Title: STOVALL v DEPT OF REVENUE

State: montana

Issuer: Montana Supreme Court

Document:

No. 12751 I N THE SUPREME COURT O F THE STATE OF M O N T A N A 1974 MARGARET S T O V A L L , P l a i n t i f f and Respondent, D E P A R T M E N T O F REVENUE O F T H E STATE O F M O N T A N A , formerly the STATE BOARD O F EQUALIZATION of the STATE OF M O N T A N A , Defendants and Appellants. Appeal from: D i s t r i c t Court of the Thirteenth Judicial D i s t r i c t , Honorable C. B. Sande, Judge presiding. Counsel of Record: For Appellants : Terence B. Cosgrove argued, Helena, Montana For Respondent: Jack Burnett argued, Billings, Montana Submitted: September 16, 1974 Decided : OCT 1 0 194 M r . Chief J u s t i c e James T. Harrison d e l i v e r e d t h e Opinion of t h e Court . This is an appeal from an o r d e r of t h e d i s t r i c t court of Yellowstone County r e q u i r i n g t h e Department of Revenue of t h e S t a t e of Montana t o refund t o t h e p l a i n t i f f c e r t a i n i n h e r i t a n c e t a x e s paid upon t h e e s t a t e of her husband. The s o l e i s s u e is a l e g a l question: Must a widow who renounces t h e provisions of her husband's w i l l and e x e r c i s e s her s t a t u t o r y r i g h t of dower pay any Montana i n h e r i t a n c e t a x on t h e property she receives? The f a c t s leading up t o t h i s appeal w e r e agreed upon by t h e p a r t i e s and i n essence a r e a s follows: Respondent's husband, O r v i l l e R. S t o v a l l , a Montana r e s i d e n t , died t e s t a t e on November 1 4 , 1963, and h i s w i l l was probated i n t h e d i s t r i c t c o u r t of Yellowstone County. Respondent timely e l e c t e d t o renounce t h e provisions of t h e w i l l and t o take t h e b e n e f i t s provided by s e c t i o n 22-107, R.C.M. 1947. Respondent paid a n e t Montana i n h e r i t a n c e t a x of $3,463.45. This t a x was based on a reported d i s t r i b u t i v e share i n t h e amount of $91,595.74, of which $46,356.69 represented t h e dower property respondent received pursuant t o s e c t i o n 22-107, X.C.M. 1947. The p a r t i e s s t i p u l a t e d t h a t respondent is e n t i t l e d t o a refund of $3,050.39 ( t h e portion of t h e t a x paid a l l o c a b l e t o t h e dower property) i f it is determined t h a t dower property i s n o t s u b j e c t t o t h e Montana i n h e r i t a n c e t a x . The i n h e r i t a n c e t a x s t a t u t e is s e c t i o n 91-4401, R.C.M. 1947, which i n p e r t i n e n t p a r t provides: "Taxes on transfer--when and how imposed. A t a x s h a l l be and i s hereby imposed upon any t r a n s f e r of property * * * "(1) By a r e s i d e n t of s t a t e . When t h e t r a n s f e r is by w i l l o r by i n t e s t a t e l a w s of t h i s s t a t e from any person dying possessed of t h e property while a r e s i d e n t of t h i s s t a t e . " (Emphasis added) The construction t o be placed upon " i n t e s t a t e laws" is t h e h e a r t of t h e controversy between t h e p a r t i e s t o t h i s case. Appellant takes t h e position t h a t s i n c e a widow's r i g h t of dower is exercisable only a t t h e t i m e of her husband's death, it is a transaction within t h e meaning of " i n t e s t a t e laws". Respond- e n t , on t h e other hand, contends t h a t s i n c e dower i n t e r e s t s a r i s e a t marriage, a widow does not take dower property a s t h e h e i r of her husband but a s one independently e n t i t l e d t o it on account of an inchoate r i g h t becoming absolute by operation of law. Other j u r i s d i c t i o n s disagree on t h i s point. See, e.g., 4 2 Am.Jur.2d 366, Inheritance, Etc., Taxes, S 158. Representa- t i v e of t h e cases holding dower subject t o an inheritance t a x is B i l l i n g s v. People, 189 Ill. 472, 59 N.E. 798, 800, a f f ' d 188 U.S. 97, 47 L.Ed. 400, 23 S.Ct. 272. That c o u r t , a t 59 N.E. 800, took t h e view t h a t t h e taxing s t a t u t e (covering property passing by w i l l o r "the i n t e s t a t e laws of t h i s s t a t e " ) was very comprehensive and w a s designed t o embrace a l l property passing from persons upon t h e i r death, except property otherwise exempt: "There a r e no laws of t h i s s t a t e which a r e spec- i f i c a l l y designated a s ' i n t e s t a t e laws,' * * * w e have no doubt t h e laws r e f e r r e d t o a r e those laws of t h e s t a t e which govern t h e devolution of es- t a t e s of persons dying i n t e s t a t e , and include a l l applicable r u l e s of common law i n f o r c e i n t h i s s t a t e . * * * A s a general r u l e , t h e property of persons dying passes i n two ways, --that is, by w i l l , o r by