United States v. Ford

• Decision Date: 23 May 1967
• Docket Number: No. 18293.,18293.
• Citation: 377 F.2d 93
• Parties: UNITED STATES of America, Appellant, v. LaRue FORD, as Executrix of the Estate of P. Robert Ford, Deceased, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

377 F.2d 93 (1967)

UNITED STATES of America, Appellant, v. LaRue FORD, as Executrix of the Estate of P. Robert Ford, Deceased, Appellee.

No. 18293.

United States Court of Appeals Eighth Circuit.

May 23, 1967.

Benjamin M. Parker, Atty., Dept. of Justice, Washington, D. C., for appellant. Mitchell Rogovin, Asst. Atty. Gen., Lee A. Jackson and Robert N. Anderson, Attys., Dept. of Justice, were on the brief, together with Donald E. O'Brien, U. S. Atty., Sioux City, Iowa.

William W. Crissman, Cedar Rapids, Iowa, for appellee.

Before VAN OOSTERHOUT, BLACKMUN and MEHAFFY, Circuit Judges.

BLACKMUN, Circuit Judge.

The representative of the estate of P. Robert Ford, deceased, instituted this action for refund of additional federal estate tax paid when the marital deduction, claimed on the return as filed for certain properties under § 2056 of the Internal Revenue Code of 1954, 26 U.S.C. § 2056, was disallowed on audit. Tax of $4,395.49, plus interest, is in issue.

The facts are stipulated. Cross-motions for summary judgment were made. Judge McManus decided the case against the government, 66-1 USTC par. 12,372, and it appeals.

The decedent died December 5, 1961. His wife, LaRue Ford, survived him. They resided in Cedar Rapids, Iowa. The only properties in question, as they existed at Mr. Ford's death, were (a) a balance in an Iowa checking account in the joint names of the decedent and his wife; (b) the Fords' Cedar Rapids home acquired and held of record by them as joint tenants with right of survivorship;¹ and (c) insurance on Mr. Ford's life payable in a lump sum to Mrs. Ford as the named surviving beneficiary.

What would seem to be the obvious marital deduction character of these three properties under § 2056(a) and (e) (5) and (7) is destroyed, the government claims, by a "Joint and Mutual Last Will and Testament" which Mr. and Mrs. Ford executed on August 29, 1958. We therefore examine that instrument in some detail.

This will recites that each of the spouses made it "for and in consideration of the agreements of the other herein contained, and of the execution hereof by the other". Its declared purpose was to preserve the Fords' property for their descendants as against any subsequent spouse.

The will states that upon the death of the first to die "we hereby will" the residue "of our property", including the proceeds of insurance payable to the survivor and property owned jointly, to the survivor for life with power to sell and use as the survivor "in his or her sole discretion may deem necessary to provide only for his or her" support. The survivor otherwise "agrees" that his property, including insurance proceeds and that acquired as surviving joint tenant, "shall be held in trust" for residuary beneficiaries; that he will not dispose of the property by gift or insurance designation to anyone other than children or grandchildren of the two testators; and that the interests "of the survivor in such property shall become limited, cut down and reduced to a life estate only, with the powers of disposition and use hereinabove granted". The will goes on to provide that, upon the death of the survivor, the property is devised and bequeathed to two daughters, or their descendants, in equal shares per stirpes, with a trust to come into being for their benefit in the event of certain contingencies. If lineal descendants die out before distribution, sisters of Mr. Ford are the ultimate beneficiaries.

The will states:

"We hereby declare and agree that all property of every kind and nature now or hereafter owned by us while we are both living, whether the legal title thereto is held jointly or in severalty, and including the proceeds of insurance and annuity contracts payable on the death of either of us to the other, is owned by us jointly and for the use and benefit of us both and comprises our common estates."

It recites that provisions for the survivor are in lieu of dower and similar interests, and that each agrees that the will "shall not be revoked or changed except while both of us are living and then only by the joint action of both of us". The will was not thereafter revoked or changed.

After Mr. Ford's death the instrument was admitted to probate in Linn County, Iowa, as his will.

Judge McManus, in brief findings and conclusions, held that the joint property and the insurance proceeds qualified for the marital deduction under § 2056 and upon the authority of this court's decision in Estate of Awtry v. Commissioner of Internal Revenue, 221 F.2d 749 (8 Cir. 1955).

