Court Opinion

ID: 9444611
Source: CourtListenerOpinion
Date Created: 2023-08-03 21:06:07.460891+00
Date Added: 2024-06-11T17:29:55.881696
License: Public Domain

HUTCHESON, Chief Judge
(dissenting).
The majority opinion has not decided the sole question presented and decided below and argued here and on briefs, whether the appellee was liable as a transferee under Section 827(b), 26 U.S.C. It has, however, found the judge *172in error on a theory of its own, not considered or put forward either by the parties or the trial court, and, in my opinion, not within the compass of the issues raised or tendered below or here. Because this is so, I have concluded to present the case and give my opinion with respect to it as it was presented and decided below and came and was presented here for decision, reserving for the foot of my opinion my comments upon the theory upon which my brothers have put the judge in error and reversed his judgment.
Brought by appellant, plaintiff below, against the appellee, defendant below, the widow and administratrix of Francis Knauer, deceased, the suit involved deficiencies in his individual income taxes for the years 1943 and 1944.
The claim was that the defendant had received from her deceased husband, under circumstances obligating her as transferee to pay the deficiencies, proceeds of life insurance policies, payable to her as beneficiary, sufficient in amount to discharge them.
The defense was a denial that she had received any assets personally from her deceased husband or his estate, and an affirmative plea: that the policies of insurance were payable to her as beneficiary; that her husband had died without undertaking to exercise any control over the policies; that any right that he may have had in and to them prior to his death had expired with it; and that, therefore, she could not be held liable as transferee of the proceeds or any part thereof.
Tried to the court without a jury on facts which were stipulated or undisputed, there were findings of fact1 and conclusions of law, and a judgment in favor of defendant.
Appealing from the judgment, the United States is here urging that the judgment was wrong and may not stand.
I cannot agree. On the contrary, I think it clear: that the defendant did not receive from the deceased either the proceeds of the policies as a whole or the cash surrender value thereof; or any part of the property of his estate; that all of these proceeds, under the controlling Florida statute,2 inured exclusively *173and directly to her; and that she was not obligated, as transferee of property of the deceased, within the meaning of the invoked statute,3 to pay the deficiencies.
As to the meaning and effect of the Florida statute, this court, beginning with Webster v. Commissioner of Internal Revenue, 5 Cir., 120 F.2d 514, and continuing in New York Life Insurance Co. v. Valz, 5 Cir, 141 F.2d 1014, Flick’s Estate v. Commissioner of Internal Revenue, 5 Cir, 166 F.2d 733, and Johnson v. Remy, 5 Cir, 220 F.2d 73, has given effect without varying to the decisions of the Florida courts, holding that, where under the Florida Statute the wife is the beneficiary, the proceeds of life insurance policies do not pass to the executor or administrator of the insured’s estate but inure to the benefit of and go directly to the beneficiary. This court, too, in Liquidators of Exchange National Bank of Shreveport v. United States, 5 Cir., 65 F.2d 316, early held that whether or not one is obligated as transferee to pay the tax of another is governed by the law of the state where the transaction occurs and that where the transfer under state law would not be impeachable as to creditors, it would not be as to the United States, and this view has been followed in the Sixth Circuit, Tyson v. C. I. R., 212 F.2d 16; in the Second Circuit, in Rowen v. Commissioner, 215 F.2d 641; and in the Seventh Circuit in United States v. New, 217 F.2d 166. Cf. Shelton v. Gill, 4 Cir, 202 F.2d 503, at page 506.
The law standing thus, if the law as established in Florida and in this circuit is followed, the defendant was not a transferee within the meaning of the invoked section as to the proceeds of the policy, including the cash surrender value, because she did not receive the proceeds or any part thereof from the decedent but directly under the statute law of Florida. If, on the other hand, it be held, as was held in the Rowen case, that the defendant was transferee as to the cash surrender value of the policies, though not as to the balance of the proceeds, it must, since there was no proof that the decedent was insolvent at his death but, on the contrary, the evidence showed that he was solvent, be held that no liability as transferee was imposed upon her. I think it is quite plain, therefore, that the defendant was not a transferee ; that in no event could the United States prevail against her as such; that the conclusion of the judge, that it was not, was right; and that this being so, the judgment must be affirmed.
And now for a word or two with respect to the theory upon which the majority predicates liability, a theory, as I understand the matter, not heretofore advanced in this or any other similar case.
This theory is that Section 826(c)4 imposes upon recipients of insurance, the *174value of which has been included under Section 811 in the gross estate of the decedent, an obligation in favor of the United States, or for that matter of any other creditor, to pay into the estate a proportionate amount thereof, such that if they do not pay it in, the United States, or for that matter any other creditor, can compel them to do so to the extent necessary to satisfy an unpaid debt of the estate. As sought to be applied here, this supposed obligation exists, though the United States has already received out of the assets of the estate plus a contribution by the insurance beneficiary sufficient to make up the difference between the value of the assets and the claim for estate taxes, payment in full of its claim for estate taxes, the only claim to which Section 811 applies.
No language in the section in terms affording the United States or other creditors the remedy claimed is pointed to by my brothers. Their view seems to be that if the United States and the defendant had been aware, before the estate taxes were paid, of its claim for the income tax, much later assessed and asserted, payment of the income tax would have been first demanded and made, and the United States would then have been in a position to invoke and would have invoked, for the payment of its unpaid estate tax claim, the provisions of Section 811(g) (2).
Proceeding on this assumption, the majority argues in effect that what was actually done must be disregarded and the situation must be viewed on a what ought to or might have been done basis. In short, the estate taxes must be regarded as unpaid, the money of the estate which was actually used to pay them as not so used, and as remaining in the estate for application to the payment of the income tax and to the extent that the estate tax would under this assumption remain unpaid, the obligation of the beneficiary to pay, imposed by Section 811(g), would be still existing and enforceable.
If, however, there is one proposition in tax law which has been and remains settled, it is that taxes go not on what ought to or might have been done but on what actually was done, whether the result, as in Jeffries v. Commissioner of Internal Revenue, 5 Cir., 158 F.2d 225,5 was an apparently unjust and heavy burden on the taxpayer, or, as is claimed here, imposes a loss upon the government.
Another basis seems to be that the United States which has received full payment of its estate taxes and which therefore had no claim for estate taxes to satisfy, is somehow subrogated to, or entitled to exercise, the right accorded the executor of the estate, when he has paid the estate tax in full and where, as here, the decedent has not provided otherwise, to enforce contribution from the beneficiary.
With deference, all of these ideas are based not upon reality but upon a hypos-tasis. The plain and simple facts here *175are that the United States has no claim for estate taxes and is in no position to invoke any of the rights or remedies accorded to anyone with respect to them. It has only a claim for income taxes and, as pointed out in the Rowen case, supra, a claim based upon Section 811(g) does not extend to the collection of income taxes but is limited and applies only to unpaid estate taxes.
Finally and generally, the majority apparently proceeds upon the theory that it was the duty of the widow to collect from herself and pay into the estate the amount of the estate tax attributable to the inclusion of the insurance policies in the estate, though at the time the estate tax was settled there was nearly sufficient money in the estate to pay those taxes and there was no other claim or debt being asserted by anyone, including the United States, against the estate. This seems to me to be applying with a vengeance to the widow and the insurance provided by the husband for her protection, and under the Statutes of Florida inuring directly to her, the principle that nothing is certain but death and taxes.
I respectfully dissent.

