In re Clark's Estate

• Decision Date: 12 November 1937
• Docket Number: 7707.
• Parties: In re CLARK'S ESTATE. v. CLARK'S EX'RS et al. STATE et al.
• Court: Montana Supreme Court

74 P.2d 401

105 Mont. 401

In re CLARK'S ESTATE.

STATE et al. v. CLARK'S EX'RS et al.

No. 7707.

Supreme Court of Montana

November 12, 1937

Rehearing Denied Dec. 20, 1937.

Appeal from District Court, Second District, Silverbow County; R. E McHugh, Judge.

Proceeding in the matter of the estate of William A. Clark, Jr. deceased, between the State of Montana and others, and the executors of the last will and testament of William A. Clark Jr., deceased, the testamentary trustees for George John Pale, and another. From an order determining the inheritance tax due the State, the former appeal and the latter cross-appeal.

Cause remanded, with direction to modify order to conform with opinion.

Motion for rehearing denied.

SANDS C.J., dissenting on the motion for rehearing.

Harrison J. Freebourn, John A. Matthews, and Carl N. Thompson, all of Helena, for appellants.

Sidney Sanner and John A. Fleming, both of Los Angeles, Cal., and Corette & Corette, of Butte, for respondents.

ANDERSON Justice.

These appeals are from the final order of the district court of Silver Bow county determining the inheritance tax due the State in the estate of William A. Clark, Jr., deceased.

The State by its appeal seeks a review of that portion of the order allowing as a deduction the total amount of the federal estate tax paid for the purpose of determining the clear market value of the property of the estate in order to compute the amount of the inheritance tax due the State of Montana.

The executors of the last will and testament of the deceased, and the testamentary trustees for George John Pale, to whom the residue of the estate was left under the terms of the will, have filed their crossappeal seeking a review of the same order of the district court, and in particular of that portion thereof fixing the tax as to this residue upon the basis that George John Pale was a stranger to the blood, instead of at the rate fixed by the statute for an adopted child?

William A. Clark, Jr., was a resident of Silver Bow county, and died testate on June 14, 1934. His last will and testament was duly admitted to probate in the district court of that county. He left estate partly within and partly without the State of Montana. There is no controversy as to the gross value of the estate. He left numerous legacies, bequests, and devises to individuals and institutions about which there is no controversy.

The two questions here involved may be stated as follows: Was the amount of the federal estate tax a proper deduction in arriving at the clear market value of the property of the estate? Was George John Pale an adopted child of the deceased, within the meaning of the applicable statutes? We proceed to the consideration of the first question.

Our first inheritance tax comprised sections 7724 to 7751 of the Revised Codes of 1907, and it was expressly repealed by a new act in 1921 on the same subject. Sections 10377 to 10400, inclusive, Rev.Codes 1921. Thus far no mention was made in the inheritance tax laws by our Legislatures, when considering deductions, in arriving at the clear market value of estates, of federal estate taxes paid.

In 1923 (chapter 65, Laws 1923) subdivision 7 of section 10377 of the Revised Codes of 1921 was rewritten, so that, in determining the "clear market value" of property passing by transfers within the purview of the act, the amount of federal estate tax was included among the deductions. The applicable portion of the amended section reads as follows: "The following deductions, and no other shall be allowed; debts of the decedent owing at the date of death, expenses of funeral and last illness, all state, county and municipal taxes which are a lien against property situated in this State at the date of death, the ordinary expenses of administration, including the commissions and fees of executors and administrators and their attorneys actually allowed and paid, and Federal estate taxes due or paid." Laws 1923, c. 65, § 1 (8).

By the same act, subdivision 4 of section 10387, Revised Codes of 1921, was also amended so as to read as follows: "Whenever a tax may be due from the estate, or the beneficiaries therein, of any resident or nonresident decedent upon the transfer of any property, when the property or estate left by such decedent is partly within and partly without this state, or upon any stocks, bonds, mortgages, or other securities representing property or estate partly within and partly without the state, any beneficiary of such estate shall be entitled to deduct only a portion of his share of the debts, expenses of administration, federal estate taxes, and of his Montana exemption, equal to the proportion which his interest in the property within the state or within its jurisdiction bears to his entire interest in such estate." Laws 1923, c. 65, § 11 (5). This latter section relates in its entirety to estates partly within and partly without the state, and, in particular, to the procedure to be followed in such estates in the computation and collection of the inheritance tax from them.

