In re Fotheringham's Estate

• Court: Washington Supreme Court
• Writing for the Court: [183 Wash. 580] STEINERT, Justice.
• Citation: In re Fotheringham's Estate, 49 P.2d 480, 183 Wash. 579 (Wash. 1935)
• Decision Date: 19 September 1935
• Docket Number: 25411.
• Parties: In re FOTHERINGHAM'S ESTATE. v. FOTHERINGHAM. STATE, by PEMBERTON, Supervisor of Inheritance Tax and Escheat Division,

49 P.2d 480

183 Wash. 579

In re FOTHERINGHAM'S ESTATE.

STATE, by PEMBERTON, Supervisor of Inheritance Tax and Escheat Division, v. FOTHERINGHAM.

No. 25411.

Supreme Court of Washington, En Banc.

September 19, 1935

Appeal from Superior Court, Spokane County; Joseph B. Lindsley Judge.

Proceeding by the State, by William H. Pemberton, supervisor of Inheritance Tax and Escheat Division, against the estate of Mary Fotheringham, deceased, to have appraisement of property of deceased for inheritance tax purposes increased. From an order increasing valuation of assets of the estate for inheritance tax purposes, B. H. Fotheringham, executor of the estate of Mary Fotheringham, deceased, appeals.

Order reversed, with directions.

D. R Glasgow, of Spokane, for appellant.

Wm. H Pemberton and John M. Boyle, Jr., both of Olympia, and Henry Russell, of Seattle, for respondent.

Hamblen Gilbert & Brooke, of Spokane, amici curiae.

STEINERT, Justice.

This is an appeal by the executor of a decedent's estate from an order increasing, for inheritance tax purposes, the valuation of the assets of the estate.

Mary Fotheringham died, testate, on February 1, 1932. Her executor, who is the appellant here, filed an inventory of the estate, upon which an appraisement was made by three duly appointed appraisers. According to the appraisement, the real estate was valued at $91,780 and the personal property at $12,750, or a total of $104,530. The state of Washington through its supervisor of inheritance tax and escheat division, respondent here, filed exceptions to the appraisement, claiming that the appraisement was too low. The exceptions are based upon the following allegations: That the assessed valuation of the real estate for the year 1932 was $59,520; that the ratio of assessed values to market values of real property for that year, in Spokane county, was 44 per cent.; that, computed upon that ratio, the true value of the real estate here involved was, for inheritance tax purposes, $134,135; that the appraised value of the personal property was $12,750; and that the total value of the estate, for inheritance tax purposes, was $146,885. It will be observed that this computation results in an increase of $42,355 in the valuation of the real estate and, consequently, of the total estate.

Issue was joined upon the state's exceptions, and, after a hearing, the court entered an order sustaining the exceptions and increasing the valuation of the assets of the estate, for inheritance tax purposes, by the sum of $42,355. From that order this appeal was taken.

The question that is now presented comes to us through a rather peculiar and uncommon set of circumstances, owing to successive changes in the law with respect to appraisement and valuation of decedents' estates for inheritance tax purposes.

Immediately prior to 1931, the law upon that subject was contained in Rem. Comp. Stat. § 11211, as amended by chapter 205, Laws 1929, p. 530, § 3 (Rem. Rev. Stat. § 11211 [Pierce's Code, § 7062]). Section 3 of the act of 1929, so far as it is material here, reads as follows:

'The superior court, having jurisdiction, shall appoint three suitable, disinterested persons to appraise the estate and effects of deceased persons for inheritance tax purposes, and unless otherwise provided by order of the court, the appraisers appointed under the probate law to appraise the estate and effects of deceased persons shall be and constitute the appraisers under the provisions of this act. * * * The supervisor of the inheritance tax and escheat division or any person interested in the estate appraised, may file exceptions to the appraisement, which shall be heard and determined by the court having jurisdiction in probate of the estate involved. If, upon the hearing, the court finds the amount at which the property is appraised is its market value and the appraisement was fairly and in good faith made, it shall approve such appraisement; but if it finds that the appraisement was made at a greater or less sum than the market value of the property, or that the same was not fairly or in good faith made, it shall set aside the appraisement and determine such value. The supervisor of the inheritance tax and escheat division, or any one interested in the property appraised, may appeal to the supreme court from the order of the superior court in the premises.'

