In re Bernheimer's Estate

• Decision Date: 06 December 1943
• Docket Number: 38602,38603
• Parties: In the Matter of the Estate of Bertha C. Bernheimer, Deceased Earle J. Bernheimer, and George K. Baum and Earle J. Bernheimer, as Executors of the Estate of Bertha C. Bernheimer, Deceased, Appellants and Cross-Respondents, v. The First National Bank of Kansas City, Missouri, Trustee, and Jewish Memorial Hospital Association, a Corporation, Respondents and Cross-Appellants, Congregation B'Nai Jehudah, Respondent. George K. Baum, Executor of the Estate of Bertha C. Bernheimer, Deceased, Appellant and Cross-Respondent, v. The First National Bank of Kansas City, Missouri, Trustee, Respondent and Cross-Appellant, Earle J. Bernheimer, Appellant and Cross-Respondent, Jewish Memorial Hospital Association, a Corporation, Respondent and Cross-Appellant, Congregation B'Nai Jehudah, Respondent
• Court: Missouri Supreme Court

176 S.W.2d 15

352 Mo. 91

In the Matter of the Estate of Bertha C. Bernheimer, Deceased Earle J. Bernheimer, and George K. Baum and Earle J. Bernheimer, as Executors of the Estate of Bertha C. Bernheimer, Deceased, Appellants and Cross-Respondents, v. The First National Bank of Kansas City, Missouri, Trustee, and Jewish Memorial Hospital Association, a Corporation, Respondents and Cross-Appellants, Congregation B'Nai Jehudah, Respondent. George K. Baum, Executor of the Estate of Bertha C. Bernheimer, Deceased, Appellant and Cross-Respondent, v. The First National Bank of Kansas City, Missouri, Trustee, Respondent and Cross-Appellant, Earle J. Bernheimer, Appellant and Cross-Respondent, Jewish Memorial Hospital Association, a Corporation, Respondent and Cross-Appellant, Congregation B'Nai Jehudah, Respondent

Nos. 38602, 38603

Supreme Court of Missouri

December 6, 1943

Appeal from Jackson Circuit Court; Hon. Ben Terte, Judge.

Affirmed in part, and reversed and remanded in part.

Maurice H. Winger, Harry G. Stocks and George J. Winger for The First National Bank of Kansas City; Winger, Reeder & Barker of counsel, and John H. McEvers, Frank C. Rayburn and Jennie F Cockrum for Jewish Memorial Hospital Association, appellants in Case No. 38602.

The Missouri inheritance tax levied against the inheritance of Earle J. Bernheimer constitutes a personal charge against him and his inheritance. The trial court, therefore, erred in holding: That this tax was not a charge upon and should not be deducted from any amount payable to him out of the Estate of Bertha C. Bernheimer, deceased, or out of the trust created under the will of said Bertha C. Bernheimer; that the tax was properly payable out of and deductible from the corpus of the trust estate and in refusing to hold to the contrary. Sec. 571, R.S. 1939; In re Estate of Rosing v State of Missouri, 337 Mo. 544, 85 S.W.2d 495; Bernays v. Major, 344 Mo. 135, 126 S.W.2d 209; Secs 577, 578, R.S. 1939; Bryant v. Green, 328 Mo. 1226, 44 S.W.2d 7; State Treasurer v. Trust Co., 293 Mo. 545, 239 S.W. 818; State ex rel. Pollock v. Becker, 289 Mo. 660, 233 S.W. 641; Pratt v. Miller, 109 Mo. 78, 18 S.W. 965; 25 R.C.L. 1073; Stephen v. Metzger, 95 Mo.App. 609, 69 S.W. 625; Torrance v. Edwards, 99 A. 136; Whitney v. Fox, 166 U.S. 637; State v. Chaplain, 101 Kan. 413, 166 P. 238; State v. Campbell, 73 Kan. 688, 85 P. 784; Deer Lodge v. U.S. Fidelity & Guarantee Co., 42 Mont. 135; Hibernians v. Sparrow, 29 Mont. 132; Pierson v. Minnehaha, 26 S.D. 462, 128 N.W. 616; State v. De Weese, 51 Utah 515, 172 P. 290; Matter of Vanderbilt, 172 N.Y. 69, 64 N.E. 782.

