Court Opinion

ID: 4135113
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:58:32.328937+00
Date Added: 2024-06-11T14:37:41.368872
License: Public Domain

..

               THEATTORNEYGENERAL
                        OF TEXAS

     Ronorable Robert 8. Culvert                    opinion   Ro. (C- 347)
     Comptroller of PubJlc Accounts
     Capitol   station                             Rer    Whether income from Susan
     Au&n,     Texas                                      V. Clayton trust fund may
                                                          be used to retire Treasury
                                                          bills   of the United States
                                                          of America which are In
                                                          bearer form and are tender-
                                                          ed for redemption to the
                                                          Federal Reserve Bank of
                                                          p&&t by Texas ColPsPerCir3
     rwar Nr. ce1vertt                                          .
           You have rBque8fed the eplnlon of this office on the
     above captioned matter.      .-_ late Mrs. ~layton~exercise~~a
                                  The
     power of appointment by will over certam trust. income m
     favor of the United States of America upon the condition
     that eald incaae be used for the retirement       of the Ilcrtlonal
     debt.    You have advised ue that ti     Treasury bill8 of the
     Wited States .of America, which are in bearer form, are tendered
     for redegtion    to the Federal Beeerve Benk of Dallas by Texae
     cmmerclal    banb, payment 16 arAe to erid banks aa owner8 of the
     oblleptiono   dthout   inquiry am to rhether    the blank ni t be
     acting for ofhor partlea     in lb mltk ia  the gTreamry b el..
            A jud ent use entered in J. Y. Johnson v. R. 8. Calvart,
     Ro. 600, dr in the 129th Judicirl                +fl et ceuct
                                                   Dl ,_____  __-  _ Of
                                                                     --  Harris
                                                                         __----- cellntv.
                                                                                 _._~~.   I
     Texas
        __-- on___ October
                   .- .-_ -- 14.~I 1963.
                                    ~~~--~ Boththe e’ #&ate
                                                        -    of Texas and the
      undted Stat@6 of Amrlca            lnterpened In this cult.       Under the tenor,
      of the judgment, it use decreSa thet the UnIted State0 of Awrlca
      owed an inheritance         tax to the State of Texas by rea8on of t
      exercise     of the power OS appointment by Sllun: Vi-C&
      the tax rhould be computed under the provilrlonr              of Article   14.t
     .Taxatlon-Wneral,        Vernon*r Civil,8ktuter.          The tax 80 computQd
     -tBd       to $g7,351.71. uo
     and the tax hu been patd to %sG
     of Art&ala   x4.03 read, %n part, (yo Pollorrrr
    Honorable Robert S. Calvert,    Page ,2      Opinion No. (C-347)

                 “If paeelng to or for the we ~of the United
         Statea,    to be ueed in this State, the tax shall
         be one per cent of any Flue in exe688 of Twenty-
         five Thousand Dotlare, and,not exceeding Fifty
         Thousand Dollars;, two per c$nt on any value in
         exdgse of Fifty Thousand Dollars an< not exceed-
         ing One Hundred Thoueand Domlarej. . .”
    Thereafter the Article provides $or inoreaee in rate& In stated
    value brackets with a maxlmuin 61~ per cent rate on any value in
    exceea of One~Nillion Dollare.
          Prior to theIsnddition of thle judgment, the Secretary of
    the Treasury of the United State8 of America, the Honorable
    D$ug;lf Dillon,  executed a Commitment which it? here copied
             .
               “WHEREAS,Susan Va     an Olayton late of the
         State of Texas, by a cod“ircil to her iaet will dated
         August 3, 1957, directed, that one-half of th6 Income
         of a truet theretofore   created by her surviving
         h.ueband, William L, Cla ton, by an indenture made
         February 19, 1931, and &l own 00 the ‘Susan Vaughan
         Clayton Truet No, ?t, br pIid to the United States
         of America;.
                 “NOW,THEREFORE,the United States of America, by
         It8 undereigned Secrrter      OP the Treasury, by virtue
         of the authority vreted 3:n him bnolud$n$ the authority
         contained in the Act of 8Yunr24, 1961, Public Law 58,
         87th Congress, and for the purpose of securing the
         benefit   afforded lsy’&%kcl$ .J&,O6 kif3%tle: l22A,:~VB~llanfis
         Annotate,d Texas StattiLer,, to bequests to the United
         States which are irrevoaaibly    committed for use ex-
         cluaively    within th8 8trte of Texan, herrby declarei%,
         directs   and agrees:
                    "(1) That thr~txNcWm     of the Susan
              Vaughan Clayton TrwO No, 2 @hall be and they
              hereby are directed to pay all income of said
              truet to which the United State6 may now be,
              or hereafter  broomr ‘cmtitled  to the Federal
              Res@Me Rank oi Do&,       am the fiacbl agent of’
              the United klt&~OaJ.and

.
.     -

    Honorable Robert 8. Calvert,      Page 3           cpinion   Ro. (C-347)

