No. 2802 | La. Ct. App. | Dec 18, 1967
Lead Opinion
This proceeding was instituted as an application to the Court by the Trustees of the St. Charles Land Trust, pursuant to LSA-R.S. 9:2233, for instructions concerning the administration of their Trust. The Trustees seek instructions authorizing them to comply with requests that they effect and recognize transfers of the beneficial interests in the Trust of deceased nonresident beneficiaries, pursuant to orders of the courts in which their estates are being administered, without requiring their Successions to be opened in Louisiana, and without payment of Louisiana inheritance taxes.
The St. Charles Land Trust was organized as a Louisiana Trust upon dissolution of St. Charles Land Company, a Maryland corporation. The assets of the dissolved corporation were transferred to the Trust, and the former shareholders of the corporation became beneficiaries of the Trust. The property of the Trust consists of mineral servitudes on lands in St. Charles Parish, and cash.
Article 3b of the Trust Instrument provides expressly that “the interests of the beneficiaries are classified as movable property, notwithstanding that the trust estate consists in whole or in part of immovable property.”
One of the beneficiaries of the Trust died in California where she was domiciled and where her estate is now being administered. The Trustees have been requested to effect or recognize transfer of this beneficiary’s beneficial interest pursuant to the orders of the California court, without requiring the beneficiary’s Succession to be opened in St. Charles Parish, and without payment of the Louisiana inheritance tax. The Trustees seek instructions authorizing them to comply with this request, and with similar requests received in the future. The decedent left no forced heirs, hence the only adverse party is the Defendant Sheriff who is ex-officio Inheritance Tax Collector of St. Charles Parish.
The question thus presented is whether the deceased nonresident beneficiary’s beneficial interest under the Trust constitutes an interest in immovable property in Louisiana. If the beneficial interest is an ownership interest in the Trust’s immovable property in Louisiana, it is subject to the Louisiana law of succession and to Louisiana inheritance tax. If, on the other hand, the beneficial interest is incorporeal movable property, its transmission on the owner’s death is governed by the law of her domicile and is not subject to Louisiana inheritance tax. Succession of Thomas, 35 La. Ann. 19" court="La." date_filed="1883-01-15" href="https://app.midpage.ai/document/succession-of-thomas-7192499?utm_source=webapp" opinion_id="7192499">35 La.Ann. 19; LSA-R.S. 47:2404.
The District Court rendered judgment instructing the Trustees that the decedent’s beneficial interest in the Trust is immovable property, transferable only pursuant to Louisiana succession proceedings, and is subject to Louisiana inheritance tax. The Trustees have appealed.
Briefly, the question presented here is whether or not the interest of a nonresident beneficiary in a Louisiana trust, passing at death to another nonresident, is subject to an inheritance tax, because the main property of the trust estate is Louisiana lands.
For economic reasons the Louisiana Constitution was amended to authorize the Legislature to provide for tenure of property in trust. Const. Art. IV Sec. 16, as amended in 1962.
Pursuant to this mandate, the Legislature adopted the Louisiana Trust Code, which became effective July 29, 1964. LSA-R.S. 9:1721 et seq.
As the Louisiana Trust Code was adopted pursuant to a direct mandate of the people, it should prevail over the Louisiana Inheritance Tax law (LSA-R.S. 47:2401 et seq.) which is a legislative enactment, not mandated by the Constitution.
Pretermitting this question of priority, there still remains the prohibition, contained in the Inheritance Tax Statute, against the imposition of the tax upon any transfer of intangible movable property owned by a person not domiciled in the State at the time of his death. LSA-R.S. 47:2404.
A beneficial interest in a trust estate is as much an intangible as a share of corporate stock, and there is no question that the transmission of the latter by death would not be subject to inheritance tax under the circumstances.
