Court Opinion

ID: 8042462
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:41:45.535766+00
Date Added: 2024-06-11T16:37:22.338379
License: Public Domain

Coleman, C. J.,
dissenting:
I- dissent from the opinion filed in this case by my learned associates. That opinion is máde to turn upon the conclusion that the title to the property in question did not vest in the trustees at the time of the execution and delivery of the trust agreement, but that it vested upon the death of the settlor. That was the very theory upon which'the trial court rendered its judgment. If that conclusion is sound, it must necessarily follow that the tax is due and collectible.
*33Whatever might be my view as to a transaction, such as appears from the record in this case, had it taken place, in this state, I think that, in view of the fact that it took place in California, where all. of the parties reside, where the property was situated, and where the declaration of trust was executed and delivered, the question as tó whether or not the title to the property vested at the time of the execution and delivery of the trust agreement is controlled by the law of California. The supreme court of that state, in Nichols v. Emery et al., 109 Cal. 323, 41 Pac. 1089, 50 Am. St. Rep. 43, laid down the rule which I think is binding upon the court in the case at bar upon the point in question. In that case the settlor reserved the right to revoke the trust, but died without exercising the right. The court said:
“It is undoubtedly the general rule enunciated by the leading case of Habergham v. Vincent, 2 Ves. Jr. 231, and oft repeated, that the true test of the character of an instrument is, not the testator’s realization' that it is a will, but his intention to create a revocable disposition of his property to accrue and take effect only upon his death and passing no present interest. The essential characteristic of an instrument testamentary in its nature is that it operates only upon, and by reason of, the death of the maker. Up to that time it is ambulatory. By its execution the maker has parted with no rights and divested himself of no modicum of his estate, and per contra no rights have accrued to and no estate has vested in any other person. The death of the maker establishes for the first time the character of the instrument. It at once ceases to be ambulatory. It acquires a fixed status and operates as a conveyance of title. Its admission to probate is merely a judicial declaration of that status. Upon the other hand, to the creation of a valid express trust it is essential that some estate or interest should be conveyed to the trustee; and, when the instrument creating the trust is other than a will, that estate or interest must pass immediately. Perry,. Trusts, sec. 92. By such a trust, therefore, something *34of the settlor’s estate has passed from him and into the trustee for the benefit of the cestui, and this transfer of interest is a present one, and in no wise dependent upon the settlor’s death. But it is important to note the distinction between the interest transferred and the enjoyment of that interest. The enjoyment of the cestui may be made to commence in the future and to depend for its commencement upon the termination of an existing life or lives or an intermediate estate. Civ. Code, sec. 707. Did the grantor in the present case divest himself, by the instrument, of any part of the estate in the land which he had formerly owned and enjoyed? By the terms of the instrument, an estate was assuredly conveyed to the trustee. The language is appropriate to a conveyance, and the grantor’s execution and delivery of the deed (both found), he being under no difficulty, and impelled by no fraud, operated to vest so much of his estate in the trustee as was necessary to carry out the purpose of the trust. The especial purpose was to sell and distribute the proceeds upon his death — a legal purpose, authorized by section 857 of the civil code. The term of the duration of the trust — the life of the settlor — did not violate the provisions of section 715 of the same code.
“We have, therefore, an estate conveyed to a named trustee, for named beneficiaries, for a legal purpose and a legal term — such a trust as conforms, in all its essentials, to the statutory requirements. That no disposition is made by the trust of the interest and estate intervening in time and enjoyment between the dates of the deed and the death of the settlor cannot affect the trust. The trustee takes the whole estate necessary for the purposes of the trust. All else remains in the grantor. Civ. Code, sec. 866. In this case there remained in the grantor the equivalent of a life estate during his own life, and he was thus entitled to remain in possession of the land, or lease it and retain the profits. Nor did the fact that the settlor reserved the power to revoke the trust operate to destroy it or change its character. He *35had the right to make the reservation. Civ. Code, sec. 2280. But the trust remained operative and absolute until the right was exercised in proper mode. Stone v. Hackett, 12 Gray (Mass.) 232; Van Cott v. Prentice, 104 N. Y. 45, 10 N. E. 257. Indeed, this power of revocation was strongly favored in the case of voluntary settlements at common law, and.such a trust, without such a reservation, was "open to suspicion of undue advantage taken of the settlor. Lewin on Trusts, 75, 76; Perry on Trusts, sec: 104. We think, however, that the circumstances of the reservation of power to revoke, and the limitation of the trust upon the life of the settlor, have operated to mislead the learned judge of •the trial court. If the life selected had been that of a third person, and if no revocatory power had been reserved, no one would question but that a valid express trust had been created. But the fact that the designated life in being was the settlor’s could not operate to destroy its validity, for he had the right to select the life of any person as the measure of duration. And the fact that he reserved the right to revoke did not impair the •trust, nor affect its character, since title and interest vested subject to divestiture only by revocation, and, if no revocation was made, they became absolute. A man may desire to make disposition of his property in his lifetime to avoid administration of his estate after death. Indeed, in view of the fact, both patent and painful, that the fiercest and most expensive litigation, engendering the bitterest feelings, springs up over wills, such a desire is not unnatural. And when it is given legal expression, as by gifts absolute during life, * * il: or voluntary settlements, there is manifest, not only an absence of testamentary intent, but an absolute hostility to such intent.”
