Greer v. United States

• Citation: 448 F.2d 937
• Decision Date: 01 September 1971
• Docket Number: No. 15425,15426.,15425
• Parties: Hattie S. O'Briant GREER, Executrix, of the Estate of William S. O'Briant, deceased, Appellee, v. UNITED STATES of America, Appellant. Hattie S. O'Briant GREER, Executrix of the Estate of William S. O'Briant, deceased, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

448 F.2d 937 (1971)

Hattie S. O'Briant GREER, Executrix, of the Estate of William S. O'Briant, deceased, Appellee, v. UNITED STATES of America, Appellant.

Hattie S. O'Briant GREER, Executrix of the Estate of William S. O'Briant, deceased, Appellant, v. UNITED STATES of America, Appellee.

Nos. 15425, 15426.

United States Court of Appeals, Fourth Circuit.

Argued May 13, 1971.

Decided September 1, 1971.

Gary R. Allen, Atty., Dept. of Justice (Johnnie M. Walters, Asst. Atty. Gen., Meyer Rothwacks, Paul M. Ginsburg, Attys., Dept. of Justice, and William L. Osteen, U. S. Atty., on brief), for the United States.

Frank P. Meadows, Jr., and Robert M. Wiley, Rocky Mount, N. C. (Biggs, Meadows & Batts, and Battle, Winslow, Scott, & Wiley, Rocky Mount, N. C., on brief), for Hattie S. O'Briant Greer.

Robert Morgan, Atty. Gen. of N. C., on brief for amicus curiae.

Before SOBELOFF, Senior Circuit Judge, and WINTER and CRAVEN, Circuit Judges.

WINTER, Circuit Judge:

The appeal of plaintiff (No. 15,426), the executrix of her deceased husband's estate, in her suit for refund of estate taxes, raises the question of whether the deceased's interest in a farm, the record title of which was solely in his name, passed to his wife so as to entitle the estate to a marital deduction under 26 U.S. C.A. § 2056. It is the plaintiff's position that notwithstanding record title she and her deceased husband owned the farm as tenants by the entireties so that the deceased's interest passed to her by operation of law. The government's appeal (No. 15,425) raises the question of whether the value of the charitable remainder of the trust of the husband's residuary estate is "presently ascertainable" so as to entitle the estate to a charitable deduction in the computation of estate taxes. The government's position is that the discretionary power of the trustees to reinvest the principal of the trust estate and to allocate and apportion receipts and expenses between principal and income rendered the ascertainment of present value impossible so as to require disallowance of the charitable deduction.

The district court made detailed findings of fact, and, without discussion or citation of supporting authorities, concluded that the farm was owned by the husband alone — thus disqualifying it, under this particular will, for the marital deduction — and that the possibility that the charitable transfer will not become effective was so remote as to be negligible — thus allowing the charitable deduction. We disagree in part with respect to the farm, but we agree with respect to deductibility of the value of the charitable remainder. We, therefore, affirm in part and reverse in part.

Since the two questions involve largely unrelated facts and legal issues, we will treat them in separate sections of this opinion.

I

The Claimed Marital Deduction

A.

The testator's will made no devise of the farm to his wife, so if he was the sole fee simple absolute owner at the time of his death, as the record title indicated, the farm would become part of his residuary estate and pass into a residuary trust in which his wife had only a life interest. This would not result in a marital deduction. But plaintiff contends that title to the farm was vested in her husband and her as tenants by the entireties, and thus, that title to the farm passed to her by operation of law, outside of the will, entitling the estate to the marital deduction. Aside from its tax consequences, the dispute does not have any bearing on the ultimate disposition of the farm, since plaintiff entered into an agreement to convey her property including whatever interest she has in the farm, to the deceased's residuary estate.

The farm was originally acquired by the testator and his wife as tenants by the entireties. In 1944 they wished to acquire tobacco allotments from land owned by Rux Wilkins and his sister which had been the subject of condemnation. The testator paid Wilkins $850.00 for the tobacco allotments, and the testator and his wife executed a deed of the farm to Wilkins. At the same time, Wilkins gave them his note, payable to them, in the amount of $15,000.00, secured by a purchase money mortgage recorded simultaneously with the registration of the deed from the testator and his wife to Wilkins. The testator and his wife promised to cancel the mortgage when the farm, with the increased tobacco allotment, was reconveyed. The tobacco allotment on the farm was increased in February and April 1945, and Wilkins reconveyed the farm in November, of 1946. The deed of reconveyance was to the testator alone, but the note and the purchase money mortgage securing it were cancelled simultaneously.