Even if the trust estate consists entirely of lands, neither the principal nor income beneficiary enjoys any dominion or ownership over the Corpus of the estate during the existence of the trust. During the trust neither an income nor a principle beneficiary has the right to exercise any semblance of ownership in the Corpus of the estate. Such a beneficiary is very much in the same situation as a shareholder in a corporation. He cannot exercise any ownership over any of the corporation’s property. Only the corporate directors can administer the property as fiduciaries the same as the trustee under a trust. The share of stock remains an incorporeal right even though the only asset of the corporation is an immovable. No inheritance tax is due on the transmission by the death of a nonresident owner of shares in a Louisiana corporation, even though the corporation’s sole asset is land in Louisiana.
The beneficiary in the instant case was exactly in the same situation as a shareholder, except that a corporation can be liquidated by 66^3% of the shares, whereas in the instant case the lands cannot be sold without the consent of 75% of the beneficiaries, and conversely 75% can order the sale over the protest of 25%, which further establishes there is no direct ownership in any one beneficiary.
LSA-C.C. art. 489 plainly states that ownership “is vested in him who has the immediate dominion of it, and not in him who has a mere beneficiary right * *
The beneficiaries in the instant case are not owners of the land, held in Trust; but mere beneficiaries of the Trust.
A beneficiary of income under a trust (like a shareholder in a corporation) has a proximate interest in the distribution of income. A principle beneficiary has only a future ownership in the corpus of the trust which he cannot realize until expiration of the trust (or liquidation of the corporation) .
The argument that the beneficial interest is an immovable lacks substance.
LSA-C.C. art. 474 defines movables as including shares in corporations, perpetual rents, and annuities — whether provided on a price in money or on the condition of the alienation of an immovable, and LSA-C.C. art. 475 fixes as movables all things corporeal and incorporeal which do not have the character of immovables by their nature or by the disposition of law. We know of no law that makes a beneficial interest in a trust estate an immovable; and certainly it is not such by nature. No law is cited that
As we understand the Trust involved here, the death of the nonresident beneficiaries has not terminated the Trust, but has merely served to substitute living nonresidents of the State as beneficiaries for deceased nonresident beneficiaries.
The Louisiana Trust Code does not split title to land into legal title held by the trustee, and beneficial title held by the beneficiary, as at common law. On the contrary, the Code vests full ownership of the trust property in the trustee, and the beneficiary has no in rem ownership in the trust property, but only an in personam right against the trustee to enforce the trust.
The express prohibition against imposition of the tax upon a transfer of an intangible movable, owned by a nonresident, in the Inheritance Tax Statute would have to be ignored to impose an inheritance tax upon the transfer under consideration. (Apparently the shareholders of the former corporation decided to avail themselves of the Louisiana law and vested their interests in a trust instead of a corporation. The only difference is in management.)
Accordingly, the judgment appealed from is reversed and judgment rendered granting the Trustees’ application for authority to effect transfer of the beneficiary’s interest, pursuant to the orders of the California court administering her estate, without payment of Louisiana inheritance tax; all costs to be taxed as provided by law.
Judgment reversed.
Dissenting Opinion
(dissenting).
The District Court of the Parish of St. Charles rendered a judgment herein on March 21, 1967 instructing the Trustees of the St. Charles Land Trust that the interest of decedent, Mrs. Ella E. Watkins, in the Trust is immovable property under the law of Louisiana, transferrable only pursuant to Louisiana Succession proceedings and is subject to Louisiana Inheritance Taxes. The decedent was domiciled in the State of California; the Trust herein involved and the immovable corpus of the Trust is in the State of Louisiana.
From the judgment against the Trustees of the St. Charles Land Trust and in favor of the Inheritance Tax Collector for the Parish of St. Charles, State of Louisiana, the Trustees have appealed.
I am in accord with the judgment rendered against said appellants and therefore
The issues set forth in the main and concurring opinions are substantially correct. However it should be stated that the pleadings filed in this matter and the documents attached thereto, including the Trust agreement itself, reveal that while the former stockholders of the St. Charles Land Company desired to create a Trust and although they each, through their agent, caused the interest they owned in the property they received from the completely liquidated corporation to be transferred to the Trustees for the purpose set forth in the Trust agreement, an analysis of that document shows that it is essentially an agency and partnership agreement whereby former stockholders of the liquidated corporation transferred their property to designated trustees for administration purposes only, with the Trustees being paid for their services. The trustees designated do not have the power of alienation of any part of the property transferred to them without the consent of 75% of the owners who transferred it to them; likewise they are unable to invest any funds accruing to the trust except to the extent of purchasing Government Bonds, at interest, to be held by them until it is necessary to remit the quarter-annual distribution of net revenues to the beneficiary certificate holders or to pay taxes or other obligations that are due.