One must concede that the Awtry case is close on its facts to this one. The Awtrys, too, were Iowa residents and had executed what they called a "joint and mutual" will. Their instrument declared, "Whatever property we own * * we jointly own whether or not so recorded, and we have agreed and do hereby agree that the survivor of us shall have the full use and income and control of all our property so long as the survivor of us shall live".

Mr. Awtry died July 31, 1950. He was survived by his wife. The instrument was admitted to probate as the decedent's will. At his death there were savings bonds registered jointly in the names of the two testators, a joint account in an Iowa bank, and Iowa real estate acquired and held of record by them as joint tenants and not as tenants in common.

This court, in an opinion by Judge Van Oosterhout, held (a) that the effect which the will and the various instruments creating the joint titles "have upon passing title to the property in controversy must be determined by the Iowa law" which "creates the legal interests and rights";² (b) that (citing Iowa cases) "Joint tenancies in real and personal property have long been recognized and enforced by the Iowa courts";³ (c) that "it appears to be clear under the Iowa law that the surviving co-owner of Government bonds becomes the absolute owner thereof"; (d) that Mrs. Awtry "received complete and absolute fee simple title to the joint tenancy real estate, the joint bank deposits, and the jointly-held Government bonds by virtue of the deeds and contracts creating such joint tenancies"; (e) that the decedent's will did not operate on the joint tenancy properties "and this is true even if it be conceded that the will by its terms was broad enough to include the joint tenancy property"; (f) that while there may be contractual obligations imposed under a joint and mutual will upon the survivor, there is nothing in such a will "which precludes the operation of the usual rules relating to joint tenancies"; (g) that separate probate upon the death of each testator is required and "Each will passes the property owned by each testator at the time of his death"; (h) that the contractual restrictions urged by the Commissioner "were not imposed by Mr. Awtry in connection with the creation of the various joint tenancies"; and (i) that there is nothing in the Code definitions "which requires us to hold that a restriction voluntarily placed by a beneficiary upon her own property turns an absolute interest into a terminable one". Accordingly,

"We conclude that Mrs. Awtry acquired absolute title to the joint tenancy property through the joint tenancy contracts, that the will as a testamentary instrument in no way affects the title to the joint tenancy property, and that the joint tenancy property did not by reason of anything done by Mr. Awtry pass to others than his surviving spouse."

Pp. 753, 755-757 and 759-760 of 221 F.2d.

Both Awtry and the present case concern Iowa real estate acquired and held of record by spouses as joint tenants with right of survivorship, and an Iowa bank account held in their joint names. Although Awtry also involved co-ownership government bonds and the present case does not, and although the present case involves lump sum life insurance proceeds and Awtry did not, these are minor factual differences obviously of no import here.⁴ Awtry therefore would appear to control the present case unless Iowa law has changed in the intervening 12 years or unless there are differences in the wills which occasion opposing estate tax consequences.

The government does indeed assert that there are "controlling differences" between the Awtry will and the Ford will. Specifically, it says that the Awtry instrument "merely reflects an understanding of a husband and wife, which was not binding on either of them"; that in Awtry "it is plain that there was not * * * any severance of their joint properties"; that the Awtry will was revocable while both spouses were living and even after the death of the first to die; that neither spouse was obligated to take under the Awtry will; that it was mandatory to probate that will, whereas the Fords intended that their interests pass without probate; and that the Awtry will did not limit the disposition of each spouse of his own property.

The government also suggests that Iowa law has been clarified in the interim and that Iowa decisions since 1955 demand a result in its favor here.

We may accept for present purposes — for the estate does not really contend otherwise — the government's arguments (which we supplement by some citations of our own) that:

1. In Iowa, as generally elsewhere, a joint tenancy may be severed by agreement or by appropriate action of either tenant. See Wood v. Logue, 167 Iowa 436, 149 N.W. 613, 615 (1914); In re Baker's Estate, 247 Iowa 1380, 78 N.W.2d 863, 867, 64 A.L.R.2d 902 (1956).

2. The Iowa court, since Awtry, has clearly defined the words "joint", "reciprocal", and "mutual", as applied to wills, and has sought thereby to eliminate what it felt was preexisting confusion. A will is joint when it "is nothing more than a single documentary instrument constituting the wills of two or more persons, jointly executed". Wills are reciprocal when "two or more testators make testamentary dispositions in favor of each other"; this may be done by one will "in which case the will is both joint and...