Walker v. United States, 10415.

• Decision Date: 30 March 1936
• Docket Number: No. 10415.,10415.
• Citation: 83 F.2d 103
• Parties: WALKER v. UNITED STATES.
• Court: U.S. Court of Appeals — Eighth Circuit

83 F.2d 103 (1936)

WALKER v. UNITED STATES.

No. 10415.

Circuit Court of Appeals, Eighth Circuit.

March 30, 1936.

Josiah E. Brill, of Minneapolis, Minn. (Samuel H. Maslon, of Minneapolis, Minn., on the brief), for appellant.

Harry Marselli, Sp. Asst. to the Atty. Gen. (Frank J. Wideman, Asst. Atty. Gen., Sewall Key, Sp. Asst. to the Atty. Gen., and George F. Sullivan, U. S. Atty., and Linus J. Hammond, Asst. U. S. Atty., both of St. Paul, Minn., on the brief), for the United States.

Before STONE, SANBORN, and THOMAS, Circuit Judges.

STONE, Circuit Judge.

This is an appeal by plaintiff in an action for refund of estate taxes levied on the proceeds of certain insurance policies on the life of Gilbert M. Walker who died testate in December, 1928, while a resident of Minnesota.

There were six such policies outstanding at death of decedent. In each of these the named beneficiary was appellant, who was the wife of decedent, the residuary legatee under his will, and an executrix. In four of the policies (all issued by the Union Central Life Insurance Company), insured reserved the right to change the beneficiary. In another policy (issued by the New York Life Insurance Company), it was provided that, if appellant should die before the insured, payment was to be made to his "executors, administrators or assigns," and in the application for the policy (made part of the policy) insured signified that in case of appellant's prior death the insurance should "revert to insured." In the remaining policy (issued by the Mutual Benefit Life Insurance Company), there was a similar survival clause as to beneficiary and a provision permitting loans up to cash surrender value upon satisfactory assignment of the policy. The four Union Central policies were issued in 1927 and but two premiums paid before death. Of these premiums, amounting to $14,345, appellant paid from her own funds slightly more than one-half ($7,688). The entire proceeds from the six policies were paid direct to appellant as beneficiary thereunder.

The tax return filed by the estate of Gilbert M. Walker included no proceeds from any of these policies. Subsequently, the Commissioner determined that the proceeds ($100,903.32) from the four Union Central policies should be included in the gross estate, and collected a tax upon the excess thereof above the statutory $40,000 exemption. Proceeds from the two other policies were not included by the Commissioner. The additional tax paid by appellant was $4,872.27. This tax was paid and the estate closed in May, 1931.

June 27, 1934, appellant brought this action for refund of $3,746.05 on the ground that the prorated amount of insurance covered by her contribution to the premiums on these four policies was exempt from the tax. The Commissioner denied this claim, and also pleaded, as an offset to any recovery by appellant, a tax due on the proceeds of the two policies (New York Life and Mutual Benefit) which he had omitted to include as part of the gross estate. The general issues so framed were (1) the right of appellant to the refund, and (2) if this right be sustained, the right to the offset. Jury being waived, the trial court found against plaintiff on the refund, and from that judgment she appeals.

1. Right to Refund.

The governing statute is section 302(g) of the Revenue Act of 1926 (44 Stat. 9, 71, 26 U.S.C.A. § 411(g), which provides that the value of the gross estate for estate tax purposes shall include amounts receivable from insurance "to the extent of the excess over $40,000 of the amount receivable by all other beneficiaries than the executor as insurance under policies taken out by the decedent upon his own life." The controversy is over the proper construction to be given "taken out by the decedent upon his own life." Appellant contends that this expression is ambiguous; that "taken out by the decedent" means paid for by or for him, and therefore excludes such insurance as is paid for by the beneficiary; that this construction is the one given by the Treasury Regulation (article 25, Regulations 70)¹ at the time of the death of decedent, of administration of his estate and for some years thereafter; that, while this regulation was in force, Congress passed acts covering the same subject-matter and using the identical language above quoted from section 302(g) of the Revenue Act of 1926; that this court must presume Congress thereby approved the construction in the above regulation, and therefore must accept such construction unless it is "plainly erroneous"; and that such construction is not plainly erroneous.

Appellee contends that "taken out by the decedent" means applied for by him; that the construction in the above regulation is entirely erroneous; and that such regulation was effectively superseded by a later (1934) regulation (article 25, Regulations 80).²

These opposed contentions present, as the prime issue, the influence of these two Treasury Regulations upon the construction, by this court, of the statutory expression "taken out by the decedent" as used in the Revenue Act of 1926. It is well first to state generally the rules of law defining the place of such departmental, or executive, interpretations upon the construction of statutes by the courts.

