In re Estate of Sanford

• Decision Date: 19 December 1919
• Docket Number: 32892
• Citation: 175 N.W. 506,188 Iowa 833
• Parties: IN RE ESTATE OF HETTA A. SANFORD
• Court: Iowa Supreme Court

175 N.W. 506

188 Iowa 833

IN RE ESTATE OF HETTA A. SANFORD

No. 32892

Supreme Court of Iowa, Des Moines

December 19, 1919

REHEARING DENIED MARCH 17, 1920.

Appeal from Cass District Court.--J. B. ROCKAFELLOW, Judge.

THIS is an appeal from the finding and decree of the district court of Cass County, holding the estate of Hetta A. Sanford liable for the payment of a collateral inheritance tax. E. H. Hoyt treasurer, F. M. Nichols, executor, Charles W. Sanford, Daisy R. Sanford, and other residuary legatees appeal.--Reversed in part and remanded.

Reversed in part and remanded.

H. M Havner, Attorney General, B. J. Powers, Tom C. Whitmore, and E. M. Willard, for appellants.

D. J. Flaherty, for appellees.

STEVENS, J. LADD, C. J., WEAVER and GAYNOR, JJ., concur.

OPINION

STEVENS, J.

Hetta A. Sanford, a resident of Cass County, Iowa, died testate on December 20, 1916, seized and possessed of real and personal property of the approximate value of $ 230,000. Of this amount, $ 35,054.69 was personal property; and the rest, real estate situated in Iowa, Nebraska, and Missouri. The Missouri land was devised in fee, and does not enter into our consideration in this case. Her will made money bequests to the extent of $ 147,800 to various collateral relatives, friends, missionary societies, colleges, and other societies or institutions. The following is the residuary clause of the will:

"If after all my just debts are paid, and all of the foregoing gifts and bequests are paid and satisfied it should be found that there still remain a portion of my property that has not been disposed of, I desire that such undisposed of property shall be divided share and share alike between my son, Charles W. Sanford, my daughter-in-law, Daisy R. Sanford, and my sister, Martha H. Ayres."

The case involves few, if any, disputed questions of fact, and was submitted largely upon an agreed statement of facts, from which it appears that the net value of the estate in Iowa, subject to the collateral inheritance tax, was $ 84,428.56 (on which the tax, amounting to $ 4,221.43, was promptly paid by the executor), and of the real estate and other property in Nebraska, which includes $ 6,796.25 received as rental therefrom, was $ 110,986.37. The controversy arises out of the attempt of the treasurer of the state of Iowa to collect an inheritance tax upon the Nebraska property. The will was admitted to probate by the district court of Cass County, Iowa, on the 23d day of January, 1917, and Frank M. Nichols was appointed executor; and, on July 23, 1917, same was admitted to probate in Saunders County, Nebraska, upon a duly certified and authenticated copy of the will and of its probate by the district court of Cass County, and Frank M. Nichols was appointed executor in that state. Except a small amount of money, none of the personal property or proceeds of the sale of the Nebraska real property has been brought into this state by the executor, but $ 56,850 thereof has been paid to various legatees named in the will, the amount paid to each being 75 per cent of the legacy. The court below found this amount subject to the succession tax, and directed the executor to pay $ 2,842.50, with interest thereon, to the treasurer of state, but found that the real estate in Nebraska, except that actually used to pay legacies, did not come within the statutes or jurisdiction of this state. The Iowa real estate sold by the executor consisted of 720 acres in Adair County, and the Nebraska real estate, of 320 acres in Saunders County and a large tract in York County.

I. It is not claimed by counsel for appellants that real property situated outside of this state, as such, is subject to the payment of a succession tax in this jurisdiction, but that, by the terms of the will of Hetta A. Sanford, there was an equitable conversion of all of her real estate, and that, under the provisions of Section 1481-a, Supplement to the Code, 1913, the same became subject to the tax in this state. Section 1481-a is as follows:

"The estates of all deceased persons, whether they be inhabitants of this state or not, and whether such estate consists of real, personal or mixed property, tangible or intangible, and any interest in, or income from any such estate or property, which property is, at the death of the decedent owner, within this state or is subject to, or thereafter, for the purpose of distribution, is brought within this state and becomes subject to the jurisdiction of the courts of this state, or the property of any decedent, domiciled within this state at the time of the death of such decedent, even though the property of such decedent so domiciled was situated outside of the state, except real estate located outside of the state passing in fee from the decedent owner, which shall pass by will or by the statutes of inheritance of this or any other state or country, or by deed, grant, sale, gift, or transfer made in contemplation of the death of the donor, or made or intended to take effect in possession or enjoyment after the death of the grantor or donor, to any person, or for any use in trust or otherwise, other than to or for the use of persons, or uses exempt by this act shall be subject to a tax of five per centum; * * *"

