Court Opinion

ID: 3487312
Source: CourtListenerOpinion
Date Created: 2016-07-05 21:14:48.597134+00
Date Added: 2024-06-11T13:54:01.456644
License: Public Domain

For the purpose of emphasis, and to avoid unnecessary explanatory comment, section 124 of article 81 will be repeated, with the more significant terms italicized:
"124. All estates real, personal and mixed, money, public and private securities for money of every kind, passing from any person who may die seized and possessed thereof, being in this State, or any part of such estate or estates, money or securities, or interest therein, transferred by deed, will, grant, bargain, gift or sale, made or intended to take effect inpossession after the death of the grantor, bargainor, devisor or donor to any person or persons, bodies corporate, in trust or otherwise, other than to or for the use of the father, mother, husband, wife, children and lineal descendants of the grantor, *Page 221 
bargainor or testator, donor or intestate shall be subject to a tax of five per centum in every hundred dollars of the clear value of such estate, money or securities; and all executors, administrators, trustees and other persons making distribution, shall only be discharged from liability for the amount of such tax, the payment of which they be charged with, by paying the same for the use of this state, as hereinafter directed; provided, that no estate which may be valued at less sum than five hundred dollars shall be subject to the tax imposed by this section." Code, vol. 2, art. 81, sec. 124, as amended by chapter 242 of Acts of 1927. Compare Acts 1929, ch. 226, sec. 105, Code, Supp. 1929, art. 81, sec. 124.
It will be observed that this section defined by exclusion. General and comprehensive terms are first employed, and then certain classes of persons and of property are withdrawn from the operation of the law, whose origin and history may be found and followed in chapter 237 of the Acts of 1844; Code of 1860, art. 81, sec. 124; Acts of 1864, ch. 200; Acts 1874, ch. 483, sec. 113; Code of 1878, art. 11, sec. 104; Acts of 1880, ch. 444; Code of 1888, art. 81, sec. 102; Code of 1904, art. 81, sec. 117; Code of 1924, vol. 2, art. 81, sec. 124, as amended by chapter 242 of Acts of 1927. While there have been a few changes in the language of the statute as first enacted in the Acts of 1844, the changes are not material to this discussion, except in the dropping of "or enjoyment" from the clause "made or intended to take effect in possession or enjoyment" of the original act. See Code of 1860, art. 81, sec. 124, and Code of 1888, art. 81, sec. 102. The language of the law in which the tax originated, together with the subsequent amendatory legislation, makes it clear that the tax created is imposed upon any estate or interest in real or personal property, within the State of Maryland, of which either (first) the party has died seized or possessed, and of which he has either died intestate or has made testamentary disposition, so that, in either contingency, the estate or interest shall pass from the intestate or testator to collaterals within the definition of the law; or (second) the party, being so seized or possessed of any such estate or *Page 222 
interest, has before death transferred, so as to take effect in possession after his death, such estate or interest to any of the defined class of collaterals. The question before the court in the present record falls within the second category.
In the present case, the owner, who was seized or possessed of real and personal property, conveyed and assigned it absolutely to a third party in trust, with power to sell, lease, mortgage, or convey, and the net income thereof to pay to the grantor for and during her natural life, with the power to dispose of all or any part of the corpus of the trust as the grantor should by her last will direct, and, in default of such appointment, then, in further trust, that the trustee divide, transfer, and pay over the trust estate among the heirs of the grantor. The legal estate in fee simple in the realty and an absolute legal title in the personalty passed by this deed to the trustee, and so remained until the trust was determined according to its terms and purpose. The grantor made no exception, but conveyed her entire interest in the whole of the property to the trustee. As a result of the terms of the grant, she created an equitable life estate in herself with remainder in her heirs, defeasible in whole or in part upon the exercise by her of her power to dispose of the trust estate, in whole or part, by a last will. So she had no estate nor interest, save an equitable life estate, which, of course, was neither descendible, distributable, nor transmissible. It is true that the grantor was the donee of a power to will, and could thereby appoint the corpus in whole or in part. The reservation of a power is not an exclusion from the operation of the grant of a certain part of what is conveyed by its general words of description, nor the creation by the grantor for his benefit of a new thing "issuing out of" the land and not previously in existence. Infra. The creation, therefore, of a power to appoint is neither an exception nor reservation within the technical meaning of those terms, although the terms have been applied in connection with a clause in a conveyance by which the grantor retains a power of disposition over the land conveyed. 2 Tiffany, Real Property (2nd Ed.), sec. 436, page 1606. However, as is evident from the *Page 223 
quotation from Mr. Tiffany's work that is found in the decision of the court, the use of the term "reservation" in this connection is justifiable on the ground of convenience rather than of accuracy, and is not objectionable in the ordinary case. This qualified approval of the extension of the application of the term "reserve" and "reservation" does not, however, alter the essential nature of a power to appoint by will, which is neither an estate nor an interest in the subject-matter of the power. For the donee of the power has neither legal nor equitable title to the property over which the right to appoint exists, and so possesses no exclusive rights of any form of legal or equitable ownership whereby any use, enjoyment, or dominion of the property which may be appointed inures to her by virtue of any estate or right in such property. International News Service v. AssociatedPress, 248 U.S. 215, 39 S. Ct. 68, 63 L. Ed. 211; De Lauder v.Baltimore County, 94 Md. 1, 6, 50 A. 427; Royal Ins. Co. v.Drury, 150 Md. 211, 225, 132 A. 635.
