People v. Cavenee

• Decision Date: 07 April 1938
• Docket Number: No. 24487.,24487.
• Citation: 368 Ill. 391,14 N.E.2d 232
• Parties: PEOPLE v. CAVENEE et al.
• Court: Illinois Supreme Court

368 Ill. 391

14 N.E.2d 232

PEOPLE

v.CAVENEE et al.

No. 24487.

Supreme Court of Illinois.

Feb. 17, 1938.

As Modified on Denial of Rehearing April 7, 1938.

Proceeding by the People to collect inheritance taxes on the transfer to Evelyn Lawson Cavenee and another of a trust estate created by the will of Victor F. Lawson. From an order fixing the tax, the transferees appeal.

Reversed.

FARTHING, C. J., and ORR, J., dissenting.Appeal from Cook County Court; Edmund K. Jarecki, Judge.

Essington & McKibbin and Poppenhusen, Johnston, Thompson & Raymond, all of Chicago (Floyd E. Thompson, Thurlow G. Essington, Walter E. Beebe, and Joseph Rolnick, all of Chicago, of counsel), for appellants.

Otto Kerner, Atty. Gen. (James G. Skinner and Ashley Greene, both of Chicago, of counsel), for the People.

STONE, Justice.

This is an appeal from an order of the county court of Cook county fixing an inheritance tax upon the transfer of a certain trust estate created by the will of Victor F. Lawson, who died in 1925. Under his will the Merchants' Loan & Trust Company was made trustee with directions to pay the income of the trust here involved to the testator's brother, Iver Norman Lawson, during his life, with power to Iver, to appoint, by will, the beneficiary of the remainder, and in default of said appointment the remainder to pass to his heirs. Iver died without exercising the power of appointment.

The facts are stipulated and are, in substance, as follows: Following the death of Victor F. Lawson, the county court of Cook county fixed the inheritance tax on the life estate given to Iver, and found the value of the remainder of the trust, after such life estate had been deducted, to be $1,707,368.63. The order fixing the tax in 1926 stated that this remainder ‘is not presently taxable but is taxable in the future according to law.’ The order noted as to this remainder, ‘tax postponed.’ The total inheritance tax assessed in Victor F. Lawson's estate was fixed at the sum of $372,192.70, which the court found to be due as of August 19, 1925, the date of the death of Victor F. Lawson. No appeal was taken from this order and the tax was paid in due course.

Iver Norman Lawson, also a resident of Chicago, died March 31, 1937, and by his will he expressly declined to exercise the power of appointment granted to him by the will of his brother, Victor. He left him surviving appellants Evelyn Lawson Cavenee and Iver Norman Lawson, Jr., his children and only heirs at law.

On October 8, 1937, a second inheritance tax appraisement in the estate of Victor F. Lawson was instituted before the county judge of Cook county, who, on October 13, fixed the value of the remainder after the death of Iver Norman Lawson at $1,716,794.07 and fixed the transfer or inheritance tax of $136,147.52 against the portion passing to the daughter Evelyn, and a tax of $136,278.33 against that portion passing to the son Iver. On appeal from that order the county court fixed the appraised value of the remainders at $1,692,386.63, and fixed an inheritance or transfer tax against the portion passing to Evelyn at $134,139.49, and against that portion passing to Iver at $134,324.29. This tax was assessed as due and payable as of August 19, 1925, as a result of the death of Victor F. Lawson, deceased. This is the order appealed from.

The grounds of appellants' appeal are that, under the Inheritance Tax Act of this state, as it was when Victor F. Lawson died, and when the county court, in 1926, fixed the inheritance tax in the Victor F. Lawson estate, no tax could be assessed and collected in the Victor F. Lawson estate, in respect of the remainders after the life estate of Iver Lawson; that there was no postponement of such a tax; that the judgment of the county court in the first inheritance tax proceeding correctly followed the law, and its order then entered is res judicata of all inheritance, transfer, or succession taxes due by reason of his death. It is also argued that the order of the county court on November 5, 1937, deprived appellants of their constitutional rights.

To determine whether further transfer taxes may be assessed in the estate of Victor F. Lawson, it is necessary to have in mind the provisions of the Inheritance Tax Act of this state at the time of his death in 1925. At that time the section of the statute imposing a tax on a transfer of property was section 1. This declared that ‘A tax shall be and is hereby imposed * * * in the following cases.’ Smith-Hurd Stats. c. 120, § 375 note, Cahill's Stat. 1925, c. 120, par. 396. This is the only section, as the law existed at that time, imposing a tax. The only section of the act as it at that time stood, fixing the time when such taxes are payable, was section 3, Smith-Hurd Stats. c. 120, § 377 note, which provided that all taxes imposed by the act, ‘unless otherwise herein provided for,’ shall be due and payable at the death of the decedent. Section 1, so far as applicable here, is as follows: ‘A tax shall be and is hereby imposed upon the transfer of any property, real, personal or mixed, or of any interest therein or income therefrom, in trust or otherwise, to persons, institutions or corporations, not hereinafter exempted, in the following cases: 1. When the transfer is by will or by the intestate laws of this State, from any person dying, seized or possessed of the property while a resident of the State. * * * 4. Whenever any person, institution or corporation shall exercise a power of appointment derived from any disposition of property made either before or after the passage of this Act, such appointment, when made, shall be deemed a taxable transfer under the provisions of this Act, in the same manner as though the property to which such appointment relates belonged absolutely to the donee of such power and had been bequeathed or devised by such donee by will; and whenever any person or corporation possessing such a power of appointment so derived shall omit or fail to exercise the same within the time provided therefor, in whole or in part, a transfer taxable under the provisions of this Act shall be deemed to take place to the extent of such omission or failure, in the same manner as though the persons or corporations thereby becoming entitled to the possession or enjoyment of the property to which such power related had succeeded thereto by a will of the donee of the power failing to exercise such power, taking effect at the time of such omission or failure.’

The Inheritance Tax Act, as it stood in 1925, did not purport to impose a tax on all transfers at the death of the person from whom the property sprang. The right to impose inheritance taxes under the statute is to be determined as of the time of the death which effects the transfer of the property. People v. Linn, 357 Ill. 220, 191 N.E. 450;People v. Flanagin, 331 Ill. 203, 162 N.E. 848, 60 A.L.R. 305;In re Estate of Graves, 242 Ill. 212, 89 N.E. 978. At the time of Victor F. Lawson's death the statute, as we have seen, provided no tax in his estate regarding a remainder subject to power of appointment. The tax on the transfer of such remainder was to be assessed in the estate of the donee of the power at the time when the power was to be exercised, whether it was in fact exercised or not. This was the clear holding in the Linn Case. In 1933 the General Assembly amended subsection 4 of section 1, Smith-Hurd Stats. c. 120, § 375, by repealing the...