Osterloh's Estate v. Carpenter

• Decision Date: 12 September 1960
• Docket Number: No. 2,No. 47777,47777,2
• Parties: ESTATE OF Agnes OSTERLOH, Deceased, Anna W. Osterloh, Executrix, Respondent, v. Milton CARPENTER, Director of Revenue, State of Missouri, Appellant
• Court: Missouri Supreme Court

Page 942

337 S.W.2d 942

ESTATE OF Agnes OSTERLOH, Deceased, Anna W. Osterloh Executrix, Respondent, v. Milton CARPENTER, Director of Revenue, State of Missouri, Appellant.

No. 47777.

Supreme Court of Missouri, Division No. 2.

Sept. 12, 1960.

John M. Dalton, Atty. Gen., Jerry B. Buxton, Asst. Atty. Gen., for appellant, Milton Carpenter.

Joseph J. Russell, Limbaugh & Limbaugh, Cape Girardeau, for respondents.

STORCKMAN, Judge.

This proceeding is based on exceptions to the report of the Missouri inheritance tax appraiser of the estate of Agnes Osterloh, deceased, in the Cape Girardeau Court of Common Pleas. The question presented is whether securities purchased by Agnes Osterloh within two years prior to her death, and issued jointly in her name and the names of her sister, niece and nephews, are subject to taxation as being a transfer made in the contemplation of death. The trial court sustained the exceptions of the executrix and held that the securities were not properly includable in the decedent's estate because there was no transfer within the meaning of the inheritance tax laws. The director of revenue appealed from the judgment.

The director contends that the creation of the joint tenancy was a transfer of property by gift at the time the securities were purchased, that such transfer having been made within two years prior to the death of the purchaser was presumed, in the absence of rebutting evidence, to have been made in contemplation of death under Sec. 145.020, subd. 1(3) RSMo 1949, V.A.M.S., and that the trial court erred in excluding the securities from the taxable property of the estate. The supreme court has jurisdiction of the appeal because a construction of the revenue laws of this state is involved. Art. V, Sec. 3, Constitution of Missouri 1945, V.A.M.S.

No evidence was offered at the hearing of the exceptions, but the parties entered into an agreed statement which, among other things, stipulated these facts: At the time of her death on May 4, 1955, Agnes Osterloh was 71 years of age and a legal resident of Cape Girardeau, Missouri. On August 5, 1955, the inheritance tax appraiser filed his report in the Cape Girardeau Court of Common Pleas where the estate was being administered. The exceptions with which we are concerned are that the appraiser erroneously included as a part of the taxable estate United States government bonds in the sum of $5,673 and capital stock of American Telephone and Telegraph Company in the sum of $18,350 which were purchased by Agnes Osterloh within two years prior to her death and were issued jointly to her and her relatives. In her exceptions, the executrix alleged that the inclusion of these securities as taxable assets of the estate was erroneous for these reasons:

'(1) The bonds and stocks * * * were not purchased by the decedent in contemplation of death.

'(2) The purchase by the decedent of stocks and bonds and the placing of title in the joint names of decedent and others with right of survivorship results in title passing by operation of law upon the death of decedent and does not constitute a 'transfer' within the meaning of Section 145.020, R. S. Mo. 1949.

'(3) Section 145.020, R. S. Mo. 1949, which establishes a conclusive presumption that transfers made within two years of the death of decedent are made in contemplation of death violates Article I, Section 10, of the 1945 Constitution of Missouri, and violates the 14th Amendment of the Constitution of the United States of America. It is, therefore, void and of no effect and cannot operate to make the property herein mentioned subject to tax.'

The order sustaining the exceptions states that the court found 'as a matter of law' that the bonds and stocks in question should not be included as a part of the estate taxable under the Missouri inheritance tax laws, and specifically that the securities were not taxable under the provisions of Sec. 145.020. A memorandum opinion, ordered made a part of the record, gives this reason for the court's ruling: 'I believe that there was no transfer here that brings the property under the above cited statute nor of any other applicable statute that would subject the bonds and stocks held in joint tenancy by the decedent and surviving relatives to Inheritance Tax.' The finding and judgment was in keeping with ground (2) of the exceptions set out above.

