Bingham's Adm'r v. Commonwealth

• Decision Date: 03 November 1922
• Parties: BINGHAM'S ADM'R ET AL. v. COMMONWEALTH. COMMONWEALTH v. BINGHAM'S ADM'R ET AL.
• Court: Kentucky Court of Appeals

244 S.W. 781

196 Ky. 318

BINGHAM'S ADM'R ET AL. v. COMMONWEALTH.

COMMONWEALTH v. BINGHAM'S ADM'R ET AL.

Court of Appeals of Kentucky.

November 3, 1922

Appeal from Circuit Court, Jefferson County, Common Pleas Branch Third Division.

Action by the Commonwealth of Kentucky against Mary Lily Bingham's administrator and others. From the judgment both parties appeal. Affirmed on appeal by defendant's appeal and affirmed in part, and reversed in part on plaintiff's appeal.

Helm Bruce and Bruce & Bullitt, all of Louisville, for administrator.

Chas I. Dawson, Atty. Gen., for the Commonwealth.

CLARKE J.

These two independent appeals from the same judgment, one by the plaintiff and the other by the defendants, present many questions of law and fact with reference to the inheritance taxes due the commonwealth of Kentucky by the various beneficiaries under the will of Mrs. Mary Lily Bingham, who died, a resident of Jefferson county, Ky. July 27, 1917.

At the time of her death, Mrs. Bingham had the absolute title to and actual possession of a very large estate, and this portion of her estate is known in the record and will be referred to as the "Bingham Estate." In addition, she had the entire beneficial interest under the will of her first husband, Henry M. Flagler, in certain properties of large value, nearly all of which is personalty, being administered by trustees in accordance with the Flagler will, and this property is known in the record and will be referred to as the "Flagler Trust."

The questions of law presented for decision will be considered first, and in the following order, without reference to whether they are raised by the plaintiff, the commonwealth of Kentucky, or the defendants, who are the administrator with the will annexed of Mrs. Bingham, and her devisees:

(1) Is Mrs. Bingham's interest in the Flagler Trust, which passed under her will, subject to an inheritance tax in this state?

(2) Is the amount paid by her administrator to the federal government as an "estate tax" to be deducted from the value of the estate in fixing the net amount subject to the Kentucky inheritance tax?

(3) Are the amounts paid by the administrator to states other than Kentucky as inheritance taxes to be deducted in determining the amount upon which the Kentucky tax is to be computed?

(4) Are legacies to the University of North Carolina, and hospitals and churches located in Florida subject to inheritance taxes in this state?

(5) Are large blocks of stocks and securities, customarily traded in and quoted daily upon the open markets in New York City and elsewhere, to be appraised by the same rule as small blocks of such stocks?

(6) From what date is interest to be computed upon the inheritance tax ascertained to be due? 1. The applicable portion of our inheritance law with reference to whether the so-called "Flagler Trust" property is liable to the tax is that part of subsection 1 of section 4281a1 Kentucky Statutes, which reads:

"All property which shall pass, by will or by intestate laws of this state, from any person who may die seized or possessed of the same while a resident of this state, or if such decedent was not a resident of this state at the time of death, which property, or any part thereof, shall be within this state, or any interest therein, or income therefrom, which shall be transferred by deed, grant, sale or gift, made in contemplation of the death of the grantor or bargainor, or intended to take effect in possession or enjoyment after such death, to any person or persons or to any body politic or corporate, in trust or otherwise, or by reason whereof any person or body politic or corporate shall become beneficially entitled in possession or expectancy, to any property, or to the income thereof, shall be and is subject to a tax for the general use of the commonwealth, upon the fair cash value of such property in excess of the exemptions hereinafter granted and at the rates hereinafter prescribed."

It is the claim of the defendants that Mrs. Bingham, at her death, was not "seized or possessed," in contemplation of the above provision, of the so-called Flagler Trust property, and that the same, although it passed to them under her will, is not subject to the inheritance tax.

