Court Opinion

ID: 4143521
Source: CourtListenerOpinion
Date Created: 2017-02-18 03:34:39.716484+00
Date Added: 2024-06-11T14:26:08.114722
License: Public Domain

OFFICE      OF THE ATI’ORNEY    GENERAL       OF TEXAS
                                         AUSTIN
Qmhwo.NAfm                                                         I
rsna oP(Ru
    '..
                                                            p
          ronarable Csores B, Sheppard
          Cocptroller oi Publfo AccOUlIts
          AUtBth,     ‘bXa8
                                                     /       n
          near Sir:

                                                           ooneidsretion of
                                                         ot conteetlq the will?
                                                          etter OS October 24,
                                                          or thle departncnt

                                                 ie will was a~ttaaked on the
                                               y oapaclty end undue him-
                                               ed a judcr/tont
                                                             orderins that
                                             5 this jucip6nt tba contest-
                                           distriat court at whfoh trial the

                              lifterthe s~rement m15 reached tbe
                          nkstants we5 dfsznieaedand the will wae ..
                                      The question with ahloh you are ‘-1
          now prssented is whether or not the beneficiary namd ixi
          the will la subjeot to t.hspayzmnt of the *^stasInheritance
          *-axupon the entire mount devised to him unCer the will
          or 15 he subjeot to the payment to such tax only upon the
          value of the estate left to him in the will lees the
          'Zi.,SOO.OOwhich ha paid to the Oth6r Ceirs under the Coo-
          prociiesagreecent.
                         Article 7117, oi Vsrnon~o Annotated Civil Stat-
          utes,     reads in part a8 iollomr
         -Al].prcpcrty   witSin t&r jurisdiction of
    thlr Gtete, real or personal, corporate   or ln-
           te, and any intcreat
    oorporci                      therein, lroludtng
    property passla& under a gcnercl power ci appolnt-
    mot excrclecd by the dec6dent by will, Iaolud-
    Inc the proceed8 of life lnourance tc the ax-
    tent o: the mount recolvable by the executor
    or admlnletretor   as lneuraace under pollales
    tcken out by the decedent upon his own life, and
    to the extent of the &x0883 over Forty Thousand
    mllars ($cO,OOO) of tLe anouct rccslvable by
    all other benailciarles a6 lnsura~cs under pol-
    Ioiee taken out by the deoedent upon his own
    life, whether belon&lng to ltiabitantr cf this
    ctrte or to persons who are net Inhabitants, re-
    gardfees of whether such property Ia.loocted
    wlthln or witbout thla State, whioh shall pass
    ;beolutoly or In trust bg ~111 ox by the laws
    of descent or elstributlon of this or cny other
    State, or by deed, grant, aele, or Rift made
    or intended to take effect la posea~~ion or es-
    jopmot after the daatb of the grantor or donor,
    shell, upon pesslo5 to or for the use of any
    person, corporetion, or asscclaticn, bo subjeot
    to a tax Sor t&6 benefit of the State’s   General
    Bevenue ‘grund, lo accordasoe with th4 fc~lowlag
    claesl2loation. . . .*
          xe are unable to find any case authority in Texas
on the propositloz 00'spreneat. Dwever, cL elallar questlon
hao presented itself on nmerous oooasion5 in the courts of
other states of the WIted State3 and the c%rta am In oon-
tlict ad to th6 -?orreot result to bs reached in suoh a sltua-
tioa. rvldeztly Q mijcrity of the jurisdlctlone hold the
sntlrc arount reoelvad by the d6vlsee under the will ae sub-
ject to the lnberltcnce tax despite the faot that tn6 erzount
aotually taken by bin is diafnishod becsul:ect a cozpronise
egreezent he entered Into with other clelnent8   13 ooneldera-
tion of their forbearance  fron contesting  the will.
           The Supreme 3udloial Court oi Yassaohusotts was
presented with e IS& fact eituatlon In the case of 2own
v. :'otou$lin, 190 !':.T. 796. ?he ccurt held the eati*
amount received by the devises aa tax6118 deerite the oom-
promisI# agreemnt end stated afifollcwer
           Tven when a corrproiilee
                                  of a ccntset over
     the a6xisslon of a ~111 to probate haa been au-
     thorized by a court under the statute (G. L.
                                                            .

