Learn About the Law
Get help with your legal needs
FindLaw’s Learn About the Law features thousands of informational articles to help you understand your options. And if you’re ready to hire an attorney, find one in your area who can help.
IN RE: RATH'S ESTATE.* FAY et al. v. RILEY, State Controller, et al.
In her lifetime, Nellie Fay Rath owned as her separate property four certain town lots. With reference thereto, it was not only her desire, but also that of her husband, William A. Rath, that should the latter survive the former, and should the latter thereafter, during the remainder of the time that he should live, be in need of said property or any portion of the value thereof for the purpose of providing at any time for his “support and livelihood,” he should be privileged to use it to that end; otherwise, at his death either the entire property, or such of it as remained in any form, should go to two designated nephews of Mrs. Rath. In order to provide for such a disposition of the said property, not only did Mr. and Mrs. Rath enter into a written agreement, one with the other, but as well, each of them executed a will, which in substance and effect either contained, or purported to carry out, the wishes and desires of the respective parties in that regard. Some time thereafter Mrs. Rath died, and within six months next ensuing Mr. Rath also passed away. The estate of Mrs. Rath, including the particular property to which reference hereinbefore has been had, was regularly distributed to the estate of Mr. Rath; but when the matter of the distribution of his estate came on for determination, an incidental question arose regarding the amount which was then payable as inheritance tax by the nephews of Mrs. Rath. In that connection, they contended that the amount which would become due to the state as and on account of the inheritance tax on the value of the said property should be determined as of the date of Mrs. Rath's death. Following a hearing in the lower court on that issue, an order was made which included the determination, in effect, that the property was demised, and that title passed, to the two nephews, not by reason of the legal effect of the several instruments to which reference hereinbefore has been had, but rather solely by the will of Mr. Rath; and consequently, that the inheritance tax was to be levied as of the date of his death. It is from that portion of the order or “judgment” that the two nephews have prosecuted the instant appeal.
Preliminarily, and as a foundation for the contention on the part of appellants that title was passed to them by virtue of the respective wills of Mr. and Mrs. Rath together with the agreement, two points are presented, namely: (1) That the agreement which was entered into between Mr. and Mrs. Rath respectively was made for the express benefit of appellants; and (2) that the said agreement, together with the will of each of the parties thereto, “should be read as one document.” With regard to such issues, respondent not only does not resist, but concedes, the correctness of appellants' position. The result is that the only important question which remains in the appeal ultimately relates to the time or the date when title of some sort to the particular property vested in appellants; and in order that a determination thereof may be reached, it would seem meet to consider the pertinent language that was employed by the testator and the testatrix, both in the respective wills of such persons, and also in the agreement which was entered into between them. In that regard, by the said agreement it was provided that Mrs. Rath would make a will “leaving the said property * * * to the said party of the first part (the husband) in the event that he shall survive her” (the wife); and in that connection, Mr. Rath agreed that he also would make a will by which he would devise “all of said real property * * * or such portion thereof as has not been used or consumed by him during his natural life for his support and livelihood, in whatsoever form the same may then be in, whether in the form of real estate, money, investments, or securities, unto the said two nephews of the said party of the second part (the wife). * * *” Furthermore, it was expressly agreed that the agreement itself was “made for the benefit” of the said two nephews. By the will of Mrs. Rath, which was executed contemporaneously with the agreement, she devised to her husband, Mr. Rath, “all of the property of which I die possessed, both real and personal, of every kind, name and nature, and wheresoever the same may be situated.” But her will also contained the provision that “in the event that my said beloved husband, William A. Rath, shall not survive me, then and in such event, I hereby give, devise and bequeath all of the property of which I die possessed unto my nephews. * * *” In accord with the spirit of said agreement, Mr. Rath likewise made his will, which contained a provision by which, in the event that Mrs. Rath should survive him, all his property was devised to her; but also, that in the event he should be the surviving spouse, “all of the property” of which he might “die possessed” was devised unto his “wife's two nephews.”
