Case Title: In Re Estate of Wartenhorst

Citation: 211 N.W.2d 705

Docket Number: 

State: south-dakota

Court: South Dakota Supreme Court

Date: 1973-10-31T00:00:00Z

Document:
211 N.W.2d 705 (1973) In the Matter of the ESTATE of Peter WARTENHORST, Deceased. George WARTENHORST, Executor of the Estate of Peter Wartenhorst, Deceased, Plaintiff and Appellant, v. The STATE of South Dakota and Lowell Schmidt, Commissioner of Revenue of the State of South Dakota, Defendants and Respondents. No. 11063. Supreme Court of South Dakota. October 31, 1973. Claude A. Hamilton, Blaine Simons, Sioux Falls, for plaintiff and appellant. Gordon Mydland, Atty. Gen., John Dewell, Asst. Atty. Gen., Pierre, for defendants and respondents. WINANS, Justice (on reassignment). The executor of the estate of Peter Wartenhorst, deceased, instituted this proceeding to obtain a refund of state inheritance taxes alleged by him to have been erroneously paid. The facts have been stipulated and, in brief, are as follows: On or about September 11, 1970 an inheritance tax report and inventory in the matter of the estate of Peter Wartenhorst was filed with the South Dakota Department of Revenue and on September 15, 1970 the State of South Dakota entered into a stipulation with the estate as to the amount of inheritance tax due, based upon the valuation of the estate and claims as shown in the report. The stipulation was on October 6, 1970 approved by the court and payment of the tax was made on the same day. On December 11, 1970 a proof of claim against the estate in the amount of $10,550.82 was presented to the court and allowed in the amount of $6,000. This claim was unknown to the executor at the time the stipulation was entered into and was not taken into account in the determination of the inheritance tax. On June 16, 1971 the executor of the estate made application to the Department of Revenue for a refund of $720 which was denied on August 31, 1971. The bona fides of the claim filed and allowed is not disputed by the state, nor is it disputed that the claim was timely filed, was unknown to the executor and had not been taken into account in the determination of the inheritance tax. The settled record further discloses that from an adverse determination disallowing the claim for a refund by the Department of Revenue the estate petitioned for a judicial review by the circuit court and "that *706 upon such review, the said Order of the Department of Revenue be vacated and the petition for refund be granted." The matter was tried to the court on October 15, 1971 and the trial court made its decision consisting of findings of fact and conclusions of law in favor of the Commissioner of Revenue of the State of South Dakota and judgment was entered on December 1, 1971, reading in pertinent part as follows: From this judgment the estate appeals. It is patent from the settled record in this case that the basis for the order denying the refund by the Department of Revenue and for the judgment of the circuit court upon review of such order is the holding in this court in 1928 in the case of Security National Bank v. Twinde, 52 S.D. 352, 217 N.W. 542, and the opinion of the Attorney General of the State of South Dakota found in the 1939-1940 AGR, p. 389. It is our opinion that the facts in Twinde, supra, are distinguishable from the facts here and that the sections of law involved in this court's opinion in Twinde are likewise distinguishable from the sections of law involved in the case at bar. In Twinde the capital stock of the bank was listed as personal property, whereas it should have been listed as moneys and credits. As personal property the capital stock was taxed much higher than it would have been taxed as moneys and credits. The law with respect to the refunding of real and personal taxes, as distinguished from inheritance taxes, at the time of Twinde is found in Sections 6813 and 6826 of the Code of 1919. Section 6813 of the 1919 Code is the source of SDCL 10-18-1, which provides six different situations, as it does now, where taxes may be abated or the tax, if paid, refunded by the Board of County Commissioners. The fifth reason for abatement or refund is: Section 6826 of the Code of 1919, as amended, is the source of SDCL 10-27-2 and is generally referred to as the protest statute. The bank sought to have a refund of the difference, claiming it erroneously paid the higher tax. The court in Twinde said: Twinde, supra, is one of those cases that must necessarily be limited in application to the fact situation with which it deals. The court there was concerned with the payment of ordinary taxes as we usually understand the term "taxes". It was not writing law on inheritance taxes. That this is too plain to admit of any doubt is established because the court further wrote in Twinde that Sections 6813 and 6826, Code of 1919, "remains the only remedy for the recovery of taxes paid." Section 6855, Code of 1919, was the law when Twinde was before the court and it provided, as its counterpart SDCL 10-41-83 does today, a remedy for recovery of inheritance taxes erroneously paid. SDCL 10-41-83 does not contain six different situations where the tax may be refunded and the words "erroneously paid, wholly or in part" contained in this section are not boxed in and strictly and severely limited because of five other subdivisions of the same section, as they were in Twinde, supra. The court did not define the word "erroneously" standing alone. We write on a clean slate here. The laws relating to the imposition and the amount of inheritance taxes and the administration and collection of them are found in SDCL 10-40 and 10-41. It is provided in SDCL 10-40-26, in pertinent part, that "The