In re Fulham's Estate

• Citation: 119 A. 433
• Decision Date: 04 January 1923
• Docket Number: No. 394.,394.
• Parties: In re FULHAM'S ESTATE.
• Court: United States State Supreme Court of Vermont

119 A. 433

In re FULHAM'S ESTATE.

No. 394.

Supreme Court of Vermont. Windsor.

Jan. 4, 1923.

Exceptions and Appeal from Windsor County Court; Stanley C. Wilson, Judge.

Proceedings for inheritance tax by the State Commissioner of Taxes against the estate of Volney S. Fulham, deceased. From a pro forma judgment of the county court affirming the decree of the probate court in favor of the estate, the Commissioner excepted and appeals. Reversed, with directions for judgment for claimant.

Argued before WATSON, C. J., and POWERS, TAYLOR, MILES, and SLACK, JJ.

Frank C. Archibald, Atty. Gen., and F. B. Thomas, of Montplier, for appellant.

Charles H. Darling, of Burlington, for estate.

POWERS, J. The probate court for the district of Windsor disallowed the claim of the state for a transfer tax on certain property formerly owned by Volney S. Fulham, late of Ludlow. The commissioner of taxes, in behalf of the state, appealed to the county court, wherein a trial by court was had on an agreed statement of facts, and judgment was rendered for the defendant estate. The state alleges error. Briefly stated, the essential facts are as follows: At different times, Fulham, being the owner of certain railroad stocks, indorsed the seven certificates representing the same and delivered them to the trustees of Tufts College, a Massachusetts corporation, in trust. He made deposits in certain saving institutions in this state, taking the passbooks in the name of the "Trustees of Tufts College, trustee of the estate of Volney Sewell Fulham," and delivering them to the college. On October 2, 1915, he made a will giving the residue of his estate to the trustees of Tufts College, in trust for educational purposes.

On September 27, 1917, he executed a writing wherein he recited the fact that he had made a will by which he bad bequeathed to the college the residue of his estate, including, as the writing states, "stock in the New York Central & Hudson River Railroad Company and stock in the New York Central Railroad Company that I had before assigned and delivered to said trustee, in trust, all to be transferred to said trustee on the books of said corporation after my death, so that I might receive the dividends thereon during my life * * * and said trustee accepted said trust in writing. * * *" This writing also recited the fact that be had made the deposits above referred to as a part of said trust fund, and that he then intended in his lifetime to create and establish the trust "projected in said will, independently of the provisions thereof," except as thereinafter provided. The writing then continues:

"Now, therefore, in order to put said trustee in possession of nearly all my property while I live, I hereby release to said trustee my right to further dividends from said stocks; and I direct said trustee to procure the transfer of said stocks to said trustee on the books of said companies. And in consideration of the assumption by said trustee of the trust hereby created, I hereby give, grant, convey and confirm to said trustees of Tufts College, trustee, in trust, all the stocks described in the seven certificates issued to me in said railroad companies, the aforesaid two books of deposit in savings institutions, with moneys deposited and that may be deposited therein by me to the credit of said trustee, and all the assets remaining in the hands of the executor of my will or that may remain after the settlement of my estate. Said trustees of Tufts College, trustee, to have and to hold said stocks, the sums deposited by me in institution of savings to the credit of said trustee with the accumulated interest thereon, and what may come to said trustee from my estate on its settlement, in trust for the uses and purposes specified in said will, except, if the funds retained by me for personal expenses, at any time, in my judgment, shall be insufficient therefor, or if for any reason I desire it, said trustee shall pay back to me, on demand, any part of said trust fund."

Then follows a further provision not here important. The college through its president accepted the trust and agreed to administer it according to the will.

The stocks and deposits constituted practically all of the property owned by Fulham. The certificates and passbooks have remained in the possession of the college from the time of their deliveries, but the former have never been transferred on the books of the corporations. The college has never collected the dividends on the stocks, but these were paid to Fulham as long as he lived, and then to his executor. The interest on the deposits has been allowed to accumulate, and none of it has been withdrawn.

