In re In re Estate of Castle

• Decision Date: 06 September 1919
• Docket Number: No. 1179.,No. 1186.,1179.,1186.
• Citation: 25 Haw. 108
• Parties: IN THE MATTER OF THE ESTATE OF JAMES BICKNELL CASTLE, DECEASED. IN THE MATTER OF THE ASSESSMENT OF THE INHERITANCE TAX ON THE ESTATE OF JAMES BICKNELL CASTLE, DECEASED.
• Court: Hawaii Supreme Court

25 Haw. 108

IN THE MATTER OF THE ESTATE OF JAMES BICKNELL CASTLE, DECEASED. IN THE MATTER OF THE ASSESSMENT OF THE INHERITANCE TAX ON THE ESTATE OF JAMES BICKNELL CASTLE, DECEASED.

No. 1179.

No. 1186.

Supreme Court of the Territory of Hawai‘i.

Argued August 26, 1919.

Decided September 6, 1919.

APPEALS FROM CIRCUIT JUDGE, FIRST CIRCUIT. HON. W. H. HEEN, JUDGE.

Syllabus by the Court

The estate which a widow takes in the property of her deceased husband as her dower does not pass to her by virtue of the intestate laws and is not subject to the inheritance tax which is chargeable only upon property which shall pass by will or by the intestate laws of this Territory.

A devise to trustees in order to be exempt from an inheritance tax as being for or to be devoted to a charitable or educational purpose must be by the terms of the will given up wholly to such charitable or educational purpose.

Where an estate is devised to trustees and such trustees are charged with the duty of paying out of such estate certain annuities, the annuities as such are not subject to the inheritance tax.

H. Irwin, Attorney General, for the Territory.

A. Withington ( Castle & Withington on the brief) for the executors.

F. M. Hatch for Julia White Castle and H. K. L. Castle.

KEMP AND EDINGS, JJ., AND CIRCUIT JUDGE DEBOLT IN PLACE OF COKE, C. J., ABSENT.

OPINION OF THE COURT BY KEMP, J.

James Bicknell Castle, late of Honolulu, died on April 8, 1918, leaving a will made in September 1907, which was admitted to probate on May 18, 1918, by which he disposed of his estate. On April 21, 1919, during the pendency of proceedings for the approval of the final accounts of the executors, the attorney general, on behalf of the Territory of Hawaii, intervened and moved for the appointment of appraisers of the estate for inheritance tax purposes, to the end that the inheritance tax due upon (a) the dower estate passing to the widow, (b) the estate transferred to the trustees, and (c) the life income passing to the son, Harold K. L. Castle, might be definitely ascertained. When the said motion was presented to the probate court having jurisdiction of the cause it was suggested by counsel that as a preliminary to the granting of the motion for the appointment of appraisers it should first be decided by the court whether any tax was due and payable from any person or persons upon any part of the estate transferred by said will or otherwise. Of course if it should be decided that no tax is due there would be no necessity for the appointment of appraisers and the motion presented by the attorney general would necessarily have to be denied. This procedure was agreed to by all parties and the question as to whether any tax is due from either the widow, the son, or the trustees, was argued and presented to the probate court. The probate judge ruled (a) that no tax was due upon that portion of the estate which passed to the widow by way of dower, she having duly elected to take by way of dower rather than under the will, (b) that no tax was due upon the corpus of the estate which by the will was transferred to the trustees for the reason that the will created a valid, charitable trust and conveyed the remainder of the estate to the trustees for the purpose of carrying out the terms of the charitable trust, and (c) that a tax was due upon the life income which under the will was transferred to Harold K. L. Castle, the son. The probate judge allowed the Territory an interlocutory appeal from the first two rulings and allowed Harold K. L. Castle, the son, an interlocutory appeal from the last ruling as above set forth.

At the hearing on appeal the attorney general has confessed error in the ruling of the circuit judge to the effect that the annuity to Harold K. L. Castle is subject to a tax to be paid out of said annuity. In this we concur and in line with the holding of Estate of Brown, 24 Haw. 443, hold that as the residuary clause of the will transfers the entire estate (with the exception of the estate known as Mahuilani on Haleakala, Maui, which is devised to Julia White Castle,) to the executors and trustees, the inheritance tax (if any is due) must be paid by the executors and trustees out of the corpus of the estate. The residuary clause of the will is in part as follows:

“All the rest of my estate, real, personal and mixed, I devise and bequeath to my executors and trustees hereinafter named, for the following purposes:

First. For the payment of my just debts and funeral expenses.