     (?er. Ed.) o. 204, 8 8 U-16), upon the probate
     OS the will the title devolvea ty foroe of the
     wi11, an6 then ia transferred aocordinq to the
     agmZ?tit O? C0iiprOmfSe. Ellin Va Wit, E28
     !?ese.SO, 116 :f.E. 956, copelqnd v. ?heslwrl~ht,
     230 yass. 121, 119 Y. .r.567. gle tar was prop-
     erly levlcd upon the gift by ~111 of the whole
     residue to C-affney,and at a rate adapted to his
     roletionohip or want of rclatlonshlp tc the tcs-
     tatrix. . . .-
          The Court of Appeals of Few York reached a sim-
ilar result in the ease of In %Y Cook*s Tstate, 79 i;.t.
991. The ocurt .steted as follower
              Vhe ccqmomlso die not ohaoge the nI11.
     no settlement could change a word that the tes-
     tator wee.        3~ will atasddsao it was nrltter.,
     and the noat eolmn lnstrwent, executed by all
     partlea intereetsd, could not convert B bequost
     to the nephew a~~3niece8 into a bequest to the
     WIllOR’.    A.8wa Eeid in onother oese, she takes
     under then *by contraat, not under the wlll.or
     from the teatatcr.’ ~raenwood v. Fallbrook, 111
     Y. +. 465, 471, 16 K. F. 711. A SUOCe5f3iOn tCiX
     le ~~eaeuredby ?te IeRa relation Pchioh the lsqa-
     tee beare to the testator and Is not affected by
     the relation v&lob an assignee of the ltp,at@t
     tears to him. ?Xwt the legatees tcok ‘the re-
     obluum un:‘,sr   the fill. Th0Yeuooeede0 tte testa-
     tcr In the owntrahip thereof end their BuoCeD-
     sion gives rise to the tax. The wldcm did not
     take the residue from the tastator, for LX did
     not give it to 50r. S.hctook as assignee, not
     a8 lsgatee, Vnleas she tcok as aseiqnee, she
     did net take at all. The legatees esslgzed to
     her end the rate cf taxation 1s fixed by their
     relation to t.hetrstator. AB she did not teke
     through the will, the 8uooesslon tax ctnnot be
     Sired at the rate of 1 per cent, 6s in the case
     of a bequest to a widow, but Eust is fixed at
     the rate of 5 per cent, 08 in the oese of a be-
     quest to nephew! azd nitoes.w

          Terheps the best discussion concerning the rea8on
behind   the
           rule eiscussed in these cases was qiven tg the
Fuprsee Court of Illlncls in the cacteof ?a ?e Weyes* fstete,
ncaoreble CiegrgrF. sbepprrb, Page   4

                 .

89 Y. IP. 976. The,oourt eonatrued a fact sltuatlon very
sirAlar to tha one under consideration in this opinion,
an& rtated a8 follows:
          Vhe lnheritanoe tax law (F!urd*sFey. Tt.
     1908, C. 120, ilI 366-388) proviCco tttt all
     property 80 deaosndln~, rbethcr under the etat-
     ute oi willa or the atotute of daaoent, &all
     b* Subject to a tax at certain specified ratea
     at ths fair uarket vslue thereof, which shall
     be due at the deeth of thd Ceoedent. The tax
     la not upon the estatr of the deoedent but upon
     the richt ot rucce~ei~n,  end it ct~cruts at the
     smut ,the the eatstt vsats -- thet is, upon ths
     death of the decedent. Sueationa 6&y arise as
     to the persOn in whom the tit16 Yest8, am? such
     puettions eey afisot the mount of the tax and
     the person nhcae estetro ahall be cherqeable with
     it; but, Fhm those questione are finally Ceter-
     nAne0, their Eetrrrrinationrelates to the,t&t
     OS the dtccdent*s de&h.    Yo changes or title,
     traimiers, or ageactnts. oi those rho suocaed
     to thb e&ate, aacng ther6elvee or with strmgme,
     oan affect tke tax. ,511que6tlons concerning it
     cuat be betorzined as ci the &at.eof the aece&antra
     death.
           *It is insisted thut the value of the re-
      siduary satats i6 dirrlniahsdby the adverse claim
      of the contestins:h?ir, end thet tAo papent of
      %O,OCO ~sde in gooG faith upon reasonable grounde
      ror the eettlezent of such olaim ahoulb tl;ere-
      fore be aonuctd in fixin::t!!r: velus of the estate.
      Fhe statute requkes all the property .oS the es-
      tett to be cqpwlse2  at Its fair re~kst value.
      The value af th* eStnte VitiCh paoses ia ttievalue
      80 ascertained leas tke IndebteCneao at the Be-
      oedent end the exywncs of ed;?.inlstration.%at-
      ever litlgutlon my ooour betwsen those who suo-
      oeed tc the estate 88 to thair rea;lectlveriqhts,
      or between,tiiffw-Antolelmnte ot intereete, oen-
      not aiiect such Value. l . .
           *It la ar.$uedthat the heir reoclved the oum
      of L50,000 es the value cf her interest in the
      estate by virtue OS the feet t!xt s!z was heir,
      and that it therrfore pawed by desoent. In sot,
Uonorabl. OaOrUe 39.She~FarC, Pago 3                        .

