Mahan v. Plank

289 F. 722, 1923 U.S. App. LEXIS 2042

• Court: Court of Appeals for the Seventh Circuit
• Decided: April 12, 1923
• Docket: No. 3112
• Status: Published

Opinions

EVAN A. EVANS, Circuit Judge.

Appellant by this appeal seeks to review a decree entered against him in a suit which he brought to recover certain shares of stock of the Washington Park National Bank, and which he claims were given to him by his father October 15, 1913, their enjoyment, however; to remain in the father until his death, which occurred May 25, 1919; The outcome depends upon the construction and effect of a certain letter written by the father to the son and herewith set forth in full:

“Chicago, 111., Oct. 15, 1913.

“Henry W. 'Mahan, Jr., 1143 'No. Los Kobles Ave., Pasadena, Calif—My Dear Son; I am getting to be an old man, and had in mind doing a little something Christmas; but, as there is no time like the present, I want to do the following now:

“I want to leave something that shall be yours at my death, but at the same time I want to fix it absolutely now. I want to leave you 50 shares in the Washington Park National Bank, of Chicago, to be delivered to you at my death. This is worth to-day exactly $10,000 or more, and growing in value. It is paying dividends of $750 per year, and ought to always pay that or more.

“To accomplish this, it is necessary for me to get the dividends during my lifetime, to pay on more stock I have bought, but not fully paid for, so there will be still more to divide, if I continue to live and stay able to work. To do this, I inclose a certificate for 50 shares in your name, which please indorse on the back, where marked, and have your signature witnessed by any one, and mail to me at once, by registered mail. You will find it in a sealed envelope in my safe deposit box in this or the Washington Park National Bank, and I want you to keep it and not sell, unless all the other children decide together to sell, or, if you should ever sell, I want the other children to have the first right to buy at the market. I am asking each one to do this, as I want that bank to stay in the family control. I know you will obey my wishes in the matter. Also please sign the inclosed order to the bank to pay me the dividends during my life, and power to vote your stock.

“You may get this stock soon, or may have to wait a few years; but you and I, when this is fixed up, will have the satisfaction of knowing I had you in mind during my life, and wanted to do something that would show such to be the case after I am through. I inclose you a copy of how I have divided with your mother and the children. I trust you will think it fair, and am writing each one an exact copy of this letter. If I live, there will be more to divide, if I make the money. At any rate, I trust your judgment will be that I have accomplished, not all my heart hoped for, but have done something at least that has proven an ordinary’s father's love for you.

“May God bless and keep you always.

“Your loving father, H. W. Mahon.

“P. S.—You understand that your stock is worth much more when it is kept in the family, or when the family control the majority of this stock. Kindly sign inclosed, which helps to accomplish that. This market now is over $200.00; but, if all should sell together, it would probably bring $275 to $300 per share.

“Xou will also note that I have attempted to divide $75,000, and I have given your mother $100,000, so that she is sure of a good income, and will have more to divide, when she is through, than I had. I think you will agree that I have been thoroughly fair in the matter.

“This is reason I have deeded Pasadena house to Adelaide. Beal estate depreciates.' Bank stock increases in value, so while hers looks a little bigger, it is not, as you have your share in bank stock, which will grow faster in value. I have also an extra insurance policy for $2,000—$1,000 to you and $1,000 to Adelaide.”

Other facts alleged to have a bearing upon the question of intent are: The certificate of stock referred to in the letter was a blank one, and the son assigned it to the father before it was filled out and executed by the bank. On October 31, 1913, this blank certificate was filled out and executed by the batik, and ran to the son; bu.t the father retained its possession until it was surrendered January 3, 1916, and new certificates issued in lieu thereof. In 1914 and 1915 appellant was asked by the bank to sign and execute a power of attorney to' vote this stock at the annual meeting of the bank. No dividends were' ever paid to appellant, who was 17 years of age at' the time the alleged' gift was made, and reached his majority in August, 1917. His father was president of the bank at the time he wrote the letter. A very similar letter was written and sent to a daughter at the same time. Instead of bank stock, other property was mentioned in this letter to the daughter.

