Newton v. Dailey

• Decision Date: 07 July 1981
• Docket Number: No. 14298,14298
• Citation: 280 S.E.2d 91,167 W.Va. 347
• Court: West Virginia Supreme Court
• Parties: Genevieve Mae NEWTON, Extrx., etc., et al. v. Richard L. DAILEY, Tax Commr., etc.

Page 91

280 S.E.2d 91

167 W.Va. 347

Genevieve Mae NEWTON, Extrx., etc., et al. v. Richard L. DAILEY, Tax Commr., etc.

No. 14298.

Supreme Court of Appeals of West Virginia.

July 7, 1981.

Syllabus by the Court

1. "Statutes which relate to the same subject matter should be read and applied together so that the Legislature's intention can be gathered from the whole of the enactments." Syllabus Point 3, Smith v. State Workmen's Compensation Commissioner, W.Va., 219 S.E.2d 361 (1975).

2. W.Va.Code, 11-11-1(d), provides "that in the case of a surviving spouse, not more than fifty per centum of the value of any transfer (of jointly-owned property with the right of survivorship) shall be included and taxed in any such decedent's estate." This language indicates the Legislature intended to tax jointly-owned survivorship property by including fifty per centum of its value in the deceased spouse's estate.

3. W.Va.Code, 11-11-5, permits the deduction of debts and encumbrances against the actual market value of the property to arrive at its taxable value.

4. Under our law, co-obligors on a note are jointly and severally liable. If one co-obligor is required to pay the entire obligation, he may seek contribution or reimbursement from his co-obligor for fifty per centum of the amount paid.

5. The common law rule, which precluded an action against a deceased co-obligor and required the creditor to sue only the surviving co-obligor, has been changed by statute. W.Va.Code, 55-8-6. This statute now charges the estate for such joint debt to the same extent as the deceased co-obligor would have been charged had he lived.

6. A deceased's estate having a continuing co-obligation on a joint note secured by a deed of trust with a surviving spouse has a right of reimbursement under W.Va.Code, 11-11-5. The estate, therefore, can deduct fifty per centum of the obligation from the one-half of the actual market value of the jointly-owned property taxable in the deceased's estate. W.Va. Code, 11-11-1(d).

Chauncey H. Browning, Jr., Atty. Gen., Gene W. Bailey, Asst. Atty. Gen., Charleston, for appellant.

No appearance for appellees.

MILLER, Justice:

The State Tax Commissioner appeals from an adverse judgment of the Circuit Court of Cabell County, which held that the entire amount of a joint debt should be deducted from the deceased's property interest in determining the fair market value of jointly-owned real estate for inheritance tax purposes. We disagree and reverse.

George T. Newton died jointly owning several parcels of real estate with his wife with a right of survivorship. The property had an appraised fair market value of $156,500.00, excluding the joint indebtedness owed on the property, which amounted to approximately $52,400.00. The fiduciary filed the State Inheritance and Transfer Tax Return taking the entire amount of the indebtedness as a deduction from the deceased's one-half share of the property. The Tax Commissioner then issued a deficiency assessment and the estate contested the assessment in the Circuit Court of Cabell County. As previously noted, the judge held that the estate had correctly calculated the net taxable value of the jointly-owned property.

The Tax Commissioner contends that where there is a surviving spouse W.Va.Code, 11-11-1, imposes an inheritance and transfer tax on not more than fifty per centum of the value of jointly-owned property which has the incidence of the right of survivorship, as provided by subsection (d) of that statute. W.Va.Code, 11-11-1(d). ¹

This controversy arises over an interpretation of W.Va.Code, 11-11-5, which determines the market value of property for purposes of our State inheritance tax. This Code section permits the "deducting (of) debts and encumbrances for which the (property) is liable" from the actual market value of the property. ²

This statute does not spell out in any detail how debts against jointly-owned real estate are to be deducted. However, we will read related statutes in pari materia. Snodgrass v. Sisson's Mobile Home Sales, Inc., W.Va., 244 S.E.2d 321, 324 (1978). Customary rules of construction dictate that "(s)tatutes which relate to the same subject matter should be read and applied together so that the Legislature's intention can be gathered from the whole of the enactments." Syllabus Point 3, Smith v. State Workmen's Compensation Commissioner, W.Va., 219 S.E.2d 361 (1975). Reading W.Va.Code, 11-11-5, with the following pertinent provisions of W.Va.Code, 11-11-1(d), reveals "that in the case of a surviving spouse, not more than fifty per centum of the value of any transfer (of jointly-owned property with the right of survivorship) shall be included and taxed in any such decedent's estate." This language indicates the Legislature intended to tax jointly-owned survivorship property by including fifty per centum of its value in the deceased spouse's estate.

