Opinion
Decided November 25, 1931.
Taxation — Inheritance or succession — Transfer or conveyance in contemplation of death — Section 5332-2, General Code — Decedent executed will and distributed stock seven months thereafter.
On June 5, 1928, S. executed his last will and testament, never having prior thereto executed any will, and, after making certain other bequests, directed the division of the remainder of his estate to his three children in equal shares. On January 22, 1929, he transferred and delivered to these three children, in equal shares, a substantial block of stock, which he then owned. Shortly thereafter he was injured in an automobile accident, as a result of which he died on February 18, 1929. Prior to this accident he had been without any apparent physical ailment or disability, gave every evidence of perfect health, and was very active in the management of large business interests. At the time of his death he was 79 years of age. Held: the stock transferred to his children on January 22, 1929, is subject to the inheritance tax of the state of Ohio, under the provisions of Section 5332-2, General Code.
ERROR: Court of Appeals for Richland county.
Mr. Gilbert Bettman, attorney general, Mr. William J. Ford and Mr. Carleton S. Dargusch, for plaintiff in error.
Mr. Charles J. Anderson and Mr. A.B. Mabee, for defendants in error.
Joseph A. Seltzer died on February 18, 1929. Prior thereto, on January 22, 1929, he had transferred and delivered to each of his three children two hundred and fifty shares of the Shelby Spring Hinge Company stock, appraised at $125 per share; the aggregate value being, for each gift, $31,250, or a total of $93,750.
The sole question involved in the controversy is whether this transfer or conveyance was made in contemplation of death, so that the amount involved became subject to the inheritance tax under the laws of Ohio. The probate court of Richland county held it taxable. On appeal, the common pleas court held it not taxable, and sustained the exceptions of the defendant in error to the finding of the probate court. From that decision of the court of common pleas error is prosecuted to this court.
The record shows that Joseph A. Seltzer at the time of his death was 79 years of age, and that prior to an accident sustained by him between the date of this transfer and his death he had been physically vigorous and without any apparent disability or ailment. His death was due to injuries sustained from being struck by an automobile.
The record shows that during his whole life the decedent had been a very vigorous and active man; that up until the time of his injury he had actively conducted his own affairs, being interested in two or three manufacturing plants, owning and operating a large stock farm, being an active director in a bank, and looking after various real estate holdings, and, in fact, attending to all of his business affairs.
He left three children, a son living in Shelby, another son living in Cleveland, and a daughter living in the far West. He left one granddaughter by a deceased son.
Some time in the year 1924, the son John, a resident of Shelby, was started in a garage business by his father, who advanced therefor the sum of $5,000. At the same time he gave to each of the other two children the same amount. Later, desiring the cooperation of his son John in his other business, he induced him to give up the garage business, which the son then leased, and the son's statement in regard to whether or not he lost anything by the change was that it was problematical; but he testified that his father stated to him that, if he would make this change he (the father) would make it right with him.
This son, John, also built a home in the city of Shelby, and the record shows that his father insisted upon certain changes being made in that proposed home, which cost approximately a sum of $4,000 in excess of the amount which the son had intended to invest in the home; that the father insisted that the changes be made, and told him, in effect, that he (the father) would stand back of him.
This son continued in business with his father until the end, but it does not appear that anything exceptional was done by the father until the transfer of this stock on January 22, 1929. The other son, a resident of Cleveland, was not in good health, and was indebted to the extent of a few thousand dollars, and the daughter, living on the Pacific Coast, had a known indebtedness of approximately $1,000. The certificates of stock appear to have been handed by the father to each of the sons, and one certificate mailed to the daughter.
It does not appear that at the time of making these transfers the father made any statement that would indicate that the transfer was in contemplation of death, or for the purpose of avoiding any inheritance tax; nor does it appear that he made any statement indicating that it was a payment of any obligation, or the making good of any promise.
On June 5, 1928, the decedent executed a will, which is in evidence, wherein he gave to his wife $200,000, to his granddaughter $10,000, and gave certain sums to certain other relatives, to employees, to a church, to a library, and to a hospital, and then directed the division of the remainder to the same three children to whom he had made these transfers of stock.
The record shows that the amount which came to each of the three children, under this residuary clause, was $84,767.61.
The law in Ohio was laid down in the case of Tax Commission v. Parker, 117 Ohio St. 215, 158 N.E. 89. The first and fourth propositions of the syllabus read:
"1. The provision of Section 5332-2, General Code, `Any transfer of property from a resident * * * if shown to have been made without a valuable consideration substantially equivalent in money or money's worth to the full value of such property, if so made within two years prior to the death of the transferor, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this title,' casts upon the transferee the burden of showing that a transfer of property made within two years of the death of the transferor was not made in contemplation of death."
"4. The controlling fact in determining whether a transferor made the transfer of property in contemplation of death is whether the purpose of the transferor was to distribute or partially distribute his estate, or was simply to do an act of generosity or kindness."
The court, in the opinion written by Judge Robinson, says at page 223 of 117 Ohio State, 158 N.E. 89, 92:
"The burden by statute was cast upon the donees to show that the gifts within that period were not made in contemplation of death. We are of opinion that they did not sustain such burden. On the contrary, the record discloses that the property was transferred without a valuable consideration; that it was upon the part of the donor the beginning of a systematic distribution of property, such a distribution of property as a person would make by will, and had for its purpose such purpose as would actuate the mind of a person making a will; that the evidence of statements made by the donor indicate such purpose; that the gifts made subsequent to such statements appear to have been made in pursuance of such purpose, and that this distribution of his property in advance of his demise was a distribution in the manner he would have it distributed after death, and that the outstanding purpose of the donor was to distribute his property."