descent i n t h e modes provided by law; and when it does not pass by w i l l it generally passes by law, --that is, by t h e l a w governing t h e d i s p o s i t i o n of property of persons dying i n t e s t a t e . " Typical of t h e l i n e of a u t h o r i t y holding dower not subject t o an inheritance t a x is E s t a t e of Bullen, 47 Utah 96, 151 P. 533. The question posed i n Bullen was whether dower i n t e r e s t s passed by t h e " s t a t u t e s of inheritance". The c o u r t answered a t p. 535: "What t h e wife receives (under t h e s t a t u t e ) * * * she receives, n o t a s an h e i r of her hus- band, but i n her own r i g h t , something which belongs t o her absolutely, and of which she could not have been deprived by w i l l o r by any o t h e r voluntary a c t of her husband without her consent. Under t h a t s e c t i o n , she is not an h e i r within t h e meaning of our i n t e s t a t e o r succession s t a t u t e s . " While both of these arguments have their merits, we shall follow Billings as being the better reasoned approach to the prob- lem before us. Notwithstanding Bullen's view of what are "intestate laws" insofar as the substantive rules of property law are con- cerned, we think our Legislature had more than that in mind when it inserted that term in the inheritance tax statute. That is, the Legislature thought of dower as a "law governing the disposi- tion of property of persons dying intestate". Billings v. People, supra. Moreover, Bullen and the cases in agreement with it in our opinion fail to sufficiently take into account the state's ability to tax. We have no quarrel with the proposition that a husband cannot deprive his wife of either her inchoate or vested dower without her consent. But it does not necessarily follow that the state is similarly strapped. Inchoate dower can be eliminated simply by a repeal of the dower statute. The result reached in Billings is readily supportable by our present law. In re Wilson's Estate, 102 Mont. 178, 56 P.2d 733, is significant. In Wilson, the widow-executrix was paid a total of $3,600 as a statutory living allowance. In preparing the final report on the estate, she claimed the $3,600 as an ad- ministration expense. The State Board of Equalization (predeces- sor of the Department of Revenue) objected on the ground the stat- utory living allowance was includable in the widow's exemption. Section 10400.4, R.C.M. 1921, now section 91-4414, R.C.M. 1947, gave the widow an inheritance tax exemption of $17,500, with the proviso that "Such exemption to the widow shall include all her statutory dower and other allowances". The widow maintained the living allowance was not property passing either by will or the intestate laws of the state and therefore it was not subject to the inheritance tax. In holding the widow's allowance subject t o t h e inheritance t a x , t h e Court, a t 1 0 2 Mont. 192, 193, s t a t e d : "It must be kept i n mind t h a t t h e only s t a t u - t o r y allowances granted t o t h e widow under any of our laws a r e her dower r i g h t , her home- stead r i g h t , and her family allowance. The 1921 law s p e c i f i c a l l y provided t h a t t h e widow's dower and homestead r i g h t s should be included i n her exemption set out i n t h e Inheritance Tax Law * * * It is axiomatic t h a t any bequest, devise o r allowance going t o t h e widow o r any o t h e r person taking any p a r t of t h e decedent's e s t a t e , passes only by s t a t u t e , and it t h e r e f o r e follows t h a t t h e family allowance, o r any o t h e r allowance, passinq t o one who takes p a r t of t h e decedent's e s t a t e , takes by s t a t u t o r y a u t h o r i t y and receives ProPertv bv v i r t u e of t h e s t a t u t e . " - . . - - fFmphasis added) I n o t h e r words, a person who takes property under a s t a t u t o r y allowance--or dower--takes by what t h e Legislature considers " i n t e s t a t e laws". Since t h e Legislature has i n s i s t e d upon inclusion of a l l s t a t u t o r y dower and other allowances i n t h e exemption, it is manifest t h a t such amounts exceeding t h e exemption a r e subject t o t h e inheritance tax. O n t h i s p o i n t , t h e Court i n Wilson, page 192, said: "In Montana t h e widow is granted t h e very l i b e r a l allowance of $17,500, a g a i n s t which no inheritance t a x i s levied, and we believe t h a t was a l l t h e l e g i s l a t u r e intended she should take t a x f r e e . " I n view of t h e f o r e g o i q ; a e judgment of t h e / d i s t r i c t c o u r t is reversed. i - - , . ; - ,* -. - - .- -- b ' .................................... chief J u s t i c e W e concur: . - J u s t i c e s