Button v. Hikes

• Decision Date: 17 December 1943
• Parties: Button et al. v. Hikes.
• Court: United States State Supreme Court — District of Kentucky

Page 163

296 Ky. 163

Button et al. v. Hikes.

Court of Appeals of Kentucky. Common Pleas Branch, First Division.

March 19, 1943.

Rehearing Denied December 17, 1943.

1. Statutes. — Since the word "property" is so all-embracing as to include within its definition every physical object, intangible benefit, and prerogative susceptible of ownership, possession, or disposition, the meaning of the word, when used in a legislative act, must be gathered from then prevailing concepts as reflected by contemporaneous construction.

2. Statutes. — Taxing statute which is so general in its terms, by reason of definitions employed, as to make taxable, through extension of those definitions to their utmost limits, not only those things generally regarded as properly subject to taxation, but others which, historically, have been considered by the public, as well as the lawmakers, to be immune, is so uncertain as to render applicable doctrine of "contemporaneous construction" by administrative officers.

3. Statutes. — To ascertain legislature's intention court should look to the letter of statute, to it as a whole, to circumstances under which it was enacted, to old law, if any, to mischief to be remedied, to other statutes, to common law rules, and to condition of affairs when statute was enacted.

4. Statutes. — The legislature's contemporaneous and subsequent action in reference to the subject-matter is controlling evidence of the intention of a particular act.

5. Statutes. — It is presumed that the legislature is acquainted with the law, that it has knowledge of the state of the law on subjects on which it legislates, and that it is informed of previous legislation and the construction that previous legislation has received.

6. Taxation. — If framers of Constitution regarded rights arising out of life policies as property, then the legislative intent in tax statute would be immaterial, since the Constitution requires that all property, not specifically exempted by its terms, be taxed. KRS 132.010; Const. secs. 171, 172, 174.

7. Taxation. — Widow's right to receive from life insurance companies income during her life in accordance with terms of a mode of settlement selected by her deceased husband with respect to life policies was not "property" within meaning of tax statute or constitutional provisions requiring all property, not specifically exempted by its terms, to be taxed. KRS 132.010; Const. secs. 171, 172, 174.

Chief Justice Fulton and Judges Cammack and Thomas dissenting.

Appeal from Jefferson Circuit Court.

Lawrence Grauman for appellant.

J. Verser Conner and John K. Skaggs, Jr. for appellee.

Before Joseph J. Hancock, Judge.

OPINION OF THE COURT BY JUDGE TILFORD.

Affirming.

The appellants, constituting the Jefferson County Board of Supervisors of Tax, listed for taxation for the year 1941 the appellee's right to receive from life insurance companies income during her life payable in accordance with the terms of a "mode of settlement" selected by the insured, her deceased husband. The Jefferson County Quarterly Court, on appeal, adjudged the assessment to be erroneous and void. A similar decision was rendered by the Circuit Court on appeal to that tribunal by the Board, and it is this decision we are called upon to review.

The facts pertaining to the policies, the insured, the beneficiary and her rights thereunder, together with the testimony which actuaries and bankers would give concerning the extent, value, and salability of such rights, were stipulated; and, in order that the scope of this opinion may not be extended beyond its actual intent, we set forth the stipulation, omitting surplus verbiage, and a summary of the testimony:

"(1) Samuel L. Hikes, a * * * resident of Jefferson County, Kentucky, died in that County on January 10th, 1940, at the age of 58 years * * *. He was survived by his widow, the appellant, Verna Ray Hikes, and by the following children:

Kenneth Hikes, born October, 1913

Margaret Hikes Sutherland, born March 19, 1917,

Verna Ray Hikes, born August 24, 1924

Said children still survive, and there are two infant children born to Margaret Hikes Sutherland. No other descendants survive the said Samuel L. Hikes.

"(2) Between the years 1922 and 1931, Samuel L. Hikes procured policies of insurance on his own life * * * issued respectively by the Northwestern Mutual Life Insurance Company, * * * The Connecticut Mutual Life Insurance Company, * * * The Equitable Life Assurance Society of the United States * * *.

"(3) Prior to the year 1935, * * * Samuel L. Hikes retained all rights to change the beneficiary in said several policies and complete control over said policies.