     houever, rbe rewired   nothing aa heir. fhe re-
     otlved nothlor:from the estatv. X0 banerlclal
     interest pavred to her under an9 statute. The
     mon39 wav paid to her by vlrtuc oi a ccntraot
     with the keirv. ??cnryC.ravevdlsd testate. Fls
     rlll’dlspo8ed of all hlv evtats. The whole of
     the rerrlduaryestate oeatad, at the instant or
     hi8 daoth, ln the r~vlduar~  legatees. Tha in-
     herltancs tar was Cub and pnyable. The bencil-
     clsl interest in the property t3en passed to the
     legatees and their suoosselon gave rise to the
     tax. . . 9”
           The fmce r66tit has besn reached by the court8
0r  aever   other vtates. ,me tho oases br ra~lish*s xstats
‘1. crcrlfm3x,110 P. y. 510, by the Cupreme Court or ?snnoe-
see; In !a Wells* ifstate,120 ?T.3. 713, by the Supreme
Court or Xoara;Coohrnn*e Sxeoutor and ?Tustee v. CoE;Bon-
wealth, 44 E. ?J, Ied) 603, 3C:eatuckg; ?f~o~enzie V. Trlrjht.,
252 F. 621, by the Puprem Ccxrt of Arizona; In Fe O~I:elll*s
Eatate, 102 Xtl.  425, by the Freroqativ3 Court of Xea Jersey.
          A Einoritp or t!iestates have adopted e view that
when the banatloiary under the will paps 281% cr the ev-
tate to other heirs a8 a oompromlve agreement the vaeunt
he actually receives tide? the will lv sonordlq19 dlmin-
lvhed and nuoh aaouzitas hs aatuallp receives lsthersb9 sub-
jeot to l
        a l3tm x .%a Supreme Court oi ?aons9loanla in ths
ease or fn Re Fspperrs ?&ate, 28 rrt1.353, stated as r0iiowst
          -* . . Tn thlv oasa, if the will ~a8 allow-
     ed to stand, the pntlre sttate 1s liable to the
     text but the only von ai teatetor, and tr,whom
     no bequest wes mde, ior the rea83118vtsted in
     the will, -- thst he wes nlready aqly provldcd
     rar, file& a osreet to ocntcst the.v-311dlt9or
     the will. titer vovz testimony bed been taken,
     an er;reccentor cocyrcxnlsewmt3ent.ersdinto be-
     tween vc.c,e
                of the le&atees on6 the a8v+tor,
     whereby the9 authorized the erecutcrrtn pey to
     him a certain cum out of the benuaats to them in
     settlerent cf the controversy, o?ldin convibera-
     tion thereor the cavector aereRd to wlthdrax the
     oaveat, discontlnus 611 prooeedlngv, and ttst
     the will should be adnlttcd t.oprcbats, etc. The
     question now arlnes whctker the lc5ateee ere
     liable, not only to the oolleteral tax upon the
                                                         r,     -.
                                                         ., .

