*1 Rehearing. On Motion for n denied; HOLMES, dis- Rehearing J.,C. senting.
HOLMES, Judge (dissenting). Circuit rehearing should petition I think the for reversed, and judgment granted, the trial, because a new for cause remanded testimony self- hearsay and the admission be said cannot serving declarations prejudice. without C., D. Post, Washington, L. W. Clark, Jr., Atty. Asst. Gen. O. Samuel Asst, Gen., Key, Sp. Atty. for Sewall
petitioner. Brooks, George B. G. John Jackson Proctor, for City, et al.
both of New York Hartford, Gross, of Charles Welles Conn., Co. Washington Trust HELVERING PROCTOR et al. Steitz, Henry L. George Roberts City, York for trustees. both of New SAME WASHINGTON TRUST CO. HAND, CHASE, L. Before Nos. Judges. FRANK, Circuit Appeals, Second Circuit. Circuit Court of Judge. HAND, Circuit
Jan. review) are appeals (petitions These Court, ex- Tax from orders two taxes, as- in estate punging deficiencies decedent of two against executors sessed estates under the following circumstances. on Decem- In the testatrix Proctor’s case deeds, by 18th, ber had executed two securities to she of which transferred one trustees to life, pay herself income to prin- to divide and at her death equal parts, principal cipal two into pay over to her they were one of the income property”, and son “in absolute pay over to the other life, during son grandchildren then liv- her death capita per stirpes.” ing, “per If her, trustees were died before son her principal upon distribute living per grandchildren her then among capita; “during son should die ** trust”, and if the grandchildren, died without she limited a “heirs law or legal remainder representatives” daughter. of her son and counterpart other deed except just grantor’s described that the replaced her son as daughter beneficiary. Washington case the trust, had executed two testator deeds of on December and the September, 1929. By the first he *2 88 in- pay life settlor a a himself reserved to to trustees transferred securities over, principal, terest, he whom anyone during his life to income of in his estate any accumu- the fund be included residue to must designate”, should that much understand late; pay so at his death. We do not death to hist anyone exists any she that distinction of wife for life asserts the income to his “as death, reserves request”, she between settlor on her a case death, did life where he re- him, she to himself and his interest survived or on power not, appoint then serves to others pay income to his children life, any income he did in the survivorship during child his as in case living, any Washington of Trust case. share without had died issue: pass to leaving issue to child who died majority The of the in Helver- out in necessary to set his It is not issue. ing Hallock, supra, or explicitly, v. did second of the provisions full detailed said, by anything inference from declare deed; they from present no variants Heiner, 238, May supra, that question in- which to the first are relevant 1244, 286, 826, 50 L.Ed. 67 S.Ct. 74 A.L.R. ruled— Commissioner here. volved The1 longer forget was no law. that We do agreed— minority Tax Court and a U.S., page page a note on 120 452 in of 309 trusts, all four the case of that S.Ct., 1368, 604, 60 84 L.Ed. 125 A.L.R. gross be included principal should Frankfurter, J., spoke “Congression- of his or at the time doctrine;” estate of ally May v. discarded Heiner death, passage by that her virtue quite it but would be unwarranted from 1926, 26 U. 302(c) of Revenue Act that to infer that court meant to over- 227, Int.Rev.Acts, be- page which S.C.A. “doctrine,” rule that and the note was 1931, as fol- read fore amendment quite purpose. added for another The any interest extent of “To the lows: minority arguing that the distinction decedent has of which the therein States, between Klein v. 283 United U.S. transfer, by or other- 231, time made 398, 51 996, 75 S.Ct. L.Ed. and Hel ** effect in wise, to take intended Co., v. St. Louis Union Trust 296 after possession at or 39, 74, 29, U.S. 80 L.Ed. 100 A. A Tax Court majority 1239, death.” L.R. Congressional had received Heiner, 281 however, May recognition held, because, that legislation, later 286, 