"(4) In December, 1935, the insured surrendered all incidents of ownership in the policies issued by the Northwestern Mutual Life Insurance Company, and in said month entered into beneficiary agreements with the said Insurance Company; and in the month of February, 1936 entered into beneficiary agreements with the Equitable Life Assurance Society of the United States, and the Connecticut Mutual Life Insurance Company, whereby the rights of all beneficiaries under said policies were fixed and said agreements were in effect on the date of the death of the said Samuel L. Hikes, and are still in effect, and control and govern the rights of the beneficiaries under said policies.

"(5) The interests of Verna Ray Hikes, Widow of Samuel L. Hikes, sought to be taxed in this case, are the rights which she acquired and now enjoys under the terms of those beneficiary agreements.

"(6) Though differing in form and language, as between the three Companies, insofar as the rights of Mrs. Hikes herein were fixed by said agreements, they are substantially similar and (omitting provisions which would have been applicable had Mrs. Hikes predeceased the insured) may be summarized thus:

"(a) It was thus provided that upon the death of the insured, Mr. Hikes, the several Companies agreed to pay to Mrs. Hikes, during her lifetime, interest on the proceeds of the policies at such rates as might be fixed by the respective Companies, but not less than three per cent per annum, discounted by reason of the fact that said payments were made monthly instead of annually.

"(b) Said policies provided that in addition to the interest payments mentioned, the several Companies will pay to Mrs. Hikes such interest dividends, if any, as may be declared annually by the respective Companies.

"(c) It was further provided that after the death of the said Mrs. Hikes, the interest upon said proceeds should be paid to the surviving children, or grandchildren, with limited rights of withdrawal by said children of installments of principal upon reaching certain ages of 30 and 35, in case of the sons, and 45, in case of the daughters. It was further provided that in the event Mrs. Hikes should survive all of her children and all their children, she might elect to have the proceeds of said policies payable to her in certain installments over a period of years. Under no circumstances can Mrs. Hikes receive any of the proceeds of said insurance, except in the event she survives all her children and their descendants; nor can she dispose of or direct the payment of said proceeds by will or in any other manner, except in the event that she should outlive all of her children and their descendants.

"(d) In the event of the death of all of said children and all the descendants of said children, and of Mrs. Hikes, then the remaining proceeds of said insurance, if any, shall be paid to the estate of the last one of said persons to die, to-wit, Mrs. Hikes, her children and grandchildren.

"(e) Each of said policies provides that the right is withheld from Mrs. Hikes to commute, assign, alienate, anticipate or pledge any of the sums or instalments payable under the terms of said policies.

"(f) Upon the death of Mrs. Hikes, all her rights under said policies shall immediately terminate, except as to any interest installment due but unpaid at the time of her death; and neither her estate, heirs, devisees, or assigns have or can acquire any claim against said Insurance Companies.

"(7) The following table shows the amount upon which the interest paid to Mrs. Hikes by each of the Companies is calculated, and the amount actually paid to her in the year 1941, the only full year since the death of Mr. Hikes:

                Name of Company                Amount of          1941
                                             Proceeds upon
                                             which interest
                                                is paid
                Northwestern Mutual Life
                Insurance Company             $101,520.62       $3,496.32
                Connecticut Mutual Life
                Insurance Company               42,296.30        1,456.68
                Equitable Life Assurance
                Society of the United
                States                          40,026.08        1,229.64"
                

Summary of Stipulated Testimony.

(1) The Insurance Companies have not segregated any assets of any character as applicable to or answerable for the policies in question; and, in so far as appellee's rights are concerned, the principal amounts named are without significance unless she survives her children and grandchildren, except to the extent that they furnish the basis for the calculation of the interest and dividends to which she may become entitled if she lives.

(2) Because of the agreement between the insured and the Companies, they would decline to recognize any assignment by appellee of her rights under the policies. The actuaries of the Companies knew of no instances where such rights had been sold.

(3) Mortality tables reflect the death or survival of groups, and furnish no basis for predicting how long any individual will live.

(4) It is not possible to determine the fair cash value of appellee's interest in the policies estimated at the price they would bring at a fair voluntary sale, because of the unlikelihood of finding a buyer, and the inability to predict the duration of her life.

(5) Banks do...