Second. For the following uses and purposes which I will explain in some detail.

I want the business represented by the Hawaiian Development Company, Limited, to go on in the same way as though I were here. The general plans of development in Kona and Koolau are very familiar to Mr. McStocker and in a broad, general way, to Mr. Withington and Mr. Thurston. I have gone into these various enterprises prepared, if necessary for their successful establishment, to hypothecate all of my securities; but, preferably to the continued burden of heavy indebtedness, as rapidly as full value may be obtained, by selling some of my old securities, to convert the same into the new enterprises.

In line with this, it is my present intention, and in case of my decease I desire my executors and trustees, if in their discretion it seem best, to convert two thousand (2,000) shares of Alexander & Baldwin, Limited, stock into cash, provided it can be sold for not less than two hundred dollars ($200.00) per share, putting the same into Kona investments, preferably West Hawaii Railroad Company, and into the Koolau Railway Company, either or both. After the Kona Development Company and the sugar enterprise which I have planned to mature from the Heeia Agricultural and Koolau Companies' properties shall have become successfully established, I do not wish to expand any further in sugar, but only so far as each mill may become the central factory for the manufacture of sugar from the cane bought of small growers.

I do not bind my executors to follow the line of development above indicated, but mean to confer upon them the widest discretion as to investment and development. * * *

My general aim in this whole matter is not to accumulate a great estate for my family or heirs beyond conserving the estate which I now possess and which may be conservatively valued as worth between a million and a million and a half, but to devote any increase thereof to the purposes hereinafter indicated.

I desire my executors to appropriate fifteen hundred dollars ($1500) a month to my widow, that being about the amount necessary to maintain Kainalu, Mahuilani and Puuokoa, Tantalus, if she so desires: that is to say, I desire to have nothing less than this paid to my widow for that purpose, or, if she desires, to apply to her other uses, so long as embarrassing financial conditions do not prevent. Subject to the like qualification, that is, so long as such would not shorten the above named fifteen hundred dollars ($1500.00) a month being paid to my widow, I desire to continue the payments which I now am making to an old friend and teacher in New York, Mrs. H. K. Hovey, whose present address is No. 7 West 108th Street, New York, two hundred dollars ($200.00) quarterly; and I desire to pay to Dr. T. M. Coan, present address 70 Fifth Avenue, New York City, one hundred and fifty dollars ($150) quarterly, for as long as each lives. I desire to assist Dr. N. B. Emerson in his literary work to such extent as may be necessary, not to exceed six hundred dollars ($600.00) a year during his life.

With the successful and profitable establishment, however, of the various enterprises involved, with the requisite income subsequent thereon, I desire to have the amount paid to my widow out of the estate from its income increased to a sum not to exceed forty thousand dollars ($40,000.00) per annum.

Upon the decease of my wife, Julia White Castle, I desire to continue an income to my son H. K. L. Castle, subject to the following conditions: The minimum not to be less than five thousand dollars ($5,000.00) per annum unless caused by financial embarrassment or inconvenience (of which the trustees shall be the absolute judges); the maximum not to exceed forty thousand dollars ($40,000.00) per annum, which forty thousand dollars ($40,000.00) shall include the income which he may be receiving from any property which I may give him prior to my decease, including the income from the one thousand (1,000) shares of stock in Alexander & Baldwin, Limited, herein mentioned, together with that derived from property derived from his mother.

Should the development of the estate be such as to justify the expansion into other or related lines of business than those already initiated, of which condition my executors, or a majority thereof, are fully empowered, without qualification, to decide, and its expansion through establishment of other enterprises in harmony with the ultimate object of my remaining in active business, namely, to accumulate sufficient land and capital to systematically establish an effort to introduce a high-class agricultural immigration of northern races, preferably Scandinavian, Anglo-Saxon, and Teutonic, then I desire them to expand into such enterprises without hesitation and I hereby empower them amply herein for the purpose. * * *

After the fulfillment of the requirements upon the estate as above set forth, I desire to have any excess of income, and after the decease of my said wife and son and said other beneficiaries before named, the whole income (always subject to the decision of the executors to devote same to any business enterprises whatsoever which they may approve) to accumulate toward an educational purpose to be initiated at such time as their judgment will determine the estate amply able to carry on without closing its commercial character.”

What the testator terms his strong desire as to the nature of the...