Dana v. Gring

• Decision Date: 28 December 1977
• Citation: 371 N.E.2d 755,374 Mass. 109
• Parties: Lawrence DANA et al., executors v. Frank McQuesten GRING et al. Supreme Judicial Court of Massachusetts, Middlesex
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 755

371 N.E.2d 755

374 Mass. 109

Lawrence DANA et al., executors v. Frank McQuesten GRING et al. Supreme Judicial Court of Massachusetts, Middlesex.

Argued Jan. 5, 1977.

Decided Dec. 28, 1977.

Richard D. Leggat, Boston (Lawrence I. Silverstein, Boston, with him), for plaintiffs.

Myron C. Baum, Acting Asst. Atty. Gen., Gilbert E. Andrews, William A. Friedlander, Jonathan S. Cohen, and Robert A. Bernstein, Washington D. C., for the United States, amicus curiae, submitted a brief.

Before HENNESSEY, C. J., and QUIRICO, KAPLAN, WILKINS and LIACOS, JJ.

HENNESSEY, Chief Justice.

The plaintiffs, as executors of the will of Helen Barnet Gring (Gring), commenced this action in the Probate Court for Middlesex County by a complaint for instructions, seeking the proper interpretation of a testamentary provision contained in the will of Frank B. McQuesten, Gring's father. The executors sought instructions in order that they could (1) determine properly the value of Gring's gross estate for Federal estate tax purposes, and (2) determine their duties and obligations with respect to pursuing a Federal estate tax refund claim. Although the Internal Revenue Service (I.R.S.) was given timely notice and an invitation to intervene, it declined to participate in the probate proceedings. ¹ The case was reserved and reported without decision to the Appeals Court on the pleadings and a statement of agreed facts. We granted direct appellate review on application by the plaintiffs.

Preliminarily this court must determine whether it is appropriate for us to decide this case, or whether we should dismiss the matter as a nonadversarial proceeding. On the merits, the issue is whether property held in trust for Gring pursuant to a provision of her father's will is includible in her gross estate for the purpose of determining Federal estate tax liability. Under Int.Rev.Code of 1954, § 2041, the trust property is includible in Gring's gross estate if at her death it was held subject to a general power of appointment. Under the Internal Revenue Code, there is no general power of appointment if (1) the trustee's discretion to distribute trust principal to Gring during her lifetime was limited by an "ascertainable standard relating to . . . (her) health, education, support, or maintenance," Int.Rev.Code of 1954, § 2041(b) (1)(A), or if (2) Gring had no power to participate in any decisions related to distribution of principal to her. Although the I.R.S. argues that there is no State law question directly in issue here, the plaintiffs urge this court to interpret the McQuesten will and to decide as a matter of State law that the terms of the trust set forth in that will (1) provided an ascertainable standard limiting trustee discretion to invade the principal, and (2) precluded Gring from participating in any decision concerning distribution of principal to her.

We conclude that it is appropriate for us to decide the issues raised. Further, as to the merits of those issues, we agree with both contentions asserted by the plaintiffs.

The facts are as follows. Frank B. McQuesten died in 1947, leaving a will which was admitted to probate the same year. Article Fourteenth of the will ² provided that part of the residue of his estate was to be placed in trust, under which Gring was to receive income for life and as much of the principal as the trustees deemed necessary for "the reasonable welfare or happiness" of Helen Gring or her immediate family. Gring was given a special testamentary power to appoint the principal to any of McQuesten's lineal descendants then living. Additionally, Gring was named to serve as one of three trustees of the trust, in which capacity she served until her death in 1973. Finally, the trust provisions included a "spendthrift" clause purporting to limit Gring's right to alienate or assign the trust fund for the benefit of creditors.

By article Fifteenth of her will, Gring appointed the trust property outright to her issue living at the time of her death, her son and daughter, defendants herein. The plaintiffs, as executors of her will, filed a Federal estate tax return in 1973 which included the value of the property held in the trust ($449,214) in her gross estate and paid the Federal estate tax accordingly. The plaintiffs later decided that the inclusion of the trust property in Gring's gross estate had been erroneous, and in 1975 filed a claim for a refund of that portion of the Federal estate tax attributable to the inclusion of the trust property.

The I.R.S. advised the plaintiffs, by an agent's examination report dated July 25, 1975, that the trust property was properly includible in Gring's gross estate for Federal estate tax purposes. The plaintiffs filed a refund claim on August 5, 1975, and by letter dated August 6, 1975, protested the agent's determination and requested consideration of the refund claim by the Appellate Division of the office of the Regional Commissioner of Internal Revenue. The complaint for instructions was filed on November 10, 1975.