The agreement reveals that the Trustees are dominated and controlled by the owners in all important matters pertaining to the Trust. The Trust agreement itself states:
“g- Restrictions on Powers. The sole purpose of this trust is to conserve and protect the trust estate and to collect and distribute the income and proceeds therefrom to the beneficiaries after the payment of, or provision for, expenses and liabilities. The trustees shall not at any time, on behalf of the trust or the beneficiaries, enter into or engage in any business, including without limitation, the exploration, development or operations of any mineral property, wherever located. This limitation shall apply irrespective of whether the conduct of any such business activities is deemed by the trustees to be necessary or proper for the conservation and protection of the trust estate. The trustees shall not invest any of the funds held in the trust estate, except that the trustees may deposit money held under this agreement in an interest-bearing account or accounts or in a checking account or accounts, and the trustees may purchase obligations of the United States. The trustees shall be restricted to the holding and collection of the trust moneys and the payment and distribution thereof for the purposes set forth in this agreement and to the conservation and protection of the trust estate and the administration thereof in accordance with the provisions of this agreement. The trustees shall not acquire any new properties of any kind. Every provision in this agreement, including the provisions of paragraph f of this article 2, shall be construed in a way that is consistent with the purpose and with the limitations on the trustees set forth in this paragraph g, and no power granted by paragraph f of this article 2 or any other provision of this agreement shall be exercised in a manner which goes beyond the purpose and the limitations of this paragraph g.”
Thus it is fair to state that the only thing the Trustees can do with funds that come into their possession as administrators of the property transferred to them by the owners thereof is to distribute same in accordance with the proportionate interest each owner has therein, as set forth in certain certificates of interest issued to said former stockholders of the liquidated corporation, in accordance with the terms of the agreement.
Attached to the trust agreement is a description of all of the assets transferred. A casual glance at this description indicates that all the property so transferred consists of mineral interests and servitudes on lands
Revised Statutes 9:1105 reads as follows:
“Oil, gas, and other mineral leases, and contracts applying to and affecting these leases or the right to reduce oil, gas, or other minerals to possession, together with the rights, privileges, and obligations resulting therefrom, are classified as real rights and incorporeal immovable property. They may be asserted, protected, and defended in the same manner as may be the ownership or possession of other immovable property by the holder of these rights, without'the concurrence, joinder, or consent of the landowner, and without impairment of rights of warranty, in any action or by any procedure available to the owner of immovable property or land. This Section shall be considered as substantive as well as procedural so that the owners of oil, gas and other mineral leases and contracts within the purpose of this Section shall have the benefit of all laws relating to the owners of real rights in immovable property or real estate. As amended Acts 1950, 2nd Ex.Sess., No. 6, § 1.”
Article 3664 of the Code of Civil Procedure of the State of Louisiana provides as follows:
“ ‘A mineral lessee or sublessee, owner of a mineral interest in immovable property, owner of a mineral royalty, or of any right under or obligation resulting from a contract to reduce oil, gas, and other minerals to possession, is the owner of a real right. These rights may be asserted, protected, and defended in the same manner as the ownership or possession of immovable property, and without the concurrence, joinder, or consent of the owner of the land.’ ”
It is therefore clear that all property transferred by the former stockholders of the St. Charles Land Company is immovable property under our law.
The majority opinion herein, notwithstanding the foregoing, contends that the beneficial interest in 527 units in the trust estate of the trust owned by Mrs. Watkins at the time of her death, is movable property, and directs attention to the fact that Article 3(b) of the trust instrument provides expressly that “the interests of the beneficiaries are classified as movable property, notwithstanding that the trust estate consists in whole or in part of immovable property the opinion further states that there is no law that makes a beneficial interest in a trust an immovable.
