Miglionico v. United States, Civ. A. No. 69-558-S.

• Decision Date: 25 February 1971
• Docket Number: Civ. A. No. 69-558-S.
• Citation: 323 F. Supp. 197
• Parties: Nina MIGLIONICO and Doyle W. Ramey, as Executors of the Estate of Mary Lou Young Johns, deceased, Plaintiffs, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — Northern District of Alabama

323 F. Supp. 197

Nina MIGLIONICO and Doyle W. Ramey, as Executors of the Estate of Mary Lou Young Johns, deceased, Plaintiffs, v. UNITED STATES of America, Defendant.

Civ. A. No. 69-558-S.

United States District Court, N. D. Alabama, S. D.

February 25, 1971.

Harold I. Apolinsky, Sirote, Permutt, Friend & Friedman, Birmingham, Ala., for plaintiffs.

Lynn Ross, Asst. U. S. Atty., Birmingham, Ala., for defendant.

MEMORANDUM OF DECISION

POINTER, District Judge.

This case has been brought under 28 U.S.C. § 1346(a) (1) for the recovery of estate taxes alleged to have been erroneously collected from the Estate of Mary Lou Young Johns, deceased. The sole issue for decision¹ by the court is whether certain shares of stock, registered in the name of decedent and her husband, are to be excluded from her "gross estate".

FINDINGS OF FACT

Upon a consideration of the stipulations of the parties and the evidence adduced during trial, the court finds the facts to be as follows:

In late 1950 decedent's husband purchased 8249.641 shares of capital stock of Investors Mutual, Inc., registering them in the name of "Llewellyn W. Johns and Mary Lou Young Johns, tenants in common." Mr. Johns did not intend by this registration — nor indeed did he at any time ever intend — to make a gift to his wife of any part of this stock. He kept the certificate in a bank vault to which his wife did not have access.

The funds used to make the purchase belonged legally to Mr. Johns, being the proceeds realized on the sale by him of the family funeral business. Due to changes in the burial insurance industry in the state, Mr. Johns was, in effect, forced out and in the position of having to accept what he could get for the business.

At this time and periodically thereafter until her death in 1963 — Mrs. Johns was emotionally disturbed and under psychiatric care. Her condition was sufficiently serious as to require her confinement in a state mental hospital on several occasions. Her illness, at least in part, was attributable to her feelings concerning the youngest of her three children, a son who was without sight and somewhat mentally retarded.

In error the check for the proceeds from the sale of the family business — $115,000 — was made out in the names of both Mr. and Mrs. Johns. Reluctant to make a big issue on the subject with the purchaser under the circumstances, and not wanting to upset his wife further in her condition, Mr. Johns accepted finally the check in this form and also agreed to his wife's suggestion that this money be set aside in an investment. Mrs. Johns envisioned this fund — the Investors Mutual stock — as the means by which either her husband or their older son could someday re-enter the mortuary business. She expressed the fear that, without her signature being required, Mr. Johns might in acts of generosity dissipate the fund.

To preserve family harmony in the face of his wife's expressed concerns, Mr. Johns had the stock registered in both their names so as to require both as a condition to any disposition. Moreover, a bank account was opened in their joint names (with right of survivorship), with a provision requiring both their signatures on any disbursements; and this account was then used as the depository for dividends on the Investors Mutual stock. Mrs. Johns did not claim beneficial ownership in the stock. What she did claim was a power to veto a disposition of the stock and the dividends therefrom and a testamentary power to appoint half of the stock among her children and grandchildren.

Throughout the remaining years of his wife's life, Mr. Johns did not openly dispute — for the sake of harmony in the family and mindful of his wife's condition — her claim to these powers over the stock. Upon her death he, however, asserted his claim in full ownership of the shares — denying that she had been a true owner of any beneficial interest and stating that at most she had been a trustee. This claim was made promptly after her death, and months before filing of any estate tax return. Mr. Johns was not a beneficiary under his wife's will and had no right to dissent from it — his claim was adverse in a legal sense to that of the beneficiaries under the will (his children and grandchildren), though it does not appear that there was any personal animosity at that time within the family. The two adult children did not contest the facts claimed by Mr. Johns and indeed signed a release of any claim on their part to such stock. The Executrix of Mrs. Johns' Estate and the Guardian ad Litem appointed to represent the youngest Johns child did, however, deny his claim and instead assert on behalf of the Estate a claim to half the stock.

The matter was heard by the Probate Judge of Jefferson County, Alabama, and decided by him in favor of Mr. Johns and against the contentions of the Executrix and the Guardian ad Litem.

It was an adversary proceeding with qualifications — that is, while there was no anger or

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