United States v. Wells
283 U.S. 102 (1931)
Syllabus
1. Whether a gift inter vivos was made "in
contemplation of death" within the meaning of the Revenue Act of 1918
depends upon the donor's motive, to be determined in each case from the
circumstances, including his bodily and mental condition. Pp. 283 U. S. 115,
283 U. S. 119.
2. A gift is made "in contemplation of death" when
the motive inducing it is of the sort that leads to testamentary disposition,
but not when the motive is merely to attain an object desirable to the donor in
his life, as where the immediate and moving cause of transfers was the carrying
out of a policy, long followed by the decedent in dealing with his children, of
making liberal girts to them during his lifetime. Pp. 283 U. S. 117, 283 U. S.
119.
3. A transfer may be "in contemplation of death"
though not induced by a fear that death is near at hand. Pp. 283 U. S. 113, 283
U. S. 119.
4. Upon review of a judgment of the Court of Claims, the
findings of fact are to be treated like the verdict of a jury and cannot be
added to or modified by reference to that court's opinion. P. 283 U. S. 120.
5. But absence of a finding of an ultimate fact does not
require a reversal, if the circumstantial facts a found are such that the
ultimate fact follows from them by necessary inference. Pp. 283 U. S. 111, 283
U. S. 120.
Case
John W.
Wells, a resident of Menominee, Michigan, died on August 17, 1921. The
Commissioner of Internal Revenue assessed additional estate taxes, upon the
ground
that
certain transfers by the decedent within two years prior to his death, were
made in contemplation of death and should be included in the taxable estate
under the provisions of § 402(c) of the Revenue Act of 1918, 40 Stat. 1057,
1097. The amount of the additional tax was paid by the
executors and claim for refund was filed. The claim having been rejected, the executors
brought this suit in the Court of Claims to recover the amount paid. The Court
of Claims decided in favor of the executors, 69 Ct.Cls. 485, 39 F.2d 998, and
this Court granted a writ
of certiorari.
The substance of the findings of the Court of Claims with
respect to the circumstances of the transfers may be stated as follows:
The
decedent died at the age of seventy-three years; his wife and five children,
three sons and two daughters, survived him. When a young man he became
interested in the business of acquiring and selling timber lands and of
manufacturing lumber. He continued in that business to the time of his death.
As
early as the year 1901, decedent began the making of advancements of money and
other property to his children. He kept a set of books on which he
charged to his children some, but not all, of the amounts transferred to them.
The decedent believed that the appropriate course for a man of wealth was to
give to his children substantial sums of money during his lifetime while he
could advise with them as to its proper use. He informed one of his friends:
"I am making distribution from time to time of part of
my property to see what my children will do during my lifetime, and I will then
know when my time is up what I ought to do with the balance. [Footnote 1]
"
Page 283 U. S. 106
In
1918, decedent advanced to three of his children, Ralph W. Wells, Mrs. Edna
Walsh, and Mrs. Florence Law, shares of stock in the Dunbar & Wausaukee
Railway Company for which he charged each of them, in the equalization
hereafter mentioned, the sum of $25,460. Neither this transfer, nor any of the
earlier transfers, is in controversy.
In
December, 1919, decedent transferred to his son Artemus C. Wells, 343 shares,
and to his son Daniel Wells, 73 shares, of the stock of the J. W. Wells Lumber
Company. He charged Artemus with $89,180, and Daniel with $18,890, on
account of these transfers.
On January
1, 1921, after carefully examining his accounts in preparing for the
final equalization of the prior advancements, decedent transferred to his children 68,985 shares of the
stock of the Girard Lumber Company. His summaries of accounts with each
of his children showed debit balances, on which he had computed interest, as
follows: Daniel Wells, $266,530; Artemus C. Wells, $231,651; Ralph W. Wells,
$214,008; Mrs. Florence Law, $216,445, and Mrs. Edna Walsh, $180,662. The
decedent indorsed each of these statements with the words, "Account with
_____," "This account is cancelled and ledger balanced to date as a
gift to _____" (the name of the son or daughter being inserted), or with
other words to the same effect.
