Dilmore v. Heflin

• Citation: 218 S.E.2d 888,159 W.Va. 46
• Decision Date: 21 October 1975
• Docket Number: No. 13390,13390
• Court: Supreme Court of West Virginia
• Parties: E. J. DILMORE et al., as Trustees of the First United Presbyterian Church of Clarksburg, etc., et al. v. W. Clair HEFLIN, Surviving Executor of the Will of Anna Lucile Lindsay, Deceased, et al.

Page 888

218 S.E.2d 888

159 W.Va. 46

E. J. DILMORE et al., as Trustees of the First United

Presbyterian Church of Clarksburg, etc., et al. v. W. Clair HEFLIN, Surviving Executor of the Will of Anna

Lucile Lindsay, Deceased, et al.

No. 13390.

Supreme Court of Appeals of West Virginia.

Oct. 21, 1975.

Syllabus by the Court

1. W.Va.Code 1931, 44--2--16a, as amended, apportions and charges the Federal Estate Tax to the respective beneficiaries of a will according to the value of the interests received, unless the testator clearly expresses a different intent in the will.

2. Where the language of a will first directs an executor to pay taxes levied or assessed against the estate 'and the legacies hereinafter set forth', and then follows with direction to pay 'the net sum of' general pecuniary legacies and to distribute specific legacies of personalty, the testator has clearly expressed an intention to make distribution of all such legacies free from and without deduction of the West Virginia Inheritance and Transfer Tax and the Federal Estate Tax.

3. Where legacies are bequeathed taxfree, and no special fund was created by the testamentary instrument to satisfy the burden of taxation, the taxes are payable from the residuary estate, if sufficient, as the only other fund available for that purpose.

Oscar J. Andre, Ernest C. Swiger, Steptoe & Johnson, Clarksburg, for appellants.

Mary Frances Brown, Boyd L. Warner, Stathers & Cantrall, Clarksburg, for appellees.

HADEN, Chief Justice:

This is an appeal from a final order of the Circuit Court of Harrison County, which held that the executors of the will of Anna Lucile Lindsay, deceased, wrongfully paid federal estate and West Virginia inheritance taxes out of the residuum of the Lindsay estate rather than charging such taxes to the respective bequests of the non-residuary legatees.

There is but one issue in the case and it is an issue of law requiring construction of the will. The question presented is whether the testatrix, by employing certain language in her will as respects the payment of taxes and in making general and specific bequests, clearly intended and authorized that federal estate taxes and West Virginia inheritance taxes be paid from a particular fund of her estate, and thus, not be apportioned according to the primary directives of W.Va.Code 1931, 44--2--16a, as amended.

The issue was submitted to the trial court for decision on motion for summary judgment in a civil action seeking a declaratory judgment of the rights of the parties brought by the residuary legatees of the testatrix's will against the executors ¹ of the will and against all non-residuary legatees of the will. This case arose because the executors administered the estate and distributed the testatrix's bequests to the non-residuary legatees without charging these legatees with the federal estate and West Virginia inheritance taxes attributable to their respective bequests. The executors construed the will to mean that it authorized and directed them to pay such taxes from the residuum of the estate. The effect of the executors' construction was to reduce significantly the amount available for distribution to the residuary legatees, all of whom were charitable, religious, or educational organizations and, as such, otherwise exempt from the incidence of inheritance and estate taxes. See W.Va.Code 1931, 11--11--4, as amended. The civil action was commenced just prior to the time when the executors would have made distribution to the residuary legatees in accordance with their construction of the testatrix's will.

The judgment order appealed from placed a contrary construction on the language of the will. It required the surviving executor to recover from the non-residuary legatees the amounts of estate and inheritance taxes to which their respective bequests were subject by apportionment provided by statute, together with interest of six percent from the date of the institution of the action. He was then to distribute to the appellees, as residuary legatees, their respective shares of the residuary estate, also with interest until distribution.

This litigation concerns the Estate of Anna Lucile Lindsay, an unmarried lady, who died on May 21, 1963, at the age of seventy-seven. She disposed of her property by a will executed on May 4, 1960, and a codicil executed on January 3, 1962. These two instruments were admitted to probate as the last will and testament of the decedent on May 22, 1963.

