Cress' Estate, In re, s. 71-72

• Decision Date: 05 January 1953
• Docket Number: Nos. 71-72,s. 71-72
• Citation: 335 Mich. 551,56 N.W.2d 380
• Parties: , 36 A.L.R.2d 907 In re CRESS' ESTATE. DEPARTMENT OF REVENUE v. MICHIGAN NAT. BANK. In re DUNBROOK'S ESTATE. DEPARTMENT OF REVENUE v. MICHIGAN NAT. BANK et al.
• Court: Michigan Supreme Court

Page 380

56 N.W.2d 380

335 Mich. 551, 36 A.L.R.2d 907

In re CRESS' ESTATE.

DEPARTMENT OF REVENUE v. MICHIGAN NAT. BANK.

In re DUNBROOK'S ESTATE.

DEPARTMENT OF REVENUE v. MICHIGAN NAT. BANK et al.

Nos. 71-72.

Supreme Court of Michigan.

Jan. 5, 1953.

Frank G. Millard, Atty. Gen., Edmund E. Shepherd, Solicitor Gen., Lansing, T. Carl Holbrook and William D. Dexter, Assts. Atty. Gen., for plaintiff-appellant.

Schmidt, Smith & Howlett, Grand Rapids, Laurence D. Smith, Grand Rapids, for defendants-appellees.

Before the Entire Bench.

SHARPE, Justice.

These two cases submitted on separate records involves the construction of the Michigan Inheritance Law. C.L. '48 section 205.201, Stat.Ann.1950 Rev. § 7.561. The facts are not in dispute. In the matter of the estate of Oscar C. Cress, deceased, the essential facts are as follows: Oscar C. Cress died on April 21, 1950, a resident of the city of Grand Rapids. He left a will bequeathing the sum of $200 to each of his brothers, Elmer W. Cress and Earl H. Cress. After other specific bequests, the remainder of his estate was devised and bequeathed to Marguerite P. Marshall. The two brothers, being dissatisfied with the provisions in the will filed objection to admission of the will to probate. Prior to the probate of the will a settlement was arrived with the two brothers. The settlement provided:

'The undersigned Marguerite P. Marshall is the residuary legatee and devisee named in Paragraph 11 of the last will and testament of Oscar C. Cress, deceased, of date March 14, 1950, of which last will and testament the undersigned is the proponent in a petition filed by her in the above named Court.

'The Michigan National Bank is the Executor named in said last will and testament and is now acting as Special Administrator of said estate and has also, by permission of said Court, intervened as a proponent of said last will and testament.

'Earl H. Cress and Elmer W. Cress, half brothers of said Oscar C. Cress, deceased, have filed in said Court their objections to the probate of said will and the contest thus created has not yet been tried.

'The undersigned hereby authorizes said Michigan National Bank to make settlement of said contest by agreement with said contestants, upon the following basis, viz.:

'(a) The objections to the probate of said will shall be withdrawn and said will admitted to probate, subject, however, to additional payment to said Earl H. Cress and Elmer W. Cress as set forth in succeeding Subparagraph (b).

'(b) The bequest in Paragraph 7 to said Earl H. Cress shall be increased from $200 to $5,700; and the bequest in Paragraph 8 to said Elmer W. Cress shall be increased from $200 to $5,700.

'(c) Such settlement of said estate, however, shall be made by said Michigan National Bank, in behalf of the undersigned only if there is enough property in said estate to pay to the undersigned at least $30,000 in cash, after paying in full all funeral expenses and debts of the decedent, all administration expenses and debts of the decedent, all administration expenses including Special Administrator's and Executor's fees and attorneys' fees, all inheritance and estate taxes, if any, including interest and penalty thereon, if any, and all other bequests made in said will, including said enlarged bequests of $5,700 each to said Earl H. Cress and Elmer W. Cress.

'(d) In order to make certain that under such settlement at least said net sum of $30,000 will be paid to the undersigned, said Michigan National Bank is authorized to sell all securities in said estate at once, to the extent it has not heretofore done so.'

