District of Columbia v. Lloyd

• Decision Date: 17 March 1947
• Docket Number: No. 9383.,9383.
• Citation: 160 F.2d 581
• Parties: DISTRICT OF COLUMBIA v. LLOYD.
• Court: U.S. Court of Appeals — District of Columbia Circuit

160 F.2d 581 (1947)

DISTRICT OF COLUMBIA v. LLOYD.

No. 9383.

United States Court of Appeals District of Columbia.

Argued January 16, 1947.

Decided March 17, 1947.

Mr. George C. Updegraff, Assistant Corporation Counsel, District of Columbia with whom Messrs. Vernon E. West, Corporation Counsel, District of Columbia, and Chester H. Gray, Principal Assistant Corporation Counsel, District of Columbia, were on the brief, for petitioner.

Mr. Samuel T. Hazard, of Washington, D. C., with whom Mr. O. H. Chmillon, of Washington, D. C., was on the brief, for respondent.

Before GRONER, Chief Justice, and EDGERTON, and WILBUR K. MILLER, Associate Justices.

WILBUR K. MILLER, Associate Justice.

The District of Columbia exacted from the respondent an inheritance tax calculated on the value of certain property which it claimed had passed to the respondent's ward, Tangley C. Lloyd, at and because of the death of her father, Demarest Lloyd, Jr. Its Board of Tax Appeals having held the tax inapplicable and having ordered a refund, the District of Columbia appeals.

On January 23, 1932, Tangley's grandfather, Demarest Lloyd, then the owner of the property, placed it in an irrevocable trust. The instrument provided that the income, subject to certain restrictions, should be expended for or paid to the donor's son, Demarest Lloyd, Jr. Provision was also made for the corpus of the estate to be distributed to the son, one portion at the age of 25 years, another at 35, and the remainder at 45.

In the following terms, the declaration of trust gave Demarest Lloyd, Jr., a general power of appointment with respect to the corpus: "6. If the said Demarest Lloyd, Jr., dies after attaining the age of twenty-one years, all of the trust property which has not been distributed to said Demarest Lloyd, Jr., shall upon the death of the said Demarest Lloyd, Jr., be assigned and transferred as he may by his will appoint, or in default of such appointment by the said Demarest Lloyd, Jr., shall be paid and transferred to the persons who would be entitled to distribution of his personal estate as of the date of his death according to the laws of the District of Columbia."

Demarest Lloyd, Jr., executed a will on October 11, 1943, which contained the following paragraph: "Nothing contained in this, my Will, is intended to be or operate as an exercise in any respect whatsoever of any right or power of appointment which now vests or may be vested in me under any declaration of trust or testamentary instrument whatsoever."

On January 24, 1944, Demarest Lloyd, Jr., executed under seal an instrument by the terms of which he released and surrendered all power or powers of appointment conferred upon him under the declaration of trust of January 23, 1932. The text of the release is shown in the margin.¹

Young Lloyd was a naval reserve officer in active service and was killed in action on June 12, 1944, at an age of more than 21 and less than 45 years. His will was admitted to probate in the District of Columbia on June 29, 1944. Nancy T. Lloyd, his widow, and an infant daughter, Tangley C. Lloyd, survive and are "the persons who would be entitled to distribution of his personal estate as of the date of his death according to the laws of the District of Columbia."

Except for the provisions of the will and the instrument of release, there would be no question of the petitioner's right to the inheritance tax which it claims. Section 1601(j) of Title 47, District of Columbia Code 1940, provides that an appointment made under a power such as that involved here shall be deemed to be a transfer taxable as though the property transferred by the appointment had belonged absolutely to the donee of the power. Moreover, by the terms of the same section of the statute, if the person possessing the power omits or fails to exercise it within the time provided for, nevertheless a taxable transfer results as though the power had been exercised.

The petitioner asserts that the release of the power attempted to be made by the decedent in this case did not destroy the power of appointment, but amounted to no more than an assertion of an intention not to exercise it. Hence, the petitioner argues, there was a taxable transfer under § 1601(j) because of the nonexercise of a general power of appointment. The petitioner further contends that the tax is justified under § 1601(a), which applies it to the transfer of property from any person who dies "seized or possessed" thereof or of any interest therein.

The two contentions of the District of Columbia are so intertwined with respect to the factual situation, and indeed the statutory provisions as well, that they may be considered together. The petitioner says that Demarest Lloyd, Jr., died seized or possessed of the corpus, within the meaning of § 1601(a), for three reasons, viz., (a) he had the right to the income from the corpus up to the date of his death; (b) had he lived to the age of 45 years he would have become the legal owner of the corpus; (c) he had the power to dispose of the property by will. The right to the income during his life gave Demarest Lloyd, Jr., an equitable interest in the corpus, but that interest terminated with death.² Although he would have become seized and possessed of the corpus had he reached the age of 45, that fact is without significance for the reason that he never attained that age. The petitioner's third contention that Demarest Lloyd, Jr., died seized or possessed of the corpus because he had the power to dispose of the property at death assumes the very fact upon which the case turns and this brings us then to the decisive question at issue: Did the release destroy the power of appointment, or was the release no more than a covenant not to use the power with the result that until death the right of appointment, though not exercised, still existed?

No statutory provision in this jurisdiction answers the question, for the Congress, in legislating for the District of Columbia,...