Connecticut Bank and Trust Company v. United States
| Decision Date | 04 August 1972 |
| Docket Number | 563,No. 561,562,Dockets 71-1964,71-1965 and 71-1966.,561 |
| Citation | 465 F.2d 760 |
| Parties | The CONNECTICUT BANK AND TRUST COMPANY, Executor of the Estate of Warren G. Horton, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee. The CONNECTICUT BANK AND TRUST COMPANY, Executor of the Estate of Charles F. Musk, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee. The CONNECTICUT BANK AND TRUST COMPANY, Executor of the Estate of Mary Ann Musk, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Second Circuit |
John S. Mason, Jr., Hartford, Conn. (Reid & Riege, P. C. and Thomas C. McKone, Hartford, Conn., on the brief), for plaintiff-appellant.
Richard S. Halberstein, Tax Div., Dept. of Justice, Washington, D. C. (Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Richard W. Perkins, Tax Div., Dept. of Justice, Washington, D. C., and Stewart H. Jones, U. S. Atty., D. of Conn., on the brief), for defendant-appellee.
Before MOORE, ANDERSON and TIMBERS, Circuit Judges.
On June 14, 1965, Warren and Virginia Horton and Charles and Mary Ann Musk were killed when the car in which they were riding exploded after being struck by a tractor-trailer truck, owned by HMH Motor Service, while traveling the Chesapeake Bay Bridge Tunnel in Virginia. The estate of Mrs. Horton is not involved in this litigation. Mr. and Mrs. Musk and Mr. Horton (the decedents) were domiciled in Connecticut at the time of their deaths and letters testamentary were issued to The Connecticut Bank and Trust Company as executor of their respective wills.
During 1966, the executor commenced wrongful death actions in the state courts of New York against HMH which were removed to the United States District Court for the Southern District of New York. The suits were settled for $320,000 before going to trial. The recovery of this amount, which was made on the assumption of instantaneous deaths, included nothing for ante-mortem pain and suffering.
Although the proceeds were held by the executor for distribution in accordance with the terms of the wills, they were not included by the executor in the decedents' gross estates for the federal estate tax; the Commissioner, however, determined that they should have been included and he accordingly assessed deficiencies against each of the estates. The deficiencies were paid and these suits were filed on the claims for refunds.
The district court 330 F.Supp. 997, held that the wrongful death recoveries, and therefore the legal interests which the Commissioner sought to tax, cf. Morgan v. Commissioner of Internal Revenue, 309 U.S. 78, 80-81, 626, 60 S. Ct. 424, 84 L.Ed. 585, 1035 (1940), were ascertained and determined under Connecticut law, a conclusion, the correctness of which, is not questioned on these appeals; and it further held that all sums recovered under Connecticut's wrongful death statutes1 were properties held by the decedents at the time of their deaths and were therefore parts of their gross estates under § 2033 of the Internal Revenue Code.2 We are unable, however, to agree with this determination.
The crucial issue to be decided under § 2033 is whether or not the value of an action for wrongful death is "property . . . of the decedent at the time of his death." Much of the Government's argument and the opinion of the court below rest on the differences between the Connecticut statutory scheme for wrongful death recovery and the more common pattern of recovery in the majority of the states based upon "Lord Campbell's Act," which provides for a direct right of action on behalf of designated beneficiaries of the decedent to recover for his wrongful death, with damages to be measured by the loss to the survivors, see generally 2 F. Harper & F. James, The Law of Torts, § 24.2, at 1285-1288, §§ 25.14-25.15, at 1329-1333 (1956). The Connecticut statutes, on the other hand, provide for a right of action in the executor or administrator, with damages to be measured on the basis of the loss of the decedent's ability to carry on life's activities, Floyd v. Fruit Industries, Inc., 144 Conn. 659, 669-677, 136 A.2d 918, 923-927 (1957); Chase v. Fitzgerald, 132 Conn. 461, 466-471, 45 A.2d 789, 791-793 (1946). In addition, by recent amendments, the wrongful death proceeds in Connecticut are distributed according to the terms of the decedent's will, if there is one, and are subject to the general claims of the estate. The differences in results under the two types of statutes may be more theoretical than real, cf. Foran v. Carangelo, 153 Conn. 356, 362, 216 A.2d 638, 641 (1966), but in any event, these differences have little relevance concerning the question of whether or not the right of action for wrongful death was property owned at death.
Simple logic mandates the conclusion that an action for wrongful death cannot exist until a decedent has died, at which point, he is no longer a person capable of owning any property interests. The Government's reply to this is that at the very instant of death the right of action arose which the decedent was then capable of owning at death. The only authorities cited for this position, however, are cases where preexisting property interests were valued as of the instant of death, but valuation at time of death of prior existing interests is a far different concern from that in this case where the property interest itself has sprung from the fact that the death has taken place.
While it is true that Congress may constitutionally place an excise tax on property created by death, as well as upon property transferred by death, Fernandez v. Wiener, 326 U.S. 340, 352, 66 S.Ct. 178, 90 L.Ed. 116 (1945); Tyler v. United States, 281 U.S. 497, 502, 50 S.Ct. 356, 74 L.Ed. 991 (1930), § 2033 does not read so broadly. In a discussion of the estate tax the Supreme Court described the scope of § 2033: "What this law taxes is not the interest to which the legatees and devisees succeeded on death, but the interest which ceased by reason of the death," Y.M.C.A. of Columbus, Ohio v. Davis, 264 U.S. 47, 50, 44 S.Ct. 291, 292, 68 L.Ed. 558 (1924); see also, Nichols v. Coolidge, 274 U.S. 531, 537, 47 S.Ct. 710, 71 L. Ed. 1184 (1927). Where, as here, there was no property interest in the decedent which passed by virtue of his death, but rather one which arose after his death, such an interest is not property owned at death and not part of the gross estate under § 2033, cf. Mandel v. Sturr, 266 F.2d 321, 324-325 (2 Cir. 1959); Note, "Estate Taxation of Contract Rights Subject to Conditions Precedent," 67 Yale L.J. 467, 470-73 (1958).
This construction of the relevant statutes is supported both by Connecticut law and Treasury Department Revenue Rulings. The Connecticut Supreme Court has stated that under Connecticut statutes "no person, during his lifetime, can possess an action or right of action embracing, as elements of damage, his own death or any of its direct consequences," Foran, supra, 153 Conn. n. 2 at 360, 216 A.2d at 641. Connecticut General Statute § 45-280 specifically states that wrongful death proceeds are not part of the gross estate for state succession tax purposes, and the Probate Court Administrator, a Connecticut Superior Court Judge, has ruled that wrongful death proceeds are not part of the gross estate for purposes of determining the probate court fee, Opinion No. 10 of the Connecticut Probate Court Administrator (February 4, 1971).
The Treasury Department has issued three Revenue Rulings concerning the inclusion of wrongful death proceeds under § 2033, all of which hold that the proceeds are not part of the gross estate. In this case, the Government tries to distinguish them because they concerned rights of action arising under New Jersey and Virginia state law and the federal Death on the High Seas Act, 46 U.S.C. § 761; however, the rationale of those rulings is fully applicable here. In Rev.Rul. 54-19, 1954-1 Cum.Bull. 179, 180, the Department stated: It held that such proceeds were not part of the gross estate...
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