Fahs v. Merrill

• Citation: 142 F.2d 651
• Decision Date: 03 May 1944
• Docket Number: No. 10874.,10874.
• Parties: FAHS, Collector of Internal Revenue, v. MERRILL.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

142 F.2d 651 (1944)

FAHS, Collector of Internal Revenue, v. MERRILL.

No. 10874.

Circuit Court of Appeals, Fifth Circuit.

May 3, 1944.

Maryhelen Wigle, Sewall Key, and Harry G. Taylor, Sp. Assts. to the Atty. Gen., Samuel O. Clark, Jr., Asst. Atty. Gen., and Herbert S. Phillips, U. S. Atty., of Tampa, Fla., for appellant.

Sam R. Marks and Harry T. Gray, both of Jacksonville, Fla., for appellee.

Before SIBLEY, McCORD, and WALLER, Circuit Judges.

SIBLEY, Circuit Judge.

The suit in the District Court was for the recovery of a gift tax unlawfully exacted by the Collector. The court gave judgment for the plaintiff June 24, 1943. On Sept. 17, 1943, a notice was filed entitled in the cause and headed "Notice of Appeal", which reads: "Comes now John L. Fahs, United States Collector of Internal Revenue for the District of Florida, defendant in the above entitled case, and gives notice of an appeal from the findings and judgment entered and filed therein on June 24, 1943, to the United States Circuit Court of Appeals of the Fifth Circuit". Appellee moves to dismiss the appeal because not perfected in the manner prescribed by law. The argument is that the notice is not an appeal, but a notice of an intended appeal, and insufficient to give the appellate court jurisdiction, citing Benitez v. Bank of Nova Scotia, 1 Cir., 109 F.2d 743; United States v. New National Coal & Mining Co., 7 Cir., 72 F.2d 168; and Ex parte Hollon Parker, 120 U.S. 737, 7 S.Ct. 767, 30 L.Ed. 818, besides some decisions from State courts. It is true the notice here is not in the precise language of Form 27 under Rule of Civil Procedure 73(b), 28 U.S.C.A. following section 723c: "Notice is hereby given that C. D. and E. F., defendants above named, hereby appeal to the Circuit Court of Appeals," etc. But the Forms are not mandatory. They are, as stated in Rule 84, "intended to indicate, subject to the provisions of these rules, the simplicity and brevity of statement which the rules contemplate." The requirement of Rule 73(b) is: "The notice of appeal shall specify the parties taking the appeal; shall designate the judgment or part thereof appealed from; and shall name the court to which the appeal is taken." This notice does precisely that. No one could fairly doubt that it gave notice of an appeal then taken rather than that one was intended to be thereafter taken. No one of the cases cited is a construction of the Rules of Civil Procedure. The reasoning of Ex parte Hollon Parker supports the sufficiency of this notice. We hold it to be sufficient and deny the motion to dismiss.

The tax in dispute was assessed in respect of the transfer of $300,000 on May 29, 1939, by plaintiff-appellee Charles E. Merrill to himself as trustee for his wife and her mother. The transfer was disclosed in a gift tax return by Merrill, but under the claim that it was not taxable as a gift, but was for adequate and full consideration in money or money's worth, to-wit the release by the wife of her dower and all property rights in his estate. A tax was nevertheless assessed and collected, and refund being denied, this suit was brought against the Collector.

The deed of trust recites that on March 7, 1939, Merrill and his wife had made an antenuptial agreement providing for the trust, and "pursuant thereto and in consideration thereof" the transfer of the $300,000 is made. The facts found support that recital. The transfer was a part of the antenuptial agreement. Merrill, fifty-three years old, already having been twice married and having three children and some grandchildren, and property amounting in value to over $5,300,000, was about to marry Miss Kinta Desmare. To forestall possible family disputes and simplify his business and facilitate his provisions for his children and grandchildren and for his bride, and antenuptial agreement was made in good faith and in due form on the day before the wedding. Each party was represented by legal counsel. The agreement recites as its main purpose the making of a reasonable provision "in full settlement and satisfaction and in substitution and lieu of any and all rights which upon consummation of said marriage, second party would otherwise have and become entitled to as wife, widow or otherwise, in the property which the first party now has, or may hereafter own, or in his estate upon his death". Mention is also made of the possibility of heavy losses in his business, which was investment banking and stock market operations. Therefore, "in consideration of the premises, and of the solemnization of the aforesaid marriage", Kinta Desmare remises and releases, conveys and quitclaims to Merrill all right and title she may acquire as wife and widow in his lands then owned or thereafter acquired, and all right or interest she may thus acquire in all personal property. Merrill agrees within ninety days to make an irrevocable trust of $300,000 to uses desired by Miss Desmare and by will, if his wife survives, an additional trust of $300,000 to like uses; and still further $300,000 for the benefit of any living child or children born of their marriage. These provisions were stipulated not to deprive her or her children of proper support and maintenance in addition. The first described trust is the one now in controversy. Miss Desmare had no property of consequence. Merrill had land in Florida worth $135,000. The remainder of his wealth was mainly in money, stocks, bonds and other securities. Both were domiciled in Florida in 1939, but Merrill had become a resident of New York when this suit was brought.

