Jenkins' Estate, In re

• Decision Date: 05 October 1960
• Citation: 355 P.2d 729,224 Or. 144
• Parties: In the Matter of the ESTATE of Hopkin JENKINS, Deceased. Sig UNANDER, as State Treasurer, Appellant, v. UNITED STATES NATIONAL BANK OF PORTLAND (Oregon), as Co-Executor and Trustee of the above entitled estate, and Jennie R. Jenkins, as Co-Executrix thereof, Respondents.
• Court: Oregon Supreme Court

Page 729

355 P.2d 729

224 Or. 144

In the Matter of the ESTATE of Hopkin JENKINS, Deceased.

Sig UNANDER, as State Treasurer, Appellant, v. UNITED STATES NATIONAL BANK OF PORTLAND (Oregon), as

Co-Executor and Trustee of the above entitled

estate, and Jennie R. Jenkins, as

Co-Executrix thereof, Respondents.

Supreme Court of Oregon, In Banc.

Argued and Submitted June 16, 1960.

Decided Oct. 5, 1960.

William E. Dougherty, Sp. Asst. Atty. Gen., argued the cause for appellant. With him on the briefs was Robert Y. Thornton, Atty. Gen.

Robert R. Rankin, Portland, argued the cause and filed a brief for respondent United States National Bank of Portland (Oregon).

Before McALLISTER, C. J., and WARNER, PERRY, SLOAN, O'CONNELL, GOODWIN and MILLARD, JJ.

WARNER, Justice.

The appellant, State of Oregon, acting by and through the State Treasurer, appeals from an order of the Circuit Court of Multinomah County (Department of Probate) holding that funds of the estate of Hopkin Jenkins, deceased, accruing to the testamentary trust, hereinafter more particularly described, are exempt from inheritance tax charges. His executors and the testamentary trustee, as respondents, defend the holding of the lower court.

Mr. Jenkins died July 21, 1956. His will was executed September 20, 1948. The provision (subparagraph 2 of Article IV) which inspires this appeal reads:

'Trust No. 2: I bequeath to The United States National Bank of Portland (Oregon), In Trust and in perpetuity, and all accretions thereto, sums of money consisting principally of One Hundred Thousand ($100,000.00) Dollars of the appraised value of my estate either in cash or securities or both, including any shares of capital stock in the Jenkins Estate Company, an Oregon corporation, in my estate at its appraised value, together with any remainder hereinafter defined, to constitute the corpus of this trust estate, to be held by said trustee for the following purpose:----

'--for the purpose of providing a fund of money for the advanced education of qualified boys and girls, beyond that of high school requirements. (15%)

'This perpetual educational trust is established to the glory of God and the memory of my father, Thomas W. Jenkins, my mother, Mary Jenkins, and my brother, Albert E. Jenkins, and the years of service I was permitted to render the educational system in the State of Oregon mostly as Principal of Jefferson High School at Portland, Oregon.

'I desire the fund be designated as 'Thomas W. Jenkins, Mary Jenkins, Albert E. Jenkins and Hopkin Jenkins Student Loan Fund' and for brevity referred to as the 'Jenkins Student Loan Fund.'

'Out of my familiarity with and the performance of obligations similar to those hereof, I have compiled a Code of Procedure for the direction of the trustee or trustees in the execution of this trust. Said Code is in no way to be construed as a part of this testamentary expression, but I do ask of those who administer it that in so far as my directions therein do not, under the unforeseen circumstances of the future, interfere with the trustor's obvious purposes, the Code provisions be followed. This Code of Procedure will be kept with my will, come into the hands of my executors and be by them delivered to and held by the bank trustee for the guidance of all.'

It will be observed that the gift in question does not expressly limit the use of the student loan fund to uses 'within this state.'

The circuit court held that the foregoing bequest is one 'to a person or persons or association of persons in trust for educational uses within the State of Oregon, and is exempt from taxation as provided by ORS 118.020.' (Emphasis supplied.)

The issue presented by the appeal is whether the educational charity as established by the testator is exempt from inheritance tax under ORS 118.020. In its narrower aspect the issue may be stated thus: Are the funds provided for the trust limited to 'educational uses within the State of Oregon'?

ORS 118.020 makes provision for such exemptions from inheritance tax as may be accorded to benevolent, charitable, religious or educational institutions. The pertinent part thereof in which we have interest reads:

'(1) Devises, bequests, legacies and gifts are exempt from taxation under the provisions of ORS 118.005 to 118.840, if made:

'(a) To any benevolent, charitable, religious or educational institution, society, association or corporation organized and existing within this state and actually engaged in carrying out the objects and purposes for which so organized or existing; or

'(b) To a corporation, association or society to be organized for such purposes under the laws of this state pursuant to the terms of the instrument providing such devise, bequest, legacy or gift; or

'(c) To a person or persons or association of persons in trust for benevolent, charitable, religious or educational uses within this state.'