In this process of equalization, decedent charged his
children with a total of 3,458 shares of the capital stock of the Lloyd
Manufacturing Company. These shares were not delivered at that time, as
decedent had agreed to exchange them for a like number of shares in a new
company to result from an expected merger. On January 26, 1921, decedent transferred to Marshall B.
Lloyd, as trustee for the benefit of his wife and five children, 3,713 shares
of the stock of the Lloyd Manufacturing Company with authority to exchange
these shares for shares of the stock of the new corporation, on the
issue of which the trustee
Page 283 U. S. 107
was to assign the shares to decedent's wife and children,
respectively, in designated amounts, or, in the event that the exchange was not
consummated before December 1, 1921, to distribute to them the shares of the
Lloyd company. [Footnote 2] On April 6, 1921, Lloyd, the trustee, distributed
the certificates for the shares in the new company, but the finding states that
the decedent had divested himself of all interest in the 3,713 shares of the
Lloyd stock when they were transferred in trust.
The
transfers which the Commissioner deemed to be subject to the additional estate
tax are these:
That of
December, 1919, to his sons Daniel and Artemus, of 416 shares of the stock of
the J. W. Wells Lumber
Page 283 U. S. 108
Company,
increased by a subsequent stock dividend to 1,280 shares at the date of the
decedent's death;
That of
January 1, 1921, to his children, of 68,985 shares of the stock of the Girard
Lumber Company:
That of
January 26, 1921, in trust for his wife and children, of 3,713 shares of the
stock of the Lloyd Manufacturing Company.
The aggregate value at the time of the decedent's death of
all the property embraced in these transfers was $782,903. Excluding this
property, the value of decedent's estate at the time of his death was
$881,314.61, on which the decedent's annual income was approximately $50,000 a
year.
The
Court of Claims made detailed findings as to the state of decedent's health. It
appeared that, for some time prior to the year 1919, he had suffered from
attacks of asthma. In May of that year, he went to a hospital in Chicago for
treatment, and remained eleven days. About the middle of April, 1920, decedent
began to be afflicted with ulcerative colitis, a condition in which the large
intestine becomes inflamed. The finding states: "It is a curable disease.
About eighty to eighty-five percent of the cases are cured." In June,
1920, decedent was advised by physicians in California that he was suffering
from cancer of the intestines. In the following July, decedent again entered
the hospital in Chicago and, on an examination by a specialist in diseases of
the bowels, the case was diagnosed as ulcerative colitis. Between July and
September, 1920, decedent was informed in detail of his condition. His
physician told him that "he would get well."
While at the hospital, following an inquiry by his business
associate, Marshall B. Lloyd, whether decedent had made any agreement with his
second wife, Katherine Wells, with reference to a division of property after
his death, decedent made such an agreement. Reciting his
Page 283 U. S. 109
illness, it provided that his wife "should have
$100,000 in money and certain other property in lieu of her statutory and dower
rights." Mrs. Wells ratified all gifts theretofore made by the decedent to
his children and all gifts which might be made to his children thereafter
"and before his death whether any of such gifts be made in contemplation
of his death or otherwise." Pursuant to the agreement, decedent made his
will on August 18, 1920, the provisions of which differed only slightly from
those of an earlier will. After providing for the payment of $100,000 to his
widow and making other bequests, decedent devised his residuary estate to his
five children, with the proviso:
"Provided, however, that the amount shown to be due me
from each of my children severally in accordance with my books at the time of
my death shall be considered advancement made by me to them from time to time
and shall be chargeable to each of them severally as advancements and shall be
deducted from their respective shares."
On
September 14, 1920, decedent wrote to his son Ralph: "The doctors say that
I will be absolutely cured if I am careful for two or three months after
leaving and I certainly will be careful after this." [Footnote 3]
On
September 22, 1920, decedent was discharged from the hospital in an improved
condition. His medial adviser stated that decedent's condition was
"excellent," "he had not fully at that time recovered, but he
did within the next two of three months." "His appearance was normal;
he had gained an appreciable amount of weight" and "he was in a very
fair state of health." On his return to Menominee, decedent said to his
son, who had been in charge of his affairs during his absence, that
Page 283 U. S. 110
"he
was completely cured of the trouble that he had had, and he felt good."
