Bookwalter v. Phelps, 17339.

• Decision Date: 11 December 1963
• Docket Number: No. 17339.,17339.
• Citation: 325 F.2d 186
• Parties: E. O. BOOKWALTER, District Director of Internal Revenue, Appellant, v. Marie PHELPS, Executrix of the Estate of Calvin N. Phelps, Deceased, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

325 F.2d 186 (1963)

E. O. BOOKWALTER, District Director of Internal Revenue, Appellant, v. Marie PHELPS, Executrix of the Estate of Calvin N. Phelps, Deceased, Appellee.

No. 17339.

United States Court of Appeals Eighth Circuit.

December 11, 1963.

Arthur E. Strout, Atty., Tax Division, Dept. of Justice, Washington, D. C., for appellant; Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, Robert N. Anderson, Morton K. Rothschild, Attys., Dept. of Justice, Washington, D. C., and also F. Russell Millin, U. S. Atty., Kansas City, Mo., and William Kitchen, Asst. U. S. Atty., Kansas City, Mo., on the brief.

Clarence O. Woolsey, Springfield, Mo., for appellee.

Before VAN OOSTERHOUT and BLACKMUN, Circuit Judges, and DAVIES, District Judge.

VAN OOSTERHOUT, Circuit Judge.

This is an appeal by the District Director of Internal Revenue from final judgment entered against him in favor of estate taxpayer for refund of estate taxes erroneously assessed and paid. All jurisdictional requirements relating to the bringing of this action and the taking of this appeal have been met.

The issue presented by this appeal is whether the widow's allowance made by the probate court to the surviving spouse under Missouri law in the form of a lump sum award of $20,000, which in fact has been paid to the surviving spouse, qualifies for the marital deduction under § 2056 I.R.C.1954. More specifically, the issue is whether the Missouri widow's allowance here involved is a terminable interest and hence not subject to the marital deduction.

The case was tried to the court without a jury. The court held the estate was entitled to a marital deduction upon the widow's allowance and entered judgment for the refund. The Government, as a basis for reversal, states:

"Since a support allowance made by the probate court to the decedent\'s widow pursuant to the probate code of Missouri was conditioned upon her being alive at the time it was payable, it constitutes a terminable interest under Section 2056(b) (1) of the Internal Revenue Code of 1954, and therefore may not be included in the marital deduction for federal estate tax purposes."

Judge Oliver, in a memorandum opinion reported at 210 F.Supp. 801, rejects the Government's contention that the Missouri widow's allowance here involved is a terminable interest. He points out that Missouri adopted a new probate code in 1955 and that no Missouri interpretation has been made of the widow's allowance provision of the 1955 Code. Judge Oliver sets out the statutory law existing prior to the adoption of the 1955 Code and with respect to the interpretation of such earlier provisions states:

"Monahan v. Monahan\'s Estate (1936) 232 Mo.App. 91, 89 S.W.2d 153, 155, 156, construing the Missouri law as it stood before the enactment of the new Missouri Probate Code, held:

"`(O)ur courts, from a very early day, have, with remarkable unanimity, held that * * * the money allowed * * * became the absolute property of the surviving widow or widower, as the case may be, free from the claims of creditors or distributees or other beneficiaries of the estate. * * * (T)he right to an allowance out of the estate * * * inures in the surviving spouse.

* * * * *

"`It is certain that under the established rule of decision in this state the widow\'s allowances are regarded as her absolute property, and not to be considered as assets of the estate.\'" 210 F.Supp. 801, 802-03.

The parties to this appeal do not question the foregoing as being a proper statement of Missouri law as it existed prior to the enactment of the 1955 Code.

The court then sets out §§ 474.260 and 474.300, 26 V.A.M.S., which contain the new Code provisions relating to widow's allowances and carefully considers the legislative history of such statutes, the report of the Joint Probate Laws Revision Committee to the legislature, and Law Review articles written by persons closely associated with the probate law revision, and comments:

"We are not at all sure that had we been sitting on a Missouri court we would have decided Monahan in the manner that it was decided. But we have no doubt about what a Missouri court did hold in Monahan. Nor do we have any doubt that no one connected with the drafting and passage of the new Probate Code ever dreamed that they were changing the rule of Monahan. We likewise are most doubtful that any Missouri court would hold that a single sentence in Section 474.300 was intended to and did in fact change the rule of Monahan. We are therefore required to find that the interest created by Section 474.260 is unaffected in substance by the language relating to that section in Section 474.300 and that the rule of decision announced in Monahan is still the law of Missouri, at least so far as the facts of this case involving a lump sum payment are concerned, and that plaintiff should prevail." 210 F.Supp. 801, 807.

