Beeler v. Motter

• Decision Date: 22 September 1928
• Docket Number: No. 1028.,1028.
• Citation: 33 F.2d 788
• Parties: BEELER et al. v. MOTTER, Internal Revenue Collector, etc.
• Court: U.S. District Court — Panama Canal Zone

33 F.2d 788 (1928)

BEELER et al. v. MOTTER, Internal Revenue Collector, etc.

No. 1028.

District Court, D. Kansas, Second Division.

September 22, 1928.

Henry H. Asher and Walter G. Thiele, both of Lawrence, Kan., for plaintiffs.

Al F. Williams, U. S. Atty., and Alton H. Skinner, Asst. U. S. Atty., both of Topeka, Kan. (C. M. Charest, General Counsel, Bureau of Internal Revenue, and Wm. T. Sabine, Jr., Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for defendant.

McDERMOTT, District Judge.

This is an action at law to recover $7,402.12 paid by the plaintiffs as a part of the tax on the estate of their deceased father. The tax was levied by the Commissioner under a finding made by him that four farms, conveyed by the decedent to his sons, were gifts made in contemplation of death. The plaintiffs claim they were not so made; hence this lawsuit.

Fred Beeler, Sr., the decedent, by the exercise of industry and thrift and an exceptional amount of business shrewdness and acumen, hewed out from the resisting prairies of Western Kansas, a fortune of well over a million dollars, nearly all of it in liquid, negotiable, and sound securities, upon which the tax has been paid to both the government and the state. He retained his strong and dominant mental powers until he was 80. About two years before his death the doctors at the Mayo Bros. Clinic at Rochester, Minn., pronounced him sound. Later he became troubled with catarrhal duodenitis, and on the morning of January 10, 1925, was found dead in bed. Within a week of his death he traveled alone and transacted business. Five days before his death he made his will, and also deeds to his four sons to the four farms in question. Each deed recited as follows:

"Witnesseth, that whereas, party of the first part, in consideration of love and affection did on or about the first day of January, 1919, give, grant, and convey unto party of the second part the property hereinafter described; at which time, party of the second part entered upon the same and took possession thereof and has since that time occupied, used and enjoyed the same as his own, and has appropriated to his own use and benefit all income derived therefrom, and has made and placed valuable improvements upon said property, and is now occupying and using the same and whereas, party of the first part overlooked and neglected to make, execute and deliver a deed conveying the legal title to said property unto said party of the second part and now wishes to complete said gift, grant and conveyance to party of the second part, by transferring to him the legal title to said property, the equitable title to which he now has had since the above mentioned date."

There is no doubt but that such deeds were made in contemplation of death, and, if the gifts rest upon those deeds, judgment must go for the defendants. The plaintiffs claim that parol gifts of the farms were completed on January 1, 1919. If that is true, judgment must go for the plaintiffs, for the evidence is entirely clear that at that time the decedent was not in contemplation of death, as that term has been construed by our Court of Appeals. In Flannery v. Willcuts, 25 F.(2d) 951, 953, that court said:

"We are also in accord with counsel's statement in his brief that the cases `hold that the thought of death must be the actuating motive without which the gift would not have been made' — adding thereto the qualification that the `thought of death' as an anticipation of the inevitable which we all realize, is not within the statute; but to be within the statute the thought must arise because of some known infirmity which, it is believed, will likely cause death."

A question is raised as to where the burden of proving the fact rests. Being back of the two-year period of presumption prescribed by the statute (section 402, Revenue Act of 1918, 40 Stat. 1097) the plaintiffs insist that the burden rests upon the government. The government insists that the burden is upon the plaintiffs to overturn the finding of the Commissioner that the gifts were in contemplation of death. It is a question of some nicety, but need not now be determined, for, if the burden be upon the plaintiffs, they have carried it, as there is not the slightest doubt that in 1919 Mr. Beeler was vigorous, hearty, and bothered with no thought of death. He made the gifts upon the occasion of the marriage of his youngest son. He desired to himself retire from the active management of his farms, and to start the boys on their own careers; and the occasion was an appropriate one.

The real controversy is of double aspect: Did the father give these farms to his sons on New Year's Day, 1919, or is the story a fabricated one? If he did, was the parol gift effective?