Decedent then resumed his normal business activities. [Footnote 4]
Decedent
was again admitted to the hospital in Chicago, on November 30, 1920, for the
purpose of an operation to relieve his asthma. His physician stated that, at
that time, "he found him to be in good general condition."
[Footnote 5] On December
9, 1920, decedent was discharged from the hospital and returned to his home. He
went back to the hospital on January 10, 1921, for the completion of the nasal
operation. [Footnote 6] At the time of his discharge on January 14, 1921, the medical
examination showed "a very greatly improved condition," and that,
"in respect to the ulcerative colitis, it was 90 percent normal.'"
On
January 26, 1921, the date of the trust agreement (constituting the last of the
transfers in question), decedent wrote to his son Ralph: "The doctors
pronounce me cured of bowel trouble, but I will always have asthma. I weigh 140
stripped." On February 3, 1921, he left for California, where he was
accustomed to spend the winter months. His physician stated that decedent at
that time
"considered
himself well, and I told him that he need have no anxiety whatever about his
state of health;
Page 283 U. S. 111
that I considered him in excellent condition; that he need
have no fears of any recurrence of the ulcerated colitis. [Footnote 7]"
But, in
April, 1921, while still in California, decedent had such a recurrence. He
consulted a specialist of reputation who, after examination, informed him that
he might have a cancer, and advised an operation. In June, 1921, decedent
reentered the hospital in Chicago. His condition proved to be due to a virulent
form of infection that failed to yield to treatment. Returning to his home, he
continued to lose ground, and he died on August 17, 1921. An autopsy disclosed
a severe and extensive inflammation of the large intestine, with ulceration of
the bowel. No trace of cancer was found. The death certificate signed by his
physician set forth the cause of decedent's death as "suppurative
colitis" and its "duration one year."
The Court of Claims did not find, in terms, that the
transfers in question were not made in contemplation of death, but it is
evident that the court considered that its findings of fact amounted to that in
substance, in view
Page 283 U. S. 112
of the conclusion of law, based upon these findings, that
the executors were entitled to recover the additional tax. This is also
manifest from the reasoning of the court's opinion. The court said:
"The plaintiffs have not only overcome the presumption
created by the statute that the transfers were made in contemplation of death,
but have definitely established the fact that the immediate and moving cause of
the transfers was the carrying out of a policy long followed by decedent in
dealing with his children of making liberal gifts to them during his lifetime.
He had consistently followed that policy for nearly thirty years, and the three
transfers in question were a continuation and final consummation of such
policy. In the last transfer, such amounts were given to his children as would
even them up one with another in the gifts and advancements made to them."
"That this was the motive which actuated the decedent
in making these transfers seems unquestioned. He repeatedly, in letters to his
children and in statements to business associates at about the time the
transfers were made, gave this as his reason for such transfers. After the
final transfer in which the advancements and gifts to the children were evened
up in January, 1921, the decedent still possessed property of the value of
nearly $900,000, from which he drew an annual income of approximately $50,000.
At the time the transfers were made, decedent had no reason to believe
otherwise than, aside from his asthma, he was, for a man of his age, in
ordinary health. While he had gone through a most serious and painful illness,
he had, as he believed, made an almost complete recovery. He was assured of
this fact by his physician, an eminent specialist in whom he had great
confidence. The repeated statements made by him to close friends and
associates, his daily activities in matters connected with his business
affairs, his letters to his children assuring them of his renewed health, show
Page 283 U. S. 113
that he fully believed the assurances given him by his
physician that he was cured and had nothing to fear on account of his former
illness."
