Court Opinion

ID: 9751754
Source: CourtListenerOpinion
Date Created: 2023-08-28 16:57:49.696495+00
Date Added: 2024-06-11T07:26:58.651315
License: Public Domain

Dissenting Opinion by
Mr. Justice Bell :
The question raised at the audit of the account of the executor of Mrs. Hitchcock’s will is an important *581one, namely, is the amount wbicb was payable to Mr. Hitchcock’s devisees under a joint will and binding contract executed by Mr. and Mrs. Hitchcock, properly deductible as a debt of Mrs. Hitchcock, in computing the Pennsylvania Inheritance Tax.
The sealed contract provided that Mr. and Mrs. Hitchcock agreed (1) to combine their respective estates; (2) to hold the same as tenants in common; and (3) “that the last survivor shall enjoy the joint estate or entire property * possessed by both at the time of the death of the first to die so long as the other shall his or her own personal use all of the income therefrom and as much of the principal as the last survivor may see fit to use . . . .” In other words, the survivor could live, with the right of the last survivor to convert to enjoy the entire combined estates with power of personal consumption of the principal. The only condition imposed by the agreement was that “at the death of the last survivor one-half of the then remaining [combined] estate** shall be distributed to the devisees of . . . Hitchcock.”
*582The instrument signed by Mr. and Mrs. Hitchcock on September 2, 1922 was a combined joint will and joint contract under seal and as such the contractual part thereof was absolutely binding on both parties: Gredler Estate, 361 Pa. 384, 65 A. 2d 404; Cramer v. McKinney, 355 Pa. 202, 49 A. 2d 374; Kocher Estate, 354 Pa. 81, 46 A. 2d 488; Craig’s Estate, 298 Pa. 235, 148 A. 83; Cridge’s Estate, 289 Pa. 331, 137 A. 455; McGinley’s Estate, 257 Pa. 478, 101 A. 807; Shroyer v. Smith, 204 Pa. 310, 54 A. 24; Hoffner’s Estate, 161 Pa. 331, 29 A. 33; Smith v. Tuit, 127 Pa. 341, 17 A. 995; Taylor v. Mitchell, 87 Pa. 518; Johnson v. McCue, 34 Pa. 180; Logan v. McGinnis, 12 Pa. 27; Brinker v. Brinker, 7 Pa. 53; Culhane’s Estate, 133 Pa. Superior Ct. 339, 2 A. 2d 567; Park v. Park, 39 Pa. Superior Ct. 212; Lewallen’s Estate, 27 Pa. Superior Ct. 320; Conlan v. Conlan, 20 Pa. Superior Ct. 45. “An agreement to make a will or to [give or] devise one’s property to a particular person or for a particular purpose is binding and irrevocable when supported by what the law regards as valid consideration”: Gredler Estate, 361 Pa., supra.
Mr. Hitchcock’s devisees * undoubtedly had the right to enforce the contract made by Mr. and Mrs. Hitchcock — if Mrs. Hitchcock breached it, they could have presented their claim as creditors at the audit of the account of Mrs. Hitchcock’s executor: Gredler Estate, 361 Pa. supra; Craig’s Estate, 298 Pa., supra; Hoffner’s Estate, 161 Pa., supra; or they could have sued as third party donee beneficiaries in view of the *583fact that the provision here involved was unquestionably made for their benefit: Cf. Commonwealth v. Great American Indemnity Co., 312 Pa. 183, 167 A. 793; Logan v. Glass, 338 Pa. 489 14, A. 2d 306; Logan v. Glass, 136 Pa. Superior Ct. 221, 7 A. 2d 116; Philipsborn v. 17th and Chestnut Holding Corp., 111 Pa. Superior Ct. 9; Restatement, Contracts, §§133, 135, 139.