Harry L. Jacobs for Earle J. Bernheimer, cross-respondent in Case No. 38602.

(1) Under the provisions of the Missouri inheritance tax laws the tax on all interests in the trust was payable from the corpus of the trust. (2) Under Section 597, R.S. 1939, the tax on the entire transfer in trust was payable out of the property transferred. This has been the construction placed on similar statutes by numerous other states. (3) Missouri statutes involved in determination of the question presented in this case. Secs. 577, 578, 579, 595, 597, R.S. 1939. (4) The Missouri inheritance tax law was copied from Illinois and New York laws. In re Estate of Kinsella, 293 Mo. 545, 239 S.W. 818. (5) New York and Illinois construed their laws to mean that the tax on the life interest was payable out of the corpus of the trust. Matter of Tracy, 179 N.Y. 501, 72 N.E. 519; People v. Lowenstein, 284 Ill. 126, 119 N.E. 917. (6) Section 577, which cross-appellants invoke, is inapplicable because it only applies when both life estate and remainder are unconditional. Here the remainder concededly was conditional. This required application of Section 597, and having once attached, Section 597 was applicable to all connected interests. Section 597 makes the tax payable out of the property. In re Vanderbilt's Estate, 172 N.Y. 69, 64 N.E. 782; Matter of Tracy, 179 N.Y. 501, 72 N.E. 519; In re Hoyt's Estate, 89 N.Y.S. 744; In re Wilcox's Estate, 118 N.Y.S. 254. (7) Even under Section 577 the tax on the life interest is payable out of the property left in trust, as this statute specifically makes the tax on the life interest a lien upon the entire property. If Section 578 is applied still the tax is payable from the property left by the decedent in trust, because thereunder the executor is authorized to hold the property itself until the tax is paid, and is directed to collect the tax from the person entitled to such property. Here the persons entitled to the property are the trustees who may either keep the property or sell it and invest in other forms of property. The beneficiary of the life interest has no interest in the specific property in the trust. In re Kinsella's Estate, 293 Mo. 545; Gleason & Otis on Inheritance Taxation (2d Ed.), p. 267; Matter of Guggenheim, 189 N.Y. 561, 82 N.E. 1127; In re Bushnell's Estate, 77 N.Y.S. 4, 172 N.E. 649; Erickson v. Childs, 124 Conn. 66, 198 A. 176; In re Tracy, 83 N.Y.S. 1049; Estate of Brown, 24 Hawaii 443. (8) Section 597 applies to either vested or contingent estates. People v. Hulbard, 327 Ill. 72, 158 N.E. 373; In re Sperling's Estate, 234 N.Y.S. 119; In re Vanderbilt's Estate, 172 N.Y. 69, 64 N.E. 782. (9) The will in question here provided that testatrix' son should have the income from the date of her death. To hold up this income until over $ 30,000 had been collected therefrom to reimburse the trustees for the tax would defeat the express direction of the will. In re Diehl, 88 N.J.Eq. 310, 102 A. 738. (10) Courts of other states having laws similar to Missouri's inheritance tax law have all rejected such arguments as cross-appellants make here. (11) Courts of other jurisdictions without exception hold the tax is payable from the corpus. In re Tracy, 179 N.Y. 501, 72 N.E. 519; Bishop v. Bishop, 81 Conn. 509, 71 A. 583; In re Diehl's Estate, 88 N.J.Eq. 310, 102 A. 738; affirmed 89 N.J.Eq. 310, 103 A. 822; People v. Lowenstein, 284 Ill. 126, 119 N.E. 917; Estate of Brown, 24 Hawaii 443; Estate of Castle, 25 Hawaii 108; Castle v. Castle, 281 F. 609; Wellman v. Cleveland Trust Co., 107 Ohio St. 267, 140 N.E. 