STANLEY, Commissioner. The ultimate question is which of two groups of devisees of the late Mrs. Eliza S. Bowman is responsible for the payment of the estate and inheritance taxes on the residuary estate of her husband, W. R. Bowman. The construction of the provisions of Mr. Bowman's will bequeathing the residuary to his widow is required to reach the decision. This basic question is whether he gave her the fee in remainder or a power of appointment. Then follows the construction of Mrs. Bowman's will. Another question of primary importance is that of a plea of res adjudicata. Dependent or subordinate propositions appear during the course of the opinion.
Bowman's will, probated in January, 1938, was prepared by a banker. His use of legal terminology has caused confusion. Insofar as relevant here, the testator bequeathed the residue of his estate, about $120,000, to the Union Bank & Trust Company of Lexington in trust, the net income to be paid to his widow. Board powers were conferred upon the trustee but it could make no conveyance of the real estate unless Mrs. Bowman joined in it. The troublesome provision reads:
'Said Trustee is directed at any time to dispose of any of the securities or investments or cash that would be allocated as the corpus of my estate at any time for the proper comfort and well-being of my wife, Eliza S. Bowman, however, the appointment of the Trust herein created shall not be construed in any way to divest my wife, Eliza S. Bowman, of title to said Trust estate as a remainderman, with remainder in fee to my wife, Eliza S. Bowman. She is to have the right to dispose of any part or all of the said estate by will, then any part of said estate remaining undisposed of by the will of said Eliza S. Bowman, I hereby direct that the Trustee, herein named, to convert same into cash and distribute to my nieces and nephews and to the nieces and nephews of the said Eliza S. Bowman, share and share alike.'
The bank is also the executor of the will.
Mrs. Bowman's will, probated in March, 1948, was prepared by another officer of the bank. The first clause reads:
'I direct that all of my just debts, funeral expenses, Federal Estate taxes and State Inheritance taxes and the costs of administration be paid as soon after my death as can conveniently be done.'
By the second paragraph the testatrix directs her executor (also the Union Bank & Trust Company) to sell her farm of 240 acres and all equipment, livestock, etc., on it, 'and after the payment of all direct liabilities of my estate mentioned in clause one of this will' she disposes of the remainder of the proceeds of the farm. She gives for named persons certain sums and provides: 'After the payment of the hereinbefore direct obligations of my estate named in the first clause of my will' and the four specific bequests, and then divides the residue equally between two of her grandnephews, Edward Bassett III, and Julius Clark. (Provisions for substitutionary beneficiaries in case of the predecease of either are irrelevant.) By the third clause testatrix disposes of the proceeds of 'all of the rest and residue of my estate.' One-half is devised 'equally, share and share alike, to the then living nieces and nephews of my deceased husband, W. R. Bowman.' The other half is devised 'equally, share and share alike, to my nieces and nephews living at the time of my death.'
It appears Mrs. Bowman individually had some estate in addition to her farm and equipment. It is to be noted that she makes no reference whatever to the estate or the will of her deceased husband. Both estates approximate $245,000.
The point at issue is this: 'If Bowman devised to his widow his residuary estate in fee subject to the trust during her lifetime, then it became part of her estate, and all federal estate taxes and state inheritance taxes thereon are payable as directed in the second clause of her will out of the proceeds of her farm and are borne by Edward Bassett and Julius Clark. If Bowman gave his widow only the power of appointment and its exercise is embraced in the third clause of her will, then the class of devisees named therein (his nieces and nephews and her nieces and nephews) are to be regarded as appointees and their legacies are chargeable with the estate and inheritance taxes. The amount involved is around $30,000.
The circuit court adjudged as a declaration of rights: (1) The widow received from her husband the net income from the trust established by him during her life together with a power of appointment or of disposition by her will of the remainder interest, and she had exercised the power by directing it to be equally divided among his and her nieces and nephews. (2) It was the intention of the testatrix to provide for the payment of the estate and inheritance taxes chargeable against her individual estate and the costs of administering it, but it was not her intention to provide for the payment out of her individual estate of such taxes levied on her husband's estate or costs of administering it, and same are payable out of the funds devised the two groups of beneficiaries named in the third clause of her will. (3) It was further held that a previous judgment pleaded is not res adjudicata of the questions involved in the present suit. The Bank & Trust Company as trustee and executor of both wills, and the residuary beneficiaries prosecute an appeal.
The pleadings became rather complicated. The case was referred to the Master Commissioner 'to hear proof and to report on all matters of law and fact.' No proof was heard but the Commissioner filed an opinion construing the two wills and finding that the estate and inheritance taxes on the W. R. Bowman estate were chargeable against his and Mrs. Bowman's nieces and nephews as appointees of a power. He further reported the controversial questions relative to a proper accounting of the Union Bank and Trust Co., as executor of both wills and trustee under Mr. Bowman's will, could not be decided until proof had been taken, and those questions were reserved. The court construed the wills in the same way, confirmed the report, and entered judgment accordingly.
The appellants contend the Commissioner's report should not have been confirmed without proof having been heard and that this court should decline to make a final declaration of rights upon the pleadings alone, as did the chancellor, and should remand the case that evidence may be presented (1) as to the conditions surrounding the testator and testatrix pertaining to the execution of the two wills, that they may be properly interpreted in the light thereof; (2) the correctness of the settlements which have been tendered; and (3) from what sources and by whom the taxes, costs, etc. should be paid. The appellants also insist that if the court should be in doubt as to the meaning and effect of the agreed judgments pleaded in bar, we should remand the case for proof to clarify the orders.
We pass the question of waiver of the right to an order of remand by the circuit court and now by this court because of the appellants' participation in the proceedings before the Commissioner without having offered to take the proof.
We think no evidence was competent or necessary concerning the situation of the testator and testatrix. It seems sufficiently shown in the pleadings. They were first cousins. The ambiguities in the wills are patent and not latent. Parrott v. Crosby, 179 Ky. 658, 201 S.W. 13; Daniel v. Tyler's Ex'r, 296 Ky. 808, 178 S.W.2d 411. The sources for payment of the taxes and liability therefor are determinable by the construction of the wills. The correctness of the settlements filed by the trustee and executor was reserved by the ...