Department of Revenue v. Estate of Dwyer ( 1989 )

IN THE SUPREME COURT OF THE STATE OF MONTANA
DEPARTMENT OF REVENUE, STATE OF MONTANA,
Appellant,
-vs-
ESTATE OF MICHAEL D. DWYER,
Respondent.
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APPEAL FROM: The District Court of the Second Judicial District,
In and for the County of Silver BOW,
The Honorable Arnold Olsen, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
R. Bruce McGinnis, DOR, Helena, Montana
For Respondent :
Robert T. OILeary, Butte, Montana
Submitted: February 9, 1989
Decided: March 13, 1989
Filed:
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.
We decide in this case that when the owner of real or
personal property in Montana creates a joint tenancy in such
property between himself and another or others, more than
three years before his death, the tax levied by our state on
the transfer of his joint tenancy interest upon his death is
measured by his interest in the joint tenancy, one-half or
other proper fraction under the written instrument creating
the same. Section 72-16-303 (2), MCA.
Thus, in this appeal, we affirm a like holding of the
District Court of the Second Judicial District, Silver Bow
County.
The facts are agreed to by the parties. Michael D.
Dwyer was a resident of Butte, Montana, at the time of his
death on February 5, 1985. His death terminated certain
joint tenancies in real and personal property with David F.
Cunningham, who is the deceased's nephew, and of course, not
a surviving spouse nor issue of the deceased.
The deceased was the sole owner of real property which
he conveyed into joint tenancy with Cunningham and himself by
a grant deed on November 25, 1981, which was recorded
December 29, 1981. The deed created a joint tenancy between
the deceased and Cunningham with the right of survivorship.
Cunningham neither paid consideration in monies nor money's
worth for his interest in the property, nor made any
contribution toward the acquisition of the property.
On October 30, 1979, out of funds completely and solely
owned by the deceased, two joint bank accounts with the right
of survivorship were created at Prudential Savings and Loan
Association of Butte, Montana. The deceased and Cunningham
were both authorized signators on the accounts. Cunningham
did not deposit or withdraw any of the funds in the accounts
prior to the time of Mr. Dwyer's death.
Out of funds completely and solely owned by the
deceased, on October 31, 1979, two joint bank accounts with
right of survivorship were created at the Miner's Bank of
Montana, Butte, Montana. The deceased and Cunningham were
both signators on the accounts. Cunningham did not deposit
or withdraw any funds on the accounts prior to the time of
Mr. Dwyer's death.
David Cunningham, as personal representative of the
Dwyer estate, filed a request for determination of state
inheritance tax on September 16, 1985. The application
showed a tax due in the amount of $1,917.20. The amount was
calculated upon 50% of the value of the joint tenancy estate.
The Department of Revenue issued a certificate showing a tax
due in the amount of $6,458.04 based on the whole value of
the estate. The personal representative paid the tax to
prevent the accrual of interest, and to receive the 5%
discount.
Cunningham sued in the District Court, Second Judicial
District, Silver Bow County, for a proper determination of
the inheritance tax due and payable upon the joint tenancy
estate. The District Court ordered the Department of Revenue
to recompute the amount of inheritance tax due from the
surviving joint tenant, David F. Cunningham, based upon
one-half of the value of the property passing on the
deceased's death. The Department appealed to this Court.
On appeal, the Department contends that the District
Court erred as a matter of law in holding that 5 72-16-303,
MCA, does not provide for the taxation of the total value of
the property passing to the surviving joint tenant when the
joint tenancy property was not originally owned by the
surviving joint tenant.
The legislature amended § 72-16-303, MCA, in 1977, and
in 1979. The Department contends that prior to 1977, the
inheritance tax on a joint tenancy interest passing to a
surviving joint owner was one-half or other proper fraction
of the joint property, unless the surviving joint tenant
could show contribution. However, in 1977, the legislature
limited the contribution rule to the circumstance when a
surviving ioint tenant was the spouse of a deceased, and in
1979, when the joint tenancy included issue of the decedent.