Other California cases sustaining the decision quoted are: Tennant v. Tennant Memorial Home, 167 Cal. 570, 140 Pac. 242, and Gray v. Union Trust Co., 171 Cal. 637, 154 Pac. 306.
Do the circumstances of the case, particularly the *36making of the will by Miller, show that it was not the intention that the trust agreement should operate to vest title to the stock except upon the death of Miller? In considering this question, it becomes necessary to call attention to Matter of the Estate of Stanford, 126 Cal. 122, 58 Pac. 465, 45 L. R. A. 788, another California case, in which it is said:
“An estate is vested when there is an immediate right of present enjoyment or a * * * fixed right of future enjoyment.”
With the rule laid down in the language just quoted, and that declared in Nichols v. Emery, supra, in mind, it is necessary to inquire if, at the time of the execution and delivery of the declaration of trust and the transfer of the stock certificates, an estate so vested that the beneficiaries acquired a “fixed right of future enjoyment.” If they did acquire such a fixed right of future enjoyment, then the contention of the state cannot be sustained. If the theory of the state is sound, Miller could, by a will executed subsequent to the trust agreement, have revoked the declaration of trust. Suppose he had tried to do that very thing, and pursuant to such will the trustees had repudiated the trust agreement, in what court would the beneficiaries have brought suit to compel the performance of the trust? Certainly no other courts would have had jurisdiction than the courts of California, and they would be bound by the decisions from that state, to which I have alluded. Would the court of that state say that under the circumstances leading up to the execution of the trust, and contemporaneous with it, no estate was so vested under the trust as to establish a fixed right of future enjoyment in the beneficiaries named? The only circumstances connected with the entire transaction which throw any light upon it are the physical condition of Miller at and shortly prior to the time of executing the trust and the execution of the' will simultaneously with the execution of the trust. Just how the fact that Miller was in poor health can aid the court, in determining whether or not he *37intended that a fixed right of future enjoyment should vest under the trust, is more than I am able to see; but, if it can, there is nothing in it which j ustifies the conclusion that he did not so intend. If a fixed right of future enjoyment vested under the terms of the declaration of trust, such right was not, and could not have been, divested by the will.
It seéms to me that the strongest circumstance surrounding the entire transaction, throwing light upon the character of the declaration of trust, is the indorsing and delivering of the stock certificates by Miller at the time of executing and delivering the declaration of trust. By that act he completely surrendered control, for all time, of the' property in question; for, not having reserved the right to revoke the trust, such revocation was- impossible, as shown in the case of Nichols v. Emery, supra, which rule is sustained by the overwhelming weight of authority. See 1 Perry on Trusts (6th ed.) sec. 104; 39 Cyc. 92. But. the majority opinion states that the deceased (Miller) “disposed of his property to take effect in possession or enjoyment at or after his death.” From this statement it seems that the court concluded that Miller did that which was held in Re Stanford’s Estate, supra, to be sufficient to create a fixed right of future enjoyment.
