Court Opinion

ID: 7121299
Source: CourtListenerOpinion
Date Created: 2022-07-24 12:48:18.998865+00
Date Added: 2024-06-11T16:14:06.781429
License: Public Domain

Smith, J.
(dissenting) — I. I cannot conclude this transfer is taxable under our statute. Section 450.3, Code of 1950, provides :
“The tax hereby imposed shall be collected upon the net market value * * “ of any property passing: * * *
“3. By deed, grant, sale, gift or transfer made or intended to take effect in possession or enjoyment after the death of the grantor or donor. A transfer * * * in respect of which the transferor reserves to himself a life income or interest shall be deemed to have been intended to take effect in possession or enjoyment at death * *
The majority opinion is based on this provision.’ It relies entirely on decisions from other jurisdictions. Few if any of them involve a fact situation comparable to the one disclosed here.
Under this record, read in the light of our own decisions, the transfer did not, could not and was not intended to “take effect in possession or enjoyment after [or at] the death of the grantor” and did not reserve to Mrs. Sayres “a life income or interest.” Notwithstanding the language of the deed the evidence clearly establishes it was not a reservation of a life estate but was part -of a contract which merely pledged a “life estate” *144as security for the performance of the service which constituted the consideration or purchase price.
There is no factual dispute in the record. Attorney W. R. Fimmen, who drew the deed, testified: “She told me because of her condition of health she could not live alone and that * * * she wanted to give this farm to Frank Utt, with the understanding he was to take care of her as long as she lived and provide for her * * *. They had talked it over and that was the agreement.”
He further testified the language concerning life estate was put into the deed entirely upon his advice “for her own protection pure and simple and (so that) even if Frank and his wife should die she would have the income from the farm in that event.” (Emphasis and parentheses supplied.)
In strict performance of the contract Mrs. Sayres was at once moved out to the farm. Her brother and his wife had lived on it as tenants for forty-five years. Thereafter, according to the trial court’s well-supported findings, she exercised no “dominion; control or right” over the farm “and received no enjoyment or possession thereof or income therefrom. * * * Frank Utt went into immediate possession and full enjoyment * * * the same as if he owned it completely, and the life estate provision * * * in no way delayed or postponed such possession and enjoyment.”
The court further found “Frank Utt paid no more rent to Mrs. Sayres nor did he pay her any part of the income * * *. Utt paid all the taxes, interest on the mortgage, insurance and upkeep * * * from his own funds. * * * He paid for electric wiring and * * * exercised complete dominion.”
The proceeding was in probate and the undisputed testimony supported these findings. We are not at liberty to disregard them. They lead inevitably to the conclusion reached by the trial court that a life estate was not in fact reserved, but only pledged as security for performance of the contract. Mrs. Sayres was to be supported, not from the income of the farm hut regardless of such income.
II. The admissibility of the extrinsic evidence showing the real transaction (evidenced only m part by the deed) is not, and cannot be, seriously questioned. Even as between the 'parties *145themselves this court is committed from an early day to the doctrine : “The object for which a deed is given must be regarded as the true test of its character. If a deed is given as a security it is a mortgage, although an absolute conveyance in form.” Hall v. Savill, 3 (G. Greene) Iowa 37, 40, 41, 54 Am. Dec. 485; See later cases: Kleinsorge v. Clark, 232 Iowa 313, 316, 4 N.W.2d 433; Olson v. Sievert, 238 Iowa 1316, 1319, 1320, 30 N.W.2d 157.
In Campbell v. Dearborn, 109 Mass. 130, 142, 12 Am. Rep. 671, 679, it is explained “* * * the parol evidence is admitted, not to vary, add to or contradict the writings, but to establish the fact of an inherent fault in the transaction or its consideration, which affords ground for avoiding the effect of the writings,.by restricting their operation, or defeating them altogether. This is a general principle of evidence, well established and recognized both at law and in equity.”
Perhaps the best statement of the basis of the rule (or exception to the parol-evidence rule) is suggested by the fact that a deed is unilateral, is given in performance and consummation of an antecedent contract and need not express all the terms thereof. As suggested by Judge Evans in Bilbo v. Ball, 194 Iowa 875, 892, 188 N.W. 753, 760: “This opens the door to the proof of such prior contract, whether it be written or oral.” See Boyce v. Allen, 105 Iowa 249, 256, 74 N.W. 948.
In McAnnulty v. Seick, 59 Iowa 586, 590, 13 N.W. 743, 744, we said:' “The Aveight of reason * * !>i is in favor of the rule that parol evidence is admissible in an action at law, as well as in equity, to show that a bill of sale absolute upon its face was intended as a mortgage.”
By the same token a reservation of a life estate, absolute upon its face, may be shown to be inserted only as security. Surely, if Mrs. Sayres had in her lifetime attempted to assert ownership of a life estate, under this rule and in the light of this record her brother could have defended his full absolute title to the property as long as he performed the stipulated service which was the agreed consideration for the transfer.
And had he defaulted in such performance, or died before it was completed, Mrs. Sayres could only have asserted her lien in equity, and only to the extent necessary to make good the default, *146just as she would haVs been compelled to do had she taken back a mortgage on the rents and profits.
III. Furthermore, the parol-evidence rule, even in cases where it could be invoked by a party to the transaction, is not available to a stranger to the contract. Kiser v. Morton Farmers Mut. Ins. Assn., 213 Iowa 18, 23, 237 N.W. 328. See cases cited 8 Iowa Digest (West) Evidence, Key No. 424. The decisions in In re Estate of Choate, 195 Iowa 715, 192 N.W. 857, In re Estate of Lamb v. Morrow, 140 Iowa 89, 117 N.W. 1118, 18 L. R. A., N.S., 226, and Brown v. Gulliford, 181 Iowa 897, 165 N.W. 182, support the contention that the State Tax Commission, in cases of this character, is a stranger to the transaction and not entitled to the benefit of the parol-evidence rule.
IV. The majority opinion in effect holds that the language of the deed is controlling (so far as concerns the liability to tax) regardless of whether it correctly states the real transaction. I cannot agree. The language of the statute does not purport to foreclose an investigation into the real character of the transaction. Where, as here, there is no slightest hint of ulterior purpose, I can see no reason for disregarding rules of law that would apply in any other kind of litigation.
The State tax authorities were entirely justified (by the language of the deed) in assuming a tax was due. But when evidence was adduced that would in any other case conclusively establish no life estate was in fact reserved, our duty to treat the State of Iowa the same as any other litigant seems clear. The tax is on the transfer — the actual transaction — not on the deed which is only some evidence of the transaction.
These parties were not attempted tax dodgers. The contract was faithfully carried out by this devoted brother and his wife just as decedent knew it would be. I think it clearly a ease where no tax should be exacted. I would affirm.
Wennerstrum and Garfield, JJ., join in this dissent.