Upon the first question, the evidence leaves no room for doubt. Agreeing fully that such evidence must be clear, satisfactory, and convincing, particularly between father and sons, there is still no reason or excuse for ignoring all the evidence in the case, much of which comes from disinterested persons. If the mass of evidence in this case is to be simply disregarded, courts of justice might well close their doors. Without detailing the evidence, it is enough to say that Mr. Beeler told many people he had given the farms to the boys; they testified they paid no rent to him, and an examination of his accounts and theirs disclosed no such payments. One of the boys wanted to lease a portion of the lands given him, and his father drew the lease, inserting his son's name as owner, and his son signed it. The sons occupied the farms, built buildings on them, used the income, and considered them their own. The government argues that the sons are incompetent witnesses under the Kansas statute prohibiting a party to a lawsuit from testifying to transactions or conversations with a deceased person.

The disqualification is limited to cases where (a) one of the parties claims to have acquired title from the deceased person, which is construed to mean, as it must, title to property in litigation; or, (b) where the adverse party is the heir or personal representative of the deceased. Section 60 — 2804, Rev. St. Kan. 1923. This case falls in neither category. K. C. Life Ins. Co. v. Wilkinson, 125 Kan. 305, 264 P. 37; Savage v. Modern Woodmen, 84 Kan. 63, 113 P. 802, 33 L. R. A. (N. S.) 773. But, if the evidence is incompetent, there is abundant other evidence to establish the fact.

The evidence is also without dispute that the sons made certain improvements on the lands after January 1, 1919, and prior to their father's death. These were such as hog houses, sheds, caves, cisterns, and fences, and were permanent in character. The average value was probably about $2,000 a farm, or about one-tenth of the value of the farm.

This brings us to the legal question: Is a parol, completed gift, accompanied by exclusive possession and followed by lasting and valuable improvements, valid?

The government insists that, this being an action at law, no equitable doctrine of "part performance" can be invoked to get around the statute of frauds, which in Kansas requires a writing to convey real estate. The plaintiffs insist that a stranger to the contract cannot invoke the statute of frauds. In my opinion both positions are untenable. This action, of course, is at law; but, if a valid gift was made, not in contemplation of death, the tax is recoverable. The question is, Was a valid gift made? Now a gift, to be valid, within this taxing statute, must intentionally and irrevocably divest the donor of dominion and control in præsenti. Allen-West Comm. Co. v. Grumbles (8th C. C. A.) 129 F. 287. If, then, a parol gift is unenforceable in Kansas, the father had not irrevocably parted with dominion and control; at any time between January 1, 1919, and January 5, 1925, he could have recovered possession by action at law, and the gift was incomplete. If, on the contrary, under Kansas law, and under the facts, he could not have recovered possession from his sons after the parol gift, or if the sons could have required a conveyance to perfect their title, then the gift was irrevocable and complete. The government does have the right to test the sufficiency of the gift under the Kansas law; and the plaintiffs have the right to establish its sufficiency in this action at law.

Whether or not the transaction of January, 1919, resulted in an effective, valid, and irrevocable gift must be determined by the laws of Kansas. The federal courts have consistently followed the state law in determining title to real estate (Williamson v. Suydam, 6 Wall. 723, 18 L. Ed. 967; Nichol v. Levy, 5 Wall. 433, 18 L. Ed. 596), and have also followed the state courts in their decisions as to the statute of frauds (Moses v. National Bank, 149 U. S. 298, 13 S. Ct. 900, 37 L. Ed. 743), as in fact they do as to state statutes generally (Webster v. Cooper, 14 How. 488, 14 L. Ed. 510). In the case in hand, the rules of the state and federal courts appear to be in harmony.

The Kansas courts have uniformly held that a parol gift of land, accompanied by possession and followed by lasting and valuable improvements, is valid, and may be enforced against the donor or any one else. In short, it is irrevocable. Schwindt v. Schwindt, 61 Kan. 377, 59 P. 647; Galbraith v. Galbraith, 5 Kan. 405; Newkirk v. Marshall, 35 Kan. 77, 10 P. 571; Flanigan v. Waters, 57 Kan. 18, 45 P. 56; Baldwin v. Baldwin, 73 Kan. 44, ...