the power of appointment to William Foster. The document titled "Exercise of Power of Appointment" specifically provided that Billy Foster was exercising the power of appointment granted to him under Bryant Foster's will.

Billy Foster contends that the document was not valid because it was never filed with the county court. Contrary to that argument, the court in Fredericks did not include filing with the court as a criterion for determining whether a power of appointment was valid. Billy Foster cites no authority and we find none requiring that an exercise of a power of appointment be filed with the court in order to be effective.

Standing and Limitations

In the alternative, Billy Foster contends that, assuming the November 23, 1985 document was a valid exercise of his power of appointment, William Foster lacked standing to file his application for partition and distribution of the estate. He argues that once the court construed the will as granting him a general power of appointment, William Foster no longer qualified as an "interested person" pursuant to section 3(r) of the Texas Probate Code with the right to complain about how the estate's assets were divided because William Foster was not a beneficiary under the will. Billy Foster's interpretation of section 3(r) is incorrect.

Section 3(r) defines interested persons as "heirs, devisees, spouses, creditors, or any others having a property right in, or claim against, the estate being administered. . . ." TEX.PROB.CODE ANN. § 3(r) (Vernon 1980). William Foster claimed a property right in one-half of the assets of the estate by virtue of the November 23, 1985 exercise of the power of appointment. He was, therefore, an interested party as defined by section 3(r) and had standing to file his application.

Also in the alternative and assuming the November 23, 1985 document was valid and enforceable, Billy Foster contends that William Foster's claim was for breach of the document and was barred by limitations because he did not assert it within four years of the date the document was signed. He argues, therefore, that the trial court was required to disapprove the claim pursuant to section 298(c) of the Texas Probate Code. This argument fails for two reasons. First, a claim for breach of contract accrues when the contract is breached, not when the contract is signed. See Hoover v. Gregory, 835 S.W.2d 668, 677 (Tex.App. Dallas 1992, writ denied). Second, section 298 addresses money claims against a testator or intestate, such as those of a creditor, that were already in existence before death. TEX.PROB.CODE ANN. § 298(a) (Vernon 1980). That section does not concern claims dealing with the final division of the estate to devisees or appointees, as William Foster's claim in this case. See TEX.PROB.CODE ANN. s 298 (Vernon 1980).

Conclusion

Based upon section 37 of the Texas Probate Code and the criteria set out in Fredericks, the power of appointment granted to Billy Foster under Bryant Foster's will vested in Billy Foster at the time of Bryant Foster's death on August 24, 1985, and the November 23, 1985 document was a valid and enforceable exercise of that power. Accordingly, the court's conclusions that the document was invalid and unenforceable were incorrect because the trial court improperly applied the law to the facts. Because the exercise of the power of appointment was valid and enforceable, we conclude there is no other theory on which to affirm the court's order. We, therefore, sustain William Foster's first point of error. Because of our disposition of his first point of error, we need not reach his second point of error.

We reverse the court's order approving Billy Foster's account for final settlement and denying William Foster's application for partition of assets and remand the case to the court for further proceedings consistent with this opinion.