From the foregoing, it is apparent that, whatever the understanding may have been between Fulham and the college when this property was delivered to the latter, their ultimate relations to this property and to each other in respect thereof was such as was evidenced by this writing of September 27th. All right, title, or interest Which Fulham theretofore had in or to that property was released and cut off by that writing; not absolutely, however, but provisionally. If, in his own judgment, he had left enough for his personal expenses, the gift stood. If not, he could recall any part of the fund. Not only this, but, if for any reason he desired it, the college was bound to restore any part of the fund, on his demand. In these circumstances, is this property subject to a transfer tax under the statute? In stating the question in this form, and in referring to the taxability of this property elsewhere herein, we do not overlook the fact that such a tax as is here claimed by the state is not a tax on the property itself, but upon the right of succession to the property. In re Joyslin's Est., 76 Vt. 88, 06 Atl. 281; In re Hickok's Est., 78 Vt. 259, 62 Atl. 724, 6 Ann. Cas. 578; In re Howard's Est., 80 Vt. 489, 68 Atl. 513. G. L. 1093 reads as follows:

"Every person in a class liable to a tax under the second and third preceding sections, who acquires title to real estate within this state or any interest therein by deed, grant or gift, except in case of a bona fide purchase for a full consideration in money or money's worth, made or intended to take effect in possession or enjoyment upon or after the death of the grantor or donor, and every such person who thus acquires title to personal estate or any interest therein from a deceased person who at the date of his death was an inhabitant of this state and then owned such property, shall pay to the state the same tax that he would have been required to pay had such estate or interest passed to him from such deceased person by will, the laws of descent or decree of a court in this state. Such tax shall be a first lien on the real or personal estate thus conveyed, until paid in full."

The college is such a "person" as is referred to; the transaction was not such a purchase as is described; and Fulham was, at the time of his death, an inhabitant of this state. Thus far, there is no controversy.

It is quite generally held that taxing statutes are to be strictly construed against the taxing power, and this rule is applied to statutes providing for inheritance taxes. But the real meaning and purpose of the lawgiver is the thing to be sought after, and if fair and reasonable construction discloses it, it is to be given effect. Then, too, we must remember that the section under consideration is not the one that provides for taxing inheritances, direct or collateral, but the one intended to prevent the evasion of such taxes. The very purpose of its enactment was to make it impossible to escape such taxes by transfers merely colorable or fictitious. The policy of such statutes—now in force in many of the states—is that the owner of property shall not evade the tax, except by full and effective transfers made during his lifetime. State Street Trust Co. v. Stevens, 209 Mass. 373, 95 N. E. 851. Surely, such a statute should be carefully considered and liberally construed in favor of the taxing power (In re Gordon, 186 N. Y. 471, 79 N. E. 722, 10 L. R. A. [N. S.] 1089), lest its purpose be easily circumvented by designing persons. For a construction that would facilitate evasion should be avoided. Endl. Sts. §§ 138, 152.

The legislative history of the statute before us is both interesting and instructive. G. L. 1093, originated in section 2, No. 30, Acts of 1904, which, so far as need be quoted, reads as follows:

"Every person * * * who shall acquire title to real estate or any interest therein by voluntary conveyance or deed of gift made or intended to take effect in possession or enjoyment upon or after the death of the grantor, or who shall by voluntary conveyance or by gift acquire title to personal estate or any interest therein made or intended to take effect and [in] possession or enjoyment upon or after the death of the grantor or donor," etc.

This became P. S. 823, where it reads:

"Every person * * * who acquires title to real or personal estate or any interest therein by voluntary conveyance or gift made or intended to take effect in possession or enjoyment upon or after the death of the grantor or donor," etc.

So far, then, the statute treated real and personal estate transfers alike, and made their taxability depend on when they were to take effect in possession and enjoyment. Then came No. 60, Acts of 1912, section 2 of which amended P. S. 823, so as to read (in the respect here important) just as G. L. 1093, does.

To give effect to this statute according to the purpose of the...