Erieg's Estate, In re
| Decision Date | 02 July 1970 |
| Citation | 267 A.2d 841,439 Pa. 550 |
| Parties | In re ESTATE of James S. ERIEG, Deceased. Appeal of Jane Levering LAHER. |
| Court | Pennsylvania Supreme Court |
John C. Youngman, Jr., Harry R. Gibson, Candor, Youngman, Gibson & Gault, Williamsport, for appellee, Claire W. Erieg.
Before BELL, C.J., and JONES, COHEN, EAGEN O'BRIEN, ROBERTS, and POMEROY, JJ.
James S. Erieg died testate on November 4, 1965. His will provided, inter alia:
'ITEM I. I give all my tangible personal property (not including cash and securities) and my insurance thereon to my wife, Claire W. Erieg.
'ITEM II. I give the residue of my estate, of whatsoever kind and wheresoever situate, as follows:
(a) Sixty-seven (67) per cent thereof to my wife, Claire W. Erieg;
(b) Thirty-three (33) per cent thereof to my niece, Jane Levering Laher.
The executor submitted a statement of proposed distribution in which it indicated its intention to wind up the affairs of the Erieg estate by distributing $118,048.01 to Claire W. Erieg and $33,604.26 to Jane Levering Laher. 1 Jane Laher filed objections to the proposed distribution, asserting that a disproportionate share of the estate's tax liability had been charged against her part of the estate. She based her claim on ITEM IV of the Will, which she interpreted as requiring the payment of all taxes from the principal of the residue before computation of the residuary legatees' shares. 2 The executor disagreed with Jane Laher's interpretation of ITEM IV and argued that the proposed distribution was mandated by several statutory provisions 3 which require 'absent a contrary intent appearing in the will,' proration of the estate tax liability among the residuary beneficiaries in accordance with a set formula. 4
The proposed distribution was confirmed by the auditing judge, Jane Laher filed exceptions, and the orphans' court, sitting en banc, dismissed the exceptions and affirmed the decree. It is from this decision that Jane Laher now appeals.
We must begin with the proposition that the several applicable statutes create 'a presumption that a testator intends that proration should be made in accordance with * * * (the statutory) terms unless his will contains a specific provision, clearly expressed, inconsistent with such presumption, and, to accomplish that result, his language must not be of doubtful import.' Stadtfeld Estate, 359 Pa. 147, 152, 58 A.2d 478, 481--482 (1948) (). See Wahr Estate, 370 Pa. 382, 88 A.2d 417 (1952). The aim of these statutes is to promote the presumed intentions of most testators. Since the statutes represent the Legislature's judgment as to the normal intention of testators, the provision which renders them inapplicable must be unambiguous and open to no other interpretation. In re Shubert's Will, 10 N.Y.2d 461, 225 N.Y.S.2d 13, 180 N.E.2d 410 (1962).
Our reluctance to abandon the statutory scheme of proration without a clear indication that such was the testator's intent is based in great measure on the fact that the effect of such a departure is to take the tax relief available to the testator's spouse and use it to benefit all beneficiaries under the will. In the instant case the effect of utilizing Jane Leher's proposed method of distribution would be to take the widow's federal estate tax exemption and the more favorable state inheritance tax rate on the widow's inheritances and distribute a portion of those benefits to Jane Laher, giving her $16,440.99 more than she would get under the executor's proposed distribution and giving the widow correspondingly less. We will permit a testator to deprive his widow, the primary object of his bounty, of much of her favored tax treatment, but only on a clear showing that such was his intention.
We do not find that the directive in ITEM IV that '[a]ll taxes * * * shall be paid from my residuary estate,' provides the explicit expression of a contrary intent necessary to render the statutory presumption inapplicable. Both the executor's and Jane Laher's proposed methods of distribution would be consistent with the direction that all taxes be paid from the residue. The question in this case is not whether the taxes are to be deducted from the residue, but from whose share of the residue they should be taken. And ITEM IV can hardly be said to contain any guidance on this point.