tax imposed by this chapter shall be computed upon the true and full market value in money of such property less any indebtedness, and expenses of administration, chargeable against such property, * * *." In our case we are concerned with an indebtedness which would reduce the value of the estate on which the computation of the tax would be made. SDCL 10-41-32 provides as follows: The stipulation as to the facts shows that this was done. SDCL 10-41-34 provides as follows: The sections excluded by exception relate to contingent and conditional transfers taxed at the highest possible rate and are not applicable to our situation. The appeal statute is SDCL 10-41-36 and such section provides that the appeal shall be taken within 30 days from the entry of the decree of the county court. In this case the time for appeal expired within 30 days from October 6, 1970 when the court entered its order determining the amount of the tax due. The case does not reach us by an appeal from the order, but by reason of SDCL 10-41-83 which reads as follows: It is plain that the refund statute cited above has no application until and after the tax has been determined and paid. It is provided by law that "Within thirty days after the appointment and qualification of an executor or administrator he shall make and return under oath to the clerk of the court issuing to him his letters" his inheritance tax report showing among other things the inventory of the property, valuation, and other information. SDCL 10-41-17. Where the estate is complicated, the county court may extend the time for filing. SDCL 10-41-20. At that point the administrator or executor usually does not know what claims, if any, will be filed. It appears clear in this case that when the executor filed his inheritance tax report, he was not aware of the claim later filed in the amount of $10,550.82 and allowed in the sum of $6,000. He paid the tax before the claim was filed, which claim was filed within the four months period allowed. The executor was uninformed, the amount of the tax paid was based on misinformation, and paid willingly. The state of North Dakota had before it in the case of Boe v. Steele County, 1945, 74 N.D. 58, 19 N.W.2d 921, the question of whether the order of the county court fixing the amount of estate tax and assessing the same was res judicata on the amount of the estate tax legally assessable against the estate so as to preclude a refund of overpayments in cases where overpayment has been made. In Boe, supra, the court quoted their statute which provided, "`All assessments shall be made upon appraisals of the full and fair cash value of the property to be transferred as of the date of the death of the decedent.'" In Boe it was the appellant's contention "that the order made by the county court on October 29, 1940, assessing the estate tax is res judicata of all questions relating to the legality and the amount of the estate tax; that such order became final and conclusive when the time for appeal expired; that consequently, the amount of the estate tax legally and actually due was not subject to review or consideration by the county court when it made its order dated January 6, 1943, ordering a refund of an overpayment; and that any question as to the amount of the estate tax and whether there had been an overpayment is not subject for review by the courts at all." Answering this contention, the North Dakota court said, *709 The court went on to say: Then quoting from a decision of the United States Supreme Court, Bull v. United States, 295 U.S. 247, 259-261, 55 S. Ct. 695, 699, 79 L. Ed. 1421, 1427, 1428, It is also true that the statute of North Dakota provided, as set forth in Boe, "In case an overpayment of such tax has been made, such overpayment shall be repaid out of any estate tax funds * * *." In Boe it was contended that the payment of the tax was a voluntary payment and that consequently there could be no recovery. The court in answer to that said: Our inheritance tax refund statute is simple and direct. It makes no distinction between taxes paid under compulsion and taxes paid voluntarily. Any tax paid erroneously must be refunded, without restrictions or qualifications. SDCL 10-41-83. In 42 Am.Jur.2d, Inheritance, Etc., Taxes, § 408, Statutory right to refund, it is stated in part: California is quoted in the same section of American Jurisprudence as authority for the proposition that a statute providing for a refund of inheritance taxes "erroneously paid" refers only to a payment not made in conformity with the order fixing the amount of the tax, and that therefore where the tax paid was the exact amount specified in the taxing order, it was not "erroneously paid" within the meaning of the statute, even though it was subsequently found there had been overpayment. Kelshaw v. Superior Court in and for San Luis Obispo County, 137 Cal. App. 189, 30 P.2d 432. Whatever may be the holding in California, we cannot interpret our own refunding statute so narrowly and so detrimentally to the taxpayer. A statute which provides for the additional tax on newly discovered assets after the inheritance tax has been paid, as ours does, surely is bound to permit the deduction of newly discovered and approved claims. We are aware that there is a diversity of authority and there must come a time when payment is final; otherwise, we *710 would make the state subject to all kinds of stale claims. That is not the case here, and furthermore, and of great weight with us, we do have applicable to inheritance tax payments the statute of limitations. SDCL 10-41-84 provides: "All applications for such refunding of erroneous taxes shall be made within three years from the payment thereof * * *." We think this statute of limitations is reasonable and protects the state. It is enough. Judgment reversed. BIEGELMEIER, C. J., WOLLMAN, J., and HANSON, Retired Justice, concur. DOYLE, J., dissents. HANSON, Retired Justice sitting for DUNN, J., disqualified. DOYLE, Justice (dissenting). In Security National Bank v. Twinde, 1928, 52 S.D. 352, 217 N.W. 542, this court said: Conceding that Twinde is distinguishable because of the difference in the law between the refunding of real and personal property taxes and inheritance taxes, the interpretation of "erroneously paid" as set forth in Twinde is precisely the same one that other jurisdictions have followed when asked to interpret inheritance tax refund statutes quite similar to ours. In the case of In re Brown's Estate, 1925, 196 Cal. 114, 236 P. 144, their court construing California's inheritance tax refund statute stated: This position was upheld in Kelshaw v. Superior Court In And For San Luis Obispo County, 1934, 137 Cal. App. 189, 30 P.2d 432, wherein the court stated: Colorado has also applied the Twinde definition in explaining its inheritance tax refund statute. In State v. Newton, 1956, 134 Colo. 58, 300 P.2d 527, the court stated: Two more recent Colorado decisions reaffirm this interpretation. National State Bank of Boulder v. State, 1964, 156 Colo. 34, 396 P.2d 948; State v. Matthews, 1971, 29 Colo.App. 143, 480 P.2d 593. According to the latter case, Colorado has amended its statute to read as follows: In regard to this amendment the court in Matthews stated: As noted in State v. Newton, supra, two other jurisdictions have followed the Twinde decision in interpreting the term "erroneously paid". Shea v. State Tax Commission, 1941, 101 Utah 209, 120 P.2d 274 (diesel fuel tax included in motor vehicle registration fee); Pittsburgh Coal Co. v. School District of Forward Tp., 1951, 366 Pa. 489, 78 A.2d 253 (school tax). Moreover, when the same question, as in the instant case, was posed earlier to the South Dakota Attorney General, he concluded: True, as the majority opinion points out, the Attorney General's opinion was based upon the Twinde decision. Therefore, by distinguishing Twinde they apparently are able to totally disregard the Attorney General's opinion. As this court stated in Jordan v. Mellette County, 1917, 38 S.D. 299, 161 N.W. 279: Realizing no absolute compulsion, I, however, believe it proper in this instance to concur in the opinion of the Attorney General to avoid unsettling administrative practices of long standing absent a stronger basis than shown by the majority to rule otherwise. State v. Esmay, 1948, 72 S.D. 270, 33 N.W.2d 280. Furthermore, I believe the majority inappropriately relies on the case of Boe v. Steele County, 1945, 74 N.D. 58, 19 N.W.2d 921. The North Dakota statute involved, in applicable part, is as follows: It is patent the question of whether the inheritance tax paid in that case was "erroneously paid" was not before the court. As the court itself stated: It is noted that SDCL 10-41-83 is entitled "Refund of erroneous or overpaymentVoucher and warrantRefund of county portion." However, under our rules of statutory construction, source notes, cross-references and titles do not constitute part of the statute and, consequently, are no basis for forming an interpretation thereof. SDCL 2-14-9. The majority also cites the Boe decision for the proposition that the assessment of an inheritance tax is not to be given the force and effect of a final judgment. This may be the law in North Dakota but, in my opinion, it is not the statutory or case law in South Dakota. SDCL 10-41-32 provides: SDCL 10-41-34 further provides: Also in the recent case of In re Estate of Grimes, 1973, S.D., 204 N.W.2d 812, Chief Justice Biegelmeier, with all the justices concurring, stated: I believe that this language is applicable, although the cases are factually distinguishable, to the one at bar unless "a decree is not always a decree." Other jurisdictions have also been confronted with this question. In the previously cited case of In re Brown's Estate, supra, the California court stated: Colorado also noted this question in National State Bank of Boulder v. State, supra. *713 The answer, I believe, is found in SDCL 15-6-60(b), which provides: The record indicates that the appellant attempted to have the original decree corrected.[*] Using the proper procedure, it is my opinion that this is the correct approach to this situation in the face of the present wording of our statute. In the present case the executor must be charged with knowledge that the time for filing claims had not expired and that additional claims might be filed when he made his report and had the tax liability determined. He stipulated as to the amount of the tax and paid it. He paid the amount he intended to pay. The tax was not "erroneously paid". The majority reaches a highly desirable result, but in seeking fairness and justice they trample over much-settled law. I believe an equitable and proper result can also be achieved without taking such a route and, therefore, I must respectfully dissent. [*] The record is not complete in this matter. However, in an Order dated September 2, 1971, the circuit court judge ordered: "that Order of the District County Court made and entered on January 6, 1971 correcting the amount of Inheritance Tax due on the above estate be and the same is hereby vacated." The Department of Revenue had appealed the above-mentioned District County Court order. In a memorandum opinion the circuit court judge held "that the District County Court had no jurisdiction to make the order." It appears the order was issued ex parte without notice of hearing to the Department of Revenue.