The taxing statute is Revenue Act of 1932, Sections 501, 502, 503, 47 Stat. 169, 26 U.S.C.A. Int.Rev.Acts, pages 580, 585. The tax is laid on transfers during the calendar year of property by gift, and applies whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible. "Where property is transferred for less than an adequate and full consideration in money or money's worth", then the excess of value is to be taxed as a gift. By the same Act, Section 804, 26 U.S.C.A. Int.Rev.Acts, page 642, the estate tax law was so amended as to provide that a relinquishment or promised relinquishment of dower, curtesy or a statutory estate in lieu thereof, or of other marital rights in the decedent's property or estate "shall not be considered to any extent a `consideration' in money or money's worth." These words, if written into the gift tax law, would of course settle this controversy in favor of the tax. Though in the same Act, they were added by amendment to the estate tax law only. They were thought significant, if not controlling, touching a gift tax in Commissioner v. Bristol, 1 Cir., 121 F.2d 129, but we prefer to rest our decision on the words of the gift tax sections alone. Our question is, then, What if any consideration in money or money's worth did the transferror, Merrill, receive in this transaction?

It will be noted that the agreement of March 7, 1939, which is the recited and actual consideration for the transfer, and which alone purports to relinquish anything on the part of Miss Desmare, was made before she was married, when she had no dower or other right whatever in Merrill's property. It is not a case in which one already a wife sells or relinquishes for a consideration the rights which the law has given her, whether she relinquishes them to her husband or to another. We may well concede that in such a case she gives a money value for what she gets. Such is Lasker v. Commissioner, 7 Cir., 138 F.2d 989. This case is one in which a woman offers herself in marriage, and herself alone, for she had no property and the Florida law retains for her all she may after marriage earn or acquire. That law would give her, after marriage, if she survives him, the right to elect dower in her husband's lands and in his personal estate owned at his death; but instead of these uncertain and contingent rights, the parties here agree that these rights shall not come into existence, but another more definite provision shall be made for her. For this substituted provision she pays just what she would have paid for the provision made by law — herself in marriage. Merrill receives that and nothing else. It is what moves him to make a provision for her. When the transaction is consummated he has a wife and $300,000 less money. She has the $300,000 (with more to follow) and has given herself. Marriage is of course a valuable consideration, so recognized by the law. Antenuptial agreements like this are lawful and valid as against everyone, so far as consideration is concerned. But the acquisition of a wife is not a consideration in money or money's worth, and it would be a degradation of the wife to attempt so to value her. The applicable Regulations 79, Art. 8, correctly declare: "A consideration not reducible to a money value, as love and affection, promise of marriage, etc., is to be wholly disregarded and the entire value of the property transferred constitutes the amount of the gift". Merrill received no consideration in money or money's worth.

But if we are wrong in thinking the marriage was the only consideration Merrill received, and if by some hocus pocus of law we ought to regard an interest in Merrill's own property which Miss Desmare did not in fact own to be the consideration for what he did for her, the burden of showing the money value of that interest rests upon Merrill; for this is not a transaction at arm's length in the ordinary course of business as to which an adequate consideration will be presumed; Robinette v. Helvering, Commissioner, 318 U.S. 184, 63 S.Ct. 540, 87 L.Ed. 700. That burden has not been and cannot well be borne. But for the antenuptial agreement the wife would on March 8 have had as inchoate dower one-third interest in fee simple after Merrill's death in the lands he owned at marriage or might acquire during the...