109 Tenn. 245 | Tenn. | 1902
Lead Opinion
delivered the opinion of the Court.
This is a hill to collect a collateral inheritance tax, filed in the county court of Bradley county. John H. Craigmiles died in 1899, leaving a widow, hut no children. J. E. Johnston and Mrs. Craigmiles, the widow, qualified as executors of his will. In general terms, he gave his property, which was large and valuable, to his wife for life, except some bequests not necessary now to consider; remainder to his niece, Myra Adelia Thompson, if she should be living at the time of his wife’s death, and, if she should be dead, then to St. Luke’s Church.
The consideration for this conveyance was $50,000, and it was further agreed that all matters in controversy between the aunt and niece were thereby settled. Regular conveyance was made April 16, 1901, with covenants of warranty only as to claims by or under the seller.
St. Luks’s Church, through its vestry, also' conveyed to the life tenant, Mrs. Craigmiles, all rights and claims it had under said will, in consideration of a conveyance to it of certain real estate by Mrs. Craig-miles, which belonged to the estate of John H. Craigmiles. Steps were taken by which this exchange or transfer was approved and confirmed by this court. The value of the consideration was $8,500, for the interest and claim of the church. Subsequent to these sales and assignments, the clerk of the county court of Bradley county filed this bill in the county court against Johnston and Mrs. Craigmiles, executors, and against the latter individually, and also against Mrs. Sellers and the vestry of St. Luke’s Church, to collect an inheritance tax upon the remainder interests, to be assessed on the whole value of the estate, or,
Complainant Harrison, as clerk, and Mrs. Sellers have appealed to this court and assigned errors.
On behalf of complainant clerk it is insisted that the court below should have given judgment against the executors on what is called the “clear value of the estate,” to-wit, $185,189.21.
It is contended that the estate is worth that much; that such fact was ascertained by an appraisal in the court below, and so reported without exception or question; and such appears to be the fact from the record. This insistence is based upon the idea that the executors were derelict in their duty as such, in not complying with the provision of the last clause
This provision applies to personal estate covered by life estate, where the remainderman does not elect to pay the taxes before the falling in of the life estate. It is insisted that all such tax as thus becomes immediately payable shall be collected by the executors or administrators, and paid over by them, and, unless the tax is paid or report made as the act contemplates, the argument is that the executors or administrators become individually responsible therefor.
Without stopping to inquire whether this is the proper construction and legal effect of the act in cases of vested remaindermen, we are of opinion that such rule is not applicable when the remainders are contingent, and may never vest in actual possession and beneficial OAvnership, as in this case.
At the time of John H. Craigmiles’ death, it was a mere contingency whether Mrs. Sellers or the church, as between themselves, would ever become beneficially interested in such estate, and this condi
The act does not contemplate that persons holding such contingent interests shall be required to make the report and give the security provided in section 3, and the executors were not, therefore, in default in not requiring the same, and in not collecting the tax as that section provides. In re Cagar’s Will, 111 N. Y., 343 (18 N. E., 866); Dos P. Inh. Tax Law, p. 247, et seq.
Again, it is insisted that the tax, if not assessed upon the entire value of the estate, should have been assessed on the value of the remainder estate transferred by Mrs. Sellers and the church to Mrs. Craig-miles, which, it is insisted, was $87,702.43, as against Mrs. Sellers and the church, and, as against Mrs. Craigmiles, there should have been assessed a tax upon a value of $135,189.21, the difference between the amount paid Mrs. Sellers and the full value of the entire estate. The contention as to Mrs. Sellers is based upon the idea that she was taxable on the actual value of her interest and claim, and not what she realized for it on the sale; and, as to Mrs. Craig-miles, that by accepting these conveyances from Mrs. Sellers and the church she terminated her life estate, and became seised in fee, on the doctrine of the merger of estates, and that the private agreement of
Again, it is said that' it was error not to tax St. Luke’s Church upon the value of its claim or interest, or at least upon $8,500, the amount it received for that interest. This upon the idea that the value of the church interests was independent of that of Mrs. Sellers, and it took both to represent the entire values received for their remainders, and that $58,500 represented the actual amount received for such remainders.
