Oliver v. Bell

• Decision Date: 05 April 1939
• Docket Number: No. 6828.,6828.
• Citation: 103 F.2d 760
• Parties: OLIVER et al. v. BELL.
• Court: U.S. Court of Appeals — Third Circuit

103 F.2d 760 (1939)

OLIVER et al. v. BELL.

No. 6828.

Circuit Court of Appeals, Third Circuit.

April 5, 1939.

Henry O. & Oliver Evans, of Pittsburgh, Pa. (Henry O. Evans and Oliver Evans, both of Pittsburgh, Pa., of counsel), for appellants.

James W. Morris, Asst. Atty. Gen., Sewall Key, J. Louis Monarch, and John E. Garvey, Sp. Assts. to Atty. Gen., and Charles F. Uhl, U. S. Atty., of Pittsburgh, Pa., for appellee.

Before DAVIS, MARIS, and BUFFINGTON, Circuit Judges.

DAVIS, Circuit Judge.

This was a suit by plaintiffs to recover $444,492.10 which they, as executors of the estate of David B. Oliver, deceased, paid to defendant on a deficiency assessment of estate taxes made against the estate of David B. Oliver because in his lifetime he transferred to his children and grandchildren "in contemplation of death" certain property which they did not include in his gross estate when making the tax return.

The learned district judge, before whom the case was tried without a jury, determined as a fact that the property was transferred "in contemplation of death".

Mr. Oliver died testate on October 21, 1934, at the age of 99 years, 11 months and 11 days. He left a last will and testament bearing date April 6, 1932, which was duly probated and on which letters testamentary were issued. His executors in due time filed an estate tax return purporting to show the tax due on the estate, which they paid.

On April 4, 1932, two days before his will was executed, he transferred to each of his four daughters, to each of his two sons and to two grandchildren, the children of a deceased son, the following shares of stock:

                   180  Aluminum Company of America
                         Common
                   180  Anaconda Copper Mining Company
                         Common
                   750  Armstrong Cork Company, Common
                  1543  Harbison Walker, Common
                   121  National Union Fire Insurance Company
                  2403  Phelps-Dodge Corporation, Capital
                         stock
                   400  Pittsburgh Coal Company, Pfd
                   464  Sinclair Consolidated Oil Corporation
                         Common
                  2643  Socony Vacuum Oil Corporation
                         Capital stock
                   600  Timken Roller Bearing, Common
                   714  United States Steel, Pfd.
                

The gifts to the daughters and grandsons were in trust with remainders over but those to the two sons were "outright", absolute gifts.

As above stated the property so transferred was not included in the gross estate in the return made by the executors. But on final audit the commissioner determined that the transfers made on April 4, 1932, were gifts made "in contemplation of death", were substituted for testamentary dispositions and should have been included in the gross estate.

The value of the property transferred was $1,526,732.67 on which the commissioner, under the applicable provisions of the Revenue Act of 1926, assessed a tax of $438,288.00, which, with interest, totaled $444,492.10.¹ This was paid and suit was brought to recover the payment thereof.

These transfers were made two and one-half years before the death of the decedent and when he was over ninety-seven years of age.

The plaintiffs alleged that the growing needs and expenses of decedent's children and the curtailment of their income, together with his desire to give them and their families every advantage, were the reasons and the only reasons that induced him to make the transfers.

This the commissioner denies and contends that the transfers were made "in contemplation of death" in order to avoid the payment of high taxes on testamentary gifts.

A jury was waived by the parties and the case was tried to the judge without a jury. He found as a fact that the transfers were made "in contemplation of death". His findings of fact have the force and effect of a finding by a jury and may not be disturbed if there was any substantial evidence to support them. Enterprise Coal Company v. Phillips, 3 Cir., 84 F.2d 565.

Accordingly there are two questions before us. The first is whether or not there was any substantial evidence to support the finding by the learned trial judge that the transfers were made "in contemplation of death", and the second is whether or not he erred in admitting and rejecting evidence.

A great deal of evidence was produced by the plaintiffs to show that the decedent made the transfers to supply the needs of his children and their families and to give them "every advantage" which he felt they should have. After reviewing the evidence the learned trial judge in his opinion said:

"The sole issue involved in this case is one of fact, i. e., were the gifts of April 4, 1932, made in contemplation of death?

"The assessment by the Commissioner established a prima facie case of liability, for the presumption is that taxes paid are rightly collected upon assessments correctly made by the Commissioner. Therefore, in a suit to recover them, the burden rests upon the taxpayer to prove all the facts necessary to establish the illegality of the collection: United States v. Rindskopf, 105 U.S. 418, 422, 26 L.Ed. 1131; United States v. Anderson, 269 U.S. 422, 443, 46 S.Ct. 131, 70 L.Ed. 347; Wickwire v. Reinecke, 275 U.S. 101, 105, 48 S.Ct. 43, 72 L.Ed. 184; Niles Bement Pond Company v. United States, 281 U.S. 357, 361, 50 S.Ct. 251, 74 L.Ed. 901; McCaughn v. Real Estate Co., 297 U.S. 606, 56 S.Ct. 604, 80 L. Ed. 879.

"We have fully considered the evidence in this case, having in mind the principles governing the determination of whether or not a gift inter vivos is made `in contemplation of death' as announced by the Supreme Court in United States v. Wells, 283 U.S. 102, 51 S.Ct. 446, 75 L.Ed. 867; and have come to the conclusion that not only have the plaintiffs failed to meet the burden of proof imposed upon them to show the gifts in question were not made `in contemplation of death', but, on the contrary, we are of the opinion that the evidence taken as a whole established the dominant motives for those gifts were death-motives, and not life-motives."

In support of this conclusion he found the following specific facts:

"10. The decedent had not been actively engaged in business for many years preceding the transfers of April 4, 1932. By January 1, 1932, his activities and interests had been so curtailed on account of increasing bodily infirmities that it could be said of him that under the watchful care of nurses and doctors he was gently but surely drifting to the inevitable end which loomed before him.

"11. When he made the transfers which are the subject of this law suit, the decedent was over 97 years of age. Although the evidence does not show that the decedent was suffering from any particular organic disease on or about April 4, 1932, it does establish that on April 4, 1932, as the result of over 97 years of living, the decedent's energy and vitality were reduced to the point where he was prone to engage in only the absolute minimum of physical and mental activity. His routine of living, the continuous attendance of a nurse, and the physical examinations two or three times a week by doctors clearly indicate that the decedent fully realized that, while death might not be imminent, still, in the ordinary course of nature, it might occur at any time, and could not long be delayed.

"12. On April 4, 1932, all of the sons and daughters of the decedent were financially secure; all of their children were then reared and educated and the financial needs of the decedent's sons and daughters were then decreasing and not increasing.

"13. Immediately before the making of the gifts on April 4, 1932, the testator was aware of legislation then pending in Congress to bring about substantial increase in estate taxes.

"14. Under the terms of the decedent's will, which was unrevoked on April 4, 1932, and under the terms of the last will which was executed on April 6, 1932, the donees of the gifts of April 4, 1932, would have succeeded to the property which was the subject of the gifts in substantially the same proportion and under the same conditions as they did under the transfers.

"15. The trust instruments and other gifts of April 4, 1932, and the last will of April 6, 1932, were parts of what was practically a single transaction, and when the gifts were arranged for and made, the decedent had in contemplation his own death just as much as when he arranged for and executed his last will and testament.

"16. The gifts which are the subject of this suit were motivated by the same considerations that lead to...