Lead Opinion
William J. Hunter died testate July 13, 1948, willing his entire estate to his-wife Thelma D. Hunter. At the time of his death he was a resident of the state of California. His estate was partly in California and partly in Montana. The gross estate in California amounted to $98,174.68. The gross estate in Montana amounted to $156,063.95.
Two items of the Montana property are the subject of this action. One, the decedent and B. L. Lail as co-partners, entered into a written contract for the purchase of a ranch in Beaverhead county consisting of approximately 7,120 acres and stocked with 1,000 head of livestock and other property. The purchase price of this ranch was $215,000. Decedent’s interest in the ranch and the partnership bank account has been inventoried and appraised at $125,000. The wife of the decedent was not a party to the contract for the purchase of the ranch nor was she a partner in the partnership. The second item consists of a contract for the purchase of a 3,907 acre ranch in Beaverhead county. The contract price was $45,000. Also on the ranch were
The surviving wife as executrix of the estate of William James Hunter, deceased, claims that the Montana property was purchased with funds acquired by her and her husband while residents of the state of California; that these funds constituted community property in California.
The respondent concedes that the law of the situs of the land governs the incidence of inheritance tax on the death of the owner. 11 Am. Jur., Conflict of Laws, sec. 30, p. 328; 1 Beale, Conflict of Laws, sec. 118D.2, p. 602; Restatement, Conflict of Laws, sec. 245, p. 329; In re Gift Estate, Mont.,
But respondent contends: That by virtue of the law of California the money that the decedent used to pay on the purchase contract of the land was community property. Property rights are not lost simply because property is transported into another state and exchanged there for other property. Citing Tomaier v. Tomaier, 23 Cal. (2d) 754,
The trial court adopted this theory and found: “That an Undivided one-half interest in said property acquired in the State of California, immediately upon the acquisition thereof, vested in the said Thelma D. Hunter as the wife of said testator by reason of the community property laws of the State of California; that her said interest in this said community property into which it was converted has never been divested; that by reason of the premises, the said Thelma D. Hunter was the
The validity of the argument depends on the accuracy of the premise that according to California law one-half of the community property was vested in the wife prior to the testator’s death.
We take judicial notice of the common law and statutes of California. R. C. M. 1947, sec. 93-501-2. In order to inform ourselves of the California law we may not only call upon counsel, sec. 93-501-3, but may resort to “appropriate books or documents,” 93-501-1, and “ascertain from all available data what the highest court of the state will probably hold the state law to be. ’ ’ Chief Justice Stone in Helvering v. Stuart,
In determining what the state law of California is upon the question before us, we are endeavoring to define the nature of the interest a husband and wife have in California community property prior to the dissolution of ,the marriage and then apply the Montana tax statutes to a transfer of that interest if applicable. In so doing we have no definitive decision of the highest court of California to guide us. Further we are compelled to analyze a system of ownership adopted largely from Spanish sources and foreign to our common law. For a discussion of the origin and extent of the community property system, see de Funiak, “Principles of Community Property,” Vol. 1, and the article by Evans, The Ownership of Community Property, 35 Harv. L. Rev. 47. In applying our taxing law to the interests growing out of a different system of law in a different jurisdiction we must also preserve the integrity of our own system
It was early established in California that the wife’s interest in the community property was “a mere expectancy, like the interest which an heir may possess in the property of his ancestor.” Van Maren v. Johnson, 1860,
Despite changes in the statutes and deviations in the decisions the wife’s proprietary interest was not very different in 1927 when the California court decided Stewart v. Stewart,
For a comprehensive analysis and citation of the history of the growth of California community property law prior to 1927, see the two Stewart cases: Stewart v. Stewart,
In 1927 the California legislature enacted section 161a, Civil Code of California, which says: “The respective interests of the husband and wife in community property during continuance of the marriage relation are present, existing and equal interests under the management and control of the husband as is provided in sections 172 and 172a of the Civil Code. This section shall be construed as defining the respective interests and rights of husband and wife in the community property.” Immediately after the passage of section 161a an article in 16 Cal. L. Rev. (1927) 68, “doubted that it has added to the law of the State of California.” See also, 4 So. Cal. L. Rev. 395, 400. Dean McMurray (Cal. Jur., 1930 Supp., p. 108), takes the same position as does Cahn, Federal Taxation and Private Law (1944), 44 Columbia L. Rev. 669, 676. “Méanwhile the California wife enjoys precisely the same privileges and remedies as before the enactment of the 1927 law.”
