Boynton's Estate, In re, 331

• Decision Date: 06 January 1959
• Docket Number: No. 331,331
• Citation: 121 Vt. 98,148 A.2d 115
• Parties: In re Estate of Bial J. BOYNTON.
• Court: Vermont Supreme Court

Page 115

148 A.2d 115

121 Vt. 98

In re Estate of Bial J. BOYNTON.

No. 331.

Supreme Court of Vermont.

Jan. 6, 1959.

Black, Wilson, Coffrin & Hoff, Burlington, for plaintiff.

Frederick M. Reed, Atty. Gen., Louis P. Peck, Legal Asst. to Atty. Gen., for defendant.

Before CLEARY, C. J., and ADAMS, HULBURD, HOLDEN and SHANGRAW, JJ.

SHANGRAW, Justice.

This is a petition for a declaratory judgment under Chapter 77, V.S. 47 seeking a construction of § 1055, V.S. 47 as amended by No. 26 of the Acts of 1951 in its application to (a) property transferred in trust; (b) jointly owned property; and (c) a claimed accord and satisfaction.

Petitioners are Caroline Boynton Rondeau, individually and as beneficiary under a trust created by Bial J. Boynton, deceased, and J. Boone Wilson, as trustee. The petition was brought against Leonard W. Morrison, Commissioner of Taxes, who has been succeeded by Austin B. Noble. Stipulations were entered into by and between the parties as to all factual allegations and documents. Findings were made by the court predicated upon the agreed facts. The court issued a declaratory judgment order declaring that: (1) the property placed in trust by the deceased is subject to the assessment and payment of a transfer tax as provided by V.S. 47, § 1055, as amended; (2) that the real and personal property jointly owned by Bial J. Boynton and Caroline Boynton Rondeau, with right of survivorship is subject to the assessment and payment of a transfer tax upon 50% of the value thereof under the above statute; (3) there was not an accord and satisfaction of the transfer tax on the jointly owned property by the payment of $238.80 to the Commissioner of Taxes by Mrs. Rondeau. Petitioners took exceptions to (1) and (3) of the judgment order, petitionee to (2) of said order. The case is here on these exceptions. Thus the only question for us to determine is whether the judgment order is supported by the facts found. Dindo v. Cappelletti, 116 Vt. 403, 405, 77 A.2d 840; Little v. Loud, 112 Vt. 299, 304, 23 A.2d 628. The commissioner of taxes initially assessed a transfer tax on the property placed in trust, and on the full value of the jointly owned property.

The material facts are as follows: On January 9, 1949 Bial J. Boynton entered into a voluntary trust agreement with J. Boone Wilson, both of Burlington, Vermont, as trustee. At the time Mr. Boynton transferred securities to the named trustee of the value of $25,327 and a bank account of $7,300.05, making the total value of the trust as of the date of its creation $32,627.05. Mr. Boynton died on July 26, 1949, and the Commissioner of Taxes as of that date valued said trust property at $36,501.92. The trust agreement is irrevocable and contains the provision that 'donor is desirous of making an outright gift for the benefit of his daughter Caroline Helen Boynton Rondeau, and her children.' The trust agreement in part provides:

'The Trustee shall take and hold the trust estate, together with any funds which may hereafter be added, with full power, from time to time so long as this trust agreement shall remain in force, in his sole discretion, to hold, pledge, sell, convert, exchange or otherwise dispose of said trust estate or any part thereof and to invest and reinvest the same or any proceeds thereof. * * *'

The trust indenture also provides that the trustee make a semi-annual accounting to Mr. Boynton during his lifetime of '* * * all funds and property of the trust estate together with all receipts and expenditures thus showing the amount on hand at the time of such accounting. * * *'

The trust agreement further in part reads:

'Out of the income derived by the Trustee from the property at any time comprising the trust estate the Trustee shall:

'First, pay all the necessary costs and expenses of this trust, including a reasonable compensation of the Trustee.

'Second, pay the balance of the income (hereinafter called net income) in installments as hereinafter set forth.

'The purpose of this trust is to provide for my daughter, Caroline Helen Boynton Rondeau, her child, Thomas Boynton Rondeau, and any children that may subsequently be born to her. In view of the fact that so long as I live I shall see that my daughter and her child (or children) are not in need, the Trustee during my lifetime shall collect the income from the trust estate and add such money to the principal, making no payment whatsoever to my daughter or to any one during my lifetime. The Trustee shall reinvest such income as accumulates during my lifetime as he shall see fit.