1. We conclude that it is appropriate for us to decide the merits of this case. First, there are questions of State law directly in issue. Although the decision whether to include the trust property in Gring's gross estate for the purposes of determining tax liability is undeniably a question of Federal tax law, see Morgan v. Commissioner of Internal Revenue, 309 U.S. 78, 80-81, 60 S.Ct. 424, 84 L.Ed. 585 (1940), a conclusion as to the extent of Gring's power under the terms of the trust involves the interpretation of a testamentary instrument, and, as such, clearly turns on questions of State law. See, e. g., Mazzola v Myers, 363 Mass. 625, 633, 296 N.E.2d 481 (1973); Old Colony Trust Co. v. Silliman, 352 Mass. 6, 8, 223 N.E.2d 504 (1967); Morgan v. Commissioner of Internal Revenue, supra at 80, 60 S.Ct. 424; Blair v. Commissioner of Internal Revenue, 300 U.S. 5, 9-10, 57 S.Ct. 330, 81 L.Ed. 465 (1937); Freuler v. Helvering, 291 U.S. 35, 44-45, 54 S.Ct. 308, 78 L.Ed. 634 (1934); Stedman v. United States, 233 F.Supp. 569, 571 (D.Mass.1964); Pittsfield Nat'l Bank v. United States, 181 F.Supp. 851, 853 (D.Mass.1960). Following the above principle, this court on numerous occasions has allowed petitions for instructions concerning the interpretation of a will, where such questions arose in the context of a controversy with the I.R.S. See, e. g., Mazzola v. Myers, supra, 363 Mass. at 634, 296 N.E.2d 481; Woodberry v. Bunker, 359 Mass. 239, 240, 268 N.E.2d 841 (1971); Old Colony Trust Co. v. Silliman, supra, 352 Mass. at 8, 223 N.E.2d 504; Watson v. Goldthwaite, 345 Mass. 29, 31, 184 N.E. 340 (1962). See also Persky v. Hutner, --- Mass. ---, --- - --- ^a, 336 N.E.2d 865 (1975); Putnam v. Putnam, 366 Mass. 261, 262, 316 N.E.2d 729 (1974) (declaratory relief granted).

Second, we have decided such questions of State law even where, as here, ³ all immediate parties sought the same result or, in other words, where there were no real "adversaries" before this court. ⁴ See Persky v. Hutner, supra at --- - --- ^b, 336 N.E.2d 865; Putnam v. Putnam, supra, 366 Mass. at 265-266, 316 N.E.2d 729; Old Colony Trust Co. v. Silliman, supra, 352 Mass. at 8, 223 N.E.2d 504. Although in this case the interests of the plaintiff-executors and defendant-appointees are essentially the same (see note 3, supra ), the parties have submitted concrete questions of State law which grow out of an actual, live dispute. Further, the I.R.S. was given timely notice of the proceedings and an opportunity to intervene, but declined to do so. In light of these considerations, we find that the "nonadversarial" nature of this proceeding should not preclude our review.

The United States argues in its amicus brief that the instant case is distinguishable from those where we have answered questions of State law arising from Federal tax disputes, in that a decision here would not "directly . . . (affect) the nature of state property interests." Although the I.R.S. is correct in pointing out that any decision by this court would not "(enlarge) the estate or trust shares of one beneficiary or class of beneficiaries as against those of another," this fact is not determinative. A decision in this case will serve to define clearly the nature of the property interest which had passed to Gring under her father's will, thereby answering an important question concerning the proper administration of the Gring estate. As such, a determination of the merits is consistent with past cases holding that a petition for instructions properly may be entertained where trustees or executors have some present duty to perform with respect to trust funds. See generally Dumaine v. Dumaine, 301 Mass. 214, 217, 16 N.E.2d 625 (1938); Cronan v. Cronan, 286 Mass. 497, 499, 190 N.E. 721 (1934); Hull v. Adams, 286 Mass. 329, 331-332, 190 N.E. 510 (1934); Boyden v. Stevens, 285 Mass. 176, 180, 188 N.E. 741 (1934); Saltonstall v. Treasurer & Receiver Gen., 256 Mass. 519, 528, 153 N.E. 4 (1926).

Third, our decision with respect to the State law questions in this case will be dispositive both for purposes of our own subsequent decisions, see Old Colony Trust Co. v. Silliman, 352 Mass. 6, 9, 223 N.E.2d 504 (1967), and for purposes of any further Federal litigation concerning this estate. See Putnam v. Putnam, 366 Mass. 261, 262 n.2, 316 N.E.2d 729 (1974); Mazzola v. Myers, 363 Mass. 625, 633-634, 296 N.E.2d 481 (1973); Worcester County Nat'l Bank v. King, 359 Mass. 231, 233 and n.1, 268 N.E.2d 838 (1971). See also Commissioner of Internal Revenue v. Estate of Bosch, 387 U.S. 456, 465, 87 S.Ct. 1776, 18 L.Ed.2d 886 (1967). As we stated in Babson v. Babson, --- Mass. ---, --- n.5 ^c, 371 N.E.2d 400 (1977), "We are mindful of the suggestion of the Supreme Court in Freuler v. Helvering, 291 U.S. 35, 45, 54 S.Ct. 308, 78 L.Ed. 634 (1934), that the conclusiveness of a State court construction in subsequent tax litigation...