In the instrument of May 4, 1960, Miss Lindsay had made a number of small bequests, but the chief beneficiary and object of her bounty was to be her sister, Madge Lindsay, who was to receive property as a devisee and residuary legatee. In recognition of the possibility that her sister might predecease her, the testatrix provided that, if that event occurred, certain bequests already made were to be supplemented and enlarged, new bequests to other individuals were provided for, and the residuum of the estate was then to be divided among the appellees. Madge Lindsay, the sister, did predecease the testatrix, and following her death the testatrix executed the codicil of January 3, 1962. Its chief purpose, clearly expressive of the testatrix's intention, was to leave a substantial part of the testatrix's corporate stock, the principal assets of her estate, to W. Clair Heflin and to his wife, Ethel Heflin.

The assets of the Lindsay estate were appraised at over $150,000.00 in gross value. In the performance of their duties towards administration and settlement of the estate, the executors paid from the estate assets the sum of $11,582.70 to the State of West Virginia for inheritance and transfer taxes and the sum of $13,062.06 to the Internal Revenue Service of the United States Treasury Department for estate taxes. Thereafter the executors made net or face amount distribution of the various general legacies to the non-residuary legatees and distributed all specific legacies not adeemed by the testatrix's Inter vivos dispositions. Accordingly, no non-residuary legatee was required by the executors to pay taxes allocable to his or her bequest, although later the circuit court determined to the contrary.

On this appeal, the surviving executor contends that the testatrix clearly authorized and directed her executors to pay or make distribution of all non-residuary bequests tax-free and to place the burden of taxation upon the residuum of the estate. The executor urges that this intent of the testatrix was clearly expressed by reading the first paragraph of the testatrix's will. It provides:

'FIRST: I direct my Executors hereinafter named, To pay all my just debts, the expenses of my funeral, the costs and expenses of the administration of my estate, Taxes, which may be levied or assessed against my estate, and the legacies hereinafter set forth.' (Emphasis supplied).

The executor argues that the intention of the foregoing language is made apparent by reading it in Pari materia with the language contained in nine general legacies of money to particular persons set forth in the succeeding sections of the will and its codicil when such bequests were prefaced by the words 'the net sum of.' Illustrative of such bequests is the following:

'SEVENTH: I give and bequeath unto W. Clair Heflin, 147 Hall Street, Clarksburg, West Virginia, The net sum of Two Thousand Dollars ($2,000.00).' (Emphasis supplied).

The appellant executor further contends that the testatrix's general direction to her executors 'to pay . . . taxes, which may be levied or assessed against my estate, and the legacies hereinafter set forth(,)' coupled with the precise bequest in general legacy form of specific net sums--instructed them that all other non-residuary bequests, i.e. the specific legacies, were to be tax-free as well.

As has been often recognized, we are dealing with two types of 'death' taxes in this appeal. See generally, Estate of Aul v. Haden, 154 W.Va. 484, 488, 177 S.E.2d 142, 144 (1970). Congress conceived the Federal Estate Tax as a tax on the right to transmit property and, as such, chargeable against the estate as a whole, payable out of the residuary estate and not out of the particular devises or legacies, unless there were directions in the will to the contrary. Cuppett v. Neilly, 143 W.Va. 845, 105 S.E.2d 548 (1958). Particularly relevant is the statement in the Cuppett decision that:

'Under the rule supported by the weight of authority any federal estate tax for which the estate of the decedent is liable is payable out of the residuary estate of the decedent . . . and not out of any particular legacy or devise contained in the will, unless such residuary estate is not sufficient for the payment of such tax or unless the testatrix has clearly provided otherwise by testamentary direction to the executor.' Id. at 865, 105 S.E.2d at 562.

On the other hand, the West Virginia Inheritance and Transfer Tax is a tax on the right to receive property and is chargeable against or out of each share or interest, in the absence of a specific provision to the contrary in the will. Cuppett v. Neilly, supra, at 866, 105 S.E.2d 548. Irrespective of the statutory distinctions regarding the chargeability of the two taxes, the Cuppett Court went on to recognize and apply the rule that the testator's expressions of intent ultimately control:

'It is well settled that a testator may specify which property or class of property shall bear the burden of the taxes for which his estate is liable and may direct that the residuary estate or other funds be used for the payment of estate or inheritance taxes, but such direction must be clearly expressed in the will.' Id. at 867, 105 S.E.2d at 563.

In the year following the Cuppett decision, the West Virginia Legislature modified the effects of the Court's holdings in Cuppett with the enactment of W.Va.Code 1931, 44--2--16a, as amended. This statute specifically provides that...