The issue which we must determine is an extremely narrow one— a question of intent. We must decide an issue of fact, making our deductions from evidence that has given rise to conflicting inferences. In the last analysis, it is a question of the weight to be given such inferences. If, from the language of this letter, we can read an intent to make a gift in prsesenti, then the decree must be for appellant. The trial judge found against him, and the legal presumptions bearing on the controverted issue strengthen the finding. Such oral testimony as was received, and concerning which there is any doubt or dispute, must also be resolved in favor of appellees, for presumably the trial judge resolved such facts in their favor.

While there is certain evidence outside the letter which the court properly received as bearing upon this question of intent, it is the letter and that document” only that must furnish support for appellant’s ' contention that a -gift inter vivos was established. The reasonableness or unreasonableness of the gift is not before us. Nor can the relationship of the parties or their subsequent actions either enlarge or narrow the effect of the letter. The motive for the father’s subsequent action is not disclosed, and any statement of counsel dehors the record, must be ignored. In other words, the letter is the sole source of appellant’s title, and, while subsequent or contemporaneous action may help explain any ambiguous language indicative of intent, such action is not capable of changing the status of either party or the rights fixed by the letter. Nor can the subsequent action of' either or both parties throw much light on the question of intent in the instant case, because the letter itself leaves little or no room' for uncertainty.

. From a reading of this communication, we immediately gather the impression that the father was contemplating a testamentary disposition of His estate and all of it. It appears that his entire estate, consisting of $240,000, with debts aggregating '$45,000, was under review, and the full distribution thereof among the natural objects of his bounty, the subject of his immediate attention. But when—before or after death—were the gifts to take effect? Were they to be “in praesenti,” or were the gifts to be effective only after death?

Turning to the letter and examining it microscopically, with the sole purpose of answering this question, numerous passages at once force themselves upon our attention (italics are used to direct attention to significant words):

• “I want to leave something that shall be yours at mig death but at the same time I want to fix it absolutely now.”

“I want to leave you 50 shares in the Washington Park National Bank of Chicago, to he delivered to you at my death."

Could intent have been more clearly expressed in these preliminary sentences ? It would have been easy to have given the stock outright, if such were the father’s intent. The two quoted sentences so clearly indicate that a testamentary document, as distinguished from a gift inter vivos, was being drawn, that further search is hardly necessary. But the letter says more. Speaking of the certificate of stock:

“You will find it in a sealed envelope in my safe deposit box, in this or the Washington .Park National Bank, and I want you to keep it and not sell, unless all the other children decide to go together.”

Evidently this sentence was inserted that the son might locate the certificate after the father's death. ‘ Again:

“You may get this stock soon or may have to wait a few years.”

Certainly there is no evidence of an intent to pass title in this language :

“You and I when this is fixed up, will have the satisfaction of knowing that I had you in mind during my life, and wanted to do something that would show such to he the case after I am through.”

Comment is unnecessary.

Another significant sentence is the succeeding one:

“I inclose you a copy of how I have divided with your mother and the children. I trust you will think it fair, and am writing each one an exact copy of this letter. If I live there will he more to dmide, if I make the money."

If a gift inter vivos were intended, why submit an outline of the donor’s plan to divide an entire estate among his wife and children, and indirectly solicit approval of the plan? The postscript contains two significant passages:

“You-will also note that I have attempted to divide $75,000, and I have given your mother $100,000, so that she is sure of a good income, and will have more to divide when she is through than I had.”

He speaks of the disposition by his wife “when she is through” in comparison with his own gifts implying here, what he has directly-ex-' pressed elsewhere, that the value of the gifts is to be determined “when I am through.” The last sentence worthy of consideration is found in the last paragraph of the postscript:

“This is the reason I have deeded the Pasadena house to Adelaide. Real estate depreciates. Bank stock increases in value, and so, while hers looks a little bigger, it is not, as you have your share of bank stock, which will grow faster in value.”

In other words, the property represented by the Pasadena house, which was given Adelaide, was worth more at the time the letfe'r was written than the 50 shares of bank stock, but inasmuch as “real estate depreciates,” and “bank stock appreciates,” there would be approximate equality in the value of the gifts at his death, which he then evidently believed would not be long postponed.

The only persuasive language indicating a contrary intent is found in the sentence:

“Also please sign the inclosed order to the bank to pay me the dividends during my life and power to vote your stock.”