"The presumption created by the statute that the
transfers in question were made in contemplation of death cannot stand against
ascertained and proven facts showing the contrary to be true. The best evidence of the state
of the decedent's health at the time the transfers were made is the statement
of his doctor. The best evidence of the decedent's state of mind at that time
and the reasons actuating him in making the transfers are the statements and
expressions of the decedent himself, supported as such statements are by all
the circumstances concerning the transfers. [Footnote 8]"
The government contests the decision of the Court of Claims
upon the ground that the conclusion was reached by an erroneous construction of
the words "in contemplation of death" as used in the statute. The
court held that "contemplation of death" does not mean that general
knowledge of all men that they must die, but that
Page 283 U. S. 114
there must be a present apprehension, from some existing
bodily or mental condition or impending peril, creating a reasonable fear that
death is near at hand, and that such reasonable fear or apprehension must be
the direct or animating cause, and the only cause of the transfer. [Footnote 9]
The government insists that this definition is too narrow;
that transfers in contemplation of death are not limited to those induced by a
condition causing expectation of death in the near future; that the character
of such gifts is determined by the state of mind of the donor at the time they
are made, and that the statutory presumption may be overcome only by proof that
the decedent's purpose in making the gift was to attain some object desirable
to him during his life, as distinguished from the distribution of his estate as
at death.
Page 283 U. S. 115
The phrase "in contemplation of death," previously
found in state statutes, was first used by the Congress in the Revenue Act of
1916, imposing an estate tax. It was coupled with a clause creating a statutory
presumption in case of gifts within two years before death. [Footnote 10] The
provision was continued in the Revenue Act of 1918, [Footnote 11] which governs
the present case, and in later legislation. While the interpretation of the
phrase has not been uniform, there had been agreement upon certain fundamental
considerations. It is recognized that the reference is not to the general
expectation of death which all entertain. It must be a particular concern,
giving rise to a definite motive. [Footnote 12] The provision is not confined
to gifts causa mortis,
Page 283 U. S. 116
which are made in anticipation of impending death, are
revocable, and are defeated if the donor survives the apprehended peril. Basket
v. Hassell, 107 U. S. 602, 107 U. S. 609-610. [Footnote 13] The statutory
description embraces gifts inter vivos, despite the fact that they are fully
executed, are irrevocable and indefeasible. The quality which brings the
transfer within the statute is indicated by the context and manifest purpose.
Transfers in contemplation of death are included within the same category, for
the purpose of taxation, with transfers intended to take effect at or after the
death of the transferor. The dominant
Page 283 U. S. 117
purpose is to reach substitutes for testamentary
dispositions, and thus to prevent the evasion of the estate tax. Nichols v.
Coolidge, 274 U. S. 531, 274 U. S. 542; Milliken v. United States, ante, p. 283
U. S. 15. As the transfer may otherwise have all the indicia of a valid gift
inter vivos, the differentiating factor must be found in the transferor's
motive. Death must be
"contemplated" -- that is, the motive which induces the transfer must
be of the sort which leads to testamentary disposition. As a condition
of body and mind that naturally gives rise to the feeling that death is near,
that the donor is about to reach the moment of inevitable surrender of
ownership, is most likely to prompt such a disposition to those who are deemed
to be the proper objects of his bounty, the evidence of the existence or
nonexistence of such a condition at the time of the gift is obviously of great
importance in determining whether it is made in contemplation of death. The natural and reasonable
inference which may be drawn from the fact that but a short period intervenes
between the transfer and death is recognized by the statutory provision
creating a presumption in the case of gifts within two years prior to death.
But this presumption, by the statute before us, is expressly stated to be a
rebuttable one, and the mere fact that death ensues even shortly after
the gift does not determine absolutely that it is in contemplation of death.
The question, necessarily, is as to the state of mind of the donor.
As the test, despite varying circumstances, is always to be
found in motive, it cannot be said that the determinative motive is lacking
merely because of the absence of a consciousness that death is imminent. It is contemplation of death,
not necessarily contemplation of imminent death, to which the statute refers.
It is conceivable that the idea of death may possess the mind so as to furnish
a controlling motive for the disposition of property, although death is not
thought to be close at hand. Old age
Page 283 U. S. 118
may give premonitions and promptings independent of mortal
disease. Yet age, in itself, cannot be regarded as furnishing a decisive test,
for sound health and purposes associated with life, rather than with death, may
motivate the transfer. The
words "in contemplation of death" mean that the thought of death is
the impelling cause of the transfer, and, while the belief in the imminence of
death may afford convincing evidence, the statute is not to be limited, and its
purpose thwarted, by a rule of construction which, in place of contemplation of
death, makes the final criterion to be an apprehension that death is "near
at hand."
