Blum v. Wardell

• Decision Date: 30 December 1920
• Docket Number: 16311.
• Court: U.S. District Court — Northern District of California
• Parties: BLUM et al. v. WARDELL, Collector of Internal Revenue.

270 F. 309

BLUM et al. v. WARDELL, Collector of Internal Revenue.

No. 16311.

United States District Court, N.D. California, Southern Division.

December 30, 1920

Goldman & Altman, Thomas P. Boyd, of San Rafael, Cal., John W Preston, of San Francisco, Cal., and H. W. B. Taylor, of San Anselmo, Cal., for plaintiffs.

Annette Abbott Adams, U.S. Atty., and Charles W. Thomas, Jr., Asst U.S. Atty., both of San Francisco, Cal., for defendant.

Robbins Elkins & Van Fleet, of San Francisco, Cal., amici curiae.

RUDKIN District Judge.

Section 201 of the Act of September 8, 1916 (39 Stat. 777 (Comp. St Sec. 6336 1/2b)), imposes a tax upon the transfer of the net estate of every decedent dying after the passage of the act, whether a resident or nonresident of the United States.

Section 202 (Comp. St. Sec. 6336 1/2c) provides that the value of the gross estate shall be determined by including the value, at the time of his death, of all property, real or personal, tangible or intangible, wherever situated, to the extent of the interest therein of the decedent at the time of his death, which after his death is subject to the payment of the charges against his estate and the expenses of administration, and is subject to distribution as a part of his estate, and to the extent of the interest therein held jointly or as tenants in the entirety by the decedent and any other person.

Section 203 (Comp. St. Sec. 6336 1/2d) provides that the value of the net estate shall be determined by deducting from the value of the gross estate funeral expenses, administration expenses, claims against the estate, unpaid mortgages, losses incurred during the settlement of the estate, arising from fires, storms, shipwreck, or other casualty, and from theft, where such losses are not compensated for by insurance or otherwise, support during the settlement of the estate of those dependent upon the decedent, and such other charges against the estate as are allowed by the laws of the jurisdiction, whether within or without the United States, under which the estate is administered, and an exemption of $50,000.

Moses Blum, a resident of the city and county of San Francisco, died testate on the 22d day of June, 1918, and after his death the executors of his last will and testament paid under protest an estate tax on the sum of $116,663.38, which was the value of the half interest in the community personal property which passed to the surviving widow under the laws of the state upon the death of the husband. The present action was thereafter instituted against the collector of internal revenue to recover the tax thus paid.

The foregoing statement is deemed sufficient to a proper understanding of the questions presented by the demurrer to the amended complaint.

The defendant contends that the decedent was the owner of the entire community personal estate at the time of his death; that the interest of the wife was a mere expectancy, like the interest of an heir in the property of his ancestor, and possessed none of the attributes of an estate, either at law or in equity. The plaintiffs, on the other hand, while conceding that such was the rule of decision in the state at one period, contend that such was not the law or rule of decision at the date of the marriage of the decedent in 1885; that such is not now the law of the state; and that in any event a federal court sitting in California will place its own construction upon the community property laws of the state and on the federal act imposing the tax in question.

That the Supreme Court of California has repeatedly construed the community property laws of the state, as claimed by the defendant, does not admit of question. Reference to a single decision will demonstrate this. In re Moffitt's Estate, 153 Cal. 359, 95 P. 653, 1025, 20 L.R.A. (N.S.) 207, decided in 1908. The court there held that the share of the surviving wife in the community property was subject to the inheritance tax imposed by the laws of the state, and in discussing the nature of her interest in the community property said:

'It is conceded that the determination of the trial court that such property is liable for the payment of this tax finds support in the cases of In re Burdick, 112 Cal. 387, 44 P. 734, Spreckels v. Spreckels, 116 Cal. 339, 48 P. 228, 36 L.R.A. 497, 58 Am.St.Rep. 170, and Sharp v. Loupe, 120 Cal. 89, 52 P. 134, 586. But it is earnestly contended that this court should overrule these cases to the extent of holding that, as to the community property, the widow has such an ownership or estate or title as enables her to take upon the death of the husband, not as his heir, and not by succession, but by a certain right of survivorship; that, in effect, the wife during the existence of the marriage status has always enjoyed an ownership in one-half of the community property; and that by the death of the husband her ownership of this moiety is simply released from the power of disposition over it, with which the law during his lifetime and during the existence of the marriage status has clothed him. Reference is made to the language of the Civil Code (section 682), which declares that ownership of property by several persons is either (1) of joint interest; (2) of partnership interest; (3) of interests in common; (4) community interest of husband and wife. We are referred also to expressions in some of the earlier decisions of this court, such as the language of Beard v. Knox, 5 Cal. 256, 63 Am.Dec. 125, where it is said: 'The husband and wife during coverture are jointly seized of the property, with a half interest remaining over to the wife, subject only to the husband's disposal during their joint lives. This is a present, definite, and certain interest, which becomes absolute at his death.' All of these Code sections, all of these cases, and all of these arguments were most ably urged upon the attention of the court in the first two cases above cited, and the conclusion then reached was there expressed in the following language: 'Courts and counsel have occasionally endeavored to find some property right in the wife or some respect in which the husband's interest falls short of full property. I think it will be universally admitted that so far there had been a complete failure in this respect. The first attempt shown by our reports of that kind is in De Godey v. De Godey, 39 Cal. 157. In that case it is said that, while no other technical term so well defines the wife's interest as the phrase 'a mere expectancy, * * * it is at the same time * * * so vested in her that the husband cannot deprive her of it by his will, nor voluntarily alienate it for the mere purpose of divesting her of her claim to it." After painstaking investigation and review, and after the fullest deliberation, this court, in Re Burdick, determined and held, as it declared in Spreckels v. Spreckels, that upon the death of the husband the wife takes one-half of the community property as heir. Every argument here advanced against that conclusion was urged by learned counsel in the other cases, and was fully met in the opinions above referred to. No useful purpose can be subserved by a repetition of these arguments or of the answers to them. A reading of the opinions of this court in those cases will establish how thoroughly the questions were entered into, and what a complete disposition was made of them.'

The opinion on rehearing in the same case (153 Cal. 359, 95 P. 1025, 20 L.R.A. (N.S.) 207) disposes of the further contention that there was no such rule of decision at the date of the marriage of the decedent in 1885. It was there urged that the property upon which the tax was imposed was acquired under the Constitution of 1849 (article 11, Sec. 14), which declared:

'Laws shall be passed more clearly defining the rights of the wife, in relation as well to her separate property, as to that held in common with her husband'

-- and that neither the new Constitution of 1879 nor the laws enacted thereunder could deprive the wife of her interest in the community property thus guaranteed and secured by the former Constitution. But the court,...