Opinion ID: 1967333
Heading Depth: 1
Heading Rank: 2

Heading: Equitable Adoption and Inheritance Taxes

Text: In 1917 ( Clayton ) and in 1948 ( Besche ), the Court was aware that there was widespread support for the doctrine of equitable adoption, at least in certain limited circumstances. As we have shown, that is still the case. But the agreement narrows considerably as we move beyond the subject of inheritance by an equitably adopted child from an equitably adoptive parent. Annotation, 97 A.L.R.3d at 354-355. Nevertheless, McGarvey would have us extend the doctrine far beyond the area of general agreement as identified in Besche. McGarvey points to cases like Foster v. Cheek, 212 Ga. 821, 96 S.E.2d 545 (1957), in which the Supreme Court of Georgia applied the doctrine to allow an equitably adopted child to obtain insurance benefits provided for a child. Clayton, supra, could be regarded as a case of this type, since it applied an estoppel theory to prevent an insurer from denying that the words adopted child did not include an equitably adopted child. He also cites Bower v. Landa, 78 Nev. 246, 371 P.2d 657 (1962), in which an equitably adopted child was treated as an heir in order to give him plaintiff status under a wrongful death statute. Contra Limbaugh v. Woodall, 121 Ga. App. 638, 175 S.E.2d 135 (1970). McGarvey places considerable reliance on cases such as Williams v. Richardson, 523 F.2d 999 (2d Cir.1975), Broussard v. Weinberger, 499 F.2d 969 (5th Cir.1974), and Smith v. Secretary of Health, Educ. & Welfare, 431 F.2d 1241 (5th Cir.1970). In each of them, a federal court recognized the doctrine of equitable adoption in order to allow recovery of certain social security benefits. The State, on the other hand, invokes cases such as Sheffield v. Barry, 153 Fla. 144, 14 So.2d 417 (1943), and Collins v. Griffin, 93 Ga. App. 282, 91 S.E.2d 369 (1956), which tend to limit the doctrine to intestacy or, at the most, insurance situations. Many of these cases make it clear that use of the doctrine does not affect the actual status of the child. Thus, the Foster court pointed out that in Georgia, under the doctrine of virtual adoption, no relationship of parent and child is created, but it is only a court-given name to a status arising from and created by contract where one takes and agrees to legally adopt the child of another but fails to do so. 212 Ga. at 827-828, 96 S.E.2d at 549-550. Accord Limbaugh, 121 Ga. App. at 641, 175 S.E.2d at 138: The equitable principle of considering done what ought to have been done with regard to an unperformed contract to adopt has not, to our knowledge, ever been extended [in Georgia] beyond decreeing in the child a right to inheritance or a right to receive as a beneficiary under some types of insurance policies. The relation of parent and child does not arise from virtual adoption. McGarvey importunes us to depart from this view and to hold that equitable doctrine does establish the same parent-child relationship that formal adoption creates. He correctly notes that West Virginia has done this. In First Nat'l Bank in Fairmont v. Phillips, 344 S.E.2d 201, 204 (W. Va. 1985), a divided court rejected such machinations as specific performance and estoppel, and read its earlier decision of Wheeling Dollar Savings & Trust Co. v. Singer, 162 W. Va. 502, 250 S.E.2d 369 (1978), as recognizing that an equitably adopted child occupies the identical status as a formally adopted child; that is, in West Virginia, legal adoption may be achieved either by equitable adoption or formal judicial adoption. We do not, of course, have before us a question of insurance benefits or of who may sue as a plaintiff in a wrongful death action. We need not decide whether we would apply the doctrine in that sort of case. But we are surely not prepared to go as far as West Virginia has gone. Adoption is an important matter, not only from the viewpoint of property concerns, such as inheritance, but from the perspective of personal relationships. By enacting the adoption statute now codified at Md.Code (1984, 1987 Cum. Supp.) §§ 5-301 through 5-330 of the Family Law Article, our legislature has made it plain that as a matter of general policy, termination of natural parental rights and the creation of a wholly new parent-child relationship may be accomplished only by following elaborate and carefully devised statutory procedures, and that these results may be achieved only by formal court decree. Our predecessors said as much in Besche: [T]here was then [prior to the 1892 enactment of the first adoption statute], and is now, no other method by which a child can be adopted in this State. 