Lacy v. State Treasurer

• Citation: 121 N.W. 179
• Parties: LACY v. STATE TREASURER.
• Decision Date: 15 May 1909
• Court: United States State Supreme Court of Iowa

121 N.W. 179

LACY

v.STATE TREASURER.

Supreme Court of Iowa.

May 15, 1909.

McClain, J., dissenting, and Deemer, J., dissenting in part.

Appeal from District Court, Louisa County; W. S. Withrow, Judge.

This is a suit brought by the administrator of the estate of John Smith, deceased, to determine the question as to whether or not certain lands, at one time owned by the deceased, are subject to the collateral inheritance tax. The trial court held that the lands were taxable, and the administrator appeals. Modified and remanded.C. A. Carpenter, for appellant.

H. W. Byers, Atty. Gen., George Cosson, Asst. Atty. Gen., and Oscar Hale, Co. Atty., for appellee.

DEEMER, J.

Our collateral inheritance tax statute provides, in substance, that all property within the jurisdiction of this state which shall pass by deed, grant, sale, or gift, made or intended to take effect in possession or enjoyment after the death of the grantor or donor, etc., shall be liable to an inheritance tax. Code, § 1467. It appears from the record in this case that on January 11, 1892, John Smith, now deceased, entered into the following contract with Sarah Burns, George Cavanaugh, and Emma J. Raymond, to wit: “Columbus Junction, Iowa, Jan. 11, 1892. This agreement witnesseth: That in consideration that George H. Cavanaugh, Sarah Burns and Emma Raymond, brother and sisters of Ellen Cavanaugh, deceased, have this day agreed to allow John Smith to probate the will of the said Ellen Cavanaugh without protest, said will giving to John Smith all property of the said Ellen Cavanaugh owned by her in September, 1889, and further agreeing to allow said John Smith to take and hold all property accumulated by Ellen Cavanaugh since that time, and owned by her at the time of her death, and they agree to allow the said John Smith to take and use the said land of Ellen Cavanaugh, to wit, the S. W. 1/4 sec. 4-74-4, during his lifetime, controlling and receiving for his use and benefit all of the rents and profits therefrom as long as he shall live, and in consideration of the foregoing said John Smith agrees that he will pay to Sarah Barton, mother of George Cavanaugh, Sarah Burns and Emma Raymond, an annuity of $104 per year, payable December 1st of each year as long as she shall live, unless said annuity is terminated by the death of John Smith. John Smith further agrees that he will, so far as possible, keep all property, real and personal, left by Ellen Cavanaugh, and now owned by him, intact. Will not sell any of the land described as S. W. 1/4 and the west half of southeast quarter and south half northeast quarter and N. 1/2 N. E. 1/4 S. E. 1/4, all in sec. 4-74-4, unless it becomes necessary to sell same to pay the incumbrance thereon of $4,000. Should said incumbrance become due, said George Cavanaugh, Sarah Burns and Emma Raymond, or either of them may pay off same, or any part, and hold the amount so paid as a lien against the said land. After this year, and beginning with March 1, 1893, George Cavanaugh shall have the right to rent of John Smith the premises above described, giving as rent therefor two-fifths of all grain raised on old ground, and one-half of all grain raised on newly broken ground, all delivered in the crib on the said premises. In consideration that John Smith takes and keeps, during his natural lifetime, all the rents and profits of said land, with full use and control thereof, during said period, he agrees to and with the said George H. Cavanaugh, Sarah Burns and Emma Raymond, that upon his death they may take the same, share and share alike, and the land above described shall be equally divided among them. If their mother, Sarah Barton, should survive this grantor, John Smith, then she is to take an equal share with the rest.” This paper was witnessed by two witnesses, and was filed for record January 14, 1892. John Smith died intestate April 13, 1906, and E. R. Lacey was appointed administrator of his estate. This administrator claims that the real estate mentioned in said contract is not subject to the collateral inheritance tax for the reason that the district court of Louisa county, wherein administration was granted, found that Cavanaugh, Raymond, and Barnes were entitled to a conveyance of the land under the contract hitherto set out, and directed the administrator to make a conveyance to them of said land, which was accordingly done. He also claims that John Smith, at the time of his death, held nothing but the naked legal title to the land for the purpose of securing his life estate, and that the remainder in fee was vested in Cavanaugh and others in virtue of said contract, that nothing descended to the parties from John Smith, and that title passed through and under the contract above set out. Defendant contends that nothing passed from John Smith until his death; that the contract conveyed no present interest; that Smith was in the possession and enjoyment of the entire premises until his death; and that the enjoyment of the property by Cavanaugh and others was postponed until the death of Smith. Further, it is contended that the contract was nothing more than a conditional promise on the part of Smith to permit Cavanaugh et al. to inherit the real estate. Smith left no direct descendants, and Cavanaugh and others are brothers and sisters of Ellen Cavanaugh deceased, who, according to the recitations of the contract, devised part of the land involved to John Smith, deceased.