The power to appoint was limited in time and in mode of execution; and the donee could, in a proprietary capacity, neither alienate, bargain and sell, bequeath nor devise the property which might be appointed (a). Nor, in the absence of fraud in the inception of the deed, could this property be made subject to the claims of appointor's creditors, whether in bankruptcy, insolvency, or otherwise; nor could it be taken by them in attachment or execution howsoever (b); nor is it subject to dower of the wife of the donee (c).
(a) Wilks v. Burns, 60 Md. 64, 68; Worthington v. Rich,77 Md. 265, 269-270, 26 A. 403; Chenoweth v. Bullitt, 224 Ky. 698,6 S.W.2d 1061; 2 Tiffany on Real Property (2nd Ed.), sec. 327, p. 1093, sec. 322, n. 41. (b) Balls v. Dampman,69 Md. 390, 394-395, 16 A. 16; Price v. Cherbonnier, 103 Md. 107, 110-111, 63 A. 209; Prince de Bearn v. Winans, 111 Md. 434, 472, 74 A. 626; Jones v. Clifton, 101 U.S. 225, 229-231, 25 L. Ed. 908; Story's Equity Jur. (14th Ed.), sec. 250 (176);Cleveland Nat. Bank v. Morrow, 99 Tenn. 527, 42 S.W. 200;Holmes v. Coghill, 12 Ves. Jr. 206; Rhode Island HospitalTrust v. Anthony, *Page 224 49 R.I. 339, 142 A. 531, reported in 59 A.L.R. 1501, with an able and comprehensive statement of the conflict of authority on the rights in equity of creditors of a donee who has executed a general power of disposition. See Tiffany, Real Property (2nd Ed.), sec. 332. (c) Ray v. Pung, 5 B.  Ald. 561; Sugden onPowers (8th Ed.), 144, n.; Armstrong v. Kerns, 61 Md. 364, 369.
Quoting from Mutual Benefit Society v. Clendinen, 44 Md. 429, 433: "A power is defined to be a liberty or authority reserved by, or limited to, a party to dispose of real or personal property for his own benefit, or for the benefit of others, and operating upon an estate or interest, vested either in himself or in some other person; the liberty or authority, however, not being derived out of such estate or interest, but overreaching or superseding it, either wholly or partially." Butler, note 1 to Co. Lit. 342b; 1 Chance on Powers, sec. 1. Again: "That a person having a power over property has not, in strictness, any interest in, or right or title to, the property to which the power relates, appears in early authorities." Albany's Case, 1 Co. 110b; Lampet's Case, 10 Co. 48b; Co. Lit. 265b. "Though where the power is for his own benefit, he has the means of acquiring such interest, right or title; and in all cases, by the execution of the power, the possession, right, title or interest is altered or divested." Id., sec. 2; Mandrell v. Mandrell,
