First National Bank of Montgomery v. United States

• Decision Date: 28 August 1959
• Docket Number: No. 1409-N.,1409-N.
• Citation: 176 F. Supp. 768
• Parties: FIRST NATIONAL BANK OF MONTGOMERY, Executor of the Estate of Georgia S. Gossler, Deceased, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — Middle District of Alabama

176 F. Supp. 768

FIRST NATIONAL BANK OF MONTGOMERY, Executor of the Estate of Georgia S. Gossler, Deceased, Plaintiff, v. UNITED STATES of America, Defendant.

No. 1409-N.

United States District Court M. D. Alabama, N. D.

August 28, 1959.

William S. Duke and Robert D. Thorington, Montgomery, Ala., for plaintiff.

Charles K. Rice, Asst. Atty. Gen., James P. Garland, David A. Wilson, Jr., Washington, D. C., George T. Qualley, Arlington, Va., Attorneys, Department of Justice, Hartwell Davis, U. S. Atty., and Paul L. Millirons, Asst. U. S. Atty., Montgomery, Ala., for defendant.

JOHNSON, District Judge.

This cause is now submitted upon the complaint, answer, plaintiff's request for admissions and defendant's response thereto, the stipulation of the parties, with the exhibits thereto, said stipulation having been filed herein on April 9, 1959, the order of this Court made and entered on April 10, 1959, pursuant to said stipulation of the parties, and the written briefs of said parties. Upon this submission, this Court now proceeds to make and file this memorandum opinion, embodying herein the appropriate findings of fact and conclusions of law.

This action, brought by The First National Bank of Montgomery, as executor of the estate of Georgia S. Gossler, deceased, against the United States of America, seeks recovery of $141,086.17, with interest from April 9, 1957. The basis of plaintiff's action is that plaintiff erroneously paid to defendant said amount on a deficiency that had been determined by the defendant as estate tax due on the estate of Georgia S. Gossler, deceased. An intelligent understanding of the issues involved requires a detailed statement of the facts. William C. Oates, a resident of Montgomery, Alabama, died on February 6, 1938, testate. His will was dated August 16, 1918, and was admitted to probate in Montgomery County, Alabama, February 23, 1938. At the time of the execution of his will, William C. Oates had no children. He was then married to Georgia S. Oates. A daughter, Marion Oates, now Marion Oates Leiter, was born to this union on September 29, 1919. The marriage was dissolved on January 14, 1938, by divorce. Upon the death of William C. Oates, Georgia S. Gossler filed her petition for the probate of his will. Marion Oates, now Marion Oates Leiter, the only child, was then nineteen years of age and, as authorized by the Alabama law, had her disabilities of non-age removed; whereupon she then executed an acceptance of service of Georgia S. Gossler's petition for the probate of the will, and consented that said will be admitted to probate. No estate tax return was ever filed by Georgia S. Oates Gossler as executrix of the estate of William C. Oates; nor did she ever at any time make any statement, either partial or final, of said estate. Georgia S. Oates married Philip G. Gossler on the 12th day of March, 1938, and remained Georgia S. Oates Gossler until she died on March 16, 1953, testate. Her will was admitted to probate in Montgomery County, Alabama, and under the terms of said will, the daughter, Marion Oates Leiter, and The First National Bank of Montgomery, the plaintiff here, were named as joint executors. Insofar as this litigation is concerned, Marion Oates Leiter was the sole beneficiary under this will. Upon the 18th day of January, 1954, Marion Oates Leiter resigned as an executor of the will of Georgia S. Oates Gossler. Subsequent to her resignation, The First National Bank of Montgomery, as the other executor of said will, filed in the Circuit Court of Montgomery County, Alabama, a statement for final settlement of the estate of William C. Oates. In said petition for final settlement, made pursuant to the provisions of an Alabama statute¹ the bank alleged that Marion Oates Leiter was claiming as the next of kin and sole heir at law of William C. Oates the title and right of distribution to all of the estate of William C. Oates and because of said claim the bank requested the Circuit Court of Montgomery County, Alabama, to pass upon and determine the validity of the claim of Marion Oates Leiter to said estate of William C. Oates as opposed to the right of the estate of Georgia S. Oates Gossler.

To said petition of the bank, as executor of the estate of Georgia S. Oates Gossler, Marion Oates Leiter filed her answer and claim. Said claim was based upon two propositions:

(1) Item Sixth of the Will of William C. Oates left such property to his wife, Georgia S. Oates, and Georgia S. Oates renounced her inheritance under such Will clearly, continuously and unquestionably.

(2) Item Seventh of the Will of William C. Oates made no provision for Marion Oates Leiter, a child born after the making of said Will, and Marion Oates Leiter therefore took as a child as though her father, William C. Oates, had died intestate.

