Alexandria Nat. Bank v. Thomas

• Court: Virginia Supreme Court
• Writing for the Court: Before SNEAD; I'ANSON
• Citation: Alexandria Nat. Bank v. Thomas, 213 Va. 620, 194 S.E.2d 723 (1973)
• Decision Date: 05 March 1973
• Parties: , 67 A.L.R.3d 190 The ALEXANDRIA NATIONAL BANK, a corporation, as Co-Executor Under the Will and Codicils of Henry P. Thomas, Deceased, and as Trustee Under an Inter Vivos Trust, et al. v. Jane Colton THOMAS.

Page 723

194 S.E.2d 723

213 Va. 620, 67 A.L.R.3d 190

The ALEXANDRIA NATIONAL BANK, a corporation, as Co-Executor Under the Will and Codicils of Henry P. Thomas, Deceased, and as Trustee Under an Inter Vivos Trust, et al. v. Jane Colton THOMAS.

Supreme Court of Virginia.

March 5, 1973.

Brockenbrough Lamb, Jr., Richmond, Philip Tierney, Alexandria (Christian, Barton, Parker, Epps & Brent, Richmond, Boothe, Prichard & Dudley, Alexandria, on brief), for appellants.

Edmund D. Campbell, Arlington (Benjamin W. Dulany, Washington, D.C., on brief), for appellee.

Before SNEAD, C.J., and I'ANSON, CARRICO, HARRISON, COCHRAN, HARMAN and POFF, JJ.

I'ANSON, Justice.

This proceeding for a declaratory judgment and injunctive relief was filed in the court below by Jane Colton Thomas, appellee herein, asking the court to hold (1) that the statutory share distributable to her as the result of her election to take against the will of her deceased husband is not to be charged with any part of the Federal estate tax imposed on the decedent's estate, and (2) that she is entitled to receive one-third of the income earned on the personal assets of the estate during the period of administration.

The basic facts are not in dispute. Henry P. Thomas, of Alexandria, Virginia, died on May 23, 1969, leaving a will dated December 7, 1965, and two codicils dated December 9, 1966, and November 2, 1967, respectively. He was survived by his widow and two sons by a former marriage. The sons, Henry A. Thomas and William G. Thomas, and the Alexandria National Bank, appellants herein, qualified as executors of the estate. The widow elected to renounce the will and take her statutory share. Under the provisions of the will the residue of the estate passes to an inter vivos trust which provides for the equal payment of its income to decedent's aforementioned sons. The bank is also trustee under the trust.

The case was heard on a stipulation of facts, and the chancellor, in a written opinion, held: (1) that the Virginia apportionment statutes entitle the renouncing widow to the benefit of the marital deduction allowed under the Federal Estate Tax Law (26 U.S.C.A. § 2056) and that her statutory share was not burdened with any portion of the Federal estate tax on decedent's estate; and (2) that the widow was entitled to receive the income earned during the period of the administration on the personal assets of the estate that will pass to her. The appellants were also ordered to pay a reasonable sum to the widow on account of the income accrued during the period of administration on the personal assets of the estate that will ultimately pass to her, without prejudice to a final determination of the exact amount she is entitled to receive when her statutory share is finally determined.

The Virginia apportionment statutes were adopted as one act (Acts of 1946, Ch. 128, p. 188), and the 1950 Code revisors codified and divided the act into six sections (§§ 64--150 to 64--155, ¹ inclusive). Section 64.1--161, formerly § 64--151, provides that Federal estate taxes assessed upon an estate shall be charged against the share of each beneficiary thereof in the proportion that the value of his interest bears to the total value of the estate, 'except that in making such proration each such person shall have the benefit of any exemptions, deductions and exclusions allowed by such law in respect of such person or the property passing to him . . ..' One such deduction under the Federal law is the marital deduction, written into the Internal Revenue Code in 1948, which is an amount equal to the value of the interest in all property which passes or has passed from the decedent to the surviving spouse up to fifty percent of the total adjusted gross estate. 26 U.S.C.A. § 2056.

The Act of Congress imposing the Federal estate tax upon the transfer of property and authorizing the marital deduction did not attempt to provide for the distribution of the Federal estate tax burden. The Internal Revenue Code merely contemplates that the tax shall be paid out of the taxable estate unless otherwise directed by the decedent. Thus, where there is no direction by a decedent, or where decedent dies intestate, the Federal statute leaves it to the states to determine how the tax burden shall be borne by those who share in the taxed estate. Riggs v. Del Drago, 317 U.S. 95, 97--98, 63 S.Ct. 109, 110, 87 L.Ed. 106, 110--111, 142 A.L.R. 1131, 1132 (1942). Also, see Fernandez v. Wiener, 326 U.S. 340, 66 S.Ct. 178, 90 L.Ed. 116 (1945).

