In re Barclay's Estate, 27678.

• Decision Date: 30 October 1939
• Docket Number: 27678.
• Court: Washington Supreme Court
• Parties: In re BARCLAY'S ESTATE. v. BROOKS. STATE, by WALDRON, Sup'r of Inheritance Tax and Escheat Division,

95 P.2d 393

1 Wn.2d 82

In re BARCLAY'S ESTATE.

STATE, by WALDRON, Sup'r of Inheritance Tax and Escheat Division, v. BROOKS.

No. 27678.

Supreme Court of Washington

October 30, 1939

Department 2.

Proceeding in the matter of the estate of Alice Willard Barclay deceased, wherein the State, by Robert F. Waldron, supervisor of inheritance tax and escheat division thereof, filed findings fixing amount of inheritance tax due to which D. F Brooks, as administrator of the estate of Alice Willard Barclay, deceased, filed objections. From an order sustaining the administrator's objections, the State, by Robert F Waldron, supervisor of inheritance tax and escheat division thereof, appeals.

Affirmed.

Appeal from Superior Court, King County; James T. Lawler, judge.

Robert F. Waldron, John M. Boyle, Jr., and Charles Snyder, all of Olympia, for appellant.

Arthur P. Redman, of Seattle, for respondent.

JEFFERS Justice.

Alice Willard Barclay died intestate, July 11, 1938, a resident of Seattle, Washington, leaving separate estate subject to probate in King county, of the appraised value of $5,004.38. She was also possessed of certain other property at the time of her death, including a lessee's interest in a ninety-nine year lease of real estate in Minnesota, having an unexpired term of sixty-nine years, and a lessee's interest in a mineral lease in Oklahoma. The leasehold interest in Minnesota was appraised at $21,700, in ancillary proceedings had in that state, and it was agreed between the supervisor of the inheritance and escheat division of the tax commission of the state of Washington and the administrator of the estate of the deceased that the leasehold in Oklahoma was of the reasonable value of $500.

The supervisor filed his findings, fixing the tax due, which findings included the value of both leases for taxation purposes, in the amounts above set out.

The administrator of the estate filed objections to such findings, contending that the value of the leaseholds should not be included in the value of the estate for inheritance tax purposes, inasmuch as the leaseholds are interests in real property situated outside the state of Washington, not subject to the jurisdiction thereof, and consequently not subject to the payment of an inheritance tax to this state.

The matter was set down for hearing on the findings of the supervisor and the objections thereto by the administrator, and at the conclusion of such hearing, the trial court sustained the administrator's objections and held that the leasehold interests were not liable for payment of inheritance tax to the state of Washington. From this order entered May 9, 1939, the supervisor has appealed.

The question presented for determination is whether or not a leasehold interest in realty outside the state of Washington is subject to the payment of an inheritance tax to this state, where the lessee died domiciled in the state of Washington.

Rem.Rev.Stat.Supp. § 11201, provides in part: 'All property within the jurisdiction of this state, and any interest therein, whether belonging to the inhabitants of this state or not, and whether tangible or intangible, which shall pass by will or by the statutes of inheritance of this or any other state * * * shall, for the use of the state, be subject to a tax * * *.'

Appellant contends that the leasehold interests in the instant case are, for the purpose of taxation, to be considered as intangible personal property, and as such are subject to inheritance tax by the state of Washington, and, while respondent contends that a leasehold is an interest in real estate, we think it is apparent, from the question to be determined as presented by respondent, that his real contention is that a leasehold interest in realty is immovable tangible personal property, having the same situs as the land to which it relates, and taxable only by the state in which the real estate is located.

The leases in question were upon land in Minnesota and Oklahoma, but the statutes of those states having been neither pleaded nor proven, it must be assumed they are the same as those of the state of Washington.

There can be no question but that under our statutes and decisions, a leasehold interest in real estate for a term less than life is personal property. Rem.Rev.Stat. § 11108, provides in part as follows: 'The term 'real property' for the purposes of taxation shall be held and construed to mean and include the land itself, * * * and all rights and privileges thereto belonging or in any wise appertaining, except leases of real property and leasehold interests therein for a term less than the life of the holder * * *.'

Personal property is defined by Rem.Rev.Stat. § 11109, as follows: 'The term 'personal property' for the purposes of taxation, shall be held and construed to embrace and include * * * all leases of real property and leasehold interests therein for a term less than the life of the holder * * *.'

