Jerome v. Jerome

• Decision Date: 02 December 1952
• Citation: 93 A.2d 139,139 Conn. 285
• Court: Connecticut Supreme Court
• Parties: JEROME et al. v. JEROME et al. In re JEROME'S ESTATE. Supreme Court of Errors of Connecticut

Page 139

93 A.2d 139

139 Conn. 285

JEROME et al. v. JEROME et al. In re JEROME'S ESTATE.

Supreme Court of Errors of Connecticut.

Dec. 2, 1952.

Hugh M. Alcorn, Jr., Hartford, with whom was Henry P. Bakewell, Hartford, for appellant (defendant McMillan).

Herbert L. Cohen, Bridgeport, with whom was Edward J. Schoenbrod, New York City, for appellee (named defendant).

Francis P. Schiaroli, Stamford, for plaintiffs but did not argue the cause.

Before BROWN, C. J., and JENNINGS, BALDWIN, INGLIS and O'SULLIVAN, JJ.

O'SULLIVAN, Associate Justice.

This action was instituted by the executrices of the will of the late Franklin S. Jerome. The defendants, Janet Jerome and Louise McMillan, were cited to appear as individuals and as trustees. The court adjudicated four issues, arising out of questions incorporated in both the complaint and a cross complaint filed by Janet Jerome. From the judgment entered thereon, Louise McMillan has appealed.

The unchallenged finding establishes the following facts: Franklin S. Jerome, a resident of the town of Orange for a number of years, died testate on June 22, 1948. He was survived by the defendants, one of whom, Janet Jerome, is his widow and the other, Louise McMillan, his daughter by a former marriage. His last illness was of short duration. Until then, he had actively served as president of a large manufacturing concern and of a banking corporation. His primary interest in these and other enterprises in which he participated lay in the field of finance.

Jerome executed his will on May 15, 1936. This was three days before he married the defendant Janet Jerome. In the will he made the following provisions which are relevant to the issues presented by the appeal: (1) In article first he directed his executrices 'to pay all my just and lawful debts, funeral and testamentary expenses.' (2) In article fifth he created a trust, consisting of one-half of the residue of his estate, for the life use of his widow and conferred upon her a testamentary power of appointment over the corpus of the trust. (3) In article sixth he created a trust of the other half of the residue for the life use of his daughter, Mrs. McMillan, with a like power of appointment.

In 1945, the General Assembly passed an act which now appears as chapter 102 of the General Statutes, captioned 'Proration of Federal and State Estate Taxes'. On April 2, 1948, the Congress of the United States enacted the Revenue Act of 1948. 62 Stat. 117. Section 361 of that act added to § 812 of the Internal Revenue Code, 26 U.S.C.A. § 812, a new subsection providing for an additional deduction known as the 'marital deduction.' By virtue of this subsection, the net estate of a decedent subject to the federal estate tax is now reduced by the value of so much of the decedent's estate, not in excess of 50 per cent of the value of the adjusted gross estate, as is bequeathed, devised or passes to the surviving spouse.

Jerome did not revise his will subsequent to its execution in 1936. The total appraised value of his estate is $2,500,000. The parties are in agreement that the basic issue, determinative of the differences between them, is whether the widow is entitled, under the proration statute, to the full allowance of the marital deduction permitted by the federal estate tax law or whether it should be shared with the daughter.

The proration statute provides, in part, that federal and state estate taxes paid by an executor or other fiduciary upon any property required to be included in the gross estate of a decedent shall be 'equitably prorated among the persons interested in the estate to whom such property is or may be transferred or to whom any benefit accrues.' General Statutes § 2076, as amended, Cum.Sup. 1951, § 449b. Both defendants fall within the definition of 'persons interested in the estate' of the testator. § 2075.

The federal estate tax, as the name implies, is a tax against the estate of a decedent. Ericson v. Childs, 124 Conn. 66, 81, 198 A. 176, 115 A.L.R. 907. It differs from an inheritance tax in that the latter is levied against the recipient of the taxed property. Hackett v. Bankers Trust Co., 122 Conn. 107, 126, 187 A. 653. The passage of the Proration Act did not destroy this distinction. It still exists in the manner discussed in Blodgett v. Guaranty Trust Co., 114 Conn. 207, 217, 158 A. 245, although the executor may now seek from the beneficiaries reimbursement to the estate of the amount of the tax. In other words, while the primary obligation of paying the tax is borne by the executor, the ultimate burden now rests, by virtue of the proration statute, on those who benefit under the estate, except when the will clearly provides otherwise. McLaughlin v. Green, 136 Conn. 138, 141, 69 A.2d 289, 15 A.L.R.2d 1210. 'It was neither the purpose nor the effect of the proration statute to raise money for the federal government, and neither before nor after its enactment was the estate tax a tax upon beneficiaries under a will. The proration statute is not a taxing statute. The context of chapter 102 confirms this conclusion, for by its terms it applies only after the executor 'has paid' the tax, § 2076 * * *.' Parlato v. McCarthy, 136 Conn. 126, 132, 69 A.2d 648, 651.

Mrs. McMillan maintains that the action before us is fundamentally one to construe a will. In this she is, in a manner of speaking, partially correct. The proration statute, she points out, recites that its provisions shall not govern in any instance 'when a testator otherwise directs in his will'. § 2076. This provision is highly desirable and accords with common sense. The testator should have the right to provide in his will that the recipients of his bounty shall receive their bequests free from taxation. A testamentary directive against the prorating of taxes, as provided by statute, cannot, however, be spun out of vague and uncertain language. In re Uber's Estate, 330 Pa. 417, 420, 199 A. 356, 116 A.L.R. 851. It must be clear and unambiguous, since the practical effect of such a provision is to increase the gifts to some by shifting to others the burden of absorbing the tax. Sherman v. Moore, 89 Conn. 190, 193, 93 A. 241. 'In the absence of a definite declaration of the subject it must be presumed that the intention was that the ultimate weight of taxation must rest where the law places it. It cannot be presumed that anything else was intended than what is stated in the written instrument.' Bemis v. Converse, 246 Mass. 131, 134, 140 N.E. 686, 687; McLaughlin v. Green, supra, 136 Conn. 145, 69 A.2d 292, 293.

It is urged that under article first of his will the testator expressly directed his executrices to pay the federal tax. That article, it will be recalled, required them 'to pay all my just and lawful debts, funeral and testamentary expenses.' This language cannot be construed as an unambiguous order to pay estate taxes contrary to the method prescribed in § 2076. 'Testamentary expenses,' the words specifically stressed by counsel, connote nothing more than the customary disbursements attendant upon the ordinary administration of an estate. They cannot be expanded to include a tax levied by the government upon the net avails of an estate. Matter of Walbridge's Estate, 170 Misc. 127, 128, 9 N.Y.S.2d 907; see Matter of Stanfield's Estate, 170 Misc. 447, 449, 10 N.Y.S.2d 613; Matter of Parsons' Will, 258 N.Y. 547, 180 N.E. 326. Starr v. Watrous, 116 Conn. 448, 165 A. 459, cited by the daughter, is readily distinguishable. There the testator directed, 116 Conn. at page 449, 165 A. at page 459, his executors to pay 'all my just debts, funeral expenses, succession and other taxes'. See Baylor v. National Bank of Commerce, 194 Va. 1, 72 S.E.2d 282. Corbin v. Townshend, 92 Conn. 501, 103 A. 647, also relied upon by the daughter, is not pertinent. That case held, 92 Conn. at page 506, 103 A. at page 648, that, in computing the succession tax, any expenditure arising by operation of law...