The Inheritance Tax Act of Pennsylvania of June 20,1919, P. L. 521, as amended by the Act of December 21, 1951, P. L. 1713, provides: “Section 2. All taxes imposed by this act shall be imposed upon the clear value of the property subject to the tax and shall be at the rate of . . . In ascertaining the clear value of such estates, the only deductions to be allowed from the gross values of such estates . . . shall he the debts of the decedent, reasonable and, customary funeral expenses . . . Provided, That the deductions herein allowed in the case of any indebtedness of the decedent shall, when founded upon a promise or agreement, be limited to the extent that they were contracted bona fide for an adequate and full consideration in money or money’s worth . .
It is clear, and indisputable, that this indebtedness of the decedent, Mrs. Hitchcock, was founded upon a binding, enforceable agreement', and the majority opinion as well as the Commonwealth admits that it was contracted bona fide and with no intent to defraud the Commonwealth. Three questions remain: (a) was it a debt within the meaning of the Inheritance Tax Act; (b) was it contracted for an adequate and full consideration; and (c) in money or money’s worth? Each of these questions has already been decided, adversely to the Commonwealth, by prior decisions of this Court.
An analysis of the cases of Mills Estate, 367 Pa. 504, 80 A. 2d 809, and Neller Estate, 356 Pa. 628, 53 A. 2d 122, will demonstrate that the majority opinion can *584not be justified unless those cases are repudiated and the Inheritance Tax Act is rewritten.
In Mills Estate, 367 Pa., supra, this Court attempted to put at rest any doubt on the questions which the Commonwealth has once again raised in this appeal. In that case a husband and his wife entered into a so-called separation or post-nuptial agreement in and by which he agreed to pay his wife a stipulated amount per month for her support, and likewise agreed to make a will leaving all his estate to his wife. At his death she claimed his entire estate of $40,000., not as a legatee under his will, but as a creditor. This Court allowed her claim as a creditor, and specifically held that the Commonwealth was not entitled to any inheritance tax because her claim constituted a debt in money or money’s worth. The majority in the instant case reached the conclusion it did by completely ignoring the fact that in the Mills case, supra, the husband promised in the agreement to leave all his estate to his wife, and the Court held that she was entitled as a creditor, not to support for the future, but to the husband’s entire estate, (provided the consideration was adequate and full). The evidence as to adequacy was not sufficiently clear and therefore this Court remanded the case to the lower Court for the sole purpose of enabling it to take further evidence in order to determine whether the consideration was adequate and full. Justice Stearns, speaking for the Court, said (pages 505, 506-508) :
“The question raised by this appeal is whether the amount awarded to a widow under the terms of an agreement for support constitutes a debt of the husband ‘contracted bona fide and for an adequate and full consideration in money or money’s worth.’ The learned court below ruled that it did.
*585“On May IT, 1946, James H. Mills and Ms wife, Anna Irene Mills, entered into a post-nuptial agreement,* under seal, and which preceded a divorce. . . . The consideration named was ‘. . . the mutual undertaMngs of the parties hereto as hereinafter contained, and in settlement, adjustment and compromise of all property questions and rights and liability for support and maintenance’ . . . He agreed: to pay his wife $300 a month while he was employed, and after his retirement $150 per month; real estate held by them in entireties could be sold after divorce and the husband’s retirement and proceeds divided equally; if such real estate was not sold before his death the husband’s interest therein was to go to the wife; he also agreed to make a will leaving all his estate to the wife; policies of life insurance payable to wife were to be irrevocable. The wife agreed that real estate held by them in entireties could be sold after divorce and her husband’s retirement and proceeds equally divided; in the event that the wife predeceased her husband before sale of the real estate, the husband was to receive a one third interest therein and the wife agreed to make a will leaving her husband one third of her estate. . . . His will was probated. The Com monwealth assessed a transfer inheritance tax on the amount payable to the widow. At the audit of the account of the executrix, the widow presented her claim as creditor, which was allowed.