Standing alone, this would well support appellant’s claim of a gift inter vivos. But it must be read as a part of the entire letter, and, so read, is consistent with the plan to make a testamentary disposition of the property. It must be borne in mind that the father first obtained a blank certificate of stock, which he had his son assign to him before it was filled out and executed by the bank officials. After securing this certificate thus assigned, he presented it to the bank and surrendered stock standing in his own name. He then had in his possession the certificate on the back of which was an assignment from his son to himself. He also asked for and obtained (before the stock was issued) an order from the son directing the bank to pay all dividends to him during his life.

Bearing in mind that we are not called upon to determine the legal effect of such transactions, nor the validity of the assignment or of the order, the probative value of these acts in determining the father’s intent remains, and cannot be ignored. They are most significant, for they indicate an intention on the part of the father to take all the necessary steps and precautions to retain possession and control of the certificate of stock (and in fact the paper title), with the attending authority to transfer and retransfer it during his life, as changing circumstances might indicate or require.

Even though no assignment were executed, the possession of the stock certificate by the father is most significant. It may well have been the basis for a finding in appellees’ favpr. For the issuance of the stock certificate, unaccompanied by possession, would not necessitate, nor, standing alone, support, a finding of a gift inter vivos. Allen-West Commission Co. v. Grumbles, 129 Fed. 287, 63 C. C. A. 401; Bowen v. Kutzner, 167 Fed. 281, 93 C. C. A. 33; Walker v. Walker, 66 N. H. 390, 31 Atl. 14, 27 L. R. A. 799, 49 Am. St. Rep. 616; Cummings v. Bramhall, 120 Mass. 552.

Nor can we ignore the rule of law respecting the burden of proof and the quantum of evidence necessary to overcome such burden that applies in a case of this character. Allen-West Commission Co. v. Grumbles, supra; Merchants’ Loan & Trust Co. v. Egan, 222 Ill. 494, 78 N. E. 800. We have been urged to reach a different conclusion because of the relationship of the parties. In other words, it is contended that, because the father was dealing with a son, the court should more readily and easily find the intention to pass title in prsesenti, without which the gift cannot be sustained. Our attention has been directed to the decisions in Beaumont v. Beaumont, 152 Fed. 55 (59), 81 C. C. A. 251; Innes v. Potter, 130 Minn. 320, 153 N. W. 605, 3 A. L. R. 896; Shepard v. Shepard, 164 Mich. 183, 129 N. W. 201, 209. But we do not think they are helpful, much less controlling. In fact, their weight has been gre'atly impaired, if riot destroyed, by the enactment oí inheritance tax laws by the various state Legislatures and the Congress.

The considerations, based largely on common observations, which lead to the announcement of a rule of law requiring a lesser quantum of proof to establish such a gift where the donor was dealing with a child, are now offset by facts, equally a matter of common knowledge, arising out of the application and enforcement of these inheritance tax laws. In fact, it would be better to say that no different rule of law applies,- but that the relationship of father and son, in and of itself, gives rise to inferences which tend to establish the necessary element in a gift inter vivos—intent to pass title in prsesenti. Just as the relationship, which, when shown, implies íove and affection and confidence, furnishes an explanation for the transfer of one’s property during lifetime, so does the existence of the inheritance tax law provide a motive and aii inducement for attempted testamentary bequests executed with the hope of evading or avoiding the transfer tax. As a trait of human nature is the basis of the presumption in the one case, so should it be considered in determining the intention to be drawn from a donation such as the one we are here studying.

To hold and enjoy one’s property, and yet to provide for its passage to children, unburdened by inheritance tax or administration expenses, has been the task and the worry of many an accumulator during the later years, of his life. The decedent could have easily transferred this property and made doubt and dispute impossible. To have done so, however, would have necessitated his surrendering the title to, and the control of, his property, and all the enjoyment that was incident thereto. The rights and privileges of ownership, however, he wished to retain. The pleasure of adding to his accumulations (that he might perhaps have the more to give to his wife and children) he wished to enjoy, and frankly so states in his letter.

Whether the result was fortunate or unfortunate, whether the final disposition of his property was less equitable or more just, cannot concern us. Upon the appellant rested the burden of establishing the intent pf his father to part with title at the time the letter was written; and this task carried with it the burden of showing the transfers to the mother and sister were also made under similar conditions. We are convinced that the burden resting upon appellant to establish an intention to make a gift in praesenti has not been met.

The decree is affirmed.