10 Ves. 246b, 255; 1 Sugden on Powers, [*]121; 4 Kent,Commentaries, [*]319.
Mr. Tiffany sums up the matter in the statement that "a power over land, a mere ability to dispose thereof, is obviously not an estate therein nor does it involve rights of property or ownership." He, however, continues with these remarks: "It has even been said not to be an interest in the land, but whether this is so depends on the meaning which we may choose to give to the indefinite expression interest. Especially when the donee of the power may exercise it for his own benefit does it seem difficult to say that he has no interest in the land." Tiffanyon Real Property (2nd Ed.), sec. 310. *Page 225 
It may be urged in reply to this view that no legal or equitable interest in the property to be appointed can arise in a donee under a general power of appointment until the power is first executed, since the interest in the appointee has no existence except by virtue and as a result of the exercise of the power. Moreover, the right to exercise the power is not an interest within the meaning of the statute, because by its explicit terms the interest contemplated must be in an estate in real, personal or mixed property, public and private securities for money of every kind passing from a testator or intestate, or transferred by the donor by deed, grant, bargain, gift or sale. It may further be stated that, as the appointment is to be made by will and not by deed or will, it could not be exercised except by a testamentary disposition. And so, upon these considerations, and in view of this court's approval, in Mutual Benefit Societyv. Clendinen, 44 Md. 433, of the doctrine, it is sound in principle and on authority to insist that the donee, qua donee, has neither any interest in nor right nor title to the property over which the power may be exercised. Tiffany, Real Property
(2nd Ed.), secs. 310, 313-315, 317, 318.
It follows from these principles and conclusions that, upon the death of the life tenant in the equitable estate, she was not seized and possessed of any right, title or interest passing from her to any one whomsoever. The equitable estate in remainder, which under the deed of the donor had been in her heirs at law, defeasible upon her execution of a retained power of disposition by last will, was defeated, and an equitable remainder or executory interest vested in the appointees, as a result of the execution of the donor's power of testamentary disposition.Supra. The collateral parties holding under and by execution of the power took under the donor, qua donor, and in like manner as if the power, and the instrument executing it, had been incorporated in the instrument by which the donor created the power. So, if there be a lien of judgment or execution on the equitable estates or interests which had its origin during the period *Page 226 
between the creation of the power and its execution, or a dower claim of the wife of any person entitled in default of appointment, these will be defeated by the making of the appointment. Tiffany, Real Property (2nd Ed.), secs. 314, 315;Conner v. Waring, 52 Md. 724, 732-734; Armstrong v. Kerns,61 Md. 364, 368-369; Reed v. McIlvain, 113 Md. 140, 146,77 A. 329; Albert v. Albert, 68 Md. 372, 12 A. 11; Thomas v. Gregg,76 Md. 174, 24 A. 418.
Hence the parties taking under the power derive their estate from the deed creating the power; and their rights are ascertained and enforced according to the construction of this deed, with the instrument whereby the power has been executed incorporated in the deed as an integral part thereof. The document thus completed, when construed as of the date of the execution of the deed, will determine the estate and interest of the appointees of the power. Supra.
Unless, therefore, the deed to the trustee, as thus amplified and completed, was made or intended to take effect in possession after the death of the grantor, no collateral tax is imposed by the statute. The solution of this problem must begin with a determination of the legal effect of the conveyance as completed by the incorporation therein of the terms of the execution of the power. The deed conveyed in praesenti the absolute and complete legal title to the subject-matter of the grant to a trustee, who took immediate possession of all the property for the use and benefit of the grantor for her life, and then for the heirs of the grantor in remainder, and for such appointees, if any, of the equitable estate or interest, in remainder or executory limitation under an executed testamentary power. The deed, therefore, became effective from its date, and immediate and actual possession of the legal title and estate was taken by the trustee. And so with respect to the equitable title and estate, which, while divided into an equitable life estate and an equitable estate in remainder or executory limitation, devolved forthwith and at once, in accordance with the principles stated, upon the life tenant, and those taking in remainder, and, in the event of an appointment, upon those appointed to take by *Page 227 
