Willis' Estate, In re

Decision Date28 February 1950
Citation34 Cal.2d 782,215 P.2d 453
CourtCalifornia Supreme Court
PartiesIn re WILLIS' ESTATE. KUCHEL, Controller, v. WILLIS. L. A. 20696.

James W. Hickey, Chief Inheritance Tax Attorney, Sacramento, Morton L. Barker, Los Angeles, and Raymond G. LaNoue, Deputy Inheritance Tax Attorneys, and Joseph D. Lear, Assistant Inheritance Tax Attorney, Sacramento, for appellant.

Arnold Praeger, Los Angeles, and Laura O. Coffield, San Luis Obispo, for respondent.

EDMONDS, Justice.

The appeal of the Controller of the State of California from an order granting a refund of inheritance tax is based upon an agreed statement of facts and presents for decision only a question of statutory interpretation.

Bertram Paul Willis was bequeathed 691 shares of common stock of C. G. Willis & Sons. The inheritance tax appraiser fixed the value of the stock according to a balance sheet submitted by the corporation showing its assets and liabilities as of the date of testator's death and Willis paid the tax found to be due upon the property bequeathed to him.

A few months later, the Commissioner of Internal Revenue levied against C. G. Willis & Sons a deficiency income tax for previous years and it was paid. It is agreed that if this had been determined at, or prior to, the time the inheritance tax appraiser made his appraisal, he would have taken such deficiency into consideration in determining the value of the stock and the inheritance tax due from Willis would have been $1,335.22 less than the amount which he paid.

Upon learning these facts, Willis filed a petition for a refund of the amount of the asserted overpayment. The petition was granted and the appeal is from that order.

Section 14401 of the Revenue and Taxation Code provides: 'If any tax has been paid to the county treasurer on a transfer subject to a contingent incumbrance or any contingency which might burden, abridge, defeat, or diminish the estate or interest of the transferee, and the gift was valued without allowance for the incumbrance or contingency, upon the the taking effect of the incumbrance or the happening of the contingency the person who paid the tax is entitled to a refund * * *.' The controller contends that this section is inapplicable to the facts of the present case because the taxable transfer of the shares of stock was of the entire interest of the testator and there was no contingency or contingent incumbrance restricting the legatee's full enjoyment and ownership of such shares. Willis argues that the income tax assessment was an unknown contingency which necessarily affected the intrinsic value of the shares and that the equitable basis of the code section authorizes a refund to correct the valuation of the stock.

Section 14401 is based upon a statute enacted in 1893, Stats.1893, ch. 168, sec. 2, p. 193, which provided: 'When any grant, gift, legacy, or succession upon which a tax is imposed * * * shall be an estate, income, or interest for a term of years, or for life, or determinable upon any future or contingent event, or shall be a remainder, reversion, or other expectancy, real or personal, the entire property or fund by which such estate, income, or interest is supported * * * shall be appraised * * * at what was the market value thereof * * * provided, that the person or persons * * * beneficially interested * * * may elect not to pay the same until they shall come into the actual possession or enjoyment of such property (in the event a bond is posted).' Obviously, this section was designed to regulate the taxation of presently enjoyed interests and contingent remainders or future estates. If the interest subject to a tax was determinable by a contingent event, the assessee might withhold payment of it until that event occurred.

The same language was carried into the amendment of the section made in 1895, Stats.1895, ch. 28, sec. 1, p. 33. Each of these statutes was entitled 'An act to * * * establish a tax on collateral inheritances, bequests, and devises.' Considering the purpose and scope of the legislation, unquestionably the term 'collateral' was used to call attention to the fact that it applied to present and future estates including, in the later category, a contingent interest.

The quoted language was retained by the legislature in 1905, Stats.1905, ch. 314, secs. 5, 27, pp. 343, 250, and again in 1911, Stats. 1911, ch. 395, secs. 5, 28, pp. 716, 727. In each of these years the statute was re-enacted. The 1911 version of it, supra, at page 720 et seq., reads: 'In estimating the value of any estate or interest in property, to the beneficial enjoyment or possession whereof there are persons * * * presently entitled thereto, no allowance shall be made on account of any contingent incumbrance thereon, nor on account of any contingency upon the happening of which the estate or property or some part thereof or interest therein might be abridged, defeated or diminished; provided, however, that in the event of such incumbrance taking effect as an actual burden upon the interest of the beneficiary, or in the event of the abridgement, defeat or diminution of said estate or property or interest * * * a return shall be made to the person properly entitled thereto of a proportionate amount of such tax * * * or so much as will reduce the same to the amount which would have been assessed on account of the actual duration or extent of the estate or interest enjoyed. * * * (When) the rights, interest or estates of the transferees are dependent upon contingencies or conditions whereby they may be wholly or in part created, defeated, extended or abridged, a tax shall be imposed upon said transfer at the highest rate which, on the happening of any of the said contingencies or conditions, would be possible * * *.'

It is manifest that the legislature, in using the word 'contingencies,' was referring to a contingent interest in property which might affect '* * * the actual duration or extent of the estate of interest enjoyed. * * *' by the one presently having possession or enjoyment. The word was used in its technical meaning, and described somethind by which rights, interests or estates might be '* * * created, defeated, extended or abridged,' as in the case of a contingent remainder.

