United States v. Merriam Same v. Anderson, s. 67

• Decision Date: 12 November 1923
• Docket Number: 68,Nos. 67,s. 67
• Citation: United States v. Merriam Same v. Anderson, 263 U.S. 179, 44 S.Ct. 69, 68 L.Ed. 240, 29 A.L.R. 1547 (1923)
• Parties: UNITED STATES v. MERRIAM. SAME v. ANDERSON
• Court: U.S. Supreme Court

263 U.S. 179

44 S.Ct. 69

68 L.Ed. 240

UNITED STATES

v MERRIAM.

SAME

v. ANDERSON.

Nos. 67, 68.

Argued Oct. 11, 12, 1923.

Decided Nov. 12, 1923.

Mr. Solicitor General Beck, of Washington, D. C., for the United states.

[Argument of Counsel from pages 179-181 intentionally omitted] Mr. Roy C. Gasser, of New York City, for respondents.

Mr. Justice SUTHERLAND delivered the opinion of the Court.

These are actions brought by the United States against the respective defendants, to recover the amount of additional income taxes assessed against them under the Act of October 3, 1913, c. 16, 38 Stat. 114, 166. The pertinent provisions of the statute are:

'A. Subdivision 1. That there shall be levied, assessed, collected and paid annually upon the entire net income arising or accruing from all sources in the preceding calendar year to every citizen of the United States, whether residing at home or abroad, and to every person residing in the United States, though not a citizen thereof, a tax of one per centum * * * upon such income. * * *

'B. That, subject only to such exemptions and deductions as are hereinafter allowed, the net income of a taxable person shall include gains, profits, and income derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid, or from professions, vocations, businesses, trade, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in real or personal property, also from interest, rent, dividends, securities, or the transaction of any lawful business carried on for gain or profit, or gains or profits and income derived from any source whatever, including the income from but not the value of property acquired by gift, bequest, devise or descent. * * *'

The taxes were assessed upon certain legacies bequeathed to the defendants by the will of the late Alfred G. Vanderbilt. The provisions of the will which give rise to the controversy are as follows:

'Eleventh: I give and bequeath to my brother Reginald C. Vanderbilt, five hundred thousand dollars ($500,000); to my uncle Frederick W. Vanderbilt, two hundred thousand dollars ($200,000): to Frederick M. Davies, five hundred thousand dollars ($500,000); to Henry B. Anderson, two hundred thousand dollars ($200,000); to Frederick L. Merriam, two hundred and fifty thousand dollars ($250,000); to Charles E. Crocker, ten thousand dollars ($10,000), and to Howard Lockwood, one thousand dollars ($1,000).

* * *

'Sixteenth. I nominate and appoint my brother, Reginald C. Vanderbilt, my uncle, Frederick W. Vander bilt Henry B. Anderson, Frederick M. Davies, and Frederick L. Merriam executors of this my will and trustees of the several trusts created by this my will. * * * The bequests herein made to my said executors are in lieu of all compensation or commissions to which they would otherwise be entitled as executors or trustees.'

The defendants qualified as executors and letters testamentary were duly issued to them prior to the commencement of these actions. The legacies were received by the respective defendants during the year 1915-$250,000 by Merriam and $200,000 by Anderson.

Demurrers to the complaints were overruled by the District Court and judgments rendered against defendants. Upon writs of error from the Circuit Court of Appeals these judgments were reversed. Merriam v. United States, 282 Fed. 851. The government contends that these legacies are compensation for personal service within the meaning of paragraph B, quoted above.

The cases turn upon the meaning of the phrase which describes net income as 'including the income from but not the value of property acquired by * * * bequest. * * *' The word 'bequest' is commonly defined as a gift of personal property by will; but it is not necessarily confined to a gratuity. Thus, it was held in Orton v. Orton, *42 N. Y. 486, that a bequest of personal property, though made in lieu of dower, was nevertheless, a legacy, the court saying:

'Every bequest of personal property is a legacy, including as well those made in lieu of dower, and in satisfaction of an indebtedness as those which are wholly gratuities. The circumstance whether gratuitous or not, does not enter into consideration in the definition. * * * And when it is said that a legacy is a gift of chattels, the word is not limited in its meaning to a gratuity, but has the more extended signification, the primary one given by Worcester in his Dictionary, 'a thing given, either as a gratuity or as a recompense."

Without now attempting to formulate a precise definition of the meaning of the word as used in this statute, or deciding whether it includes an amount expressly left as compensation for service actually performed, it is enough for present purposes to say that it does include the bequest here under consideration since, as we shall presently show, actual service as a condition of payment is not required. A bequest to a person as executor is considered as given upon the implied condition that the person named shall, in good faith, clothe himself with the character. 2 Williams on Executors (6th Am. Ed.) 1391; Morris v. Kent, 2 Edw. Ch. 175, 179. And this is so whether given to him simply in this capacity or for care and trouble in executing the office. Id. And it is a sufficient performance of the condition if the executor prove the will or unequivocally manifests an intention to act. Lewis v. Mathews, L. R. 8 Eq. Cas. 277, 281; Kirkland v. Narramore, 105 Mass. 31, 32, 7 Am. Rep. 497; Scofield v. St. John, 65 How. Pr. (N. Y.) 292, 294-296; Morris v. Kent, supra; Harrison v. Rowley, 4 Vesey, 212, 215.

In Morris v. Kent, supra (page 179), it is said:

'A legacy to an executor, even expressed to be for care and pains, is not to be regarded in the light of a debt or as founded in contract, or to be governed by the principles applicable to contracts. * * * When a legacy is given to a person in the character of executor, so as to attach this implied condition to it, the question generally has been upon the sufficient assumption of the character to entitle the party to the same. The cases establish the general rule that it will be a sufficient performance of the condition, if the legatee prove the will with a bona fide intention to act under it or unequivocally manifest an intention to act in the executorship, as, for instance, by giving directions about the funeral of the testator,...