way of remainder or executory limitation. Tiffany, RealProperty (2nd Ed.), secs. 313,315. The possession of the equitable life tenant and of those entitled to take, by way of remainder or executory limitation, after the death of the life tenant, was not an actual occupancy or custody of the corpus of the trust, since this actual possession was only possible to the trustee as the holder of the legal title under an active trust. So the estate created, from its inception, was not susceptible of actual possession by the beneficiaries of the trust, but these beneficiaries, first, the life tenant and the heirs holding in defeasible remainder, and then the appointees under the power, took and held their respective equitable titles and estates from the date of the execution of the deed, and were entitled and had under the deed their respective rights and titles to full but successive enjoyment of the benefits of such equitable estates from the date of the deed. The circumstance that the enjoyment of the benefits of the trust was successive instead of contemporaneous does not postpone or defer the time of the acquisition of the equitable title of the remaindermen and appointees to that of the death of the life tenant, when all took and held their titles as of the same date by virtue of the same document of title. It would be a denial of the deed, of authority, and of long-established principles of construction, if it be declared that the grant of the appointee's title was intended by the grantor, or could be assumed by the court, to be inoperative until the death of the life tenant. Supra. If such were the law, a deed by A to B, in trust for C for life, and then over to D, would not transfer any title to D until C's death. In the teeth of the express transfer of title by the deed to the appointee, and from the nature of the case, it cannot be logically said that the terms of the deed establish that it was made or intended to take effect in possession, with respect to the appointee's title, only upon the death of the life tenant. The circumstance that the grantor in the deed of trust became thereby an equitable life tenant, with a power of testamentary disposition, is immaterial. *Page 228 
The title, estate, and interest of the grantor as owner in fee simple of the realty and absolutely of the personally conveyed and assigned in trust to a trustee, and then as an equitable life tenant of the trust estate created, with a power of testamentary disposition over the corpus of the trust, are as successive and separate as though the grantor and life tenant were different persons; and, in the absence of fraud, must be here so regarded in the application of the principles of law relative to these titles, estates, and interests. And, similarly, the donor and appointor are to be treated as if they were distinct individuals.Brown v. Renshaw, 57 Md. 67; Farlow v. Farlow, 83 Md. 118, 34 A. 837; Nevin v. Gillespie, 56 Md. 320; Benesch v. Clark,49 Md. 497, 504; Conner v. Waring, 52 Md. 724; Foos v. Scarf,55 Md. 301, 310; Albert v. Albert, 68 Md. 352, 372, 12 A. 11;Ridgely v. Cross, 83 Md. 161, 34 A. 469; Welsh v. Gist,101 Md. 606, 608, 61 A. 665; Cook v. Councilman, 109 Md. 638,72 A. 404; Marden v. Leimbach, 115 Md. 206, 80 A. 958; Beranek v.Caccimaici, 157 Md. 144, 145 A. 369.
The appeal of Fisher v. State, 106 Md. 104, 66 A. 661, is not a refutation but an illustration of the application of the position taken by this dissent. There by will a testator gave property to trustees for the use and benefit of his wife for life, with a general power in the equitable life tenant to appoint by last will, and the wife executed the power by giving the estate to a collateral, and the estate was held subject to the collateral inheritance tax. This was true, because the instrument whereby the appointor exercised the power became, on the principles stated, the complementary part of the will of the donor, and the appointee took and held under the donor's will, which, as thus completed and read, was effective at the donor's death and was the sole source of the appointee's estate. Supra;Downes v. Safe Dep.  Tr. Co., 157 Md. 87, 145 A. 350; Miller'sConstruction of Wills, 742, 743.
2. Whether regarded as equitable estates in remainder or as executory limitations, the title of the appointees thereof took effect by relation as of the date of the execution of the *Page 229 
deed, but, while seized and possessed in interest, the appointees were not seized and possessed in enjoyment until the death of the equitable life tenant. Although this postponement of enjoyment was according to the nature of the successive equitable estates created by the deed, and did not defer the transfer by relation of the title and estate in interest to the appointees from the date of the execution of the deed to the day of the death of the equitable life tenant, who had been the grantor to the trustee, yet it apparently furnishes a stronger basis for the prevailing opinion than the one adopted. However, this seeming support disappears upon analysis.
