Bowers v. South Carolina National Bank of Greenville

• Decision Date: 14 December 1955
• Docket Number: No. 7077.,7077.
• Citation: 228 F.2d 4
• Parties: W. P. BOWERS, Former Collector of Internal Revenue, Appellant, v. SOUTH CAROLINA NATIONAL BANK OF GREENVILLE, SOUTH CAROLINA, and Marion M. Hewell, as Executors and Trustees of the Estate of Charles H. Yates, Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

228 F.2d 4 (1955)

W. P. BOWERS, Former Collector of Internal Revenue, Appellant, v. SOUTH CAROLINA NATIONAL BANK OF GREENVILLE, SOUTH CAROLINA, and Marion M. Hewell, as Executors and Trustees of the Estate of Charles H. Yates, Appellees.

No. 7077.

United States Court of Appeals Fourth Circuit.

Argued October 21, 1955.

Decided December 14, 1955.

Carolyn R. Just, Atty., Dept. of Justice, Washington, D. C. (H. Brian Holland, Asst. Atty. Gen., Ellis N. Slack and Lee A. Jackson, Attys., Dept. of Justice, Joseph E. Hines, U. S. Atty., Spartanburg, S. C., and W. A. Bull, Asst. U. S. Atty., Greenville, S. C., on the brief), for appellant.

J. Alex Neely, Jr., Anderson, S. C., and James L. Love, Greenville, S. C., for appellees.

Before PARKER, Chief Judge, SOPER, Circuit Judge, and BRYAN, District Judge.

SOPER, Circuit Judge.

This appeal involves estate taxes in the amount of $97,074.19 and income taxes for the years 1944, 1945 and 1946 in the amount of $3,205.08 claimed by the United States to be due by the estate of Charles H. Yates, deceased, of Greenville, South Carolina. The crucial question is whether the estate, in the computation of the taxes, is entitled to a deduction of the residue of the decedent's property which was left in trust for charitable purposes by his will. The taxes claimed were paid by the executors of the estate and this suit was brought to secure a refund. The District Judge decided in favor of the estate and the government appealed.

Charles H. Yates executed a will on January 18, 1940 and died on June 15, 1944, leaving a net estate of $311,081.59. By his will, after making certain minor bequests, his residence at Greenville was left to his two sisters, Carrie L. Yates and Daisy Yates McDavid, for their joint lives and the life of the survivor. The rest and the residue of the estate were devised and bequeathed to two trustees with full power of sale and reinvestment, to collect the income, and after paying all necessary expenses, to pay from said income $150 per month to each of the two sisters for life, and $25 per month to the testator's cousin, Parmie Bignon of Augusta, Georgia, until the death of the survivor of the sisters. The trustees were also directed to pay all expenses of the upkeep of the home place and all necessary medical and hospital expenses in case of the illness of either or both of the sisters from any cause. The trustees were given power to use the corpus of the estate for these purposes if the income should prove insufficient, and if the income should prove to be more than sufficient, the trustees were directed to add the surplus to the corpus.

The testator directed that upon the death of both sisters, the trustee should pay $1,000 to the cousin Parmie Bignon, $2,000 for a building or improvement at Greenacre in Greenville County, and $1,000 each to the Boy and Girl Scouts in Greenville. He then disposed of the rest of the estate in the following terms:

"The remainder of said trust estate shall be used by my said trustees, in their discretion, for some worthy charitable purpose. They may increase the amounts above indicated for the benefit of Greenacre, the Boy Scouts and the Girl Scouts, or they may dispose of any or all of said remainder to some other charitable or eleemosynary institution or for some other charitable purpose. The disposition of said remainder shall be absolutely in the discretion of said trustees. In the event there should not be sufficient funds remaining in the hands of my trustees at the time of the death of my two sisters to pay all of the bequests in this item, they shall dispose of whatever funds are in their hands in the order in which they are above indicated until said funds are exhausted.

Marion M. Hewell and the South Carolina National Bank were named as executors and trustees under the will.

One of the sisters, Carrie L. Yates, died in 1941 before the death of the testator. The other sister, Daisy Yates McDavid was sixty-five years of age when he died. A few days before his death the cousin, Parmie Bignon, came to live in the home and the testator on his deathbed entered into an agreement with her that if she would give up her employment in Augusta and live with Mrs. McDavid during her life, and be a sister to her, he would pay her the amount that she was earning in Augusta or more. The two women have lived in his residence since his death and both of them are in good health.

Subsequent to the testator's death the executors and trustees brought a suit in the Court of Common Pleas of the County of Greenville, South Carolina, joining Daisy Yates McDavid and Parmie Bignon as defendants,¹ to secure a construction of the will and particularly the rights of the two women and the duties of the trustees as to the monthly payments to be made to them and as to the expenditures for the upkeep of the home. After testimony was taken, the court decreed on August 8, 1944 that the payments to Mrs. McDavid should be increased from $150 to $300 per month for life, and that Parmie Bignon should be paid the sum of $25, as directed by the will, and the additional sum of $50 per month until the death of the surviving sister so long as the two women lived together. The court was of the opinion that the testator by leaving the sum of $150 per month to each of his sisters for life, had in mind that the sum of $300 per month was necessary for the maintenance of the home, and hence the increase of the allowance to the surviving sister to $300 was justified. The court further found that before the testator's death he had made the agreement with Parmie Bignon above described, and directed that on this account the trustees pay her the additional sum of $50 per month.

Subsequently, upon a supplemental petition filed by the executors and trustees, the court on February 10, 1945 authorized them to reimburse Mrs. McDavid for payments made by her in 1944 and to be made in subsequent years for federal and State income taxes. In doing so the court referred to the language of the residuary clause of the will above set out which directed the trustees to use the remainder of the trust estate for some worthy charitable purpose, saying that "the disposition of said remainder shall be absolutely in the discretion of said trustees." The court found support in these words for the conclusion that the testator vested discretion in the trustees to act as he would do if he were living.

On September 14, 1946, upon a third petition of the executors and trustees, the court ordered the trustees to pay all items of medical and hospital expenses of Parmie Bignon that had then accrued or which might accrue in the future so long as she would reside with Mrs. McDavid. The court also authorized the trustees to pay for the installation of an automatic oil heating furnace in the home and retained jurisdiction for additional relief or instructions.

The evidence shows that all the expenditures made upon the authority of these three decrees were taken from the income of the trust estate. The District Judge in the pending case found that the inventory showed a net estate of $311,081.59; that the annual income reasonably to be expected therefrom was $11,200; and that the actual income from June 15, 1944 to October 12, 1949 was $53,940.48 of which $35,284.36 was paid to the beneficiaries and $7,888.11 was used to defray the expenses of administration, leaving an excess over the amount distributed of $10,768.01. During this period $10,606.40 was added to the corpus of the estate.

The court also found that the two women...