282 F. 851 | 2d Cir. | 1922
We shall refer to the parties herein as plaintiff and defendants, as below. Plaintiff sued to recover an income tax claimed to be owing by each of the defendants, arising out of moneys received by them from the estate of Alfred G. Vanderbilt. After the service of an amended complaint, a demurrer was interposed, and motions were made for judgments, which resulted in judgment for the plaintiff in each of these actions.
Alfred G. Vanderbik died May 7, 1915, leaving a will which was duly admitted to probate on June 16, 1915. In that will he made a bequest to each of the defendants. This article of his will reads as follows:
“Eleventh. I give 'and bequeath to my brother Reginald O. Vanderbilt five hundred thousand dollars ($500,000) ; to my uncle, Frederick W. Vanderbilt, two hundred thousand dollars ($200,000); to Frederick M. Davies, five hundred thousand dollars ($500,000) ; to Henry B. Anderson, two hundred thousand dollars ($200,000); to Frederick D. Merriam, two hundred and fifty thousand dollars ($250,000); to Charles E. Crocker, ten thousand dollars ($10,000), and to Howard Lockwood, one thousand dollars ($1,000).
“I give and bequeath to each of those persons who may be in my employ at my farm known as ‘Oakland Farm,’ at Portsmouth, Rhode Island, or on my properties known as ‘Sagamore Lodge,’ Camp ‘Kill-Kare,’ or ‘Moose River Tract,’ or on any of my other property in Hamilton county, New. York, or in my stable or garage in the city of New York, or in my apartment in Gloucester House in London, England, at the time of my decease, and who at that time shall have been in my employ for a period of five years consecutively, an amount equivalent to his or her wages for. the last year of such period.”
Article sixteenth thereof provides as follows:
“The bequests herein made to my said executors are in lieu of all compensation or commissions to which they would otherwise be entitled as executors or trustee.”
These bequests were paid to the defendants in 1915 in the due administration of the estate. The amended complaint recites that each bequest was received “as given to him by said will.” Each of the defendants made a return of his income for taxation prior to March 15, 1916, and neither included in said return this legacy so received. Their positions rest upon the act of Congress then in force (38 Stat. 114, 166), providing that—
“Income of a taxable nature shall not include the value of property * * * acquired by bequest.”
The statute provides in section 2B for exemptions and deductions, and that—
“Net income of a taxable person shall include gains, profits; and income derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form * * * or the transaction of any lawful business carried on for gain or profit, or gains or profits and income derived from any source whatever, including the income from but not the value of property acquired by gift, bequest, devise, or descent.”
The conditional or unconditional voluntary disposition of personal property by will is a bequest. Jessup’s Redfield, § 917, p. 1138. A bequest in lieu of dower, which is a legacy given conditional upon the surrender by the legatee of a right of dower, has been held to be a bequest. Orton v. Orton, *42 N. Y. (3 Keyes) 486. In the cited case, the legacy was given in lieu of dower, and a provision was made that, should there be a surplus in the estate after the payment of the legacies, the legatee should share proportionately therein. The executors assumed the position that the widow was not entitled to any part of the surplus, on the ground that a bequest in lieu of dower was not a legacy, and that therefore she was not a legatee; but the court held that, notwithstanding the bequest to the wife was declared to be in lieu of dower, it was still a legacy. “Such it was in legal as well as common parlance, and it is constantly called by that name in the books.”
Direction by the testator that his debts should be paid negatives the presumption that a bequest to a creditor is conditional upon a waiver of his claim, and makes his legacy absolute. Boughton v. Flint, 74 N. Y. 476. Bequests to executors or trustees in lieu of compensation for their services, or “for their care and pain,” have been held to be bequests in every acceptation of that term. And a legacy to an executor, even expressed to be “for care and pains,” is not to be regarded in the light of a debt, or as founded in contract, or to be governed by principles applicable to contracts, for to do so would make the executor who undertook the discharge of his duties entitled to his legacy in preference to all other legacies, even if there were a deficiency of assets to satisfy all of them, and a legatee of this description must abate equally with other legatees. Morris v. Kent, 2 Edw. Ch. 179.
