Estate of Fegestad

• Decision Date: 17 April 1981
• Citation: 178 Cal.Rptr. 202,124 Cal.App.3d 208
• Court: California Court of Appeals Court of Appeals
• Parties: ESTATE OF Samuel Olie FEGESTAD, Deceased. Kenneth CORY, etc., et al., Respondents, v. John W. NETTERBLAD, Objector and Appellant. Civ. 22566.

Page 202

178 Cal.Rptr. 202

124 Cal.App.3d 208

ESTATE OF Samuel Olie FEGESTAD, Deceased.

Kenneth CORY, etc., et al., Respondents, v. John W. NETTERBLAD, Objector and Appellant.

Civ. 22566.

Court of Appeal, Fourth District, Division 1, California.

April 17, 1981.

Milton M. Byron, National City, for objector and appellant.

Myron Siedorf, Margaret Groscup, Michael J. Gittleman, Los Angeles, for Kenneth Cory.

Arthur Levy, pro se.

WORK, Associate Justice.

John W. Netterblad, executor of the estate of Samuel Olie Fegestad, decedent, appeals from an order fixing inheritance taxes after objections on a residuary bequest to Flekkefjord City Hospital in the Kingdom of Norway.

State inheritance taxes were paid under protest, executor claiming exemption under section 13842, Revenue and Taxation Code. ¹

The sole issue on appeal is whether the Kingdom of Norway reciprocally provides California charities with inheritance tax exemptions, within the meaning of section 13842 subdivision (c). ² We conclude it does and reverse. The initial inheritance tax act was enacted in 1893 and completely rewritten in 1905, being modeled from the New York statute. (Barnett, California Inheritance and Gift Taxes a Summary, (1955) 43 Cal.L.Rev. 49.) Section 13842 was added in 1943 as part of the Uniform Reciprocal Transfer Tax Act (Stats.1943, c. 658, p. 2306, § 1). Part of the reason for enacting section 13842 was to prevent double taxation. ³

In establishing exemptions from the California inheritance tax, the legislature is free to impose any conditions it chooses. (Estate of Wilson (1968) 265 Cal.App.2d 943, 947, 71 Cal.Rptr. 822.) "(T)he right to succession (in California) is not an inherent or natural right. It is only by virtue of statute that an heir is given the right to receive any of his ancestor's estate." (Estate of Simmons (1966) 64 Cal.2d 217, 221, 49 Cal.Rptr. 369, 411 P.2d 97.) "Nothing in the Federal Constitution forbids the legislature of a state to limit, condition, or even abolish the power of testamentary disposition over property within its jurisdiction." (Irving Trust Co. v. Day (1942) 314 U.S. 556, 562, 62 S.Ct. 398, 401, 86 L.Ed. 452.) "So broad is the power of the state to determine the devolution of title to the property ... within its boundaries that it may take the property itself and deny any right of anyone to succeed thereto either by will or by succession ...." (Estate of Zimmermann (1955) 132 Cal.App.2d 702, 704, 283 P.2d 68; see also Estate of Knutzen (1948) 31 Cal.2d 573, 578, 191 P.2d 747, and cases cited therein.)

"Obviously, it is on the basis of such power that the state has the right to impose, or to exempt from imposition, an inheritance tax upon intangible property which is situated in this state at the time of the decedent's death." (Cf. Estate of Mears (1979) 90 Cal.App.3d 885, 892, 153 Cal.Rptr. 566.)

In this case, the state has created an exemption from inheritance taxes for bequests given to foreign charities on the condition the foreign sovereign provide a reciprocal exemption.

The executor contends the Kingdom of Norway provides such a reciprocal exemption in the pertinent section of the Norwegian Inheritance Act of June 19, 1964 ⁴ and in practice, as shown by the "verified" statement of the Royal Ministry of Finance and Customs in Oslo, Norway and dated January 13, 1981. ⁵

The controller maintains, for true reciprocity, Californians "must receive a guarantee of exemption under the foreign law equal to that provided by California to foreign charities and an ability to protect that guarantee equal to that provided by California." (Italics added.)

The controller argues the Norwegian provision is "discretionary," using the word "may," and therefore not similar to California's automatic nondiscretionary exemption. He misconstrues the character of reciprocity required.

In the Estate of Melvin (1970) 10 Cal.App.3d 48, 52, 53, 88 Cal.Rptr. 701, involving a similar contention, the court found reciprocity under section 13842, subdivision (c)(1), saying:

"In effect, the California statute ... exacts reciprocity of tax exemption, under the foreign law involved, as a condition of allowing a similar exemption to a foreign recipient under a California will. Such reciprocity statutes are designed, not to demand identity of substantive law abroad, but to insure parity of the treatment accorded Californians thereunder....

"Gifts for charitable purposes are highly favored in this state (citations), and the Legislature has expressed an intent to encourage them by exempting them from taxation. (Citation.) 'It is settled law that taxing statutes are acts in invitum and that the courts will not adopt a strained construction to impose a tax which is not part of the legislative act .... If the legislative act expresses an intention to exempt certain property, judicial construction is not appropriate to defeat the exemption.' (Citation.)" (Italics added.)

In testing the reciprocity provision of the foreign sovereign, we do not look for identical guarantees under the foreign laws, as suggested by the controller, but rather to parity in the treatment accorded Californians under the foreign law. The Norwegian law meets this test.

The reciprocity as required by Probate Code section 259 is analyzed in Estate of Larkin (1966) 65 Cal.2d 60, 52 Cal.Rptr. 441, 416 P.2d 473. The beneficiaries there were citizens and residents of Russia (Union of Soviet Socialist Republics). The court noted the law requires no more than a showing the foreign law as written and consistently applied allows Californians to inherit on equal terms with its own residents. (Id., at p. 65, 52 Cal.Rptr. 441, 416 P.2d 473.) Whether the foreign law meets this standard may be shown by evidence statutes, otherwise ambiguous or nonspecific, are so interpreted and applied by the foreign sovereign. Larkin approved interpretive evidence from legal scholars, and evidence of specific applications of the foreign law. Similar evidence was deemed sufficient in Estate of Miller (1951) 104 Cal.App.2d 1, 5, 230 P.2d 667, where the court upheld a finding of reciprocity with Nazi Germany, predicating its conclusion on testimony of experts of the actual practice of the Nazi regime, although the court noted that, "(n)either Americans nor aliens generally are mentioned in the German Civil Code," and even though its dictatorial government had total discretion in applying the law.

Admittedly the volume and variety of evidence relied on by the trial court in Larkin and Miller far exceed that submitted here. However, it is uncontradicted, was received and...