Ogburn's Estate, In re

• Decision Date: 15 October 1965
• Docket Number: No. 3424,3424
• Citation: 406 P.2d 655
• Parties: In the Matter of the ESTATE of Alice R. OGBURN, Deceased. Howard Y. RANDLER, Mabel Seely, Daisy Sammis, Leona Russell, Frances R. Johnson and Frances R. Johnson, Administratrix of the Estate of Bertha Kleiser, Deceased, Appellants, v. Douglas B. OGBURN, Individually and as Executor of the Estate of Alice R. Ogburn, Deceased, and Cynthia K. Ogburn, Douglas B. Ogburn 11, and David Scott Ogburn, Appellees.
• Court: Wyoming Supreme Court

Page 655

406 P.2d 655

In the Matter of the ESTATE of Alice R. OGBURN, Deceased.

Howard Y. RANDLER, Mabel Seely, Daisy Sammis, Leona Russell, Frances R. Johnson and Frances R. Johnson, Administratrix of the Estate of Bertha Kleiser, Deceased, Appellants, v. Douglas B. OGBURN, Individually and as Executor of the Estate of Alice R. Ogburn, Deceased, and Cynthia K. Ogburn, Douglas B. Ogburn 11, and David Scott Ogburn, Appellees.

No. 3424.

Supreme Court of Wyoming.

Oct. 15, 1965.

C. L. Bates, Rawlins, for appellants.

C. A. Brimmer, Jr., of Brimmer & Brimmer, Samuel T. Ishmael, Rawlins, for appellees.

Before PARKER, C. J., and HARNSBERGER, GRAY and McINTYRE, JJ.

Mr. Justice GRAY delivered the opinion of the court.

The will of Alice R. Ogburn, deceased, disposed of real and personal property appraised in her probate estate in the sum of approximately $238,000. Out of that property a special devise was made to her foster son, Douglas Bell Ogburn, of certain real estate valued at $80,000 and a special bequest of certain stocks valued in the approximate sum of $62,000 was made to his children. A brother and five sisters of decedent were made the residuary devisees and legatees. In addition to the above-described property passing under the will, the foster son, as a result of the death of testatrix, acquired ownership of jointly held property valued at approximately $12,500 and proceeds of insurance policies in the sum of $20,000. The foster son was named as executor of the estate and qualified and acted as such during the times herein. In rendering his final account as executor, the foster son undertook to charge the residuary estate with the full amount paid for Federal estate tax and the full amount paid for Wyoming inheritance tax. Exceptions to the accounting treatment accorded such items were duly taken by the residuary legatees. After hearing, the trial court approved the final accounting in all respects and a decree of distribution was entered on that basis. From that decree the residuary devisees and legatees appeal. For convenience we shall hereafter usually refer to the brother and sisters as appellants and to the foster son and his children as appellees.

The ultimate questions presented, as we view it, may be summarized as follows:

1. Did the will contain a sufficient directive against apportionment of the Federal estate tax in the manner prescribed by the Uniform Estate Tax Apportionment Act, Ch. 171, S.L. of Wyoming, 1959 (§§ 2-336 to 2-346, W.S.1965 Cum.Supp.), with respect to (a) the testamentary gifts made to appellees and (b) to the nontestamentary gifts of the joint property to the foster son?

2. Did the will contain a sufficient directive against apportionment of that part of the Federal estate tax levied upon the proceeds of insurance policies in the manner prescribed by the Internal Revenue Code of 1954, 26 U.S.C.A. § 2206 (1955)?

3. Did the will contain a sufficient directive to shift the burden of payment of State inheritance taxes from the devisees and legatees of property transferred by the will, as the statute provides, to the residuary estate?

In this connection we shold state that the parties, for purposes of argument with respect to the questions relating to Federal estate taxes, made no effort to segregate into component parts the three classes of property that were included in decedent's taxable estate and, although recognizing that the enumerated specific questions exist, simply took the position that the language of the will either did, or did not, contain a directive against apportionment of the Federal tax as a whole. For reasons soon to be stated we believe that the views of the parties are not entirely correct and hence the necessity to state the questions with preciseness.

The clause of the will that brought about this controversy states:

'FIRST: I direct the payment of all my just debts, taxes, funeral expenses and expense of administration of my estate.'

Following this are articles 'THIRD' and 'FOURTH' making the specific devises and bequests to the foster son and his children, and article 'FIFTH' granting the residuary estate to the brother and sisters of the testatrix. For our purposes that is the sum and substance of the will.

