## Facts

- Lucille Ann Austin executed a will on March 9, 1977, making Betty Guldberg a legatee of (1) an oil portrait and (2) “the promissory note … made by Gary Grenz, together with the deed of trust or mortgage securing said promissory note,” with contingent takers if Betty failed to survive distribution.
- The will included other legacies and specific gifts and left the residue to Shrine Hospital for Crippled Children.
- On July 1, 1977, the Grenz promissory note was paid in full ($17,065.88) after sale of the secured property.
- The payoff proceeds were deposited into a savings account that already contained approximately $7,727.67 (plus accrued interest).
- On August 9, 1977, Austin withdrew $20,000 from that account and loaned it to the Inmans, taking a new promissory note secured by a deed of trust, due in six months.
- Austin died on January 14, 1978, without changing her will.
- After death, the Inman note was paid off and the proceeds were held in the estate.
- No extrinsic evidence of Austin’s intent was presented beyond the will and the financial transactions.

## Issues

1. Whether the devise of the Grenz promissory note and its deed of trust was a specific legacy.
2. Whether payment and extinction of the Grenz note during the testatrix’s lifetime adeemed the specific legacy.
3. Whether the Grenz payoff proceeds, or the later Inman note funded from commingled account funds, should pass to the specific legatee rather than to the residuary beneficiary.

## Decision

- The Court of Appeal affirmed the probate court’s order.
- The Grenz note devise was a specific legacy of a particular identified promissory note and its security.
- Because the Grenz note was paid and no longer existed or was owned by the testatrix at death, the specific legacy was adeemed and the legatee took nothing under that clause.
- The savings-account funds, the Inman note, and the Inman payoff proceeds did not pass as a non-ademptive substitute and instead fell into the residuary estate for Shrine Hospital.

## Legal Principles

- A specific legacy is a gift of a particular, identified item that can be satisfied only by delivery of that item.
- If the subject of a specific gift is not in existence or not owned by the testator at death, the gift is adeemed by extinction and fails.
- Ademption analysis primarily turns on objective facts about the existence and ownership of the specified property at death, not unexpressed intent.
- A limited “change in form, not in substance” concept may prevent ademption in narrow circumstances, but it generally does not apply where the original asset is extinguished, converted to cash, commingled, and reinvested by voluntary transactions.

## Conclusion

A testamentary gift of a specifically identified promissory note and deed of trust fails by ademption when the note is paid and extinguished before the testator’s death; traceable cash proceeds and a later replacement loan instrument derived from commingled funds pass under the residuary clause absent a recognized non-ademption exception.


Estate of Austin, 113 Cal. App. 3d 167 (Ct. App. 1980)