Boatmen's Union Nat. Bank v. Welton, s. 12199

• Decision Date: 14 September 1982
• Docket Number: Nos. 12199,12206,s. 12199
• Parties: BOATMEN'S UNION NATIONAL BANK, Trustee, Plaintiff, v. Caroline Johnson WELTON, Martha Hopkins, Mark Dewey Hopkins, Thomas Christopher Hopkins, Benjamin Wood Muetzel, Robert Wood Lemon, Virginia M. Lemon, Henry M. Compton, Mamie Sweaney, Dorothy Burr, St. James Episcopal Church, Elizabeth Johnson Tuche, John Daniel Hopkins, Sara Lou Hopkins, Nancy Hopkins Steury, Sally Lemon, Kitty A. Wood, Robert Edwards, Hester Sheridan, Stella Hanks, Frances Rounkles, Goldia McCracken, Mary Hawthorne, Josephine Carson Luther, Elizabeth Harris, Morris Harris, Helen Ross, Richard Edward Carson, Drury College, Ascension Episcopal Church, Delores Todd, Vesta Doss, Pearl Sewell, Dr. Robert B. Stewart, Alpha Foster, St. Labre Indian School Education Association, Group One Defendants, Lester E. Cox Medical Center, Group One Defendant-Respondent, and Elizabeth Johnson Tuche, Stella Hanks, Kitty Symson, Grace Moulder, Earl Moulder, Caroline Johnson Wheeler Welton, Dorothy Burr, Mary Ann Johnson Rollins, Anna Johnson, Catherine Adams, Dr. Robert B. Stewart, Marguerite Lee, Elizabeth Harris, Morris J. Harris, Frances Carson, Marjorie Mann Carson, Maude Ingram, Julianna J. Everett, Eugene F. Everett, John M. Carnahan, Jr., and Turner White, Group Two Defendants, and James C. Johnson and Francis W. Muetzel, Defendants-Appellants, and Leslie A. McNeely, Jr., Mary Ellen McDaniel, David B. McDaniel, Robert Hunt McDaniel and Richard McDaniel, Defendants-Appellants.
• Court: Missouri Court of Appeals

Page 497

640 S.W.2d 497

BOATMEN'S UNION NATIONAL BANK, Trustee, Plaintiff, v. Caroline Johnson WELTON, Martha Hopkins, Mark Dewey Hopkins Thomas Christopher Hopkins, Benjamin Wood Muetzel, Robert Wood Lemon, Virginia M. Lemon, Henry M. Compton, Mamie Sweaney, Dorothy Burr, St. James Episcopal Church, Elizabeth Johnson Tuche, John Daniel Hopkins, Sara Lou Hopkins, Nancy Hopkins Steury, Sally Lemon, Kitty A. Wood, Robert Edwards Hester Sheridan, Stella Hanks, Frances Rounkles, Goldia McCracken, Mary Hawthorne, Josephine Carson Luther Elizabeth Harris, Morris Harris, Helen Ross, Richard Edward Carson, Drury College, Ascension Episcopal Church, Delores Todd, Vesta Doss, Pearl Sewell, Dr. Robert B. Stewart, Alpha Foster, St. Labre Indian School Education Association, Group One Defendants Lester E. Cox Medical Center, Group One Defendant-Respondent, and Elizabeth Johnson Tuche, Stella Hanks, Kitty Symson, Grace Moulder, Earl Moulder, Caroline Johnson Wheeler Welton, Dorothy Burr, Mary Ann Johnson Rollins, Anna Johnson, Catherine Adams, Dr. Robert B. Stewart, Marguerite Lee, Elizabeth Harris, Morris J. Harris, Frances Carson, Marjorie Mann Carson, Maude Ingram, Julianna J. Everett, Eugene F. Everett, John M. Carnahan, Jr., and Turner White, Group Two Defendants, and James C. Johnson and Francis W. Muetzel, Defendants-Appellants, and Leslie A. McNeely, Jr., Mary Ellen McDaniel, David B. McDaniel, Robert Hunt McDaniel and Richard McDaniel, Defendants-Appellants.

Nos. 12199, 12206.

Missouri Court of Appeals,

Southern District,

Division One.

Sept. 14, 1982.

Motions for Rehearing or Transfer to

Supreme Court Denied Oct. 12, 1982.

Applications to Transfer Denied

Nov. 15, 1982.

No appearance for plaintiff.

Garry E. Champion, Lloyd G. Poole, Jr., David L. Wieland, Poole, Croessmann & Champion, Springfield, for defendant-respondent Lester E. Cox Medical Center.

James E. Miller, Thomas D. Peebles, Jr., John R. Courtney, P.C., Springfield, for defendants-appellants Johnson and Muetzel.

Kenneth W. Johnson, Hamra, Greene, Johnson & Sweeney, Springfield, for defendants-appellants McDaniels and McNeely.

TITUS, Presiding Judge.

Lillie Ward Wood executed a revocable living trust agreement and a will. Plaintiff bank was named trustee of the agreement which became irrevocable when Mrs. Wood died. ¹ A dispute arose as to whether, under the terms of the trust agreement, the federal and state taxes were to be paid from the residual portion of the trust estate or should be apportioned among the individual non-residuary beneficiaries in accordance with the value of their respective bequests under the doctrine of equitable apportionment. In effect, the court nisi held the revocable trust agreement and the will were silent as to the ultimate burden of death taxes and that the doctrine of equitable apportionment should apply. The appeal herein ensued.

