Tax, On successions and inheritances. Probate Court, Decree, Compromise of contest as to will. Will. Executor and Administrator.
A testator, who died in October, 1909, by his will gave $2,600 to be divided equally between two nephews. A controversy as to the allowance of the will having arisen between the nephews and one, who was sister of the testator and his only other heir at law, and an agreement of compromise having been made between them by which the sister should receive $1,300 and each of the nephews $650, the Probate Court under R. L. c. 148, § 15; St. 1903, c. 222, § 1, by a decree adjusted the controversy in accordance with the agreement and on petition by the executor of the will also ordered that the succession tax, assessed under St. 1909, c. 490, Part IV. § 1, should be assessed only on the $1,300 which, according to the decree of compromise, was given to the testator's sister, adjudging the shares given to the nephews to be exempt because they were less than $1,000. On appeal by the treasurer and receiver general to this court, it was held, that the tax should be assessed upon the property as it was disposed of by the will and not as it was disposed of by the decree making the compromise effectual; and that the executor therefore should pay a tax on the entire $2,600.
PETITION , filed in the Probate Court for the County of Suffolk on January 11, 1911, by the executor of the will of Helen F. Baxter, late of Boston, from which and from the answer of the Treasurer and Receiver General it appeared that Helen F. Baxter died testate and by her will gave $5 to her sister, Florence I. Neale, and the residue, $2,602.15 to her nephews, Carlton W. Baxter and Lawrence M. Baxter, to be equally divided between them; that, by a decree of the Probate Court made under R. L. c. 148, §§ 15-17, in accordance with an agreement of compromise, the residue was divided so that the testator's sister received $l,301.07 and each of the nephews received $650.54; that the tax commissioner assessed a succession tax of three
per cent of $2,602.15, or $78.06, which the executor of the will paid under protest. The prayer of the petition was "that said tax be abated."
In the Probate Court Grant, J., made a decree that the amount of the tax due and payable upon the estate should have been determined in accordance with the terms of the agreement of compromise; that the property passing to Carlton W. Baxter and Lawrence M. Baxter under the agreement of compromise was exempt from the tax, but that the property passing thereunder to Florence I. Neale was subject to the tax; that one half of the amount of $78.06 paid by the executor as assessed by the tax commissioner "was wrongly exacted," and that such portion "be abated."
On appeal, Hammond, J., reserved the case for determination by the full court.
The case was submitted on briefs.
H. W. Irish & W. L. George, for the petitioner.
J. M. Swift, Attorney General, & F. T. Field, Assistant Attorney General, for the respondent.
HAMMOND, J. Helen F. Baxter, a single woman, died in October, 1909, leaving a will giving practically all her property to her nephews Carlton W. Baxter and Lawrence M. Baxter. Florence I. Neale, a sister of the testator and an heir at law, contested the probate of the will, and finally an agreement of compromise was made by which the sister was to have one half of the estate and the two nephews were to have each a quarter. This agreement of compromise was confirmed by the Probate Court and a decree entered thereon under R. L. c. 148, §§ 15-17, St. 1903, c. 222, § 1. The object of this suit is to ascertain the rule regulating the assessment of the succession tax.
St. 1907, c. 563, § 1 (now St. 1909, c. 490, Part IV. § 1), provides, with some exceptions not here material, that a succession tax shall be imposed upon all property within the jurisdiction of this Commonwealth "which shall pass by will, or by the laws regulating intestate succession," provided the amount so passing shall exceed $1,000 in value.
The present case raises the general question whether the amount of a tax assessed under this statute shall be determined in accordance with the provisions of a will as written, or in
accordance with the result of the will and compromise agreement made by the parties and approved by the court.
It becomes necessary to look into the legislation leading up to R. L. c. 148, §§ 15-17, and to determine the real nature of the statute. It first appears as St. 1864, c. 173, and has remained substantially the same ever since. Before the passage of this earlier statute a contest over the probate of a will could be settled by the parties interested as well as any other suit, provided they were all of age and sui juris; and the courts looked with favor upon such settlements and by proceedings in equity enforced the specific performance of them. Leach v. Fobes, 11 Gray 506 . But it frequently happened that possible future contingent interests, especially of persons not in being, stood in the way of a settlement because no one was empowered to represent them. There was also some uncertainty about carrying out the settlement even when made by persons competent to contract. If the contestant agreed to withdraw from the contest and allow the will to be probated upon a promise by the legatees to pay him something, then it might happen that in a suit to enforce the promise the promisee for some reason might fail to maintain his case even when the promise was in writing. In Leach v. Fobes, ubi supra, which was a suit in equity to enforce such a promise, the defense was that it had been fraudulently obtained. In Seaman v. Colley, 178 Mass. 478 , which was an action at law to recover a sum of money alleged by the plaintiff to have been promised him by the defendant in consideration that the plaintiff should withdraw his objections to the allowance of a certain codicil, the defense was a general denial and that the promise was void as against public policy. In Blount v. Wheeler, 199 Mass. 330 , the defense denied the promise and set up lack of consideration. It is true that the two cases last above cited were since 1864, and there was no confirmation of the settlement by the court, but they illustrate the dangers liable to be met by the promisee in attempting to enforce the promise when there is no statute like the one in question, or where, such a statute existing, the settlement is not confirmed by the court under it. Again the promise was a simple personal undertaking of the promisor, who might prove financially unable to respond.