The doctrine of equitable conversion has been so often defined and discussed by the courts of this and the other states of the Union as to require little more than a restatement of the conditions under which same will arise, and to make application thereof to the facts of this case. The general rule was stated in Hanson v. Hanson, 149 Iowa 82, 127 N.W. 1032, as follows (quoting from Darlington v. Darlington, 160 Pa. 65, 28 A. 503):

"'To work a conversion of real estate into personalty, there must be either (a) a positive direction to sell; (b) an absolute necessity to sell, in order to execute the will; or (c) such a blending of realty and personalty by the testator in his will as to clearly show that he intended to create a fund out of both real and personal estate, and to bequeath the same as money. In the first, the intention to convert is expressed; in the latter two, it is implied. A bare power of sale, like a discretionary power given in a will, does not work a conversion, until exercised.' Again, it has been said in effect that: 'Equitable conversion arises from an express, clear, and imperative direction, or from a necessary implication of such express direction. The question of conversion is one of intention, and the question is, Is it the testator's intent to have his real estate converted into personalty immediately upon his death?' (citing Clift v. Moses, 116 N.Y. 144)"

The will in question did not contain positive directions to sell any of the real estate. The personal property amounted to only $ 35,054.69, of which amount approximately two thirds were required for the payment of debts and the expenses of administration; so that it was necessary for the executor to sell a large portion of the real estate, to pay the legacies provided by the will. It is contended by counsel for appellant that this necessity worked an equitable conversion of at least so much of the real estate of testator as was required for the payment of the legacies, amounting to $ 147,800. Unless, however, an absolute, imperative necessity to sell the real estate, or some part thereof, in order to carry out the terms and provisions of the will, is shown, an equitable conversion did not result. If, on the other hand, such absolute, imperative necessity existed, then the intention of the testator to work an equitable conversion of the real estate will be implied. Hanson v. Hanson, supra; Beaver v. Ross, 140 Iowa 154, 118 N.W. 287; In the Matter of the Estate of Bernhard v. Henning, 134 Iowa 603, 112 N.W. 86; Swisher v. Swisher, 157 Iowa 55, 137 N.W. 1076; Inghram v. Chandler, 179 Iowa 304, 161 N.W. 434; Ramsey v. Ramsey, 226 Pa. 249 (75 A. 420); Isenburg v. Rose, (N. J.) 99 A. 615; Harris v. Ingalls, 74 N.H. 339 (68 A. 34); Chick v. Ives, (Neb.) 2 Neb. Unoff. 879, 90 N.W. 751; Griffith v. Witten, 252 Mo. 627 (161 S.W. 708); Greenman v. McVey, 126 Minn. 21 (147 N.W. 812); Stake v. Mobley, 102 Md. 408 (62 A. 963); In re Tailer, 147 A.D. 741 (133 N.Y.S. 122); Lynch v. Spicer, 53 W.Va. 426 (44 S.E. 255); Becker v. Chester, 115 Wis. 90 (91 N.W. 87); Appeal of Clarke, 70 Conn. 195 (39 A. 155).

Manifestly, the facts disclosed make it certain that testator must have intended an equitable conversion of at least a part of her real estate, which took place immediately upon her death, for the purpose of executing and carrying out the terms of her will. Beaver v. Ross, supra; In the Matter of the Estate of Bernhard, supra; Swisher v. Swisher, supra; Inghram v. Chandler, supra; Hanson v. Hanson, supra.

There was an equitable conversion, however, only to the extent that the sale of real estate was imperatively necessary to pay the pecuniary legacies and otherwise carry out the intention and purpose of the testator. Duffield v. Pike, 71 Conn. 521 (42 A. 641); McHugh v. McCole, 97 Wis. 166 (72 N.W. 631); Painter v. Painter, 220 Pa. 82 (69 A. 323); Boyce v. Kelso Home, 107 Md. 190 (68 A. 550); Kolars v. Brown, 108 Minn. 60 (121 N.W. 229); James v. Hanks, 202 Ill. 114 (66 N.E. 1034).

But it is earnestly argued by counsel for appellees that, even though there was an equitable conversion of a part or all of the real estate of testatrix situated in the state of Nebraska, it is not liable to the payment of a succession tax in this state, for the following principal reasons: (a) That no part of the proceeds of the sale of the Nebraska property has ever been brought into the state of Iowa, or within the jurisdiction of the courts of this state; (b) that the administration of the estate in...