Section 460 of Kentucky Statutes provides, in substance, that in construing a statute common words must be given their common meaning, and technical words their technical meaning. Counsel agree that the word "seized" is a technical word, and, given its technical meaning, Mrs. Bingham did not die "seized" of the Flagler Trust property. They also agree that "possessed" is not a technical word, but counsel for defendants earnestly contend that she was not "possessed" of any of this property as the word is ordinarily employed and understood, while counsel for the plaintiff insist that at her death she was so "possessed" of this property.

We are furnished by counsel with cases from this and other courts determining the meaning of the word "possessed" under varying circumstances, but in the light of the requirements of section 460 of our statutes quoted above, requiring that an ordinary word such as "possessed" shall be given its common or ordinary meaning, we think that we should look to the standard dictionaries to ascertain the meaning that should be ascribed to it here, rather than to the opinions of courts under different circumstances and when not so bound. Webster's New International Dictionary gives several definitions of the verb "possess," the first of which is marked "obsolete," and the next is:

"To have and hold as property; to have a just right to; to be master of; to own, as to possess land, money, a horse, a watch."

Other less common meanings, more or less derivative or secondary, are stated, and then the following words are given as synonyms: "hold, occupy, control, own." It is therefore clear, we think, that this eminent authority fully recognizes, and it is in truth matter of common knowledge, that the verb "possess" is commonly employed to indicate ownership of any kind of property.

Illustrative at least of this "common and approved usage" of the word "possessed" is the fact that Mrs. Bingham in her will employs the same word in connection with "seized" to describe the property, including the Flagler Trust, she devised to the defendants; and they are therefore in the peculiar position of claiming that for their benefit it is to be construed as synonymous with "own" in the will, but not so in the statute.

It is only in its technical or strictly legal sense that "possessed of" can be limited to mean only actual physical possession, or the right of immediate actual possession, as counsel for defendants insist, and there is no basis whatever, in our judgment, for assuming, as they do, that the Legislature intended that the word "seized" should apply to real estate, as technically it does, and that the words "possessed of" should apply in the same strict and limited way to personalty.

Mrs. Bingham was certainly "possessed of the Flagler Trust property at the time of her death in the sense that she owned every beneficial interest therein, immediate and prospective, to the exclusion of everybody else on earth.

During the limited trust period, she was to receive an annuity of at least $100,000 from the trust property, and at the end of that period all of such property was to be turned over to her absolutely, including "all accumulations or enlargements of my estate and property as shall have arisen during the life and operation of said trust." No one else shares in the income therefrom; there is no gift over to any one, and there was included in the trust decedent's summer home and residence in New York City, of which we apprehend Mrs. Bingham was not only "possessed" but "seized," since doubtlessly she was intended to have, and did have, the actual possession thereof whenever she desired it.

The trustees were to administer the trust for a very limited time, "for the purpose of protecting, fostering, operating and developing" the various properties included in the trust until they no longer needed financial assistance, and in order "to relieve my beloved wife * * * from the immediate cares and responsibilities of so varied and such extensive interests." The trustees were therefore, we think, mere custodians for compensation, and for not exceeding 10 years, to manage and develop the trust property for the sole benefit of Mrs. Bingham.

To understand how clearly this is made to appear, we copy the pertinent clauses of the will of Mr. Flagler creating the trust and declaring its purposes, which are as follows:

"Third. I have been for many years investing in railroads, hotel and land companies in the state of Florida, and it is my intention in the future to foster, protect and properly develop such properties, and to provide against my decease while such properties are in the processes of development and to relieve my beloved wife, hereinafter named, from the immediate cares and responsibilities of so varied and such extensive interests, I hereby declare a trust concerning all my property, both real and personal, and wheresoever situated, except what is covered by the 'fourth' item of this instrument, and may be necessary for the expense of administration by my executors, including court costs, to my trustees above named, which trusts shall be and continue for the length of time hereinafter by this instrument provided. * * *

Fifth. The balance of my estate I place, according to the purpose declared in the third item of this instrument, in the hands of my said trustees, to be used, managed and controlled by them and their successors for the purpose of protecting fostering, operating and...