holding that mandatory buy-sell provision in partnership agreement fixed value of decedent's partnership interest
How later courts described this case
- holding that mandatory buy-sell provision in partnership agreement fixed value of decedent's partnership interest
- agreement not testamentary device because it was equally binding on all partners and not all partners were related
- buy-sell agreement not testamentary device where all provisions equally applicable to all partners
- keeping business in family is legitimate business purpose
Written by the judges who cited it.
The opinion
Tannenwald, J., concurring: While I agree with the result reached herein, I am concerned that the majority opinion may be interpreted as applying United States v. Estate of Grace, 395 U.S. 316 (1969), beyond its intended scope. By the same token, I disagree with the narrow interpretation accorded to Grace by Judge Hall in her dissent.
In its opinion in Grace, the Supreme Court stated that the reciprocal trust doctrine does not depend upon a finding of a quid pro quo and that all that is required is an interrelationship between the trusts which leaves the settlor in the same economic position.
I read Grace neither to lay down a rule (as Judge Hall suggests) that, even where there is an interrelationship, the absence of an economic interest in the settlor precludes the use of that doctrine, nor to imply (as the majority opinion may be read to do) that the mere simultaneity of the establishment of the trusts is enough to produce the necessary interrelationship.
In short, I read Grace to require a determination that the trusts were in fact interrelated. Thus, in instances where it is demonstrated that the trusts were established independently, the reciprocal trust doctrine would be inapplicable whether or not there was an economic interest in the settlor. Estate of Grace v. United States, 393 F.2d 939 (Ct. Cl. 1968) (Davis, J., dissenting). See also Note, "United States v. Estate of Grace: The Reincarnation of the Reciprocal Trust Doctrine,” 17 U.C.L.A. L. Rev. 436 (1969). Such objective factors as a significant separation of time in the establishment of the trusts, the occurrence of intervening events, differing amounts placed in the trusts, or differing powers granted to each trustee may indicate that the trusts were created independently.
I believe that this interpretation is a reasonable one, founded in both logic and a knowledge of human affairs. It is also consistent with footnote 10 of the opinion in Grace (see 395 U.S. at 324 ), which provides:
We do not mean to say that the existence of “consideration,” in the traditional legal sense of a bargained-for exchange, can never be relevant. In certain cases, inquiries into the settlor’s reasons for creating the trusts may be helpful in establishing the requisite link between the two trusts. We only hold that a finding of bargained-for consideration is not necessary to establish reciprocity.
Under the circumstances of this case, I would hold that the reciprocal trust doctrine should apply. The only evidence of record herein is that the trusts were established at or about the same time. Such being the case, it cannot be said that the petitioners have carried their burden of proof that each trust was not bargained for by the establishment of the other trust.
Sterrett and Wiles, JJ., agree with this concurring opinion.