229 Iowa 921 | Iowa | 1940
The defendants Linn County and Frank F. Bates, as treasurer of said County, having first perfected their appeal, they are designated in the caption as appellant and cross-appellee, and the executor as appellee and cross-appellant. For convenience, they will be herein designated as plaintiff and defendants.
The action concerns the taxes on the moneys and credits in the estate of Robert W. Cooper, who died testate May 24, 1937. A. L. Augustine qualified as executor June 17, 1937. All of decedent’s property was left to religious, educational, and charitable institutions, as follows: 1/20 to the Young Women’s Christian Association of Cedar Rapids, 1/20 to the Young Men’s Christian Association of Cedar Rapids, 1/20 to St. Luke’s Methodist Hospital of Cedar Rapids, 2/20 to the Home for Aged Women of Cedar Rapids, 2/20 to the Home for the Friendless of Cedar Rapids, 1/20 to Coe College of Cedar Rapids — all of which are corporations organized under the laws of the state of Iowa; 10/20 to the American Bible Society, a corporation organized by the act of the legislature of the state of New York, and 2/20 to the Trustees of the Synod of the Reformed Presbyterian Church of North America, a corporation organized by the act of the legislature of the state of Pennsylvania.
The will directed “that plenty of time be taken in the settlement of my estate, so that as much as possible may be realized out of my estate to distribute as above directed. ’ ’
This appeal does not involve the estate or inheritance tax.
“That the beneficiaries under the will of Robert W. Cooper, Deceased, known and designated as the Young Men’s Christian Association of Cedar Rapids, the Young Women’s Christian Association of Cedar Rapids, St. Luke’s Methodist Hospital, the Home for the Friendless of the City of Cedar Rapids, and Coe College are corporations not for pecuniary profit, organized, existing and operating under the laws of the State of Iowa and doing business within the State of Iowa, and are charitable, educational and religious organizations, within the definition, meaning, and intent of section 6944,1935 Code of Iowa.
‘ ‘ That the beneficiary under said will, known as the American Bible Society, is also a religious, charitable and educational institution within the definition, meaning' and intent of section 6944, 1935 Code of Iowa. That said society is a corporation organized under the laws of the State of New York, for the purpose of printing and distributing protestant Bibles throughout every state of the United States and foreign countries throughout the world. That said society is not a corporation organized for pecuniary profit, but a non-profit organization existing and operating by virtue of the gifts and bequests which are made to it, and that it distributes its Bibles to any individual or group which desires them at less than cost, that said Bibles are published in more than one hundred different languages and dialects, and are distributed, and said corporation is doing business in many foreign countries and in every state in the union including Iowa.
“That the beneficiary under the will of Robert W. Cooper, known as the Trustee of the Synod of the Reformed Presbyterian Church of North America is a charitable, educational and re*924 ligious institution within the definition, meaning and intent of Section 6944 of the 1935 Code of Iowa, that said beneficiary is a corporation organized and operating under the laws of the State of Pennsylvania, and that it has in Iowa churches and congregations at Hopkinton, Morning Sun, Sharon, and Grundy Center, and that, by order of the Synod of the Reformed Presbyterian Church, the bequest in the Estate of Robert W. Cooper, deceased, when received will be used for the benefit of the educational and religious organizations of this beneficiary of which the congregations of the State of Iowa are a part. That said corporation is doing business in every state in which its churches and schools are located, including Iowa.
“That the above named institutions comprise the beneficiaries under the will of Robert W. Cooper, and will receive all of the net proceeds of said estate. That on January 1, 1939, and before said date the period of filing claims which had been presented had been paid, that all taxes on said estate have been paid save the taxes which is the subject of this motion.”
On trial to the court a decree was entered December 14,-1939, finding the facts as above stated, and further finding that “the equitable ownership of the property of this estate vested instantly on the death of decedent in the charitable legatees and devisees, who are and always have been the sole equitable owners of the property of this estate. ’’ The court further found that the Cooper Estate was liable for the moneys and credits tax for the year 1938, but not liable for such tax for the year 1939 or for subsequent years that might transpire before the estate was finally closed, and decree was entered accordingly. From the order granting exemption for the 1939 tax, defendants appeal, and from the order refusing exemption for the 1938 tax, plaintiff appeals.
As shown by the foregoing, the sole question for determination on this appeal is whether or not, under this state of facts, the property of the estate is taxable for the year 1938 and for the year 1939, while the estate was still in the process of settlement and before any distribution had been made to any of the legatees.