On behalf of Mrs. Sellers it is said that in no event did she become liable to an inheritance tax until the termination of the life estate of Mrs. Craigmiles, leaving her surviving, which would make her contingent interest a vested one; that previous to that time she might sell her interest and convey it to any one, and would not thereby make herself or her interest liable to such tax, but the assignee of her interest would hold as she held, subject to the same contingency, and, until the death of Mrs. Craigmiles prior to the death of Mrs. Sellers, no tax would accrue upon her claim or interest in the hands of any one.
Act 1893, p. 348, sec. 3, provides, among other things, that when an estate subject to collateral inheritance tax is to “take effect in possession or to come into actual enjoyment after the expiration of one or more life estates, or a period of years, the tax on such estate shall not be payable nor interest begin
Then follows the provision for cash advance payment, or giving bond for future payment, as herein-before set out.
Now, it is evident that, if there had been no transfer of property between these parties, either Mrs. Sellers or St. Luke’s Church would' have become entitled to the whole estate at the death of Mrs. Craig-miles. The provision of the will gives it to Mrs. Sellers if she survives Mrs. Craigmiles; if she does not, then to the church. There was a certainty that the whole of it would pass to either the one or the other upon the death of Mrs. Craigmiles.
It is very apparent that in that event, to wit, the death of Mrs. Craigmiles, the entire property would become subject to an inheritance tax, since neither Mrs. Sellers nor the church could receive the property free of the tax.
Can the parties now, by trading among themselves, withdraw this estate from the operation of the inheritance tax law, and defeat its collection? It is conceded the life interest of Mrs. Craigmiles can not be taxed, because, being the widow of the testator, her interest under the law is expressly exempt from
The tax will then be collectible, and the question' now presented is whether, in view of the transfers made, the period of its collection has been accelerated so as to make it collectible at this time, and, if so, whom shall it be collected from, and upon what basis of valuation? Or, upon the other hand, does the estate remain in Mrs. Craigmiles, untaxable until her death?
The statute says that the tax shall not be payable until the person liable for the same comes into actual possession of such estate, by the termination of the life estate, and then shall be assessed upon the value at the time the right of possession accrues to the owner, provided that the owner may pay before coming into possession upon a valuation at that time, deducting the value of the life estate.
It is to be noted that the act does not prescribe that the life estate must be terminated by the death of the life tenant, and, under the wording of the act, such life estate may be terminated in any other legitimate way. The controlling idea in the statute is that it is only when the remainder comes into .possession and beneficial enjoyment that the tax becomes collectible, and it does become collectible at that time.
The Pennsylvania statute upon the subject of an
Now, while that does not present this exact case, it is sufficiently near in principle to furnish an analogy and rule for guidance. Here, it is true, there is
Let us suppose that Mrs. Craigmiles should have seen proper to surrender and convey her life estate to the remaindermen; can it he doubted that it would in this way have been terminated, and that the entire estate would have come into the possession and enjoyment of the remaindermen, and that it would then become taxable on its entire value?
This did not occur, but what did occur was that the remaindermen conveyed to the-life tenant, and the latter, being already in possession, held also under her new title, and became possessed of the remainder as well, and entitled to its beneficial use; and the whole of the estate Avould have become taxable but for the fact that the statute exempts the life estate of the widow, leaving only the required remainder estate subject to taxation, or, in other words, the entire estate, less the exempt life estate.
