Darnall v. Connor

• Decision Date: 07 July 1931
• Docket Number: 35.
• Citation: 155 A. 894,161 Md. 210
• Parties: DARNALL v. CONNOR, COUNTY REGISTER OF WILLS.
• Court: Maryland Court of Appeals

155 A. 894

161 Md. 210

DARNALL v. CONNOR, COUNTY REGISTER OF WILLS.

No. 35.

Court of Appeals of Maryland

July 7, 1931

Appeal from Baltimore City Court; Eli Frank, Judge.

Action by Joseph P. Connor, Register of Wills of Baltimore County for the Use of the State of Maryland, against R. Bennett Darnall, trustee. From an adverse judgment, defendant appeals.

Affirmed.

PARKE and DIGGES, JJ., dissenting.

Argued before BOND, C.J., and URNER, OFFUTT, DIGGES, PARKE, and SLOAN, JJ.

Arthur W. Machen, Jr., of Baltimore (Armstrong, Machen & Allen, of Baltimore, on the brief), for appellant.

Willis R. Jones, Deputy Atty. Gen. (Wm. Preston Lane, Jr., Atty Gen., on the brief), for appellee.

BOND C.J.

The question to be decided is whether the collateral inheritance tax provided for by section 124 of article 81 of the Code (as amended by Acts 1927, c. 242, § 1) is collectible upon legacies made under this arrangement. A woman owning real and personal property had during her lifetime placed it in trust by deed, giving the trustee the management of the property for her life, but reserving to herself the income and the power of testamentary disposition, with a limitation over to her heirs generally in default of such disposition; and she thereafter executed a will giving the legacies in question. By agreement of the parties, this question was submitted to the trial court without a jury, upon a case stated on the facts. Code, art. 75, §§ 56 and 133. And, the decision having been that there was a liability for the tax, the defendant appeals. No question of parties or procedure is raised.

Sallie C. Brown, four years before her death in 1928, conveyed real and personal property to R. Bennett Darnall, in trust "to collect the interest, income, rents and profits therefrom; to pay all taxes, repairs and charges of every kind, including the expenses of administering this trust, and a commission to the trustee equal to the commission allowed trustees for similar services by the Circuit Court of Baltimore City, and thereafter to pay the net income from time to time to or for the account of the party of the first part, in such installments as the party of the second part, or his successor, may deem expedient and wise." The grantor reserved to herself the right to dispose of the whole or any part of the estate granted, by her will, and provided that, should she fail to do so, the trustee should divide the property, pay it over, and transfer it to her heirs. And the trustee was given authority and power to change the investments, and sell, lease, mortgage, or convey any of the property, upon such terms as he might think proper and expedient. By will duly executed, the grantor subsequently gave the legacies to collaterals here considered, expressly stating that it was in exercise of the power of disposition which she had reserved.

The tax is laid in broad terms. It is upon legacies to collaterals of "estates, real, personal and mixed, money, public and private securities for money of every kind passing from any person who may die seized and possessed thereof, being in this State, or any part of such estate or estates, money or securities, or interest therein, transferred by deed, will, grant bargain, gift or sale, made or intended to take effect in possession after the death of the grantor, bargainor, devisor or donor to any person or persons, bodies corporate, in trust or otherwise." Code, art. 81, § 124 (as amended Acts 1927, c. 242). And the comprehensive purpose is obvious. In the preamble to the original enactment the tax was described comprehensively as a tax on "collateral inheritances, distributive shares and legacies, to aid in paying the debts of the state." Acts 1844, c. 237. And this court has recently said that: "The intention of the Legislature in this case is plain that they proposed to exact from strangers or collateral heirs 5 per cent. of the value of what is distributed to them, as a premium for the privilege granted by the state of receiving it, and which they are to become entitled to after the death of the person through whose bounty they are to receive it. This being true, no devise, whether intended for that purpose or not, should be sanctioned which would deprive the state of the tax which it exacts." Lilly v. State, 156 Md. 94, 100, 143 A. 661, 664. "The tax is imposed upon the clear value of all estates passing by will or otherwise, at the time it is transferred and received by the collateral beneficiary." Fisher v. State, 106 Md. 104, 121, 66 A. 661, 663. The tax is, however, only upon inheritances, or successions to property at death, and accordingly the statute describes the property as that of which the grantor dies seized and possessed and the transfer of which is made or intended to take effect in possession at the death. And the question argued arises out of the use of these particular words of description.