                                                                     2&
                                                                     .       -

                                                                         .

zonoreblr George 8. Sheppard,   ~‘sgee

     balanoo or, thair lagacles, but also to that
     upon the mm@unt they acreed to pa9 the oaoeator
     in oolrproslseand vettlment.    34 hate rtaohed
     the conoluslon that under the rovt ravoreble
     oonstruotlon of the act, 80 rar a8 roepeote the
     oontentjon on behalf of the comonreelth, they
     art unt (10liable, end for the ree6on that the
     mount paid the aaveetor wav never received by
     them av lc,qettev,and under the aot it is on19
     80 much of the cstetr,whloh ootuallp passes to
     thornby virtue of the ~111 that 1s liable to the
     tax. Tt rlll reeally be vee?),if the oontcvt
     Inetitutbd by the kaoeetcr hod been eucoeseNl.,
     he would tieentitled, under the intestate law,
     to the entire estate, and freed trm the tax.
     Put, instead of rurtber lltlgetlon, he accepted
     a portson of the estate, relinquished his clelm
     to the balance, 8nd thus, of courve, reduced
     the amant   peaelne to the legotcea; end in fact;
     to the extent of the mount he reoalved, the
     will is a nullity; no that all the legeteev take
     ie the mount of their bequests, efter deduotlng
     the vua paid the oaveator, and thlv they concede
     iv subject to the tax. This, WC thl.nk,is the
     proper construotion to bo >laOed upon the act of
     6lmMchl9. . . 4”
          me Court or ~ppeela or Oeorgls In the ease or
Taylor 1. stnte, 149 5. 0. 321, held in eoccrdonce with the
rule ermounoed in the Feanvylvanla oave, vupre, end vtated
further that the heir which contested the will in toking
the property under the coapraa,iveagreemnt la reellty was
te2-Jagthe va~.eunder the 16~1 of deeoant end dlvtrlbutlon
bcoause it WQS through hle heirehip that he was la a posi-
tlon to contest the t~lll. The murt conoluded es follower

          v. . . sinoe the DprtSS.tnt Of eocord cad
     set~efectlon, v&ereby the rcsrectlvs r1t:ht.e of
     the le&etee ar.dtk’ohelr et lew Y:ereadjusted,
     hed the erreot of renderin. tba will lnoperetlve
     to the extent Of the portion.Of the pro2ert.yra-
     delved ty the heir, end pemltted it to peso ln
                     the lane 0r deacenta and distrl-
     aooordanoe ,+.ith
     butlon. . . l*
          The se~e rula of law ae applied by the rennvylvenla
and r?eorgAecourta we8 adcptcd tg the !‘uprenercurt of Colorado
In the oase of reorltav. Y~right,91 7. 33, Towever, since
                                                                    ; :-
                                                                           242 I

                                                                           .

that time the statutes of Golorado have been mendad so
that the COlOr6dO tax ia now similcr to the Federal tax
in that the eaze la mre properly oallad an estate tax
rather than ti lnherltanao tar, aad underthe doaislons
or tbe:ocurta of that state aonstrulnffthe new tax atat-
ute the rule la the sace as applied by the aajorltp of                             i
tbe courts dlsauss80, eupra.
          The 8ame rule of law elscusssd  herein an the
minority rule was adopted by the ixpr6~e~Gcurt of Vlnne-
sota in the ~a&e of Ptnts v. rrobato Court or xa;arrdlyohl
County, 172 7. x. 902. Eaever,    in that ease two of the
juegb~ CIiasantsdme analyzed the oases alacuafiedherein
mhlch oonstituta the majority view and expreesed a prof-
orenoe for the result rw?htd by thOsa oourt.8.
           I?ymay of summary a mejorlty of the states aho
have dit3oueetd the problem hove held that the btineflolary
under the will geta full title to the property at the t&a
or the death of the deoeasse aoa that at such time ha ba-
oor;bsliable for the rlrll lntarltance    tax.  They alao state
thct this rule ismt    affected by any ampromise or w,ree.-
nent kade in conald8ratlon of the forbearanoe of aontett-                      -
lng the will.   C:,the other hand a mlnorlty of the states
have adbptod thb view that the ;Dmperty aotually      received
by the devlsee under the will even though the 0au.aIs pro-
bate4 in full is dizlnlshad by a coEproElse amessent or
aettlaaent   mde in aoneltleration  er the rorbearance or
suit with other hairs 0r ths de0088ee.      They, theretore,
hold that tha inheritance tax attaohes only to the property
actually re:alvcd by the Qavirree.
          It 1s the opinion of thie departasot thst tk8
rula announoad haraln ~a a Eajorlty rule is the better
one and the one that ~111 be followed by the ccurta of
this State. .zrtlcls3314, of the Fcvlaed Civil Statutes,
reaca in part 68 r0110w;
          L%m   a person diae, leaving a lawful ~111,
     all or hi8 estate devised or baer,ueathaa
                                             by such
     will shall vest 1srMiately In the devleea or
     logetee;   . . .*
           3%~ Supraw    Ccur’t or thie   ?tete cited   the above
quoted artiole in the a me of ,Jraas v. ?:hiteker,36 5. 7:
(Lb) 149, and held that tha devitsas tcok title to land
dsvlced to tkiamuxdar the will of the deoeaaee lmediataly
nonorablo     Ceortw8.   Sheppard,   page 8

