First Nat. Bank of Morgantown v. McGill

• Decision Date: 29 November 1988
• Docket Number: No. 18348,18348
• Citation: 180 W.Va. 472,377 S.E.2d 464
• Court: West Virginia Supreme Court
• Parties: FIRST NATIONAL BANK OF MORGANTOWN, a WV corp., as Executor of the Estate of Georgia S. Wilkinson, Plf. Below, Appellee, v. George McGILL and Mary Grace Gilmer, Defendants Below, Appellants. West Virginia

Page 464

377 S.E.2d 464

180 W.Va. 472

FIRST NATIONAL BANK OF MORGANTOWN, a WV corp., as Executor of the Estate of Georgia S. Wilkinson, Plf. Below, Appellee, v. George McGILL and Mary Grace Gilmer, Defendants Below, Appellants.

No. 18348.

Supreme Court of Appeals of

West Virginia.

Nov. 29, 1988.

Rehearing Denied Feb. 22, 1989.

Syllabus by the Court

1. The former West Virginia inheritance tax is ultimately the responsibility of the recipient of the specific property, unless the testator or testatrix clearly and specifically expresses otherwise in the will.

2. A clause in a will which contains a general direction to the personal representative to pay debts, expenses and taxes, or similar "stock" language, is not sufficient by itself to shift the liability for the former West Virginia inheritance tax from the specific devisees or legatees to the residuary estate.

3. " 'A movant is entitled to summary judgment where the facts established show a right to judgment with such clarity as to leave no room for controversy and show affirmatively that the adverse party cannot prevail under any circumstances.' Hanks v. Beckley Newspapers Corporation, 153 W.Va. 834 [, 837, 172 S.E.2d 816, 818] (1970)." Syl. pt. 1, George v. Blosser, 157 W.Va. 811, 204 S.E.2d 567 (1974).

Charles S. Armistead, Baker & Armistead, Morgantown, for appellants.

William J. Leon, Vorbach & Gianola, Morgantown, for appellee.

McHUGH, Chief Justice:

This appeal presents us with the opportunity to determine the effect of a general clause in a will for the payment of debts, expenses and estate and inheritance taxes. Believing that the summary judgment granted in this case on this issue was proper, we affirm.

I

The testatrix, Georgia S. Wilkinson, died October 14, 1983, a resident of Monongalia County, West Virginia. Her husband predeceased her and she was survived by no children or other lineal descendants. Her will, prepared by an attorney, was executed on May 21, 1980. It provides in the second clause thereof: "I direct that my said Executor shall as soon after my death as is consistent with good business practice, discharge all of my just debts and funeral expenses, including Federal estate tax, West Virginia Inheritance Tax, and other expenses of the administration of my estate."

In subsequent clauses of her will the testatrix provided for specific devises and bequests of the following: (1) certain real estate and certain shares of stock to Mary Grace Gilmer, one of the appellants and a niece of the testatrix's deceased husband; (2) certain real estate to George McGill, one of the appellants and an heir of the testatrix's deceased husband; and (3) specific bequests to other persons, which bequests are not involved here. The residuary estate was left to various sisters and other relatives of the testatrix. The specific devises and bequests to the appellants were relatively small parts of the estate of the testatrix.

After the death of the testatrix, her executor, the First National Bank of Morgantown the appellee, paid West Virginia inheritance tax due on the specific devises and bequests to Mr. McGill and Ms. Gilmer, the appellants. The appellee subsequently brought a declaratory judgment action ¹ in the Circuit Court of Monongalia County, West Virginia (the "trial court"), for a construction of the will requiring the appellants to reimburse the appellee for the inheritance tax on the devises and bequests to them.

On cross-motions for summary judgment the trial court granted the appellee's (the executor's) motion and denied the appellants' (the specific devisees'/legatees') motion. ² The trial court held that the only question presented is one of law, specifically, whether the testatrix clearly intended and directed the appellee (the executor) to pay the West Virginia inheritance taxes from the residuary estate. Relying upon this Court's opinions in Estate of Hobbs v. Hardesty, 167 W.Va. 239, 282 S.E.2d 21 (1981), and Dilmore v. Heflin, 159 W.Va. 46, 218 S.E.2d 888 (1975), the trial court held that the testatrix had failed to charge clearly the residuary estate with the inheritance taxes. Therefore, the trial court ruled that the appellants were liable for such taxes on the specific devises and bequests to them.

