Source: http://www.chanrobles.com/usa/us_supremecourt/309/106/case.php
Timestamp: 2020-01-25 11:19:07
Document Index: 618443145

Matched Legal Cases: ['§ 302', '§ 302', '§ 302', '§ 302', '§ 302', '§ 302', '§ 302', '§ 302', '§ 302', '§ 302', '§ 302', '§ 302']

1. Decedent, in his lifetime, created a trust providing that the income from the trust property should be paid to his wife during her lifetime, that, upon his death, if she survived him, the corpus of the trust should go to her or to other named beneficiaries, but that, upon her death, if he survived, the property should revert to himself. The wife survived. Held, that the value of the remainder interest chanrobles.com-red
5. The governing principle in the application of this legislation (§ 302(c), supra) is the intention of Congress to include in the gross estate inter vivos gifts which may be resorted to as a substitute for a will, in making dispositions of property operative at death. To effectuate this purpose, practical considerations applicable to chanrobles.com-red
Certiorari, 308 U.S. 532, to review decisions of the Circuit Courts of Appeals involving federal estate taxes. In Nos. 110-112, the judgments below affirmed decisions of the Board of Tax Appeals, 34 B.T.A. 575, which had set aside deficiency assessments. chanrobles.com-red
These cases raise the same question -- namely, whether transfers of property inter vivos made in trust, the particulars of which will later appear, are within the provisions of § 302(c) of the Revenue Act of 1926. [Footnote 1] They chanrobles.com-red
Neither here nor below does the issue turn on the unglossed text of § 302(c). In its enforcement, Treasury and courts alike encounter three recent decisions of this Court, Klein v. United States, 283 U. S. 231, Helvering v. St. Louis Trust Co., 296 U. S. 39, and Becker v. St. Louis Trust Co., 296 U. S. 48. Because of the difficulties which lower courts have found in applying the distinctions made by these cases and the seeming disharmony of their results, when judged by the controlling purposes of the estate tax law, we brought the cases here. All involve dispositions of property by way of trust in which the settlement provides for return or reversion of the corpus to the donor upon a contingency terminable at his death. Whether the transfer made by the decedent in his lifetime is "intended to take effect in possession or enjoyment at or after his death" by reason of that which he retained is the crux of the problem. We must put to one side questions that arise under sections of the estate tax law other than § 302(c) -- sections, that is, relating to transfers taking place at death. Section 302(c) deals with chanrobles.com-red
Klein v. United States, supra, at 283 U. S. 234. chanrobles.com-red
In Helvering v. St. Louis Trust Co., supra, the decedent had conveyed property in trust, the income of which was to be paid to his daughter during her life, but at her death, "[i]f the grantor still be living, the Trustee shall forthwith . . . transfer, pay, and deliver the entire estate to the grantor, to be his absolutely." But, "[i]f the grantor be then not living," then the income was to be chanrobles.com-red
On the authority of the Klein case, the Commissioner had included in the taxable estates the gifts to which, in the St. Louis Trust cases, the grantor's death had given definitive measure. If the wife had predeceased the settlor in the Klein case, he would have been repossessed of his property. His wife's interests were freed from this contingency by the husband's prior death, and, because of the effect of his death, this Court swept the gift into the gross estate. So, in Helvering v. St. Louis Trust Co., supra, the grantor would have become repossessed of the granted corpus had his daughter predeceased him. But he predeceased her, and, by that event, her interest ripened to full dominion. The same analysis applies to the Becker case. In all three situations, the result and effect were the same. The event which gave to the beneficiaries a dominion over property which they did not have prior to the donor's death was an act of nature outside the grantor's "control, design, or volition." Helvering v. St. Louis Trust Co., 296 U. S. 39, 296 U. S. 43. But it was no more and no less "fortuitous," so far as the grantor's "control, design, or volition" was concerned, in the St. chanrobles.com-red
296 U.S. chanrobles.com-red
The terms of these grants differ in detail from one another, as all three differ from the formulas of conveyance used in the Klein and St. Louis Trust cases. It therefore becomes important to inquire whether the technical forms in which interests contingent upon death chanrobles.com-red
are cast should control our decision. If so, it becomes necessary to determine whether the differing terms of conveyance now in issue approximate more closely those used in the Klein case, and are therefore governed by it, or have a greater verbal resemblance to those that saved the tax in the St. Louis Trust cases. Such an essay in linguistic refinement would still further embarrass existing intricacies. It might demonstrate verbal ingenuity, but it could hardly strengthen the rational foundations of law. The law of contingent and vested remainders is full of casuistries. There are great diversities among the several states as to the conveyancing significance of like grants; sometimes, in the same state there are conflicting lines of decision, one series ignoring the other. Attempts by the Board of Tax Appeals and the Circuit Courts of Appeal to administer § 302(c) by reference to these distinctions abundantly illustrate the inevitable confusion. [Footnote 4] One of the cases at bar, No. 399, reveals vividly the snares which inevitably await an attempt to base estate tax law on the "niceties of the art of conveyancing." In connection with the ascertainment of its own death duties, the Supreme Court of Errors of Connecticut defined the nature of the interest which the decedent in that case retained after his inter vivos transfer. Bryant v. Hackett, 118 Conn. 233, 171 A. 664. And yet the nature of that interest under Connecticut law and the scope of the Connecticut Court's adjudication of that interest were made the subject of lively controversy before chanrobles.com-red
Our real problem, therefore, is to determine whether we are to adhere to a harmonizing principle in the construction of § 302(c) or whether we are to multiply gossamer distinctions between the present cases and the three earlier ones. Freed from the distinctions introduced by the St. Louis Trust cases, the Klein case furnishes such a harmonizing principle. Does, then, the doctrine of stare decisis compel us to accept the distinctions chanrobles.com-red
