WEDDLE v. KIRKWOOD (1956)

This is an appeal from an order fixing an inheritance tax. The decedent died on July 19, 1955. Her will was probated and an executrix appointed on August 5, 1955. The report of the inheritance tax appraiser was filed December 9, 1955, showing a tax due of $20,734.49. The executrix and her attorney filed an objection to the report on the sole ground that the deductions allowed for executor's commissions and attorneys fees were not in accordance with Section 901 of the Probate Code, as amended by the 1955 legislature. After a hearing the court found that these commissions and fees were computed in the report in accordance with Section 901 as those provisions were in effect on the date of the decedent's death, but not in accordance with those provisions under the amendment which became effective on September 7, 1955; and that these commissions and fees were correctly computed in the report filed by the inheritance tax appraiser. An order was entered overruling the objection made, and fixing the inheritance tax at $20,734.49. The executrix and her attorney have appealed from this order.

The appellants contend that the amendment to Section 901 which became effective on September 7, 1955, affected a matter of procedure only; that procedural amendments apply to pending cases; that an application for legal fees is a separate proceeding begun after probate proceedings have begun, and should be governed by the law in force when the fees are allowed; that there is no vested right to the fees, and the right thereto does not accrue, until they are finally fixed by the court; that the legatees take the property subject to all expenses of administration, of which such commissions and fees are a part; and that the legatees have no vested right in a limitation of such fees.

The appellants rely on McClurg v. McClurg, 212 Cal. 15, 297 P. 27, and In re Estate of Spires, 126 Cal.App. 174, 14 P.2d 340. They also argue that certain statements made in Re Estate of Parker, 200 Cal. 132, 251 P. 907, 911, 49 A.L.R. 1025 are not controlling because they are dicta since the amendment there in question was passed after the order appealed from was made. It is also pointed out that six years after the Parker case was decided the Supreme Court denied a hearing in the Spires case.

The McClurg case held that the rule that a new law will not be presumed to be retroactive in effect has no application to purely procedural matters arising in the course of litigation begun before the amendment. In the Parker case, the trial court had applied an amendment allowing increased fees for extraordinary services, the amendment having been passed after the order appealed from was made. The order was reversed on the ground that the amendment could not be given a retroactive effect. The court also said: ‘A statute will not be given a retroactive construction by which it will impose liabilities not existing at the time of its passage. ‘Laws which create new obligations, or impose new duties, or exact new penalties because of past transactions have been universally reprobated * * * and it is to be presumed that no statute is intended to have such effect unless the contrary clearly appears.’' Similar statements appear in Re Estate of Benvenuto, 183 Cal. 382, 191 P. 678, 679, where the court said: ‘But the Legislature cannot, by amending the law after his death, impose upon the property of a decedent any new or additional burdens'. While these statements may be dicta in those instances, they state a well recognized principle of law. In the Spires case the trial court had refused to apply an amendment allowing increased fees for extraordinary services which became effective before the application for fees were considered. The order was reversed, it being held that the heirs take at the time of death subject to expenses of administration, of which compensation to the executor is a part; that the right of the executor to such compensation does not vest or accrue until the amount of his compensation is determined and allowed; and that the law at the time the order fixing the compensation was made was the law to be applied. It may be noted that the Spires case involved extraordinary fees which are not only discretionary but depend upon unusual matters arising during the probate proceedings. The allowance of such fees is naturally more procedural in character than the allowance of fixed statutory fees, which is a matter of clerical computation.

The Spires case seems to lend some support to the contention here made that the 1955 amendment to Section 901 would apply in this case, insofar as the allowance of fees is concerned. However, this view would seem to conflict with the principles stated in the Parker and Benvenuto cases that a new law will not be applied where it imposes new burdens with respect to a past situation, and will be presumed not to have been intended to have such an effect unless the contrary clearly appears. While the allowance of ordinary executor and attorney fees may be a part of the expense of administration, and while the right thereto may not become vested until they are allowed, the allowance of new increased fees would seem not to be a mere matter of procedure but one which will, necessarily, impose a new or additional burden upon a preexisting situation. It is hardly logical to consider an increase in such fees as merely procedural when it conclusively was passed. In considering another phase necessarily result in an increased burden on the estate by imposing a further liability which did not exist at the time the new law has passed. In considering another phase of this inheritance tax it has been held that the transferees acquire a vested right, in both the tax rates and the amounts which are to be exempted from the tax, as of the time their interests are vested, (which would here be the time of death) and that neither of these elements can be thereafter changed. In re Estate of Potter, 188 Cal. 55, 204 P. 826.

