Robinson v. U.S.
| Decision Date | 13 November 1980 |
| Docket Number | No. 78-3083,78-3083 |
| Citation | 632 F.2d 822 |
| Parties | 80-2 USTC P 13,380 Kent ROBINSON, Plaintiff-Appellant, v. The UNITED STATES of America, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Jeffrey F. Beck, San Francisco, Cal., for plaintiff-appellant.
Jonathan A. Cohen, David I. Pincus, Washington, D.C., for defendant-appellee.
Appeal from the United States District Court for the Northern District of California.
Before MARKEY, * Chief Judge, United States Court of Customs and Patent Appeals, MERRILL and BOOCHEVER, Circuit Judges.
Kent Robinson (Robinson) appeals from a judgment of the United States District Court, 454 F.Supp. 1160, for the Northern District of California denying his claim for the refund of federal estate taxes which he paid as Executor of the estate of his mother, Hazel S. Robinson (Decedent). We affirm.
Robinson's mother died in San Francisco on November 13, 1968. Robinson filed a federal estate tax return on February 13, 1970. On audit, the Internal Revenue Service determined and assessed additional tax liability of $22,824.90 plus $3,513.78 interest. Robinson paid the assessment on September 18, 1972. The additional tax liability was assessed under 26 U.S.C. § 2037 (1976) 1 and resulted from the inclusion in Decedent's taxable estate of the value of a trust created by her on February 11, 1920, in which she reserved to herself a conditional testamentary power of appointment.
Following Treasury Regulations 20.2031-7(a)(2), (e), and using United States Life Table 38 provided therein, the Commissioner determined the value of Decedent's reserved power of appointment, classified as a "reversionary interest" under § 2037(b)(2), to be 8.47% of the value of the trust corpus. Because that value exceeded 5%, the Commissioner considered the trust corpus includible in the gross estate and taxable under § 2037(a)(2).
The subject trust was irrevocable and provided in pertinent part:
Upon the further Trust upon the death of said HAZEL LEWIS ROBINSON, to divide the principal of said trust into two equal parts ... and to collect and receive the interest and income arising from one of said two equal parts ... and after paying from such income the proper current disbursements and charges ... to pay the net residue of such interest and income to CLARENCE ROBINSON, son of said HAZEL LEWIS ROBINSON, until he shall attain the age of thirty years, ... and if the said CLARENCE ROBINSON shall die before attaining the age of thirty years, then upon the death of said CLARENCE ROBINSON to pay over and deliver the principal of said equal part to the next of kin of said CLARENCE ROBINSON, and to collect and receive the interest and income arising from the second of said equal parts of said principal of said trust fund or estate, and after paying from such income the proper current disbursements and charges ... to pay the net residue of such interest and income to KENT ROBINSON, son of said HAZEL LEWIS ROBINSON, until he shall attain the age of thirty years, ... and if the said KENT ROBINSON shall die before attaining the age of thirty years, then upon the death of said KENT ROBINSON to pay over and deliver the principal of said second of said equal parts to the next of kin of said KENT ROBINSON.
AND IT IS HEREBY FURTHER PROVIDED, DECLARED AND AGREED that in the event that both said CLARENCE ROBINSON and KENT ROBINSON, children of said party of the first part, shall die before the said party of the first part, then upon the death of HAZEL LEWIS ROBINSON, said party of the first part, the parties of the second part, their successor or successors shall pay, transfer and set over the principal of the said trust fund to such person or persons as the said HAZEL LEWIS ROBINSON, the party of the first part, shall by her last will and testament appoint and direct and in the manner in her said will provided.
Robinson's bother Clarence having predeceased Decedent, the fair market value of Clarence's share of the trust was included by Robinson in Decedent's gross estate.
On April 18, 1974, Robinson filed a claim for refund of the assessment, claiming that inclusion of his half of the trust was improper. The claim was disallowed on December 3, 1974, and Robinson brought this action on September 19, 1975.