It will be observed that by this section of the 1929 act the estates and effects of deceased persons were to be appraised at their market value, upon appraisements made fairly and in good faith.

In 1931 the Legislature passed chapter 134, p. 400, Laws of 1931, amending various sections, including section 3 of the 1929 act. Section 7 of the 1931 act provides:

'That section 11211 of Remington's Compiled Statutes as amended by section 3, chapter 205 of the Laws of 1929, be amended by adding thereto a new section to be known as section 11211-A, to read as follows:

'Section 11211-A. The market value of all real estate and the improvements thereon, of the estate of a deceased person, for the purpose of computing the inheritance tax, shall be the value of such real estate and improvements, as fixed and determined by the county assessor, board of county equalization, state tax commission, or state board of equalization and the valuation fixed by the appraisers shall be based upon the ratio of the assessed valuation to the actual value of the property, as fixed by the state board of equalization as provided by law.

'The executor, administrator or trustee, in preparing the inventory in all probate cases shall insert, at the right of each real estate tract, the assessed valuation of such tract as hereinBefore determined and also the assessed valuation of the improvements thereon.'

The body of this section appears as Rem. Rev. Stat. § 11211-a, (Pierce's Code 1931 Supp. § 7062-1).

It will be observed here that, while by the 1929 act the appraisers were required to determine the market value upon their own appraisement, fairly and in good faith, the 1931 act prescribed that the market value of real estate and the improvements thereon should be based upon the assessed value thereof according to the ratio employed by the taxing officials. To that extent the powers and duties of the appraisers of an estate were circumscribed and limited. The later act peremptorily fixed the basis upon which the market value of real estate and improvements thereon was to be determined by the appraisers.

The lower court upheld the validity of the 1931 act, and upon that basis sustained the state's exceptions to the appraisement and increased the valuations of the estate proportionately.

The question Before this court, at the time that the appeal was taken, was whether Rem. Rev. Stat. § 11211-a, above quoted, was mandatory and controlling upon the appraisers in determining the value of real estate. Upon that question the case was argued on February 20, 1935. After submission of the cause, the Legislature, on March 25, 1935, passed chapter 180, Laws 1935, which is a general revenue act. That act contained an emergency clause and became effective immediately. Sections 104 to 127, inclusive, of the act, relate to inheritance taxes. Section 106 sets forth a complete schedule of rates to be charged, which are materially in excess of the rates theretofore obtaining. Sections 113 and 123 provide, among other things, for appraisement of the estates and effects of deceased persons at their market value by three appraisers appointed by the court. These two sections restored the law in that respect substantially as it existed prior to the passage of Rem. Rev. Stat. § 11211-a, supra. Section 114 specifically amended Rem. Rev. Stat. § 11211-a, and provided that all real estate and improvements thereon, of the estate of a deceased person, should, for the purpose of computing the inheritance tax, be valued and appraised at the fair market value thereof on the day of the death of the decedent owner. Section 115 relates to inheritance taxes to be paid on the proceeds of insurance policies.

Section 124 reads as follows:

'The provisions of the title [of chapter 180], except section 115, shall apply to all cases pending in the inheritance tax and escheat division and to all cases pending in any of the courts of this state, whether on appeal or otherwise, at the time this act takes effect, whether the death of the decedent occurred prior to the passage of this act or subsequent thereto: Provided, however, That the inheritance tax now due Before the passage of this act may be paid under the law effective immediately Before the passage of this act if paid within ten months from the time this law becomes effective: Provided, further, That if a portion of the inheritance tax is paid in any estate now pending within the ten months as herein provided, then the increased rates under this title shall apply only upon the proportionate part of such estate remaining unpaid.'

This court having been advised of the change in the law, and the case not having then yet been decided, we called for a reargument. Upon the second argument, the question presented was whether or not the 1935 act had any effect upon the case at bar, and, if so, to what extent. The question arises principally out of section 124, above quoted.

The language of that section itself is very explicit in three respects: (1) That the provisions of the act, except section 115, shall apply to all cases pending on March 25, 1935, in the inheritance tax and escheat division or in any of the courts of this state, whether on appeal or otherwise, and whether the death of the decedent occurred prior to the above date or subsequent thereto; (2) that the inheritance tax due Before the passage of the act...