Irvine v. Helvering

• Decision Date: 03 November 1938
• Docket Number: No. 11152.,11152.
• Citation: 99 F.2d 265
• Parties: IRVINE v. HELVERING, Commissioner of Internal Revenue.
• Court: U.S. Court of Appeals — Eighth Circuit

99 F.2d 265 (1938)

IRVINE v. HELVERING, Commissioner of Internal Revenue.

No. 11152.

Circuit Court of Appeals, Eighth Circuit.

November 3, 1938.

John L. Connolly, of St. Paul, Minn., for petitioner.

Paul S. McMahon, Sp. Asst. to the Atty. Gen. (James W. Morris, Asst. Atty. Gen., and Sewall Key and Norman D. Keller, Sp. Assts. to the Atty. Gen., on the brief), for respondent.

Before SANBORN, THOMAS, and BOOTH, Circuit Judges.

SANBORN, Circuit Judge.

This is a petition to review an order of the Board of Tax Appeals (36 B.T.A. 653) affirming a determination by the Commissioner that for the year 1929 there was a deficiency of $2,728.05 in income taxes of C. G. Irvine (now deceased) for which Myrtle M. Irvine, his wife, as a transferee, was liable under Sec. 311 of the Revenue Act of 1928, c. 852, 45 Stat. 791, 860, 26 U.S.C.A. § 311.¹

The facts out of which this controversy arises are stipulated. A detailed statement of them would be more confusing than helpful. It is enough to say that, at the time of C. G. Irvine's death, May 14, 1932, there was personal property held by him and his wife as joint tenants, of the value of $34,527.03, consisting of corporate stocks of the value of $32,266.25, and bank account $2,260.50, and that the only property belonging to him individually was 25 shares of stock, worth $153.25, and a savings account of $30.28; that up to that time no deficiency in income taxes for the year 1929 had been assessed, the deficiency assessment being made on July 16, 1932, pursuant to a waiver executed by the taxpayer on February 16, 1932; that the Commissioner, being unable to collect this deficiency assessment from the estate of the deceased, assessed it against the petitioner as a transferee of his estate; that, from the determination of the Commissioner that she was liable for the tax, she appealed to the Board, denying her liability for her husband's unpaid income taxes for the year 1929 as a transferee within the meaning of Sec. 311.

The petitioner admits her liability for the deficiency to the extent of $183.53, the value of the property owned by her husband individually at the time of his death. As to the rest of the property, she contends that she is not a transferee within the meaning of Sec. 311, and that she acquired that property as a surviving joint tenant, free of all her husband's debts and obligations.

The respondent makes three contentions:

(1) That $7,600 worth of the stocks held in joint tenancy, which became the petitioner's upon her husband's death, were owned by him individually in 1929; that he transferred these shares to himself and wife as joint tenants, but that, since his interest in them was acquired when they were originally purchased and her interest was acquired by the subsequent transfer, the tenancy lacked unity of time and title, so that it was not a joint tenancy, but a tenancy in common; that, therefore, upon his death, C. G. Irvine owned an undivided one-half interest in these shares, which became a part of his estate and went to his wife as a distributee, and not as a surviving joint tenant.

(2) That, assuming the validity of the joint tenancies, the petitioner is, nevertheless, liable as a transferee under the trust fund doctrine, because these tenancies were created in 1929 and 1930, constituted transfers which were presumptively fraudulent, and resulted in rendering the estate of C. G. Irvine insolvent.

(3) That the enlargement of the petitioner's interest in the joint tenancies from an undivided one-half interest to the whole interest in the property by reason of the taxpayer's death, constituted a transfer to the petitioner of her husband's undivided interest in the property and made her a transferee within the meaning of Sec. 311.

We shall consider the respondent's contentions in their order.

1. Relative to the stocks which the respondent contends should not be regarded as being in joint tenancy at the time of Mr. Irvine's death, the respondent points out that such shares were acquired by Mr. Irvine individually through his brokers between September 11, 1929, and January 29, 1930; that until June 13, 1930, no transactions occurred with respect to these shares, except a change on the books of the brokers of Mr. Irvine's trading account to C. G. Irvine and Mrs. Myrtle M. Irvine as joint tenants; that on June 13, 1930, some of these shares were withdrawn from the brokers, and when they were redeposited with the brokers on June 29, 1930, new certificates were procured in the name of "C. G. Irvine and Myrtle M. Irvine, as joint tenants"; that the other shares were, on June 29, 1930, held in the name of the brokers, but were, afterwards and prior to the death of Mr. Irvine, reissued in his name and that of his wife as joint tenants.

