Schuette v. Bowers, 48.

• Decision Date: 07 April 1930
• Docket Number: No. 48.,48.
• Citation: 40 F.2d 208
• Parties: SCHUETTE v. BOWERS, Collector of Internal Revenue.
• Court: U.S. Court of Appeals — Second Circuit

40 F.2d 208 (1930)

SCHUETTE v. BOWERS, Collector of Internal Revenue.

No. 48.

Circuit Court of Appeals, Second Circuit.

April 7, 1930.

COPYRIGHT MATERIAL OMITTED

Sullivan & Donovan, of New York City (Raymond D. Thurber, of New York City, of counsel), for appellant.

Charles H. Tuttle, U. S. Atty., of New York City (Edward Feldman, Asst. U. S. Atty., of New York City, of counsel), for appellee.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

SWAN, Circuit Judge (after stating the facts as above).

The Revenue Act of 1916 (39 Stat. 756, 777), imposes, by section 201, a tax "upon the transfer of the net estate of every decedent dying after the passage of this Act." It is not a legacy or succession tax upon the benefits received by the legatee, but is a tax upon the privilege of transferring the property of the owner at death, measured by the value of the interest transferred. Y. M. C. A. v. Davis, 264 U. S. 47, 50, 44 S. Ct. 291, 68 L. Ed. 558; Chase National Bank v. United States, 278 U. S. 327, 334, 49 S. Ct. 126, 73 L. Ed. 405, 63 A. L. R. 388. The two succeeding sections, so far as material to the issue now presented, read as follows:

"Sec. 202. That the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated:

"(a) to the extent of the interest therein of the decedent at the time of his death which after his death is subject to the payment of the charges against his estate and the expenses of its administration and is subject to distribution as part of his estate.

* * * * * *

"Sec. 203. That for the purpose of the tax the value of the net estate shall be determined —

"(a) In the case of a resident, by deducting from the value of the gross estate —

"(1) Such amounts for funeral expenses, administration expenses, claims against the estate, * * * support during the settlement of the estate of those dependent upon the decedent, and such other charges against the estate, as are allowed by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered. * * *"

The appellant's argument sets up a double line of defense: (1) That the widow took her dower interest as doweress and not as devisee; and (2) that, even if she took as devisee, the value of her dower interest cannot be included in the gross estate of decedent under the Revenue Act of 1916.

It is conceded that, if she took as doweress, the value of her dower cannot be included in computing the tax. Such was the holding in Randolph v. Craig, 267 F. 993 (D. C. N. D. Tenn.), which was cited with approval in Briscoe v. Craig, 32 F.(2d) 40, 41 (C. C. A. 6), and is, in our opinion, indubitably correct. To be included in the gross estate as defined by section 202(a), the property must be (1) an interest of the decedent at the time of his death, (2) subject to payment of expenses of administration and charges against his estate, and (3) subject to distribution as part of his estate. These three conditions are to be read conjunctively. United States v. Field, 255 U. S. 257, 262, 41 S. Ct. 256, 65 L. Ed. 617, 18 A. L. R. 1461. If dower made consummate by the husband's death is not relinquished, at least the second and third of these conditions are not satisfied, for dower is neither subject to charges against the estate and expenses of its administration, nor to distribution as part of the estate. Since the decision of Randolph v. Craig, supra, the government has conformed its practice to this interpretation of the statute (T. D. 3165; article 14 of Regulations 70); and the amendment of the law to provide expressly for the inclusion of dower in the case of decedents dying subsequent to February 24, 1919 (section 402(b) Revenue Act of 1918, 40 Stat. 1097) discloses at least a legislative doubt whether this result could have been effected without a change of the prior act. See United States v. Field, 255 U. S. 257, 265, 41 S. Ct. 256, 65 L. Ed. 617, 18 A. L. R. 1461; Smietanka v. First Trust & Savings Bank, 257 U. S. 602, 607, 42 S. Ct. 223, 66 L. Ed. 391.

Our first inquiry, therefore, is to determine whether the appellant relinquished her dower. In this we must look to local law. Randolph v. Craig, supra; De Vaughn v. Hutchinson, 165 U. S. 566, 570, 17 S. Ct. 461, 41 L. Ed. 827; United States v. Robbins, 269 U. S. 315, 326, 46 S. Ct. 148, 70 L. Ed. 285. Her contention is that the local law does not put a widow to election between her rights under the will and her rights as doweress, where the testator has given her his entire estate after payment of his debts.