The determination of the construction of the meaning of congressional acts is a judicial function. This function and duty is so entirely and purely judicial that it is beyond the power either of the executive (Manhattan General Equipment Co. v. Commissioner, 56 S.Ct. 397, 80 L.Ed. ___, decided February 3, 1936; Louisville & N. R. Co. v. United States, 282 U.S. 740, 757, 51 S.Ct. 297, 75 L.Ed. 672) or of the Congress (Levindale Lead & Zinc Min. Co. v. Coleman, 241 U.S. 432, 439, 36 S.Ct. 644, 60 L.Ed. 1080; Koshkonong v. Burton, 104 U.S. 668, 678, 26 L.Ed. 886) to control.

If the statutory meaning is clear, there is no place for rules which aid in ascertaining the meaning of the statute, and neither legislative nor executive construction nor both is of any aid or force. Massachusetts Mutual Life Ins. Co. v. United States, 288 U.S. 269, 273, 53 S. Ct. 337, 77 L.Ed. 739; Louisville & N. R. Co. v. United States, 282 U.S. 740, 757, 51 S.Ct. 297, 75 L.Ed. 672; Iselin v. United States, 270 U.S. 245, 251, 46 S.Ct. 248, 70 L.Ed. 566. However, if the act is ambiguous (Massachusetts Mut. Life Ins. Co. v. United States, 288 U.S. 269, 273, 53 S.Ct. 337, 77 L.Ed. 739; Louisville & N. R. Co. v. United States, 282 U.S. 740, 757, 51 S.Ct. 297, 75 L.Ed. 672; United States v. Missouri Pac. R. Co., 278 U. S. 269, 281, 49 S.Ct. 133, 73 L.Ed. 322; Iselin v. United States, 270 U.S. 245, 251, 46 S.Ct. 248, 70 L.Ed. 566), the courts will, in their search for the proper meaning of the act, give consideration to a later legislative construction (New York, P. & Norfolk R. Co. v. Peninsula Exchange, 240 U.S. 34, 39, 36 S.Ct. 230, 60 L.Ed. 511) or to the construction by an executive for administrative or enforcement purposes (United States v. Hammers, 221 U. S. 220, 225, 226, 228, 229, 31 S.Ct. 593, 55 L.Ed. 710).

Instances occur where both the executive department and Congress adopt the same construction. This usually happens where the courts "presume" a congressional sanction of an executive construction from the situation that Congress repeats the statutory language without substantial change while the executive construction is existent and being applied in the administration of the earlier act. This "presumption" is based upon the suppositions that the Congress which enacted the later acts knew of the administrative construction and would have clarified the situation as to the later acts had it been dissatisfied with such construction. It is true that most of the decisions recognizing this presumed congressional sanction have been dealing with the construction of the later acts, as to which the situation is somewhat different, since those Acts might be regarded as passed in the light of the then existing executive construction, and therefore as having that construction in mind and adopting it as the meaning for the later acts. However, even that situation does not lessen the natural inference that by such subsequent action Congress gave its approval to the executive construction of the same language in the earlier act concerning which that construction came into being. Massachusetts Mut. Life Ins. Co. v. United States, 288 U.S. 269, 273, 53 S.Ct. 337, 77 L.Ed. 739; Murphy Oil Co. v. Burnet, 287 U.S. 299, 302, 307, 53 S.Ct. 161, 77 L.Ed. 318; Burnet v. Thompson Oil & Gas Co., 283 U.S. 301, 307, 51 S.Ct. 418, 75 L.Ed. 1049; Heiner v. Colonial Trust Co., 275 U.S. 232, 235, 48 S.Ct. 65, 72 L.Ed. 256; Provost v. United States, 269 U.S. 443, 458, 46 S.Ct. 152, 70 L.Ed. 352 — being cases involving construction of the earlier act.

The weight or force which the courts will, in their construction of an act, give to such executive or legislative constructions, has been variously phrased by the Supreme Court. Similarly, there is a variety of expression as to such weight and force where the court conceives the executive construction to be also approved by Congress. In such latter situation, it has been said that the executive construction has the "force of law" (Hartley v. Commissioner, 295 U.S. 216, 220, 55 S.Ct. 756, 758, 79 L.Ed. 1399; Old Mission Portland Cement Co. v. Helvering, 293 U.S. 289, 294, 55 S.Ct. 158, 79 L.Ed. 367); that it "must be accepted" (Alaska Steamship Co. v. United States, 290 U.S. 256, 262, 54 S.Ct. 159, 161, 78 L.Ed. 302); that it "will not be overturned except for very cogent reasons" (Norwegian Nitrogen Products Co. v. United States, 288 U.S. 294, 315, 53 S.Ct. 350, 358, 77 L.Ed. 796); that it would be given "great weight, even if we doubted the correctness of the ruling" (Costanzo v. Tillinghast, 287 U.S. 341, 345, 53 S.Ct. 152, 154, 77 L.Ed. 350); that it will not be "disturbed except for reasons of weight" (McCaughn v. Hershey...