Paragraphs F through HH of Article II of the trust agreement directed the trustee, upon grantor's death, to pay certain sums of money ranging from $1,000 to $100,000 to various named beneficiaries and to convey certain described parcels of real estate to various named individual beneficiaries. Paragraph II of Article II directed that if any residuary remained in the trust after the previously specifically directed payments and transfers were effected, such residuary of the trust should be paid $5,000 to Drury College and the balance thereof to Cox Medical Center. (Note: Approximately $332,130.26 would be the residuary portion of the estate to which Cox would be entitled under the trust agreement and which would be utterly exhausted if the residuary portion of the trust was alone held liable for the death taxes).

Those portions of the trust agreement applicable hereto are as follows:

"Article II ... E. Trustee may, in its sole discretion, pay part or all of any inheritance, estate, transfer and succession taxes, including interest and penalties thereon, if any, which may be imposed or assessed by reason of Grantor's death, on any property or interests therein included in Grantor's taxable estate regardless of whether it constitutes a part of this Trust Estate. Grantor waives and renounces, on behalf of this Trust and Grantor's probate estate, any right to recover from any person any part of such taxes, interest and penalties so paid.... JJ. Trustee may in its sole discretion retain such sums of money as it may deem necessary and appropriate from any and all cash gifts herein provided, for payment of Federal or State taxes, expenses of administration, debts and any sums which Trustee is of the opinion it may be required to pay over to Grantor's Executor under Article II, Paragraph E hereof. Article III ... I. Grantor specifically directs that Trustee shall have no power, with the exception of her home mentioned in Article IV, Paragraph V to sell any of her real estate for the payment of debts, costs of administration, taxes or for the purpose of paying monetary sums herein directed to be paid. In the event the personal property composing the corpus and any accrued income of Grantor's Trust Estate shall be insufficient to pay fully all monetary payments herein provided for, the Grantor directs the Trustee shall fund the gifts directed to be made under Article II, Paragraph H, and Article II, Paragraph I, and Article II, Paragraph W. ² J. The gifts made to charities in Article II, Paragraphs HH, and II shall be ratably reduced to permit the full payment of the other gifts directed in Article II. ³ If such sums shall be insufficient to correct the deficiency, then all other monetary gifts in said Article II (other than those in Paragraph H, I, and W thereof) shall be ratably reduced."

Article II E, supra, contemplated payment of federal and state death taxes by the trustee if "in its sole discretion" it elected to do so. This provision, perhaps, was made because the trust contained by far the greater majority of Mrs. Wood's assets. As observed in Note 1, supra, the testamentary estate had no assets with which to pay federal and state death taxes and the only source for doing so was the trust estate. 26 U.S.C.A. §§ 2002, 2203 and 6324(a)(1) and (2) normally contemplate that payment of federal estate taxes will be made before the estate is distributed, but provision is also made for collection of the tax if distribution precedes payment. If the tax payment is to be made after distribution, the final impact on the tax on the individual distributees is the same as though it had been paid from the estate before distribution, thus leaving state law to determine where the final impact shall be. Riggs v. Del Drago, 317 U.S. 95, 97-101, 63 S.Ct. 109, 110-112[1-3], 87 L.Ed. 106 (1942). Missouri, which has no statutory provision on the subject, now rejects the "burden on the residue" rule when there is no clearly expressed intention of the grantor or testatrix as to the burden of paying death taxes. Thus, in such a situation the principle of equitable apportionment will be applied. In re Estate of Wahlin, 505 S.W.2d 99, 107-108[5, 6] (Mo.App.1973). Consequently, in the instant matter the basic issue to be determined is whether the trust and will clearly expressed an intention as to whom should bear the burden of the death taxes. The reason for the rule requiring a clearly expressed intention is that if legacies to appellants are not subject to the death taxes, this would, in effect, increase each such legacy by the amount of the tax. In re Mills' Estate, 189 Misc. 136, 64 N.Y.S.2d 105, 109 (1946).

Testators via wills and grantors via trusts may designate who or what fund should bear the burden of state and federal death taxes. Cf. Priedeman v. Jamison, 356 Mo. 627, 630, 202 S.W.2d 900, 902 (1947). When the intent of the testator or grantor can be determined in respect to such taxes, then the doctrine of equitable apportionment has no application. See St. Louis Union Trust Company v. Krueger, 377 S.W.2d 303, 306 (Mo. banc 1964). In view of repeated litigation involving the basic issues herein, it is difficult to comprehend why those who concoct wills and trusts cannot simply ascertain the testator's or grantor's specific desires on the subject and then draw the instrument so that it is plainly stated that death taxes should be borne only by either the residuary estate or by those who benefit by specific bequests, legacies and devises in wills or from trusts. Perhaps scriveners of such instruments bound for litigation simply ape forms whose authors are equally uninformed as the copier of the simple solution.

In this appeal the parties cite Commerce Trust Company v. Starling, 393 S.W.2d 489 (Mo.1965), and arrive at various conclusions regarding its reading. The trust agreement in Commerce Trust Company, inter alia, provided that upon written request of grantor's personal representative the trustees "shall pay out of the corpus of the Trust Estate, without right to seek recoupment or contribution from any other source, any and all ... taxes assessed against the property declared or adjudged to be a part of the Grantor's taxable estate ... or against any beneficiary of the Grantor ... under the terms of this instrument or under his Last Will and Testament or otherwise." (Emphasis mine). In Commerce Trust Company, l.c. 495-496, the court noted that while this required trustees, upon request, to pay the death taxes without right to recoup them from any source, the provision did not pertain to who or what fund was to bear the actual burden of the death taxes. Paragraph E, Article II in the instant case which waives on behalf of the trust and probate estate "any right to recover from any person any part of such taxes" is most similar, if not identical, to the above quoted provision in Commerce Trust Company. Albeit the word "person" in its primary sense may mean a natural person, in law the generally accepted meaning of the word includes artificial as well as natural persons. City of Grand...