Brockway's Estate v. Commissioner of Internal Rev., 13616.

• Citation: 219 F.2d 400
• Decision Date: 22 December 1954
• Docket Number: No. 13616.,13616.
• Parties: ESTATE of Don Murillo BROCKWAY, Deceased, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

219 F.2d 400 (1954) ESTATE of Don Murillo BROCKWAY, Deceased, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 13616.

United States Court of Appeals, Ninth Circuit.

December 22, 1954.

George T. Altman, Beverly Hills, Cal., for appellant.

H. Brian Holland, Asst. Atty. Gen., Harry Marselli, Ellis N. Slack, Cecelia H. Goetz, Sp. Assts. to Atty. Gen., Charles W. Davis, Chief Counsel, Internal Revenue Service, Washington, D. C., for respondent.

Before FEE and CHAMBERS, Circuit Judges, and WALSH, District Judge.

JAMES ALGER FEE, Circuit Judge.

In 1922 there was incorporated Crown Body & Coach Corporation with 200 shares of common stock, of which Don Murillo Brockway¹ owned 100. Murillo M. Brockway, his son,² became an employee of Crown. In 1936 decedent acquired for Murillo the outstanding 100 shares of stock, for the purchase price of which his son subsequently reimbursed him. In the same year, decedent and Murillo entered into a written agreement to place this stock in "themselves as joint tenants." Subsequently, 550 shares of common and 950 shares of preferred stock were issued by Crown, in accordance with the contract, in the joint names.

The Tax Court, 18 T.C. 488, construed this document to create a joint tenancy, and upheld a deficiency assessment against the estate³ based upon the transfer of his father's shares of stock to Murillo by the death.

There are three questions raised on the appeal: (a) Where the agreement contained the words:

"control and management continue under the guidance of the parties hereto, and the survivor of them, and that the parties hereto, and the survivor of them, participate in and share to the maximum the benefits resulting from their joint and several efforts,"

was the stock held in "joint tenancy" within the meaning of the Internal Revenue Code, § 811(e)?⁴ (b) If the stock were so held but there was an arm's length business agreement free from donative intent, was the stock includable in the gross estate? (c) Did certain obligations assumed by the son under the written agreement affect the situation?

The contract clearly expressed the intention of the parties to create a joint tenancy in the stock. The language is that decedent and Murillo "will sell, transfer and assign unto themselves, as joint tenants, all their respective shares of stock," and that, if shares of Crown are acquired by them or either of them in the future, they or he "will transfer same to the parties hereto as joint tenants." The language quoted as to their joint efforts and survivorship has no contrary meaning. The document must be construed under California law, which requires that the intention to create such a tenancy be clear. It cannot be made more clear than here. The language of the written document and the transfer of the subsequent issues of stock into the joint names control. Some vague unexpressed intention of the parties, if it existed, could have no effect.

The agreement contained all the incidents for the formation of a joint tenancy by California law. Such incidents are unity of interest, title, time and possession. De Witt v. City of San Francisco, 2 Cal. 289, 297; Hammond v. McArthur, 30 Cal.2d 512, 514, 183 P.2d 1. The estate must have been created by a single instrument. See Plante v. Gray, 68 Cal.App.2d 582, 157 P.2d 421. Here it was so created.

The suggestion that there was not unity of interest because decedent was older than Murillo has no weight. There was no assurance that the son would not die first. The quoted language above, instead of indicating that no joint tenancy was intended, points to no other conclusion. Survivorship is one of the major incidents. It is said the son gave consideration in the promise to provide for his mother if he were the survivor, and in his efforts dedicated to the common interest. But the efforts of the father during his lifetime were of concern.

"Whereas, the efforts of said parties in the discharge of their said duties have successfully carried said Company through the financial crisis of the past few years and have placed it on a sound financial basis, and it is reasonable to anticipate that under their guidance the success will continue, with its resulting direct advantage to the parties hereto;"

It is true that the voluntary conveyance to a stranger of the entire interest of a joint tenant severs the joint tenancy relation. Swan v. Walden, 156 Cal. 195, 196, 103 P. 931. But there was no provision of this instrument forbidding the conveyance. The testimony of the son could not vary the terms of the instrument. It would seem that the suggestion that power to sever must be present is an afterthought. Apparently, non-severability tends rather to strengthen the joint tenancy than otherwise.⁵ Plante v. Gray, supra. The California courts have not held that severability is an essential.

The argument which is now made that some other form of tenancy would better serve the present purposes of the estate and the survivor, is two-edged. If a competent lawyer, such as he who drew the instrument, had intended to create a "tenancy in common for life, with cross remainders for life with remainder in fee to the ultimate survivor," or "a tenancy in common in fee simple with an executory limitation in favor of the survivor,"⁶ as petitioner now suggests, the lawyer could have used appropriate language. If it be thought his testimony is competent to interpret the instrument which he actually drew, he is positive that he intended to create a joint tenancy.

There is a claim that this was an arm's length business transaction. If true, the circumstance was immaterial. The assumption of certain obligations by the son, such as the proviso that he should pay certain sums to his mother if he and she survived the father, is also immaterial.⁷ It was not proven that the son had paid "an adequate and full...