In re Thompson's Estate

• Decision Date: 31 December 1927
• Docket Number: 4483
• Citation: 269 P. 103,72 Utah 17
• Parties: In re THOMPSON'S ESTATE. v. THOMPSON et al SUTTON, State Treasurer,
• Court: Utah Supreme Court

269 P. 103

72 Utah 17

In re THOMPSON'S ESTATE.

SUTTON, State Treasurer, v. THOMPSON et al

No. 4483

Supreme Court of Utah

December 31, 1927

Rehearing Denied June 28, 1928.

Appeal from District Court, Third District, Salt Lake County; M. L Ritchie, Judge.

In the matter of the estate of Ezra Thompson, deceased. Action by William D. Sutton, State Treasurer, against Lynn R. Thompson and others to recover an inheritance tax on shares of capital stock transferred by deceased to his children prior to his death. From a judgment for plaintiff, defendants appeal.

REVERSED AND REMANDED, WITH DIRECTIONS.

Senior & Senior, Higgins & Higgins, and Dickson, Ellis, Parson &amp Adamson, all of Salt Lake City, for appellants.

Harvey H. Cluff, Atty. Gen., and L. A. Miner, Asst. Atty. Gen., for respondent.

STRAUP, J. McCREA, District Judge, HANSEN, J., concurring. FRICK, J., died before argument and submission. CHERRY, J., and THURMAN, C. J., dissenting from main opinion, and CHERRY, J., dissenting from opinion on petition for rehearing.

OPINION

STRAUP, J.

This is an action to recover an inheritance tax on shares of capital stock of several corporations alleged to have been transferred by the deceased, Ezra Thompson, to his children more than six years prior to his death.

After the cause in the above-named estate was closed, a distribution of the property had, the administrators discharged, and their bonds exonerated, William D. Sutton, the state treasurer, in such cause, filed his petition, in which he in substance alleged that the deceased, Ezra Thompson, "during the month of March, 1917, was the owner and in possession of real and personal property within the jurisdiction of the state of Utah of the value of more than $ 1,000,000"; that on that date the deceased, James D. Murdock, William Murdock, Lynn H. Thompson (deceased's son), and Norrine T. Brown (deceased's married daughter), organized a corporation under the laws of this state, called the Thompson-Murdock Investment Company, with a capital stock of $ 100,000, divided into 1,000 shares of the par value of $ 100 each; that 498 shares of such stock were subscribed by the deceased, and one share each by his son and daughter; and that in payment of such stock so subscribed the deceased "transferred certain real estate to the said company of the value of $ 200,000." Then it is alleged that on March 31, 1917, the deceased, with other members of his family, Lynn H. Thompson (his son), Emily P. Thompson (his wife), Dorothy Z. Thompson (his daughter-in-law), Norrine T. Brown (his married daughter), and H. Ross Brown (his son-in-law), organized a corporation under the laws of this state called the Thompson Investment Company, with a capital stock of $ 100,000, divided into 1,000 shares of the par value of $ 100 each, of which the deceased subscribed 995 shares, and the other five incorporators one share each, and that in payment of such stock so subscribed the deceased conveyed to such corporation real estate in Salt Lake City, including his residence, of the value of $ 635,240, real estate in Park City of the value of $ 5,000, and 500 shares of the capital stock of the National Bank of the Republic at Salt Lake City of the value of $ 107,500.

It is then alleged that, after the organization of such companies, the deceased, "by way of gift and without consideration," transferred all of his shares of stock in such companies, except one share in each, to his four children; Lynn H., Clyde R., and Ezra P. Thompson, and Norrine T. Brown (his daughter), giving to each of two of them 123 shares and 124 shares to each of the other two of the capital stock of the Thompson-Murdock Investment Company, and 248 shares to each of two and 249 shares to each of the other two of the capital stock of the Thompson Investment Company; and that such transfers "were made in the nature of a final distribution thereof, and in contemplation of death of said Ezra Thompson, deceased, and were intended to take effect in possession and enjoyment at or upon the death of the said Ezra Thompson, deceased." It was alleged that the conveyances and transfers made by the deceased to the corporations were also made in contemplation of death, and not to take effect until at or after the death of the deceased, and on such theory the state claimed to hold such corporations also liable for the tax; but such allegations and claim during the trial were abandoned by the state, and hence we need not further notice them.