Thus, the Inheritance Tax Law clearly continued to allow federal estate taxes as a proper deduction until the amendment of 1927 (chapter 105, Laws 1927), when the already amended section 10377, supra, was again amended (section 1) so that after enumerating the various items properly deductible in arriving at the clear market value of the estate, the amended act provided as follows: "But no deduction shall be made for any federal estate inheritance or transfer taxes paid to the United States." By the same act (section 2) the provisions of section 10387, which we have quoted above, was further amended by inserting the identical language appearing in section 10377 as it was amended by the same act, with reference to federal estate taxes.

In 1935 the Legislature, by chapter 186 (section 1), again amended what was then section 10377 of the Revised Codes of 1921, as then amended, now section 10400.1 of the Revised Codes of 1935, by inserting in subdivision 8, among the deductions allowable in arriving at the clear market value of the estate, the following language: "And federal estate taxes due or paid." The Legislature did not rewrite or expressly amend amended section 10387 of the Revised Codes of 1921, now, as stated above, section 10400.11 of the Revised Codes of 1935, and that section remains unchanged in so far as it attempted to enumerate the deductions, and left the express language of the section in the same condition as it existed after the amendment of 1927.

In chapter 186, Laws 1935 (section 1), the entire section 10400.1 was set out at length, with the amendments incorporated therein. As a part of this chapter a provision is found in section 4 to the effect that "all Acts and parts of Acts in conflict herewith are hereby repealed."

It may be observed, in passing, that between 1923 and 1935 other amendments to the Inheritance Tax Law were made, but since they in nowise affect its provisions in so far as the question at hand is concerned, we have not referred and will not refer to them, since so to do would tend to confuse rather than to clarify.

Subdivision 4 of section 10400.1, as it was amended in 1935, provides that the tax shall be imposed upon, and the provisions of the act applied, "to all estates of all decedents who have died since the first day of April, 1921, and which estates remain undistributed on the date when this act takes effect, to the same extent and in the same manner as though this act had been in full force and effect at the dates of death of such decedents."

The deceased died since 1921, and his estate has not as yet been distributed. The amended section (section 10400.1) declares that its provisions are applicable both to estates of residents and nonresidents alike. The State contends that the effect of the amendment of 1935 is to divide estates into two classes: (a) Those where all the property of the decedent is within the state, and (b) those where the property is partly within and partly without the state. It contends that if the estate of the decedent falls into the first class, the federal estate tax due or paid may be deducted in arriving at the clear market value of the estate; whereas, if the estate falls into the latter class, such deduction may not be made. Among its contentions, it is asserted that section 10400.47 prevents the provisions of the amendment of 1935 becoming operative against this and all estates where the date of death of the decedent antedated the effective date of the law. Section 10400.47 expressly repealed all then existing inheritance tax laws, but provided that their repeal should in nowise affect any suit, prosecution, or proceeding pending at the time the act would take effect. The section preserved all existing rights which had accrued under the repealed laws. This section has never been amended or re-enacted since 1923; therefore, it cannot operate to preserve rights in the State or others which arose subsequent to its enactment.

It is further contended that section 10400.1 and section 10400.11 are in pari materia, and must be construed together so that both sections may stand. To be in pari materia, statutes must relate to the same subject-matter and must not be inconsistent with one another. State ex rel. Riley v District Court, 103 Mont. 576, 64 P.2d 115; Register Life Insurance Co. v. Kenniston, 99 Mont. 191, 43 P.2d 251. If these two sections are inconsistent, one with the other, they are not in pari materia. If one is inconsistent with the other, the latter repeals the former by implication. State ex rel. Esgar v. District Court, 56 Mont. 464, 185 P. 157; Wilkinson v. La Combe, 59 Mont. 518, 197 P. 836; State ex rel. Nagle v. Leader Co.,...