Taylor v. Jones

• Decision Date: 29 June 1922
• Parties: TAYLOR v. JONES et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

242 Mass. 210

136 N.E. 382

TAYLOR

v.JONES et al.^*

Supreme Judicial Court of Massachusetts, Plymouth.

June 29, 1922.

Appeal from Probate Court, Plymouth County; Loyed E. Chamberlain, Judge.

Suit by Ellen H. Phinney Taylor against John Hall Jones and others, executors, to recover the balance of a legacy deducted by the executors as the petitioner's proportionate part of the federal estate tax. From a final decree for the petitioner, defendants appeal. Modified and affirmed.R. G. Dodge and H. S. Davis, both of Boston, for appellants.

Ropes, Gray, Boyden & Perkins, of Boston (F. Delano Putnam, of Boston, of counsel), for appellee.

CROSBY, J.

This is an appeal from a final decree entered in the probate court by which the respondents are directed to pay to the petitioner the balance of a legacy of $100,000 given to her by the will of Horace P. Tobey. The respondents have paid her $80,224.37 by depositing that amount to her credit, at her request, in the Fourth-Atlantic National Bank of Boston. This sum was arrived at by deducting from the total amount of the legacy the Massachusetts inheritance tax of $8,937.50, the Maine inheritance tax of $142.08, and a proportionate part of the federal estate tax, so called, of $10,896.05, which has been paid by the executors.

This petition is brought to recover the amount of the federal estate tax, so called, with interest. Two questions are presented: (1) Is the legacy taxable under the act of Congress creating the tax? and (2) if it is not taxable, is the petitioner estopped from recovering the amount so paid?

The petition was heard by the judge of the probate court for the county of Plymouth. The only witness was the respondent Jones, whose testimony together with certain exhibits is embodied in the record. The judge found and ruled that the tax imposed by the federal act was an estate tax and should be paid out of the residue of the testator's estate; he further found upon the subsidiary facts found by him that the petitioner was not estopped from recovering from the executors the tax so paid and deducted from her legacy.

The first question is settled by the recent decision of this court in Plunkett v. Old Colony Trust Co., 233 Mass. 471, 124 N. E. 265, 7 A. L. R. 696, which held that the tax imposed by U. S. St. 1916, c. 463, § 201 (39 U. S. Sts. at Large, 777 [U. S. Comp. St. § 6336 1/2b]), as amended, is an estate tax, and not a legacy or succession tax, and when the will of the testator makes no provision for its payment, it must be paid out of the residue of the estate. As the will in the case at bar made no provision for payment of the tax, it follows that it was payable out of the residue. Matter of Hamlin, 226 N. Y. 407, 124 N. E. 4, 7 A. L. R. 701;New York Trust Co. v. Eisner (D. C.) 263 Fed. 620, affirmed by the Supreme Court of the United States in 256 U. S. 345, 41 Sup. Ct. 506, 65 L. Ed. 963, 16 A. L. R. 660;Liebman v. Fontenot (D. C.) 275 Fed. 688. See, also, United States v. Woodward, 256 U. S. 632, 41 Sup. Ct. 615, 65 L. Ed. 1131.

The question remains whether the petitioner is estopped from maintaining this suit. When the tax was paid and for some time previously thereto the petitioner was residing in Pasadena, Cal.; the respondent Jones was practicing law in New York, and his coexecutor, Taylor, who was not a lawyer, lived in Wareham, in this commonwealth. Jones testified that early in April, 1919, he had a conversation with the petitioner's husband, who wanted to know when and how the legacy was to be paid; that Jones ‘explained to him that [they] were going to pay the state inheritance tax on the legacy and the proportionate part of the federal estate tax, and that [they] would pay the balance into any bank that Mrs. Taylor would designate.’ Afterwards he sent to her a paper for her signature, copy of which, signed and witnessed, is as follows:

‘April, 1919.

‘John Hall Jones, Esq., and J. Watson Taylor, Esq., Executors of Horace P. Tobey, Deceased-Gentlemen: I hereby authorize you or either of you to deposit in my name in the Fourth-Atlantic National Bank, Boston, Massachusetts, to my credit, the net amount of the legacy left to me by the Will of the late Horace P. Tobey, of Wareham, Massachusetts, after payment by you of Massachusetts state inheritance tax on said legacy, and of my proportionate part of the federal estate tax, and I hereby authorize the president or other proper officer of said bank to receive and receipt in full for said amount in my name.’

‘Very truly yours,

‘[Signed] Ellen H. Taylor.

‘Witness: Eleanor T. Houghton.’

On April 28, 1919, the petitioner wrote to Jones. In the first sentence of her letter she states:

‘Your letter inclosing the affidavit at hand, and am returning same signed and witnessed.’

Afterwards the respondents deposited to her credit in the Fourth-Atlantic National Bank of Boston $80,224.37 and the bank notified her to that effect. On May 31, 1919, the respondents sent a letter to the petitioner showing the amount placed to her credit in the bank and the amount of the various taxes paid, including a statement of the total federal tax paid, and the proportionate share paid on the legacy in question amounting to $10,696.05. In this letter the respondents enclosed a receipt for $80,224.37 in full payment of the legacy for her to sign; in reply, by telegram, she refused to sign the receipt and demanded the amount of the tax so paid.

The respondent Jones testified in substance that he had no legal advice in the matter of the taxation of the estate; that he was satisfied that the federal estate tax should be paid ratably by all legatees; that he had read the statute but had not investigated the law; that he had seen a decision of a New York surrogate on the question which agreed with his view; that in Pennsylvania there was a law like the federal estate tax statute, that all the courts of that state had held during the last 40 years that the tax should be prorated among the legatees; that he had not seen the petitioner or discussed the matter with her before paying the tax; that he had no doubt that the legacy was taxable, that he had seen no decision to the contrary, and knew what the law should be; that he did not learn...