Estate of Gartside v. Morris
| Decision Date | 08 December 1947 |
| Docket Number | No. 40407.,40407. |
| Citation | 207 S.W.2d 273 |
| Parties | IN RE ESTATE OF JULIA GARTSIDE, Deceased: ST. LOUIS UNION TRUST COMPANY, Executor, v. M.E. MORRIS, Director of Revenue of the State of Missouri, and J.E. TAYLOR, Attorney General of the State of Missouri, Appellants. |
| Court | Missouri Supreme Court |
Appeal from Circuit Court of City of St. Louis. — Hon. Chas. B. Williams, Judge.
AFFIRMED.
J.E. Taylor, Attorney General, and Will F. Berry, Jr., Assistant Attorney General, for appellants.
The court erred in not rendering judgment in favor of the State of Missouri in the sum of $168,873.47 upon the law and the evidence. Sec. 571, R.S. 1939; Crane v. Mann, 162 S.W. (2d) 117, and cases cited therein; Brown v. McLoughlin, 190 N.E. 795; In re O'Neill's Estate, 162 Atl. 425; 78 A.L.R. 716-722; 137 A.L.R. 664-670; 139 A.L.R. 1524-1525.
Thompson, Mitchell, Thompson & Young, Samuel A. Mitchell, Robert Neill, Jr., Fordyce, White, Mayne, Williams & Hartman, Walter R. Mayne, Lashly, Lashly, Miller & Clifford, and Jacob M. Lashly for respondent.
(1) Where there has been a compromise of a will contest, the inheritance tax is computed on the amount each party to the agreement of compromise takes under its terms rather than under the terms of the will which, by agreement of the parties, is admitted to probate as the last will and testament of the decedent. Secs. 571, 604, R.S. 1939; Title 26, U.S.C.A. 22 (b) (3); Title 26, U.S.C.A. 812 (d); In re Thorson's Estate, 150 Minn. 464, 185 N.W. 508; Priedeman v. Jamison, 202 S.W. (2d) 900; In re Pepper's Estate, 159 Pa. St. 508, 28 Atl. 353; Taylor v. State, 40 Ga. App. 295, 149 S.E. 321; Hart v. Mercantile Trust Co. of Baltimore, 180 Md. 218, 23 Atl. (2d) 682; Lyeth v. Hoey, 305 U.S. 188, 59 S. Ct. 155, 83 L. Ed. 119, 119 A.L.R. 410; In re Sage's Estate, 122 Fed. (2d) 480, 137 A.L.R. 658, certiorari denied 314 U.S. 699, 86 L. Ed. 559, 62 S. Ct. 480; Dumont's Estate v. Commissioner of Internal Revenue, 150 Fed. (2d) 691; In re McKinney's Estate, 351 Mo. 718, 173 S.W. (2d) 898; In re Rosing's Estate, 337 Mo. 544, 85 S.W. (2d) 495. Cf. Title 120, Smith-Hurd Illinois Stat. Ann., Sec. 375; N.Y. General Laws and Revised Statutes (2 Ed.), Heydecker, Sec. 220 (4); MacKenzie v. Wright, 31 Ariz. 272, 252 Pac. 521; In re O'Neill's Estate, 111 N.J. Eq. 378, 162 Atl. 425; In re Cook's Estate, 187 N.Y. 253, 79 N.E. 991. (2) A will contest having once been filed must proceed to judgment. Campbell v. St. Louis Union Trust Co., 346 Mo. 200, 139 S.W. (2d) 935; Johnson v. Brewn, 277 Mo. 392, 210 S.W. 55. (3) To assess inheritance taxes according to the terms of the will rather than according to the terms of the compromise agreement is to permit the parties to the compromise agreement to determine the amount of tax that they are to pay the state. Sec. 571, R.S. 1939.
The question to be decided in this case is whether an inheritance tax must be determined on the basis of a disposition as made by will, or on the basis of a disposition as provided for in a compromise agreement entered into between the heirs who instituted a will contest and the legatees named in the will. The probate court of the City of St. Louis, Missouri, based the tax on the distribution as provided for by the compromise agreement. On appeal to the Circuit Court the same result was reached. The Director of Revenue of the State of Missouri appealed.