Section 6944 of the 1935 Code of Iowa relates to exemption
“The following classes of property shall not be taxed: * « #
“10. Moneys and credits — property of students. Moneys and credits belonging exclusively to the institutions named in subsections 7, 8, and 9” (7. Property of cemetery associations; 8. Libraries and art galleries; 9. Property of religious, literary, and charitable societies.) “and devoted solely to sustaining them, but not exceeding in amount or income the amount prescribed by their charters or articles of incorporation; and the books, papers, pictures, works of art, apparatus, and other personal property belonging to such institutions and used solely for the purposes contemplated in said subsections and the like property of students in such institutions used for their education. ’ ’
Defendants in assailing the exemption of the 1939 tax granted by the court, allege that the court erred in holding that the moneys and credits of the estate in the possession or control of the executor and subject to the orders of the probate court, belonged exclusively to the beneficiaries under the will, devoted solely to sustaining them. One difficulty about this claim of defendants is that the record here shows by stipulation that all of the legatees named were religious, charitable, or educational institutions, within the definition, meaning, and intent of Code section 6944.
But even if not stipulated, we cannot agree with defendants in their view. That the legatees come within the definition of owners, under Code section 6944, is we think established by the decisions of this court. This court has always held that the estate property vests immediately upon the death of the decedent. Moore v. Gordon, 24 Iowa 158; Ferry v. Campbell, 110 Iowa 290, 296, 81 N. W. 604, 607, 50 L. R. A. 92, 95; Douglas v. Albrecht, 130 Iowa 132, 136, 106 N. W. 354, 356, and cases cited.
Defendants cite the decisions in the cases of Wapello County Savings Bank v. Keokuk County, 209 Iowa 1127, 229 N. W. 721, and Kirk v. St. Thomas’ Church, 70 Iowa 287, 30 N. W. 569, in support of their claim that the moneys and credits of
Defendants’ argument that part of the fund must go for necessary expenses would not affect the question of exemption. The entire estate is exclusively the property of the legatees, subject only to payment of claims, costs, and expenses. However handled, through a trustee or otherwise, the expenses would necessarily have to be paid. It could not be argued that a beneficiary would be denied exemption simply because the bequest to such beneficiary would be attended by some expense in apportioning it, or in its investment and administration. As stated in 61 C. J., p. 400, sec. 400: “* * * where the title is held in trust, although trust property is taxable to the trustee, as a general rule, and not to the beneficiary, its right to exemption is determined by the nature of the beneficial interest, * * *. ” See Ellsworth College v. Emmet County, 156 Iowa 52, 135 N. W. 594, 42 L. R. A., N. S., 530, and cases cited; McColl v. Dallas County, 220 Iowa 434, 262 N. W. 824. Since the courts of this state have uniformly held that an executor holds as trustee, there can be no question that the legatees herein have an equitable title. See, among other cases, Bettendorf v. Bettendorf, 190 Iowa 83, 109, 179 N. W. 444, 456; Ryan v. Hutchinson, 161 Iowa 575, 143 N. W. 433; Goodman v. Bauer, 225 Iowa 1086, 281 N. W. 448, and eases cited. We think the ownership is established in the legatees, and, under the facts, comes within the provisions of the statute. That the money was or is invested and the proceeds of the interest applied to the purposes of the institution would not prevent the exemption.
II. It is also contended by the défendants that the exemption could not apply to the bequests to the American
It is conceded by the defendants that authorities in other states are divided on the question of exemption as to nonresident or foreign corporations. It is probably true that the majority of the states, in construing the provisions and effects of the inheritance tax laws, do not bring, within the exemption corporations or institutions of other states. We have, however, examined all of the cases cited by the defendants, with others. All are inheritance tax cases.
In re Prime’s Estate, 136 N. Y. 347, 32 N. E. 1091, 18 L. R. A. 713, bases its holding largely on the general theory that corporations of the state are creatures of the state and subject to
As holding to the contrary, that the tax exemption extends to foreign institutions, are In re Fiske’s Estate, 178 Cal. 116, 172 P. 390; In re Frain, 141 La. 932, 75 So. 847; Sage’s Executors v. Commonwealth, 196 Ky. 257, 244 S. W. 779. The Fiske case, in considering the cases holding to the contrary view, states: “Some of the cases cited are based upon the general consideration that, where ‘corporations’ are referred to in such legislation, it must be inferred that the Legislature was exempting such corporations only as it has jurisdiction over, namely, domestic corporations.” The case follows the Frain case [141 La. 932, 935, 75 So. 847, 848], which also discusses the contrary decisions, and which states: “Yery true these decisions are reinforced by considerations based on the policy of the law in granting the exemption; but their main and real basis is the text itself of the statute. And the text of the statute * * * extends the exemption to religious institutions in general, without qualification.” The Louisiana statute did not make a limitation, as ours does, to institutions within the state or organized or incorporated therein. The case [141 La. 932, 75 So. 847] cites and considers all the cases cited by the defendants and noted above, and concludes that in all the cases, except In re Speed, 216 Ill. 23, 74 N. E. 809, 108 Am. St. Rep. 189 (which, although not so stated in the opinion cited, was affirmed by the Supreme Court of the United States, 203 U. S. 553, 27 Sup. Ct. 171, 51 L. Ed. 314), the inheritance tax law read differently from the statutes of Louisiana. The case [141 La. 932, 935, 75 So. 847, 848] states that the Illinois
We think the reasoning of the three cases last mentioned is sound, and that the rule enunciated therein should apply and does apply to the statute of this state (section .6944), considered as it is in connection with the limitation on exemptions under the inheritance tax statute.