There is yet another reason for interpreting ITEM IV as we do: the decedent probably included ITEM IV because, at the time the will was written, October 20, 1965 the statutory scheme of proration required that All beneficiaries, including those receiving specific pecuniary legacies, had to share the burden of paying the estate taxes. Act of August 24, 1951, amended by Act of December 22, 1965, P.L. 1204, 20 P.S. § 883(d). In light of this provision the decedent might well have added ITEM IV, which is not an uncommon clause, in order to insure the integrity of his specific bequests and non-probate assets, and not with any thought to affecting the proration of taxes between the two residuary legatees. Given this highly probable alternative explanation for the inclusion of ITEM IV, we are hardly willing to give it the much broader interpretation urged on us by Jane Laher. 5
Appellant argues that the cases of North Estate, 50 Pa.Dist. & Co. 703 (1944); Audenried Estate, 376 Pa. 31, 101 A.2d 721 (1954), affirming on the opinion reported at 84 Pa.Dist. & Co. 468 (1953); and Estate of Bernard M. Weiss, 60,219, P-H Tax Ct.Mem., are dispositive of the case at hand and require a reversal. We have studied these cases carefully and find them inapposite.
In North Estate, 50 Pa.Dist. & Co. 703 (1944), the 'pay tax' clause was a good deal more explicit than the one involved in the instant will, stating that the estate taxes were to be paid 'out of the corpus or principal of my residuary estate,' obviously indicating that the taxes were to be paid before distribution of the residuary. Additional distinguishing factors are that the residuary legatees involved were charities rather than a widow and that the court found a clear testamentary intent to treat all the residuary legatees (17) equally. But see Wahr Estate, 370 Pa. 382, 88 A.2d 417 (1952).
In Audenried Estate, 376 Pa. 31, 101 A.2d 721 (1954), adopting opinion reported at 84 Pa.Dist. & Co. 468 (1953), the 'pay tax' clause stated that: 'I direct that all * * * taxes on all legacies herein contained in my Will shall be paid from my residuary estate, and be charged to principal thereof.' In addition to the explicit direction that the tax payments were to be charged to the principal of the residuary, the court relied on the fact that since the testator had at other points in the will demonstrated that he knew how to distinguish between varying classes of legacies, his direction that the taxes be paid on 'all legacies' was intended to include residuary legacies.
In Estate of Bernard M. Weiss, 60,219, P-H Tax Ct.Mem., the will contained an explicit direction to the executor '* * * not to * * * accept any deduction * * * on an apportionment basis * * * on account of the payment of such taxes from any legatees or divisees under this Will, or from any other donee or beneficiary.' Again, this will is explicit where the Erieg will is not.
Having concluded that none of the cited cases nor any others we could find control the disposition of this case, we restate our conclusion that this will does not contain a 'pay tax' provision which is sufficiently clear to render the statutory apportionment scheme inapplicable. We hold that this general direction to pay all estate taxes out of the residue is at most confirmatory of the statutory proration scheme and does not remove the will from the application of those laws. 6
Decree affirmed. Each party to pay own costs.
'All' taxes says and means 'all' taxes; and all taxes payable 'from my residuary estate' does not mean or say an apportionment of taxes in such a way as to benefit testator's wife; it means exactly what it says, namely, all taxes shall be payable from his residuary estate, giving 67 percent thereof to his wife and 33 percent to his niece.
I would reverse the Decree and direct that each party pay her own costs.
1 After calculating that the federal tax liability for the estate would be $16,648.41, and that the taxable residue, for federal estate tax purposes, was $225,195.05, the executor apportioned the federal estate tax as follows:
Wife's (67%) Jane Laher's (33%)
150,880.68 ---Residuary--- 74,314.37
-146,869.14 ---Non taxable
Marital Deduction
----------- ---------
4,011.54 74,314.37
------------------------------------------------
78,325.91
4,011.54 74,314.37
----------- ---------
78,325.91 =.051215 78,325.91=.948785
$852.68--Portion of Estate $15,795.73--Portion of Estate
Tax charged against Tax charged against
wife's taxable estate Jane Laher's taxable
estate
The executor then took this calculation and recommended the following distribution of the $227,041.84 residue:
Wife (67%) Jane Laher (33%)
152,118.03 74,923.81
3,067.34 --Penna. Inheritance...To continue reading
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