In re Eilermann's Estate

• Decision Date: 10 September 1934
• Docket Number: 24911.
• Citation: 35 P.2d 763,179 Wash. 15
• Court: Washington Supreme Court
• Parties: In re EILERMANN'S ESTATE. v. PEMBERTON, Sup'r. BROWN

35 P.2d 763

179 Wash. 15

In re EILERMANN'S ESTATE.

BROWN v. PEMBERTON, Sup'r.

No. 24911.

Supreme Court of Washington

September 10, 1934

Department 1.

Appeal from Superior Court, King County; Everett Smith, Judge.

In the matter of the estate of Elizabeth Eilermann, deceased wherein Herman E. Brown, administrator, filed petition for approval of final account and for decree of distribution which approval was opposed by William H. Pemberton Supervisor of the Inheritance Tax and Escheat Division of the State of Washington. From a judgment for the administrator the Supervisor appeals.

Affirmed.

William H. Pemberton, of Olympia, for appellant.

Herman E. Brown, of Seattle, for respondent.

Elizabeth Eilermann, a resident of the state of New Jersey, owned two parcels of real property in this state. Under executory installment sale contracts, she sold the land to two residents of this state. The vendor died testate June 30 1932, in Jersey City, N. J. At that time the balances on the two contracts aggregated $2500. Mrs. Eilermann bequeathed her interest in the two contracts to her cousin and to her daughter-in-law. Mrs. Eilermann's will was admitted to probate in New Jersey and in this state. In the hearing on the administrator's petition for approval of final account and for decree of distribution, the supervisor of the inheritance tax and escheat division of the state appeared and insisted that, under the following statutory provision, the above-described property of the decedent in this state is subject to an inheritance tax: '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 inheritances of this or any other state, * * * shall, for the use of the state, be subject to a tax. * * *' Rem. Rev. Stat. § 11201.

The trial court concluded that the interest of a nonresident vendor in a contract for the sale of land situated within this state is intangible personal property having its situs at the domicile of the vendor, and it is not taxable in this state. The supervisor has appealed.

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, and in Re Lyons' Estate (Wash.) 26 P.2d 615, we held that intangible personal property has its situs in the domicile of its owner and is only subject to inheritance tax by the state of the owner's domicile. See, also, Baldwin v. State of Missouri, 281 U.S. 586, 50 S.Ct. 436, 74 L.Ed. 1056, 72 A. L. R. 1303, and First National Bank of Boston v. State of Maine, 284 U.S. 312, 52 S.Ct. 174, 76 L.Ed. 313, 77 A. L. R. 1401.

In Davie v. Davie, 47 Wash. 231, 91 P. 950, 951, we held that a gift, causa mortis, of a contract for the sale of land, deed for which was executed by the donor and placed in escrow until full payment, is not an oral gift of real estate, but is to be treated as personal property; that the vendor's interest in such a contract as those in the case at bar is intangible personal property. We said:

'Decedent was giving the proceeds from the sale of the land to be paid upon, and according to the terms of, the contract. There was no way of making a delivery except by placing in her possession the written contract and escrow deed, which was done. We think this was sufficient.

'With the contention that this was real estate, and could not be legally made the subject of an oral gift, we cannot agree. Decedent and his wife had made a contract to sell this property. They had executed a deed to be held in escrow, to be delivered when the purchaser should complete his payments as called for in said contract. Having done this, the interest in the real estate became such as is ordinarily treated as personal property in matters of administration. He was virtually giving her the proceeds coming from the sale. In the case of Griggs Land Co. v. Smith, 46 Wash. 185, 89 P. 477, this court said:

"But in the case at bar the owner of the land had made a contract to convey, and he could leave to his heirs only the interest then owned which was virtually but the right to the proceeds; the holder of the contract being entitled to have the land conveyed to him upon paying the purchase price. In such cases the courts have treated the property for purposes of administration, as personal rather than real. A recognition of this doctrine may be found in Hyde v. Heller, 10 Wash. 586, 39 P. 249."

