Dolan's Estate
124 A. 176
Pa.
1924
Check Treatment

Opinion by

Mr. Justice Kephart,

Sarah Brooke Dolan, in 1908, by deed conveyed to the Fidelity Trust Company certain securities in trust for the benefit of her three sons for life, with remainders over. The relevant facts will be found in the reporter’s notes. The settlor did not revoke, add to, alter or amend the trust during her lifetime, or change the trustee or add to the principal. She died in 1920.

The life estates of the three sons were appraised as of the date of the death of Mrs. Dolan, and a tax of two per cent was imposed thereon. Exceptions attacking the validity of the tax were heard by the Orphans’ Court of Philadelphia. It held the property had vested prior to the passage of the act imposing the tax; from the decree striking down the tax the Commonwealth appeals.

It is urged that, under the deed of trust, the settlor had complete dominion and control of the property; she *588could alter or amend the trust at any time; no investment or reinvestment could be made without the consent of the husband, and the trustee could be removed at her will; property might be added, and, finally, that the power of revocation effectually retained the title and control completely in her until death, when the trust, qua trust, would effectually operate.

We held, in Kirkpatrick’s Estate, 275 Pa. 271, 273, that the right of succession or the privilege of receiving at death the property possessed by a decedent, was the thing taxed. The Act of June 20, 1919, P. L. 521, provides “that a tax shall be, and is hereby, imposed upon the transfer of any property, real or personal, or of any interest therein or income therefrom, in trust or otherwise......(c) when the transfer is......by deed, grant, bargain, sale, or gift......intended to take effect in possession or enjoyment at or after such death.” To escape the latter provision, a conveyance must be such as parts with possession, title and enjoyment in the grant- or’s lifetime: Reish v. Com., 106 Pa. 521, 526. When a transfer is made or intended to take effect either in possession or enjoyment after death, and the settlor or grantor retains a grasp of the entire estate, as long as he lives, it cannot be said possession and enjoyment in the beneficiary takes effect prior to death; under such circumstances the Commonwealth is entitled to a tax on the transfer.

We do not have here a case of this character; speaking more particularly on the subject of revocation, it being the point stressed in argument, the property no longer belonged to the grantor; she had divested herself not only of physical control of the specific things, but had given complete and sufficient evidence of the transfer of all ownership.

When the deed was executed in 1908 all the property had been transferred to the trust company. The trustee, in full possession, looked after the securities with the same authority that extended to trust property of any *589character, exercising for the beneficiaries complete rights of ownership. This was for the benefit and enjoyment of the three sons. These children had the same right to protect the trust property as any beneficiary in a trust estate, and, had the trustee become delinquent, with the mother incapacitated, they could have invoked the aid of the court for its protection. During the life of Mrs. Dolan the trustee paid the income to the sons. The income received prior to the death of the mother came through this deed, not as a testamentary document, but as an effective deed of trust. The death of the mother, without additional act, did not change either the character of this payment or the document under which it was paid, remoulding it from a deed to a testament during the mother’s life. The estate in the children was fixed and definite. The annexation of the power of revocation does not affect the grantee’s power of enjoyment, or prevent the sale of the property, privately or judicially, though the grantee takes the estate with the possibility of its being divested by the happening of an uncertain event, to wit, the exercise of the power of revocation. Through the exercise of that right reserved, the property may be recalled. But the right to revoke, unexercised, is a dead thing. Its presence in a deed does not alter the character of the instrument or estate granted; to all intents and purposes, title and possession pass just as effectively as any deed or grant could make it, continuing in that state so long as the power of revocation lies dormant.

An attempt has been made to liken the present deed to that in Matter of Bostwick, 160 N. Y. 489, 55 N. E. 208. The facts in the two cases are not similar. If they were, and the decision had the effect claimed by appellant, we would not hesitate to restate as the law that which this court has always recognized, to wit, the power of revocation in a deed is equivalent to the power of appointment; neither prevents the passing of title or the complete enjoyment of the thing granted.

