State Board of Equalization v. Cole , 122 Mont. 9 ( 1948 )

It is elementary that where a statute deals with a subject generally and another deals specifically with a part of the same subject, to the extent of any necessary repugnance between them, the special prevails over the general. A few of the many cases so holding are the following: Stadler v. City of Helena, 46 Mont. 128,127 P. 454; Daley v. Torrey, 71 Mont. 513, 230 P. 782; Franzke v. Fergus County, 76 Mont. 150, 245 P. 962; Langston v. Currie, 95 Mont. 57, 26 P.2d 160; Durland v. Prickett,98 Mont. 399, 39 P.2d 652; In re Wilson's Estate, 102 Mont. 178,56 P.2d 733, 105 A.L.R. 367.

Under subdivision 6 of section 10400.1, it is only one-half of the property held in the joint names of two or more persons or is deposited in banks in the joint names of two or more persons, that is taxable. In legal effect the legislature by saying that one-half is taxable has said that the other one-half is not taxable.

True the statute says "or other proper fraction thereof" but that means that when there are three joint tenants the fraction deemed to be passing upon death would be one-third, if there be four, the proper fraction thus passing would be one-fourth, etc.

This is the manner in which courts usually construe statutes of similar import. See Kidder on State Inheritance Tax and Taxability of Trusts, page 114, et seq. Here the joint tenancy was between two persons only and hence the fraction taxable would be one-half.

The case of Walsh v. Hall, 131 Conn. 345, 39 A.2d 889, is relied upon as announcing the rule that a joint bank account which, under the facts, was intended to take effect at death was taxable as a transfer under the statute taxing transfers intended to take effect in possession or enjoyment at or after death. But the statute there under consideration dealing with joint estates contained a proviso (sec. 184f, 1941 Supplement) not found in ours to the effect that the law taxing jointly owned property shall not be construed to prevent the taxability of the transfer under the provisions of subsection (c) or (d) of section 395e, 1939 Supplement, which subsections cover transfers in contemplation of death and those intended to take effect at or after the death of the transferor.

Had we such a proviso in subsection 6, then of course that case would be applicable, but not having such a proviso in our statute then the case is of no value here except as an argument in favor of such legislation. The joint tenancy statute involved in the case of Evans' Estate, 57 Pa. Dist. Co. 55, relied upon by the board on rehearing had a similar proviso and hence is not applicable here.

The attempt to reconcile the two subsections, (3) and (6), of section 10400.1, so as to permit the taxation of one-half of the property received by the survivor under each subsection (a proposition not urged by the state board), proceeds on the fallacious notion that the making of the joint bank account constituted a complete gift of one-half of the deposit as of that time. The case of Ludwig v. Montana Bank Trust Co., 109 Mont. 477,98 P.2d 377, 379, is cited as sustaining that conclusion. That case does not so hold. That question was not involved in the case. In that case one of the joint depositors had withdrawn the money while both were living and the action was against the bank for alleged conversion. The only question before the court and the point upon which the court divided was whether certain moneys were properly deposited in the joint account. The case of In re Sullivan's Estate, 112 Mont. 519,118 P.2d 383, simply held that the joint account agreement controlled upon death rather than a subsequently made will.

Upon the creation of a joint bank account there is no completed gift by one to the other. The one furnishing the money simply gives to the other the right to withdraw the funds, but reserves to himself the same right. So long as the one furnishing the money reserves that right there can be no completed transfer or gift to the other, where as here the other has not himself exercised the right to withdraw the funds.

There being no completed gift or transfer as of the time of making the deposit, then of course it would follow that there was no transfer in contemplation of death. There was no transfer at all. It seems to me that where as here we are dealing with an account actually in the bank at death subsection 6 and it alone has application. The suggestion of possible fraud was disposed of by the court in the case of In re Tilley's Estate, 166 A.D. 240,151 N.Y.S. 79, 81, where the court said:

"While there might be a joint tenancy created which would be so obviously fraudulent in its inception as to take it out of the general rule, we are persuaded that where an account is created in the manner permitted by the Banking Law, with all of its incidents known and recognized in the law, it cannot be presumed that there was any other intention than that which the law ascribes to such an act, and that property thus disposed of is not `made in contemplation of death,' as that language is understood in the jurisprudence of this state nor `intended to take effect in possession or enjoyment at or after such death.' Section 220, Tax Law [consol. Laws, c. 60].

"If the Legislature deems such dispositions of property to be properly taxable, that is a question which may be dealt with in the proper department; but this court has no power to enlarge upon the scheme of tax laws. (Citing cases.)"

That the legislature did not consider the mere making of a joint bank account as a gift by the one furnishing the money of one-half to the other within the meaning of the taxing statutes is made apparent from the fact that if the so-called donee died first under the statute the donor would have no tax to pay under subsection (6) because of the last two lines reading, "except such part thereof as may be shown to have originally belonged to the survivor and never to have belonged to the decedent."

