In re Dunn's Estate

• Decision Date: 24 September 1948
• Docket Number: 30487.
• Citation: 197 P.2d 606,31 Wn.2d 512
• Court: Washington Supreme Court
• Parties: In re DUNN'S ESTATE. v. STATE. DUNN et al.

197 P.2d 606

31 Wn.2d 512

In re DUNN'S ESTATE.

DUNN et al. v. STATE.

No. 30487.

Supreme Court of Washington

September 24, 1948

Department 2

Rehearing Denied Dec. 23, 1948.

Proceeding in the matter of the estate of Arthur G. Dunn, deceased wherein the supervisor of the Inheritance Tax Division filed a claim for further inheritance taxes, and wherein Arthur G Dunn, Jr., and Edward B. Dunn, executors, filed objections and exceptions to the supervisor's claim. From an order sustaining the executor's exceptions, the State of Washington, by and through the Inheritance Tax Division of the Tax Commission thereof, appeals.

Order reversed and cause remanded with instructions.

Appeal from Superior Court, King County; John A. Frater, judge.

Smith Troy, Atty. Gen., and Philip W. Richardson, of Olympia, for appellant.

Bayley Fite, Martin & Shorts and Arthur G. Dunn, Jr., all of Seattle, for respondents.

BEALS Justice.

Arthur G. Dunn and Jeannette Williams Dunn, who, for many years, had been husband and wife and residents of the state of Washington, May 6, 1927, signed and acknowledged Before a notary public an instrument, in writing, in the nature of a community property agreement, made pursuant to Rem.Rev.Stat. § 6894, infra. The agreement was also witnessed by two persons.

The preliminary paragraph of the agreement reads as follows:

'Know All Men by These Presents: That we, Arthur George Dunn and Jeanette Williams Dunn, husband and wife, residents of Seattle, Washington, do promise, agree and covenant each with the other, and also make this our Last Will and Testament as follows, to wit: * * *'

The foregoing paragraph clearly indicates the intention of the parties to make a definite agreement, each with the other, concerning the disposition to be made of their community property, and also to make a joint will.

The first and second paragraphs of the agreement read as follows:

'First: All of the property which we now own or may hereafter acquire is and shall be our community property as under the laws of the State of Washington, both personalty and realty.

'Second: Upon the death of either of us the survivor shall have all of said property Before named to use, own, enjoy, sell, lease or encumber and dispose of, during his or her life as the case may be, and upon the death of the survivor of us the unused and undisposed of portion of such property only shall go to the Trustee hereinafter named for the uses and purposes hereinafter stated, save as to each of our children Arthur George, Edward Bernard, Jeanette Gertrude, Dorothy and Morris Spencer Dunn, and any child or children hereafter born, we leave upon the death of either and each of us the sum of one dollar ($1.00).'

The agreement continues by providing for the payment of debts, upon the death of either party, for the nomination of a trustee to receive and hold the property left by the survivor in trust for the children of the parties, with directions for the disposition of the income from the estate, each party naming the other as executor of the agreement, 'as a testamentary disposition of the property,' and providing for the ultimate distribution of the property in accordance with the agreement.

Mrs. Dunn died September 7, 1929. Mr. Dunn was appointed executor of her estate, filing an inventory of the property belonging thereto, and causing the property to be duly appraised. This inventory listed all of the community property, real and personal, belonging to Mr. and Mrs. Dunn, and in the margins appear notes as follows:

In connection with the first group of real estate descriptions, 'Community Interest of Decedent with Arthur G. Dunn, in and to Real Estate situated in King County, State of Washington.' In connection with certain other real estate descriptions, 'Community Interest of Decedent in and to undivided half interest therein with the Estate of Helen Ainsworth, Deceased.' In the margins of the pages of listings of personal property appears 'Community Interest of Decedent therein.'

A page entitled 'Recapitulation of Inventory,' summarizing the separate listings above referred to, shows, in one column, 'Total Appraised Value,' and, in an adjoining column, 'Community Interest of Decedent.' At the end of the page appears 'Total Appraised Value--$862,870.95. Total appraised value of all community property--$726,302.30. Community Interest of Decedent--$363,151.16.'

