Bates v. Decree of Judge of Probate

• Decision Date: 25 April 1932
• Citation: 160 A. 22
• Parties: BATES v. DECREE OF JUDGE OF PROBATE.
• Court: Maine Supreme Court

160 A. 22

BATES

v. DECREE OF JUDGE OF PROBATE.

Supreme Judicial Court of Maine.

April 25, 1932.

Report from Superior Court, Hancock County.

Proceeding in the matter of the estate of Anna H. Bates, deceased. From a decree of the Hancock county probate court decreeing against the entire estate an inheritance tax, Samuel W. Bates, executor, appealed to the Supreme Court of Probate. On report.

Case remanded to the Supreme Court of Probate for further action in accordance with opinion.

Argued before PATTANGALL, C. J., and DUNN, STURGIS, BARNES, FARRINGTON, and THAXTER, JJ.

Robert H. Gardiner, of Boston, Mass., Hale & Hamlin, of Ellsworth, and Harris H. Gilman, of Boston, Mass., for plaintiff.

Clement F. Robinson, Atty. Gen., for defendant.

FARRINGTON, J.

On report. One Anna H. Bates died testate on July 9, 1929, resident of Bar Harbor, Me. Forming a part of her estate were 2,314 shares of Wildes Buildings Trust appraised at $231,400.

On March 10, 1931, the Hancock county probate court decreed against the entire estate an inheritance tax of $13,145.70, of which $8,517.70 was paid, leaving unpaid the tax on the above shares amounting to $4,628. From this decree an appeal was taken to the Supreme Court of Probate of Hancock county, and from thence the case comes to this court on report.

The single question to be decided is whether or not the interest of the deceased, Anna H. Bates, in Wildes Buildings Trust is property within the state of Maine and as such subject to an inheritance tax under the laws of this state, or, as expressed in the stipulations, "whether that part of the inheritance tax levied on the transfer of these shares is valid."

The executor, as appellant, claims that the interest represented by these shares is an interest in real estate situated within Massachusetts and is not property within the jurisdiction of the state of Maine, and therefore not here taxable.

The appellee contends that the interest is personal property, and that its transfer is taxable in this state.

By stipulation of parties it is agreed that the following facts in regard to the Wildes Buildings Trust shall be taken as true:

In 1915, the heirs of one Solomon Wildes, who died in 1867, owned undivided interests in certain real estate inherited from him and situated in Boston, Mass., and in that year, after partition proceedings had resulted in a division of the property, Anna H. Bates, aforesaid, a granddaughter of Solomon Bates, together with another granddaughter and a daughter, became the sole owners of a block on Washington and Friend streets in Boston.

In order to avoid subjecting the property to any future partition, the three owners on February 1, 1916, entered into a written agreement and declaration of trust to be known as the "Wildes Buildings Trust," and on the same date they conveyed their entire interests in the block to the trustee named in said agreement and declaration by the terms of which shares were issued to them in proportion to their ownership in the real estate as conveyed.

The trust property at that time and at the death of said Anna H. Bates consisted solely of this real estate. The sole trustee from the beginning to the date of the report was and now is Charles W. Whittier, who has at all times had full and complete charge of the property as such trustee. All books of account and records were kept by him in Boston, and all transfers of interest were there recorded. The trustee had no property and no activities outside of Massachusetts.

