In Re Swan's Estate

This is a proceeding by the State Tax Commission of Utah under Sec. 80-12-14, R.S. Utah 1933, for the appointment of an administrator to collect and pay over to it an inheritance of transfer tax claimed to be due the State of Utah upon assets lately held in joint tenancy by the decedent and her daughter, Theo Swan Hendee, with rights of survivorship. From a judgment of the District Court establishing a tax of $2,350.31 and 8 per cent interest thereon from the date of death of the decedent, the surviving joint tenant appeals.

The material facts are without dispute. The petition listed sundry mining stocks (hereinafter referred to as "stocks") and certain improved real estate in Blocks 53 and 57, respectively, Plat "A," Salt Lake City Survey (herein referred to as Item 1 and Item 2), as assets of the estate of Blanch Swan, deceased, held in joint tenancy with Theo Swan Hendee, with rights of survivorship, of a value in excess of $10,000, and prayed that an administrator be appointed to collect the tax from the assets and pay it over to the respondent Tax Commission.

The court appointed Coleman D. Creel special administrator, who caused the assets to be appraised at $16,545.00 for the stocks, and Item 1 of the realty at $30,000 and Item 2 at $60,550.00, or a total of $107,095.00, and thereon the court, after allowing the statutory deductions, fixed an inheritance or transfer tax of $2,350.31 and decreed its payment from the assets.

On the filing of the petition and of the later amended petition, the clerk set a date for hearing and posted notices of the hearings, but the proof of mailing thereof shows, the names of no persons to whom they were mailed. However, to each petition the appellant, Theo Swan Hendee, appeared and demurred and moved dismissal of the petitions on grounds of (1) insufficient facts; (2) the bar of limitations; and (3) defect of parties plaintiff. These were overruled and Mrs. Hendee answered.

The substantial averments of both the petitions, demurrers and answer are carried into the court's findings and conclusions, which may be summarized as follows: (1) Said Blanch Swan died in California on February 16, 1931, and her daughter, Theo Swan Hendee, was then, ever since has been, and is now a nonresident of Utah, a resident of California, and not present in Utah for a period of one year since her mother's death and before the petition herein was filed, which was on February 23, 1935. (2) That the stocks and real estate were at the time of Mrs. Swan's death held and owned by her and by appellant Mrs. Hendee as joint tenants with right of survivorship, and have been reported, listed, and appraised at the above figures after crediting the allowable deductions. (3) That there has been no previous administration or fixing of the tax on said assets. But that on May 25, 1931, an action was begun by said Theo Swan Hendee in the District Court to terminate said joint tenancy in said property and assets, and that therein the court decreed said joint tenancy terminated. R.S. Utah 1933, Sec. 104-59-1. (4) Ever since the death of said Blanch Swan, said Theo Swan Hendee has been, and is now, the owner of all of said real and personal property, except that in 1932 the said Item 1 of the realty was transferred and conveyed to Theo Swan Hendee and Grant Swan in joint tenancy. (5) All the debts and funeral expenses of Blanch Swan, deceased, except the claimed inheritance tax, have been fully paid by said Theo Swan Hendee. (6) That the transfers and conveyances by which said Blanch Swan and Theo Swan Hendee became the owners as joint tenants of all the said real and personal property were made prior to, and not within three years of, the death of Blanch Swan; and they were not made or caused to be made in contemplation of her death, or to take effect in possession or enjoyment at or after her death. That the consideration for Item 2 of the real property was furnished wholly, and the income therefrom enjoyed wholly, by the said Theo Swan Hendee. And that the consideration for the stocks and the realty in Item 1 was furnished equally and the income therefrom enjoyed equally by said Theo Swan Hendee and Blanch Swan. (7) that during February, 1931, shortly after Mrs. Swan's death, the Attorney General of Utah was notified and his deputy was present when the safety deposit box, in a Salt Lake City bank, owned by Blanch Swan and Theo Swan Hendee jointly, was opened and that then and there a complete inventory of all property held in joint tenancy by said named parties was furnished to said deputy Attorney General.

From said findings of fact, the court drew conclusions and rendered the decree or order to which appellant objects. There are several distinct issues of law presented for decision. We are met at the threshold with appellant's plea of the statute of limitations. Comp. Laws Utah 1917, Sec. 6468; R.S. Utah 1933, Sec. 104-2-26, limiting the time for an action to enforce a statutory liability to one year from the time the cause of action arises. We dispose of that question first, since, if well taken, a decision of the other questions becomes unnecessary. In this connection, Sec. 104-2-31, R.S. 1933, provides that, "The limitations prescribed in this article shall apply to actions brought in the name of, or for the benefit of the state in the same manner as to actions by private parties." And Sec. 104-2-47 provides that the word "action," as used in the chapter, is to be construed as including a special proceeding of a civil nature, wherever necessary.

