Case Title: Elliott v. Elliott

Citation: 349 So. 2d 1092

Docket Number: 

State: alabama

Court: Alabama Supreme Court

Date: 1977-08-26T00:00:00Z

Document:
349 So. 2d 1092 (1977)
James Bryan ELLIOTT et al.
v.
Jettie Mayo ELLIOTT et al.
SC 2145.

Supreme Court of Alabama.
August 26, 1977.
Rehearing Denied September 30, 1977.
*1093 Winston V. Legge, of Patton, Latham & Legge, Athens, for appellants.
David H. Culver, of Culver & Miller, Huntsville, for appellee, Jettie Mayo Elliott.
John R. Wynn, Huntsville, for appellee, Central Bank of Alabama.
MADDOX, Justice.
Plaintiff-appellee, Jettie Mayo Elliott, widow of James D. Elliott, filed suit seeking construction of the will of her deceased husband and declaratory instructions as to whether or not a proportionate part of the estate taxes and the cost of administering the estate should be paid from the widow's share.
In the proceedings below, the defendants were James Bryan Elliott, Doris E. Maples, Margaret Demetria Nichols, and George Robert Elliott, all children of the deceased by a previous marriage. Central Bank of Alabama, named by the deceased as executor, was also made a party defendant. The children and the bank assert in their answers to the widow's complaint that the widow's interest under the residuary clause of the will must bear all the estate taxes, expenses of administration and debts. In its cross-claim against the children, the bank also raised the question of whether the income taxes on income reported for federal and state income tax purposes by the estate should be paid from the widow's residuary interest or from the interest of the children. In the event the court ruled in favor of the widow, the bank sought a judgment against the children for the amount of taxes, expenses and debts payable to the estate.
The facts were stipulated. James D. Elliott, a resident of Huntsville, died December 19, 1974, leaving a valid will which was duly probated on January 6, 1975. The dispositive portions of the will consisted of ITEMS 1, 2, 3 and 4, and appear, in part, as follows:
Based on these stipulated facts, the trial court entered its decree declaring that the share of the widow under the will of the decedent should not be charged with federal or state estate or income taxes unless all other assets of the estate are insufficient to pay the taxes; that the share of the widow should not be chargeable with the expenses of administration, absent insufficient other assets; that the share of the widow should not be chargeable with debts of the estate, absent insufficient other assets. The court also granted the bank a judgment against appellants, James Bryan Elliott, Doris E. Maples and Margaret Demetria Nichols, for all sums properly paid or payable by the bank as executor on account of federal and state estate and income taxes, expenses of administration and debts, to the extent of *1095 the value of their share of the decedent's partnership interest, less the amount of assets, other than assets passing to the widow, available to the estate with which to pay such taxes, expenses and debts.
1. Whether estate taxes, state or federal, shall be a charge against the residue of the decedent's estate where the residuary devise or bequest is to the widow or in trust for the benefit of the widow.
2. Whether the trial court erred by rendering an incomplete and uncertain judgment or by failing to determine all issues among the parties.
Appellants contend that absent testamentary instructions to the contrary, a residuary devise or bequest solely to the decedent's widow, or in trust for her benefit, is subject to the payment of federal and state estate taxes. Appellants contend that under Item 4 of the will, the decedent conveyed the residuary of his estate in two parts, one quarter to his widow and three quarters in trust to the bank as trustee with income to be paid to the widow. Appellants rely on Title 51, § 449(1), Code, for the proposition that estate taxes are to be paid from the residuary. The pertinent portion of Title 51, § 449(1) is as follows:
Appellants contend that Item 4 of the will is a residuary devise or bequest and to hold otherwise would be contrary to prior law and in direct conflict with a determination made by this court in Davis v. Davis, 289 Ala. 313, 267 So. 2d 158 (1972). Appellants submit that the trial court erred in not declaring that estate taxes are to be paid from the residuary devise or bequest under Item 4. The appellee bank's position is that when the widow is the sole residuary legatee, her interest under the will must first be reduced by debts, expenses of administration and taxes. The bank contends that under the will the gift to the children under Item 3 is a specific legacy, and the gift to the widow under Item 4 is a residuary legacy. Rowe v. Newman, 290 Ala. 289, 276 So. 2d 412 (1972). The bank further contends that the widow elected not to dissent from the will and therefore having agreed to accept the residuary of the estate, she cannot now claim that the residuary passes to her free of estate taxes, administration expenses or debts.