Indeed, our particular interest centers upon subsection (c) of the foregoing where we find the significant words of limitation: for 'uses within this state.' We find no ambiguities in the statute which necessitate resorting to rules of construction.

There is no question that a student loan fund does constitute a charitable or educational use fully as much as would a scholarship fund. By making available funds at a relatively low rate of interest to qualifying persons, the loan fund serves a purpose as charitable as it is meritorious. Clearly, this is an educational use within the meaning of the language of ORS 118.020(1)(c). Support for this view may be found in the following authorities and the cases which they cite. 4 Scott, Trusts (2d Ed.), 2648, 2726, §§ 370.5, 376; Annotation 33 A.L.R.2d 1183 (1954).

Oregon's limitation of the charitable exemption to domestic charity is not peculiar to this jurisdiction. Similar statutory limitations are common in other jurisdictions and have occasionally been imposed by the courts even in the absence of statutes. See 2 Bogert, Trusts and Trustees, 352, § 290(b).

In this state such restrictions have a long history. Restrictions to Oregon corporations may be found in Oregon Laws 1903, p. 49, § 1. Gifts in trust to persons were so restricted by statute in Oregon Laws 1905, ch. 178, p. 309, § 1; Oregon Laws 1919, ch. 392, p. 697, § 1. After 1925 there was a restriction upon use in the United States. Oregon Laws 1925, ch. 338, p. 688, § 1; Oregon Laws 1931, ch. 332, p. 569, § 1; Oregon Laws 1933, ch. 26, p. 44, § 1. However, in 1939 we returned to a restriction to use within this state. The language with which we are now concerned was inserted at that time. See Oregon Laws 1939, ch. 148, p. 300, § 1 (now ORS 118.020).

We are concerned, therefore, with no mere inadvertent use of language. Such a restriction has been a part of the public policy of this state in some form for nearly half a century. The legislative history of this particular language re-emphasizes the intent of the legislature to restrict rather than to expand the scope of such gifts. When the bill of 1939 was originally passed by both houses of the legislature unanimously it did not contain the instant provision. 1939 Senate & House Journals, 114, 443, 131. But before the governor could sign the bill it was recalled and the provision inserted. Ibid. 160, 521.

The rationale of policy consideration giving rise to limitations on tax exemptions to charities finds expression in In re Prime's Estate, 1893, 136 N.Y. 347, 32 N.E. 1091, 1095, 18 L.R.A. 713. There, the Court of Appeals of New York declared: 'It is the policy of society to encourage benevolence and charity. But it is not the proper function of a state to go outside of its own limits, and devote its resources to support the cause of religion, education, or missions for the benefit of mankind at large.' Carter v. Whitcomb, 74 N.H. 482, 69 A. 779, 784, 17 L.R.A.,N.S., 733, citing Prime, supra, speaks in the same tenor, the court saying: 'The state is not itself a charitable institution, and does not authorize its representatives to expend the public money, by exemptions from taxation or otherwise, for purposes having little or no relation to the welfare of the inhabitants of the state. The purpose of such laws is the acquisition of some supposed public advantage. * * *' See, also, Methodist Book Concern v. State Tax Comm., 1949, 186 Or. 585, 208 P.2d 319.

We pause to take note of some fundamental rules which necessarily bear upon our conclusions as to whether the instant scholarship trust falls within the ambit of the tax immunity provided by ORS 118.020(1)(c).

It is a canon of universal recognition that tax exemption statutes will be strictly construed in favor of the state and against the taxpayer. It applies with equal force to inheritance taxes. In re Bremer's Estate, 166 Ohio St. 233, 141 N.E.2d 166, 170. But this rule does not foreclose the application of a reasonable construction in order to ascertain the legislative intent. Multnomah School of the Bible v. Multnomah County, 1959, 218 Or. 19, 27, 343 P.2d 893, and cases there cited.

Rules of statutory construction will not be invoked where no ambiguity exists, and even if a statute should be deemed ambiguous, we would be required to apply the rule of strict construction, to which we above make reference, and deny the exemption unless it is so clearly granted as to be free of reasonable doubt. Methodist Book Concern v. State Tax Comm., supra (186 Or. at page 592).

Charities in this state enjoy no inherent right to exemption from taxation; and are taxable only in so far as they may be specifically exempt by constitutional provision or statutory enactment. Security Sav. & Trust Co. v. Lane County, 152 Or. 108, 141, 53 P.2d 33. There is no presumption or implied exemption from taxation in their favor. Malad Second Ward of the Church, etc., v. State Tax Comm., 1954, 75 Idaho 162, 269 P.2d 1077, 1079.

The burden is on a claimant to prove or establish clearly a right...