The taxes provided by Chapter 145 are referred to as inheritance taxes. These statutes, and particularly Sec. 145.020, subd. 1(1)(2), are on the transfer of property by will or the intestate laws. Subsection (3) of Sec. 145.020 deals with transfers made in contemplation of death. Section 145.010, subd. 1 defines 'contemplation of death' and also declares it to be 'the intent and purpose of this chapter to tax any and all transfers which are made in lieu of or to avoid the passing of the property transferred by testate or intestate laws'. In this case we are concerned with transfers alleged to have been made in contemplation of death.

In re Gerling's Estate, Mo., 303 S.W.2d 915, involved an attempt to subject property previously held in joint tenancy to taxation under the inheritance tax laws. The joint estates had been in existence from six to sixteen years. These contentions made on appeal by the department of revenue were denied: (1) there was a transfer intended to take effect in possession and enjoyment at the death of the deceased cotenant; (2) the deceased joint tenant had retained for her life the possession, enjoyment and income from the property held in joint tenancy; and (3) an interest in the property passed by reason of the death of the cotenant. The decision in Gerling effectively disposes of any claim that property or an interest therein was transferred or passed to the surviving joint tenant within the meaning of the act. In the present case the director contends that there was a transfer of property at the time the joint tenancy was created and, if made in contemplation of death, the transfer is taxable under Sec. 145.020, subd. 1(3).

Section 145.020 insofar as here applicable provides: '1. A tax is hereby imposed upon the transfer of any property, real, personal, or mixed, or any interest therein or income therefrom in trust or otherwise, to persons, institutions, associations, or corporations, not herein exempted, in the following cases:

* * *

* * *

'(3) When the transfer is made by a resident or by a nonresident whose property is within this state or within its jurisdiction, by deed, grant, bargain, sale or gift made in contemplation of the death of the grantor, vendor or donor, or intending to take effect in possession or enjoyment at or after such death. Every such transfer made within two years prior to the death of the grantor, vendor or donor, of a material part of his estate or in the nature of a final disposition or distribution thereof without an adequate valuable consideration shall be considered to have been made in contemplation of death within the meaning of this section'. The words italicized are the ones claimed by the director to be applicable and to characterize this fact situation.

The director places considerable stress on the fact that the joint tenancy was created within the period of two years before the death of the testatrix and urges that the last sentence of subsection (3) gives rise to a rebuttable presumption that the transaction in question was made in contemplation of death. If the presumption is a rebuttable one, as it should be, it is but a rule of evidence and not a part of the substantive law regarding transfers made in contemplation of death. Heiner v. Donnan, 285 U.S. 312, 52 S.Ct. 358, 362, 76 L.Ed. 772; City of St. Louis v. Cook, 359 Mo. 270, 221 S.W.2d 468, 469; State ex rel. Stevens v. Arnold, 326 Mo. 32, 30 S.W.2d 1015, 1018. Further, it is not initially material if the creation of the joint tenancy was in contemplation of death because that goes to the intention of the testatrix. Unless a 'transfer' of 'property' was made within the meaning of the statutes, the intention of the testatrix is not important.

Thus, the first question to be considered is whether the creation of the joint tenancy constitutes a transfer of property within the purview of the statutes which imposes an inheritance tax on such transfers if made in contemplation of death. Section 145.020, subd. 1(3). The words 'transfer' and 'property' are defined by statute. Subsections of Sec. 145.010 give them the following meanings: '4. The word 'transfer' as used in this chapter shall be taken to include the passing of property or any interest therein, in possession or enjoyment, present or future, by inheritance, descent, devise, succession, bequest, grant, deed, bargain, sale, gift or appointment in the manner herein described.' '3. ...