Bergren v. Mason's Estate

• Decision Date: 10 December 1968
• Docket Number: No. 53142,53142
• Citation: 163 N.W.2d 374
• Parties: Allan J. BERGREN and the First National Exchange Bank of Virginia, Executors of the Estate of Catherine M. Prosser, Deceased, Appellants, v. In the Matter of the ESTATE of Frances B. MASON, Deceased, Clarence Clausen and Frances M. Anderson, Executors, Appellees.
• Court: Iowa Supreme Court

Page 374

163 N.W.2d 374

Allan J. BERGREN and the First National Exchange Bank of Virginia, Executors of the Estate of Catherine M. Prosser, Deceased, Appellants, v. In the Matter of the ESTATE of Frances B. MASON, Deceased, Clarence Clausen and Frances M. Anderson, Executors, Appellees.

No. 53142.

Supreme Court of Iowa.

Dec. 10, 1968.

Allan J. Bergren, Boone, for appellants.

Mahoney, Jordan & Statton, Boone, for appellees.

LARSON, Justice.

The only issue before us is whether the executors of the Frances B. Mason estate are to charge a prorata share of the federal estate tax to Catherine M. Prosser, a specific devisee, or pay the entire federal estate tax from the residue of the estate.

The trial court found the will and codicils involved were silent as to how this tax is to be paid, and held, since the federal estate tax is a tax on the gross estate collectible from all the property in the estate, that Catherine M. Prosser must pay her share of the tax. We cannot agree.

Appellee executors filed an application requesting the court to determine whether the federal estate tax due from the decedent's estate should be paid from the residue or taken pro rata from specific bequests in decedent's will. Pursuant to due notice, only the devisee Catherine M. Prosser answered and objected to an apportionment against the property specifically devised to her. No oral testimony was taken at the hearing on October 25, 1967, but by agreement a written stipulation of the relevant facts was filed. Therein it was stipulated that Frances B. Mason, a resident of Boone County, Iowa, died August 18, 1966, that she never married, that her will and two codicils were admitted to probate on August 24, 1966, and that the will in substance provided: first, for the payment of all just debts and funeral expenses; second, for specific bequests to four individuals of $1,000 each and $7,000 to specified institutions, and a devise of real estate in Boone County and household goods to Catherine M. Prosser; third, for the devise of the residue to certain named individuals in equal shares. It was further stipulated that the will contained no provision for payment of the federal estate tax and that the value of the estate for federal estate tax purposes is $468,867.21, that the tax as computed by the executors is $124,582.75, and that the value of the property devised to appellants is $60,100, or 12.81 percent of the taxable estate. A copy of the will as executed, as well as the two subsequently-executed codicils, were incorporated in the stipulation. The first codicil merely added specific bequests to certain parties in the sum of $1,000 each, and the second provided for two executors instead of one.

On October 31, 1967, the court entered its order stating: 'The will and codicil are silent as to how the death taxes are to be paid. The Federal Estate Tax is just what is says it is, a tax on the gross estate. Therefore, unless directed otherwise the tax must be paid from the gross estate. IT IS SO ORDERED.'

Subsequent thereto both parties joined in an application to enlarge the ruling to specifically answer the question as to whether the executors are to charge a prorata share of the federal estate tax to Catherine M. Prosser or pay the entire tax from the residue of this estate. In a supplemental ruling the court clarified its decision by stating: '* * * it is a tax to be collected against all of the property in the estate no matter to whom it is devised. Mrs. Prosser will have to pay her share of the estate tax.' Thereafter due notice of appeal was given, Mrs. Prosser died, and her executors were substituted as appellants herein.

I. Prior to the 60th session of the General Assembly, which enacted chapter 326 generally known as the Probate Code, this court for a long period recognized and followed the common law rule that such tax was to be paid from the residue of an estate unless it was insufficient. In September 1962 we recognized the doctrine of equitable contribution as applicable in certain situations to provide for proration of this tax. Kintzinger v. Millin, 254 Iowa 173, 190, 117 N.W.2d 68, 78. Also see In re Estate of Artz, 254 Iowa 1064, 1075, 120 N.W.2d 418, 425.

In Kintzinger, this court held the donee of a gift inter vivos of corporate common stock should pay such portion of the federal estate tax on donor's estate as the value of such stock, for estate tax purposes, bears to the sum of the net estate, for such purposes, and the exemption allowed in computing that net estate, determined under section 935(c), Title 26, United States Code Annotated. We also held therein that where Congress has included in the estate taxable for federal estate taxes, not only probate assets but also an inter vivos gift which testator did not own when he died, it is just and equitable, In the absence of a contrary direction in the will, to require the donee of the gift to reimburse the executor to the extent of the estate tax generated by it.

Although this doctrine was recognized in In re Estate of Artz, supra, and in In re Estate of Tedford, 258 Iowa 890, 140 N.W.2d 908, cited by counsel, in each of those cases the decision turned upon the express or implied intention of the testator. In neither case was it necessary to determine what the situation would have been if the will had been silent as to who should pay the federal estate tax. It is true, in Tedford, which was decided subsequent to the enactment of the Probate Code, we said at page 893 of 258 Iowa, at page 911 of 140 N.W.2d 'Succession taxes, such as our inheritance tax, must ultimately be paid by the beneficiary under the will unless the provisions and language used in the will, considered as a whole, direct otherwise', and there is language in some cases to the effect that the Iowa inheritance tax and the federal estate tax are both succession taxes which should be abated in the same manner. However, we have not dealt directly with the question presented here since sections 633.436 and 633.449 as amended were enacted by the Iowa legislature in 1963.

Section 633.436, the general order for abatement, provides in part as follows: 'Except as provided...