In order to solve the questions presented by this appeal it is necessary to construe the various provisions of the contract, in order to determine whether or not the land therein referred to passed to Cavanaugh and others by will, deed, grant, sale, or gift made or intended to take effect in possession or enjoyment after the death of the grantor or donor. It seems that the title to part of the land passed to Smith through the will of Ellen Cavanaugh, deceased, and that under the contract Smith was to take and use the land during his natural life; he to pay an annuity to persons named of $104 per year until his death. He (Smith) also agreed to keep the property which it is said was owned by him intact so far as possible. George H. Cavanaugh was to have the right to rent the land, and by the concluding paragraph of the contract, Smith agreed with Cavanaugh and others that upon his death they should take the land share and share alike, to be divided equally between them. It was also agreed that Sarah Barton, if alive at the time of the death of John Smith, should also have a share of the land.

For appellant it is contended that Smith was nothing more than a naked legal trustee of the land, that the contract conveyed a present interest to Cavanaugh and others in the land, and that as they were not and are not heirs of Smith, and do not take by inheritance, the land is not subject to the collateral inheritance tax. Something is claimed for the decree of the district court, passed after the death of Smith, finding that Cavanaugh and others were entitled to a deed of the lands, and ordering the administrator to make such a deed: but, as the State Treasurer was not a party to that suit, and was in no manner interested therein, this decree has no significance, and is in no manner controlling. The exact point made by plaintiff's counsel is that the contract conveyed a present interest in the land to Cavanaugh and others, reserving simply a life estate in Smith. On the other hand, it is insisted that the contract is testamentary in character, and that in no event could the grant, gift, sale, or will take effect in possession or enjoyment until after the death of Smith. We are constrained to hold that this contract was testamentary in character, or rather that it did not take effect in so far as Cavanaugh and others were concerned, either in enjoyment or possession, until after the death of Smith. Cavanaugh and others are collateral heirs of Ellen Cavanaugh, deceased, and if they take either mediately or immediately through her, the land is subject to the tax. If, on the other hand, they take through Smith under the contract, construing it to be a grant, this grant was not made to take effect, either in enjoyment or possession, until after the death of Smith, and in such event the land was subject to the tax. The record does not disclose the date of Ellen Cavanaugh's death, but the contract was made January 11, 1892, and Smith died April 13, 1906. Appellant contends that as the collateral inheritance law did not go into effect until July, 1896, the land cannot be made subject to the tax. The difficulty with this contention is that, unless Cavanaugh and others took an estate in enjoyment or possession in 1892 as claimed, the collateral inheritance tax statute does apply, for the reason that, whether they took through Smith or remotely from Ellen Cavanaugh, they did not have either the possession or enjoyment until the death of Smith. Indeed, we doubt if they acquired any title until after Smith's death; but this point need not, as we view it, be determined at this time. The statute is very clear, and applies to all cases where wills, grants, deeds, sales, or gifts are made, or intended, to take effect in possession or enjoyment after the death of the grantor or donor. If, then, the title passed either mediately or immediately from Ellen Cavanaugh, it did not take effect, either in possession or enjoyment, until after the death of Smith. Her estate was subject to the control of the district court, in virtue of the contract, for a long time after the collateral inheritance law went into effect, and by reason of that fact the land was subject to the tax. Ferry v. Campbell, 110 Iowa, 290, 81 N. W. 604;Gelsthorpe v. Furnell, 20 Mont. 299, 51 Pac. 267, 39 L. R. A. 170. In other words, by making of the contract with Smith, they surrendered their right to take an immediate possession and enjoyment of the property under the will of Cavanaugh;...