104; Grainger's Executors and Trustees v. Pennebaker, 247 Ky. 324, 56 S.W.2d 1007; Wachovia Bank & Trust Co. v. Lambeth, 213 N.C. 576, 197 S.E. 179; In re Allen's Estate, 9 N.W.2d 102. (12) New York cases reviewed. In re Vanderbilt's Estate, 172 N.Y. 69, cited In re Estate of Kinsella, 293 Mo. 545; In re Brez's Estate, 172 N.Y. 609, 64 N.E. 958; Matter of Tracy, 179 N.Y. 501, cited in Maguire v. University, 271 Mo. 359. Under the above cases when Section 597 is invoked as to the remainder it applies also to the life estate. (13) Illinois cases reviewed. People v. Lowenstein, 284 Ill. 126, 119 N.E. 917, cited In re Estate of Kinsella, 293 Mo. 545; People v. Linn, 357 Ill. 220, 191 N.E. 450. The above cases hold that the New York construction applies to Illinois also. (14) New Jersey case reviewed. In re Diehl, 88 N.J.Eq. 310, 102 A. 738. The court points out that any construction other than the New York construction would be unjust and unfeasible. (15) Ohio case reviewed. Wellman v. Cleveland Trust Co., 107 Ohio St. 267, 140 N.E. 104. The court reasons that construction of the Act as a whole requires the conclusion that the tax is payable from the corpus. (16) North Carolina case reviewed. Wachovia Bank & Trust Co. v. Lambeth, 213 N.C. 576, 197 S.E. 179. The court reviews the authorities and holds that the New York position is the logical, common-sense view. (17) Connecticut cases reviewed. Blodgett v. New Britain Trust Co., 108 Conn. 715, 145 A. 56; Bishop v. Bishop, 108 Conn. 715, 71 A. 583. (18) Hawaii cases reviewed. Estate of Brown, 24 Hawaii 443; Estate of Castle, 25 Hawaii 108; Castle v. Castle, 281 F. 609. The above cases hold that the party (trustee) directly receiving the specific property left by the decedent was liable for the tax. Reasons pointed out showing injustice of any other conclusion. (19) Kentucky case reviewed. Grainger's Executors and Trustees v. Pennebaker, 247 Ky. 324, 56 S.W.2d 1007. The court reached this conclusion on consideration of the statute as a whole, pointing out such conclusion was in harmony with the construction given to like provisions of similar statutes of other states. (20) Wisconsin case reviewed. In re Allen's Estate, 9 N.W.2d 102. The decisions of other states and the reasoning thereof were fully reviewed in this case decided April 13, 1943. The court held the tax on the life interest payable from the corpus of the trust estate without recoupment from the life tenant. (21) Pennsylvania case reviewed. In re Crane's Estate, 170 A. 284. In Pennsylvania the tax on the remainder is not payable until the contingency is removed. In such case Pennsylvania holds that the tax on the life estate is not payable from the corpus either. However, in the above case, presenting peculiar circumstances under which the tax on the remainder was payable from the corpus, it was held that the tax on the life estate in an equitable amount should be paid from the corpus also. (22) The tax is payable from the property even if the life beneficiary receives other legacies under the same will. Gates v. Plainfield Tr. Co., 121 N.J.Eq. 460, 191 A. 304, 194 A. 65; In re Murphy's Estate, 209 N.Y.S. 686; In re Wilcox's Estate, 118 N.Y.S. 254; Title Guar. & Tr. Co. v. Lohrke, 102 A. 660; In re Strong's Estate, 74 P.2d 341; Smith v. Browning, 225 N.Y. 358, 122 N.E. 216. (23) Cases cited by cross-appellants are not in point. Bryant v. Green, 328 Mo. 1226, 44 S.W.2d 7, distinguished; In re Bernays' Estate, 344 Mo. 145, 126 S.W.2d 209, distinguished.

Harry L. Jacobs for Earle J. Bernheimer, appellant in Case No. 38603.

(1) Effect...