If Miller “disposed” of the property, the title must have vested, in which case there was a fixed.right of future enjoyment at the time of the execution of the trust agreement, which was prior to the time the inheritance-tax law of Nevada went into effect, and hence no inheritance tax is collectible, unless the act operates retrospectively. The learned trial judge held that the act does not operate retrospectively, in which, I think, he was clearly right; for it would seem absurd to say that such could have been the intention,' when in express terms the act was made to go into effect thirty days after approval; besides, there is absolutely nothing to indicate that it was the intention that the act should so operate, and it is a well-known rule of law that—
*38“All statutes are to be construed as having only a prospective operation, unless the purpose and intention of the legislature to give them a retrospective effect is expressly declared, or is necessarily implied from the language used. In every case of doubt, the doubt must be solved against the retrospective effect.” 36 Cyc. pp. 1205-1208.
See, also, Milliken v. Sloat, 1 Nev. 577; Hunter v. Savage, etc., 4 Nev. 154; State v. Manhattan S. M. Co., 4 Nev. 333; State v. Manhattan V. Co., 32 Nev. 474, 109 Pac. 442; State v. Eggers, 33 Nev. 535, 112 Pac. 699; Chew Heong v. U. S., 112 U. S. 536, 5 Sup. Ct. 255, 25 L. Ed. 770; Winfree v. N. P. R. Co., 227 U. S. 301, 33 Sup. Ct. 273, 57 L. Ed. 518.
However, I do not understand that the learned attorney-general questions the correctness of the rule invoked, but he insists that the provision in the inheritance-tax law which provides that when property shall pass without valuable consideration, and “in contemplation of the death of the grantor * * * or intended to take effect in possession or enjoyment at or after such death,” it shall be liable to the tax, subjects the property rights in question to the' terms of the inheritance-tax law. To sustain this view, reliance is had upon the following authorities: In Re Masury’s Estate, 28 App. Div. 580, 51 N. Y. Supp. 331; In Re Ogsbury’s Estate, 7 App. Div. 71, 39 N. Y. Supp. 978; In Re Barbey’s Estate, 114 N. Y. Supp. 725; In Re Patterson's Estate, 127 N. Y. Supp. 284; In Re Seaman’s Estate, 147 N. Y. 69, 41 N. E. 401; In Re Green’s Estate, 153 N. Y. 223, 47 N. E. 292; In Re Bostwick’s Estate, 160 N. Y. 489, 55 N. E. 208; In Re Brandreth’s Estate, 169 N. Y. 437, 62 N. E. 563, 58 L. R. A. 148; In Re Douglas Co., 84 Neb. 506, 121 N. W. 593; Appeal of Seibert, 110 Pa. 329, 1 Atl. 346; In Re Maris’s Estate, 14 Pac. Co. Ct. R. 171, 3 Pa. Dist. R. 38; Crocker v. Shaw, 174 Mass. 266, 54 N. E. 549; New England Trust Co. v. Abbott, 205 Mass. 279, 91 N. E. 379, 137 Am. St. Rep. 437; State v. Bullen, 143 Wis. 512, 128 N. W. 109.
*39In the first case mentioned (In Re Masury’s Estate, 28 App. Div. 580, 51 N. Y. Supp. 331), the deed was executed in 1890, but the inheritance-tax law had been in effect since 1885. The question involved in this case was not presented to the court in that case.
In the Matter of Ogsbury’s Estate, 7 App. Div. 71, 39 N. Y. Supp. 978, it appears that the transfer was made to the trustees upon the condition that they should, upon the death of the grantor, transfer and convey the property to such person or persons as the grantor should direct in his will. There is no similarity between that case and the one at bar.
The Matter of Barbey’s Estate, 114 N. Y. Supp. 725, was decided in 1908, twenty-three years after an inheritance-tax law had been enacted, and it does not appear that the transfer- was made before the act became operative, but it does appear that the sole ground upon which the opinion was based was the fact that the grantor reserved to himself the right of ownership in the trust property until his death. The case is not in point.
In Re Patterson’s Estate, 127 N. Y. Supp. 284, is one in which the trust law was enacted after the inheritance act had gone into effect. It is not an authority on the point in question.
In the Matter of Douglas County, 84 Neb. 506, 121 N. W. 593, the inheritance law took effect July 1, 1901, and the trust was created in 1904. Hence the question here involved was not presented.
It appears in Re Maris’s Estate, 14 Pa. Co. Ct. 171, 3 Pa. Dist. R. 38, that the inheritance layr was passed in 1887, and that the deed was made in 1891. The question here presented was not involved.
In the Matter of Green’s Estate, 153 N. Y. 223, 47 N. E. 292, the trust was created in 1889, four years after the inheritance-tax law had taken effect. It is no authority upon the point involved.