It is further alleged that on March 17, 1917, the deceased, being the then owner of 200,000 shares of the capital stock of the Cardiff Mining & Milling Company a mining corporation, of the then value of approximately $ 200,000, by way of gift, and without consideration, "and in contemplation of death," transferred 50,000 shares of such stock to each of his four children.

It is then alleged that the deceased died in April, 1923, and that he, at the time of his death, was 72 years of age; that his sons Lynn H. and Ezra P. Thompson were appointed administrators of his estate, "and that such estate has been closed and said administrators have been discharged."

The petitioner prayed that a citation issue requiring the discharged administrators and the other children of the deceased to appear and show cause why the shares of stock so transferred to them should not be subjected to an inheritance tax, an appraisement made thereof as a basis for such tax, and, for such purposes, to show cause why the cause in the matter of the estate of Ezra Thompson, deceased, should not be reopened. Such a citation was issued. In response thereto the discharged administrators and the other children of the deceased appeared and filed special and general demurrers to the petition and motions to strike portions of it. These were overruled. Then the children filed an answer denying all the material allegations of the petition and specifically denying that any of the transfers were made either in contemplation of the death of the deceased or not to take effect until at or after his death, and to the contrary averred that all of such transfers were made in due course of business at least six years prior to the death of the deceased, and at a time when he was in good and robust health, and to take effect, and did take effect, in possession and enjoyment immediately as bona fide sales or gifts.

The case was tried to the court as one in equity. However, at the request of the petitioner, a jury was called in an advisory capacity. In such capacity the case, at the conclusion of the evidence, was submitted to the jury on instructions by the court. In connection therewith there were also submitted to them thirty-six questions to be, and which were, answered by them. A special verdict was rendered finding that some of the transfers were made in contemplation of death and some not; that some were made not to take effect until at or after the death of the deceased and some not. The trial court, however, regardless of the special verdict and of the findings of the jury, made findings of fact and conclusions of law independently of the special verdict. In such respect the court found: That in March, 1917, Ezra Thompson was the owner and in possession "of certain real and personal property situated in the state of Utah," without further describing it or finding its value; that on that day the deceased, James D. Murdock, W. W Murdock, Lynn H. Thompson, and Norrine T. Brown organized the Thompson-Murdock Investment Company, a corporation, with an authorized capital of $ 100,000, divided into 1,000 shares of the par value of $ 100 each, of which Ezra Thompson subscribed 498 shares, Lynn H. Thompson and Norrine T. Brown, the son and daughter of Ezra Thompson, one share each, the Murdocks the balance, and, in payment of the stock subscribed by Thompson and his son and daughter, Ezra Thompson conveyed to the company "certain real estate situate in Salt Lake county," without further describing it, and without finding the value thereof; that on March 31, 1917, Ezra Thompson, Lynn H. Thompson, Emily P. Thompson, Dorothy Z. Thompson, Norrine T. Brown, and H. Ross Brown organized the Ezra Thompson Investment Company, a corporation, with an authorized capital of $ 100,000, divided into 1,000 shares of the par value of $ 100 each, of which 995 shares were subscribed by Ezra Thompson, and one share by each of the other incorporators, Emily P. Thompson, the wife of Ezra Thompson, and the other incorporators, his children, except H. Ross Brown, his son-in-law, and Dorothy Z. Thompson, his daughter-in-law, and that Ezra Thompson conveyed and transferred to such company "certain real estate," without further describing it or finding the value thereof, and 500 shares of the capital stock of the National Bank of the Republic at Salt Lake City, without finding the value thereof, in full payment of the shares of stock so subscribed of such company; that on April 17 and 19, 1917, Ezra Thompson, "by way of gift and without consideration other than the natural affection of a father for his children, transferred and assigned" to Lynn H. Thompson, Norrine T. Brown, Clyde R. Thompson, and Ezra P. Thompson, his children, each 124 shares of the Thompson-Murdock Company, and to each 248 shares of the Thompson Investment Company, Ezra Thompson retaining one share in each of such companies; that Ezra Thompson, when the corporations were organized and the shares of stock transferred and the gifts made, was 66 years of age, in good physical and mental health and condition, and thereafter continued to live in good health for a period of about 6 years, and continued actively to participate in business affairs until about a month prior to his death, which was in April, 1923; that...