The question to be decided in this case is a question of fact, and whether the facts, as disclosed by this record, are such as to bring this case within the rule as laid down in the Parker case.
Counsel for defendants in error attempt to distinguish the two, and as authority therefor cite two cases, to wit, Burton, Exr., v. Tax Commission, 37 Ohio App. 183, 174 N.E. 361, and In re Estate of Donnell, 28 N.P. (N.S.), 211. A careful consideration of these two cases is justified, but the dissimilarity between the facts in them and the facts in the Parker case and the case at bar will be apparent.
In the Burton case, the gifts in controversy had come to the donor from her father-in-law, who had died shortly prior thereto, and the donor, shortly after receiving these bequests from her father-in-law, turned them over to her children and others whom she regarded as the proper beneficiaries of her father-in-law. The court states in its opinion, on page 188 of 37 Ohio App., 174 N.E. 361, 363: "It is patent also that, while the donor apprehended that the title to her father-in-law's bequest had, as a matter of law, vested in her, she, as far as she was personally concerned, did not consider this bequest as a part of her own estate."
The court says that this donor exercised over this property only such authority as was necessary to transfer the securities to her transferees, that at the time of the death of her father-in-law she was in the East, and that upon her return she immediately indorsed the securities over to her transferees. The court in the Burton case, on page 187 of 37 Ohio App., 174 N.E. 361, 362, says: "The facts in the Parker case are wholly dissimilar to those in the instant case, and it is our opinion that the case at bar is an ideal case presenting facts conclusively rebutting the presumption that the gifts involved were made in contemplation of death."
In the Donnell case, the record shows that the husband of the donor had left a large estate; that his widow, who was the donor in that case, dissatisfied with the will, elected to take under the law, and transferred a substantial part of what she so took to her stepson, who was the own son of her testator. The court, in the Donnell case, also distinguished it from the Parker case in this language, as shown on page 216 of the opinion in 28 N.P. (N.S.):
"The instant case is further distinguished from the Parker case in that the donee was not the donor's own child and could not take any part of the estate as an heir. That the gift here was made to right a wrong and in consideration of the present needs of the donee, and not `in contemplation of death,' clearly an act of generosity and the donor's expression of appreciation of a devoted (step) son."
In the Donnell case the court further finds that the donor made no general distribution of her property at the time of this transfer, but was simply attempting to do what she regarded as an act of justice, giving to her stepson what she believed should have been given to him by his father.
In our judgment, the facts in the instant case are not at all similar to the facts in the Burton case, or in the Donnell case. They are very similar to the facts in the Parker case.
The gifts to the three children were in the same proportion as the residuum left to them, and in fact the amount transferred to each of these three was more than one-third of the amount left under the will to each of them.
It is claimed that the basis of the transfer was a sense of obligation to the son, John, and an act of generosity to the others, who were in debt. However, the son John, had, at his father's instance, expended $4,000 in an addition to a home, and had made a change in business with problematical financial consequences. The other son had an indebtedness of a few thousand dollars, the exact amount not appearing in the record. The daughter had, as far as the record shows, an obligation of $1,000. To compensate the son John, or to relieve the others from their indebtedness, would not have required anything like $31,250 for any one of them.
So far as the record shows, this decedent never made a will until June, 1928, at which time he was presumably 78 years of age. Seven months thereafter he makes this partial distribution, just in accordance with the manner in which these three transferees would have taken under the will. Under these circumstances, what is the presumption as to whether or not the transfers were made in contemplation of death? When does a man contemplate death? At the age of 79 he must certainly begin at least to contemplate it. In the language of the Psalmist: "The days of our years are threescore years and ten; and if by reason of strength they be fourscore years, yet is their strength labor and sorrow, for it is soon cut off, and we fly away."
That this decedent must have realized this fact is evidenced by the execution of his will in June, 1928, when, so far as the record discloses, he had never, prior thereto, executed any will; and the transfer of this amount of stock of such value, under the circumstances detailed, seems to us clearly to show that the transfer was in contemplation of death.
The statute, Section 5332-2, General Code, says that a transfer, "made within two years prior to the death of the transferor, shall, unless shown to the contrary, be deemed to have been made in contemplation of death," etc.
The burden is clearly cast upon the donees to rebut the presumption. Have they done so in this case? We think not. In our judgment the finding of the court of common pleas is clearly and manifestly against the weight of the evidence; indeed there was an utter failure, in our judgment, on the part of the donees to rebut the presumption fixed by statute, and it follows that the judgment of the court of common pleas must be and the same is hereby reversed.
Following the procedure adopted by the Court of Appeals in the Burton case, supra, which, in turn, is based upon the decision of the Supreme Court of Ohio in the case of Bridgeport Bank Co. v. Shadyside Coal Co., 121 Ohio St. 544, 170 N.E. 358, this cause is remanded to the court of common pleas of Richland county, Ohio, for a new trial.
Judgment reversed and cause remanded.
SHERICK, P.J., and LEMERT, J., concur.