In the Matter of Bostwick’s Estate, 160 N. Y. 489, 55 N. E. 208, in the Matter of Brandreth, in the Matter *40of the Appeal of Seibert, and in Crocker v. Shaw, the trusts were created after the inheritance-tax act had taken effect.
In the case of State v. Bullen, 143 Wis. 512, 128 N. W. 109, the point insisted on in this case was not considered. Furthermore, the court says in its opinion:
“As we have seen, Mr. Bullen reserved the right to direct and control the distribution of the trust property and to revoke the trust at any time during his life.”
The opinion in that case is not authority upon the point in question.
The case of New England Trust Co. v. Abbott is not in point. The court says:
“The only part of the property which was finally disposed of in a known and definitely stated way was the income for the period of five years. The disposition of the principal was left subject to contingencies, any one of three of which might terminate the trust and give direction to the payment of the principal.”
Nothing became vested until the death of the creator of the trust, which was after the inheritance-tax law had gone into effect. I am unable to see in what way this case sustains the contention of counsel.
As to the case of In Re Seaman’s Estate, which it is contended sustains -the contention of the state, it may be said that, while it is possible that different deductions may be drawn as to what was really decided, nevertheless the opinion in that case has been interpreted by the New York courts, where a different view from that contended for by the attorney-general is maintained.
In the Matter of Craig’s Estate, 97 App. Div. 289, 89 N. Y. Supp. 971, it was held that an act imposing an inheritance tax would not affect an estate which had vested before the act went into effect. In that case the Seaman case was interpreted, and the court said:
“It is true that something is said (in the Seaman case) which may seem to be in conflict with the view I am taking, but I am sure there is nothing in the actual decision to that effect.”
*41This opinion was affirmed by the Court of Appeals of New York in 181 N. Y. 551, 74 N. E. 1116, without comment, thereby approving all that had been said by the lower court. But whatever may be said of the Seaman case, or of the Craig case, the Court of Appeals in Re Pell, 171 N. Y. 48, 63 N. E. 789, 57 L. R. A. 540, 89 Am. St. Rep. 791, held that when an estate accrued before the passage of an amendment providing for a tax, but coming into actual possession after the amendment, the amendment was void. So far as I have been able to learn, there has been no decision holding squarely to the contrary, unless it be the case of People v. Carpenter, 264 Ill. 400, 106 N. E. 302. But the force of the Carpenter case is entirely lost, in view of the fact that the conclusion therein reached is based upon the court’s interpretation of In Re Seaman, supra, since the New York court from which the Seaman case emanated has put the interpretation upon the case which I contend for.
But counsel for respondent seek to distinguish the Craig case, supra, from the case at bar. They say the deed in that case was made in contemplation of marriage and not of death, and was designed to make an effective provision in prsesenti for the prospective wife and the possible offspring. It is true, as claimed by counsel, that the -trust in that case was created in contemplation of marriage, but that was not made the turning-point in the decision. The court in that case says:
“The point presented by the appeal is that the right as a property right to take the gifts when the time for possession and beneficial enjoyment should ultimately arrive had fully accrued at the date of the marriage and the birth of the children free from any existing tax upon the transfer either made or contemplated, and that subsequent legislation imposing such a tax must be deemed unconstitutional, as, in effect, the taking of private property for public use without' compensation, or as impairing the obligation of a contract. In other words, the appellants contend that at least as early as May 9, *421885, they had acquired their rights by irrevocable deed; that such rights, whether vested or contingent, then constituted present property interests in future estates, which were vested in the sense that they were secured to them by deed, subj ect only to contingencies as to time and survivorship; that incident to the ownership of such property was the absolute' right to its acquisition in possession and enjoyment at the stipulated time; and that such ultimate right of possession and enjoyment, being absolute, and not merely privileged, could not afterwards be taxed by the state, because of well-settled principles of constitutional law.”
The point involved in that case is the identical point point in question here, namely, whether the accrual of the “right as a property right to take the gifts when the time for the possession and beneficial enjoyment should ultimately arrive had fully accrued at the date” of the creation of the trust, or whether it accrued upon the death of the donor. The court held that the right fully accrued under the trust at the time of the consummation of the marriage. In the case at bar the rights of the beneficiaries under the trust, as prospective rights to take the gifts when the time for the possession and beneficial enjoyment should ultimately arrive, accrued at the date of the creation of the trust. They were rights which the settlor could not revoke or defeat, and hence the law which thereafter went into effect providing for an inheritance tax did not apply.
