Stark v. United States

5 Ohio Law. Abs. 247

• Court: District Court, D. Ohio
• Decided: May 28, 1926
• Docket: No. 3614
• Status: Published

Opinion

HICKENLOOPER, D. J.

The petition is drafted in the form of two separate causes of action. By the first cause, Edgar Stark, executor et al, seek to recover the sum of $312,058.60 with interest, which, it is alleged, was illegally assessed and paid under protest as federal estate taxes.

Jan. 15, 1915, Jacob Schmidlapp executed a deed of trust to the Bankers Trust Co. of New York, whereby he transferred to them approximately $3,000,000 off investmjent secu|riti|es with the power to hold same together with any other property that might be added later; to collect and receive rents, issues, interest and profits therefrom; and after paying all charges “to pay arid apply the remainder quarterly to the use of the donor during his life time hut not subsequent to Aug. 10, 1923 except as hereinafter provided.”

The trust further provided that upon the death of the donor or if he should be living Aug. 10, 1923, the trustee was directed to divide the trust estate into two equal parts which were to be paid to the donor’s two sons.

Further it was provided that during the lifetime of the donor he was to have control and direction of all investments and that the trustee shall be fully protected. A further clause gave the donor power to revoke in whole, or alter in any way he desired, the trust agreement.

The creator of the trust died Dec. 18, 1919 and his sons survive. The value of the trust as of that date was included in the valuation of the taxable estate upon the hypothesis that the trust so created was intended to take effect in possession and enjoyment upon donor’s death.

The second cause of action seeks to recover from the collector of internal revenue for the First district of Ohio, the sum of $25,295.13 with interest, claimed to have been wrongfully assessed and paid under protest as additional federal tax.

The third cause of action contains no allegation of application for refund, such allegation being made in the first cause of action.

The United States demurred upon four grounds, first, that there is a misjoinder of parties plaintiff, the residuary of the decedent being joined; second, there is a misjoin-der of parties defendant; and that the actions do not state facts sufficient to constitute causes of action. The court ruling upon the demurrers, held:—

1. The estate tax was paid by the executor from the assets of the estate without recourse upon the children of the decedent, the beneficiaries in remainder under the trust agreement.

2. The Union Trust Co. of Cincinnati, a testamentary trustee for charitable purposes, is a proper party planitiff under 12254 GC. although not indispensable, as their charitable trust would be diminished by the taxation, and, therefore, the first ground of the demurrer is overruled.

3. The second ground of demurrer will be sustained as the suit against the U. S. is brought under 42 Stat. 311-227, and is tried to the court, while the action against the Collector is under different provisions of law and either party has the right to a trial by jury.

4. The revenue acts relating to such matters are intended to include as taxable, all property conveyed during the life time of decedent by trust or otherwise, in which legal or equitable interest or possession therein is intended to be postponed until donor’s death.

5. The contention that the provision in the trust agreement which refers to the vesting at a determinable time, whether donor is deceased or not, takes it out of these acts, is untenable.

6. The life estate still remains a life estate though, through a happening of an uncertain contingency it may be terminated before death, because until that event happens the estate is a life estate and therefore the decedent died a life tenant.

Attorneys — Maxwell &Ramsey and Jos. S. Graydon for Stark et; Haveth E. Mau, U. S. Atty., and Simon Ross, Asst. U. S. Atty., for U. S.; all of Cincinnati.

7. Where the trust agreement is in this form it shall be construed as testamentary in character and neither declarations before or after the execution of the deed will be received to negate the clearly expressed intent of the trust deed itself.

Demurrer sustained.