Anderson v. Bowers

• Decision Date: 18 May 1948
• Docket Number: Civil Action No. 1578.
• Citation: 77 F. Supp. 980
• Court: U.S. District Court — District of South Carolina
• Parties: ANDERSON v. BOWERS.

77 F. Supp. 980

ANDERSON v. BOWERS.

Civil Action No. 1578.

District Court, E. D. South Carolina, Florence Division.

May 18, 1948.

John D. Nock, of Cheraw, S. C., for plaintiff.

Ben Scott Whaley, U. S. Atty., and Louis M. Shimel, Asst. U. S. Atty., both of Charleston, S. C., and Rhodes S. Baker, Jr., Sp. Asst. to Atty. Gen., for defendant.

WARING, District Judge.

Plaintiff, Maggie F. Anderson, a resident of Cheraw in Chesterfield County, South Carolina, in March 1942 filed her Federal Income Tax Return for the calendar year 1941 with the defendant as the Collector of Internal Revenue for the District of South Carolina, and included in said Return as an item of income was the following: "Administratrix Fee — J. L. Anderson, Est. $25,106.99."

It appears that J. L. Anderson died testate in Cheraw, Chesterfield County, South Carolina on February 18, 1940, leaving surviving him his widow, the plaintiff herein, and two sons and two daughters. By his Will the entire estate was left to his widow with the exception of the forgiveness of certain indebtedness owed to him by his four children. The plaintiff was named as sole executrix and qualified. She filed an accounting in the Probate Court and the estate was closed and she discharged as executrix by order of the Probate Court on February 28, 1941. Federal Estate Tax had been filed on February 12, 1941, and payment made of the amount of tax, according to the calculations on the Return. On "Schedule J" of the Return the amount of executrix' commissions is shown as $25,106.99. It appears that in preparation to wind up the estate the balance then on hand in the bank to the account of the estate was divided amongst the parties claiming to be entitled thereto by drawing to the order of each of the children a check in the sum of $4,596.83 (one of these checks was $4,596.82) and a fifth check to the plaintiff. This check, drawn in her name "Maggie F. Anderson," is dated February 28, 1941, and is for the amount of $25,106.96 (The receipt hereinafter refered to and tax Returns show the amount to be $25,106.99. This slight difference is probably some clerical error and is immaterial.) The check was signed "Maggie F. Anderson, Executrix Estate J. Liston Anderson, Deceased," and bears a notation "Exrs. Com." There appears the endorsement on the back, "Maggie F. Anderson," and the bank perforation showing the time of cashing is "3-15-43." Under the same date as that of the check, namely, February 28, 1941, a receipt for $25,106.99 for "Executrix's Commissions" was executed in the name of Maggie F. Anderson by her son W. G. Anderson who generally looked after her business affairs. It appears that on March 15, 1943, a new account was opened in the South Carolina National Bank entitled "J. L. Anderson Tax Account" and the above named checks, aggregating the sum of $43,494.27, were deposited. Apparently a check was drawn for the sum of $43.994.27 which was a payment to the Commissioner of Internal Revenue for estate taxes, and as this created an overdraft on the bank statement on March 29, the next day a deposit of $500 was made and the account closed.

From the testimony, it appears that Mrs. Anderson had little if any part in the managing of the affairs of the estate. Her husband and the four children had been partners in business and upon his death they continued the business, she inheriting a one-fifth interest. The business seems to have been run entirely by the children and the estate matters by them under the advice and direction of their attorney, Mr. Nock, and a tax consultant, namely, Mr. L. C. Dodge, a certified public accountant of Spartanburg, South Carolina. The five checks were drawn by Mr. Nock on or about February 4, 1941, and sent by him to Mrs. Anderson, who was temporarily absent from home and visiting in Florida. He directed her to sign the checks and various estate documents, including the Return to the Probate Court in preparation for application for discharge on February 28, 1941, the same date as the checks and receipt above referred to. Mrs. Anderson apparently signed these papers and returned them to Mr. Nock. The proceedings in the Probate Court were carried forward, the accounts filed, receipts exhibited, and the discharge obtained, declaring the estate closed; and among other items was an allowance of executrix' commissions in the amount heretofore set forth. It appears that the tax consultant had advised that there might be some question as to some of the tax liability, particularly in view of some gifts that might be claimed to have been made in contemplation of death, and of course if the Commissioner of Internal Revenue had assessed an additional tax, the estate having been closed, claim would come back upon the beneficiaries. It was therefore deemed expedient to retain the five checks in a safe in the office of the partnership business. One of Mrs. Anderson's sons testified that this was done on the advice of Mr. Nock, but it is indefinite as to exactly by whom or how it was brought about. Mrs. Anderson said she was not familiar with these matters and left the direction of it to her children and their advisors.

Now, while this check was never cashed by Mrs. Anderson, she certainly had a right so to do if she had wished. Some question has been made as to whether there was actual delivery. Of course if the money had been retained in the estate, it might be argued that no delivery was made, but the checks were drawn, the receipt signed, the Returns made to the Probate Court, all for the purpose of ending the estate, and when the executrix had once been discharged and these checks issued, there was no longer any estate in existence to retain any control or direction over the funds. If Mrs. Anderson had chosen she could have presented this check for payment and demanded payment. It is true the physical custody of the check was in the hands of her sons and those in charge of the business, but this custody had been created voluntarily by her and they were her agents and acting for her. Therefore their custody was her custody and she had a right at any time to take the check out of the safe since she was an equal partner in the business and since the Probate Court had allowed this amount to her. Or she could have gone further if she wished and herself drawn a new check, presented it to the bank, and withdrawn the moneys. And she was the only person that could sign checks on the estate account or direct the payment of the money. It is quite apparent that the arrangement by which these checks were held was one of convenience and protection to all parties because of the possibility of further tax liability. In fact, the tax consultant said that he apprehended that the government would make a claim since there had been a gift by the decedent on his deathbed, and while he considered it legitimate to make the claim, he believed there was great probability that the government would refuse the claim and make an additional assessment. And also there was certain litigation in regard to transactions with the decedent which might cause some further tax liability. And so it is clear that these parties who would have to make up contributions for the purpose of meeting any future tax liability determined that they would protect themselves against each other by holding the checks in one common fund, subject to use in the future. But it must be reiterated that this was a voluntary agreement and each party and particularly the executrix was entitled as a matter of right at that time to cash the...