“In Neller Estate, 356 Pa. 628, 53 A. 2d 122, it was decided by a majority of this Court, contra to the doctrine in the Federal jurisdiction, that a wife’s waiver of her marital rights may constitute the consideration for a contractually created debt of the husband. ... In Stadtfeld Estate, 359 Pa. 147, 58 A. 2d 478, we reaffirmed the doctrine of Neller Estate. Mr. Justice *586Horace Stern said, p. 151: ‘... in Neller Estate, 356 Pa. 628, 53 A. 2d 122, which held that the share of a decedent’s estate due to his widow under a separation agreement is not subject to the Pennsylvania transfer inheritance tax since the payment made to the widow out of the estate is not in the nature of a legacy but is merely the liquidation of a debt.’
“The Commonwealth in the present case challenges the ruling of the court below that the present agreement creates a debt due the widow which meets the statutory requirement that also it must be founded upon ‘an adequate and full consideration in money or money’s worth’
“Since the decision in Neller Estate, supra, it is no longer an open question in Pennsylvania that a bona fide separation agreement between a husband and wife providing for a payment at the husband’s death, constitutes a debt and is consideration in money or money’s worth.
“. . . While the amount cannot always in every case be arithmetically calculated, the inquiry must satisfy the hearing judge not only that the separation agreement was bona fide but that the amount of the debt represented a substantially adequate and full consideration in money or money’s worth, for only to that extent is it a deductible tax exemption.”
In Neller Estate, 356 Pa., supra, cited and quoted with approval in Mills Estate, 367 Pa., supra, the Court held that an agreement between husband and wife in which the husband agreed to leave his wife a sum equal to one-quarter of his estate, was a binding and enforceable agreement and created a debt based on a consideration of money or money’s worth, and was a *587proper deduction from the husband’s estate and was not subject to transfer inheritance tax. The Court, speaking through Chief Justice Maxmy, said (pages 629-833) :
“This is an appeal from the decree of the Orphans’ Court of York County denying the claim of the Commonwealth for certain Transfer inheritance taxes’ claimed on a portion of the estate of Harry C. Neller, who died January IS, 1945, intestate. Surviving him were two daughters of his marriage with Kathryn E. Neller, and a son by a former marriage. Kathryn E. Keller presented her claim against the estate for one fourth of the net estate, pursuant to a ‘separation agreement’ which she entered into with the decedent on October 30, 1934. In it the husband admitted his liability for the support of his wife, and she agreed that she would not press any nonsupport charge against him and in lieu of her claim for support that she would accept §75 per week until April 1, 1935, and thereafter the sum of §50 per week for and during her natural lifetime. The husband agreed to make these payments and also that ‘at the time of his death there shall be paid from his estate to the wife a sum equal to one fourth of the net amount of said estate’. ... In the adjudication the wife was awarded, according to this agreement, one fourth of the estate, amounting to §10,850.77. On this sum of money the Commonwealth makes its tax claim.
“Certainly the Legislature did not intend by the Transfer Inheritance Tax Act of June 20, 1919, and its amendments, that the money used by an executor or administrator to pay the debts a deceased debtor intended to have paid only after his death should be subject to a transfer tax. Many individuals late in life incur debts whose payments they do not intend to be *588made until after their death, for the reason that their chief assets consist of the promises in their life insurance policies or because their estate is in such form that their debts cannot be liquidated until their estate is converted into money or its equivalent. . . . There is no basis for a logical distinction in imposing ‘transfer taxes’, between a transfer of money from a decedent’s estate to pay his general debts and a transfer of money from a decedent’s estate to pay a debt whose time of payment was formally fixed ‘at or after his death’. . . .
“The very name ‘Transfer Inheritance Tax’ by which the tax imposed by the Act of 1919 is generally referred to indicates that the transfer which is taxable arises from an inheritance and not from a creditor-debtor relationship based on a contract.