'Except in so far as the common-law rules may have been modified by statute, terms for years, however long, are chattels real, falling within the classification of personal property.' 35 C.J. 970, § 47.

See Taylor v. Basye, 119 Wash. 263, 205 P. 16; Myers v. Arthur, 135 Wash. 583, 238 P. 899; Salisbury v. Alskog, 144 Wash. 88, 256 P. 1030; Sakris v. Eagle Indemnity Co., 176 Wash. 73, 28 P.2d 316; Irons Investment Co. v. Richardson, 184 Wash. 118, 50 P.2d 42. We cite the foregoing cases as showing that a leasehold has generally been considered as personal property in this state.

In none of the cases last above cited did this court decide whether a leasehold was tangible or intangible personal property. We have been able to find only two cases in this state which deal with the question of whether a leasehold interest is tangible or intangible personal property. In Farmers' State Bank v. Scheel, 124 Wash. 429, 214 P. 825, we held that a leasehold interest in real estate was a tangible interest which the assignee could take into his possession. To the same effect is Lloyd v. Hughes, Inc. v. Widders, 187 Wash. 452, 60 P.2d 243.

In so far as we have been able to find, the rule announced in the last two cited cases, that leasehold interests are tangible personal property, is the general rule.

In 2 Beale's Conflict of Laws 932, § 208.1, we find the following statement: 'Several kinds of personal property are really immovable, principally leasehold interests. These are treated at common law as so many chattels under the name of 'chattel real.' Nevertheless, they are immovable since they are interests in land and cannot be removed from the power of the law prevailing at the situs of the land.'

In Dicey's Conflict of Laws, 3d Ed., p. 75, we find the following statement:

'Immovables are tangible things which cannot be moved, such as are lands and houses, whatever be the interest or estate which a person has in them. Hence the term includes what English lawyers call 'chattels real,' that is to say, land, etc., in which a person has less than a freehold interest, as, for instance, leaseholds. * * *

'To put the same thing in other words, 'immovables' are equivalent to realty, with the addition of chattels real or leaseholds; 'movables' are equivalent to personalty, with the omission of chattels real. * * *

'It is of consequence to notice the difference between movables and personal property, because judges, especially in the earlier cases on the conflict of laws, have occasionally used language which identifies movables with personal property, and suggests the conclusion that all kinds of personalty, including leaseholds, are, as regards the conflict of laws (e. g., in case of intestate succession), governed by the rules which apply to movables property so called. This doctrine has now been pronounced erroneous, and leaseholds (it has been decided) are, as regards the conflict of laws, to be considered of course as personalty, but also as immovables.' In re Craver's Estate, 319 Pa. 282, 179 A. 606.

It appearing that leaseholds are not only tangible personal property, but also immovable tangible personal property, the question then presented is: Are such leaseholds taxable at the domicile of the owner or the situs of the leaseholds?

Appellant has referred us to no case, and we have been able to find none, which holds that immovable tangible personal property is taxable at the domicile of the owner, where such property is located in a state other than that of the owner's domicile. Appellant does, however, cite In re Sherwood's Estate, 122 Wash. 648, 211 P. 734; In re Ellis' Estate, 169 Wash. 581, 14 P.2d 37, 86 A.L.R. 734; In re Lyons' Estate, 175 Wash. 115, 26 P.2d 615; and In re Eilermann's Estate, 179 Wash. 15, 35 P.2d 763.

In re Sherwood's Estate, supra, involved the right of the state of Washington to impose an inheritance tax on personal property of the estate of Josephine C. Sherwood, located in California, and consisting of bonds, stocks, cash, treasury certificates, jewelry and other personal property. All of the property was movable personal property. In the cited case, in referring to the cases upon which the decision is apparently based, we stated [122 Wash. 648, 211 P. 741]: 'The rule of these cases leaves no doubt, we think, as to the power of the state to levy an inheritance tax on movable personal property owned by a person who dies domiciled in this state, regardless of the situs of the property, or whether it is tangible or intangible in its nature.' (Italics ours.)

It may be doubtful as to whether the rule announced in the cited case, in so far as it affects tangible personal property, can be followed--a question which we do not now decide--in view of the decision in the case of Frick v Pennsylvania, 268...