We learn from the record that if the tax is determined on the basis of the will it will amount to $168,873.47, but if determined on the compromise agreement and as fixed by the courts below it will amount to $77,167.68. A short statement of the facts will suffice for a determination of the question presented. The testatrix, Julia Gartside, by her will, dated in 1935 and supplemented by a codicil dated 1944, made seven specific bequests. One bequest was to a cousin for $10,000 and the other six were for $2,000 each. Two of these bequests were to charities, the Shriner's Hospital for Crippled Children and the Missouri School for the Blind at St. Louis. The balance of the estate, valued at $684,253.24, was by the codicil given to Mrs. Carol White, who was not related to the testatrix. The testatrix, by her codicil, changed some of the bequests and others were revoked. A number of beneficiaries named in the will of 1935, whose legacies were revoked, instituted proceedings to set aside the codicil of 1944. Later certain heirs of the testatrix brought suit to set aside the will of 1935, as well as the codicil of 1944 While these suits were pending, and after much labor had been performed in preparing for trial, the parties entered into a compromise agreement wherein it was agreed that the will should be admitted to probate and a further stipulation was made as to the disposition of the property of the estate. The two bequests to the charitable institutions were left intact. The principal beneficiary under the codicil of 1944, Mrs. Carol White, by the agreement received $270,901.30. A number of beneficiaries under the will of 1935, whose bequests had been revoked by the codicil, received certain amounts, and the collateral heirs also received substantial amounts. There were no lineal descendants.
It is conceded that the settlement was made in good faith and not with a view of reducing taxes. The position of the state is that the tax must be computed without regard to the compromise agreement. The argument is made that the residuary estate, in this case vested in Mrs. Carol White at the instant of the death of the testatrix, subject to the payment of the debts, and the subsequent agreement, was only a matter of contract and the parties receiving property through such a contract take as assignees of the residuary legatee. The appellate courts of this state have not passed on the identical question, but the state is supported in this contention by a number of cases from other states. See Brown et al. v. McLoughlin et al., 190 N.E. 795; In re O'Neill's Estate, 162 Atl. 425; In re Sanford's Estate, 90 Neb. 410, 133 N.W. 870; English's Estate v. Crenshaw, 120 Tenn. 531, 110 S.W. 210; Crane v. Mann et al., 162 S.W. 2d (Texas) 117.
The state lays much stress on the fact that the will was probated and thus adjudicated to be valid. In deciding such cases the Texas court in Crane v. Mann, supra, and other courts, gave much consideration to the fact that the will was probated. Note what was said in the Texas case, 162 S.W. 2d 119 (3):
"Regardless of the agreement which brought it about, the fact remains that the will of the decedent was probated and by the terms of it appellant received all of the estate." The court further commented that the legatee was purchasing her peace and thereby securing unquestioned title to the balance. These same reasons were generally assigned in the cases holding that the tax should be determined on the basis of the disposition made by the will and not according to the compromise agreement. The Texas court, however, recognized the rule, holding a tax must be based on what the parties actually received from an estate, to have some merit, Note what it said about this rule:
"It would at first appear not only logical but also a more equitable and just rule of taxation than that announced above." The Texas court said in its opinion that the majority rule was that the tax must be based upon a disposition as made by the will which has been probated. The state in this case also asserts that the weight of authority supports its contention. Let us for the sake of argument concede that to be a fact. That would be persuasive but not binding on this court. We are firmly convinced, as it at first appeared to the Texas court, that the ruling basing the tax on the amount actually received by persons from an estate, be that under the terms of a will by the intestate laws or pursuant to a compromise agreement in case of a contest, is the most logical, equitable and just. To illustrate let us take the present case as an example. Suppose that in place of Mrs. White, the Shriner's Hospital for Crippled Children had been the residuary legatee. Then, let us suppose a contest had been instituted by these same collateral heirs and a compromise effected whereby the collateral heirs would receive more than $400,000. Under the rule, as contended for by the state, no tax could be imposed. Was that the intention of the legislature when it enacted the inheritance, tax law? We think not. We find respectable authority holding that an inheritance tax must be based upon the amounts actually received. See Re Estate of John Sage et al. v. Commissioner of Internal Revenue, 122 Fed. 2d 480, 137 A.L.R. 658. In re Thorson's Estate, 185 N.W. (Minn.) 508; Re Kierstead, 122 Neb. 694, 241 N.W. 274; Taylor v. State, 149 S.E. (Ga.) 321; In re Pepper's Estate, 28 Atl. (Pa.) 353; Heim v. Nee, 40 Fed. Supp. 594.
We are not impressed with the reasoning that under a compromise agreement to settle a will contest the contester receives the property as an assignee of the legatee. The right to contest a will is given only to those who have a right under the law to...
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