Upon the issues thus made and the testimony submitted thereon, the Circuit Court of Montgomery County, Alabama, on the 5th day of August, 1954, ordered:

"1. That the Will of William C. Oates dated August 16, 1918, and admitted to probate and record in the office of the Judge of Probate of Montgomery County, Alabama, on February 23, 1938, and of record in Will Book 13, at Page 192, in said Probate Office of Montgomery County, Alabama, be and the same is hereby declared to have been valid and binding.

"2. That Georgia Saffold Oates Gossler be and she is hereby declared to have renounced any and all of her inheritance under said Will.

"3. That Marion Oates Leiter be and she is hereby declared as the sole heir of William C. Oates, deceased.

"4. That Marion Oates Leiter as sole heir of William C. Oates, deceased, be and she is hereby entitled to all of the undistributed residue and remainder of the Estate of William C. Oates, deceased."

and further ordered the bank, as the executor of the estate of Georgia S. Oates Gossler, to make distribution of the assets of said estate to Marion Oates Leiter; in due course said distribution was made. It is significant to note that Marion Oates Leiter was the ultimate beneficiary of the estate of William C. Oates and also of the estate of Georgia S. Oates Gossler, regardless of the court proceeding and/or the outcome thereof in the Circuit Court of Montgomery County, Alabama.

On June 14, 1954, The First National Bank of Montgomery, as executor of the estate of Georgia S. Oates Gossler, filed a Federal estate tax return reporting a total gross estate of $607,228.08 and showing a net estate tax payable of $133,576.92, which amount was tendered with the return. There was deleted from said return the value of certain shares of stock in The First National Bank of Montgomery, Alabama, and the value of certain real property situate in Hale County, Texas, and Houston County, Alabama, for the reason that Marion Oates Leiter had filed a claim to ownership of such property as the legal heir of William C. Oates and such claim was then pending. Subsequently, on October 21, 1954, the bank, as executor of the estate of Georgia S. Oates Gossler, filed claims for refund for the years 1950 through 1953 in the total amount of $30,975.01, said claims for refund being upon the theory that said sums had been improperly included in the individual income tax returns of Georgia S. Oates Gossler for those years and that such items were not the income of Georgia S. Oates Gossler according to the decree of the Circuit Court of Montgomery County, Alabama. This collective claim for refund was granted. The deficiency forming the basis for this litigation was upon the determination of the Commissioner of Internal Revenue that the aforementioned shares in The First National Bank of Montgomery and the real property situate in Hale County, Texas, and Houston County, Alabama, that had been devised by William C. Oates to Georgia S. Oates (Gossler) was properly includable in the estate of Georgia S. Oates Gossler, who was named as the sole beneficiary in his will. The claim for refund was denied by the Commissioner on October 31, 1957, and this litigation ensued.

The issues now presented are:

(1) Plaintiff's claim that defendant is estopped to deny the validity and binding effect of the decree of the Circuit Court of Montgomery County, Alabama, dated August 5, 1954.

(2) Plaintiff's claim that the decree of the Circuit Court of Montgomery County, Alabama, dated August 5, 1954, is binding and controlling in this case.

(3) The claim of the plaintiff that Marion Oates Leiter inherited the property in question under the provisions of the will of her father, William C. Oates, and that said property is not properly includable in the estate of Georgia S. Gossler for Federal estate tax purposes.

With respect to plaintiff's claim that the defendant is estopped to deny the binding effect of the decree of the Circuit Court of Montgomery County, Alabama, said decree being dated August 5, 1954, we must start with the proposition that there is a legal presumption to the effect that defendant is not so estopped in such cases and the burden to prove equitable estoppel is upon the plaintiff. See Girard v. Gill, 4 Cir., 1958, 261 F.2d 695, and May Broadcasting Co. v. United States, 8 Cir., 1953, 200 F.2d 852. And also it must be kept in mind that such a doctrine is to be applied only with caution against the United States in cases such as this one. Vestal v. Commissioner, 80 U.S.App.D.C. 264, 152 F.2d 132; Estate of Guenzel v. Commissioner, 8 Cir., 1958, 258 F.2d 248; and L. Loewy & Son v. Commissioner, 2 Cir., 1929, 31 F.2d 652.

Under the settled law, equitable estoppel, such as plaintiff seeks to have invoked in this case, must be predicated upon the conduct, language, or the silence of the party against whom it is sought to be invoked. Said conduct, language, or silence must amount to the representation or concealment of a material fact or facts. The representation must be as to fact or facts and not as to law. The theory upon which plaintiff seeks to have the doctrine of...