II

The tax involved in this case is the former West Virginia inheritance and transfer tax, set forth, prior to its repeal, in chapter 11, article 11 of the West Virginia Code. This tax was repealed in 1985 and replaced by the West Virginia estate tax, now set forth in chapter 11, article 11 of the Code. The former West Virginia inheritance and transfer tax ("inheritance tax") was a tax on the right to receive property from the estate of a testate or an intestate decedent. It was a tax on the beneficiary in proportion to the amount of the estate received. Estate of Aul v. Haden, 154 W.Va. 484, 488, 177 S.E.2d 142, 144-45 (1970). ³ See also Dilmore v. Heflin, 159 W.Va. 46, 51, 218 S.E.2d 888, 891 (1975); Cuppett v. Neilly, 143 W.Va. 845, 866-67, 105 S.E.2d 548, 562-63 (1958).

This Court has consistently recognized that the former West Virginia inheritance tax is ultimately the responsibility of the recipient of the specific property, unless the testator or testatrix clearly and specifically expresses otherwise in the will. In syllabus point 15 of Cuppett v. Neilly, 143 W.Va. 845, 105 S.E.2d 548 (1958), the Court stated this proposition in the following manner: "The transfer tax imposed by the [former] statute of this State is an inheritance tax on the right to receive property and in the absence of a testamentary direction to the contrary the ultimate burden of the tax rests upon the property transferred to the beneficiary." See also Dilmore v. Heflin, 159 W.Va. 46, 51, 218 S.E.2d 888, 891 (1975) (requiring specific provisions to shift liability). Similarly, syllabus point 16 of Cuppett v. Neilly stresses the importance of a clear expression of testamentary intent as to the source of payment for "death" taxes (estate and inheritance taxes):

A testator may specify which property or class of property shall bear the burden of the tax for which his estate is liable and may direct that the residuary estate or other funds be used for the payment of such tax, but such direction must be clearly expressed in the will.

See also 1 Page on the Law of Wills § 4:23 (Bowe-Parker rev. 1960 and Cum.Supp.1987) (burden of death taxes may be shifted from one person or fund ordinarily liable therefor under the law to another person or fund, if testator unambiguously so provides). ⁴

The question which, as here, usually arises is whether there has been a clearly expressed intent to shift liability for death taxes from one person or fund ordinarily liable therefor under the law--here, the appellants as recipients of specific property--to another person or fund--here, the residuary estate, which is ordinarily not liable under the law for inheritance taxes. The cases relied upon by the trial court are dispositive of this question.

The will in Estate of Hobbs v. Hardesty, 167 W.Va. 239, 282 S.E.2d 21 (1981), contained a so-called "tax clause" which is virtually identical to the one in the present case. In Hobbs the tax clause stated:

FIRST: I direct that all my just debts, funeral expenses of my last illness and all the expenses of the settlement of my estate, including any taxes which may be assessed by the Federal or State Government, be paid out of my estate by my Executor as soon as conveniently may be done after my decease.

167 W.Va. at 241, 282 S.E.2d at 22. The question presented in Hobbs pertaining to this testamentary language was whether the entire, or merely a portion of, the federal estate tax should be credited against the former West Virginia inheritance tax.

The executor argued that the entire federal estate tax should be so credited, on the ground that the above quoted testamentary language in Hobbs makes the entire federal estate tax a charge upon the residuary estate, all of which was located within West Virginia. This Court disagreed. We agreed with the state tax commissioner that only a partial credit was allowable. We examined the above testamentary language in light of W.Va.Code, 44-2-16a(5) [1959, 1988], see supra note 4, which provides for apportionment of federal estate tax between or among the beneficiaries, absent specific direction in the will as to a specific fund or funds, for example, the residuary estate, from which the federal estate tax is to be paid. This Court held that there was no such specific direction in that case. ⁵

In deciding that the will in Hobbs did not make a sufficiently specific direction for payment of death taxes to rebut the statutory presumption of apportionment of federal estate tax liability between or among beneficiaries, we stated: "The direction to the executor to pay funeral expenses, just debts, and taxes was entirely unnecessary since the law requires the executor to do all of those things." 167 W.Va. at 242, 282 S.E.2d at 23. We reiterated this principle: "A general provision in a will requiring an executor to pay state and federal taxes is entirely nugatory; it does nothing but restate one of the primary legal obligations of an executor." 167 W.Va. at 243-44, 282 S.E.2d at 23-24. Again, within syllabus point 1 of Hobbs, is the holding that "[w]ords in a will giving general direction to an executor to pay taxes from the estate merely restate the general law and such general words do not create a specific fund for the payment of taxes."

We recognize that there is a split of authorities on the question of whether a so-called "tax clause" in a will which contains a general direction to the personal representative to pay debts, expenses and taxes, or similar "stock" language, is sufficient to exonerate the recipients of specific property under the will from estate or inheritance taxes. See annotation,Construction and Effect of Will Provisions Expressly Relating to the Burden...