United States v. Mappes

• Decision Date: 03 June 1963
• Docket Number: No. 7232.,7232.
• Citation: 318 F.2d 508
• Parties: UNITED STATES of America, Appellant, v. Lottie A. MAPPES, individually, and Ernest E. Mappes, Executor of the Estate of William G. Mappes, deceased, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

318 F.2d 508 (1963)

UNITED STATES of America, Appellant, v. Lottie A. MAPPES, individually, and Ernest E. Mappes, Executor of the Estate of William G. Mappes, deceased, Appellees.

No. 7232.

United States Court of Appeals Tenth Circuit.

June 3, 1963.

Benjamin M. Parker, Washington, D. C. (Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, Robert N. Anderson, Attorneys for Department of Justice, Washington, D. C., and B. Andrew Potter, U. S. Atty., on brief), for appellant.

Tom W. Garrett, of Garrett & Garrett, Oklahoma City, Okl., for appellees.

Before MURRAH, Chief Judge, and BREITENSTEIN and HILL, Circuit Judges.

MURRAH, Chief Judge.

This is an appeal from a judgment entered on stipulated facts, awarding appellee-taxpayer a refund of federal estate taxes, based upon the "marital deduction" provided in 26 U.S.C. § 2056. This section of the Internal Revenue Code provides for a deduction from the gross estate of an amount "* * * equal to the value of any interest in property which passes or has passed from the decedent to his surviving spouse, * *" but also significantly provides that no such deduction is allowable with respect to the passing of a "terminable interest," if another interest in the same property passes from the decedent, without consideration, to some other person who may possess or enjoy the property after termination or failure of the interest passing to the spouse. See: Treasury Regulation § 20.2056(b)-1(b) and (c) (1) (i) and (ii), interpreting 26 U.S.C. § 2056(a) and (b) (1) of the 1954 Code;¹ and In re Reilly's Estate, 3 Cir., 239 F.2d 797.

William G. Mappes, husband of the appellee-taxpayer, died testate, leaving a wife and two sons. The decedent's will was duly admitted to probate in the County Court of Oklahoma County, Oklahoma, and provided in presently material part: "I give, devise and bequeath to my wife, Lottie Mappes, if living at the time of my death, all of the remainder of my property, real, personal and mixed, wherever it may be situated." In the next paragraph, however, the will further provided: "In the event that my wife should predecease me, or should die before my estate has been administered, then in that event I give, devise and bequeath to my sons, * * * all the remainder of my property, * * *." On March 29, 1960, the County Court entered its final decree and order of distribution in the estate of William G. Mappes, and ordered, "* * * that under the terms of his will, all of the above described property, as well as any other property owned by William G. Mappes at the time of his death, should be distributed to his wife, Lottie Mappes."

The Executor of the estate filed a Federal Estate Tax Return, in which he deducted 50 per cent of the value of the property so distributed, as the statutory "marital deduction," from the gross estate. The deduction was disallowed by the government, on the ground that the interest in the property which passed to the wife at the instant of the decedent's death was a non-deductible, terminable interest, within the meaning of 26 U.S.C. § 2056(b) (1) of the Internal Revenue Code. The resulting additional assessment of estate tax was paid by the appellee-taxpayer; the claim for refund was duly rejected; and, this suit followed.

The trial Court's allowance of the deduction is based upon the conclusive effect accorded the Oklahoma Probate Court's decree, which gave the widow a fee simple interest in the property. The Court accordingly held that the interest which passed by the will was not a terminable interest, within the meaning of the applicable federal statute. See: Mappes v. United States, D.C., 208 F. Supp. 42.

For the purpose of determining whether the interest which passed to the spouse was a terminable interest, within the meaning of the federal statute, we must first determine the nature and extent of the interest which passed at the instant of the testator's death, not the interest given by the decree of the Probate Court. "Brief as is the instant of death, the court must pinpoint its valuation at this instant — the moment when the ownership of the decedent ends and the ownership of the successors begins." Wisdom, in United States v. Land, 5 Cir., 303 F.2d 170, 172. And see: Shedd's Estate v. Commissioner, 9 Cir., 237 F.2d 345; Ballantine v. Tomlinson, 5 Cir., 293 F.2d 311; Cunha's Estate v. Commissioner, 9 Cir., 279 F.2d 292; and Starrett v. Commissioner, 1 Cir., 223 F.2d 163. And see also: U.S. Code Congressional Service, 80th Congress, 2nd Session, p. 1228, 1232 for the legislative history of 26 U.S.C. § 2056.

We think reliance on the conclusive effect of the decree of the Probate Court is untenable, for the Probate decree did not purport to construe the will to determine the nature and extent of the property interest which passed at the instant of the testator's death — the crucial time here. It was in no way passing upon the nature of the interest that Mrs. Mappes took at the instant of Mr. Mappes' death. The vital question then must be resolved by resort to Oklahoma law, to determine whether the interest which passed at the instant of the testator's death would terminate or fail on the lapse of time or the occurrence of some contingency, thus allowing another interest in the same property to pass from the decedent to some other person, without consideration, who may possess or enjoy the property, after the termination or failure of the spouse's interest. See: Shedd's Estate v. Commissioner, supra. Indeed, the trial Court recognized the sole question as "whether or not, under local Oklahoma law, the interest which passed to Lottie Mappes was a contingent interest, or a vested interest subject to complete defeasance and thus terminable * * * or whether the interest * * * indefeasibly vested at the decedent's death * * *." Mappes v. United States, supra, 208 F.Supp. p. 43.

The devising paragraph of the will clearly and distinctly devised the subject property interest to the surviving spouse. The succeeding paragraph undoubtedly purported to condition that grant on two contingencies: (1) that she would survive the testator; and (2) that she should not die before the estate "has been administered." The words of the second paragraph are undoubtedly intended to impose a limitation over to the sons, thus effecting a conditional disposition, as one depending upon the occurrence of some uncertain event, "by which it is either to take effect or be defeated." 84 O.S. § 179. The narrow and decisive question is whether, under applicable Oklahoma law, the words, "before my estate has been administered," are equally "clear and distinct" when considered as words of limitation or condition on the original devise. 84 O.S. § 156. See: Ferguson v. Patterson, 10 Cir., 191 F.2d 584, and Oklahoma cases cited therein; and Dannenburg v. Dannenburg, Okl., 271 P.2d 345.

We have found no case from Oklahoma, or any other jurisdiction, construing the precise language of our instrument. The legal effect of words of similar import have been the subject of much discussion, with a divergence of opinion concerning their sufficiency to condition an otherwise indefeasible devise. See: Lamar v. Bookwalter, D.C., 213 F.Supp. 860. The case which seems most influential is Kasper v. Kellar, 8 Cir., 217 F.2d 744, a South Dakota case, involving the South Dakota statutes, from which the Oklahoma statutory law of wills and succession originated. In that case, the critical paragraph of the will bequeathed to the spouse, "if living at the time of the distribution of my estate, the sum of * *." The question arose as to whether the quoted words operated to devise a terminable interest for federal estate tax purposes. The trial Court was not concerned with ...