People v. Northern Trust Co.

• Citation: 289 Ill. 475,124 N.E. 662
• Decision Date: 27 October 1919
• Docket Number: No. 12382.,12382.
• Parties: PEOPLE v. NORTHERN TRUST CO.
• Court: Supreme Court of Illinois

289 Ill. 475

124 N.E. 662

PEOPLE

v.NORTHERN TRUST CO.

No. 12382.

Supreme Court of Illinois.

Oct. 27, 1919.

Appeal from Cook County Court; J. J. Cooke, Judge.

Suit by the People of the State of Illinois against the Northern Trust Company, executor. From judgment for plaintiff, defendant appeals. Reversed and remanded, with directions.

Fisher, Boyden, Kales & Bell, of Chicago, (Albert M. Kales and Darrell S. Boyd, both of Chicago, of counsel), for appellant.

Edward J. Brundage, Atty. Gen., and Le Roy Millner, of Chicago (Walter K. Lincoln and Henry F. Hawkins, both of Chicago, of counsel), for the People.

DUNCAN, J.

The Northern Trust Company, executor of the estate of Charles W. Pardridge, deceased, has appealed from a judgment of the county court of Cook county, requiring appellant to pay inheritance taxes in the amount of $31,818.20 upon the property interests disposed of by two deeds of settlement executed by Pardridge in his lifetime and a further inheritance tax of $53,144.20 on interests disposed of by his will.

There are three questions raised by the assignment of errors on this record: (1) In computing the state inheritance tax on the value of the property passing by the will of the testator, is appellant entitled to have first deducted therefrom the federal estate tax? (2) Are the property interests disposed of by the aforesaid deeds of trust subject to an inheritance tax? (3) If the properties transferred by the deeds of trust are taxable, should they be taxed according to their value on their respective dates or as of the date of the testator's death?

It is conceded by appellee that the court erred in holding that the properties transferred by the deeds of trust should be assessed on their values at the respective dates of the deeds instead of their values at the date of the testator's death, and in the view that we have taken of this case that question need not be further considered.

The only question relative to the tax assessed on the property passing by the will of the testator is the refusal of the court to first deduct the federal estate taxes as an expense of the estate before assessing the tax on the property passing by will. The testator died November 17, 1917. He left an estate valued by the inheritance tax appraiser at $2,871,151.71, which he disposed of by will. The county court, in assessing the state inheritance tax on that property, refused to deduct the federal estate tax paid by the executor, amounting to $316,432.40. In this ruling the court erred. The federal estate tax is a charge or an expense against the estate of the decedent rather than against the shares of the legatees or the distributees, and as part of the expense of administration this tax should be deducted before computing the state inheritance tax. People v. Pasfield, 284 Ill. 450, 120 N. E. 286.

The two deeds in question contained substantially the same provisions, were absolute in form, and were executed to the Northern Trust Company, as trustee, on May 6, 1910, and on December 18, 1911, respectively. The real estate and leasehold interests so conveyed were valued by the inheritance tax appraiser at $2,333,333.33. Besides the tax assessed on this property, on a large balance thereof there is still left in suspense, under the judgment of the court, a state inheritance tax by reason of the fact that some of the beneficiaries cannot be ascertained until the exercise of certain powers of appointment. Trust instruments separate and apart from the deeds were executed on the respective days that the deeds were executed, and they are substantially the same in form and contain substantially the same provisions. They provide that the trustee shall take possession of the trust property, with complete power to manage, lease, care for, and protect the same; to collect the rents and incomes therefrom; to pay taxes and assessments levied threon; to repair and keep the buildings in repair and rebuild the same if destroyed; to insure the same against fire and other casualties usually insured against by prudent owners in Chicago; and to have the right to institute and defendand all legal proceedings affecting the same. The trustee is to hold the property in trust for the testator's four children, Edward W. Pardridge, Albert J. Pardridge, Evelyn Florence Pardridge Engalitcheff, and May Aline PardridgeSargent, for their natural lives and until the death of the last survivor of them in equal shares as tenants in common, and is to hold the share of each deceased child in trust for such person or persons as such deceased child shall by last will or testament have appointed. In default of such appointment the trustee shall hold such deceased child's share in trust for the issue of such deceased child, and if any child shall die without issue its portion shall be divided equally among the other shareholders of the trust estate. The distribution of the trust estate is to be made upon the death of the last survivor of the four children. During the lifetime of each of the four children the trustee is to pay in monthly installments the net income arising from such child's share, and from and after the death of any of said four children, and until the death of the last survivor of them, the net income arising from such deceased child's share is to be paid in monthly installments to the person or persons for whom such share is held under the terms of the trust agreements. The deeds also provide that a majority of the four children then living may at any time, by an instrument under seal delivered to the trustee, admit their brother Charles A. Pardridge as a tenant in common with them in such property, with like powers and privileges granted to him for the receiving and appointing persons to receive said property and the issues and profits thereof. His interest, however, is at no time to exceed one-fifth of the income of said trust estate, and in case he is so admitted as a beneficiary the final distribution of the property is to be made on the death of the last survivor of the five brothers and sisters, and during his lifetime the trustee is to hold the property for the benefit of the five brothers and sisters upon the same terms as provided in the original trust agreement for the original four brothers and sisters. The deeds provide for compensation to the trustee and for the appointment of the two sons Edward W. and Albert J. Pardridge, and the survivor of them, as the agent of the trustee in the management of the trust estate, and also fix their compensation and require them to give a bond. Their powers and duties are to determine the rental to be charged for the property and to negotiate and prepare all leases for the same, to assume entire charge of affairs and make all contracts for the same, pay all taxes and assessments against the trust estate and insure the same, and to render statements of accounts...