190 Md. at 544, 59 A.2d at 502. McGarvey, then, cannot prevail by way of the argument that his equitable adoption has cloaked him in the mantle of a formally or legally adopted child, and that for this reason, he should be treated as a direct descendant for inheritance tax purposes. Nor can he successfully invoke arguments based on contract performance or equitable estoppel. The State, in its tax-collecting capacity, is not a party to any contract to adopt McGarvey; the State did or failed to do nothing with respect to adoption upon which McGarvey could have relied to his detriment. In the last analysis, his plea to be so treated comes down to a question of statutory construction. The social security cases, Williams, Broussard, and Smith, all supra, also turned on statutory construction. In each of them, the word child and the phrase legally adopted child was read to include an equitably adopted child, in order to permit the receipt of certain benefits. This construction was thought to embody the intent of Congress, in view of the remedial purposes of the Social Security Act. See, e.g., Williams, 523 F.2d at 1003, and Broussard, 499 F.2d at 970. Maryland tax law does not have the same remedial purposes as the Social Security Act; its aim is to raise revenue, not to distribute benefits to the needy. That law, Art. 81, § 149(a), levies a tax at the rate of one per centum on every one hundred dollars of the clear value of any and all property, having a taxable situs in this State, passing at the death of any ... decedent ... to or for the use of the [ inter alia ] children ... of such decedent.... Section 150(a) imposes a ten per centum tax on property so passing to any person or persons other than the [ inter alia ] children ... of such decedent.... The General Assembly did not, in the inheritance tax laws, define the word children. But the adoptions statute itself suggests that in this context we should look to the Estates and Trusts Article. See Family Law Art. § 5-308(b)(3). Md.Code (1974) § 1-207(a) of the Estates and Trusts Article provides: An adopted child shall be treated as a natural child of his adopting parent or parents. On adoption, a child no longer shall be considered a child of either natural parent, except that upon adoption by the spouse of a natural parent, the child shall still be considered the child of that natural parent. This language clearly refers to the formal adoption process, since it is only by that process that a child no longer shall be considered a child of either natural parent. See Family Law Art. § 5-308(b). See also Estates and Trusts Art. § 1-205: A child includes ... an adopted child.... While earlier statutes spoke in terms of a legally adopted child, see former Art. 93, §§ 142 (1951) and 147 (1964), we do not think the subsequent elimination of the adverb legally effected any substantive change. See, e.g., Lyman v. Sullivan, 147 Conn. 134, 137-139, 157 A.2d 759, 761 (1960). The elimination of the adverb occurred during code revision. It is well established that a language change effected during the course of formal code revision accomplishes no substantive change absent the clearest legislative intent. Bureau of Mines v. George's Creek, 272 Md. 143, 155, 321 A.2d 748, 754-755 (1974). Thus, reading together the adoption statute, the estates and trusts law, and the inheritance tax law, we conclude that when the legislature wrote children in Art. 81, §§ 149(a) and 150(a), it meant formally adopted children. McGarvey reads Estate of Radovich, 48 Cal.2d 116, 308 P.2d 14 (1957), and Estate of Reid, 80 Cal. App.3d 185, 145 Cal. Rptr. 451 (1978), as supporting a contrary result, but we do not find those cases helpful. In Radovich, a California probate court had decreed that an equitably adopted child was the adopted son and heir of the decedent. The Supreme Court of California held that the probate court had made an in rem determination of status which was final and binding on all the world, including the tax collector. Accordingly, under settled principles of res judicata, that official had to assess inheritance taxes at the rate applicable to property passing to adopted children. Reid simply followed Radovich. In the case before us, we have no final and binding determination by any court that McGarvey occupies, for all purposes, the status of Mrs. Saul's adopted son. More closely on point, we think, are cases like Lyman, supra; Wooster v. Iowa State Tax Comm'n, 230 Iowa 797, 298 N.W. 922 (1941); In re Clark's Estate, 105 Mont. 401, 74 P.2d 401 (1937); and Goldberg v. Robertson, 615 S.W.2d 59 (Mo. 1981). In each of these cases, the holding is that equitable adoption is not enough to give an individual status as an adopted child for the purpose of favorable inheritance tax treatment; instead, formal adoption is required to achieve that result. See also First Nat'l Bank of Denver v. People, 183 Colo. 320, 324, 516 P.2d 639, 641 (1973). That is our holding as well. JUDGMENT AFFIRMED. COSTS TO BE PAID BY APPELLANT.