Lilly v. State

• Decision Date: 23 November 1928
• Docket Number: 33. [a1]
• Citation: 143 A. 661,156 Md. 94
• Parties: LILLY ET AL. v. STATE ET AL.
• Court: Maryland Court of Appeals

143 A. 661

156 Md. 94

LILLY ET AL. v. STATE ET AL.

No. 33. ^[a1]

Court of Appeals of Maryland

November 23, 1928

Appeal from Circuit Court of Baltimore City; Eugene O'Dunne Judge.

Proceeding by the State of Maryland and others against William D. Lilly and others. From an adverse decree, defendants appeal. Affirmed.

Argued before BOND, C.J., and PATTISON, URNER, ADKINS, OFFUTT. DIGGES, PARKE, and SLOAN, JJ.

J Morfit Mullen, of Baltimore, for appellants.

Willis R. Jones, Asst. Atty. Gen. (Thomas H. Robinson, Atty. Gen on the brief), for appellees.

DIGGES J.

By this appeal we are asked to determine three questions: First, is the property now about to be distributed by the Safe Deposit & Trust Company, trustee, to the appellants, subject to a collateral inheritance tax? Second, if so subject, is the proper rate 2 1/2 per cent. or 5 per cent? And, third, upon what amount is the tax to be computed? The facts which give rise to these questions are contained in an agreed statement set forth in the record, and are substantially these:

That Channing Lilly, a resident of Boston, Mass., became the owner of certain fee-simple real estate located in Baltimore city, known as No. 323 West Baltimore street, by deed from Alonzo Lilly, dated December 22, 1888, duly executed and recorded. That on March 28, 1898, by deed of that date, duly executed and recorded on April 1, 1898, Channing Lilly conveyed this property, for a nominal consideration, to a certain James Cummings, of Boston, Mass. That Cummings, for a like consideration by deed dated also March 28, 1898, and recorded on the same day as the deed to him, conveyed said property to Channing Lilly, trustee, which latter deed is as follows:

"Know all men by these presents, that I, James Cummings, of Boston, in the county of Suffolk, and commonwealth of Massachusetts, in consideration of one dollar to me paid by Channing Lilly, of said Boston, the receipt whereof is hereby acknowledged, do hereby give, grant, bargain, sell and convey unto the said Channing Lilly, his heirs and assigns, but in trust as hereinafter mentioned, all that parcel of land with the buildings thereon situate in the city of Baltimore, in the state of Maryland, which is particularly described as follows, that is to say: [Then follows a description of the property known as No. 323 West Baltimore street, Baltimore City, Md.] Being the same premises conveyed to me by said Channing Lilly by deed of even date and to be recorded herewith. To have and to hold the granted premises with all the privileges and appurtenances thereto belonging to the said Channing Lilly, his heirs, successors and assigns, in trust nevertheless, for the following purposes, viz.:

First. To permit and allow Frances E. Lilly, wife of said Channing Lilly to occupy said premises during her life, she paying taxes and making ordinary repairs and in case she does not personally occupy said premises, then to pay to her the net rents, profits and income of the same during her life and, in addition, to the foregoing provision said trustee shall also from time to time pay to said Frances E. Lilly for her support and protection such amounts from the principal of the trust property as he may see fit, such amounts being raised by sale or mortgage or otherwise.

Second. Said trustee shall have full power and authority at any time and from time to time to sell and execute deed or deeds to convey absolutely or in mortgage with usual power of sale the whole or any part of said premises or of any real estate that may be held under this trust and no purchaser or mortgagee shall be liable for the application of the purchase money.

Third. Said trustee shall also have full power to change the investment of the whole or any part of the trust property from time to time and at any time as said trustee may see fit and to do all that is necessary to effect the same.

Fourth. Upon the decease of said Frances E. Lilly to pay the income to said Channing Lilly, if surviving, during his life, or if said Channing Lilly does not survive and in any event upon the death of the survivor of said Frances E. Lilly and Channing Lilly the principal of said trust property is to be paid and conveyed or directed by the last will of said Channing Lilly, or in default of such will to his then heirs at law.