It is said that the effect of the transfers by Mrs. Sellers and the church was to vest in their assignee only the contingent interest in remainder which each of them had in the estate, and that the estates thus transferred continued to he, as they were originally, estates in remainder, and contingent. This would,, no doubt, be true, if the transfers had been made to a third person. Such third person would merely have
Applying the statute to the facts of this case, the court is of opinion that when Mrs. Craigmiles became the owner of the remainder interest in the property, being already the life tenant, the two estates thereby merged into one, and the remainder vested in pos* session, to all intents and purposes, and for all beneficial uses, and she might at once dispose of the whole estate in fee. She became thus entitled to the possession as fee-simple owner of the estate, and the beneficial use of it as a whole, and by virtue of these transactions the tax upon the remainder interest became at once payable, and upon an assessment at its value at that time.
It appears from the record that the value of the entire estate, by appraisement, including the life estate and remainder, was $185,189.21, at the date of these transactions, and the value of Mrs. Craigmiles’ life estate, not taxable, was at that date $97,486.78, leaving the value of the remainder interest $87,702.48.
The court is unanimously of opinion that, under the facts of this case, the State, as the effect of the trans
The court is divided as to who should pay this tax. The majority is of opinion that the whole of it should be paid by Mrs. Craigmiles, and upon the following grounds and reason, to wit: That the life estate and remainder, by virtue of these transfers, became vested in the same person, — Mrs. Craigmiles, — and there Avas a merger of the two estates into one fee-simple estate in her. Upon the value of her life estate, which entered into the merger, she is not subject to tax; but upon the value of the remainder she is taxable, because she comes at once into the actual ownership, possession, and beneficial enjoyment. In David v. Williams, 85 Tenn., 650 (4 S. W., 8,) it is said: “The estate for life and the remainder estate, uniting in the same person, would result in a merger of the lesser estate with the greater, and the estate of the children (who in that instance were remainder-men) would become an absolute one,” citing 1 Washb. Real Prop., sec. 113.
The court is of opinion that the doctrine of merger applies as well where the remainder interest comes into possession of the life tenant as when the life estate comes into the ownership and possession of the remainderman. In either event the two estates be
In 20 Am. &.Eng. Enc. Law,'p. 590, a distinction is pointed out between “surrender’’ and “merger,” and it is said that “merger” is a wider term than “surrender,” in that it takes place when the two estates are united, either in the hands of the re-mainderman or reversioner, or in the hands of the tenant of the particular estate, without regard to the method in which the two estates were united, while “surrender” is confined to the relinquishment by the tenant of the particular estate to him in reversion or remainder. Fisher v. Edington, 12 Lea, 189.
Under these and other authorities cited in the work above named, the majority is of opinion that Mrs. Oaigmiles united the two estates in herself, and merged them into one, and came into actual possession of the fee, and is therefore liable to pay the tax upon the remainder thus acquired by her.
Judgment is therefore rendered against her for a tax of five per cent, upon $87,702.43, the value of the estates in remainder, to the exoneration of Mrs. Sellers and the church, which will not be required to pay any tax; and the decree of the circuit court is accordingly modified.
It is said that the original suit for' the settlement of the estate of John H. Oraigmiles is still pending in the chancery court of Bradley county, and the statute. provides that in such cases the inheritance tax
We tbink this contention not well made. While section 22 of tbe act does provide for tbe collection and retaining of tbe tax in suits pending in tbe chancery court, it is evidently intended as an additional remedy to that which exists in the county court, and its purpose is to make certain tbe collection of tbe tax before the estate is distributed. That section provides that, if such tax is collected or retained by tbe clerk and master, it shall still be paid over to tbe county court clerk, who shall account for it to tbe State comptroller. But this provision, designed to make certain tbe collection of tbe tax, is not intended to oust tbe county court of its jurisdiction, but merely to supplement it and render it effective. In addition, tbe series of sales and transfers which render this tax collectible are not matters which pertain to tbe settlement of tbe estate in tbe chancery court, nor are they in any way involved or embraced in that suit, but they are independent transactions, Avhich have taken place out of court, and do not in any way enter into tbe purposes or purview of tbe chancery court case.
