In re McCoy's Estate
Decision Date | 06 January 1937 |
Docket Number | 26146. |
Citation | 189 Wash. 103,63 P.2d 522 |
Court | Washington Supreme Court |
Parties | In re McCOY'S ESTATE. v. McCOY. STATE |
Department 1.
Appeal from Superior Court, King County; Chester A. Batchelor Judge.
Proceeding in the matter of the estate of Gertrude Butler McCoy deceased, wherein the State of Washington, by William H Pemberton, supervisor of inheritance tax and escheat division, filed a motion for an order requiring Pat McCoy, as executor of the estate of Gertrude Butler McCoy, to list as community assets of the estate certain shares of stock. From an order denying the motion, the supervisor appeals.
Order reversed.
William H. Pemberton, John M. Boyle, Jr., and Charles Snyder, all of Olympia, for appellant.
J. L. Corrigan, of Seattle, for respondent.
Gertrude Butler McCoy died testate, naming Pat McCoy, her husband, as executor of her estate. The will was admitted to probate. Pat McCoy qualified as executor and filed an inventory. Thereafter, William H. Pemberton, as supervisor of the inheritance tax and escheat division of the state of Washington, filed a motion for an order requiring the executor to list, as community assets of the estate, 2,400 shares of McCoy Investment Company, a corporation. The motion came on for hearing, evidence was taken, and the court, concluding that the shares in question did not belong to the estate, denied the motion. The supervisor appeals from the order.
The question to be determined is whether or not Mr. and Mrs. McCoy had made a valid gift of the shares in question to their four children, Wade B. McCoy, Mrs. Charles H. Black, Donald McCoy, and Elizabeth McCoy. In approaching the problem, it must be borne in mind that there are three essential elements required to constitute a valid gift of personal property: (a) An intention on the part of the donor to presently give; (b) a subject-matter capable of passing by delivery; and (c) an actual delivery at the time. 'The delivery must be such as will divest the donor of the present control and dominion over the property absolutely and irrevocably and confer upon the donee the dominion and control.' In re Slocum's Estate, 83 Wash. 158, 145 P. 204, 205; Dingley v. Robinson, 149 Wash. 301, 270 P. 1018.
The articles of incorporation of McCoy Investment Company were executed March 23, 1925, by Patrick McCoy, Charles H. Black, and George V. Whittle. The articles provided for not less than three nor more than five trustees. The three incorporators were named as trustees, to act for two months from the date of filing the articles. It was provided that 'the capital stock * * * shall be two hundred and fifty thousand dollars divided into twenty five hundred shares of the par value of one hundred dollars each.' Paragraph seventh provided as follows:
The first meeting of the incorporators and subscribers was held April 4, 1925. The minutes of the meeting recite:
'The following incorporators and subscribers were present in person:
In the minutes appears the following resolution:
'Resolved, that the offer of Patrick McCoy to turn over assets to the approximate value of $850,000.00, which assets are adjudged and declared to be of such value by the Board of Trustees, and that the Vice-President and Secretary be and are hereby authorized to execute and deliver such agreement or agreements as may be necessary for the purchase of such property in accordance with said offer and furthermore that the Vice-President and Secretary be and are hereby directed to issue and deliver in payment for said assets, certificates of full paid capital stock of this corporation to said Patrick McCoy or his nominees for an aggregate of twenty-five hundred (2500) shares.'
There also appears a list of the assets so offered and accepted. They consist of:
Seattle 2,500.00
Balance on Timber Contract
Webb Logging Company 75,000.00
Loans (Notes)
(Follows a list of 19
individual notes of persons
and corporations) 141,054.00
Timber
(Follows a list of 3 timber
holdings) 80,000.00
Stock
(Follows a list of holdings
in 9 corporations) 180,300.00
Real Estate
(Follows a list of
descriptions of real estate
conveyed to the company
by 'Pat McCoy and Gertie McCoy.') 92,500.00 The assets listed comprised all of the property of Mr. and Mrs. McCoy, except their home.