Fifth. Upon the termination of this trust by an instrument in writing signed by said Channing Lilly and Frances E. Lilly duly recorded in the Registry of Deeds all the trust property shall vest in and become the property of said Channing Lilly, his heirs and assigns forever, absolutely, free from all trust.

Sixth. These terms of trust may at any time be terminated or changed and rechanged in any way and to any extent by an instrument in writing signed by said Channing Lilly and Frances E. Lilly and duly recorded in the registry of deeds with the same right thereafter at any time and from time to time to change and rechange the existing terms of trust or terminate said trust by an instrument in writing signed and recorded as aforesaid, and I, the said James Cummings, do hereby, for myself and my heirs, executors, and administrators, covenant with the said grantee and his heirs, successors and assigns, that the granted premises are free from all incumbrances made or suffered by me and that I will, and my heirs, executors and administrators shall warrant and defend the same to the said grantee and his heirs, successors and assigns forever against the lawful claims and demands of all persons claiming through or under me but against none other."

That Channing Lilly died February 29, 1912, leaving an estate of the approximate value of $300,000, about one-half of which was located in Massachusetts and the residue in Maryland, his Maryland property consisting of the real estate referred to in the aforementioned deed of trust, and certain bonds, mortgages and other property. That Channing Lilly left a last will and testament which was duly admitted to probate in the orphans' court of Baltimore city, and under which said will the Safe Deposit & Trust Company of Baltimore was appointed coexecutor and trustee as to the real and leasehold property in Maryland, the provisions of the will of Channing Lilly relevant to this case being those in which the testator made provision for the distribution of his property after the death of his widow, who survived him, and under these provisions, upon the termination of the widow's life estate, the property covered by the deed of trust was devised and bequeathed to the appellants, who are collateral relatives, being his nephews and niece. That upon the death of Channing Lilly the Safe Deposit & Trust Company of Baltimore was substituted as trustee by an order of the circuit court of Baltimore city passed on March 18, 1912, the circuit court assuming jurisdiction over the further administration of the trust created by the deed. That subsequently the substituted trustee, in October, 1920, sold the Baltimore street property and reinvested the proceeds under the order and direction of the circuit court. That Frances E. Lilly, widow of Channing Lilly, the life tenant, died on August 25, 1927, and at the time of her death the trust estate consisted of certain bonds and mortgages of the appraised value of $80,560. That the real estate conveyed by the deed of trust, at the time of the death of Channing Lilly on February 29, 1912, had a value of $50,000. That no collateral inheritance tax has heretofore been paid on the said real estate or the proceeds of the sale thereof, or any property constituting the trust estate. It is further agreed that if any collateral inheritance tax shall be held to be payable, if the value of the property in question is determined as of the date of the death of the said Channing Lilly, the same will be payable upon the value of said real estate, to wit, $50,000, but that if a collateral inheritance tax is held to be payable upon the value of the said estate at the time of the death of said Frances E. Lilly, the same will be payable upon the said amount of $80,560.

The lower court decreed that the trustee, the Safe Deposit & Trust Company, pay to the register of wills, for the use of the state of Maryland, in due course of administration of this estate, the collateral inheritance tax at the rate of 5 per cent. on the sum of $80,560, the said amount being the agreed valuation of the property passing to the nephews and niece of the said Channing Lilly. The appeal is taken from that decree.

We will consider the questions in the order in which we have stated them.

First, Is the property in question subject to any collateral inheritance tax? The authority under which the state claims its right to collect this tax is contained in section 124 of article 81 of the Code, which is:

"All estates, real, personal and mixed, money, public and private securities for money of every kind passing from any person who may die seized and possessed thereof, being in this state, or any part of such estate or estates, money or securities, or interest therein, transferred by deed, will grant, bargain, gift or sale, made or intended to take effect in possession after the death of the grantor, bargainor, devisor or donor to any person or persons, bodies corporate, in trust or otherwise, other than to or for the use of the father, mother, husband, wife, children and lineal descendants of the grantor, bargainor or testator, donor or intestate, shall be subject to a tax of five per centum in every hundred dollars of the

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