Wise v. Commonwealth

• Citation: 95 S.E. 632
• Parties: WISE et al. v. COMMONWEALTH et al.
• Decision Date: 28 March 1918
• Court: Supreme Court of Virginia

95 S.E. 632

WISE et al.

v.COMMONWEALTH et al.

Supreme Court of Appeals of Virginia.

March 28, 1918.

Error to Circuit Court of James City and City of Williamsburg.

Motions to correct erroneous assessments of taxes on intangible personal property by Henry A. Wise, trustee, and another, against the Commonwealth of Virginia, and another. To review judgments denying the applications and dismissing the motions, applicants bring error. Affirmed.

Henley, Hall & Hall, of Williamsburg, for plaintiffs in error.

J. D. Hank, Jr., Atty. Gen., O. L. Shewmake, Asst. Atty. Gen., and Frank Armistead, of Williamsburg, for defendants in error.

BURKS, J. Two motions to correct erroneous assessments of 'taxes on intangible personal property were made in the circuit court of the city of Williamsburg and county of James City, one by Henry A. Wise, trustee, and the other by James A. Ballentine, trustee. The trust funds sought 'to be taxed were held under identical trusts, and by consent of parties the two cases were heard together. The circuit court denied the applications and dismissed the motions, and 'to the judgments of dismissal these writs of error were awarded.

The facts as stated in the petition for the writs of error are as follows:

"Henry A. Wise is now, and was at the time of the assessment, as well as at the time the trusts were created, a resident of the state of New York, while James A. Ballentine is now, and was at the time of the assessment, as well as at the time the trust was created, a resident of the state of California.

"Prior to 1900, real estate situate in the county of James City, Va., had been held by E. G. Booth, trustee, under the will of Edwin G. Booth, deceased, for the use and benefit of Clara 11. Booth, wife of E. G. Booth, and their children. In 1900 the real estate in James City county was sold in a suit brought for that purpose, and all the parties were before the court. The purchase money was brought into court and under decree entered on January 28, 1907, E. G. Booth, trustee, was ordered to pay the purchase money derived from said real estate to Clara H. Booth (his wife), Lucy Booth Cummings, Frances Booth Ballentine, Henrietta Booth Wise, Edwin G. Booth, John Thomson Booth, Clara Thomson Booth, and William Harris Booth, his children, share and share alike, and to take their receipts therefor. The money was distributed as directed by said decree, and a report made to that effect by E.

G. Booth, trustee, and by a subsequent decree the trustee was discharged and the suit dismissed.

"These funds were turned over to Henry A. Wise, who was then living in New York, as attorney for the parties, most of whom were then living in New York. $9,110 of this amount was turned over to James A. Ballentine, which amount went to create the trust dated March 19, 1907. The rest of the funds, aggregating $25,539, went to create the trusts dated April 10, 1908, April 20, 1907, and April 25, 1908.

"The provisions of the various trusts are substantially the same, and, broadly stated, provide that the funds shall remain in the possession and under the control of the said trustees for each of the other parties, for investment and reinvestment during the life of Clara

H. Booth, and at her death, and only in that event, the trust shall cease and determine, and the estate of the said Clara II. Booth, and the other parties who contributed to said fund, shall each be entitled to a distributive share in said funds in proportion to their several contributions thereto. * * * "It is further provided that the trustee shall, after deducting his expenses, pay to Clara H. Booth the interest from investments made by him, and that the amounts so paid shall be the sole and separate property of said Clara H. Booth.

"It is further provided that the trustee shall render to each of the parties to said agreement annually a full and accurate account and report of the investment made by him."

The statute under which the assessments were made in this case is section 492 of the Code, which, so far as need be quoted, is as follows:

"If the property is the separate property of a person over twenty-one years of age, or a married woman, it shall be listed by and taxed to the trustee, if any they have; and if they have no trustee it shall be listed by and taxed to themselves. In either case it shall be listed and taxed in the county or corporation where they reside. * * * If the property is held * * * for the benefit of another, it shall be listed by and taxed to the trustee in the county of his residence (except as hereinbefore provided)."

This statute was construed in Selden v. Brooke, 104 Va. 832, 52 S. E. 632. In that case the facts were that there was a trust fund under the control of the corporation court, of the city of Norfolk, in which Elizabeth T. Selden had an estate for her life. For that fund the corporation court of the city of Norfolk appointed a trustee, and directed him to pay the income and revenue accruing therefrom to Elizabeth T. Selden, the cestui que trust, during her natural life. The life tenant resided in the city of Norfolk. but some of the remaindermen and the trustee were nonresidents, and the choses in action in which the trust fund was invested were at all times during the years for which the taxes were assessed kept by the trustee in his personal possession outside of the state. The decision of this court, as appears from the syllabus, was that:

"Intangible personal property in the hands of a nonresident trustee, in the income from which a person over the age of 21 years residing in this state has a life estate, is, by virtue of the statute in such case made and provided (Acts 1897-98. p. 519, amending Code, § 492), taxable in this state in the county or corporation in which the beneficiary resides. The tax, though assessed in the name of the trustee, is not against him, but the beneficiary. He is the mere conduit through the medium of which the tax upon the property of a citizen passes into the treasury."

The decision is rested upon the ground that it is the policy of this commonwealth to impose taxes on all intangible property of its citizens in the county or corporation of their residence, without regard to the situs of the physical symbol by which such property is evidenced. Furthermore, it is said:

"Though the tax is assessed in the name of the trustee, the burden is, in reality, imposed upon the beneficial owner, a resident of the commonwealth, who enjoys the protection of its laws along with other citizens, and ought, in fairness, to contribute her due proportion of revenue for the support of the government. * * * "If the construction contended for on behalf of the appellant, that the domicile of a nonresident trustee fixes the situs of intangible personal property for purposes of taxation, were to prevail, it would afford ready means of escape from taxation and divert from the treasury of the state a very large amount of revenue to which, in our judgment, it is justly entitled. The contention that the construction indicated would render the statute unconstitutional proceeds upon the hypothesis that the tax is against the nonresident trustee, whereas he is personally unaffected by the imposition, and is but the conduit through the medium of which the tax upon the property of a citizen passes into the state treasury. Hunt v. Perry , 43 N. E. 103; Lewis v. County of Chester, 60 Pa. 325."

Not a word is said about the trustee being an appointee of a court of this state or his accountability to such court, nor is there an intimation that the result would have been different if the appointment had been by the voluntary act of the parties in or out of the state. Indeed, the last paragraph quoted above would seem to indicate that the result would have been the same if the appointment had been by such voluntary act of the parties.

In the instant case, no express life estate is given in the corpus of the fund from which the interest or income is to be derived, but it is stipulated that "said trustee shall, after deducting his expenses, remit to the said Clara H. Booth all sums received by him as interest from investments and deposits as received" during her natural life, "and that such remittance shall be the sole and separate property of the said Clara H. Booth." It is a conceded fact that Mrs. Booth was to receive the entire income from the trust subject during her natural life, subject to no deduction except the expenses of the trustee in handling the fund, or, in other words, the entire net income. What other or different interest would she have had, what more could she have gotten from it, if the corpus had been conveyed to the trustee in trust for the life of Clara H. Booth, with remainder to the founders of the trust? A gift to another for his life of the entire income and interest to be derived from a trust fund is a gift of a life estate in the fund. The quantity of the estate is the same, no matter by what name it is called, and it is this quantity of estate to which the tax laws apply.

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