Shaughnessy v. Perlman

• Decision Date: 07 December 1951
• Docket Number: No. 49,49
• Citation: 85 A.2d 38,198 Md. 619
• Parties: SHAUGHNESSY v. PERLMAN et al.
• Court: Maryland Court of Appeals

Page 619

198 Md. 619

85 A.2d 38

SHAUGHNESSY v. PERLMAN et al.

No. 49.

Court of Appeals of Maryland.

Dec. 7, 1951.

Rehearing Denied Jan. 8, 1952.

Hall Hammond, Atty. Gen., and Ward B. Coe, Jr., Asst. Atty. Gen., for appellant.

Harry Troth Gross and George Gump, Baltimore (Eli Frank, Jr. and Frank & Oppenheimer, Baltimore, on the brief), for appellees.

Before MARBURY, C. J., and DELAPLAINE, COLLINS, HENDERSON and MARKELL, JJ.

HENDERSON, Judge.

The question raised on this appeal is whether the Maryland inheritance tax on property passing in remainder to a taxable remainderman, upon the death of a taxable life tenant, is to be computed upon the value of such property as of the date of the death of the testatrix, or as of the date it vests in possession.

There is no dispute as to the facts. Claribel Cone, a resident of Baltimore City, died September 20, 1929. By the Thirteenth Item of her will, she left her art collection to her sister, Etta Cone, for life, giving her an unrestricted power of appointment over it by will or deed. By the Fourteenth Item she left the sum of $100,000 in trust to pay the income to Etta for life and directed that, upon Etta's death the fund be paid over to the appointee of the art collection, provided that said fund 'and all rents, issues and profits resulting from the investment thereof' be accepted by the appointee as a trust fund to house, preserve, maintain and care for the collection. By the Sixteenth Item of the will, she left the residue of her estate in trust for Etta for life, remainder to the Moses H. Cone Memorial Hospital of Greensboro, North Carolina.

Etta Cone died August 31, 1949. By the Third and Fourth Items of her will, she appointed the art collection and the $100,000 fund to the Baltimore Museum of Art, Incorporated, and the Mayor and City Council of Baltimore, with the stipulation that the fund be used for housing, preserving, maintaining and caring for the collection.

On Claribel's death in 1929, the now famous and extremely valuable art collection was appraised at only $19,596 and the entire property in which Etta had a life estate, including the art collection and the $100,000 trust fund, was then appraised at $242,666.15. The value of the residue was appraised at $123,070.15. The proportional value of Etta's life estate was fixed by the Orphans' Court (under section 118, Article 81, 1929 suppl. to Bagby's Code) at three-tenths of the entire estate or $72,799.84. She paid an inheritance tax at the rate of five per cent of this figure, or $3,639.99. No tax was paid on the remainder. Since then, not only the art collection but the entire estate has increased tremendously in value. The appellant concedes that there is no tax due on the art collection or the $100,000 fund, or any increase or increment thereof, passing to and accepted by the Museum of Art and the City, by virtue of the exemption contained in Section 110, Article 81 of the Code (1947 Suppl.), as enacted by Chapter 964 of the Acts of 1943 and expressly made applicable to 'property passing or passed at deaths which occurred before the passage of this Act, in those instances where the property has not yet been distributed or where the inheritance taxes previously imposed have not yet been paid.' The trustees concede that the exemption statute does not apply to the Moses H. Cone Memorial Hospital, none of whose activities and work are carried on in Maryland. Both sides concede that the rate of tax is five per cent, the rate in effect at Claribel's death. The Register of Wills contends that a tax at the rate of five per cent is now payable upon seven-tenths of the present appraised value of the property passing to the Memorial Hospital. The trustees contend that a tax at the rate of five per cent is now payable upon seventenths of the entire estate, as valued at the death of Claribel. The Chancellor so held, calculating the tax at $8,493.32. This calculation, of course, includes the property now passing to the Museum of Art and the City, at its appraised value as of the death of Claribel. There was no cross appeal.