826, 238, 67 although 74 L.Ed. Heiner, May U.S. S.Ct. the doctrine of 1244, supra, they 238, described as “discarded”, A.L.R. U.S. had been grounded Reinecke v. Northern “solidly Helvering had left v. St. Louis Company, Co., supra, U.S. S.Ct. Union Trust untouched. It was 410, 397],” 123, 66 A.L.R. for- to directed; meet this that note was ex- i.e., bade result and therefore it negatively: this was intended minority prove The ob- punged the deficiencies. the amendment was not a legislative recognition between served that there was difference the distinction Heiner, May supra, States, between supra, and Reinecke v. Klein v. United Company, supra, Northern Trust the St. Louis Union Trust Co. Heiner, effect; interest life remained in it properly cannot settlor, interpreted supra, had been holding limited while that the amendment legislative Reinecke Northern Com- was a interpretation Heiner, supra, supra, pany, been it had limited to another had wrongly decided. Perhaps person, years decided; five wrongly terminable after it was perhaps minority The was; death of the settlor. held amendment evidence it while this was a sufficient distinction but the say so, support thought Reinecke v. Northern indicate Roberts, it so. is true that supra, 339, 123, S.Ct. his dissent found no differ- J. 397, 410, (309 127, page 66 A.L.R. the rationale ence U.S. at page L.Ed. 455 of Hallock, 106, S.Ct., 604, Helvering v. 1368) U.S. L.Ed. 125 A.L.R. 604, 444, 1368, 125 A.L.R. between S.Ct. that decision and Helvering v. inevitably Co., supra, led to the St. Louis Union Trust conclusion 296 U. just quoted from language S. S.Ct. should read; apparently thought
be enforced that con Heiner, supra, 286, sistently, U.S. supra, must also fall, 67 A.L.R. majority L.Ed. had did not share overruled; opinion. all cases in which 309 84 overruled Hallock, supra, 125 A.L.R. May Heiner, 106, 60 quite an- 74 L.Ed. 67 A.L.R. was concerned provided settlor other situation. that, agree Virtually all commentators *3 a had wife —who if he survived his be- wrongly decided May v. Heiner was him; to went life remainder estate —the of wording plain § ignored cause it the him, remainder if the she survived life following a 302(c). remainder For a decided was All that was went that, her. to always, had donor estate reserved intent, no it made when that re- 302(c), been of enactment § form of words was difference what pos- “effect garded as one which takes enough that settlor’s used. It death.” at or after session had re- off which he death cut an interest enjoyment” “possession or The words upon a condition then served to himself determined; meaning, of with a well-settled words art remainder that made the clearly 302(c) showed and their use § already part we have of his This estate. of the time Congress meant Company once decided. Bankers of no passing vesting should be of title Cir., Higgins, 2 136 477. If therefore F.2d consequence. Yet in Heiner, supra, 238, 281 50 U.S. v. 286, 826, 67 287, 238, L.Ed. 74 50 S.Ct. U.S. 1244, 826, L.Ed. 67 A.L.R. is S.Ct. 74 302(c) 1244], held that A.L.R. the court overruled, to be we how Hel do not see re- of apply the transfer such did not Hallock, vering supra, thought to can be was “not mainder because the transfer result; be over- contribute to that it must “beyond character,” was testamentary in independent by altogether ruled a new and decedent,” because “title by recall * * * power, clearly of lift which it is not ours by the definitely fixed had been Furthermore, if the Com- to exercise. Keeney, of 194 N. trust deed.” Matter Hallock, right, Helvering missioner is 281, 428, said 283, court 87 N.E. Y. 106, 444, supra, 309 84 U.S. 60 S.Ct. L.Ed. Hel quoted (in language approval 1368, 604, 125 A.L.R. also overruled Has 302, Bullard, 297, 58 S. 303, 559, 303 58 sett U.S. S.Ct. 565, 568, 852), is 82 L.Ed. “It true Ct. 858, sub silentio. That decision means ingenious may devise other mind an 302(c) had held the amendment to § tax, one but the avoiding an inheritance of operate retroactively; did not and it would with a reser- commonly used a transfer necessary have discuss that Patently, Con- of life vation estate.” question, nor would the actual result have 