Robinson maintained that the reversionary interest was improperly valued because: (1) the trust instrument was improperly construed to make the power of appointment effective when Decedent survived her sons only, rather than when she also survived all issue of her sons; 2 and, (2) the Commissioner's valuation method failed to consider the actual health and physical condition of Decedent. Adoption of either contention would result in valuation of the reversionary interest at below the 5% threshold requirement of § 2037(a)(2) and a consequent impropriety in including the trust corpus in the estate. 3
The District Court rejected both contentions, and entered judgment on July 5, 1978, finding that Decedent had retained a reversionary interest in excess of 5% of the value of the trust property. From that judgment, Robinson appeals.
Whether: (1) the trust instrument should be construed to render the power of appointment effective only upon Decedent's surviving her sons and all issue of her sons; and (2) the IRS, in evaluating a reversionary interest for federal estate tax purposes under 26 U.S.C. § 2037, must use a method which considers the actual health and physical condition of the decedent immediately prior to decedent's death without regard to the fact of death.
OpinionRobinson correctly says the applicable law requires that the trust instrument be examined as a whole and that it be construed to give effect to the settlor's intention. 4 Application of United States Trust Co. of N.Y., 114 N.Y.S.2d 336 (Sup.Ct.1952).
Robinson then says the instrument's remainder provisions indicate that the issue of Decedent's children are intended remainder beneficiaries, and that it was Decedent's expressed intent that the remainder interest reside first in her children and next in the issue of her children, with the reversionary power of appointment to take effect only in the event she survived her sons and all issue of her sons. He finds that intention in the language passing a son's interest to his children (i. e., as his "next of kin") if the son dies before age 30, and in the absence of any indication that the interests of her son's children shall exist only in those circumstances.
Whatever may be said of other portions of the trust instrument, the language establishing the reserved testamentary power of appointment is clear and unambiguous, and its plain language must therefore control. Nothing in the remainder provisions renders the power of appointment provision ambiguous. Although, as Robinson notes, the trust remainder provisions leave unanswered questions relating to the disposition of the trust remainder, 5 those questions have no relevance when the provision at issue, that is, the provision reserving the testamentary power of appointment, is clear and susceptible of but one interpretation.
Robinson would have us ignore the plain and unambiguous language of the settlor. We cannot. The duty of a court is to construe a trust instrument as written. It may not, under the guise of construction or otherwise, make a new trust agreement for the parties or read into the trust instrument provisions not expressly there or not arising necessarily from the ordinary meaning of the words used. No technical rules of construction nor artificial analysis of language used may defeat settlor's intention where that intention is manifest in the language of the trust instrument itself. Farmers' Loan & Trust Co. v. Callan, 246 N.Y. 481, 159 N.E. 405 (Ct.App.1927); In re Fields' Trust, 302 N.Y. 262, 97 N.E.2d 896 (Ct.App.1952).
The trust provision creating the power of appointment provides in pertinent part:
(I)n the event that both said Clarence Robinson and Kent Robinson ... shall die before the (Decedent) ..., then upon the death of (Decedent) ..., the (trustees) ... shall pay, transfer and set over the principal of the said trust fund to such person or persons as the (Decedent) ..., shall by her last will and testament appoint and direct and in the manner her said will provided.
It is clear from this language that Decedent intended the power of appointment to become effective if her sons predeceased her. There is nothing to suggest that Decedent intended that an additional prerequisite to the power of appointment becoming effective be that she also survive all issue of her sons. If Decedent had intended the latter, it would have been a simple matter for her to have included appropriate language, in much the same way as she did in the remainder provisions that an interest of a son in certain circumstances shall pass to his next of kin. She did not choose to include such language, and we cannot do so for her. The plain language of the trust instrument must be construed to render the power of appointment effective upon Decedent's surviving her sons.
Robinson says the Government, in evaluating the reversionary interest, improperly relied exclusively on Table 38 of the U.S. Life Tables and Actuarial Tables 1939-1941. Table 38 is a normal-health mortality table which provides average life expectancy figures from which a calculation of the value of a reversionary interest dependent upon the continuation or termination of more than one life may be made. Robinson contends that the exclusive use of Table 38 life expectancy figures is improper here because Decedent had a reduced life expectancy of at least 200% normal mortality during the last two years of her life. He asserts that § 2037 in these circumstances requires consideration of the actual state of health...
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