'Upon the decease of the Donor the Trustee will pay to the aforesaid Caroline Helen Boynton Rondeau during her life in quarterly installments the income from the trust estate and so much of the principal thereof as in his discretion shall be necessary or advisable for the proper care, maintenance, support and education of my daughter and her children. It is my wish that the Trustee provide amply for the needs of my daughter and her children and to provide her from the principal with such money as in his sole discretion shall be for her and their best interest; payments, if any, from the principal to my said daughter shall depend entirely upon the judgment and discretion of my said Trustee.

'Upon the death of my said daughter the balance of the trust estate and any accrued income (if at that time there be any balance in said trust estate) shall be paid over forthwith to such children of my daughter as may be living at the time of her decease. If upon the death of my daughter she shall not leave any children (or children of deceased children) surviving then I direct that the Trustee pay over said balance forthwith in equal shares to Henry Thomas Rondeau, my son-in-law (if living) and the Mary Fletcher Hospital; if my son-in-law be not then living, then the whole share be paid to the said Mary Fletcher Hospital.

'Neither the income from said trust estate nor the principal fund shall be liable for the debts present or future of any beneficiary hereunder and shall not be subject to the right on the part of any creditor to seize or reach the same under any writ or by a proceeding at law or in equity. No beneficiary shall have any power to give, grant, sell, convey, mortgage, pledge or otherwise dispose of, encomber, or anticipate the income or any installment thereof, or of any balance in the principal thereof, it being my intention that no right of disposition of any such property shall vest in the beneficiary until the same shall have actually been transferred and paid over to such beneficiary.'

Said agreement contains other provisions not here material.

Mr. Boynton for a number of years prior to his death had owned certain property with his daughter, Caroline Boynton Rondeau, as 'joint tenants with the right of survivorship.' This property consisted of a house and lot located in Burlington, Vermont, and also certain common stock and United States Government bonds, all of which valued at $23,880.50. Mrs. Rondeau contributed no money to the purchase of any of the jointly held property. Title remained the same until the death of Mr. Boynton, which occurred July 26, 1949.

As heretofore stated, after the death of Mr. Boynton and after the payment of the inheritance tax, the Commissioner of Taxes for the State of Vermont sought to impose a transfer tax on the assets held in trust, and on the jointly held property, each for its full value, all under and by virtue of V.S. 47, § 1055 as amended.

Petitioners, by letter dated December 28, 1954, signed by Black & Wilson, their attorneys, took the position that the trust estate was not taxable under the provisions of the above statute. As to the jointly owned property it was also their contention that only 50% of the value thereof should be taxed and tendered a check for $238.80 'in full settlement of the Transfer Tax liability for the jointly owned property.' This remittance was accepted by the Commissioner of Taxes by letter dated January 14, 1955, wherein it was stated that said sum was 'accepted in partial payment of the outstanding transfer tax liability in the amount of $2,161.46.' Petitioners also claim an accord and satisfaction.

The statute in question, V.S. 47, § 1055 as amended by the Acts of 1951, reads:

'1055. Transfers; tax; lien; estates by entirety. A person in a class liable to a tax under sections 1053 and 1054, who acquires title to real estate within this state or any interest therein by deed, grant or gift, except in case of a bona fide purchase for a full consideration in money or money's worth, made or intended to take effect in possession or enjoyment upon or after the death of the grantor or donor, and every such person who thus acquires title to personal estate or any interest therein from a deceased person who at the date of his death was an inhabitant of this state and then owned such property, shall pay to the state the same tax that he would have been required to pay had such estate or interest passed to him from such deceased person by will, the laws of descent or decree of a court in this state. Such tax shall be a first lien on the real or personal estate thus conveyed until paid in full.

'However, when real or personal property is held by a husband and wife, the survivor's interest in and ownership thereof shall not be deemed a transfer subject to taxation and this exception shall apply to all now pending estates in probate court and to all now unsettled estates of deceased persons.'

Sections 1053 and 1054 referred to in the above statute have reference to collateral and direct inheritances respectively. The taxes provided for in sections 1053, 1054, and 1055, that is, taxes on collateral and direct inheritances and taxes on transfers are not taxes on the property, but upon the right of succession to the property merely. Lovejoy v. Morrison, 116 Vt. 453, 457, 78 A.2d 679, and cases cited.

We will first consider the...