But it is urged that we should so construe section 6944, with the exemptions therein provided for, as to conform to the holdings under the inheritance tax statute, section 7308. We cannot undertake to add to an act of the legislature that which will result in a change in its meaning. The exemption given by section 6944 is clear and needs no construction or interpretation. De
III. Defendants also claim that the court erred in holding moneys and credits of educational institutions entitled to exemption from taxation, and argue that the stipulation on which the submission was made is that the beneficiaries of the will are charitable, educational, and religious institutions within the definition and intent of Code section 6944, and that, as there was no evidence or finding as to what particular beneficiaries are “educational institutions,” the court erred in holding the moneys and credits exempt. Defendants argue that subsection 11 of section 6944 exempts certain real estate of educational institutions, but subsections 7, 8, and 9, upon which subsection 10 is based, do not include them. The stipulation and decree, however, include educational institutions, but defendants urge that there is no showing as to which are so classed. There was no error here. No attempt was made on trial to distinguish between them, and in view of the stipulated facts, we do not think that it was necessary. And it has frequently been held that an educational institution, under the provisions of section 6944, is also a charitable organization, and that educational institutions are within the provisions of subsection 9 of section 6944. If so exempted under subsection 9, they would necessarily be exempted under subsection 10, which exempts institutions named in subsections 7, 8, and 9.
In Wilson v. First Nat. Bank, 164 Iowa 402, 410, 412, 145 N. W. 948, 951, 952, Ann. Cas. 1916D, 481, the court states: ‘ ‘ That gifts to establish or endow schools for the mental or moral improvement of the people, and especially of those members of society who are handicapped by actual or comparative poverty, are lawful public charities is so well settled as to require no
IV. Defendants claim that the court erred in holding moneys and credits given by the will to the beneficiary institutions exempt from taxation without any showing that they did not exceed the amount prescribed by their charters or articles of incorporation. Plaintiff insists that this question was not an issue at the trial, that defendants did not demur to the executor’s application for failure to allege that the various beneficiaries did not exceed their charter limits, nor did they seem to regard the point as an affirmative defense which they should plead, and that the matter was not mentioned during the course of the hearing or in argument. The record seems to sustain the plaintiff’s objection, since what may be denominated the answer to plaintiff’s application makes no reference to the question of charter limitation. We do not think the burden was upon the plaintiff to show that the gift was within the charter limitation. Such objection, if true, would properly have been made to the application of the executor and sustained by evidence. Defendants cite no authorities in support of this contention, which we think is negatived by the opinion of this court in In re Appeal of Trustees, 185 Iowa 434, 170 N. W. 813. See also Rine v. Wagner [135 Iowa 626, 113 N. W. 471], supra.
In the examination of the questions raised by this appeal, our attention has been called to the case of Samuelson v. Horn, 221 Iowa 208, 265 N. W. 168. The decision in that case has no application to the instant ease, since it was decided upon
Plaintiff-appellee has filed motion to dismiss and motion to strike defendant-appellants’ amendment to brief and argument, and defendant-appellants have filed motion to dismiss cross-appeal of plaintiff-appellee. We have examined the motions, and since, in any event, it was necessary to determine this appeal upon the facts, the same are overruled.
After examination and consideration of the arguments of the parties, and the authorities referred to by them, our holding must be that the bequests are within the provisions of Code section 6944, both as to the domestic and foreign legacies, that as such all institutions named in the will are included, and that none of them would be subject to payment either of the tax of 1938 or 1939. So holding it is necessary that the order and decree of the district court as to the tax of 1939 be affirmed, and that as to the tax of 1938, such order and decree be reversed. The cause must therefore be remanded to the district court for an order in conformity to this opinion. — Affirmed in part; reversed in part.