If it is the thought of death, as a controlling motive
prompting the disposition of property, that affords the test, it follows that
the statute does not embrace gifts inter vivos which spring from a different
motive. Such transfers were made the subject of a distinct gift tax, since
repealed. [Footnote 14] As illustrating transfers found to be related to
purposes associated with life, rather than with the distribution of property in
anticipation of death, the government mentions transfers made
"for the purpose of relieving the donor of the cares of
management or in order that his children may experience the responsibilities of
business under his guidance and supervision."
The illustrations are useful but not exhaustive. The
purposes which may be served by gifts are of great variety. It is common
knowledge that a frequent inducement is not only the desire to be relieved of
responsibilities, but to have children, or others who may be the appropriate
objects of the donor's bounty, independently established with competencies of
their own without being compelled to await the death of the donor and without
particular
Page 283 U. S. 119
consideration of that event. There may be the desire to
recognize special needs or exigencies or to discharge moral obligations. The
gratification of such desires may be a more compelling motive than any thought
of death.
It is apparent that there can be no precise delimitation of
the transactions embraced within the conception of transfers in
"contemplation of death," as there can be none in relation to fraud,
undue influence, due process of law, or other familiar legal concepts which are
applicable to many varying circumstances. There is no escape from the necessity
of carefully scrutinizing the circumstances of each case to detect the dominant
motive of the donor in the light of his bodily and mental condition, and thus
to give effect to the manifest purpose of the statute.
We think that the government is right in its criticism of
the narrowness of the rule laid down by the Court of Claims, in requiring that
there be a condition "creating a reasonable fear that death is near at
hand," and that "such reasonable fear or apprehension" must be
"the only cause of the transfer." It is sufficient if contemplation
of death be the inducing cause of the transfer whether or not death is believed
to be near. But it does not appear that the decision of the court rests upon
the limitation thus expressed. The court did not rely merely upon the fact
that, at the time of the transfers, decedent considered that he had recovered
from his former illness and believed the assurances given him by his physician
that he need have no fear of its recurrence or any "anxiety whatever about
his state of health." That fact was manifestly important, but, in addition
to that, the court held
that
"immediate
and moving cause of the transfers was the carrying out of a policy, long
followed by decedent in dealing with his children of making liberal gifts to
them during his lifetime."
The court regarded the transfers in question as "a
continuation and and final consummation of such policy," saying "that
this was the motive
Page 283 U. S. 120
which actuated the decedent in making these transfers seems
unquestioned." In the view of the court as thus explicitly stated, not
only was there no fear at the time of the transfers that death was near at
hand, but the motive for the transfers brought them within the category of
those which, as described by the government, are intended by the donor "to
accomplish some purpose desirable to him if he continues to live." In the
presence of such a motive, appropriately found, and of the underlying facts
which have been expressly found, there would be no ground for a reversal of the
judgment merely because of an inaccuracy in the general statement as to the
meaning of the statutory phrase.
The only difficulty presented by the record is that this
statement with respect to the motive of decedent appears in the opinion of the
court and not in its findings of fact. We are not at liberty to refer to the
opinion for additional findings. The findings of fact of the Court of Claims
are to be treated like the verdict of a jury. [Footnote 15] We cannot add to them,
or modify them, but the absence of the finding of an ultimate fact does not
require a reversal of the judgment if the circumstantial facts as found are
such that the ultimate fact follows from them as a necessary inference.
[Footnote 16]
It is evident that the court did not consider the statements
in its opinion, which we have quoted, as additional findings of fact, but as an
argument with respect to the conclusion to be drawn from its findings. In its
opinion, the court was summarizing what it considered to be the effect of its
findings, and no useful purpose would be served in returning the case for a
specific finding that the motive which impelled the decedent to make the
transfers
Page 283 U. S. 121
was precisely that which the court has thus definitely
stated. While, in accordance with proper practice and the rule of this Court,
[Footnote 17] the Court of Claims should have found the ultimate fact, and we
do not approve the method it adopted, we are of the opinion that, in view of
the findings of fact actually made and the conclusion they import, the judgment
should be sustained. [Footnote 18]
Judgment
affirmed.
MR. JUSTICE ROBERTS took no part in the consideration or
decision of this case.