From a consideration of the several instruments considered as a whole, it would seem apparent that it could not be seriously contended that the intention of Mrs. Rath was to do otherwise than to devise her estate to her husband, to be “used or consumed by him during his natural life for his support and livelihood”––provided, that if at the time of his death, anything should remain of her former separate estate, he would will it to her two nephews. However, by her will, Mrs. Rath devised the property directly and without limitation to her husband; following which, she provided that if he should not survive her the property should go to her two nephews. Apparently, and aside from judicial decisions in cases that have arisen on similar facts, as far as the language of either of such instruments (considered separately) discloses, not the slightest obstacle was placed in the way of full and complete investiture of title to the property in the husband at the moment of the death of the wife, and on the happening of that event he was entitled to “use or consume” either the whole or any part of the property for “his support and livelihood.” Nor, considering all of said instruments together, immediately on the death of Mrs. Rath, notwithstanding the conceded fact that the several instruments here under consideration were “made for the benefit” of the two nephews, would they or either of them have any just right to complain. By no means could they at that moment rightfully assert a present title in fee, either to the whole or to any portion of the property that formerly had belonged to her. They became entitled to share in the corpus of Mrs. Rath's estate only in the event that some part thereof remained at the time of the death of Mr. Rath. They had a sort of expectancy only, which, before it might ripen into something tangible or real, depended upon the condition that on the death of another person, to wit, Mr. Rath, the subject–matter thereof, or some portion of it, remain at least as a part of his apparent estate. But notwithstanding such conditions and circumstances, in dealing with analogous situations, the courts, not only of this state, but as well, those of other jurisdictions, have ruled that on the death of the original donor of the property, the direct beneficiary under the provisions of the will takes a life estate only, with vested remainder in the persons so designated.
In the case of Chesnut v. Chesnut, 300 Pa. 146, 151 A. 339, 75 A.L.R. 66, the will provided: “I * * * devise * * * to my * * * sister * * * all of my estate.” In the following paragraph it continued: “Should there be any of my estate, real, personal, or mixed, or the proceeds thereof unused or not required for the support of my said sister * * * remaining over at her decease, then it is my will that such remaining estate, interest or the proceeds of what I have herein given to my said sister * * * shall at her * * * death be given, devised, bequeathed, taken and held by my brother, * * * he to use or do with the said estate, remainder or proceeds of the same as he may think best.” The court construed the will as giving a life estate to the sister, with the right to consume the principal for the purpose of her support, and said, in part: “If the present will shows that there is a devise over, as clearly it does, or that testatrix's dominant purpose was to give her sister less than a fee–simple estate, as we think it does, then the sister, through whom defendants claim, did not get an absolute title to the real estate.” The court then quoted from In re Wettengel's Estate, 278 Pa. 571, 123 A. 488: “While testator, in the above–quoted residuary clause of his will, makes the devise to his three daughters and ‘their heirs and assigns,’ he immediately follows this apparently absolute gift by words plainly indicating a contrary intent. We have repeatedly held that, where the dominant purpose shown by a devise is to vest a fee, this estate cannot be stripped of its inherent attributes by subsequent words (merely) indicating an intent so to do. * * * On the other hand, we have probably as often held that, in finding the controlling intention, all the words used by testator should be taken into account, and, if the intent to restrict the gift is clear, it must be given effect. * * * The present will falls fairly within the last–stated rule.”
In Allen v. Hirlinger, 219 Pa. 56, 67 A. 907, 13 L.R.A.(N.S.) 458, 123 Am.St. Rep. 617, with reference to a devise to the wife “for life or widowhood, with permission to use and live therefrom and to have the full ownership, the same as he [testator] had himself during his life, and at her death whatever should remain to be given to his daughter,” it was said:
“The class of wills to which this belongs presents inherent difficulties in construction by their indication of an intent not accurately defined in the testator's own mind, if not of double and to some extent conflicting intents. The testator gives to the first taker the estate, or what is practically the same thing, the power to consume the whole, and yet manifests his expectation at least, if not his intention, that it shall not all be consumed. These two purposes, manifestly present in his mind, but not accurately defined, and their possible conflict, perhaps not perceived at all, at once raise the question: Has the will limited the estate given, or has it attempted to deprive the estate given of some of its essential legal properties? The cases must be classified on this line of distinction. In Good v. Fichthorn, 144 Pa. 287, 22 A. 1032, 27 Am.St.Rep. 630, it was said: ‘The true test of the effect of language apparently at variance with other parts of the devise is whether the intent is to give a smaller estate than the meaning of the words of the gift standing alone would import, or to impose restraints upon the estate given. The former is always lawful and effective, the latter rarely, if ever. The first, because the testator's intention is the governing consideration in the construction and carrying out of a will; the second, because even a clear intention of the testator cannot be permitted to contravene the settled rules of law by depriving any estate of its essential legal attributes.’ * * *
“The gift to the widow is of the estate; she to be ‘the real owner thereof,’ and ‘with full permission to her to use and live therefrom as her necessities may require.’ And she is to have ‘the full ownership thereof the same as I now have, and have had during my natural life.’ It is plain that he meant her to have whatever her necessities should require, even to the extent of the entire estate, as he had himself undoubtedly had during his lifetime. * * * There was no limit put on her use. If she needed the whole, she was to have the whole. But it is plain that he did not think she would need the whole, and expected that there would be something left, and this residue, be it much or little, he gave to his daughter. * * * The appellant does not have a fee simple, for she could not make a valid devise of what may be left at her death, as that would go under the testator's will to his daughter. But appellant has an unlimited power to consume, and, as said in the very analogous case of Kennedy v. Pittsburg & L. E. R. R. Co., 216 Pa. 575, 65 A. 1102, the power to consume real estate necessarily includes the power to convey. Her deed therefore will convey a good title.”