“. . . ‘If this decedent had agreed in writing for the same considerations to pay his wife a fixed and definite sum of money, or had executed and delivered to her a promissory note for the same purpose payable at his death, it could hardly be successfully argued that he would not have created a debt against his estate, and we fail to see any difference between the contract as written and the two methods just mentioned, nor are we able to distinguish between the effect of this contract and an antenuptial agreement insofar as the payment of transfer inheritance tax is concerned.’ ”
In limiting the principle laid down by the Mills and Heller cases to debts arising out of a sepai*ation agreement, the majority opinion (1) utterly disregards (a) the facts in those cases, namely, the wife claimed as a creditor — not future support at the monthly rate fixed by the agreement, but — her husband’s entire estate in Mills, and one-quarter of his estate in Heller, and (b) the analogies in, and (c) the broad principles and language of those opinions; and (2) rewrites the Pennsylvania Inheritance Tax Act. There is no sound *589basis, reason, or logic for the majority’s aforesaid restriction; nor is consideration for a debt arising between husband and wife limited to a separation agreement; nor has this Court any right to rewrite the Inheritance Tax Act.
To summarize: (1) the several and mutual promises and covenants, indisputably and unquestionably, created and constituted a debt which was due by Mrs. Hitchcock to the devisees and beneficiaries of Mr. Hitchcock’s will; (2) there was not only valid, but adequate and full consideration * passing to Mrs. Hitchcock for her promise to leave one-half of their combined estates to the devisees and legatees of Mr. Hitchcock’s will; (3) if the promise in the Mills case to leave his wife his entire estate by will, and in the Neller case to leave his wife one-quarter of his estate at his death, constituted a debt of the decedent which was contracted bona fide for an adequate and full consideration in money or money’s, worth,- — as this Court in those cases so held — it is equally and just as certainly, a debt in this case which was contracted bona fide for an adequate and full consideration in money or money’s worth. The only difference in the consideration between the Mills and the Neller cases on the one hand and the instant case on the other hand, is the difference between costume jewelry worth a small sum and a diamond necklace worth a large fortune.
The majority opinion asserts (1) that the obligations created by this sealed contract “were testamentary benefactions and not debts”; and (2) “while such *590promises were sufficient to support the agreement and to constitute it a binding and enforceable contract, they were not an adequate and full consideration in money or money’s worth”; and (3) “in the instant case the consideration for the agreement is not in money or money’s worth”. The majority opinion and the decision of the Court thereunder not only atrophies the Heller and Mills cases- — it repudiates and nullifies them. While giving lip service to Mills and Heller, the majority opinion says in ipsissimis verbis that the law is what the Mills and Heller cases in ipsissimis verbis said it was not. What the prior cases really held and how clearly the principles they asserted have been repudiated is made clear by Justice Jones’ dissenting opinion in Neller Estate, 356 Pa. 628, 637, 53 A. 2d 122:
“The majority opinion seems unmistakably to chart as sure a course to effective tax -avoidance as one could possibly -imagine. Under the rationale of the decision, a wife’s postmiptially agreed upon share of her husband’s estate, payable after his death, can be relieved from liability for Pennsylvania’s transfer inheritance tax if the wife’s waiver of a marital right be made the consideration for her contractually specified property interest in her husband’s post-mortem estate.
“As I see it, ail that will be necessary for any married man, resident in Pennsylvania, to do henceforth in order to obtain the tax-free situation, as above indicated, with respect to his estate will be for him and his spouse to enter into a postnuptial contract whereby -she agrees That she will not press any nonsupport charges against [him] . .. but in lieu of a support order will accept’ a specified sum monthly for the husband’s life upon the -further condition That at the time of his death there shall be paid [to her] from his estate ... a sum equal to [any agreed upon portion] of the net amount of his said estate’; and the husband, on his own *591part, binds himself, ‘his heirs, executors, administrators and assigns’ for the payment of the sums set forth in the contract. Such is precisely the situation which the instant decision covers; and the majority hold that the amount so payable to the wife out of her husband’s estate after his death is in discharge of a debt and, therefore, deductible in ascertaining the dear value of his net estate subject to tax. With that, I cannot agree.
