State v. Kistner , 132 Mont. 437 ( 1957 )

MR. JUSTICE ANGSTMAN:

This is an appeal by the state from an order fixing an inheritance tax.

Decedent, George A. Briebach, had been a resident of Park County, Montana, but had moved to the State of California, where he resided at the time of his death on November 9, 1951. During his lifetime he entered into two written agreements. In one agreement he contracted to sell one tract of land situated in Montana for $31,500 payable in installments. At the time of his death there remained due and unpaid on this contract the sum of $15,750.

In the other agreement he contracted to sell another tract of land also situated in Montana, for $29,000 payable in installments.

At the time of his death there was due and unpaid on that contract the sum of $23,000. Deeds were deposited in escrow in a bank in Livingston with instructions to deliver them to the purchaser upon payment of the balance of the purchase price.

Decedent left a will devising and bequeathing all of his property to his wife, Hannah Eckles Briebaeh.

The only question presented by the appeal is whether the rights passing to the widow under the contracts for sale above referred to must be included in the gross value of the estate subject to an inheritance tax. The district court ruled against its inclusion and this the state contends was error.

Defendant contends that the court’s ruling is commanded by our statute and relies on R.C.M. 1947, section 91-4413, reading:

‘ ‘ The tax imposed by sections 91-4401 to 91-4411, 91-4421 and 91-4425 in respect of personal property, except tangible personal property having an actual situs in this state, shall not be payable :

“ (1) If the decedent is a resident of a state or territory of the United States which at the time of the transfer did not impose a transfer tax or death tax of any character in respect of personal property of residents of this state, except tangible personal property having an actual situs in that state or territory; or

“(2) If the laws of the state or territory of residence of the nonresident decedent at the time of the transfer contained a reciprocal provision under which nonresidents of that state were exempted from transfer tax or death taxes of every character in respect of personal property, except tangible personal property having an actual situs in that state, providing the state or territory of residence of such nonresident decedent allowed a similar exemption to residents of this state.”

California has a reciprocal statute, being section 13851 of the Revenue and Taxation Code, reading:

“Intangible personal property is exempt from the tax imposed by this part if the decedent at the time of his death was a resident of a Territory or another State of the United States or of a foreign state or country which then imposed a legacy, succession, or death tax in respect to intangible personal property of its own residents, but either:

“(a) Did not impose a legacy, succession, or death tax of any character in respect to intangible personal property of residents of this State; or

“(b) Had in its laws a reciprocal provision under which intangible personal property of a nonresident was exempt from legacy, succession, or death taxes of every character if the Territory or other State of the United States or foreign state or country in which the nonresident resided allowed a similar exemption in respect to intangible personal property of residents of the Territory or State of the United States or foreign state of country or residence of the decedent.”

The determinative question then is: Is the right of the widow to the unpaid purchase price of the land intangible personal property?

R.C.M. 1947, section 91-4453, so far as pertinent here, defines intangible property as follows:

“ ‘Intangible’ or ‘intangible property’ when used in this act without other qualifications, shall be taken to include all moneys, stocks, bonds, notes, securities and credits of all kinds, secured or unsecured.”

The interest of a vendor in a contract to sell real estate is intangible property. He holds the title of the real estate as security for the purchaser’s obligation to pay the purchase price. Kern v. Robertson, 92 Mont. 283, 12 Pac. (2d) 565; Calvin v. Custer County, 111 Mont. 162, 107 Pac. (2d) 134; Epletveit v. Solberg, 119 Mont. 45, 169 Pac. (2d) 722. The same rule prevails in California. See Retsloff v. Smith, 79 Cal. App. 443, 249 Pac. 886; Sherman v. Quinn, 31 Cal. (2d) 661, 192 Pac. (2d) 17; In re Estate of Reid, 26 Cal. App. (2d) 362, 79 Pac. (2d) 451.

The interest of the vendor is treated as personalty. Calvin v. Custer County, supra.

The interest is intangible personal property and under the facts here involved is not subject to the inheritance tax. The rule is stated in Kidder, State Inheritance Tax and Taxability of Trusts, page 242, as follows :

“* * * one must have in mind that the sale of real estate by a vendor under a contract for a deed works an equitable conversion, whereby the vendor holds the title to the real estate as trustee for the vendee, and as security for the payment of the balance of the agreed purchase price; that in the event of the death of the vendor, his interest, which is now intangible personalty, goes to his administrators and not to his heirs, and upon the death of the vendee, his interest in the land by virtue of the contract is deemed realty, and goes to his heirs at law and not to his legal representatives.

“It becomes apparent that upon the death of a nonresident decedent his interest in real estate in the foreign state which he had sold under a contract for a warranty deed was intangible personal property at his death, he only holding the title to the real estate as trustee for the vendees and to secure the balance of the purchase price, the equitable title being in the vendee. Under this situation, such nonresident decedent’s interest in lands equitably converted in other states would not be subject to tax.”

The interest of the vendor is analogous to that of the holder of a note secured by a mortgage on real estate. In such a case the transfer is subject to an inheritance tax by the state of the domicile of the holder of the note regardless of the location of the real estate. Baldwin v. State of Missouri, 281 U.S. 586, 50 S. Ct. 436, 74 L. Ed. 1056.

The case of In re Eilermann’s Estate, 179 Wash. 15, 35 Pac. (2d) 763, involved the same question which we have before us, and the court ruled that the vendor’s interest in a contract for the sale of real estate is personal property with its situs for inheritance tax purposes at the domicile of the vendor. The court in that case also ruled that the interest was not subject to an inheritance tax in the State of Washington because of reciprocal statutes similar to those of Montana and California. To the same effect is the later case of In re Plasterer’s Estate, 49 Wash. (2d) 339, 301 Pac. (2d) 539.

For the purposes of this case we may assume that it was-competent for the legislature to tax the transfer here in question within the principles enunciated in State ex rel. Walker v. Jones, 80 Mont. 574, 261 Pac. 356, 60 A.L.R. 551, and Blackstone v. Miller, 188 U.S. 189, 23 S. Ct. 277, 47 L. Ed. 439, but the state-has not seen fit to do so. By section 91-4413, supra, it relinquished its right to do so. The United States Supreme Court first held that for more than one jurisdiction to impose a tax on the same transfer violated the constitution. First Nat. Bank of Boston v. State of Maine, 284 U.S. 312, 52 S. Ct. 174, 76 L. Ed. 313. It has since ruled that more than one jurisdiction may tax the same transfer. Curry v. McCanless, 307 U.S. 357, 59 S. Ct. 900, 83 L. Ed. 1339, 123 A.L.R. 162. It was to avoid this result that section 91-4413 was enacted. The legislature set itself against the principle of double taxation. Whether it acted wisely or unwisely is not for us to determine.

The cases of Connell v. Crosby, 210 Ill. 380, 71 N.E. 350 and In re Swift’s Estate, 137 N.Y. 77, 32 N.E. 1096, 18 L.R.A. 709, relied on in the dissenting opinion do not reach the question before us. In those eases it was sought to tax real estate situated in another state by the state of the domicile of the testator on the theory that it had been converted into personal property by the executor upon a sale thereof by him. Obviously it is the character of the property at death that determines whether it is real or personal property and whether it is subject to a transfer tax.

We agree that taxation is the rule and exemption the exception as stated in the dissenting opinion. That is especially true in that field of taxation invaded by the federal government. But here the legislature in plain and unambiguous language declared against the principle of double taxation and thus enacted section 91-4413 which is completely ignored by the dissenting opinion.

The order appealed from is affirmed.

MR. CHIEF JUSTICE HARRISON and MR. JUSTICE CASTLES, concur.