The question of what is fifty per centum of the value of jointly-owned survivorship property is then answered by W.Va.Code, 11-11-5, which permits the deduction of debts and encumbrances against the actual market value of the property to arrive at its taxable value. This statute, however, qualifies the right to deduct such debt by providing that:

"(A)llowances shall not be made for debts incurred by the decedent, or encumbrances made by him, unless such debts or encumbrances were incurred or created in good faith for an adequate consideration, nor for any debt in respect whereof there is a right to reimbursement from any other estate or person, unless such reimbursement from any other estate or person cannot be obtained." W.Va.Code, 11-11-5.

There is no issue raised as to the good faith nature of the debts. The pivotal issue is the trial court's legal conclusion that there was no right of reimbursement on the joint debt as against the surviving widow. This conclusion was predicated on the court's finding that under W.Va.Code, 48-3-9, a contract between husband and wife is not enforceable unless it is in writing signed by the party to be charged. ³

It does not appear to be disputed that the debts involved were jointly-executed notes signed by the husband and wife for loans obtained against the property secured by deeds of trust. The notes were contracts in writing signed by the parties and meet the requirements of W.Va.Code, 48-3-9. We discuss below that this written joint obligation gives rise to a right of contribution or reimbursement. We also note that under W.Va.Code, 48-3-8, a married woman may contract with any person and be held liable on such contract. ⁴

Under our law, co-obligors on a note are jointly and severally liable. If one co-obligor is required to pay the entire obligation, he may seek contribution or reimbursement from his co-obligor for fifty per centum of the amount paid. Cost v. MacGregor, 124 W.Va. 204, 19 S.E.2d 599 (1942); Bringardner v. Rollins, 102 W.Va. 584, 135 S.E. 665 (1926); McKown v. Silver, 99 W.Va. 78, 128 S.E. 134 (1925); Huffman v. Manley, 83 W.Va. 503, 98 S.E. 613 (1919). This is the rule generally adopted in other jurisdictions. E. g., Matter of the Estate of Linker, 30 Colo.App. 25, 488 P.2d 1128 (1971); McLochlin v. Miller, 139 Ind.App. 443, 217 N.E.2d 50 (1966); Kelley v. Halperin, 390 A.2d 1078 (Me.1978); Fithian v. Jamar, 286 Md. 161, 410 A.2d 569 (1979); Farmington National Bank v. Basin Plastics, Inc., 94 N.M. 668, 615 P.2d 985 (1980); Montsinger v. White, 240 N.C. 441, 82 S.E.2d 362 (1954); Pietro v. Leonetti, 30 Ohio St.2d 178, 283 N.E.2d 172 (1972); In re Kershaw's Estate, 352 Pa. 205, 42 A.2d 538 (1945); Matter of the Estate of Fredie Hoffman, 15 Wash.App. 307, 548 P.2d 1101 (1976); 11 Am.Jur.2d Bills and Notes § 588 (1963); Hart & Willier, Commercial Paper Under U.C.C. § 5.05 (1976).

In three of the foregoing cases, this question arose in the same context as this case, that is, the proper valuation for state inheritance tax purposes of jointly-held property with right of survivorship where both parties had signed on the note which secured the loan on the real estate. Under inheritance tax statutes similar to ours, the courts held that fifty per centum of the amount of the debt should be deducted from the deceased's one-half of the fair market value of the property. Kelley v. Halperin, supra; In re Kershaw's Estate, supra; Matter of the Estate of Fredie Hoffman, supra.

Although the point has not often been discussed, the common law rule, which precluded an action against a deceased co-obligor and required the creditor to sue only the surviving co-obligor, has been changed by statute. W.Va.Code, 55-8-6. ⁵ This statute now charges the estate for such joint debt to the same extent as the deceased co-obligor would have been charged had he lived. Citizens' Trust & Guaranty Company v. Young, 75 W.Va. 241, 83 S.E. 1007 (1914); Greathouse v. Morrison, ...