It appears to the writer hereof that as the corpus of the trust is immovable property, the mere statement in any agreement between the parties that immovable property becomes and is classified as movable proper-' ty does not in fact change the nature of the property. As hereinabove stated our law defines mineral rights attached to lands in this State, wherever located, to be immovable property, i. e., incorporeal immovables, and the laws of this State governing immovable property apply thereto.
The majority herein contends that the beneficiary certificates of interest held by the owners of the property transferred to the trust (all being former shareholders of the liquidated St. Charles Land Company) are likened to and should be treated in the same manner as shares of stock in a corporation and should be accorded the same recognition here as exists in succession proceedings, i. e., the owner of a share of stock having an interest in the assets of the corporation but not in the realty owned by it, to the extent of his holdings. A shareholder in the corporation becomes the owner of corporate stock only if he has paid the price therefor or given other consideration for same, in accordance with the law of the State. The trustees of the trust herein discussed cannot liken the certificates issued tO' the parties participating in the trust to shares of stock of a corporation for the sound reason that the trustees did not pay one dime for the property transferred to' them, and did not or could not sell these cer
The Constitution of Louisiana provides that inheritance taxes shall be due the State upon the transmission of the property of a decedent when he resides therein, and upon the transmission of property of a foreign decedent when he owns or has an interest in immovable property, within the State. The trust discussed herein is registered in the Parish of St. Charles, Louisiana in accordance with provisions of Section 2092 of the Louisiana Trust Code which reads as follows :
“If at any time the trust property of either an inter vivos trust or a testamentary trust includes immovables or other property the title to which must be recorded in order to affect third parties, a trustee shall file the trust instrument for record in each parish in which the property is located.”
The Court a qua, in its opinion, made the following comment:
“This Court feels that the trustees regarded the beneficial interest as an immovable and subject to probate in this state and subject to the inheritance tax, because Article 3(b) of the trust reads in part: provided that the trustees shall have the right, but shall not be bound, to require, as a condition precedent to recognition of the validity or effectiveness of any transfer of the interest of a beneficiary, compliance in respect thereof with the formalities attendant on like transfers of immovable property.’ ”
It should also be stated that while parties might be required to honor agreements which they mutually make, they should not be permitted to successfully urge them as a legal defense affecting the rights of third parties, or, as in this case, to avoid the payment of taxes that may be due the State.
I am constrained to conclude that the property involved in this proceeding and the beneficiary interest represented by the certificate issued by the trustees to the decedent is immovable property located in the State of Louisiana, and the State of Louisiana is entitled to demand and to be paid an inheritance tax on the transmission of that property to decedent’s heirs. Therefore judgment should be entered instructing the Trustees of St. Charles Land Trust as follows :
1. The beneficial interest sought to be transferred is an incorporeal immovable; and, as such,
2. Under C.C.P. Art. 3401 an ancillary probate of the estate of the decedent must be instituted in the Parish of St. Charles, State of Louisiana, and any judgment and any transfer relative to the beneficial interest must be recorded in the conveyance records of said parish; and,
3. The beneficial interest under the trust is subject to the Louisiana Inheritance Tax laws.
All costs shall be borne by the appellants.
CHASEZ, J., is of opinion a rehearing should be granted.
Concurrence Opinion
(concurring).
I concur in everything stated in the majority opinion, and I would add that I see nothing which conflicts with the holding of the Supreme Court in Succession of Simms, 250 La. 177, 195 So.2d 114.
Where an immovable is left by testament to an heir and in that testament a trust is created and the property is subject to the trust thus created, the title vests in the heir and not in the trustee regardless of who may have actual seizin.
A different situation results where there is an already created trust in which many persons are interested and by testament an heir is left an interest in that trust. The heir does not obtain title to anything held by the trust whether movable or immovable, but obtains title only to a share in the trust. The situation resembles that presented where there is left stock in a corporation. The shares do not become immovable even if the corporation owns only immovable property.
Here there was no immovable left by the testament to an heir. It left only a beneficial interest in the trust along with similar interests of others. Even though, by the terms of the trust agreement, 75'% of them could have ordered the sale of the property held in trust, no one of them obtained any sort of title to any immovable.