As a consequence of such settlement, the last will and testament of the testator was duly admitted to probate as his last will and testament. The order of the probate court, admitting the testator's will to probate, provided in part as follows:

'It appearing to the Court from stipulation on file herein that the differences between said parties have been compromised and settled by agreement between them, which said stipulation and agreement is for the best interests of said estate and the parties interested therein and is hereby approved; and

'It appearing to the Court from the testimony of the subscribing witnesses to said instrument that said deceased signed and duly executed said instrument as and for his last will and testament in the presence of sufficient and competent witnesses, and that said witnesses attested and subscribed said instrument as subscribing witnesses thereto at the request of said deceased, in his presence and in the presence of each other, and that said deceased at the time of the execution thereof was of lawful age and sound mind and under no restraint or undue influence; and

'It further appearing that said deceased died on the 21st day of April, 1950, and that at the time of his death was an inhabitant of the City of Grand Rapids in said County, and that said instrument was duly proved and ought to be allowed as the last will and testament of said deceased, subject to the direction as to the bequests to Earl H. Cress and Elmer W. Cress hereinafter mentioned;

'It Is Ordered that said instrument be and is hereby allowed and admitted to probate as the last will and testament of said deceased, subject, however, to the direction and instruction to the Executor, pursuant to the stipulation and agreement of the parties, to increase the bequest in Paragraph 7 to said Earl H. Cress from $200 to $5,700 and the bequest in Paragraph 8 to said Elmer W. Cress from $200 to $5,700.

'It Is Further Ordered that the execution of said will be committed, and the administration of the estate of said deceased be granted, pursuant to the direction herein contained, to Michigan National Bank, a national banking association with an office in Grand Rapids, Michigan, said Michigan National Bank to qualify by filing its acceptance of said appointment herein.'

On the 17th day of April, 1951, the probate court for the county of Kent determined the inheritance tax on the basis of the transfers made by the decedent to the beneficiaries, in accordance with the provisions of his will, unmodified by the authorization of settlement entered into by Marguerite P. Marshall, Elmer W. Cress and Earl H. Cress. The Michigan National Bank, as executor of the estate, filed a petition for redetermination of the inheritance tax and for a refund of the tax paid, contending that the tax should be computed on the basis of the authorization of settlement, rather than on the basis of the distribution made by the testator in his will. On the 12th of September, 1951, the probate court for the county of Kent issued an order allowing the petition and provided for the computation of inheritance tax based upon distribution of $5,700 to each of the contestants and providing that the residue of the estate, for inheritance tax purposes, be reduced by the sum of $11,000. The Department of Revenue of the State of Michigan appealed to the Circuit Court for the County of Kent from the order of re-determination of inheritance tax. The circuit court for the county of Kent affirmed the order of the probate court.

In the matter of the estate of Augustus Dunbrook, deceased, the facts are as follows: Augustus Dunbrook, died a resident of Kent County. He left a will dated March 12, 1942. The will contained the following provisions:

'(1) Five hundred dollars ($500) shall be paid to my son, Raymond Dunbrook. In this connection I wish to state that the amount that my said son shall obtain from my estate is limited to this amount for the reason that I have heretofore given my said son his share of my said estate.

'(2) All of the remainder of my estate, real, personal and mixed, and wherever located, shall be paid to the Evangelical Lutheran Synod of Missouri, Ohio and other states, whose principal office is now at 3558 South Jefferson Avenue, St. Louis, Missouri, to be used by such Synod for missions.'

Raymond F. Dunbrook, being dissatisfied with the $500 given him under the will, threatened to commence suit to contest the validity of the will. As a result of this threat, Raymond F. Dunbrook, Emma Dunbrook and the Evangelical Lutheran Synod, entered into a settlement agreement on April 5, 1951, and pursuant to such agreement Raymond F. Dunbrook was to receive $13,000. The agreement also provided that any increase or decrease in the value of the securities should accrue to Raymond F. Dunbrook. On the above date the Judge of Probate entered an order approving the agreement. On September 12, 1951, the probate court issued an order requiring that the inheritance tax be determined on a basis of a transfer by the decedent to Raymond F. Dunbrook, rather than as a transfer to the residuary legatee under the decedent's will.

Plaintiff appealed to the circuit court from the above order. The circuit court affirmed the order of the Judge of Probate and in an opinion stated:

'In each case the Probate Court determined the inheritance tax on the basis of the actual distribution of the estate in accordance with the compromise agreement.

'In each case the Michigan Department of Revenue has appealed from that determination to this Court, claiming that the tax should have been computed as though the estate had been distributed in accordance with the terms of the will.

'There is a split of authority on the question and apparently our Supreme Court has not as yet been called upon to pass on the question. Several states assess the tax on the basis of the will as written, upon the theory that title vests at the date of the testator's death, that the tax accrues as of that date and that nothing subsequent thereto can reduce the tax liability.

'While it must be acknowledged that there is ample authority in support of this theory, I am unable to convince myself that it is a doctrine that should be followed in Michigan for the reason that it rests on fiction and not on fact.

'It is based on the...