In re Stephenson's Estate

• Decision Date: 06 June 1944
• Docket Number: 46390.
• Citation: 14 N.W.2d 684,234 Iowa 1315
• Parties: In re STEPHENSON'S ESTATE.
• Court: Iowa Supreme Court

14 N.W.2d 684

234 Iowa 1315

In re STEPHENSON'S ESTATE.

No. 46390.

Supreme Court of Iowa

June 6, 1944

John M. Rankin, Atty. Gen., Jens Grothe, Sp. Asst Atty. Gen., and W. D. Daly, Counsel, Inheritance Tax Division of Iowa State Tax Commission, of Des Moines, for appellant.

O M. Slaymaker, R. E. Killmar, and D. D. Slaymaker, all of Osceola, for appellees.

SMITH, Chief Justice.

The facts may be briefly stated. Decedent, an unmarried woman, 86 years old when she died July 6, 1941, was an aunt of Pearle Gould (formerly Pearle Stephenson) who became administratrix of her estate. She had lived with her niece and husband Roy H. Gould (hereinafter called the claimant) since 1911, the year Pearle and claimant were married. Decedent's parents were then dead and she had already, in 1907, made a will in which she gave all her estate to "my beloved niece, Pearle Stephenson."

This will was promptly probated after her death and the administratrix gave immediate notice of her appointment. More than a year later claimant filed his claim for $6,000 for "room, board, keep and nursing" since 1911 furnished upon "expressed oral agreement to pay for the same."

At the same time the administratrix filed a Report and Application showing that she held as an asset of the estate, a note and mortgage dated March 1, 1919, for $4000, given by claimant and herself; that her husband had paid interest on said note in cash on each due date during decedent's lifetime; that she (administratrix) had knowledge of the services for which the claim was filed; that she had agreed to present the situation to the court for allowance of his claim as an offset; that he need not file his claim but she "would see that it was taken care of." She also reported that she believed the claim was just and had agreed in writing to a compromise by which the note and mortgage of $4000 would be cancelled and surrendered in settlement of the claim. She asked authority to consummate this settlement agreement.

The Iowa State Tax Commission, being duly notified, filed objections to the allowance of the claim and asked that the approval of the Report and Application of the administratrix be withheld and denied, pending adjudication of the claim. The objection to the claim was based on a general denial of knowledge, and on the special defense that the claim was barred because not timely filed and no peculiar circumstances were shown entitling claimant to equitable relief. No allegation of fraud or bad faith was made or of improper collusion between the administratrix and her husband, the claimant. It is alleged however that "the claim is filed with the sole object and intent of avoiding payment of inheritance tax."

The probate inventory and preliminary inheritance tax report, filed July 1, 1941, shows as assets the $4,000 note and mortgage, a bank deposit balance of $49.25, and an unsecured note of $200 signed by other parties. It shows liabilities of the estate $4500, being the claim in question here. Based on the preliminary report the court made an order finding the estate not subject to inheritance tax.

The trial court, basing its decision upon the proposition that the Commission could only litigate the question of fraud, "perpetrated or attempted to be perpetrated in the allowance of claims so as to defeat a legitimate claim of the state," held there was no such fraud shown, that there were equitable reasons excusing claimant's failure to file his claim within the six month period, allowed the claim and approved the compromise agreement. The Commission will hereinafter be referred to as appellant; claimant and administratrix, when spoken of collectively, will be called appellees.

Various errors are assigned: (1) That the testimony of appellees should have been excluded because of incompetency of the witnesses under section 11257, Code of Iowa 1939 ("dead man's statute"), and because the claim was filed too late and was barred under Code section 11972, as amended by c. 301, § 2, Acts of the 49th General Assembly; (2) that under the uncontradicted evidence the services covered by the claim were to be compensated for by the provision in the will giving all decedent's property to the wife of claimant; (3) that the court erred in holding appellant could only contest the claim and proposed compromise by alleging and proving fraud; (4) that there was no evidence of "peculiar circumstances" excusing failure to file the claim within the statutory time.

I. It seems logical first to consider the status of appellant in this litigation. Determination of that question will perhaps help in solving the questions presented by the assignment of errors.

The proceeding was, on its face, one for the allowance of a claim and approval of a compromise of it by use of the principal asset of the estate as an offset. It was in fact, however, a proceeding for the purpose of determining the net estate subject to inheritance tax. When the claim and the Report and Application (for leave to compromise) were filed the court, recognizing the situation, set them down for hearing and ordered that notice thereof be given to the State Tax Commission. The rights of no other party could be affected. The administratrix was joined in interest with claimant.

We are not prepared to say, as did the trial court, that appellant was limited to a defense of fraud. The State had a vital interest in the proceeding-in fact, the only interest adverse to appellees. Section 7364 of the Code of Iowa 1939 contemplates that the district court may have before it...