The 1946 Virginia apportionment statutes were designed to give a widow 'the benefit of any exemptions, deductions and exclusions allowed by such (Federal) law,' unless the decedent directs otherwise as provided in Code § 64--155, now § 64.1--165. Baylor v. National Bank of Commerce, 194 Va. 1, 7, 72 S.E.2d 282, 285 (1952). ² The present statute, § 64.1--161, has the same purpose.

After the Baylor case arose, and before our decision in that case, the 1952 General Assembly amended Code § 64--151 (now § 64.1--161) of the apportionment statutes. One of the changes provided that:

'. . . (A) surviving spouse shall not have the benefit of the marital deduction allowable in determining the net estate under the tax law of the United States.'

In 1954 the General Assembly again amended the statute by striking out the above quoted provision and restoring substantially the original statute (Code § 64--151).

Since 1954 the statute, now § 64.1--161, has remained unchanged except for a minor amendment in 1968, which has no bearing on this case.

The statutory share of a widow who renounces the provisions made for her in her husband's will is defined in Code §§ 64.1--16 and 64.1--11. The relevant portion of § 64.1--16 provides that:

'If renunciation is made, the surviving consort shall, if the decedent left surviving any direct descendants . . ., have one-third of the surplus of decedent's personal estate mentioned in § 64.1--11 . . ..'

The pertinent parts of Code § 64.1--11 provide as follows:

'Distribution of personal estate.--When any person shall die intestate as to his personal estate or any part thereof, the surplus (subject to the provisions of Title 34) ³ after payment of funeral expenses, charges of administration and debts, shall pass and be distributed to and among the same persons, and in the same proportions, to whom and in which real estate is directed to descend, except as follows:

'(2) Married persons.--If the intestate was married, the surviving husband or wife shall be entitled to one-third of such surplus, if the intestate left surviving children or their descendants . . . (b) of a former marriage . . .; but if no such children or their descendants survive, the surviving husband or wife shall be entitled to the whole of such surplus.'

Appellants first contend that the chancellor erred in holding that the statutory share of the widow in the estate of her deceased husband is not to be burdened with any portion of the Federal estate taxes imposed on his estate.

They argue (1) that the phrase 'charges of administration and debts,' as used in Code § 64.1--11, includes the Federal estate taxes payable on decedent's estate and, accordingly, that the widow's statutory share of the personal property of her husband is one-third of the surplus of his personal property which is determined after the payment of funeral expenses, charges of administration and debts, including Federal estate taxes; (2) that since the legislature did not amend Code § 64.1--11 after 1948, the year in which the marital deduction was allowed under the Federal law, it intended to deny a renouncing spouse her right to take advantage of the marital deduction and the provisions of § 64.1--161 allowing the deduction; and (3) that the provisions of Code § 64.1--161 are not applicable because the testator expressed directions for the payment of the estate and inheritance taxes as provided in § 64.1--165.

In support of their first assertion, appellants rely on the opinion of Judge Brockenbrough Lamb, of the Chancery Court of the City of Richmond, now retired, in Moon v. Moon, reported in Opinions of Judge Lamb, Volume 1, pp. 109--112 (October 8, 1946), appeal refused by this court sub nom Virginia Norvell v. Bank of Commerce & Trust, Committee of J. Luther Moon, and others, 186 Va. 1 xx (1947).

In Moon Judge Lamb held that the language 'surplus' after payment of 'charges of administration and debts' in the then Code § 5273, now § 64.1--11, meant the net distributable personal estate after the payment of all debts, which included Federal estate taxes. However, Moon had died before the 1946 Virginia Apportionment Act became effective, and before the marital deduction was written into the Federal law, and Judge Lamb made no reference to the Apportionment Act in his opinion.

In Campbell, Ex'r v. Lloyd, et al., 162 Ohio St. 203, 122 N.E.2d 695 (1954), In re Estate of Hurlbut, 126 Vt. 562, 238 A.2d 68 (1968), and Del Mar v. United States, 129 U.S.App.D.C. 51, 390 F.2d 466 (1968), also relied on by appellants, there were no state apportionment statutes involved.

It is perfectly manifest from the history of Code § 64.1--161 that the legislature intended to give a surviving spouse the benefit of the marital deduction allowed under the Federal estate tax law. Code § 64.1--161 is subsequent in time to the passage of Code § 64.1--11, and we have said that when a later act of the legislature is clear and unambiguous in its terms and deals fully and completely with the subject, if there is any repugnancy between it and an earlier statute the earlier yields to the later expression of the legislative will. N. & W. R. Co. v. Virginian R. Co., 110 Va. 631, 644, 66 S.E. 863, 867 (1910). Thus Code § 64.1--11 must be read along with § 64.1--161. When Code § 64.1--11 is read and considered along with § 64.1--161, it is evident that the phrase 'charges of administration and debts' found in the...