In Colburn v. Burlingame, 190 Cal. 697, 214 P. 226, 227, 27 A.L.R. 1374, where the opinion in Allen v. Hirlinger, supra, was quoted from at length, the facts were as follows: The will provided: “I give * * * to my * * * wife * * * the entire handling and control of any and all of my real estate and * * * personal property, * * * to have and to hold, occupy or use the whole or any part thereof * * * as may in her judgment seem best for her own individual benefit, and support, * * * believing my * * * wife will not allow said property to depreciate or go to waste.” The will was admitted to probate in Pennsylvania and a decree of distribution to the wife was made in that state pursuant to the will. The brothers of the testator, who under another clause of the will would take the property on the death of the wife, sought to enjoin her from disposing of the corpus of the estate and to compel her to post a bond for their protection. The Supreme Court affirmed a judgment of dismissal of the action, holding that although a life estate was created, nevertheless the widow was entitled to spend the corpus for her own benefit. The court said, in part: “The rule of construction here applicable is that stated in Hardy v. Mayhew, 158 Cal. 95, 110 P. 113, 139 Am.St.Rep. 73, where it is said: ‘It appears to be settled by the overwhelming weight of authority that the mere fact that the first taker is invested with the power to dispose of or consume the whole of the property for certain purposes does not invest him with the absolute ownership thereof and render the gift over void where taking the whole instrument together it is concluded that the intent was to give only an estate for life, with limited power of disposal or consumption.’ And the rule thus announced was followed in Luscomb v. Fintzelberg, 162 Cal. [433], 440, 123 P. 247.”
In Hardy v. Mayhew, 158 Cal. 95, 110 P. 113, 114, 139 Am.St.Rep. 73, which involved the right of a legatee to give away the principal of a legacy which had been distributed to him, under the terms of the will, “for his use, during his natural life,” and on his death “the unused portion of said sum” was to go to other relatives of the testator, it was said:
“Herein was clearly a distribution to Judge Mayhew of a life estate simply, an estate limited by express terms to his natural life, with the power of disposing of the principal, even to the extent of entirely consuming it, in such ways as might be consistent with his ‘use’ thereof, and a distribution of the remainder to plaintiff. * * *
“The interest given to Judge Mayhew was the kind of interest referred to in 2 Underhill on Wills, at section 689, a life interest by its express terms, with the power of disposing of a part or all of the property itself for a particular purpose only, as for the support and maintenance of the life tenant, with a valid gift over to the other distributees which might be disappointed by the exercise of his power by the life tenant and the application of the principal to the purposes indicated. As to such a life tenant Mr. Underhill says substantially, in another section, he may not use the proceeds of a sale of the property for another purpose, he cannot give them away, nor can he devise the land, and also that those who take what remains unused, do not take by descent, as heirs of the first taker, but as purchasers and remaindermen under the will of the testator (section 687).”
The same conclusion was reached in Adams v. Prather, 176 Cal. 33, 167 P. 534, 535, in construing a will which read: “I give all the property of which I die possessed to my husband. * * * Upon the death of my husband * * * one half of the unexpended portion of my estate bequeathed to my husband to be given to” (nieces of testatrix). To the same effect is In re Estate of Tooley, 170 Cal. 164, 149 P. 574, Ann.Cas.1917B, 516, where the words “If at her death she has neither husband or children I desire any property that may be left divided equally among my sisters and brother” were held to constitute a valid limitation upon a devise made in unconditional language in an earlier paragraph of the will. In Re Estate of Thompson, 62 Cal.App. 493, 217 P. 127, 128, a provision in the seventh paragraph of a will to the effect that “I require and direct that in the event of my daughter * * * dying without issue such estate as shall remain shall be distributed,” etc., was held not to be repugnant to the absolute devise to the daughter contained in the second paragraph of the will; that the “provisions of the will show a clear intent * * * to bequeath * * * a limited estate.”