If the correct construction of the statute should reject as controlling the time at which the document of transfer becomes operative, and should declare that no matter when the estate or interest is created, the right, at the death of the maker of the document, to the present actual beneficial occupation or enjoyment of the estate or interest in the property of the maker, within the state and transferred to collaterals as defined by the statute, is the final and determinative test for the imposition of the tax, this conclusion must depend upon the language of the statute: "Transferred by deed, will, grant, bargain, gift or sale, made or intended to take effect in possession after the death of the grantor, bargainor, devisor or donor," when considered in connection with the context of the law. This second clause refers grammatically to the instrument of transfer, and the difficulty arises over the term "to take effect in possession" after the death of the maker of the instrument. If a party die testate or intestate, and his estate, whether vested in interest or in possession, descend or pass to collaterals, there is no problem, and, obviously, the portion of the law now being considered was to cover those instances where the estate passed to collaterals at the death of the party by virtue of some other instrument than a will. This conclusion is fortified by the fact that the tax is on a transfer at death of the then ownership of property. *Page 230 
Again, the key word of the construction is "possession," which is a slippery term. Its meaning is various, particularly when used in a statute with reference to every possible form of real, personal, and mixed property. National Safe Deposit Co. v.Stead, 232 U.S. 58, 67, 34 S. Ct. 209, 58 L. Ed. 504; GreenwichBank v. Hartford Ins. Co., 250 N.Y. 116, 125, 164 N.E. 876;Leslie v. Rothes [1894], 2 Ch. 499, 506. One of these meanings is ownership apart from any question of immediate occupancy or use. And, in this sense, it is in harmony with the present language of the statute. Webster's Dictionary; CenturyDictionary. It is of some significance that the original statute (Acts of 1844, ch. 237, sec. 1, lines 10 and 11) read: "Made or intended to take effect in possession or enjoyment." In 1860, the General Assembly re-enacted the statute and omitted the words "or enjoyment," and they have never been restored by any successive amendment. Code of 1860, page 5, and Code of 1924, art. 81, sec. 124, and supra.
The estates which are so limited as not to be vested in present possession, but to be in expectancy or future possession, are reversions, remainders, and executory interests. So a grantor who held such an estate in futuro could not, by any deed or other instrument whatsoever, grant, devise, bequeath, or transfer such an estate so as to take effect in possession at his death, if, at his death, the event or contingency upon which is limited his right to a present possession and enjoyment of the property had not then happened. Therefore, if the proper construction of the words "to take effect in possession" is not equivalent to become operative as a transfer of ownership, whether the subject-matter of the transfer be an estate in present possession or one in expectancy or future possession, there would be no collateral tax laid upon an estate in futuro of the decedent. The statute, however, is plain that no distinction was intended to be made in the imposition of the collateral inheritance tax on whether or not an estate or interest was in praesenti or in futuro, and this is a convincing argument that the words "to take effect in possession" do not refer to estates or interests, *Page 231 
but only to those documents of title which are designed to become operative as a transfer of interest of estate at the time of the death of the maker. Code, art. 81, secs. 124, 138, 139.
Since the context demonstrates that the law concerns the estate passing from the owner at death, and not a transaction operatinginter vivos, all documents of title which are delivered with the intention of taking effect at the time of delivery and not at the death of the maker are not within the terms of the act. The phrase "take effect in possession after the death" must be read with this circumstance in mind and in association with the other phrase "all estates * * * passing from any person who may die seized and possessed," which language evidently embraces every form of ownership, whether with the right of present or future occupancy, enjoyment, or use. So it must be concluded that, declaring the transfer of every form of property, whether vested, contingent, or with its occupation, use, or enjoyment subsisting or in futuro, by a document of title which was made or intended to take effect in possession after the death of the maker, to be subject to the tax, was an enactment that applied to those documents which would become operative in the transfer of title or ownership at the death of the maker by reason either of the nature of the instrument or of its terms or the condition of its delivery. State v. Dalrymple, 70 Md. 297, 299, 17 A. 82. So, if the document of transfer is effective as a testamentary paper, or is one which does not become operative to pass title or ownership except at and upon the maker's death, or is one whose terms are a cover for what is actually a transfer of ownership at death of the maker, the statute applies, as the transfer of title or ownership is deferred until the maker's death, because a testamentary writing is ambulatory until death of the testator; a document of title conditional on its maker's death does not transfer title or ownership until the fulfillment of the antecedent condition or event upon which ownership is made to depend; and a feigned transfer so as to have and enjoy one's property as owner until death and then to transfer to collaterals title and ownership *Page 232 
in what remains, is, when disclosed, an actual transfer of title and ownership at death. The first two classes of documents of title are too familiar to need comment or illustration. Tiffanyon Real Property (2nd Ed.), secs. 461, 462, pp. 1763, 1768-1774, 1778-1788; Kelleher v. Kernan, 60 Md. 440; Carey v. Dennis,13 Md. 17; Clark v. Creswell, 112 Md. 339, 76 A. 579; Renehanv. McAvoy, 116 Md. 359, 81 A. 586. The third class is exemplified by the cases of Smith v. State, 134 Md. 474, 478,107 A. 255, and Lilly v. State, 156 Md. 94, 100, 143 A. 661.
