In re Perry's Estate

• Decision Date: 15 April 1948
• Docket Number: 8765.
• Parties: In re PERRY'S ESTATE. v. FALL. STATE BOARD OF EQUALIZATION
• Court: Montana Supreme Court

192 P.2d 532

121 Mont. 280

In re PERRY'S ESTATE.

STATE BOARD OF EQUALIZATION v. FALL.

No. 8765.

Supreme Court of Montana

April 15, 1948

Appeal from District Court, First District, Lewis and Clark County George H. Padbury, Jr., Judge.

Proceeding in the matter of the estate of David Perry, deceased, by the State Board of Equalization of the State of Montana against Victor H. Fall, as administrator with the will annexed, for determination of inheritance tax. From an order determining that no tax was due, plaintiff appeals.

Order reversed and cause remanded.

ADAIR, C.J., dissenting in part, and GIBSON, J dissenting.

R. V Bottomly, Atty. Gen., Alfred F. Dougherty, Asst.Atty.Gen., and H. O. Vralsted, of Helena, for appellant.

Victor H. Fall, of Helena, pro se.

ANGSTMAN Justice.

Plaintiff has appealed from an order determining that no inheritance tax is due to the state of Montana from the estate of David Perry, deceased.

David Perry died on February 6, 1946, a resident of California. At the time of his death he was a member of a partnership composed of himself, Owen H. Perry, William M. Perry and John W. Schroeder. The partnership was engaged in dredging operations in Lewis and Clark county, Montana.

The case turns upon the question whether certain real and personal property in Montana constituted property of the partnership or whether it was owned by the individuals named above as tenants in common, and if partnership property, whether it was tangible or intangible property.

The record before us shows that in December 1938 Perry-Schroeder Mining Company, Inc. conveyed by deed to David Perry an undivided 375 0/10,000 interest in and to all of the property and assets of the first party, real, personal and mixed, and wheresoever situated, including 'certain specifically described lands, mining claims, leases on land for placer mining purposes, rights of way and power line,' certain water rights, and 'all dredges, mining machinery, tools, equipment and supplies now owned or used by said corporation.'

All of the above described property has at all times been situated in Montana.

The same deed conveyed to Owen H. Perry an undivided 25 00/10,000 interest; to William M. Perry an undivided 125 0/10,000 interest and to John W. Schroeder an undivided 25 00/10,000 interest. The deed made no mention of a partnership. However, on October 30, 1939, the partners entered into an amended partnership agreement as follows:

'Amended Articles of Partnership of Perry-Schroeder Mining Company

'We, David Perry of Seattle, Washington, John W. Schroeder, Owen H. Perry and William M. Perry of Helena, Montana, do hereby associate ourselves as co-partners, and do hereby mutually covenant and agree, each with the others, to articles of partnership as follows, to-wit:

'1. The copartnership firm name shall be 'Perry-Schroeder Mining Company.'

'2. The business of the copartnership shall be, and be confined to taking over the property and assets of Perry-Schroeder Mining Company, Inc., (a Montana corporation), placer mining on the so-called Eldorado Bar in Lewis and Clark County, Montana, including the owning, leasing and working of placer mining grounds in and in that locality, the acquiring of placer mining machinery and equipment, and the borrowing of money for such purposes, including the assumption of the debts of said corporation; also including such business as may be incident to the conduct of such placer mining industry, and the pledging, mortgaging, exchange or sale of the partnership property.

'3. The respective interests of the several partners in the partnership property and business shall be as follows: David Perry, 18 3/4 per cent; John W. Schroeder, 43 3/4 per cent; Owen H. Perry, 25 per cent; William M. Perry, 12 1/2 per cent.

'4. Upon any disputed question in the management of the partnership business or property, the majority in partnership interest (as distinguished from number of partners) shall control the action of the partnership, and the partnership shall exist and continue so long as it has any indebtedness to Reconstruction Finance Corporation and as much longer as all the partners may desire.

'5. These amended articles of partnership differ from the original only in the respective interests of David Perry and John W. Schroeder.'