302(c), intended to close gress, in § same, supra, if loophole. In United “commonly used” 238, 286, 826, 50 U.S. 372, 373, Brown, Cir., F.2d States 1244, Finally, had been law. “arrangements” that such court said our is in United decision accord with precise spirit not the are “within 372, Brown, Cir., 134 States v. F.2d 1926Act.” I think letter with New York Trust v. United letter, precise I are 733, States, F.Supp. by decided the Court remarks agree with Paul who Indeed, Claims on October 1943. we “like Heiner case section fitted should have affirm the been content glove.” authority orders before us these it is not overrule agree for us own, cases our save the differences Court, mat no a decision of the opinion developed. which have Since may think it. But we ter how erroneous obviously right plain answer is hesitated decide we have not be, appears as it us to we felt has, implica by clear Supreme Court itself should state we our reasons. tion, of its earlier decisions overruled Orders affirmed. follow no reluctance to have shown new trend” in that doctrinal pronounced “a FRANK, Judge (dissenting). Circuit Indeed, followed such a course we court.2 very when, reasons, following agree For statute reference this States, 2 minority Bank v. United Tax Court that Helver Chase National that, Hallock, Bing we Cir., 116 F.2d held U.S. Corp., Paul, J., Aircraft Picard United 1 1 Federal and Gift Tax Estate Cir., (1942) At- F.2d 636. See The ation Changing Corp., Lower Courts To titude Perkins v. Endicott Johnson 218; (1941) Precedents, Cir., Hand, L.J. 50 Yale 128 F.2d States, possession 56 S. tended to or en- ham take effect in United * * * * * joyment ”),4 Ct. Helver had relied on Company, repudiated Union Trust court Louis rationale 100 v. Moreover, majority Hallock, discussing Union in v. St. Louis Becker when plausible in a footnote what is called the im been overruled had “in in 1931 plication principle already rejected v. Hallock. general at- underlying titude Union the St. Louis surprising would have been cases,” significantly that “in stated Supreme Court, Hal- willing when part least, those majority, cases *4 lock to as the St. case reverse erroneous * * * upon May relied doctrine,”5 Heiner the v. cases, years Louis earlier, five Union Trust decided agreeing thus in effect with any to had shown reluctance over- Mr. Roberts that the doctrine Justice patently May rule more v. the erroneous the cases which the over- court was then Roberts, Heiner. Mr. in dis- Justice ruling was at May one with v. that of opinion case, senting Hallock showed in the court, Heiner. If expressly when the thus that v. Hallock in fact did over- noting fact, that had wished to avoid the May rule v. on reasoning Heiner. The obvious conclusion wiping it was that out which he based be that conclusion May Heiner, easy it would have been v.May summarized as follows: Heiner so, say unlikely it is that it would not was decided in 1930. In in McCor- light have said so in the of Mr. Justice Burnet, mick v. Roberts’ dissent. court, relying solely on the says, “Undoubtedly Paul the Hallock Heiner, May v. reversed a decision hold- May case and v. Heiner incom- are grant 302(c) creating a life patible”;6 also 49 see Yale In grantor estate in with J. remainders Company Higgins, Cir., Bankers Trust grantor. others if survived 136 F.2d we said that Helvering v. in the Louis Union Trust Com- Heiner; May Hallock had not overruled pany cases, the court cited and relied government but in that case in its brief May both v. Heiner and McCormick v. expressly stated it was on that Burnet, treating the of Mc- thus rationale contention, appeal contrary making the Cormick v. Burnet and the St. Louis Union we therefore did not have the benefit of the case identical that set forth discussion which it now supplied by has its more, May in v. Heiner. What is in Hel- brief in the instant cases. v. St. Union Louis My colleagues suggest if the Hal- 1239], adopted pass- the court May Heiner, lock case overruled it ing-of-title employed test which had been must be true also it overruled Has Heiner, May saying grantor in sett v. * * * * * right follow; “held no L.Ed. 858. That does subject disposition. of testamentary the