During the time that record title was vested in Wilkins, the testator and his wife remained in possession and farmed the land as usual. They continued to do so after the reconveyance from Wilkins until the time of the testator's death. At all times after the reconveyance from Wilkins, the testator and his wife believed that they held title to the farm as tenants by the entireties, and the testator so represented to his attorney at the time of the conference resulting in the preparation of his will. The plaintiff in her individual capacity has neither sought nor obtained reformation of the Wilkins deed to her late husband.

B.

The parties are in agreement that we must look to state law — here, the law of North Carolina — to determine the property interests of the parties as the foundation for deciding how the federal estate tax law is to be applied. Morgan v. Commissioner, 309 U.S. 78, 60 S.Ct. 424, 84 L.Ed. 585 (1940) (dictum); Aldrich v. United States, 346 F.2d 37 (5 Cir. 1965) (per curiam). See Kirkpatrick v. Sanders, 261 F.2d 480 (4 Cir. 1958), cert. den., 359 U.S. 1000, 79 S.Ct. 1138, 3 L.Ed.2d 1029 (1959). We also agree although the tax consequences sought by plaintiff may have been more readily achieved if she had applied to a North Carolina court for reformation of the Wilkins deed.

Plaintiff advances several theories how, even after the reconveyance by Wilkins, she and her deceased husband were vested with title as tenants by the entireties, or, alternatively, as tenants in common. Under the latter theory, only one-half of the value of the farm would be includable in the husband's gross estate. We conclude that plaintiff was a tenant in common, by virtue of a resulting trust, unexecuted by the North Carolina Statute of Uses, and we will treat the several contentions collectively in stating our reasons.

When Wilkins reconveyed title to the property to plaintiff's husband, plaintiff agreed to the cancellation of her interest in the Wilkins note and the purchase money mortgage securing it. Thus, she supplied valuable consideration for the reconveyance. The record is devoid of any evidence that plaintiff intended that title be vested solely in her husband, and the evidence is that both were unaware that record title was restricted to him. Indeed, there is evidence from which it can be inferred that both believed that they were tenants by the entireties of the farm. At least the very strong inference that there was a mistake in conveyancing necessarily arises and this, coupled with the consideration supplied by plaintiff, is sufficient under North Carolina law to give rise to a resulting trust in plaintiff's favor, so that she is constituted a tenant in common with her deceased husband. Bullman v. Edney, 232 N.C. 465, 61 S.E.2d 338 (1950). See also, Vinson v. Smith, 259 N.C. 95, 130 S.E.2d 45 (1963); Hoffman v. Mozeley, 247 N.C. 121, 100 S.E.2d 243 (1957); Waddell v. Carson, 245 N.C. 669, 97 S.E.2d 222 (1957). Indeed, the North Carolina laws seems to be that the furnishing of consideration by the wife for a conveyance solely to her husband, absent more, is probably enough to impress a resulting trust for the wife's benefit upon the property conveyed, Deese v. Deese, 176 N.C. 527, 97 S.E. 475 (1918), although Lawrence v. Heavner, 232 N.C. 557, 61 S.E.2d 697 (1950), would seem to require some evidence of intention on the part of the parties that a resulting trust arise.

Plaintiff argues that if, as we conclude, a resulting trust arose, the trust was executed by the North Carolina Statute of Uses¹ so that, by virtue of the fact that plaintiff and her husband were husband and wife, a tenancy by the entireties resulted. Plaintiff cites no North Carolina authority to support the argument that the Statute of Uses would be operative, and the general rule elsewhere is that the Statute of Uses applies only to express passive trusts and not to resulting or constructive trusts which arise by operation of law. Restatement (Second) of the Law of Trusts § 73 (1959); Bogert, The Law of Trusts and Trustees § 206 at 381 (2d ed. 1966); Scott, The Law of Trusts § 73 (3rd ed. 1967); Annotations 42 A.L.R. 55; 135 A.L.R. 232; 27 A.L.R.2d 1298. We, therefore, cannot conclude that under North Carolina law the resulting trust would be executed.²

Plaintiff's remaining arguments invoke N.C.G.S. § 52-12, in effect at the time of the transactions with which we are concerned, limiting a wife's ability to affect or change her interest in real estate by contract with her husband unless there is a contract in writing and a certificate of a judicial officer that the contract is not unreasonable or injurious to the wife.³ Specifically, plaintiff's argument is that, prior to the conveyance to Wilkins, she and her husband owned the farm as tenants by the entireties. Because the conveyance to Wilkins lacked the formalities required by § 52-12 (the writing and the judicial certificate), the purported conveyance was void and plaintiff and her husband continued to hold title as tenants by the entireties. Alternatively, plaintiff argues that she could not validly relinquish her interest in the Wilkins note and mortgage without compliance with § 52-12 so that the purported reconveyance by Wilkins to her husband gave rise to a...