When the Act was repealed and re-enacted in 1913, Stats.1913, ch. 595, secs. 9, 26, pp. 1071, 1083, the provisions last quoted were left intact. Once again, the legislature provided, in effect, that one presently enjoying an estate would not be permitted a tax allowance because of the existence of a contingent interest in another, but that in the event the contingency occurred and effected '* * * the abridgement, defeat or diminution of said estate or property or interest * * *', the taxpayer would receive a proportionate return of the tax paid upon the market value of the whole estate.

A 1915 amendment, Stats.1915, ch. 198, sec. 2, p. 436, retained the same language as did re-enactments made in 1917, Stats.1917, ch. 589, secs. 8, 25, pp. 887, 901; in 1921, Stats.1921, ch. 821, secs. 8, 25, pp. 1507, 1522; in 1927, Stats.1927 ch. 646, sec. 4, p. 1097; in 1929, Stats.1929, ch. 844, sec. 9 1/2, p. 1842, and in 1935, Stats.1935, ch. 358, secs. 8, 25, pp. 1276, 1292. Subsequent amendments, Stats.1937, ch. 296, sec. 2, p. 651 and Stats.1941, ch. 833, sec. 2, p. 2390, continued the same provisions.

Effective July 1, 1945, these provisions were transferred into the Revenue and Taxation Code, Stats.1943, ch. 658, sec. 1, p. 2308. Section 13956 of that code includes some of the former statute. It provides: 'In determining the value of any estate or interest to the beneficial enjoyment or possession of which there is a person presently entitled, no allowance is made on account of any contingent incumbrance on the estate or interest, nor on account of any contingency upon the happening of which the estate or interest, or some part of it, might be abridged, defeated, or diminished.' This is a part of the statute of 1911 retained as Section Eight of the 1935 Act.

That part of Section Eight commencing with the words, 'provided however,' is now included in Section 14401 of the Revenue and Taxation Code, which is the basis of the present controversy. In essence, that section provides, as it has since 1911, that one who has paid taxes upon a transfer subject to a '* * * contingent incumbrance or any contingency which night burden, abridge, defeat, or diminish the estate or interest of the transferee * * *' is entitled to a refund upon the happening of the contingency.

The provisions of the Revenue and Taxation Code 'in so far as they are substantially the same as existing statutory provisions relating to the same subject matter shall be construed as restatements and continuations, and not as new enactments.' Revenue and Taxation Code, sec. 2. Also, Section 14401, which is the second portion of Section Eight of the 1935, Act, must be read in conjunction with Section 13956; also a part of the old sectioin. When considered together, and in the light of the historical development of the legislation, it becomes clear that the 'contingency' applicable under Section 14401, is the technical contingency of the type which may vest, divest or diminish an estate, as in the case of the contingent remainder.

Clearly, since 1893 when the legislature undertook to specify the tax obligations of one succeeding to an estate subject to divestment upon the occurrence of an event, it used the word 'contingency' in the sense usually employed in coveyancing, and with reference to the divesting or diminution of a presently vested or enjoyed estate by the vesting or coming into enjoyment of a contingent future estate. This is apparent from the use of the term 'collateral estates' in the early statutory title, and by the general context of the legislation which repeatedly spoke of 'beneficial enjoyment of possession of which there is a person...

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6 cases
  • Steiner v. Flournoy
    • United States
    • California Court of Appeals Court of Appeals
    • March 9, 1972
    ...tax is in the nature of an ordinary civil judgment and has the same force and effect.' (Rev. & Tax.Code § 14672; Estate of Willis (1950) 34 Cal.2d 782, 788, 215 P.2d 453.) Plaintiff concurs in defendant's statement of that principle of law, from which she seeks to provide the Los Angeles co......
  • Luce's Estate, In re
    • United States
    • Ohio Court of Appeals
    • February 13, 1962
    ...vested or enjoyed estate by the vesting or coming into being of a contingent or conditional future estate. See In re Willis, 34 Cal.2d 782, 786, 215 P.2d 453, 456. The Supreme Court of Ohio has interpreted this section in the case of Wonderly v. Tax Commission of Ohio, 112 Ohio St. 233, 238......
  • Off's Estate, In re
    • United States
    • California Court of Appeals Court of Appeals
    • December 3, 1956
    ...§ 14672. The order having become final without appeal therefrom, its correctness may no longer be challenged. In re Estate of Willis, 34 Cal.2d 782, 788, 215 P.2d 453. Thus respondent cannot now argue that the heirs were never truly the transferees of any of the sums bequeathed to the chari......
  • Gonzales v. Lind
    • United States
    • California Court of Appeals Court of Appeals
    • December 24, 2020
    ...v. Superior Court (2011) 196 Cal.App.4th 866, 877 [the words "any dispute" are broad, with "no temporal limitation"]; Estate of Willis (1950) 34 Cal.2d 782, 790; Emmolo v. Southern Pacific Co. (1949) 91 Cal.App.2d 87, 92.) Leaving abstract philology behind, however, the arbitration agreemen......
  • Request a trial to view additional results

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