the in the Hassett case shows that parties expressly passed argu- His death no refrained from interest to * * beneficiaries case, In the Hallock whether the Heiner should be doctrine court, 1940, rejected repudiated, confining that ra- arguments their tionale, saying: single 302(c) “Section deals issue whether had re- property technically passing troactively repealed sug- it.7 is also gested but with interests death theretofore cre- if Hallock over- May ated. The taxable event is a transfer inter ruled then it must also vivos. measure of tax have overruled But is the Reinecke Northern Trust 347-349, property of the transferred value at the brings enjoy- when into time 397. But in By stressing statutory ment.”3 v. Northern Trust lan- Reinecke Co. the court * * * (as guage an “interest have before it a in- did not case where cit., Paul, loc. added. See Italics for an suggestion Congress, to the added. answer Italics 5My by making colleagues, prospective, the amendment in their discussion of deliberately adopted footnote, ignore language Court’s May Heiner, construction, quoted. of § have cit., 341, (c). note Loc. few operative a but one which became a life estate reserved As months after Heiner decision. he created estates here, however, made agreements were remainders persons than other himself amendment, taxpayers said persons. The court the Act’s still dead, might argue grantors, would now the statute was doubt whether there apply relinquishing as to changed grants, so be constitutional construed their except describing on it as their life reliance carefully interests grant, to such a the cases one which both the life estate The facts of changes granted others than bar no such tend show here donor; largely ground grantors on that would have made inapplicable. otherwise court construed As even Tax Judge Opper grantors, Court possible observed that other decided. It is us, involved, cases now before whose are not here estates Heiner;9 perhaps rely v. Northern Su Heiner and Reinecke on obviously distinguishable preme in Co. are would differentiate as to appears type Heiner from the fact that a reliance be demons stances where such trated,10 can 1931 is grant made after within the analogy of cases where amendment as construed Hassett statute been held unconstitutional has *5 Welch, type grant while Reinecke applied person on one facts set of made that date after is not.8 applied to another constitutional person on set of facts.11 ******Assum another here, taxpayers in order show The that, doc regárding stare decisis as a Supreme not hold that Court will estoppel,12 will passeé, trine May Heiner make much of most, differentiate, that, grantors so think at here fact that persons be remanded to the the on instant cases should have relied that decision course, whether precedent. Tax Court grantors determine Of there could rely in fact by anyone on such who here have been no made a reliance gift after the amendment of March never to have been See Oliver v. Louisville There seems Realty Ky. 628, type Co., that a S.W. doubt trust constitutionally brought L.R.A.,N.S., 300-302, Ann.Cas. could 1915C, 565; George, 302(c); Neff Hassett v. Ill. see U. page 309, page Ogle 4 N.E.2d Cf. at 391. Moore and S. by, Supreme Court, Stare Decisis 858. Case, of The 21 Texas Law Law My colleagues indicate believe (1943) Review judicial repudiation Louis, M. I. & See St. S. R. Co. logically call Heiner would Wynne, 56 L. repudiation of Reinecke v. North similar L.R.A.,N.S., Ed. Kan ern Co. City Anderson, R. sas Southern Co. v. That same made Gelpeke City taxpayers in the Hallock case. There 983. Cf. of Du said, buque, before us in- “We have not Wall. court See cited in note created maintained reli- cases 10. But see terests However, case, page 119, cases.” there Hallock ance those situations, page 451, were other 60 S.Ct. at then doubtless court, grantors, said, in which hav- court “We do imply inevitably on the Louis Trust not mean to em relied deci- unchanged piric process construing legislation sions, made tax left five-year give estoppel against instruments, rise to an had died should responsible judicial between those decisions exercise of the interval process,” Hallock. decision