To say that a completed gift of one-half is accomplished by the making of the joint deposit would defeat the purpose of the legislature expressed in the last two lines of subsection (6), because if the so-called donee died first and there was a completed gift of one-half to the donee, then that one-half would by right of survival pass to the donor but the last two lines of subsection (6) plainly make all the account untaxable under such circumstances.

So far as the record in this case shows the joint bank accounts were made in good faith and in the form and manner recognized as proper under the law, both state and federal, and so long as we have a statute specifically dealing with the taxation of joint bank accounts passing to the survivor they are governed by that statute. It is noteworthy that the Supreme Court of Pennsylvania under statutes substantially the same as ours in Re Cochrane's Estate, 342 Pa. 108, 20 A.2d 305, 307,135 A.L.R. 1058, upheld the statute taxing the survivor upon the basis of the fractional portion of the estate by dividing the whole amount by the number of joint tenants. It said, "Joint tenancies are in a class by themselves and the tax here in question being uniform upon all joint tenancies the constitutional provision is not violated."

The court made no attempt to justify the statute on the ground that other fractions of the estate were taxable as transfers in contemplation of death or intended to take effect at death, though Pennsylvania has a statute corresponding to our subsection (3).

Utah has a statute imposing a tax on transfers made in contemplation of death much like our subsection (3) of section 10400.1. It was involved in the case of In re Lambourne's Estate, 97 Utah 393, 93 P.2d 475. It also has a section dealing with the taxing of property held in the joint names of two or more persons.

The case of In re Cowan's Estate, 98 Utah 393,99 P.2d 605, 606, involved joint bank accounts and the court, in determining whether they were taxable, applied and construed the special statute dealing with joint bank accounts. It read: "Whenever property is held in the joint names of two or more persons, or as tenants by the entirety, with right of survivorship, or is deposited in banks or other institutions or depositories in the joint names of two or more persons and payable to the survivor or survivors upon the death of one of such persons, the right of the survivor or survivors to the immediate ownership or possession and enjoyment of such property shall be deemed a transfer taxable under the provisions of this chapter in the same manner as if the whole property to which such transfer relates belonged to the deceased and passed to the survivor or survivors by will." (Sec. 80 — 12 — 5, R.S.U. 1933.)

The court held that without that statute the "property transferred as an incident of the enumerated contractual relationships is not subject to inheritance tax laws."

It then held that the whole of the estate was taxable under the statute relating to joint tenancies. That decision was proper under that statute because the joint tenancy statute specifically provided that all of it should be taxed whereas ours says that only one-half shall be.

It is noteworthy too that Washington taxes the whole of the jointly owned property (See Nelson v. Olympia Federal Savings Loan Ass'n, 193 Wash. 222, 74 P.2d 1019), but whether the whole or only one-half shall be considered in fixing the tax is strictly a matter for the legislature.

As above noted, several states have statutes taxing transfers made in contemplation of death or intended to take effect at death and also a statute taxing joint estates passing to the survivor. In all the cases coming before the courts not one has held that joint estates passing to the survivor are taxable under the section dealing with transfers made in contemplation of death, save the Connecticut case of Walsh v. Hall, supra, and that decision, as above pointed out, was based upon a special proviso authorizing this to be done.

On the rehearing the state board stressed the case of State v. Moore, 208 Wis. 172, 242 N.W. 496, as sustaining its contention. That case does not sustain its position. There the property involved consisted of shares of stock in a corporation which were owned by deceased and Marquis D. Moore as tenants in common. There was no holding as joint tenants with the right of survival. Originally deceased owned 47 shares of the stock. He transferred 10 shares to his son, Marquis D. Moore, and the remaining 37 shares were transferred by Moore to himself and his son, within six days before his death. The county court decided that the transfer of the 28 1/2 shares to the son was not made in contemplation of death and hence not taxable. The appellate court simply held, and I think correctly, that the transfers were in contemplation of death and taxable. The court did not mention any statute of Wisconsin comparable to our subsection (6).

I am of the view that subsection (6) of section 10400.1 supports the conclusion of the trial court as to the joint bank accounts and that the judgment as to them should be affirmed. I also think that this conclusion is the only one that can be adopted to give effect to both subsections (3) and (6). Subsection (3) applies to all transfers in contemplation of death or intended to take effect in possession and enjoyment at or after death except those involving joint bank accounts actually remaining on deposit at the time of death and property held at the time of death in the names of two or more persons jointly. Those are controlled by subsection (6) whether we like that subsection or not.

I am able to subscribe to the majority opinion dealing with the government bonds because I think they were not held "in the joint names of two or more persons" within the meaning of subsection (6) of section 10400.1, Rev. Codes.