Baldwin v. Commissioner of Internal Revenue

• Decision Date: 10 February 1942
• Docket Number: No. 9877.,9877.
• Citation: 125 F.2d 812
• Parties: BALDWIN v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Ninth Circuit

125 F.2d 812 (1942)

BALDWIN v. COMMISSIONER OF INTERNAL REVENUE.

No. 9877.

Circuit Court of Appeals, Ninth Circuit.

February 10, 1942.

Allen Spivock, of San Francisco, Cal., for petitioner.

Samuel O. Clark, Jr., Asst. Atty. Gen., and J. Louis Monarch, Newton K. Fox, and Benjamin Brodsy, Sp. Assts. to Atty. Gen., for respondent.

Before GARRECHT, HANEY, and STEPHENS, Circuit Judges.

STEPHENS, Circuit Judge.

This appeal involves estate taxes in the amount of $2,034.74, and is taken from the decision of the Board of Tax Appeals entered March 27, 1941 sustaining the determination of the Commissioner to the effect that a certain transfer from the decedent to her son was one intended to take effect in possession or enjoyment at or after death. Section 302(c), Revenue Act of 1926, 26 U.S.C.A. Int.Rev.Acts, page 227.

We are first faced with the question concerning the admissibility of the testimony of one David Cosgrave, who had been the attorney for the decedent during her lifetime. The questions put to the attorney were objected to upon the ground that they called for testimony that was privileged but the objections were overruled. Cosgrave was the only witness for the Government, and testified concerning the motive behind the transfer from the decedent to her son, and also concerning a deed which the son executed back to his mother and deposited with the witness to be delivered to the mother in the event the son predeceased her. The theory of the Government's case is that by the deed from the mother to the son and his deed back, the mother retained a reversionary interest in the properties the same as if she had by a single deed conveyed the property to the son with a reversion to her in the event she survived him. Klein v. United States, 283 U.S. 231, 51 S.Ct. 398, 75 L.Ed. 996; Helvering v. Hallock, 309 U.S. 106, 60 S.Ct. 444, 84 L.Ed. 604, 125 A.L.R. 1368.

A summary of Cosgrave's testimony follows:

The decedent expressed to the witness a desire to have the property involved go to her son, and at first suggested that it be so provided in her will. The witness suggested that she deed the property direct to the son and that "he for her protection make this other deed back at the same time", (quoting his testimony directly) the second deed to be "held by me until after Mrs. Baldwin's (decedent's) death, and then, as I stated before, I either destroyed it or gave it back to Murray (the son)." The witness drafted both deeds at the same time and also prepared the decedent's will. It was his idea and suggestion that the purpose of the deed to the son "would save the expense of the administration there since it was her desire that he should have the property". The arrangement at that time was that Mrs. Baldwin would continue to receive the income from the property. Throughout these negotiations the witness was representing the decedent alone, to protect her interests. The son was not present at the time the decedent gave the witness his instructions concerning the preparation of the deeds. The son was present on some occasions when the three talked over the making of the deeds, but that he was not present at any time when there was any discussion of a confidential nature. These confidential legal discussions were had with the decedent alone. The only times that the son was brought into the discussion were when the witness told him that it was intended that he execute the deed. No explanation as to the legal reason was given the son. The son was "brought in just to tell him what you (we) were intending to do."

In urging the admissibility of the testimony of the attorney, the Government contends that the communications were not privileged because, as it alleges, (1) they were not in the first place intended by the decedent to be confidential (2) the decedent intended and instructed the attorney to communicate them to her son and (3) some, if not all, of the communications were in the presence of a third party, the son."

Section 907(a) of the Revenue Act of 1924, as amended by Revenue Act 1926, c. 27, § 1000, 44 Stat. 9, 26 U.S.C.A. Int.Rev.Acts, page 307, provides that proceedings of the Board shall be conducted in accordance with the rules of evidence applicable in courts of equity of the District of Columbia, and we therefore look to decisions of the Courts of that District to resolve the question before us.

In Elliott v. United States, 1904, 23 App. D.C. 456, page 468, the Court stated the rule as follows: "Professional communications, made by client to attorney, or communications passing between client and attorney, are, upon principles of public policy, and from the necessity of preserving confidence in all matters of business where the assistance or agency of an attorney is required, held to be privileged from disclosure; and this privilege is that of the client rather than that of the attorney. This privilege embraces all communications made by the client to his attorney for and in the course of the business for which the attorney may be employed. The latter cannot be permitted to disclose such communications, whether they be in the form of title deeds, wills, documents, or other papers delivered or statements made to him, or of letters, entries, or statements, written or made by him in that capacity. Citing cases. The protection is not qualified by any reference to proceedings pending or in contemplation, nor is it material that the client be in no manner before the court where disclosure is sought to be had * * *".

The privilege does not terminate by the death of the client. Glover v. Patten, 165 U.S. 394, 410, 17 S.Ct. 411, 41 L.Ed. 760.

Tutson v. Holland, 60 App.D.C. 188, 50 F.2d 338, 340, is one of the cases relied upon by the Government. It is urged that the cited case is authority for the admissibility of the evidence, on the theory that the presence of the son at some of the conferences destroyed the privilege. There the controversy involved a contract between the plaintiff and the defendant. The attorney for the plaintiff was called to testify as to conversations had at a conference at which all three had participated. The Court in holding the communications were not privileged pointed out the fact that the defendant in the action was one of the parties to the conference and stated the rule to be "the presence of a third party, particularly if he is an opposing party, indicates that the communication is not confidential or privileged". We do not have such a situation in the instant case. Here the third party to such conferences as were not private between the decedent and her attorney, was the decedent's son, who is now objecting to the testimony both in his individual capacity and as Executor of his mother's estate. The reason for the rule announced in the Tutson case does not apply.

Rather, we have a situation like the one present in Hartness v. Brown, 21 Wash. 655, 59 P. 491, and the one discussed in Murphy v. Waterhouse, 113 Cal. 467, 45 P. 866, 54 Am.St.Rep. 365. In the latter case (page 470 of 113 Cal., page 866 of 45 P., 54 Am.St.Rep. 365) it is said: "`When two persons address a lawyer as their common agent, their communications to the lawyer, so far as concerns strangers, will be privileged; but as to themselves they stand on the same footing as to the lawyer, and either can compel him to testify against the other as to their negotiations.'"

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