Because the legislature added the fol.lowing language to S
72-16-303, the Department contends the legislature changed
the tax treatment for non-spouses and non-issue of the
deceased from being taxed on one-half of the property to
being taxed on the full value of the property unless it can
be shown that the surviving joint tenant originally owned the
property:
. .. In all other cases, the full value of the
property shall be taxable, except the portion
thereof that originally belonged to the survivor
and as to which the decedent had made no
contrihution; if the decedent had made a
contrihution to the ownership of such property, the
amount of the contribution shall be taxable.
The Department contends that the statute, as written, is
unambiguous, but if ambiguous, under the rule of executive
interpretation of statutory provisions, any doubt as to the
construction of the statute is to be resolved in favor of the
Department because its regulations relating to this statute
adopted after 1977 require a tax levied on the full value of
joint tenancy property where the survivor made no
contribution to the value of the joint tenancy property when
it was created. A.R.M. 42.35.232-42.35.234. The Department
relies on cases holding that the contemporaneous construction
placed on a statute by the officers chargeable with the duty
of administering it is entitled to great weight. State v.
King Colony Ranch (1960), 137 Mont. 145, 350 P.2d 841; State
Ex Rel. Ehel v. Schye (19561, 130 Mont. 537, 305 P.2d 350;
State Ex Rel. Erwin v. Warren (1950), 124 Mont. 378, 224 ~ . 2 d
142; In Re Wilson's Estate (1936), 102 Mont. 178, 56 ~ . 2 d
733, 105 A.L.R. 367.
We set out in full the pertinent portions of 5
72-16-301, MCA, as to the levy of the tax:
72-16-301. Taxable transfers generally
--contemplation of death. A tax shall be and is
hereby imposed upon any transfer of property ...
except as hereinafter provided:
(3) when the transfer is of property made by a
resident or by a nonresident when such
nonresident's property is within the state or
within its jurisdiction by deed, grant, bargain,
sale or gift made in contemplation of the death of
grantor, vendor, or donor, or intended to take
effect in possession or enjoyment at or after such
death. Every transfer by deed, grant, bargain,
sale or gift made within 3 years prior to the death
of the grantor, vendor, or donor of a material part
of his estate or in the nature of a final
disposition or distribution thereof and without a
fair consideration and money or monev's worth
shall, unless shown to the contrary, be deemed to
have been made in contemplation of death within the
meaning of this section, but no such transfer by
deed, grant, bargain, sale or gift made before such
3-year period shall be treated as having been made
in contemplation of death ...
The following is the present language of S 72-16-303,
with the 1977 amendment enclosed in parentheses and the 1979
amendment enclosed in brackets:
Section 72-16-303, MCA. Joint estates--transfer
right of survivorship taxable. (1) Whenever any
property, however acquired, real or personal,
tangible or intangible, including government bonds
of the United States, is inscribed in co-ownership
form, held by two or more persons in joint tenancy
or as tenants by the entirety, or is deposited in
any bank or other depository in the joint names of
two or more persons and payable to the survivor or
survivors of them upon the death of one of them,
the right of the survivor or survivors to the
immediate possession or ownership is a taxable
transfer.
( 2 ) - - -is upon the transfer - decedent's
The tax of
interest, one-half or other proper fraction, -
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as
evidenced A -
bv the written instrument creatina -
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the
same, as though the property to which the transfer
relates belonged to the joint tenants, tenants by
the entirety, joint depositors, holders in
co-ownership form, or persons, as tenants in common
had been, for inheritance tax purposes, bequeathed
or devised to the survivor or survivors by will,
except such part thereof as may be shown to have
originally belonged to the survivor and never to
have belonged to the decedent when (the surviving
joint tenant is a spouse) [or issue] of the
decedent. In all other cases, the full value of
the property shall be taxable, except the portion
thereof that originally belonged to the survivor
and as to which the decedent had made no
contribution; if the decedent had made a
contribution to the ownership of the property, the
amount of the contribution shall be taxable.
(3) This section shall not be construed to repeal
or modify the provisions of 72-16-301(3).
(Emphasis added.)
In discussing the issues here, we ask the reader to
assume that the discussion involves situations where the
joint tenancies were created more than three years prior to
the death of one of the joint tenants; that the decedent was
the sole owner of the property at the time of the creation of
each joint tenancy; and that no contribution to the property
of the joint tenancy has been made by the surviving joint
tenant.