Dean Kirkwood of the Stanford Law School takes a contrary view (7 So. Cal. L. Rev. 11) as does Simmons (22 Cal. L. Rev. 404). The article on community property in the Ten Year Supplement to California Jurisprudence, particularly section 90, also suggests that the decision in United States v. Malcolm,
Since the United States Supreme Court had previously, in United States v. Robbins,
The Malcolm case, however, was limited by Commissioner v. Harmon,
It is worthy of note that in Poe v. Seaborn, supra, upon which the Malcolm case was founded, the commissioner also conceded his case. ‘‘The Commissioner concedes that the answer to the question involved in the cause must be found in the provisions of the law of the State.” In the cause at bar the state board of equalization has not given away its case in any such fashion. It vehemently insists that under the California law the wife’s interest in California community property is not such a proprietary vested one as to permit her to escape inheritance tax thereon.
In a note in 23 So. Cal. L. Rev. 237, 238, there is this comment on section 161a: “It is believed that the primary purpose of this addition to the Civil Code was to give the wife such an interest in the community property so as to allow the husband and wife to file separate income tax returns and thereby evade the higher income tax brackets. In United States v. Malcolm, the Supreme Court held that, by virtue of section 161a, California had given the wife a vested interest in community property and thus the Court upheld the separate returns filed by the husband and wife. But, in spite of this holding, it was soon discovered that the wife’s interest was vested only so far as income tax purposes were concerned. For all other purposes, the wife’s interest was not considered to be vested, but merely ‘present, equal and existing’ with that of the husband.”
The fact that the husband has complete control and management of the community property is a factor to be considered. The Federal government has used the test of control in a number of cases. Indeed, Poe v. Seaborn, supra, and the other cases permitting a divided return on community income seem to be an exception to the control test. However, community property jurisdictions other than California also permit the husband to control and manage the community property and still hold that the interest of the wife is vested. This on the theory that the husband is acting as agent of the community. The husband’s control might be the basis of assessing the whole tax against his estate as was suggested by Justice Holmes in United States v. Robbins, supra, but the California courts have not followed that principle.
However, in United States v. Robbins, Justice Holmes also suggested that the fact that the whole of the community property fund was liable for payment of the husband’s debts and none
In Re Cummings, D. C.,
The California Supreme Court denied a hearing in the Grolemund case thus approving the decision. See also Smedberg v. Bevilockway, 14 Cal. App. (2d) 312,
Grace v. Carpenter, 42 Cal. App. (2d) 301,
‘ ‘ An essential element of the right of private property is the right to use or dispose of it in any lawful way which does not infringe the rights of others.” Thompson v. Lincoln Nat. Ins. Co.,
William James Hunter was the record owner of the property in question at his death. “Generally speaking there is a presumption that the ownership of real estate is where the muniment of title places it.” State Board of Equalization v. Fall,
Ownership of property has been defined as a “bundle of privileges”, Henneford v. Silas Mason Co.,
By the various amendments to California’s community property law, the wife’s “bundle of privileges” has been enlarged. However, an examination of the decisions indicates that it is not yet that of ownership so that the wife has a vested title sufficient to overcome the presumption that title is where the record puts it and to bear the burden of proof necessary to impress a resulting trust. At most section 161a seems to be only another amendment giving a wife rights not possessed by an
Nor does such a conclusion deprive the California resident of property rights. While the wife who takes as an heir must pay a tax on the entire estate when the Montana property stands in the name of the husband, yet the husband whose interests are augmented by the death of his wife, cf. Fernandez v. Wiener,
Accordingly the estate passing to Thelma D. Hunter is taxable in whole and the order fixing inheritance tax thereon is set aside and the cause remanded for a determination of the tax due in- accordance with this opinion.
Dissenting Opinion
(dissenting).
I agree with the view that the result to be attained in this case depends upon the nature of the wife’s interest in community property by the California law.
The California courts have not spoken directly on the meaning of their 1927 statute, section 161a, Civil Code, as it may affect inheritance taxes such as are involved here. I concede that were the statute ambiguous or of doubtful meaning the California courts, consistent with the mounting tendency, would probably resolve all such doubts against the taxpayer. But here the statute is so plain, definite and unambiguous that it is my belief the California courts will hold, if the question ever arises as here, that the statute means what it says, and that upon the death of a husband who has left all of his property to his wife, she will inherit his one-half interest in community property, but not the other one-half interest which was hers
I think the district court’s order was correct and should be affirmed.
Dissenting Opinion
(dissenting).
I believe the judgment of the lower court should be affirmed.
Under the law and evidence the wife, prior to her husband’s death, had a one-half interest in the Montana property because bought by the husband with community funds. Under section 161a, Civil Code of California, that interest was “present,” “existing,” and “equal.”
The view now generally prevailing is that the wife has a vested interest equal in legal dignity to that of the husband in community property. See Vol. 8, Minn. L. Rev., p. 579 (Kirkwood), and authorities cited at the bottom of page 590.
At the same time the superior powers of management and control of the community property vested in the husband, by the California statutes, are held by him in a representative capacity only. See Poe v. Seaborn, 1930,
So that when the husband purchased the Montana property with community funds he acted as agent of and trustee for his wife as to her one-half interest in such property.