upon raid deaeaeed*s deeth. The San Antonio court or Civil
Jpptals In the oaoa of Cannawap v. Ferreara, 74 P. a. (ed)
qlq    (reversed   by the Cuprexa Court on other   grounde),   stated
a.1 r0iiwer
             “. . . Thbt upon the death of the owner or
      property the legal title vesta at onoe In his
      heirs,   aubjeot to the aontrol of the admlnlstra-
      tor during him tenure; . . .a
         ‘The Texarkana Court of Clvll   Ap~tal8 In the oase
or 31th v. Lanaeater,   248 Fb I?. 472, writ of error refused
by the Supreme Court, stated e4 followsr
            “.‘a . And, Eoreover, It ie the settled rule
      that an eetate by devise takes effeot izmtdiattly
      upon the death of the teatator unless otkcrnlae
      direoted, and that th4 title of the COViEOe  is
      not’arfeoted  by the delay In probating the rlll.’
           piebelleve,~.Yf~srefore,  that in the fact aItuatIon
rubrAtted rf;an th6 &X%eC3Od died title to the pmgerty be-
vised ~45 vested in tte beneflofery under the will to which
property he fully suooeedee when the will wea probated. At
r;lah time afi ln&e~ritenad tax becuss due agnil?st the full
~41~4 of the property ahioh said benerlclary      took under the
8111. Ye do not .believe this raault Is ohanged by any dls-
position whatsoever made by the daviesa under the will
Whether It be in comproElse or settlement or otherwise. 74
agree with the conment in 26 Wling Case Law 232 a5 follows:
             -‘fthas b4en held that whad the legatees
      egret   to pclyto the heirs, who are in the non-
       taxable Class, a portion of their legacies to
       avoid a contest, the mount so paid should be
       deducted in deterrrlninqthe tax upon the lega-
       tees; but thfa decision eeeze clearly unsound.’
       (%phaeie oura)
          fa reachInq thfe result.we am 5180 inflU@noed
II the 8dcinIatretIve construotion v&?ah haa been pleoed    ’
on this problem of conatruino.the Texas ;nhtrltanoa Tax
l,awby tk4 Attorney r~noral~s Cepartztnt end the Gomptrol-
ler of ?u?,lickoooust*e repertzant elnoe 19X!. Woh con-
4tructfon would be ccneldered by tie ccurta of thla ,State.
-*a TOy v. rohnclder, 110 CcX, 269, EEL Tr “:.880; City
of Fyler v. TeXeS !‘nploysrsfGSWCnO4 A55OCietion,  260
     P. F. 409.  Cn February 8, 19E8, Aseietazt Attorney Pan-
     ersl FaUl C. faC,a.,Jr., rendared an oplalon to ths uon-
     orhbla 5. R. Termll, Cosytrollrr of rub110 Xooounts, on
     tale quwtlon, and said opinion ocntuinsa the tollo~ing
     1angusEe :
              Vt sppears that the deviBeos,  under the
         term of the will, will make a settlerrentWth
         oerteln alleged heirs ona you ~QQUW~~ to be od-
         vised if the thx Is to be alwQ5Sed agcinat 0na
         paid by the dQViQeOS under tha terms of thQ will
         or by tbQ diatrlbutcss urk?erthe a.gmuzect reaoh-
         ad with the heirs.
              .Tou are new advised that the lai requires
         and it bas alco been held that the tax should
         be paid by the dcYisQe&   ?mMr the term of the
         will no arren~tcenta of this nature oen alter
         the payment OS the tax.’
               You are.adYisQd, themfore, that In our opinion
     the entire estate inherited by the derlcaQ under tha ~111
     under the mte gcu present Ia sabjsct to the paymnt of
     tho Texas Tnheritance ?a~.
                                         Yours very truly

     RorP         APPROVEDNOV 12, 1940

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