A transfer of property by will or succession is taxable under the inheritance tax law in force at the date of death of the decedent (61 Cor.Jur. 1598, 1601; In re Drishaus' Estate, 199 Cal. 369, 249 P. 515; McDougald v. First Federal Trust Co., 186 Cal. 243, 199 P. 11; Riley v. Howard, 193 Cal. 522, 528, 226 P. 393, 397; In re Estate of Hite, 159 Cal. 392, 113 P. 1072, 32 L.R.A.[N.S.] 1167, Ann.Cas.1912C, 1014); and this is true of an estate in remainder (Riley v. Gordon, 137 Cal.App. 311, 319, 30 P.(2d) 617, 619, 61 Cor.Jur. 1600, 1685), even though contingent or defeasible (61 Cor.Jur. 1684, 1685). In the case last cited, a husband and a wife created a trust whereby the survivor was given a life estate in certain property and upon the death of the survivor, the relatives of the husband were to share in one–half the corpus of the trust, and the relatives of the wife were to share in the other one–half. The appellate court, in determining that the entire estate was taxable, said, in part: “* * * the remainders thereby created were vested though defeasible, and this vesting in interest constituted the succession. Consequently the taxable transfer occurred upon the creation of the trust and not upon decedent's death, although the market value thereof would be determined as of the date of death.” The court further said: “It is clear, we think, that the transaction in question was in effect the transfer by decedent of a life estate in the community property to his wife contingent upon her survivorship, and, with her consent, of vested though defeasible interests in remainder, and that no title or estate passed from her to any one. This being true, it was a transfer within subdivision 3 of section 2 of the act (St.1921, p. 1500), and was taxable in its entirety to the husband's estate upon his death. Consequently no community exemption attached to the transfer to the beneficiaries other than the wife, and these beneficiaries should be taxed according to their relationships to decedent Gordon.”
At the time of the death of Mrs. Rath, the act then in force (St.1921, p. 1507, as amended by St.1929, p. 1842) contained the following provision: “Sec. 8. When any grant, gift, legacy, devise or succession upon which a tax is imposed by section 2 of this act shall be an estate, income, or interest for a term of years, or for life, or determinable upon any future or contingent event, or shall be a remainder, reversion, or other expectancy, real or personal, the entire property or fund by which such estate, income, or interest is supported, or of which it is a part, shall be appraised immediately after the death of the decedent, and the market value thereof determined, in the manner provided in section 16 or 17 of this act, and the tax prescribed by this act shall be immediately due and payable.”
In Riley v. Howard, supra, with reference to a similar provision in an earlier act, the court said: “The value of the property or interest is to be determined as of the day of death and not in reference to a subsequent day”; and “Many other authorities might be cited to the effect that the taxability of inheritances, devises, etc., such as are provided for by the several inheritance tax acts, must be determined by the law in effect at the time the transfer is made and the market value thereof as of the date of the death of the decedent.”
It follows that under the construction placed upon the instruments here involved, to wit, that upon the death of Mrs. Rath on February 8, 1935, a life estate passed to her husband, with remainder over to appellants, an inheritance tax due from appellants should have been determined under the act in force on that date.
That part of the order or “judgment” from which the appeal is taken is reversed.
HOUSER, Presiding Justice.
We concur: YORK, J.; DORAN, J.
A free source of state and federal court opinions, state laws, and the United States Code. For more information about the legal concepts addressed by these cases and statutes visit FindLaw's Learn About the Law.
Docket No: Civ. S. C. 53.
Decided: April 30, 1937
Court: District Court of Appeal, Second District, Division 1, California.
Search our directory by legal issue
Enter information in one or both fields (Required)
Harness the power of our directory with your own profile. Select the button below to sign up.
Learn more about FindLaw’s newsletters, including our terms of use and privacy policy.
Get help with your legal needs
FindLaw’s Learn About the Law features thousands of informational articles to help you understand your options. And if you’re ready to hire an attorney, find one in your area who can help.
Search our directory by legal issue
Enter information in one or both fields (Required)