MacKenzie v. Wright

• Court: Arizona Supreme Court
• Writing for the Court: ROSS, C. J.
• Citation: MacKenzie v. Wright, 31 Ariz. 272, 252 P. 521 (Ariz. 1927)
• Decision Date: 10 January 1927
• Docket Number: Civil 2525
• Parties: TOM MacKENZIE, Appellant, v. VERNON S. WRIGHT, as Treasurer and Ex-officio Inheritance Tax Collector of the State of Arizona, Appellee

252 P. 521

31 Ariz. 272

TOM MacKENZIE, Appellant, v. VERNON S. WRIGHT, as Treasurer and Ex-officio Inheritance Tax Collector of the State of Arizona, Appellee

Civil No. 2525

Supreme Court of Arizona

January 10, 1927

APPEAL from a judgment of the Superior Court of the County of Maricopa. M. T. Phelps, Judge. Affirmed.

Messrs Chalmers, Stahl, Fennemore & Longan, for Appellant.

Mr John W. Murphy, Attorney General, and Mr. A. R. Lynch Special Counsel for Inheritance Tax Collector, for Appellee.

OPINION

ROSS, C. J.

William Souffrien, who resided in Pinal county, Arizona, at the time of his death, and whose property was in said county, after naming in his will certain devises and bequests, gave and bequeathed the residue of his estate, amounting to $173,011.43, to Tom MacKenzie, the appellant, a stranger to the blood of Souffrien. William John Booth, a nephew of Souffrien and his sole heir at law, contested the will. In the midst of the trial of the issues raised by the contest the lawsuit was compromised, the contest withdrawn, and the will admitted to probate. According to the terms of the compromise agreement, $70,000 of the residue were to be paid over or distributed to Booth and the final decree so provided. Of the residue of the estate, then, MacKenzie kept $103,011.43 and Booth received $70,000.

Under the Inheritance Tax Act, chapter 26, Laws of 1922, when the party who receives property under a will or by the intestate law is a stranger to the blood of the decedent, the rate of the tax to be collected is higher than when such party is of the blood. Sections 2 and 3.

In the settlement with the state treasurer it was the contention of the treasurer that the inheritance tax due the state should be computed at the higher rate, upon the whole of the residue to wit, $173,011.43; whereas, the administrators with the will annexed and the appellant contended it should be computed at the lower rate upon the amount distributed or paid to Booth. The tax was paid to the state in accordance with the contention of the state treasurer, and amounted to $10,744.50 more than if it had been computed on the basis contended for by the administrators and the appellant. This was paid by the administrators under protest with the stipulation, to which the state treasurer was a party, that the appellant, he being the sole party in interest, could, if he so elected, within ninety days, sue for its recovery, and that if he did sue the treasurer would not interpose any objection to the propriety of bringing and maintaining the action in the name of MacKenzie without joining the administrators nor to the jurisdiction of the superior court to try and determine the legality of the collection of the protested payment. The question was presented to the trial court by a general demurrer to the complaint, and, the demurrer being sustained and judgment entered for defendant, it is here on appeal for our determination.

The question raised is whether the amount of the inheritance tax should be determined by the provisions of the will or by the compromise agreement made by the parties and approved by the court.

Section 1 of the Inheritance Tax Act, with certain exceptions not here material, imposes a tax upon any transfer of property within the jurisdiction of the state, as there defined, at its clear market value "when the transfer is by will or by the intestate laws. . . ." Sections 2 and 3 fix the rate of the tax to be charged to the person or persons to whom is passed any property by a transfer. Section 4 provides for exemptions to the transferee. Section 5 makes the tax due and payable at the time of the transfer (with some exceptions not material in this case), and a lien on the property transferred until paid; and by section 6 such tax bears interest from the date of its accrual.

Under the law, if a person die without making a will his heirs inherit his property. He may, however, if he makes a will, transmit his property to whom he chooses. These two methods of devolution of property are recognized by the Inheritance Tax Act as all-inclusive, and it is manifest that the legislative purpose was that the recipient of property in either of such ways must surrender a small portion thereof, in the way of a tax, to his state. The intestate feature of the law is not involved in this case, the decedent having made a will specifically directing the devolution of his property. What he said in such will was that appellant MacKenzie should have the residue of his estate, which, when other legacies and the expenses of administration were cared for, amounted to the sum of $173,011.43.

A successful contest of the will would have defeated the testator's intentions and left his property to be disposed of according to the laws of intestacy, but when the will was probated his intentions as expressed therein were upheld and made certain of performance. The residuary legatee became, as of the date of testator's death, the absolute owner of the residuum, and on that date the state's tax, at the rate fixed for a legatee of his class, fell due and became a lien thereon until paid. Nor do we think these results are defeated or changed by a compromise agreement of the parties that consents to the probate of the will on condition that the residuary legatee will give to the contestant a named portion of the legacy to withdraw the protest, even though such agreement is approved by the court in its order of distribution. The portion received by Booth was not nominated in the will, nor did he inherit it. Though it may have come from the testator's estate, it was not of the estate, but of the property of the residuary legatee. Booth did not receive it as heir to Souffrien, nor as devisee or legatee. It was a consideration paid to him by MacKenzie out of what he (MacKenzie) obtained from the estate of Souffrien to withdraw the contest and to consent to the will's being probated. Booth's succession was through MacKenzie and not Souffrien. What Booth received was not in his hands subject to the tax, as it was never intended to be imposed upon transactions not made in contemplation of death.

That the legislature might have provided that the tax should be imposed upon the consideration paid for the compromise is unquestioned, and we are not able to say that such a rule would not be the more equitable one; but it is quite evident that the language used in the statute never contemplated the adoption of such a rule by the courts.

The cases upholding the views herein expressed are: State v. Johnston, 186 Wis. 599, 203 N.W. 376; Baxter v. Treasurer & Receiver General, 209 Mass. 459, 95 N.E. 854; In re Cook's Estate, 187 N.Y. 253, 79 N.E. 991; In re Graves' Estate, 242 Ill. 212, 89 N.E. 978; In re Wells' Estate, 142 Iowa 255, 120 [31 Ariz. 277] N.W. 713; In re Sanford's Estate, 90 Neb. 410, 45 L.R.A. (N.S. 228, 133 N.W. 870; Estate of Rossi, 169 Cal. 148, 146Pac. 430; English v. Cresnhaw, 120 Tenn. 531, 127 Am. St. Rep. 1025, 17 L.R.A. (N.S.) 753, 110 S.W. 210.

In the Massachusetts case (Baxter v. Stephens, supra), the court quotes from one of its previous decisions as follows:

"The agreement for compromise did not become a part of the will. Although the practice is to insert a clause in the decree to the effect that the estate shall be administered in accordance with the agreement for compromise established...