“Nor is the decision in any wise buttressed by the fact that, at the time of the execution of the agreement here involved, the parties thereto had separated and were then ‘living separate and apart’ because of ‘divers disputes and unhappy differences [which had] arisen’ between them or that, several months after the execution of the agreement, the wife obtained an absolute divorce which did not terminate the agreement because of a cognate saving clause therein. It matters not whether the parties, when thus contracting, are living separate and apart or are living together in amity and continue so to do until separated by death. The post-nuptial relinquishment by the one of a marital right against the other is no more a ‘consideration in money or money’s worth’ in the one instance than in the other.” Yet the majority opinion reaffirms Weller Estate and then says it does not apply because the parties herein are living together in amity.
The present majority opinion not only flies in the teeth of the opinions and decisions in the Weller and Mills cases, but it necessarily rewrites the Inheritance Tax Act* so as to malte it read: “In ascertaining the clear value of such estates, the only deductions to be allowed from the gross values of such estates . . . shall be debts of the decedent . . . Provided, that the deduc*592itions herein allowed in the case of any indebtedness of the decedent shall, when founded upon a promise or agreement, be limited to the extent that they were contracted bona fide for adequate and full consideration in money or money’s worth . . .” [addition] “if and only if the promise was contained in a separation agreementThis is a usurpation of the power of the Legislature. It is within the power and province of the Legislature, but not within the power or province of a Court, to change or rewrite the statutes of Pennsylvania. The right and power to modify or otherwise change the Inheritance Tax Acts of Pennsylvania lies solely in the Legislature who can, if they disagree with a Court’s interpretation of a statute, change or rewrite that statute — as they could have done ever since 1946 when the Weller decision was handed down by this Court — and provide that a promise by a spouse to leave by his or her will all of his or her estate to a surviving spouse or to others does not constitute a promise or debt of the decedent which was contracted for a consideration in money or money’s worth.
I would neither atrophy nor negate nor reverse the Mills and Weller decisions, but would reaffirm them and the principles they unquestionably stand for; and I would reverse the decree of the lower Court.

 Italics throughout, ours.

 Mrs. Hitchcock many years after Mr. Hitchcock’s death executed a codicil which changed the share of Mr. Hitchcock’s devisees from one-half of the combined estates of herself and her husband which remained at her death, to one-half of the amount of the estate which she and her husband owned as tenants in common at the date of Ms death. Mr. Hitchcock’s devisees contended that they were entitled under the joint agreement of 1922 to one-half of the combined estates as they existed at the death of Mrs. Sitehcodlo. The parties made an amicable family settlement under which members of Mr. Hitchcock’s family received 43% of the assets remaining at Mrs. Hitchcock’s death subject to the payment by them of 43% of the debts, funeral and administrative expenses and State Inheritance and Federal Estate taxes. “Family agreements or settlements are . . . favored in the law and when fair are valid and will be upheld whenever possible: Edelman’s Estate, 336 Pa. 4, 10, 6 A. 2d 511; Iacovino v. Caterino, 332 Pa. 556, 2 A. 2d 828; Braun*582schweiger’s Estate, 322 Pa. 394, 185 A. 753.”: Fry v. Stetson, 370 Pa. 132, 135, 87 A. 2d 305. This was a fair, valid compromise family agreement. I agree with the majority that this does not alter or affect the question here involved.

 It would have been more accurate to have called them legatees, devisees and testamentary beneficiaries.

 Italics throughout, ours.

 The- majority opinion does not discuss whether the consideration was adequate and full; an examination of the facts disclosed by the record will demonstrate that the test laid down in Mills Estate, 367 Pa., supra, for a determination of whether the consideration for the wife’s promise was “adequate and fuU” has been more than fully met.

 Act of June 20, 1919, as amended by the Act of December 21, 1951.