The Federal Taxes

As an initial approach to the matter of apportionment of Federal estate taxes we point out, as indicated above, that the public policy of this State, as declared by the legislature, is to apportion such taxes to the persons benefited. Section 2 of the Act, supra, succinctly lays down that proposition. It provides:

'Unless the will otherwise provides, the tax shall be apportioned among all persons interested in the estate. The apportionment shall be made in proportion that the value of the interest of each person interested in the estate bears to the total value of the interests of all persons interested in the estate. The values used in determining the tax shall be used for that purpose.'

The statute accomplishes three general purposes. First, it preserves the inherent and recognized right of a testator or testatrix to designate the fund from which such taxes are to be paid. Secondly, it abrogates the common-law rule that, absent such a designation, the burden of payment was first to be imposed upon the residuary estate. Thirdly, and again absent a directive in the will to the contrary, it apportions the tax--without regard to special or general devises and bequests--commensurately to those benefited by the gifts of property upon which the Federal tax has been imposed.

We are one of three states which have adopted the Uniform Estate Tax Apportionment Act, as it relates to Federal estate taxes. ¹ With one exception, so far as we can determine, In re Crozier's Estate, 105 N.H. 440, 201 A.2d 895, which is not particularly helpful here in view of the variance in the language used in the will, the Uniform Act has not been subjected to judicial scrutiny. Nevertheless, we are not without guidance in the matter. Over one-half of the states have enacted laws of similar import and the aim of the commissioners was to incorporate into the Uniform Act the most desirable features of the several state acts. ² There are innumerable cases ³ from those states construing directive tax clauses of a will in the light of statutory provisions, and while there is diversity in the result reached because of the variance in the language used, there is much unanimity in the observance of certain general principles for purposes of construction.

Practically all of the cases agree that a directive against apportionment should be expressed in clear and unambiguous language. Depending, of course, upon the complexity of the testamentary plan a few simple words may suffice to effectuate that purpose. It is essential, however, that the words, or combination of words, used in the will sufficiently indicate an intention against apportionment. In case of doubt the burden of the taxes must be left where the law places it. See A.L.R. Annotations, supra. It has been said that a sufficient tax clause should expressly state '(1) what gifts or beneficiaries are freed of the burden of taxes, (2) what taxes are affected, and (3) where the burden of taxes is shifted.' 28 Am.Jur., Inheritance, Estate, and Gift Taxes, § 488, p. 353. Surmounting the foregoing rules is the paramount rule that the intention of the testator or testatrix is to be ascertained, if possible, from the meaning of the words used in the context of the entire will. White v. Wyoming National Bank of Casper, Wyo., 368 P.2d 960, 963, 100 A.L.R.2d 1044; In re Boyd's Estate, Wyo., 366 P.id 336, 337. A representative elaboration of the rule of intention is stated in Succession of Jones, La.App., 172 So.2d 312, 316, writ of review refused 247 La. 718, 174 So.2d 131, wherein it was said:

'With reference to tax clauses in wills, courts are bound to regard all words in their usual and most known signification, according to their natural and reasonable meaning. * * *

'To determine the intention of the testator the whole will is to be taken into consideration. Every word must be given effect if that can be done without defeating the general purpose of the will which is to be made effective in every reasonable method. * * *'

Once ascertained, the intention must govern, In re Gilchrist's Estate, 50 Wyo. 153, 58 P.2d 431, 60 P.2d 364; provided, of course, that the result reached is not contrary to law, In re Armstrong's Estate, 56 Cal.2d 796, 17 Cal.Rptr. 138, 366 P.2d 490, 493; National State Bank of Newark v. Stewart, 135 N.J.Eq. 603, 39 A.2d 435, 437.

Beyond the foregoing aids to construction, the authorities are not too helpful. The results reached in all of the cases vary in accordance with the circumstances present. For example, our search and apparently the search of counsel for the parties have failed to disclose a case wherein an appellate court passed upon a tax clause essentially the same as the tax clause before us. To illustrate, appellees place great reliance upon the case of In re Bourquin's Estate, 87 Colo. 144, 286 P. 114, 115, which dealt with the State inheritance tax. The tax clause there said:

'* * * 'After paying all court costs, taxes and administrators fees, I hereby give [et cetera] * * *'

The court remarked that the phrase 'all taxes' meant what it said. However, we would immediately point out that the phrase was in no way qualified by other language. That is not true in our case. Here the will goes on to say, 'of my estate.' The distinction is fully discussed in Norton v. Jones, Tex.Civ.App., 210 S.W.2d 820, 821, 822. We might also say that the cases cited to us by appellants, such as In re Grondin's Estate, 98 N.H. 313, 100 A.2d 160, 162, 163, are premised on language substantially different from the language contained in the tax clause before us.

It should be kept in mind also that the burden of establishing a basis for nonapportionment rests upon those contending against ...