*590In Dickerson’s App., 115 Pa. 198, 210, in discussing the power of revocation, the court said, where the intention was executed, coupled with an express trust, unrevoked at death, the trust is not only valid, but the reserved right of revocation is not inconsistent with the creation of the trust. If the right is not exercised during the lifetime of the donor according to the terms reserved, the validity of the trust remains unaffected as though there never had been a reserved right of revocation. This was followed by Lines v. Lines, 142 Pa. 149, 167. It is well settled, a reserved right of revocation is not inconsistent with the creation of a valid trust: Windolph v. Girard Trust Company, 245 Pa. 349, 368; Smith’s Est., 144 Pa. 428, 442; Stone v. Hackett, 78 Mass. 227, 232.

In the Supreme Court of the United States, in Jones v. Clifton, 101 U. S. 225, 230, it is said the power of revocation and appointment was reserved only to the bankrupt, but these powers were not an interest in property that could be transferred to another, or sold on execution, or devised by will. The grantor could indeed exercise the power either by deed or will, but he could not vest the power in any other person. See Brandies v. Cochrane, 112 U. S. 344.

How, then, could the extinguishment of the power to revoke the deed of trust by the death of Mrs. Dolan, — that is all death accomplished, — work a transfer of property? The right of revocation, standing alone, is not tantamount to a property-right in the settlor; it possesses none of the attributes of property. Mrs. Dolan did everything possible in 1908 to divest herself of the specific property. When she died in 1920 there was nothing for her, the law, or anyone to do to complete the act. Revocation is neither an estate nor property, and cannot pass at death.

A power of revocation is analogous to a power of appointment, which, .under the common law, is not property and can be exercised only by the person in whom it *591resides: Gilman v. Bell, 99 Ill. 144; Supreme Colony v. Towne, 87 Conn. 644, 89 Atl. 264; Harrington v. Harte, 1 Cox Chancery Cases 130, 29 Eng. Reprint 1094; Holmes v Coghill, 12 Vesey Jr. 206, 33 Eng. Reprint 79.

The case is somewhat analogous to People v. Northern Trust Co., 289 Ill. 475, 124 N. E. 662, 7 A. L. R. 709, and also to Matter of Masury, 28 N. Y. App. Div. 580, 51 N. Y. Supp. 331, affirmed 159 N. Y. 532, 53 N. E. 1127. Miller’s Est., 109 N. Y. Misc. 267, 178 N. Y. Supp. 554, a case strongly relied on by appellant, was reversed by the Appellate Division of the Supreme Court, 204 N. Y. App. Div. 418, 198 N. Y. Supp. 202, which reversal was upheld by the court of appeals, 236 N. Y. 290, 140 N. E. 701, where the court held that the mere reservation of the power to revoke did not make the transfers taxable. See also In re Bower’s Est., 195 N. Y. App. Div. 548, 186 N. Y. Supp. 912, affirmed by the court of appeals, 231 N. Y. 613, 132 N. E. 910.

Turning now to the remaining reasons, the first needs no discussion. The next, relating to approval by the husband of sales and reinvestments, was not control retained by Mrs. Dolan; it was, as stated by the court below, supervision. It did not continue during all the settlor’s life; while it continued it merely had some person with the trustee to exercise a judgment as to sale and purchases. He was a special trustee for this purpose. In Houston’s Est., 276 Pa. 330, we sustained the deed where the power was retained in the settlor to exercise jointly with the trustee the right to change the investments from time to time.

The right to remove the trustee and appoint another is not the retention of enjoyment and possession, nor the control of the specific property. In Houston’s Est., supra, we said the transfer of fresh assets would be equivalent to making a new assignment of them in trust. It was necessary, to avoid the drawing of another deed, but did not affect rights thereunder. It is somewhat like a mortgage for future advancement.

*592The conveyance is not taxable as a transfer intended to take effect in possession or enjoyment at the death of the grantor.

The decree of the court below is affirmed at the cost of appellant.