It is well established that the nature and character of a widow's right to receive an allowance from the estate of her husband must be determined upon the basis of state law. Jackson v. United States, 9 Cir., 317 F.2d 821; United States v. Quivey, 8 Cir., 292 F.2d 252; Rev. Rul. 83, 1953 — 1 Cum.Bull. 395.

We have often stated that we will accept the view of an experienced trial judge upon doubtful questions with respect to the law of his state unless we are convinced that the trial court's determination is based upon a clear misconception or misapplication of local law. Venn v. Goedert, 8 Cir., 319 F.2d 812, 814; National Bank of Eastern Ark. v. General Mills, Inc., 8 Cir., 283 F.2d 574, 576-77; Homolla v. Gluck, 8 Cir., 248 F.2d 731, 734. This is because the power to establish state law and interpret state statutes rests in the highest court of the state and an able and experienced federal trial judge, residing in the state, by reason of his close association with the development of the law of the state is ordinarily in a better position to predict the course the appellate courts of his state will follow when and if the doubtful question is presented to it than is this court.

We are not here able to say that the trial court erroneously interpreted or applied the law with respect to the survival of widows' allowances upon the death of the widow. The Government places considerable reliance upon our decision in Quivey, supra. Many distinctions exist between our present case and Quivey. We are here considering Missouri law, not Nebraska law. The Missouri statutes differ materially from the Nebraska statutes. In Quivey, we based our holding that the widow's allowance was a terminable interest upon decisions of the Nebraska Supreme Court interpreting Nebraska statutes. No comparable Missouri case law here exists.

Schubel v. Bonacker, Mo., 331 S.W.2d 552, relied upon by the Government, does not compel a reversal here. Schubel dealt exclusively with homestead rights. Homestead is one of three rights allowed a surviving spouse in Missouri and is afforded by § 474.290, V.A.M.S. Section 474.250 provides for the right of absolute property, and § 474.260 provides for the family allowance. Such rights are separate and distinct and are governed by separate statutes. The court, in its opinion in Schubel, observes that the new homestead statute is in lieu of dower and former homestead rights and that neither of such rights under prior law survived the death of the surviving spouse. Schubel does not deal with the widow's allowance situation and is not persuasive authority with respect to the widow's allowance situation. See Estate of Gardner v. United States, E.D.Mo., 220 F.Supp. 196, 198.

The trial court in reaching its decision in our present case gave full consideration to all of the issues urged by the Government on this appeal. The court in its well-considered opinion marshals all material bearing upon the legislative intent and carefully analyzes and considers all such material. Such material strongly supports the trial court's conclusion. The Government has failed to demonstrate that the trial court misinterpreted or misapplied Missouri law in reaching its decision that under Missouri law the statutory allowance for the surviving spouse is not a terminable interest.

Additional support for the trial court's opinion upon the disputed issue of state law here exists. Estate of Oliver B. Avery, 40 T.C. 392, involved a lump sum Missouri widow's allowance made and paid to the widow. The Tax Court followed Judge Oliver's interpretation of Missouri law, citing his opinion in the case now before us, and held the widow's allowance was not a terminable interest, stating:

"In the present case the allowance was paid in a lump sum, there were no minor children, and there is no provision in the Missouri statute authorizing a recovery by the estate of any part of the allowance in case of the early death of the widow. Cases involving installment allowances have no application. We conclude that the widow\'s allowance here was not a terminable interest. It is includable as a part of the marital deduction."

Judge Meredith, an able Missouri trial judge, was confronted with the problem here presented in Estate of Gardner v. United States, E.D.Mo., 220 F.Supp. 196. Judge Meredith discusses and approves Judge Oliver's interpretation of the Missouri widow's allowance statute and states, at p. 198:

"The Court finds that a spouse\'s allowance under the Missouri law is vested immediately on death. That it may be applied for after the death of the surviving spouse. It is not terminable on the happening of any contingency. It qualifies as a deduction under § 2056 of the Internal Revenue Code of 1954."

The judgment is affirmed.

BLACKMUN, Circuit Judge (dissenting).

I respectfully dissent. My concern is not so much with V.A.M.S. § 474.260 which authorizes a reasonable allowance for a surviving widow for her "maintenance during the period of one year after the death of the spouse" and which provides that that allowance "may be made payable in...