Norris v. Goodcell

• Decision Date: 15 January 1927
• Docket Number: No. 2025.,2025.
• Citation: 17 F.2d 181
• Court: U.S. District Court — Southern District of California
• Parties: NORRIS et al. v. GOODCELL, Collector of Internal Revenue.

17 F.2d 181 (1927)

NORRIS et al. v. GOODCELL, Collector of Internal Revenue.

No. 2025.

District Court, S. D. California. S. D.

January 15, 1927.

Ward Chapman and L. M. Chapman, both of Los Angeles, Cal., Claude I. Parker, of San Francisco, Cal., and Ralph W. Smith, of Sacramento, Cal., for plaintiffs.

Samuel W. McNabb, U. S. Atty., and Donald Armstrong, Asst. U. S. Atty., both of Los Angeles, Cal. (G. C. Simon, of Los Angeles, Cal., of counsel), for defendant.

JAMES, District Judge.

This action is brought to recover the principal sum of $15,874.12, alleged to have been paid under protest to the defendant collector as an estate tax owing to the government. The tax was paid by Lucy Banning Ross, as executrix of the estate of Mary Hollister Banning, deceased. An additional charge amounting to $2,408.69, as interest, was collected on the same account and the prayer of the complaint includes a demand for the repayment of that sum also. The real interest affected was that of Mary Banning Norris.

The tax charges were made on account of an alleged one-half interest held by the deceased at the time of her death in certain real property. The title to this property at the date of the death of Mrs. Banning was held by plaintiff Mary Banning Norris, a daughter of the deceased, who had received a conveyance of the same from her mother in October, 1897. In that year and month Mrs. Banning, by a grant deed, reciting the consideration to be for "love and affection and the sum of $10," made conveyance of a lot of land comprising approximately 2,800 acres to her daughter Mary, who on the 16th day of November, 1897, was married to Wilt W. Norris Norris died in 1904.

Early in the year 1906 Mrs. Banning, contending that she had not meant to make an absolute conveyance to her daughter of the land, but that the daughter was to hold the same in trust only, demanded a reconveyance to be made. Mrs. Norris, disputing the contention of her mother that the conveyance was not absolute and unconditional, refused to reconvey, whereupon Mrs. Banning caused her attorney to commence an action to compel the return to her by her daughter of the property. That action did not proceed to trial, but resulted in an agreement being executed by Mrs. Banning and Mrs. Norris, which settled the controversy. The effect of this agreement was to secure to Mrs. Banning one-half of the income derived and to be derived from the land or its proceeds during the time that she might thereafter live.

The Revenue Act of 1918, in that portion which provides for estate taxes, contains the provision which is important to the questions presented by this case. Subdivision (c) of section 402 of the act (St. L. vol. 40, p. 1097 Comp. St. § 6336¾c), provides that a tax shall be collected "to the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has at any time created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death (whether such transfer or trust is made or created before or after the passage of this act), except in case of a bona fide sale for a fair consideration in money or money's worth."

Aside from the question as to whether a complete transfer of the right and title to the property described in the deed of Mrs. Banning to her daughter Mary was effected prior to the death of Mrs. Banning, which is the main point involved, there is present also a question as to the validity of that term of the statute which makes its provisions retroactive. Because of the conclusion which I have reached on the evidence relating to the matter of the extent of the interest conveyed, it will not be important nor necessary to announce any conclusion on the latter proposition. In passing, it may be remarked that there are decisions of District Courts holding that the retroactive feature of the law is valid legislation. One of these cases (and it may be cited as an authority also in agreement with the conclusion made in this case on the main question) is Farmers' Loan & Trust Co. v. Bowers, decided in the United States District Court for the Southern District of New York. See 15 F.(2d) 706.

It is pertinent to observe, before discussing the evidence submitted in this case, that, in...