In the case of Hunt v. Wicht, 174 Cal. 205, 162 Pac. 639 L. R. A. 1917c, 961, wherein it appears that William Garms executed a deed of conveyonce to Ulrice Garms, conveying certain property, and deposited it in escrow, to be delivered upon his death, the deed was placed in escrow before his death and before the inheritance-tax act was passed. But William Garms .died after the act had become a law, whereupon the deed was delivered to the grantee. It was sought to recover an inheritance tax, upon the theory that the conveyance was a transfer by deed “made without valuable and adequate considera*43tion, in contemplation of the death * * * or intended to take effect in possession or enjoyment at or after such death”; it being contended that the grantee in the deed took pursuant to.the terms of the inheritance-tax law, which provided for the levying of a tax where the party taking “becomes beneficially entitled in possession or expectancy to any property or the income therefrom, by any such transfer, whether made before or after the passage of this act.”
The court held that the tax could not be collected, and said:
“We have then the case of a grant of land so executed and delivered on April 12, 1905, as to be fully operative and effective on that date to vest a present title in the grantee,, subject only to a life interest in the grantor; ‘an executed conveyance’ (Estate of Cornelius, supra) of this property in fee simple absolute, subject only to this life interest. Could the legislature subsequently lawfully impose a succession tax upon this fully executed transfer of title, such tax accruing at the termination of the grantor’s reserved life estate, simply because in the meantime the grantee was debarred by the intervening life estate from actual possession of the property conveyed and the other incidents of a life estate? It appears to us that to state the question is to answer it. The succession to the property by the grantee which is the thing attempted to be taxed was complete upon the delivery of the deed in escrow, notwithstanding the reservation of the life estate. The whole estate conveyed vested irrevocably in interest at once, notwithstanding that actual possession of the property itself and enjoyment of the profits thereof were deferred until the death of the life tenant. His death added nothing to the title theretofore acquired by the grantee, and there was no transfer of any property in any legal sense at the time of such death, or at any time subsequent to the delivery in escrow. The right of the grantee to have actual physical possession of the property itself, and enjoyment of the other incidents of an estate for life upon the death *44of the life tenant was absolutely vested by the delivery of the deed in escrow, and nondefeasible, and the legislature could not thereafter lawfully destroy, impair, or burden this property right under the guise of a succession tax on account of the transfer. As said in Matter of Craig, 97 App. Div. 289, 89 N. Y. Supp. 971, affirmed 181 N. Y. 551, 74 N. E. 1116:
“ ‘The underlying principle which supports the tax is that such right (the right of succession) is not a natural one, but is in fact a privilege only, and that the authority conferring the privilege may impose conditions upon its exercise. But when the privilege has ripened into a right it is too late to impose conditions of the character in question, and when the right is conferred by a lawfully executed grant or contract it is property, and not a privilege; and as such is protected from legislative encroachment by constitutional guarantees.’
“It is the vesting in interest that constitutes the succession, and the question of liability to such a tax must be determined by the law in force at that time. This view is not opposed to Estate of Woodard, 153 Cal. 39, 94 Pac. 242, cited by appellant, where the statute in force at the time of death of a testator was held applicable, rather than a later act, simply because it was at the time of such death that the estate vested in the devisee and legatee. What we have said appears perfectly clear on principle, and is sustained by practically all of the authorities in other states where the question has arisen. In New York the matter is thoroughly settled by several decisions. In the Matter of Pell, 171 N. Y. 48, 55, 63 N. E. 789, 791 (57 L. R. A. 540, 89 Am. St. Rep. 791), it is said that such a transfer tax being one not imposed on property, but upon the right to succession, it ‘follows that, where there was a complete vesting of a residuary estate before the enactment of the transfer-tax statute, it cannot be reached by that form of taxation,’ and also, ‘if these estates in remainder were vested prior to the enactment of the transfer-tax act, there could be in no legal sense a transfer of the *45property at the time of possession and enjoyment. This being so, to impose a tax based on the succession would be to diminish the value of these vested estates, to impair the obligation of a contract, and take private property for public use without compensation.’ ”
It is my opinion that it was not the intention of the legislature that the inheritance-tax act should apply to such a case as the one at bar; and, furthermore, that if such was the intention, so much of the act as so provides is unconstitutional, null, and void.