From the stock book, it does not appear that any certificate was ever issued to Patrick McCoy for 2,498 shares. In fact, it appears that no certificates were issued until June 1, 1925. Under that date, certificates of 1 share each were issued to Wade B. McCoy, Charles H. Black, George V. Whittle, and E. C. Million. These certificates Whittle, and E. C. Million. These certificates persons named to act as trustees. For on June 2, 1925, at the first annual meeting of the stockholders, they and Patrick McCoy were elected trustees of the corporation. That was the only business transacted at the meeting. At the trustees' meeting immediately following, Patrick McCoy was elected president and treasurer; Wade B. McCoy, first vice president; Charles H. Black, second vice president; and George V. Whittle, secretary. These same officers were thereafter re-elected annually. The same persons were elected as trustees until 1932, when John L. Corrigan was elected to succeed E. C. Million. The stock certificate issued to the latter was canceled, and a certificate for a qualifying share was issued to Corrigan June 23, 1932. In the meantime, the following certificates were issued:
July 7, 1925, 250 shares to Wade B. McCoy
July 7, 1925, 250 shares to Mrs. Charles H. Black
July 7, 1925, 50 shares to Donald M. McCoy
July 7, 1925, 50 shares to Elizabeth McCoy
July 7, 1925, 1896 shares to Patrick McCoy.
The latter certificate is marked: 'Canceled July 7, 1925.'
On September 7, 1928, the following certificates were issued:
350 shares to Wade B. McCoy
350 shares to Mrs. Charles H. Black
550 shares to Donald McCoy
550 shares to Elizabeth McCoy
96 shares to Patrick McCoy.
None of the children ever had in his possession any of the certificates issued to him. For aught that appears in the record, none of the children, except Wade B. McCoy, ever knew that the certificates had been issued.
The certificates were left in the custody of the secretary, George V. Whittle, who described his functions as follows:
'A. I am a so-called expert on tax matters and supposed to know the law and regulations.
'Q. Isn't that the purpose of your service in these matters? Read my former question. (Question read as follows: 'And it is your business to so arrange matters so they don't have to pay taxes, or if they do have to pay they pay the very least amount, isn't that what you mean when you say you are an expert?') A. It means that a person who is an expert takes advantage of all legal technicalities of the law.
'Q. This is the way you have this arranged: you advised them that they wouldn't need to pay inheritance tax if one of them died after this arrangement, did you? A. No.
'Q. Was there any question of taxes discussed between you and them in making these plans? A. No, not at that time.
'Q. You are an expert, and that is your business, to keep people from paying taxes, and when they come to you you don't even discuss the matter? A. Mr. McCoy wanted to make a distribution to his children, and the proper method, in order to keep the thing going legitimately and properly for all time, was to form a corporation and do it that way.
'Q. Why didn't you tell him to just give it outright and let them have it? A. Because it was scattered all over the place. You couldn't make an equitable division, you couldn't possibly make an equitable division.
'Q. Couldn't make an equitable division? A. No, and come under the gift act.
'Q. Oh, you did discuss taxes then, about the gift tax? A. Yes, so far as the gift tax was concerned, yes.
'Q. Nothing about the inheritance tax at all? A. No.
'Q. So this arrangement was not perfected by you to prevent the payment of inheritance? A. Not necessarily, no.
He also testified (as did Patrick McCoy and Wade McCoy) that the certificates were left with him with the understanding that they should be delivered to the children on demand. In other words, the inference desired for us to draw is that Patrick McCoy delivered the certificates to Whittle as agent for the children. But the uncontroverted facts with respect to the management of the company's business does not, in our opinion, admit of any such inference. Patrick McCoy completely dominated the company's affairs. Through the years of the company's existence, Mrs. McCoy and the children had charge accounts at various stores, which were paid monthly by Patrick McCoy with company checks. In addition, money was given to the children in varying amounts. The living expenses of the Patrick McCoy household were paid with company funds. Mr. Whittle testified: 'Mr. McCoy would issue checks to the various individuals from time to time and pay all their living expenses, and clothing, and every other thing, cars, and whatnot, any expenses.' At the annual meeting each year a dividend was declared in the amount of...
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