David Perry left a will which was filed for probate in California where he also left some property. Ancillary proceedings followed in this state. The inventory and appraisement filed in the ancillary proceedings listed decedent's property in Montana as follows:

"Property of Perry-Schroeder Mining Co., a partnership. Real Property, in Lewis & Clark County, Montana: Parcel #1: SW1/4SE1/4, SW1/4 of Section 3; Pt S1/2 Section 4; Pt N1/2SE1/4 and Lot 9 of Section 5; and NE1/4, NE1/4NW1/4, and Pt Lots 6 and 9 in Section 9; all in Township 11 North, Range 2 West, M.P.M. $ 3,875.00 Parcel #2; All North of Missouri River, Section 10, NW1/4, Pt NW1/4SW1/4, N1/2SE1/4, Lots 1, 2, 3, and 4 less 10 acres, Section 11, All in Township 11 North, Range 2 West, M.P.M. 2,670.00 Improvements on above Realty 5,880.00 Personal Property: Portable Houses 18,200.00 Cash 5,965.36 Petty Cash 25.00 U.S. Bonds 25,068.75 Accounts Receivable 847.70 Prepaid Insurance 620.34 Ditcher made by Company 250.00 RD-7 Caterpillar 1940 4,900.00 Carryall Scraper 750.00 3 only 40 H.P. Ingersoll- Rand Motor pumps 500 G.P.M. at 225 T.D.H. 1,032.00 1 only 15 K V A Transformer 101.00 2 only 7 1/2 K V A Transformers 132.00 2 only 50 K V A Transformers 682.00 47520 feet #8 Bare Copper Wire 2376 lbs. 238.00 1 only International Model C-60 Dump truck 156" wheel base 1935 1,363.00 1 only Ford 1/2 ton Pickup 1941 445.00 1 only 300 Amp Lincoln Welder 250.00 1 only Kirk Hillman 6" Drill 1,300.00 Shop Equipment including all major equipment, small tools and gold melting equipment 2,850.00 1 only 6 Cu. ft. Yuba Dredge 112,000.00 ----------- 189,445.15 Less Taxes due and owing at time of death of decedent 1,126.65 ----------- 188,318.50 Value of the interest of David Perry, above named decedent, and a partner in the Perry-Schroeder Mining Company-- 18 3/4 ........................... 35,309.72."

The final report and petition of defendant administrator filed with the state board of equalization to have determined the inheritance tax due alleges in substance: That testator was a resident of the state of California; that the appraised value of his real estate is $2,329.69; that his personal property consists of $1,118.50 in cash and other personal property of the appraised value of $32,072.78; that his gross estate outside of Montana amounts to $99,184.47; that his gross estate in Montana amounts to $2,329.69 (being the appraised value of his real estate in Montana); that his gross estate wherever situate amounts to $101,514.17; that the undivided 18.75% owned by decedent at the time of his death in the Perry-Schroeder Mining Company, Inc., a partnership, appraised at $33,191.28 exclusive of the value placed on the real property, is intangible personal property within the meaning of Chapter 3, Montana Session Laws 1945, and therefore exempt from the payment of inheritance tax; that the widow of decedent is entitled to an exemption of $17,000 under the laws of Montana and that no inheritance tax is due the state of Montana from the estate or from the beneficiary thereof.

The state board of equalization on behalf of the state of Montana served and filed verified objections to the administrator's final report and petition, alleging among other things: That the report and petition are incorrect and at variance with the inventory and appraisement in variously specified and enumerated respects; that the inventory shows that the property therein listed and evaluated is the property of the Perry-Schroeder Mining Company, Inc., a mining partnership; that the testator, David Perry, owned an undivided 18.75% of all such property appraised at $35,509.72; that testator together with Owen H. Perry, William M. Perry and John W. Schroeder comprise the mining partnership; that they own certain mining claims and leased other mining claims and other property, all situate in Lewis and Clark county, Montana, which they worked and mined for a period of more than five years next preceding decedent's demise, and from which they extracted minerals and derived great profit; that the decedent, his two brothers and Schroeder were jointly engaged in working the mines; that they owned all the property listed and described in the inventory and appraisement as tenants in common; that they owned a certain Yuba dredge listed and appraised at $112,000 located upon the mining claims and property so owned, occupied, mined and worked by them and which they used up to the date of decedent's death in extracting gold and minerals from the mining claims and property in which decedent at the time of his death possessed and owned an undivided interest as tenant in common; that at the time of decedent's death the dredge was mining property placed on the described mining ground and actually used by its owners in mining and extracting minerals and for working and developing the mines; that the dredge is real property and at the time of decedent's death was affixed to the mining claims and real property; that the mining partnership was solvent and all debts were paid; that all the property listed in the inventory and appraisement remained on hand at the time of decedent's death and that he then owned an interest in the whole of the property as such tenant in common; that upon the death of David Perry, the mining operations were discontinued by the owners without any agreement to resume and that there is due the state of Montana inheritance tax upon each item of property...