We are of opinion, therefore, that tbe proceeding in tbe county - court was authorized and entirely proper.
Acts 1893, secs. 14, 15, and 16, provide that, in case .
The fee provided for A. J. Fletcher, district attorney-general, herein, shall be collected in this court in the name of said Fletcher for the use of the State, and turned into the treasury of the State, in accordance with the provisions of chapter 41, acts 1897. The costs of this cause, including the costs of the court below and of this court, will be paid by Mrs. Craigmiles, and proper execution in favor of the parties entitled may issue for all of the judgments herein rendered.
Judgment for the five per cent, tax and interest is rendered in favor of the clerk of Bradley county court; for the fees of John C. Bamsey, in his name and for his use; and for the fees of the district attorney, Fletcher, in his name, for the use of the State.
Dissenting Opinion
DISSENTING OPINION.
delivered the following dissenting opinion:
I agree with this holding, except to the parties who are liable for the tax. I am of the opinion the transaction between these parties was in effect, and so intended, an agreement entered between the life tenant and remaindermen to anticipate the termination of the life estate, and to reduce the remainder into possession at once, and divide the value of the same between the parties in certain proportions. In other words, the parties virtually agreed to divide the remainder, which appears to be worth $87,702.43, among themselves, in the following proportions to wit: To Mrs. Sellers, $50,000; to St. Luke’s Church, $8,500; to Mrs. Craigmiles, the balance of the life estate, valued at $87,702.43, or $29,202.43. Each of the parties, under the arrangement between themselves, came into possession and beneficial enjoyment of the remainder in the proportion named, and each should be taxed upon the amounts thus realized by
Rehearing
ON REHEARING.
delivered the opinion of the Court.
Several matters are presented to this court upon a petition to rehear, and upon motions oral and in writing. It is said on behalf of Mrs. Craigmiles that the court erred in treating the value of the estate of John H. Craigmiles as f185,188.21, and the value of the taxable remainder as $87,702.43. In support of this contention, it is said that the value of the personal estate turned over to Mrs.' Craigmiles was $109,-
It was charged in tbe petition that tbe value of tbe estate was $185,189.21. This was not specifically denied, tbongb there was a general denial of tbe facts stated in tbe petition. Tbe appraisement shows tbe value of tbe entire estate to be $185,189.21, and of tbe taxable remainder $87,702.43. Not only was this not excepted to, but there was no serious effort made to contradict or vary it; and the testimony of Jobn-ston, tbe executor, is, at most, indefinite and uncertain, not to say evasive, and this is tbe only testimony substantially impeaching tbe report of appraisement.
It is said in tbe next place that tbe valuation fixed by tbe appraiser was as of tbe date of John H. Craig-miles’ death, and not of tbe date of tbe transaction or appraisement, but we do not so read tbe testimony of Mr. Knox, tbe appraiser.
It is said, however, that $24,000 was paid in specific legacies under tbe will, and upon this tbe inheritance tax of five per cent, was paid. In tbe first place, it appears that this tax was paid by tbe parties who received tbe legacies, and not by tbe executors or Mrs. Oraigmiles, or, rather, that these amounts were paid out of tbe estate, and deducted from tbe specific legacies. In tbe next place, it appears that these amounts were paid before tbe estate was appraised by Mr. Knox, and these amounts could not, therefore, enter into bis appraisement, which was made by him
We can not see, therefore, that the petition makes out a case for a change in our original estimates, nor is there a sufficient reason given for a further reference as to value; and the petition is therefore dismissed, and relief under it denied.
On behalf of the attorney-general it is asked that final judgment for the amounts fixed be given in this court, and that no remand of the cause be made. This, we think, is proper, and final judgments are rendered in favor of Clerk Harrison, Attorney Ramsey, and District Attorney Fletcher, for the use of the State, here; and there is-no necessity for a remand, and none is made.
A question is raised by the attorney-general upon his motion to require District Attorney-General
