Moorman v. Moorman

• Decision Date: 04 October 1954
• Docket Number: No. 65,65
• Parties: , 46 A.F.T.R. 883 Eva H. MOORMAN, Plaintiff and Appellant, v. Charles T. MOORMAN, Catherine Moorman Schneider, and Achilles H. Moorman, Jr., Individually and as Administrator of the Estate of Achilles H. Moorman, Deceased, Defendants and Appellees.
• Court: Michigan Supreme Court

Page 248

66 N.W.2d 248

340 Mich. 636, 46 A.F.T.R. 883

Eva H. MOORMAN, Plaintiff and Appellant, v. Charles T. MOORMAN, Catherine Moorman Schneider, and Achilles H. Moorman, Jr., Individually and as Administrator of the Estate of Achilles H. Moorman, Deceased Defendants and Appellees.

No. 65.

Supreme Court of Michigan.

Oct. 4, 1954.

Dickinson, Wright, Davis, McKean & Cudlip, Detroit, for plaintiff and appellant, Robert E. McKean and Thomas C. Tilley, Detroit, of counsel.

Hill, Lewis, Andrews, Granse & Adams, Detroit, for defendants and appellees, Edward T. Goodrich, Marlin F. Scholl, Detroit, of counsel.

Beaumont, Smith & Harris, Detroit, U. George Krapfel, Detroit, of counsel, amici curiae.

Before the Entire Bench.

KELLY, Justice.

Achilles H. Moorman died intestate on July 23, 1951, leaving a Michigan gross estate of approximately $832,000. Plaintiff, the widow, and defendants, children of deceased, are the sole heirs-at-law of said deceased.

Plaintiff contends that the Federal estate tax ($142,800) should not be deducted from the gross estate before plaintiff's 1/3 share, as widow, is determined. Defendants contend the Federal estate tax is a charge which should be deducted from the gross estate before the widow's share is computed.

If plaintiff's contention is correct she will receive $244,000 as her share of the estate. Defendants contend her share should be $47,600 less, or $196,400. Under plaintiff's theory the children would each receive $119,800, whereas under defendants' contention each would be entitled to $130,933.

Decree was entered for defendants. Plaintiff appeals, claiming that the court erred in holding that under the Michigan statutes of descent and distribution the Federal estate tax must first be deducted in order to arrive at the amount to be used as the basis for computing the widow's statutory 1/3 interest in her deceased husband's intestate estate.

In 1916 Congress abandoned the inheritance tax and since that time the Federal government has collected an estate tax. In 1948 Congress provided for the 'marital deduction' thereby adding to then existing exemptions and deductions, and providing for the marital deduction in the tax up to 50% of the gross amount of the estate. It is conceded in this case that plaintiff's share under the statute is less than 50% of the gross estate.

The Federal estate tax is an excise tax upon the transfer of an estate upon death of the owner and is not a tax upon succession and receipts of benefits under the law or will. It was created by Congress as death duties as distinguished from a legacy or succession tax and imposes the tax not on the interest to which the legatees and devisees succeed to on death but upon the interest which ceased by reason of the death.

To determine whether plaintiff's distributive share as widow should be computed before or after deduction of the Federal estate tax requires interpretation of the Michigan statutes of descent as to intestate property. It is the State's function to determine the amount of the distributive share as well as those who shall inherit the property of an intestate estate. Plaintiff's rights are established by C.L.1948, § 702.93 as amended by P.A.1949, No. 78, Stat.Ann.1949 Cum.Supp. § 27.3178(163), as to personal property; by C.L.1948, § 702.80, Stat.Ann.1943 Rev. § 27.3178(150), as to real property; and by C.L.S.1952, § 702.95, Stat.Ann.1953 Cum.Supp. § 27.3178(165), as to priority of charges and assignment of residue of intestate estates.

The trial court in its opinion stated: 'Plaintiff in the case at bar takes only by virtue of the statute. Her share is 1/3 of the 'residue'. 'Residue' is expressly defined by statute so as to require a deduction of the estate tax before a 'residue' is arrived at.' We agree with the court's conclusion in this regard.

Plaintiff requests that this Court recognize equitable principles and interpret the Michigan statutes in conjunction with the Federal revenue law and construe the Michigan statutes as though "estate taxes' were not mentioned when computing the widow's intestate distributive share in this case.' Plaintiff contends that 'only by computing spouse's share before deducting Federal estate tax will purpose of marital deduction be given effect,' and that 'any other result would necessarily deprive her of the freedom from tax provided by Congress.' United States supreme court decisions do not sustain this theory.

In Riggs v. Del Drago, 317 U.S. 95, 63 S.Ct. 109, 110, 87 L.Ed. 106, the court said:

'We are of opinion that Congress intended that the federal estate tax should be paid out of the estate as a whole and that the applicable state law as to the devolution of property at death should govern the distribution of the remainder and the ultimate impact of the federal tax * * *. Its legislative history indicates clearly that Congress did not contemplate that the Government would be interested in the distribution of the estate after the tax was paid, and that Congress intended that state law should determine the ultimate thrust of the tax.'

In Y. M. C. A. v. Davis, 264 U.S. 47, 44 S.Ct. 291, 292, 68 L.Ed. 558, the court dealt with the problem of residuary bequests to charities. The law then, as now, provided for the deduction of gifts to charties in arriving at the net estate subject to tax in a way similar to the marital deduction from the whole estate arrives at a taxable net estate. The laws of Ohio provided that in the absence of a contrary provision in the will, the Federal estate tax was to be paid out of the residue notwithstanding the leaving of the residue to qualified charities, and it was contended that Congress could not have intended that the tax should be paid out of the very gifts which were excluded from the taxable net estate (subdivision 3). In deciding this question the United States supreme court said:

'The argument of the petitioners is that, as the tax is expressly made equal to a percentage of the value of the net estate and is imposed upon the transfer of that net estate, Congress cannot have intended that the tax should be paid out of the very gifts which by subdivision (3) are excluded from the net estate. It is further urged that the manifest purpose of Congress was to exempt the beneficiaries under subdivision (3) from tax and the result of the construction by the Ohio courts is in this case that they are the only ones to pay it. These arguments are persuasive, but they derive much of their strength from the special circumstances of the present case. * * *

'There is nothing in subdivision (3) of section 403 which exempts the recipients of altruistic gifts from taxation; it only requires a deduction of them in calculating the amount of the estate which is to measure the tax. It exempts the estate from a tax on what is thus deducted just as subdivision (4) exempts in terms the estate from taxation on...