The appellees rely chiefly upon the language of section 118, Article 81, Bagby's Code (1929 suppl.), as enacted by Chapter 226, Acts of 1929, and in effect at Claribel's death: 'Whenever any estate, real, personal or mixed, of a decedent shall be subject to the tax mentioned in this subtitle, and there be a life estate or interest for a term of years, or a contingent interest, given to one party and the remainder, or reversionary interest, to another party, the Orphans' Court of the county or city in which administration is granted shall determine at such time as it shall think proper what proportion the party entitled to said life estate, or interest for a term of years, or contingent interest, shall pay of said tax, and the party entitled to said life estate or interest for a term of years, or other contingent interest, shall within thirty days after the date of such determination pay to the register of wills his proportion of said tax; and thereafter the said court shall from time to time after the determination of the preceding estate and as the remainder of said estate shall vest in the party or parties entitled in remainder or reversion determine what proportion of the residue of said tax shall be paid by the party or parties in whom the estate shall so vest; and each of the parties successively entitled to remainder or reversion shall pay his proportion of said tax to the register of wills within thirty days after the date of such determination as to him; and the proportion of the tax so determined to be paid by the party entitled to the life interest or estate shall be and remain a lien upon such interest or estate for the period of four years after the date of the death of the decedent, who shall have died seized and possessed of the property; and the proportion of the tax so determined to be paid by the persons respectively entitled to the remainder, or reversionary interest, shall be a lien on such interest for the period of four years from the date in which such interest shall vest in possession. * * *'

The appellees argue that this language plainly contemplates the payment of only one tax, part of which is payable by a life tenant and the balance by the remainderman, or successive remaindermen. In short, they contend that the word 'tax' means the total amount payable in money. The appellant argues that the language, construed in the light of the legislative history and the previous interpretations of this court, imposes a series of taxes, based upon the appraised value of the property at the time it is received, or vests in possession.

Section 118, of course, does not impose the tax, but deals with its apportionment and time of payment. The tax 'mentioned in this sub-title' [Collateral Inheritance Tax] is laid by Section 105, Article 81 (Bagby's Code, 1929 suppl.), which reads: 'All estates, real, personal and mixed, money, public and private securities for money of every kind passing from any person who may die seized and possessed thereof, being in this State, either by will or under the intestate laws of this State * * * in trust or otherwise * * * shall be subject to a tax of five per centum in every hundred dollars of the clear value of such estate, money or securities, and all executors, administrators, trustees and other persons making distribution, shall only be discharged from liability for the amount of such tax, the payment of which they be charged with, by paying the same for the use of this State, as hereinafter directed; * * *.' The basic language in this Section has remained the same since its first enactment by Chapter 237, Acts of 1844.

There can be no doubt that this language has always been construed to mean that the tax is imposed, not upon the property but upon the right to receive it. 'The act we are now considering plainly intended to require that a person taking the benefit of a civil right secured to him under our laws should pay a certain premium for its enjoyment.' State v. Dalrymple, 70 Md. 294, 299, 17 A. 82, 83, 3 L.R.A. 372. It was also said in that case, 70 Md. at page 305, 17 A. at page 84: 'the amount of the tax will depend upon the sum in the hands of the appellees [administrators] payable to the legatee.' See also Safe Deposit & Trust Co. of Baltimore v. State, 143 Md. 644, 123 A. 50, 32 A.L.R. 847, and Downes v. Safe Deposit & Trust Co., 164 Md. 293, 164 A. 874, 86 A.L.R. 1024. In Good Samaritan Hospital v. Dugan, 146 Md. 374, 126 A. 85, it was held that the tax was not an estate tax but a legacy tax, imposed upon the right of the legatee or heir to receive it. In Bouse v. Hull, 168 Md. 1, 7, 176 A. 645, 647, holding that no tax was due where a collateral legatee renounced and the property passed to direct descendants, the court said: 'So, when the court * * * speaks of the 'right' of the legatee or heir to receive his legacy or his share of the estate, it refers to a 'right' which not only may, but in fact does, become consummate in possession or the right to possession, otherwise the tax would be, not upon the right to receive, but upon the right to elect whether to receive or not. * * *.' In Hart v. Mercantile Trust Co., 180 Md. 218, 23 A.2d 682, it was held that the tax was to be calculated upon the amount passing under a compromise between the caveators and legatees, rather than upon the amount bequeathed in the will.

The pertinent language of Section 118 has been in effect since the passage of Chapter 455, Acts of 1880. For the history of the section prior to 1880, see Chapter 483, Acts of 1874; Chapter 222, Acts of 1847; and Chapter 344, Acts of 1846. Prior to 1880, the Orphans' Court was directed to determine 'in its discretion and at such time as it shall think proper, what proportion each party * * * shall pay of said tax * * * and any party entitled in remainder or reversion, shall be required to pay his...