In the first of the two cases last cited an active trust was created. The grantor became the equitable life tenant, and at her death the estate passed to her heirs at law and next of kin, with power in the grantor to appoint by last will among such persons as she should direct, but the grantor reserved the paramount power of completely revoking and rescinding the instrument by deed, which would be an act of complete dominion by, and in behalf of, the grantor. 134 Md., pages 478, 479, 107 A. 255, 257. It is true the grantor did not rescind the deed, but exercised the power of testamentary disposition, which, the court remarked, "of course, could only take effect after she had departed this life." In view of the decisions, this is correct only to the extent of referring to the power taking effect in enjoyment and not in title or interest. Supra.
In the second case, the husband was the owner of valuable real estate, which, for his purpose, he conveyed to a third party for a nominal consideration, and immediately the straw man reconveyed the land, for a consideration of one dollar, to the husband as sole trustee for the use and benefit of the husband's wife for life, and for his benefit for life, if he survived her, and, upon the death of the survivor, then over to the heirs of the husband, with power in the husband to appoint by will; and also, with power, inter alia, to the trustee to sell and convey all or any part of the land, and to mortgage the same, with no obligation on the part of the purchaser or mortgagee for the application of the purchase money; and to change, in his discretion, the investment of the *Page 233 
whole or any part of the trust estate. In addition to these wide powers, the husband as trustee was authorized to pay to his wife, for her support and protection, such amounts from the principal of the trust as he might see fit; and the husband and wife had the power (a) to revoke and rescind the trust, whereupon all the property was to vest absolutely in the husband, his heirs and assigns, and (b) to change and recharge or terminate, at any time and to any extent, the terms of the deed of trust. 156 Md., pages 100-102, 143 A. 661. The husband died first, and executed the power of disposition by a will giving the property to collateral relatives.
The terms, nature and object of the deeds in these two cases make manifest that the instruments were, in fact, a shift or device whereby the grantor, while apparently creating an estate in another in praesenti, actually held in substance the right of an absolute owner of the property until his death. Downes v.Safe Dep.  Tr. Co., 157 Md. 87, 94-96, 145 A. 350.
The deed in this record falls within none of the classes of documents of title transferring title or ownership of property at the death of the maker and owner, and so, for the reasons here urged, it is submitted, no collateral inheritance tax was collectible. The recent decision of Downes v. Safe. Dep.  Tr.Co., 157 Md. 87, 145 A. 350, is in point, and, on principle, authority for this dissent. "When the Legislature saw fit to limit the application of a collateral inheritance tax to property passing from any person `who may die seized and possessed thereof,' it was their purpose not to have the tax apply to other property, if we are to be governed by the plain meaning of the language used, and if at the present time it is thought wise to modify or do away altogether with this limitation, that is a legislative function and not such as the courts are warranted in usurping by judicial decision," is what this court, speaking through Judge Digges, then said should be our guide in construction. 157 Md., page 96, 145 A. 350, 353; Code, art. 81, secs. 124, 135, 136, 139, 143. And applying this rule, this court declared in that case that the section under consideration "does not mean that every *Page 234 
estate conveyed by deed, the beneficial use of which is to take effect in possession after the death of the grantor, is subject to the tax, but only such estates of which the grantor died seized and possessed." 157 Md., page 91, 145 A. 350, 351.
It must be admitted that the meaning of the act is not clear, but that is all the more reason that the State should not be a favored suitor. There should be no impairment of the wise principle that in the construction of acts imposing taxes the benefit of a doubtful meaning should be accorded the individual.Sutherland on Statutory Construction, secs. 362, 363.
DIGGES, J., also dissents.