Bemis v. Converse

• Decision Date: 16 July 1923
• Citation: 140 N.E. 686,246 Mass. 131
• Parties: BEMIS et al. v. CONVERSE et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

246 Mass. 131

140 N.E. 686

BEMIS et al.

v.CONVERSE et al.

Supreme Judicial Court of Massachusetts, Suffolk.

July 16, 1923.

Report from Supreme Judicial Court, Suffolk County.

Bill for instructions by Frank B. Bemis and others, as trustees and executors, against Mary P. Converse and others. Reported by a single justice on the questions raised for determination of the full court. Decree in accordance with the opinion.

Plaintiffs were executors of the will of Harry E. Converse and three of the plaintiffs were also trustees under a trust deed made by Harry E. Converse. They requested instructions as to whether sums paid as taxes to the United States and the state of New Jersey respectively were chargeable against the property held by them as executors or as against the property held in trust. The defendant Mary P. Converse filed an answer alleging that the trust was null and void and that the act of Congress, imposing the tax paid to the United States, was unconstitutional. Certain infant defendants through their guardians ad litem filed answers and the bill was taken for confessed as against other defendants. It was not questioned that the taxes assessed by the state of NewJersey on the property passing under the trust deed should be repaid to the executors by the trustees. The single justice was of the opinion that the trust deed did not violate the rule against perpetuities; that the federal statute was constitutional, and that a decree should be entered instructing plaintiffs that the trustees should reimburse the executors for the sum paid the state of New Jersey, but not for the federal tax.Harold S. Dvais, of Boston, for trustees.

Frederic B. Greenhalge, of Boston, for respondents.

R. D. Weston, of Boston, for executors.

RUGG, C. J.

This is a suit in equity brought by three of the plaintiffs as trustees under a deed of trust of Harry E. Converse, and by these three together with another as executors of the will of Harry E. Converse, against his widow and others interested in the deed of trust and in his estate.

The pertinent facts are that in 1910 Harry E. Converse conveyed to the plaintiff trustees certain stocks and bonds upon the trusts set forth in the deed of trust. In brief, the terms of the trust were to hold the property, pay the income to the settlor during his life, and upon his death to divide the income among his children, the issue of any deceased child to take the share of the income of the parent, and upon the death of the last survivor of his children to divide the principal of the trust equally among the issue of his children per stirpes. It is not necessary for the present decision to state the terms of the trust with further particularity. The settlor and testator died in 1920. At that time the corpus of the trust was in excess of $1,000,000 in value. The estate passing by will was in excess of $1,400,000. An estate tax of $230,926.58 was assessed to the executors under the ‘Revenue Act of 1918’ of the United States, being chapter 18, approved February 24, 1919, title 4, §§ 400-410, 40 U. S. Stats. at Large, pp. 1096-1101 (U. S. Comp. St. Ann. Supp. 1919, §§ 6336 3/4a-6336 3/4k). This sum was calculated by treating all the property, both that held under the trust deed and that passing by will, as part of the estate for purposes of taxation and subject to the estate tax. Section 402(c), being section 6336 3/4c. Of this sum $130,876.13 was assessed with respect to the property passing by the will, and $100,050.45 with respect to property held in trust under the deed. The entire tax was paid by the executors in accordance with section 407 (section 6336 3/4h). Their claim for refunding the sum paid on the property held in trust has been denied.

The object of the petition is to determine whether the portion of this tax assessed with respect to the property held under the trust deed shall be paid out of that property or whether it shall be borne wholly by the estate in the hands of the executors.

The tax here in question is entitled in the act of Congress an ‘estate tax.’ It is described in section 401 (section 6336 3/4b) as a tax ‘upon the transfer of the net estate’ of every decedent. The mandate of the act of Congress is that ‘the executor shall pay the tax.’ Section 407. With a single exception no apportionment of the tax is made among those receiving benefit from the estate. That exception is by section 408 (section 6336 3/4i) to the effect that the executor is empowered to recover from the recipient of the proceeds of life insurance policies under the conditions there stated ‘such portion of the total tax paid as the proceeds, in excess of $40,000, of such policies bear to the net estate.’ The presence of this provision indicates that no other apportionment was intended by Congress.

It is strongly argued that the intention of the settlor and testator cannot have been that the entire burden of a tax of this nature should fall upon his estate and the property held under the trust deed be completely exonerated. Courts cannot speculate concerning the intention of settlors and testators as to where they intend the burden of taxes to rest. The instrument as written must govern. Opportunity is freely open in framing trust deeds and wills to make full and accurate expression of desire and intention...