However the conflict in legal principles thus suggested may be finally resolved, the result is not controlling here. The Spires case involved only the allowance of fees under an amendment to the probate law. No fees have as yet been allowed or refused in the instant case, and the question as to what fees should eventually be allowed is not directly involved here and need not be decided. If it be assumed that such increased fees may properly be allowed, it would not necessarily follow that such higher fees are allowable as deductions for inheritance tax purposes. The question here is as to the proper interpretation of pertinent sections of the Revenue and Taxation Code, and whether increased fees, if eventually allowed, are allowable as deductions for inheritance tax purposes.

The right to the inheritance tax vests in the state at the time of death, or at the time of the transfer in question. A new law which reduces the tax which would otherwise be due is not a mere matter of procedure, but is one involving a substantive right of the state with a corresponding burden imposed on the estate and heirs. Since substantive rights and duties are affected, the mechanics of fixing the amount of the tax should not be changed by a new law, at least in the absence of a clear intention to that effect. It has long been considered in this state, in general, that inheritance taxes are fixed and determined as of the date of death. In considering a transfer before death the court said in Riley v. Havens, 193 Cal. 432, 225 P. 275, 276: ‘It is the settled law of this state that the taxability of such transfers must be determined by the law in effect at the time the transfer is made, * * * and no subsequent act of the Legislature can thereafter add to or diminish the tax or otherwise disturb it.’ The same principles should be applied in construing the provisions of the inheritance tax law now found in the Revenue and Taxation Code.

Section 13988 of that code provides that expenses of administration shall be deducted from the appraised value of the property, including ordinary commissions under section 901 of the Probate Code and ordinary attorneys fees under section 910, both of which are to be ‘computed on the value of the decedent's estate as of’ the date of death. This clearly provides that the amounts to be deducted are to be computed on the value of the property at the time of death, and the reasonable inference is that the intention was that these amounts be also computed on the fee schedules then in effect. That this was the intention is indicated by the general policy long followed with respect to such taxes, and is confirmed by other sections of the Revenue and Taxation Code relating the amount of the taxes to the date of death. Section 13402 provides that the tax is to be computed upon the value of that portion of the property ‘in excess of the exemptions allowable’ on the date of death, and at the rates then in effect. Section 13408 provides that several transfers are to be treated as a single transfer as of the date of death. Section 13951 provides that the value of the property is to be taken as of the date of death no matter when the transfer occurred. Section 13952 provides that a transfer determinable upon any future event is to be valued as of the date of death. Section 13956 provides that in determining the value of any estate or interest no allowance shall be made for any contingency which might defeat the interest. Section 13983 provides that debts owed by the decedent at the time of death are deductible. Section 13987 provides that general taxes which are a lien at the time of death are deductible. And section 14102 provides that the tax is due and payable at the time of death.

That this was the intention of Section 13988 is further confirmed by other sections outlining the proceedings for determining the tax. An inheritance tax appraiser must be appointed to ascertain and submit a report on the amount of the tax, if any, which is due, 14501. The appraiser must file such a report, 14506, and the clerk must give notice thereof, 14508. If no objections are filed the court may make an order confirming the report and ‘fixing the tax’. 14509. If objections are filed a hearing date must be fixed with notice, 14511, and for the purpose of the hearing the report is presumed to be correct, 14512. Upon completion of the hearing the court may make an appropriate order, 14513.

Section 1024 of the Probate Code further provides that before any distribution is made all inheritance taxes must be paid. Section 922 provides that the executor must render a final account when the estate is in condition to be closed. Sections 901 and 910 provide for the allowance of fees based upon ‘the amount of estate accounted for’ by the executor. Under the procedure thus provided, the amount of the inheritance tax is usually determined before the amount of the commissions and attorneys fees is to be fixed and allowed.

All of these considerations strongly indicate that it was the intention of Section 13988 to provide that the fees to be deducted pursuant to Sections 901 and 910 were those provided for in those sections as they were in effect at the time of the death, and we so hold. To change the amount of the deductions allowed would have the practical effect of changing the rates, which may not be done. In re Estate of Stanford, 126 Cal. 112, 54 P. 259, 58 P. 462, 45 L.R.A. 788. Whatever was meant by the 1955 amendment to Section 901 of the Probate Code, with respect to its application to pending cases, it must be held that it was not intended to affect or reduce the inheritance tax as provided for in the Revenue and Taxation Code. It follows that the court did not err in overruling the objection made, and in fixing the inheritance tax in accordance with the law in effect at the time of death.

The order appealed from is affirmed.

BARNARD, Presiding Justice.

GRIFFIN and MUSSELL, JJ., concur.