Our attention has not been called to any previous case in this State where this precise question has been ruled upon. In the recent case of Attorney General of Utah v. Pomeroy, 93 Utah 426,73 P.2d 1277, 114 A.L.R. 726, the question arose, and was discussed somewhat but not decided. We are satisfied that the present proceeding is a special one of a civil 1, 2 nature, and that the plaintiff's claim is based upon a statutory liability arising upon Sec. 80-12-2, R.S. 1933, which imposes the tax claimed. The claim is certainly not based upon a contract, or a tort, and if not a statutory liability, it is difficult to discover the ground of liability. The bar of the statute (Sec. 104-2-26, supra) has been applied in the case of other statutory obligations than taxes in several cases. BoxElder County v. Harding, 83 Utah 386, 28 P.2d 601, Rodriquez v. Industrial Comm., 86 Utah 273, 43 P.2d 189, Lowe v.Industrial Comm., 87 Utah 413, 49 P.2d 948; Peterson v.Sorensen, 91 Utah 507, 65 P.2d 12. Similar statutes to those of Utah above cited have in other states been construed in harmony with the conclusions we have reached in this case, and we see no reason to doubt their applicability under our statute, either in principle or upon authority. We refer to the cases of State v.Yellow Jacket S.M. Co., 14 Nev. 220; City of San Diego v. Higgins, 115 Cal. 170, 46 P. 923; Board of Com'rsof Custer County v. Story, 26 Mont. 517, 69 P. 56; LemhiCounty v. Boise Live Stock Loan Co., 47 Idaho 712, 278 P. 214;Woods v. Hyde, 64 Cal. App. 433, 222 P. 168; State v.Certain Lands, etc., 40 Minn. 512, 42 N.W. 473; State v.Chicago N.W. Ry. Co., 132 Wis. 345, 112 N.W. 515; PineCounty v. Lambert, 57 Minn. 203, 58 N.W. 990; Bristol v.Washington County, 177 U.S. 133, 20 S. Ct. 585, 44 L. Ed. 701. And on a related question, see Murry v. Monter, 90 Utah 105,60 P.2d 960, 963.

Such statutes apply to proceedings to collect inheritance taxes. Chambers v. Gallagher, 177 Cal. 704, 171 P. 931;State ex rel. Gallet v. Naylor, 50 Idaho 113, 294 P. 333. The circumstance that the statute makes taxes a lien on property does not affect the question. Both secured and 3-5 unsecured claims have potential existence even after the remedy to enforce them is barred. They may be revived by a new promise to pay and otherwise.

It may be noted that this Sec. 104-2-26, R.S. 1933, was amended in 1937 (Laws of Utah 1937, Chap. 138), changing the time from one year to three years. But 6 this was after the bar had become effective in this case, and so cannot affect our decision. Ireland v.Mackintosh, 22 Utah 296, 61 P. 901; Chambers v. Gallagher, supra.

Respondent contends that appellant's nonresidence and absence from the State tolled the statute of limitations, and cites the case of Riley v. Howard, 193 Cal. 522, 226 P. 393. The case is not in point. That was a suit in personam by the taxing authority to obtain a personal judgment for the 7-10 tax against the Howard heirs, and the jurisdiction could be exercised only upon personal service of a summons within the state of the forum. The absence of some of the defendants prevented and delayed the suit against them until their return to the state. At bar, the jurisdiction invoked is one in rem against asserted assets of the estate of Blanch Swan, deceased, not dependent for its exercise on personal service of a summons upon appellant. It was initiated, properly so, by the filing by a creditor of the deceased person's estate, of a petition for letters of administration thereon, so that the creditor's claim might be presented to the administrator for payment. Such a proceeding is essentially one in rem. Jurisdiction is acquired, not by the issuance and service of a summons under the Code, Title 104, Chap. 5, R.S. 1933, but by publication or posting and mailing of notice under Sec. 102-4-8, R.S. 1933. The filing of the petition for letters is the beginning of the action or proceeding contemplated by Title 80, Chap. 12, and the time for so proceeding had run. The facts in the case at bar are unfavorable to application of the rule in Riley v. Howard, supra. The bulk of the assets here is real estate and the state of the record title not easily concealed. In addition, the findings show that within a very short time, a matter of days, after Mrs. Swan's death, the Attorney General was notified and his deputy was present at the opening of the safety deposit box and was furnished a full list of all assets held in joint tenancy by Mrs. Swan and appellant. All the debts of Mrs. Swan were paid and Mrs. Hendee was not obligated to begin administration or to invoke the fixing of an inheritance tax. State ex rel. Gallet v. Naylor, supra. The findings further show that very soon thereafter, and on May 25, 1931, appellant, Mrs. Hendee, began a statutory action in the District Court under R.S. 1933, Sec. 104-59-1, to terminate the joint tenancy in all of the assets mentioned, and the court after due process of law decreed said joint tenancy ended and the sole title was vested in appellant. That also was a proceeding in rem, and the right to so proceed rested on as high a statutory authority as that resorted to by respondents in this case to collect the tax.

In view that appellant had paid all claims, debts, etc., against her mother's estate, there was no occasion for her to take out letters of administration, merely to invite or facilitate the imposition of a tax which it would be her purpose and intention to resist. She gave the State's taxing authorities notice and every opportunity to assert its claims if they intended to make such claims, and she was not obligated to take over their official functions in that behalf. There is no merit in the suggestion of concealment or inattention on appellant's part to the just claims, rights, or interest of the State.

The procedure resorted to by the State Tax Commission in this case is, by its petition rested on R.S. 1933, Sec. 80-12-2, and is a step in the exercise of probate jurisdiction, which is limited, special and statutory, not plenary. 11-13 It is a creditor's remedy for the collection of his debt. It is analogous to that exercised by a court of equity in aid of a general creditor's bill, when a receiver is appointed to take possession of and sell assets of a nonresident debtor and pay debts under orders of the court. It is a virtual attachment of assets to pay debts. Jurisdiction in such case is acquired by posting and mailing of notice. In either or any such case, the statute of limitations begins to run from the time the remedy selected is open to the creditor.

It would needlessly prolong this opinion to discuss and analyze all of the contentions and citations of the respondent in detail. The conclusions we have announced dispose of them all.

The judgment of the District Court of Salt Lake County is reversed and the record remanded with instructions to dismiss respondents' petition. Costs to appellant.

MOFFAT and LARSON, JJ., concur.