Case Name: CENTRAL HANOVER BANK & TRUST CO. v. UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1945-02-05
Citations: 58 F. Supp. 565
Docket Number: No. 46003
Parties: CENTRAL HANOVER BANK & TRUST CO. v. UNITED STATES.
Judges: WHALEY, C. J., concurs.
Reporter: Federal Supplement
Volume: 58
Pages: 565–568

Head Matter:
CENTRAL HANOVER BANK & TRUST CO. v. UNITED STATES.
No. 46003.
Court of Claims.
Feb. 5, 1945.
For former opinion, see 57 F.Supp. 497.
Harold L. Herrick, of New York City (Huber B. Lewis, of New York City, on the brief), for plaintiff.
Elizabeth B. Davis, of Washington, D. C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D. C., on the brief), for defendant.

Opinion:
WHITAKER, Judge.
This case is before us on plaintiff's motion for a new trial. On the former hearing both at the bar and in their briefs both parties argued the case on the assumption that if Mrs. Johnson's three children died without issue before she did, the trust would fail and the property, therefore, would revert to her. We were accordingly of the opinion, since Mrs. Johnson must have known that, or was at least chargeable with that knowledge, that she must have intended to reserve that possibility of reverter.
But, now, on motion for a new trial plaintiff earnestly argues that under the law of New York, in which State Mrs. Johnson resided when the trust instrument was executed, the property would not have reverted to her, but would have vested absolutely in the last surviving remainder man even if he had died before the settlor, or that it would have been divided equally between the estates of the three remainder men if all had predeceased the settlor. It cites several New York cases holding, in the case of wills, that the remainder interest vests absolutely in the last surviving remainder man, even though that last survivor dies before the life tenant. Matter of McCombs' Estate, 261 App.Div. 449, 25 N.Y.S.2d 894, affirmed 287 N.Y. 557, 38 N.E.2d 226; Matter of Hadden's Estate, 178 Misc. 939, 36 N.Y.S.2d 34; Matter of Stephani's Estate 161 Misc. 803, 293 N.Y.S. 485, affirmed 253 App.Div. 705, 1 N.Y.S.2d 500. Cf. Jarman on Wills, 7th Ed. p. 1340.
There may be some doubt that these decisions are equally applicable to remainder interests created by trusts, but they may be, and Mrs. Johnson may have thought that they were when the trust instrument was executed. If she did, even though she may have been mistaken, it cannot be said that she "intended" to reserve any interest in herself, even the possibility of a reverter. The Act taxes only those transfers which are "intended to take effect in possession or enjoyment at or after death." 26 U.S.C.A.Int.Rev.Code, § 811(c). (Italics ours.) Unless she "intended" to reserve some estate in herself, other than the life estate, the transfer does not come within the terms of the taxing act, even though she did not succeed in actually divesting herself of all possibility of an interest therein.
Our conclusion on the former hearing that she had "intended" to reserve this possibility of a reverter was based on the statement of the parties that this was the necessary result of the trust instrument under the New York law. Therefore, we concluded, Mrs. Johnson must have "intended" this result. If this was not the necessary result under the law, as now appears, then such an intention is not necessarily to be implied.
In all cases heretofore decided the intention to make such a reservation was expressed. There was no doubt of an intention of reserving something that should pass only at death. But, we do not suppose that it is necessary that such an intention be expressed; it may as well be implied from all the facts and circumstances.
However, we are of opinion that the facts of this case do not disclose such an intention, but rather negative it. The property Mrs. Johnson had, she had acquired from her deceased husband; she was about to remarry, and she evidently wanted to insure that the children of her former marriage would succeed at her death to the property that had been their father's, without having to divide it with her husband-to-be or any other children she might have. She was 42 years old and the children were 11, 19, and 20, respectively. We doubt she ever thought about the possibility that she might survive her children and their children. To say the least, that possibility was quite remote and might easily have been overlooked. But if she did think of it, did she think the property would come back to her in that event or go to the heirs of the survivor of her children and their issue? We do not know, but we do feel sure under the facts that she thought she was completely disposing of the property, save only for a life interest in it which she retained for herself.
Convinced that this was her intention, we do not think it can be said that this was a transfer "intended to take effect in possession or enjoyment" at her death. We are of opinion she meant to dispose of the remainder interest completely, in her lifetime, leaving nothing of the remainder to vest only at her death.
Plaintiff's motion for a new trial is granted. The findings of fact heretofore filed on November 6, 1944, are adopted and confirmed, but there is added as finding 12 the following: "12. The transfer of the property in trust, as set out in finding 3, was not intended to. take effect in possession or enjoyment at the death of the settlor."
The former opinion is modified in accordance with the foregoing, but the former conclusion of law is withdrawn, and the following is substituted therefor:
Conclusion of Law
Upon the findings of fact heretofore filed and as amended herein, the court concludes as a matter of law that the plaintiff is entitled to recover of the defendant the sum of $148.696.03, together with interest as provided by law.
It is therefore adjudged and ordered that the plaintiff recover of and from the United States the sum of $148,696.03, together with interest as provided by law. It is so ordered.
WHALEY, C. J., concurs.
JONES, J., took no part in the decision of this case.