The widow's main argument is that the devise or bequest by Item 4 of the will is not truly residuary. The widow concedes that Item 4 of the will contains language usually denoting or pertaining to a residuary clause in a will; however, she contends that the testator, by subordinating all other provisions of the will in Item 4, paragraph 4, created a preference in Item 4 and removed it from the residue as defined by this Court in American Mortgage Company of Scotland v. Boyd, 92 Ala. 139, 9 So. 166 (1890). In effect, the widow submits that the residuary should not be charged with the decedent's debts, administration expenses or estate taxes. The widow relies on the purchaser for value theory, citing Steele, et al. v. Steele's Adm'r., 64 Ala. 438 (1879). In reply, appellants contend that Title 51, § 449(1) places the estate tax burden on the residuary estate and the devise or bequest of the residuary to the widow in the instant case does not constitute a marital deduction gift exemption to Title 51, § 449(1), as this Court found was present in Davis v. Davis. We cannot agree.
We affirm the judgment of the trial court.
In Davis v. Davis, 289 Ala. at page 321, 267 So.2d at page 165, this Court held:
Even though the testator, in Item 4, used the words "all the rest and residue of my estate" and "1/4 of the residue" and "3/4 of the residue," it is significant that in Item 4(b)(4), the testator provided as follows:
Since the residue left to the wife does not exceed the allowable marital deduction, and since the testator specifically stated that he intended that the gift to the widow should qualify as a "marital deduction," it would be difficult to attribute to the testator an intention that his estate should pay an increased estate tax and that his widow's distributable share should be reduced. Davis v. Davis, supra. See, also, the many cases from other jurisdictions cited in Davis.
Appellants claim that the decree is incomplete and uncertain in this respect. We cannot agree. In view of the holding by the trial judge that the testator intended that the share of the widow should not be charged with federal or state estate or income taxes, and in view of our affirmance of that decree, it appears that the trial court's determination was correct that the widow's share"All the rest and residue" after Items 1, 2 and 3 were satisfied should not be chargeable with the debts or the expense of administration of the estate, unless all other assets of the estate were insufficient to pay the debts and expenses. In Rowe v. Newman, 290 Ala. 289, 276 So. 2d 412 (1972), this Court stated:
*1097 "`As previously noted Alabama has adopted the rule that, in case of insufficient assets, the loss falls first on the residuary estate, then on the specific devisees and legatees. But Alabama has also recognized an exception to this rule in the case of a widow, holding in Steele v. Steele's Administrator, 64 Ala. 438 (1879), that testamentary provisions made for the wife are to be accorded a priority over all other legatees and devisees, being right behind the claims of creditors. This holding has not been overruled, questioned, or distinguished in any succeeding reported decision of the Alabama appellate courtsat least none has been found by either party hereto or by the court in independent research. This Court is bound to conclude that under Alabama law the general bequest to Mrs. Dixon under the will was not subject to abatement on account of the other devises and legaciesand that accordingly the disclaimers by the sons did not add to the interests she was to receive under her husband's will. It may be noted that the preference given the widow in this regard by Alabama is in line with the weight of authority from other states. See Annot. 2 A.L.R.2d 607 (1948).' First National Bank of Birmingham et al. v. United States, supra, 328 F. Supp.  at 1342, 1343."
In summary, even though there are factual differences between this case and the Davis case, the legal effect of what the testator did is the same. The trial court, in effect, construed the intent of the testator to minimize his taxes while concurrently maximizing his bequest to this wife. Reading his will, especially Item 4(b)(4) of it, convinces us that the decree of the trial court carries out the testator's intent.
The judgment of the trial court is due to be affirmed.
AFFIRMED.
TORBERT, C. J., and FAULKNER, SHORES and BEATTY, JJ., concur.