A will providing a bequest of $700 over and above any and all commissions to an executor entitled him to receive it (upon condition that the executor should accept and qualify), not as compensation for
Bequests are either absolute or conditional, vested or contingent. It was not essential for the legatees named to qualify in order to become entitled to their legacies. A bequest to one in lieu of compensation for his services, which is conditional only upon his willingness to qualify and serve if circumstances permit him to do so, is nevertheless a legacy. We must assume that Congress had in mind, by using the term “bequest” in the Income Tax Law, to give to it that settled rule of construction well known and sanctioned by judicial decision. Kepner v. U. S., 195 U. S. 100, 24 Sup. Ct. 797, 49 L. Ed. 114, 1 Ann. Cas. 655. That presumption is “resistless, except against an intention imperatively clear.” Lynch v. Turrish, 247 U. S. 221, 38 Sup. Ct. 537, 62 L. Ed. 1087.
In interpreting statutes, levying taxes, it is the rule “not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out.” Gould v. Gould, 245 U. S., 151, 38 Sup. Ct. 53, 62 L. Ed. 211. The case differs from one where there is a provision in a will to pay a contractual obligation, a debt, which would be collectible, even if the obligor did not provide for its payment by will, for there the money agreed to be paid would be acquired by contract, and not by bequest. In re Baker, 178 N. Y. 575, 70 N. E. 1094; Matter of Vanderbilt, 184 App. Div. 661, 172 N. Y. Supp. 511; In re Alfred G. Vanderbilt, 226 N. Y. 638, 123 N. E. 893. Everything that comes is not income taxable under the statute. So. Pac. Co. v. Lowe, etc., 247 U. S. 330, 38 Sup. Ct. 540, 62 L. Ed. 1244.
It is clear that Congress intended the words “acquired by gift, bequest, devise or descent” to be words of exception, and not of exemption. The word “bequest” is used in the' exemption clause of the act, and the act provides that income shall include all gains derived from compensation for personal services, except property acquired by bequest. It is clear that it was the intent of the testator to give the legacy, and not to permit the executors to work for it.
It is contended by the government that article sixteenth of the will is in effect a testamentary fixing by the testator of the compensation to be paid for services to be rendered by his executors; but bequests are not compensatory—they are donative. The taxing statute intended something different. The compensation for personal services of whatever kind and in whatever form immediately follows
The question must be determined, not by the phrase “in lieu of commissions,” but upon the question of whether the bequest was in fact a consideration for services to be rendered. The bequests were not stipulated as a condition for service. As a general principle, if an executor unequivocally manifests an intention to act in the executorship, that will be a performance of the condition upon which his legacy depends, although he be prevented by circumstances from actually serving. 2 Williams on Executors (6th Am. Ed.) 1394; Morris v. Kent, supra; Scofield v. St. John, 65 How. Prac. (N. Y.) 292. In the case of Brydges v. Wotten, 1 Ves. & Beam, 134, a legatee named as trustee, and to whom the legacy was given as a token of regard and recompense for his trouble, died 19 months after the death of the testator, without having acted at all, and he was held to have become entitled to his legacy, in the absence of any refusal or neglect to act.
The rule of law is well settled that, where bequests are made conditional only upon being ready and willing to assume the executory office, provided circumstances permit them to do so, to entitle them to legacies, it is not required of them that they should render services for which they would have-a legal claim for compensation in the form of commissions. Inability of a legatee to enter upon performance of service as executor would not prevent the absolute vesting of a bequest in him in lieu of commission. Bean v. Carleton, 58 Hun, 611, 12 N. Y. Supp. 519, affirmed 126 N. Y. 642, 27 N. E. 852; Wheeler v. Board, 12 Johns. (N. Y.) 363.
Assuming that the executors named had all died in a common disaster before the formalities of the probate of the will had been completed, could not their representatives respectively insist upon payment of the respective legacies ? There is little doubt that the legacies would then have been acquired by bequest within the meaning of the law. We think the whole of each legacy was payable independent of services. It was an acquisition to each legatee by bequest, within the meaning of the taxing act, and was therefore not taxable as income.
Judgments reversed.