Amoskeag Trust Co. v. Trustees of Dartmouth College

• Decision Date: 21 June 1938
• Citation: 200 A. 786
• Parties: AMOSKEAG TRUST CO. et al. v. TRUSTEES OF DARTMOUTH COLLEGE.
• Court: New Hampshire Supreme Court

200 A. 786

AMOSKEAG TRUST CO. et al.

v. TRUSTEES OF DARTMOUTH COLLEGE.

Supreme Court of New Hampshire. Hillsborough.

June 21, 1938.

Transferred from Superior Court, Hillsborough County; James, Judge.

Petition for instructions by the Amoskeag Trust Company and others, as executors of a will which, after specific bequests and devises to individuals and charities, left the residue of the estate to the Trustees of Dartmouth College, which will gave no directions to the executors as to the payment of taxes of any sort. The judge transferred without ruling the question of whether, under the circumstances, the federal estate tax should be paid entirely out of the residue of the estate, or apportioned pro rata among all devisees and legatees.

Case discharged.

Warren, Wilson, McLaughlin & Wiggin, of Manchester (J. Walker Wiggin, of Manchester, orally), for specific legatees. McLane, Davis & Carleton, of Manchester (John P. Carleton, of Manchester, orally), for residuary legatee.

WOODBURY, Justice.

>

The question presented is one of local law, (Williams v. State, 81 N.H. 341, 355, 125 A. 661; Edwards v. Slocum, 264 U.S. 61, 63, 44 S.Ct. 293, 68 L.Ed, 564), and the authorities in this state are unanimous to the effect that the federal estate tax, unless the will otherwise directs, "is to be paid out of the estate and charged pro rata to each beneficiary." Fuller v. Gale, 78 N.H. 544, 546, 103 A. 308, 309; Williams v. State, supra; Foster v. Farrand, 81 N.H. 448, 450, 128 A. 683.

Counsel for the specific legatees admit that these authorities are in point but suggest that we re-examine and overrule them for the reason that they are based upon inadequate and erroneous reasoning and are contrary to the overwhelming weight of authority elsewhere.

The federal estate tax, (39 Stat. 756), was passed by Congress in September 1916. and less than two years later this court in Fuller v. Gale, supra, was called upon for the first time to consider the question here presented. In its opinion in that case the court did not indulge in any extended reasoning. It merely distinguished the federal estate tax from foreign inheritance taxes and announced its rule of pro rata distribution of the burden of the former among all the beneficiaries.

Six years later in Williams v. State, 81 N.H. 341, 354, 355, 125 A. 661, 667, the nature of the tax as one upon the "interest which ceased by reason of the death," rather than as one "upon succession and receipt of benefits under the law or the will" was mentioned, but the result of the Fuller Case was affirmed by interpreting the silence of the testator on the subject of the incidence of this tax to indicate an intention upon his part that its burden should be borne as though he had died intestate, that is, that it "should be prorated among the recipients of the testator's bounty." The case of Foster v. Farrand, 81 N. H. 448, 128 A. 683, decided six months after the Williams Case, merely refers to the question as settled by the earlier decisions of the court.

The cases from other jurisdictions, in so far as they have been cited to us by counsel or have come to our attention, do not proceed upon a theory of interpretation of the testator's intention from his silence; in fact in one of them this theory is expressly repudiated. Plunkett v. Old Colony Trust Co., 233 Mass. 471, 475, 124 N.E. 265, 7 A. L.R. 696. Instead they approach the problem from the standpoint of the nature of the tax, and the conclusion which they reach as to the incidence of its burden is contrary to that reached by the court of this state.

The leading case among the authorities in this latter group is Young Men's Christian Association v. Davis, 264 U.S. 47, 44 S.Ct. 291, 68 L.Ed. 558. In relation to the federal estate tax the Supreme Court of the United States in that case said (page 292): "What was being imposed here was an excise upon the transfer of an estate upon death of the owner. It was not a tax upon succession and receipt of benefits under the law or the will. It was death duties, as distinguished from a legacy or succession tax. What this law taxes is not the interest to which the legatees and devisees succeeded on death, but the interest which ceased by reason of the death." In view of the binding effect upon the state courts of this interpretation of the federal tax, (Gehlen v. Patterson, 83 N.H. 328, 330, 141 A. 914, and cases cited), and in view of the fact that this tax is payable by the executor out of the assets of the estate before distribution, the courts elsewhere have held that it constitutes a charge against the estate which, like other such charges and expenses of administration, is payable out of the residue. Plunkett v. Old Colony Trust Co., 233 Mass/471, 124 N.E. 265, 7 A.L.R. 696; Corbin v. Townshend, 92 Conn. 501, 505, 103 A. 647; In re Hamlin, 226 N.Y. 407, 124 N.E. 4, 7 A.L.R. 701; In re Oakes, 248 N.Y. 280, 162 N.E. 79; People v. Northern Trust Co., 289 Ill. 475, 124 N.E. 662, 7 A.L.R. 709; Hepburn v. Winthrop, 65 App.D.C. 309, 83 F.2d 566, 105 A.L.R. 310; Brown's Estate v. Hoge, 198 Iowa 373, 199 N.W. 320.

We do not believe that the reasoning of these latter cases can be successfully assailed. On the other hand, the theory upon which this court has proceeded in the past is open to serious criticism. In the first place the inference of intestacy as to the payment of this tax which was drawn from the testator's silence in the Williams Case is opposed to the presumption against partial intestacy, (Clyde v. Lake, 78 N.H. 322, 100 A. 552; Kennard v. Kennard, 63 N.H. 303), and in the second place it fails to take into account the statement in Kingsbury v. Bazeley, 75 N.H. 13, 17, 70 A. 916, 918, 139 Am.St.Rep. 664, 20 Ann.Cas. 1355, to the effect that "In a gift of a pecuniary legacy of a certain amount, the apparent intention is to benefit the legatee to the full amount named." Furthermore, "The benefaction conferred by the residuary clause of a will is only of that which remains after all paramount claims upon the estate of the testator are satisfied," (Plunkett v. Old Colony Trust Co. supra, page 267) and, as appears above, the federal estate tax is, by the law which created it, made a "paramount" claim against the estate.

Upon analysis it seems to us that the testator's silence gives no clear indication of his intention in respect to the incidence of the burden of the tax. Considering the will as a whole it seems rather more probable than not that the testator wished his...