The declaration of trust and the deed of transfer to the trustee, duly recorded in the registry of deeds for the county where the land was situated, together formed integral parts of one and the same transaction and must be so considered. That both instruments were executed in Massachusetts can scarcely be questioned, and it is conceded by the appellee that the case of an interest held by a Maine decedent under a contract created in Massachusetts operating on Massachusetts real estate presents a conflict of jurisdiction. It is also admitted by appellee that the validity of what may be called a chose in action may depend in large part upon the law of the state of its creation. In reply brief, the appellee says: "The estate's final point is that Massachusetts law governs the problem. If the problem were simply a technical question of the kind of ownership which the shareholder has, this suggestion might settle the question." But the contention is made that, if the shares under consideration represent interests in real estate, they will entirely escape the payment of an inheritance tax by reason of chapter 292 of the Acts of Massachusetts 1929, in which provision was made exempting from inheritance tax all interests in Massachusetts real estate owned by nonresident decedents represented by transferable certificate of participation or shares of an association, partnership, or trust. This contention seems unimportant, in view of the one question confronting us. That such shares have certain outward indicia of corporation shares is obvious, but we must go beyond the outward and apparent form to the law which controls, and in our opinion the determination of the question whether the "shares" involved in the instant case are choses in action or interests in real estate is dependent on and to be governed by the law of Massachusetts, the situs of the real property which was conveyed by the deed of February 1, 1916, and which was the basis of the trust agreement and declaration of that date.

It is a general rule of law, too well settled to require citation of authority, that the lex rei sitae controls the title and disposition of real estate.

As far as real estate or immovable property is concerned, the laws of the state where it is situated furnished the rules which govern its descent, alienation, and transfer, the construction, validity, and effect of conveyances thereof, and the capacity of the parties to such contracts or conveyances, as well as their rights under the same. Thompson et al. v. Kyle. 39 Fla. 582, 23 So. 12, 16, 63 Am. St. Rep. 193; Lyndon Lumber Co. v. Sawyer, 135 Wis. 525, 116 N. W. 255.

"It is a principle too firmly established to admit of dispute at this day, that to the law of the State in which land is situated must we look for the rules which govern its descent, alienation, and transfer, and for the effect and construction of conveyances." McGoon v. Scales, 9 Wall. 23, 19 L. Ed. 545; De Vaughn v. Hutchinson, 165 U. S. 566, 570, 17 S. Ct. 461, 41 L. Ed. 827.

"The validity and construction, as well as the force and effect, of all instruments affecting the title to land, depend upon the law of the state where the land is situated. This rule includes wills, as well as deeds, contracts, or agreements. * * *" Harrison et al. v. Weatherby et al., 180 Ill. at page 435. 54 N. E. 237, at page 239. See, also. Peet v. Peet et al., 229 Ill. 341, 82 N. E. 376, at page 378, 13 L. R A. (N. S.) 780, 11 Ann. Cas, 492.

"To say that the intention of a maker of an instrument is to be determined by one law or set of rules, and that its construction is to be by another and different law or set of rules, is contradictory and absurd." Harrison et al. v. Weatherby et al., supra; Peet v. Peet et al., supra.

"Whether a person has an equitable interest in land is determined by the law of the State of the situs." Restatement Conflict of Laws, American Law Institute, § 260.

"Whether the interest of the beneficiary of a trust of land is to be treated as real estate or whether because of a direction to sell the land it is to be treated as personalty is determined by the law of the State of situs." Restatement Conflict of Laws, § 265, supra.

In Williams et al. v. Inhabitants of Milton, 215 Mass. 1, 102 N. E. 355, the court reviews a number of Massachusetts cases relating to so-called trust arrangements and agreements and seems to make the test as to whether there is a trust or partnership depend upon whether the trustee or the certificate holder is in control. If the trustee holding the property has the right to manage it free from interference and instructions from the certificate or shareholders, it is a trust; but, if such holders are the principals whose instructions in the management are to be obeyed by the trustee as an agent, it is a partnership. See Narragansett Mut. Fire Ins. Co. v. Burnham et al. (R. I., 1931) 154 A. 909.

Under the original trust agreement in the instant case, it was provided that "the trustee shall have full control over and exclusive management of the trust property," enumerating incidental powers in particular which show the intent of the parties to the trust instrument to make that control and management full and exclusive in fact. There was a provision that the trustees should have the power, with the assent of the majority in interest of the shareholders, either by a vote at a meeting or by an instrument in writing, to sell or mortgage the whole or any part of the trust property and to purchase other real estate in Boston and to issue additional shares of the trust in payment for property purchased or for other purposes of the trust.

By an...