It is conceded that joint tenancies may, under the laws of Minnesota, which are here controlling, be created in personal property (Peterson v. Lake City Bank & Trust Co., 181 Minn. 128, 131, 231 N.W. 794), but it is asserted that, in order to have a valid joint tenancy in personal property, the tenants must have one and the same interest, created by one and the same conveyance, and originating at one and the same time, and that the property must be held in one and the same undivided possession; that, in other words, there must be present the four unities, those of interest, title, time, and possession. 14 Am. Jur. page 81, § 7; Peterson v. Lake City Bank & Trust Co., supra.

The respondent argues that, with respect to the creation of the joint tenancies in the shares of stock which originally stood in the name of Mr. Irvine alone, the unities of time and title were absent, for the reason that Mr. Irvine acquired his interest at the time the stocks were originally purchased by him, while the petitioner acquired her interest either at the time the brokers' account was changed to a joint account or at the time the stock certificates were reissued to the petitioner and her husband, as joint tenants. This argument finds support in Breitenbach v. Schoen, 183 Wis. 589, 198 N.W. 622, which dealt with an alleged joint tenancy of stock owned originally by a mother who had endorsed upon the stock certificates an assignment to herself and her son as joint tenants, thereafter delivering the certificates to a third person for safe keeping. The court held that this did not create a joint tenancy, saying (page 623 of 198 N.W.): "Manifestly, the deceased could not convey an interest in the certificates to herself, and it is quite clear that she did not intend to convey the entire interest in the certificates to her son. Not being able to make a conveyance to herself, there was neither unity of title nor unity of time, and under such circumstances a tenancy in common was created rather than a joint tenancy. There was therefore no right of survivorship as to the four certificates assigned. * * *"

Deslauriers v. Senesac, 331 Ill. 437, 163 N.E. 327, 62 A.L.R. 511, also supports this argument. There a husband and wife executed a deed of the wife's land to themselves as joint tenants. It was held that this did not create a joint tenancy, although that was the intent, since the wife could not convey to herself an interest in land which she owned, and that unity of time and title were absent, and, for that reason, a tenancy in common, and not a joint tenancy, was created.

The Minnesota case most closely analogous to this is Peterson v. Lake City Bank & Trust Co., supra, 181 Minn. 128, 231 N. W. 794, which related to a joint tenancy in corporate bonds. A Mr. and Mrs. Peterson jointly owned stock. Together they ordered $8,000 of bearer bonds from an investment house, and applied their stock in part payment. Mr. Peterson, in the presence of Mrs. Peterson, suggested to the bond salesman that the bonds be held in joint tenancy. The salesman endorsed upon the order for the bonds, "To be issued in joint tenancy." The bonds, when delivered were payable to bearer, but were in an envelope upon which was written, "Property of John Peterson and — or Mrs. Nina R. Peterson as joint tenants, not as tenants in common, with right of survivorship." The invoice evidencing the sale of the bonds recited that it was made to Mr. and Mrs. Peterson, "as joint tenants, not as tenants in common, with right of survivor ship." Later Mr. and Mrs. Peterson made a similar purchase of $3,000 of bonds, and directed that they be issued in the same way. The envelope in which the latter bonds were delivered bore the same notation as that in which the $8,000 of bonds were delivered. All of the bonds were kept in a "safety box" to which both husband and wife had access. The court said (pages 130, 131 of 181 Minn., 231 N.W. page 795): "The fact that the two persons did not make equal contribution, if they in truth did not, to the purchase price is not important."

And further said:

"By the transaction Mr. and Mrs. Peterson acquired the same interest in the bonds, such interest accrued in the single transaction, the interest of each commenced at the same time, and the property was received and held by one and the same undivided possession. The right of survivorship was present. The presence of such elements constitutes a joint tenancy. From the viewpoint of a layman the right of survivorship is the principal characteristic of a joint tenancy. That is what made a joint tenancy attractive to the parties to this transaction. That was the goal which they mutually sought.

"A joint tenancy may exist in personal property and it may be established by parol, though here there is supporting documentary, evidence."

The respondent argues that, because the Supreme Court of Minnesota pointed out that the four unities were present in the Peterson Case and that "the presence of such elements constitutes a joint tenancy," it would hold, with respect to the joint tenancies here in question, that the four unities were not present, and that the absence of the unities of time and title would...