In this state of the law St. 1864, c. 173, was passed. It did
at least three important things. First, it provided the machinery by which any will contest might be settled no matter how complicated might be the provisions of the will as to any possible future contingent interests; second, it made the contract a matter of record, the decree admitting the will to probate specifically stating the terms of the agreement under which the contestants withdraw their opposition, thus conclusively establishing both the form and validity of the agreement; and third, it provided that the terms of the agreement should be carried out, not by the parties themselves, but by the person who should administer the will. Under this statute the court does not undertake to admit to probate a part of the will and refuse probate as to another part. The whole will is admitted, but the concessions made by the legatees to the heirs at law or to each other are at the same time noted and made binding upon the parties. But these concessions take effect not because such is the will but because such is the agreement, and whoever takes anything or loses anything by such concessions or changes takes or loses, as the case may be, under the agreement and not under the will. While it is sometimes said that the whole decree works a modification of the will, yet that effect is not due to any change in the provisions of the will, as such, but to the concessions made by the legatees to the heirs at law or among themselves as to what disposition shall be made of various interests granted to them in the will. The change is worked not through the will or power of the testator who gives the property, but through the will of the legatee who receives it. The true nature of the situation is described by Loring, J., in Hastings v. Nesmith, 188 Mass. 190 , 194, as follows: "Such an agreement [under R. L. c. 148, §§ 15-17] never is a modification of the will; it is a compromise of the rights of the parties under the will on the one side, and of those who claim that the will is void in respect to the matters covered by the compromise, on the other side," and also by Rugg, J., in Brandeis v. Atkins, 204 Mass. 471 , 474, as follows: "The agreement for compromise did not become a part of the will. Although the practice is to insert a clause in the decree to the effect that the estate shall be administered in accordance with the agreement for compromise established thereby, yet the rights
of the parties growing out of the agreement rest upon it and the decree confirming it, and are not testamentary rights."
Since the statute a will contest may be settled by the parties when all are competent to contend, without the aid, and entirely outside of the statute, in the same manner as before. This settlement may be effected by an agreement between the legatees and the contestant that the latter shall have a certain sum or a certain specific share of the estate, and the agreement may be enforced in the former case by an action at law to recover such certain sum, or in the latter by proceedings in equity for specific performance. Seaman v. Colley, 178 Mass. 478 . Blount v. Wheeler, 199 Mass. 330 . Indeed in this case now before us the parties were all competent to contract and there was no absolute need of a resort under the statute for a confirmation of the compromise agreement.
It is important that in the assessment of this tax there should be a plain, simple rule. The property upon which the tax is to be assessed is that which passes by will or by the laws regulating intestate succession. When there is a will, whether or not it disposes of the whole estate of the testator, whatever does pass by it passes to the legatees therein named, and by force of the will passes to no other person.
In view of the nature and office of the compromise statute, and of the language of the tax statute, the most reasonable interpretation of the phrase "which shall pass by will" in the tax statute is that it describes only property that passes by the terms of the will as written and not as changed by any agreement for compromise made within or without the statute. Any other interpretation would make the amount to be assessed hinge on the manner in which the agreement was to be carried out. In the case before us there can be no doubt if the will had been admitted to probate without a record of the agreement the tax would have been assessed in accordance with the terms of the will, although the agreement as to the division of the estate would have been perfectly valid. For reasons hereinbefore stated the amount of the tax is not changed by the fact that the agreement was approved by the court and made a part of the decree.
For decision in other States to the same general effect see
In re estate of Graves, 242 Ill. 212, In re estate of Wells, 142 Iowa, 255, and In re estate of Cook, 187 N. Y. 253. So far as the cases of Pepper's estate, 159 Penn. St. 508, and Kerr's estate, 159 Penn. St. 512, are inconsistent with the conclusion to which we have come we cannot follow them.
The amount of the tax should be determined in accordance with the terms of the will.