The statutes applicable to the Kentucky land may be found in Carroll's Kentucky Statutes 1922. Section 2132 provides that a widow shall have an estate for life in one-third of her deceased husband's real estate, "unless the right to such dower or interest shall have been barred, forfeited or relinquished." Section 2136 declares that a conveyance or devise by way of jointure may bar the wife's interest in the property and estate of the husband. Section 1404 provides that a widow may relinquish what is given her by the will, and thereupon receive her dowable and distributable share as if no will had been made; but such relinquishment must be made within twelve months after probate. The section concludes with the following sentence:

"Nothing herein shall preclude the widow from receiving her dowable and distributable share, in addition to any devise or bequest made to her by the will, if such is the intention of the testator, plainly expressed in the will, or necessarily inferable therefrom."

The widow did not relinquish the provisions made for her by the decedent's will; and it is conceded, as it must be in the light of Kentucky cases, that, if the statute put her to election, her failure to renounce the will operated as a surrender of her dower rights. See Grider v. Eubanks, 12 Bush (75 Ky.) 510; Bayes v. Howes, 113 Ky. 465, 68 S. W. 449; Smith v. Perkins, 148 Ky. 387, 146 S. W. 758; Perry v. Wilson, 183 Ky. 155, 208 S. W. 776. The statute abrogates the common-law rule and substitutes a presumption that a testamentary provision is intended to be in lieu of dower. Huhlein v. Huhlein, 87 Ky. 247, 8 S. W. 260; Voss v. Stortz, 177 Ky. 541, 197 S. W. 964; Perry v. Wilson, supra. But, by virtue of the last sentence of section 1404, this statutory presumption may be overridden by the testator's intention, "plainly expressed" or "necessarily inferable" from the will. So the problem is whether a will which gives everything to the widow, subject to payment of the testator's debts, discloses by necessary inference an intention that she may have her dower rights in addition to the rights conferred by the will.

Whatever might be our independent view were the question res integra, we think it is foreclosed by Kentucky decisions. In Harrison v. Taylor's Adm'r (Ky.) 51 S. W. 193, 194, a testator gave everything to his wife, who qualified as executrix. Against a creditor's attempt to subject the decedent's land to payment of the debt, the widow pleaded dower and homestead. This was held to set forth no defense, the court saying:

"It is well settled that a person cannot claim under a will, and also against it; and, inasmuch as appellant accepted the provisions of the will of her husband, she takes the entire property subject to his debts, and cannot claim either homestead or dower against his creditors."

This was approved and followed in Schnabel v. Schnabel's Ex'r, 108 Ky. 536, 56 S. W. 983, where the will directed payment of debts and gave everything to the widow. The dispute was whether she could claim homestead, not dower, against creditors; but the principle applied is the same, namely, that she was put to an election between the testamentary provisions and her statutory rights. Watson v. Christian, 12 Bush (75 Ky.) 524. See, also, Chambers v. Davis, 15 B. Mon. 522; Hinson v. Ennis, 81 Ky. 363; Kiesewetter v. Kress (Ky.) 70 S. W. 1065; Jarboe v. Hayden, 133 Ky. 378, 117 S. W. 961. The appellant argues that these decisions as to creditors are irrelevant because in the case at bar the testator's personalty was more than sufficient to pay all debts. While there is no express finding on the subject, this fact may doubtless be assumed from the size of the federal estate tax disclosed by the record. But we cannot see how this distinction impairs the relevancy of the cases cited. The will itself must disclose the facts which require the necessary inference that the widow is to have both dower and testamentary gift; otherwise she is put to her election. In those cases, as here, the will shows nothing as to the amount of the debts. It made the widow sole beneficiary of all the property, but the cases hold that that fact did not save her from the necessity of an election. Similarly, in Grider v. Eubanks, 12 Bush (75 Ky.) 510, by accepting the will, the widow, though sole beneficiary, lost dower in property conveyed by her husband during his life without her joinder in the deed. See, also, Smith v. Perkins, 148 Ky. 387, 146 S. W. 758, where she lost dower in land as to which the husband died intestate. In short, we cannot doubt that, under the law of Kentucky, the widow, though sole beneficiary, lost all right to dower by accepting the provisions of the will. We find nothing in Kelley v. Ball (Ky.) 19 S. W. 581, upon which appellant strongly relies, inconsistent with this conclusion. There the will provided that the widow was to have the income of all the testator's realty until a son became 21, when the realty was to be divided among his children. If the widow remarried before the division, the executor was to collect the income for the children, and the widow was given "her dower interest." Applying the "necessarily inferable" clause of the statute, the court reasoned that, if she was to have dower in case of...