                 “(2) That all moneys to which the United
          States is, or may become, entitled    from said
          trust shall, upon receipt by eaid Bank, be
          deemed deposited in a subsidiary    account of
          the special account established    on the books
          of the Treasury of the United States by
          Section 4 of said Act of June 27, 19613 and
                 ’ 3) That all moneys paid over and de-
          posite 6 as aforesaid    shall be specifically
          identified   on the books of the Treasury as
          available,   and shall be disbursed,     solely .~. ‘..
          for the retirement    in Texas of national
          debt obligations    of the United States owned
          by citizens   or residents    of the State of
          Texas, and the payment of any taxes authorized
          to be paid by Section 3 of said Act of June 27,
          1961; and
                 “(4) That said Bank shall. be and hereby
          is directed to use all moneys received and
          deposited as aforesaid,    which remain after
          authorized payments of taxes, to redeem public
          debt obligations    of the United States owned by
          citieens   or residents  of the State of Texas
          which may from time to time be presented to it
          in Texas for redemption3 and
                “(5)    Thatthe    foregoing directions     to the
          Trustees of the Susan Vaughan Clayton Trust 100. 2
          and to the Federal Reserve Bank OS Dallas meqnot
          and shall not be revoked9 rescinded,        or amended,
          and said subsidiary      account may not and shall not
          be closed,    discontinued    OT terminated   until  all .
          moneys to which the United States is or may be-
          come entitled     from said trust have been received
          and paid out in accordance with the foregoing                   t.
          authorizations     and directions.
                                         “United States      of America        ‘,.

                                         (Signed)     Douglas Dillon

                                         ‘Secretary     of the Trearmry
          June 27, 1962”

                                    -1650-
                                                                -      .

Honorable Robert S. Calvert,      Page 4          Opinion Ro. (C-347)

      At the date of the death of Mrs. Clayton Article              14.06
V.C.S. provided,in  part,as followsr
              "IS passing to or for the use of the United
     States     . . . the tax shall be:
           "5s on any value     in excess    of $5dO and not
     exceeding $10,000
           "6$ on an value      in excess    of $10,000   and
     not exceeding $ 25,000
           1,. . . . It

Thereafter the percentage of the tax increase8 In stated value
bracket8 until it reaches's maximum rate of 20$ on any value in
excess of $1,000,000.
     Article    14.06 also   contained    the following   provision:
             "Provided, however, that this Article       shall
     not apply on property passing to or for the use
     of the United States,       . . . when such bequest,
     devise or gift is to be used tithin        this State.
     The exemption from tax under the preceding pro-
     vieion of this Article       shall, without limiting
     its application      under other appropriate    circum-
     stances,     apply to all or 80 much of any bequest,
     devise,     gift to or for the use of the United
     States,     . . . which is, in wrdting and prior
     to the, payment of the tax, Irrevocably        committed
     for use exclusively      within the State of Texas. .
             ,I. . . . ,t

    '. Although the commitment recites     that it wa8 executed
for the purpose of gaining exemption under the provielons         of
Article    14.06,    V.C.S., the trial  court in the Johnson case,
determined, as previously       stated,  that a tax was due under
the provision8      of Article  14.03.  In this connection,  we point
out that Article      14.03 require8 "use within this State" 88, a
prerequisite      to gaining the more favorable exemption and lower
tax rates than are accorded by 14.06 in the absence of obtain-
ing exemption thereunder.        Prior to the adjudication  of tax
liability,     the court made, among othera, the following    express
finding:

                                 -1651-
.      -

    Honorable Robert S. Calvert,      Page, 5      Opinion No. (C-347)

                  “The United States of Americaj acting by
           and through the Secretary of the Treasury,
           executed and delivered    to the Federal Reserve
           Bank of Dallas and to the Trustees of the          ‘.
           Susan V. Clayton Trust No. 2, a document com-
           mitting the income to be received by The United
           States of America to be use within the State
           of Texas, within the meaning of Chapter 14
           of Title 122A of the Revised Civil Statutes     of
           Texas, as amended. ”
          The commitment is declared to be irrevocable    and may
    not be “revoked, rescinded or amended.” It requires the money
    received from the &rust fund-to be used to redeem public debt
    obligations  of the United States owned by citizens    or Te8ident8
    of the State of Texas.    Therefore,  the express term8 of the
    commitment prohibit  retirement   of Treasury bills  of the United
    State8 of America which are in bearer form and are tendered
    for redemption to the Federal Reserve Bank of Dallas by
    Texas commercial banks.    This is so because payment8 are
    made to the commercial bank8 a8 owners of the obligations
    without inquiry as to whether the bank8 might be acting
    for parties who are not residents    of this State.
                               SUMMARY
                               -------
                 Income from Susan V. Clayton trust furid
           may not be used to retire Treaeury bill8 of
           the United States of America which are in
           bearer form and are tendered for redemption
           to the Federal Reserve Rank of Della8 by
           Texas commercial banks.      Said income has
           been irrevocably    committed by the Secretary
           of the Treasury OS the United States of
           America to the retirement     of Rational debt
           obligations   which are owned by resident8
           of the State of, Texas.     This requirement ie
           not satiefied    where redemption of Treasury
           bills   is accomplished by payment to Texas

                                    -x652-
                                                          -,   .

Honorable Robert S. Calvert,    Page 6           Opinion No. (C-347)

            commercial banks a8 owners without      inquiry
            a8 to the-residence   of the parties    for whom
            such banks are acting.
                                      Yours very truly,
                                      WAGGORER
                                            CARR
                                            General of Texas
                                      Attorney

                                By:

MHcGPrsjl
APPROVED:
OPINIOR COMMITTEE
W. V. Geppert, Chairman
Brady Coleman
George Black
Charles Swarmer
Paul Phy
~;PROVEDFORTHEATTORRRY
                     0-L
   : Roger Tyler

                                -1653~