The position of the Department and the effect of its
regulations are that the full value of the property in the
joint tenancies so created is taxable, irrespective of the
language in 5 72-16-301(3), MCA, that no such transfer made
before such three year period shall be treated as having been
made in contemplation of d.eath. We cannot agree that such is
the effect of the statutes involved, or was the intent of the
legislature in making the amendments alluded to by the
Department.
When a joint tenancy is created, whether in real or
personal property or both, the joint interest is owned by the
several persons in equal shares. Section 70-1-307, MCA. In
the case of bank deposits held by joint tenants, however, the
deposit, or any part thereof, may be paid by the bank to any
of the persons named as joint tenants, without regard to
equality of shares, and whether the other or others be living
or not. Section 32-1-442, MCA. The bank is discharged by
the receipt or acquittance of the person so paid.
When, during his lifetime, and at his death, the
decedent and another or others, hold any esstate property as
joint tenants with the right of survivorship, § § 70-20-105,
-310, MCA, the interest of the decedents at the moment of his
death passes to the survivor or survivors of the joint
tenancy. The incidents of joint tenancy property at common
law were a single estate in the property owned by two or more
persons under one instrument or act of the parties, an equal
right in all to share in the enjoyment of the property during
their lives, and on the death of a joint tenant, descent of
the property to the survivor or survivors. Hennigh v.
Hennigh (19571, 131 Mont. 372, 309 P.2d 1022. The effect of
our statutes which permits the creation of joint tenancies is
to include all incidents of a joint tenancy estate at common
law. First Westside National Bank of Great Falls v. Llera
(1978), 176 Mont. 481, 580 P.2d 100.
On the death of a joint tenant, ownership of the joint
tenancy property vests immediately in the survivor, so that
the estate of a decedent does not include the joint tenancy
property, nor is it subject to creditor's claims for debts of
a decedent. Montana's tax statutes recognize this feature by
providing especially for the determination of taxes on the
termination of a joint tenancy by death where there i.s no
other estate. Section 72-16-502, MCA, provides for a special
procedure for tax purposes when a joint tenant dies leaving
no property which requires the appointment of a personal
representative.
Under Montana's statutory law, a tax is imposed, subject
always to exemptions and exceptions, upon the transfer by
death of the person of any state propertv from a decedent to
another by will or intestate laws. Section 72-16-301(1),
( 2 ) , MCA. Without any argument, the transfer of the right to
possession of the decedent's property owned by him at his
death is a taxable event. If, however, in his lifetime, the
decedent within three years of his death has transferred
ownership of his property in contemplation of his death, the
full value of the property transferred is also taxable upon
his death. Section 72-16-301 (3), MCA. A transfer of
ownership within three years of his death is deemed to be in
contemplation of death, and thus the value thereof is fully
taxable.
In the case before us, the joint tenancies were
established by the decedent more than three years prior to
his death. "No such transfer of ownership made before such
three year period shall be treated as havinq been made in
contemplation of death." Section ?2-16-301 131, MCA. Since
there is a specific statutory direction in S 72-16-303(3),
MCA, that the section shall not be construed to repeal or
modify the provisions of 5 72-16-301(3), the latter section
must he given force and effect. The position of the
Department robs that latter section of any force and effect.
We hold it is our plain duty when interpreting statutes
relating to the same subject to give effect to all, if
possible, consonant with the intent of the legislature.
Section 1-2-101, MCA. Montana's statutes do not provide a
gift tax upon transfers of property made by a person during
his lifetime except such gifts as are made in contemplation
of death. The effect of the Department's interpretation of
the statutes is to impose a tax upon such transfers although
not levied until the grantor's or donor's death, whether or
not made in contemplation of death. We do not agree with the
Department that under 5 72-16-303(2), MCA, only wives and
issue of the decedent may take advantage of the provisions of
5 72-16-301 (3), MCA, which excludes from taxation transfers
not made in contemplation of death, or made more than three
years before the death of the grantor. We hold in this case
that one-half of the values of the joint tenancy estate only
is taxable. The regulations of the Department which would
require a contrary conclusion are inconsistent with statutory
law, and thus have no effect. Section 2-4-305(6) (a), MCA.
Accordingly, we affirm the
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