About the second part of the description, and the question whether the transfer to the legatees was made or intended to take effect in possession upon the death, there is little difficulty in the case. The transfer was made by will, taking effect, and giving possession, only upon death. The legatees have nothing except under the will. The rule that the exercise of a power of disposition relates back and dates from a previous deed creating the power does not affect the time of taking here. Never a rule for all purposes, it is commonly denied application under inheritance tax statutes. Fisher v. State, 106 Md. 104, 121, 66 A. 661; Chanler v. Kelsey, 205 U.S. 466, 473, 474, 27 S.Ct. 550, 51 L.Ed. 882; 2 Sugden, Powers (3d Ed.) 19; Saltonstall v. Saltonstall, 276 U.S. 271, 48 S.Ct. 225, 72 L.Ed. 565; Bullen v. Wisconsin, 240 U.S. 625, 36 S.Ct. 473, 60 L.Ed. 830; Crocker v. Shaw, 174 Mass. 266, 54 N.E. 549; Gleason & Otis, Inheritance Taxation (3d Ed.) 172. But see Prince de Bearn v. Winans, 111 Md. 434, 74 A. 626. And, in the second place, the power of testamentary disposition here was not created by the previous deed; it was reserved from that deed. The grantor in the deed and the subsequent testator were one and the same person. There was no donation of the power, no donor, and no donee; and, in disposing of the property beyond her life, by her will, she was exercising her own original power as owner, with which she had never parted, and which, therefore, did not derive from the deed. The language used is that of a power reserved and given, but in strict common-law terminology what is here called a reservation is an exception from the grant. "The expressions 'reserve' and 'reservation' have been applied in a somewhat untechnical sense, in connection with a clause in a conveyance by which the grantor retains a power of disposition over the land conveyed, * * * and perhaps in other cases of stipulations in behalf of the grantor. Such cases evidently do not fall within the common-law definitions of a reservation, but the use of the expression in these connections is highly convenient, and appears, in the ordinary case to be free from objection." 2 Tiffany, Real Property, § 436; Dawson v. W. M. R. R. Co., 107 Md. 70, 92, 68 A. 301, 14 L. R. A. (N. S.) 809, 126 Am. St. Rep. 337, 15 Ann. Cas. 678. The grantor made by her will her only disposition of title after her death, and the legatees take possession under the will only, after the death; and we see no escape from the conclusion that the transfer was made or intended to take effect in possession after the death, in the language of the statute.

The chief ground of contention in the case, then, has the effect of the use of the words "dies seized and possessed," in describing the property subject of the transfer taxed. What is the effect of those words in the statute when the original owner, and present testatrix, had previously conveyed the property in trust for management during her life and distribution at the end of her life? The defendant urges that the rule of strict construction applies to tax statutes (Downes v. Safe Deposit & Trust Co., 157 Md. 87, 96, 145 A. 350; Gould v Gould, 245 U.S. 151, 153, 38 S.Ct. 53, 62 L.Ed. 211; U.S. v. Merriam, 263 U.S. 179, 187, 44 S.Ct. 69, 68 L.Ed. 240, 29 A. L. R. 1547; May v. Heiner, 281 U.S. 238, 50 S.Ct. 286, 74 L.Ed. 826, 67 A. L. R. 1244); and contends that, after the execution of the trust deed, the trustee named in it was, upon strict construction of the words, the only one answering the description of seized and possessed of the property. Exactly that contention was made and rejected in Smith v. State, 134 Md. 473, 478, 107 A. 255. The words "seized and possessed" are, in modern law, used with such varied meanings that perhaps it might be questioned whether any could with certainty be declared the single, correct meanings for strict construction. Seisin has been used frequently to describe the holding of a cestui que trust under a deed. 2 Tiffany, Real Property, § 392; 1 Leake, Property in Land, 126; 12 Law Quarterly Review, 239, 247. The trustee under such a deed is, on the other hand, said not to have seisin for the purposes of dower. McCauley v. Grimes, 2 Gill & J. 318, 20 Am. Dec. 434; Cowman v. Hall, 3 Gill & J. 398. And see the use of the word in Reid v. Gordon, 35 Md. 174, 184, and Matthews v. Ward, 10 Gill & J. 443, 453. And as to possession the Supreme Court of the United States has remarked that "both in common speech and in legal terminology, there is no word more ambiguous in its meaning than possession." Nat. Safe Deposit Co. v. Stead, 232 U.S. 58, 67, 34 S.Ct. 209, 212, 58 L.Ed. 504; Pollock & Wright, Possession, 6, 47, and 50. But passing that as a possible difficulty it is to be borne in mind, as this court and others have frequently pointed out, that the rule of strict construction is a rule for...