. These were:
The plaintiff is the United States of America and the defendant is the widow and administratrix of the Estate of Francis A. Knauer.
The deceased, Francis A. Knauer, died in an automobile accident on Jan. 14, 1945.
The defendant was appointed Adminis-tratrix of the Estate of Francis A. Knauer on Feb. 6, 1945.
The personal estate of the deceased amounted to $7,954.65.
The deceased had, in full force and effect at the time of his death, insurance policies in the double indemnity amount of $90,838.31, with a cash surrender value before the death of the deceased in the total amount of $9,227.98. The proceeds of insurance in the amount of $90,838.31 have inured to the benefit of the defendant.
Estate taxes were paid in the amount of $8,753.39.
Deficiency estate taxes in the amount of $2,447.62 were paid by the defendant, making a total of estate taxes paid of $11,201.01.
The assets of the estate were exhausted, and the defendant has used personal assets and proceeds of a gift, in paying the estate taxes.
On Dec. 19, 1947, the United States assessed a deficiency assessment against the estate for a deficiency in the income taxes due from the deceased in the year 1943 in the amount of $3,858.17.
On Dec. 19, 1947, the United States assessed a deficiency assessment against the estate for a deficiency in the income taxes due from the deceased in the year 1944 in the amount of $1,596.47.

. 11 Florida Statutes Annotated:
“Title XIV — Homestead and Exemptions
“Sec. 222.13 Life insurance policies; disposition of proceeds
“Whenever any person shall die in this state leaving insurance on his life, the said insurance shall inure exclusively to the benefit of the child or children and husband or wife of such person in equal portions, or to any person for whose use and benefit such insurance is declared in the policy; and the proceeds thereof *173shall in no case be liable to attachment, garnishment or any legal process in favor of any creditor of the person whose life is so insured, unless the insurance policy declares that the policy was effected for the benefit of such creditor; provided, however, that whenever the insurance is for the benefit of the estate of the insured or is payable to the estate or to the insured, his executors, administrators or assigns, the proceeds of the insurance may be bequeathed by the insured to any person whatsoever or for any uses in like manner as he may bequeath or devise any other property or effects of which he may be possessed, and which shall be subject to disposition by last will and testament.”
“Sec. 222.14 Exemption of cash surrender value of life insurance policies from legal process.
“The cash surrender values of life insurance policies issued upon the lives of citizens or residents of the State of Florida, upon whatever form, shall not in any case be liable to attachment, garnishment or legal process in favor of any creditor of the person whose life is so insured, unless the insurance policy was effected for the benefit of such creditor.”

. 26 U.S.C.A. § 311(f), 53 Stat. 90.

. 26 U.S.C.A. § 826(c), enacted with minor changes in phraseology as Section 2206 of the 1954 Internal Revenue Code:
“Liability of life insurance beneficiaries. Unless the decedent directs otherwise in *174his will, if any part of the gross estate upon which tax has been paid consists of proceeds of policies of insurance upon the life of the decedent receivable by a beneficiary other than the executor, the executor shall be entitled to recover from such beneficiary such portion of the total tax paid as the proceeds of such policies bear to the sum of the net estate and the amount of the exemption allowed in computing the net estate, determined under section 935(c). If there is more than one such beneficiary the executor shall be entitled to recover from such beneficiaries in the same ratio. In the case of such proceeds receivable by the surviving spouse of the decedent for which a deduction is allowed under section 812(e) (the so-called ‘marital deduction’), this subsection shall not apply to such proceeds except as to the amount thereof in excess of the aggregate amount of the marital deductions allowed under such subsection.”

. In that ease at page 226, we said: “Whether a transaction or result is taxable and what the tax is is not a matter to be determined in law upon considerations of general justice or equity. It is a matter of statutes and valid regulations, and what they mean. Neither is it to be determined in fact upon considerations of what- was intended to be done. Rather it is to be determined by what was done. * * * Taxation deals not with what was attempted to be done but with what was done. * * * ”
And in United States v. Clark, 5 Cir., 159 F.2d 489, we again gave effect to those views.