We held in Re Fields' Estate, 141 Wash. 526, 252 P. 534, that decedent Fields' interest as vendor under an executory contract for the sale of real estate to one Bethel should be treated as personal property for the purpose of administration. We said:

'On appeal they contend that the real estate involved in the Bethel contract should have been determined to be real estate belonging to the estate, and it and the other real estate, consisting of the lot in Asotin, should be distributed in equal shares to the widow and to them.

'Appellants rely chiefly upon our decisions to the effect that the purchaser of real estate under an executory contract acquires no title to the real estate, and that no title passes until the vendee has so performed the conditions of the contract as to entitle him to a deed. Younkman v. Hillman, 53 Wash. 661, 102 P. 773; Tieton Hotel Co. v. Manheim, 75 Wash. 641, 135 P. 658; Smith v. Barber, 97 Wash. 18, 165 P. 873; In re Kuhn's Estate, 132 Wash. 678, 233 P. 293; Ashford v. Reese, 132 Wash. 649, 233 P. 29.

'While it is true that no title passed to the vendee under the executory contract from Fields to Bethel, nevertheless, for the purpose of administration, it should be treated as personal property rather than real property.'

See, also, In re Estate of Denning, 112 Or. 621, 229 P. 912, 915, where it was held that an owner's interest in land is converted into personal property when such owner enters into an executory contract for the sale of the land and places the purchaser in possession, and that 'the land should be treated, therefore, as personal property for the purpose of distribution.'

We have consistently held that the situs of intangible property is at all times at the domicile of the owner. We have also repeatedly held that a vendor's interest under an executory contract for the sale of land should be treated as personalty for the purpose of administration. We cannot see any good reason for holding that, for the purpose of administration of an estate, a vendor's interest in such a contract should be treated as personalty but not so treated when the question of inheritance taxation is involved. The two situations are not distinguishable on principle.

Clearly, the interest of a nonresident vendor in a contract for the sale of land situated in another state is intangible personal property. That being so, it logically follows that the vendor's interest is taxable in the state of the owner's domicile, not in the state wherein the land lies.

'Real property situated within the state, although owned by a nonresident, is subject to taxation.

'* * * Formerly it was held in several jurisdictions that, where a nonresident testator owning lands within the state directed a sale of such lands, or where it was absolutely necessary to sell them in order to execute the will, or where there was such a blending of realty and personalty by the testator in his will as clearly to show that he intended to create a fund out of both real and personal estate, and to bequeath the same as money, the doctrine of equitable conversion applied so as not to authorize the state within which the land was situated to levy an inheritance, succession, or transfer tax on the land or its proceeds; but now, under the principles laid down in later United States supreme court cases, the doctrine of equitable conversion of realty into personalty for the purposes of taxation is definitely overruled. * * *

'The interest of a nonresident vendor in a contract for the sale of land situated with in the state is intangible personal property having its situs at the domicile of the vendor, and it is not taxable in the state wherein the land lies. * * * In most jurisdictions a nonresident's tangible personalty which is physically situated in the state is taxable there. In the case of intangible personalty, however, although it was held in some cases, decided prior to United States supreme court decisions settling the rules applicable in determining the situs of intangible personalty, that the laws imposed a tax on a nonresident decedent's intangible personalty, the evidence of which was found in the state, the universal rule in the United States now is that, if a decedent is not a resident of the state at the time of his death his intangible personalty is not taxable therein, except possibly in a case where the intangible personalty has a business situs in the state.' 61 C.J. 1635-1637.

In enunciating the rule confining the jurisdiction to impose death transfer taxes as to intangibles to the state of the domicile, the United States Supreme Court said in First National Bank v. State of Maine, 284 U.S. 312, 52 S.Ct. 174, 176, 76 L.Ed. 313, 77 A. L. R. 1401:

'And it now is established by the three cases last cited that certain specific kinds of intangibles, namely, bonds, notes and credits, are subject to the imposition of an inheritance tax only by the domiciliary state; and this notwithstanding the bonds are registered in another...