Nor does want of specific Congressional repudiations of the St. Louis Trust cases serve as an implied instruction by Congress to us not to reconsider, in the light of new experience, whether those decisions in conjunction with the Klein case, make for dissonance of doctrine. It would require very persuasive circumstances enveloping Congressional silence to debar this Court from reexamining its own doctrines. To explain the cause of chanrobles.com-red
nonaction by Congress when Congress itself sheds no light is to venture into speculative unrealities. [Footnote 7] Congress may not have had its attention directed to an undesirable decision, and there is no indication that, as to the St. Louis Trust cases, it had, even by any bill that found its way into a committee pigeon-hole. Congress may not have had its attention so directed for any number of reasons that may have moved the Treasury to stay its hand. But certainly such inaction by the Treasury can hardly operate as a controlling administrative practice, through chanrobles.com-red
This Court, unlike the House of Lords, [Footnote 9] has from the beginning rejected a doctrine of disability at self-correction. Whatever else may be said about want of Congressional action to modify by legislation the result in the St. Louis Trust cases, it will hardly be urged that the reason chanrobles.com-red
THE CHIEF JUSTICE concurs in the result upon the ground that each of these cases is controlled by our decision in Klein v. United States, 283 U. S. 231. chanrobles.com-red
But if I am wrong in this, I still think the judgments in Nos. 110-112, and 183 should be affirmed, and that in 399 should be reversed. The rule of interpretation adopted in the St. Louis Union Trust Company cases should now be followed for two reasons: first, that rule was indicated by decisions of this court as the one applicable in the circumstances here disclosed, as early as 1927; was progressively developed and applied by the Board of Tax Appeals, the lower federal courts, and this court, up to the decision of McCormick v. Burnet, 283 U. S. 784, in 1931, and has since been followed by those tribunals in not less than fifty cases. It ought not to be set aside after such a history. Secondly. The rule was not contrary to any treasury regulation; was, indeed, in accord with such regulations as there were on the subject; was subsequently embodied in a specific regulation, and, with this background, Congress has three times reenacted the law without amending § 302(c) in respect of the matter here in issue. The settled doctrine that reenactment of a statute so construed, without alteration, renders such construction a part of the statute itself should not be ignored, but observed. chanrobles.com-red
If, by the will of his grandmother, A is given a life estate, with remainder to another, his executor is not bound to return anything on account of the life estate because, in respect of it, nothing passes on A's death. The estate simply ceases. The Treasury has never contended the contrary. If, however, A's grandmother gave a life estate to B, and the remainder to A, A has something which, at his death, will pass to someone else under his will, or under the intestate laws. The statute plainly taxes the value of the interest thus transferred at A's death. chanrobles.com-red
If A makes a present irrevocable transfer in trust, conditioned that he shall receive the income for life and, at his death, the principal shall go to B, B is at once legally chanrobles.com-red
In May v. Heiner, supra, it was held that a transfer in trust under which the income was payable to the transferor's husband for his life and, after his death, to the transferor during her life, with remainder to her children, was not subject to tax as a transfer intended to take effect chanrobles.com-red
Since the opinion of the court appears to treat the St. Louis cases as the origin of the principle there announced, chanrobles.com-red
Since the St. Louis cases were decided, the principle on which they went has been repeatedly applied by the Board of Tax Appeals and the courts. The Board has followed the cases in no less than seventeen instances. [Footnote 2/8] chanrobles.com-red
If there ever was an instance in which the doctrine of stare decisis should govern, this is it. Aside from the obvious hardship involved in treating the taxpayers in the present cases differently from many others whose cases have been decided or closed in accordance with the settled rule, there are the weightier considerations that the judgments now rendered disappoint the just expectations of those who have acted in reliance upon the uniform construction of the statute by this and all other federal tribunals, and that to upset these precedents now must necessarily shake the confidence of the bar and the public in the stability of the rulings of the courts and make it impossible for inferior tribunals to adjudicate controversies in reliance on the decisions of this Court. To nullify more than fifty decisions, five of them by this chanrobles.com-red
It is familiar practice for Congress to amend a statute to obviate a construction given it by the courts. The legislative history of § 302(c) demonstrates that Congress has elected not to make such an amendment to chanrobles.com-red
The day the St. Louis cases were decided, this Court announced its opinion in White v. Poor, 296 U. S. 98, construing § 302(d) of the Act of 1926. In order to make the section apply to such a situation as was disclosed in that case, [Footnote 2/14] the Congress, on June 22, 1936, by the Act of 1936, [Footnote 2/15] amended it to preclude the construction the Court had given it. Again, Congress let § 302(c) stand as before and as construed in the St. Louis cases. chanrobles.com-red
At the bar, counsel for the Government stated that it had always been the view of the Treasury that the article in question applied only to § 302(a), and had no application to § 302(c). But we are not concerned with what the Treasury thought about the matter. The regulations were issued to guide taxpayers in complying with the Act. Section 302 is an entirety. Subsections (a) and (c) were chanrobles.com-red
What, then, is to be said of the principle that reenactment of a statute which the Treasury, by its regulations, has interpreted in a given sense is an embodiment of the interpretation in the law as reenacted? Surely the principle cannot be avoided, as the Government argues, because chanrobles.com-red
See 309 U. S. supra.