In due time, the executor filed his final account and his petition for distribution of the estate. The account and petition came on regularly for hearing Before the court March 3, 1943, and, by order dated that day, the court approved the account and decreed the distribution of the property. The following portions of the decree are pertinent to this inquiry:

'It is hereby adjudged and decreed as follows:

'(1) That the distributees named in said will, to-wit, Arthur G. Dunn, as surviving spouse, the children of said deceased hereinabove named, the living grandchildren of said deceased, to-wit, Christopher T. Bayley, Emery P. Bayley, Jr., Jeanette G. Jackson and Nagle Jackson, together with any other grandchildren hereafter born, and the Seattle-First National Bank of Seattle, as successor to the Dexter Horton National Bank of Seattle, are the only persons and parties entitled to share in said estate and to receive the same. * * *

'(3) That under the terms and provisions of Paragraph Second of said Will and Agreement, as hereinBefore set forth, it was the intent and purpose of the deceased and her spouse, the petitioner herein, that the survivor of them should upon the death of the other have all of the community property covered by said Will and Agreement with the right and power to use, own, enjoy, sell, lease or encumber and dispose of during the survivor's life, and that said deceased and the petitioner did intend thereby to empower the petitioner, as surviving spouse, to dispose of any or all of said property during his life by giving the same, or such part of it as he might elect, to the children of said deceased and himself, and that any such gifts heretofore made by said petitioner, as surviving spouse, were a valid and legal exercise of such power, both as to real estate or personal property so disposed of, the same being within the intent of the parties to said Will and Agreement and within the powers granted to said surviving spouse by the language used in Paragraph Second of said Will.

'(4) That as to any residue of the property included in and a part of said estate, together with the survivor's community one-half thereof remaining unused and undisposed of by sale or by gift to the children of said deceased and the surviving spouse, shall be distributed on the death of said surviving spouse in accordance with the provisions of Paragraph Fourth of said Will and Agreement, and that the aforesaid children of said deceased and the petitioner, being now all above the age of thirty (30) years, which is the time fixed for the final distribution of Trust Fund 'B' as set forth in said paragraph, are entitled upon the death of said Arthur G. Dunn to immediate distribution of 70 per cent. of said residue; that as to the remaining 30 per cent. of said residue, the Seattle-First National Bank of Seattle, as successor to Dexter Horton National Bank of Seattle, as Trustee, is entitled to receive the same subject to the terms and provisions of said Paragraph Fourth of said Will and Agreement.

'(5) That pursuant to the foregoing, the property of said estate be, and the same hereby is distributed to Arthur G. Dunn, the surviving spouse of said deceased, pursuant to the provisions of Paragraph Second of said Will and Agreement, with the power and right during his life, to use, own, enjoy, sell, lease or encumber and dispose of as he may desire and see fit, including the right and power to dispose of said property, or any part thereof, by way of gift to any and all of the children of said deceased and himself, and that upon the death of said Arthur G. Dunn any unused or undisposed of property included in said estate be thereupon distributed 70 per cent. thereof equally to the said children, to-wit, Jeanette Gertrude Jackson, Dorothy A. Bayley, Arthur George Dunn, Edward Bernard Dunn and Maurice (or Morris) Spencer Dunn, and 30 per cent. thereof to Seattle-First National Bank of Seattle, as Trustee, under the terms and provisions of Paragraph Fourth of said Will and Agreement.'

The court then declared the estate closed, and the executor discharged.

In the course of the administration of Mrs. Dunn's estate, the executor paid the state of Washington an inheritance tax in the sum of $11,550.39, which amount was demanded by the supervisor of the inheritance tax and escheat division of the tax commission of the state of Washington as the sum due from the estate by way of inheritance tax thereon.

The inheritance tax division, January 31, 1931, wrote to the attorney for Mrs. Dunn's estate, enclosing a receipt from the state treasurer showing payment of the inheritance tax due from the estate of Jeannette Williams Dunn.

It is agreed that this tax was, in fact, calculated by the inheritance tax division upon one half of the community property belonging to Mr. and Mrs. Dunn (evidently based upon the inventory filed by Mr. Dunn, as executor of Mrs. Dunn's estate).

The decree of distribution recited that 'all estate and inheritance taxes due to the United States and State of Washington have been fully paid.'

Arthur G. Dunn, the other party to the community property agreement and will above referred to, died testate in King county Washington, October 11, 1945. He left a will expressly stating that he bequeathed thereby only his separate property, acquired by him subsequent to...