# Petition for A Writ of Certiorari — National Memorial Park, Inc. v. Commissioner

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for A Writ of Certiorari
- **Published:** January 1, 1945
- **Citation:** 324 U.S. 858

## Text

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In THE

Supreme Court of the United States

___

October Term, 1944.

Nationa Memoriau Park, Inc., Petitioner,
vs.
CoMMISSIONER OF INTERNAL REVENUE.

a

PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES CIRCUIT COURT OF APPEALS
FOR THE FOURTH CIRCUIT AND BRIEF IN SUP.
PORT THEREOF.

LiEweLtyn A. Luce,

937 Munsey Bldg.,
Washington, D. C.,

Counsel for Petitioner.

WILSON PRINTING Co., WASHINGTON 1, D. C..—Brancu P. EPES, MANAGER

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INDEX

Subject Index

Petition for writ Of COTEROPETI............0cccc Sig RMSE SRR Es, * az BE aoe
FRA TRIPE OE, IT ONE, AES OE

In THE

Supreme Court of the Gnited States

October Term, 1944.

NationaL Memoria Park, INxc., Petitioner,
Us.
COMMISSIONER OF INTERNAL REVENUE.

es

PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES CIRCUIT COURT OF APPEALS
FOR THE FOURTH CIRCUIT AND BRIEF IN SUP-
PORT THEREOF.

To the Honorable the Supreme Court of the United States:

National Memorial Park, Inc., a corporation, by its
attorney prays that a writ of certiorari issue to review
the judgment of the United States Cireuit Court of Ap-
peals for the Fourth Cireuit, entered in the above en-
titled cause on November 13, 1944, affirming a decision
of the Tax Court of the United States.

OPINIONS BELOW

The memorandum opinion of the Tax Court of the
United States is unreported but is contained in the tran-
seript of record, pages 36 to 55, inclusive.

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The opinion of the Cireuit Court of Appeals is un-
reported but may be found at Paragraph 62,801, Volume
4, 1944 Edition, Prentice-Hall Tax Service. (See also R
64-77).

JURISDICTION

The judgment of the Cireuit Court of Appeals was
entered on November 13, 1944 (R 77). The jurisdiction
of this Court is invoked under Section 240(a) of the
Judicial Code, as amended by the Act of February 13,
1925 (28 U.S.C.A. § 347).

STATUTES INVOLVED

The statutes involved are set out in the Appendix,
infra, (pp. 25-27).

STATEMENT OF FACTS

The action below was an appeal by the taxpayer from
the decision of the Tax Court of the United States in
which a judgment was rendered in favor of the Commis-
sioner (R. 55).

The facts, as found by the Cireuit Court of Appeals,
are as follows (R. 64-77):

Petitioner is a Delaware corporation, organized Sep-
tember 7, 1933, engaged during the years in question in
the business of operating a cemetery, known as ‘*National
Memorial Park’’, located in Fairfax County, Virginia.

Sometime during 1933, at a cost of $32,202.32, peti-
tioner acquired 92,986 acres of land in Virginia. This
acreage was plotted into 24,429 salable four-grave ceme-
tery lots. The balance was unsalable property, such as
roads and paths.

On June 22, 1934, pursuant to a resolution adopted by
petitioner’s board of directors on June 12, 1934, peti-

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tioner entered into a trust agreement with the City Na-
tional Bank of Philadelphia. Under the terms of this
agreement, the City National Bank was to act as trustee,
and all moneys received from the sale of burial lots were
to be deposited with the Trustee as Depository.

Certain provisions of the trust agreement which are
particularly germane to the questions on appeal are herein
set forth ipsisstaisx rerbis:

ve * * No sections of lots in the Memorial Park shall
he sold unless au initial cash payment of at least 20%
of the purchase price is made by the purchaser at the
time of the execution of the contract of sale. Upon
receipt of such puviment of 20% the trustee shall credit
the same to the General Fund.

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ach subseuent payment made by the pur-
chaser of a seetion o¢ let in the Memorial Park when
received by the trustee shall be credited by it to the
General Fund, until one-half of the purchase price is
paid when the halunee of payments shall be apportioned
as follows:

(a) Perpetusl Maintenanee Fund... 20%
COO) RUMMBVIO tana i cscs cnet estes tad 40%
ye Beg RAR nN NEEL cee 40%

RE ii) sk nh nian taal 100%

so that when payinent is made in full by the purchasers
of a section or lot in the Memorial Park the Trustee
shall have eredited the same as follows:

(a) Perpetual Maintenance Fund... 10°
CU): “Wemmpprrerrernnst Pa asics hess escent 20
(ja. (gS ROR ee ere ene ee TOC

bE Hey idee tans Mee eT RMN ee TEF ROD. UR Re 100°

4

‘“* * * The Memorial Park covenants and agrees that
each purchaser of a section or lot will receive a good
and sufficient deed of right of sepulchre to such section
or lot in the Memorial Park when payment of all install-
ments of purchase price and interest have been made in
full.

“* * * \ cum equal to 10% of the gross proceeds
of funds arising from the sale of sections or lots in the
Memorial Park shall as above provided be set apart and
shall constitute a Perpetual Maintenance Fund, for the
perpetual care and preservation of the grounds and the
repair and renewal of the Memorial Park. A total of
10% of the total purchase price of all sections of lots
shall be deducted from the payments on account of the
purchase price of said sections or lots in the respective
percentages hereinbefore enumerated. The principal of
<uch fund shall be held intact by the trustee and shall he
invested in the manner hereinafter stated, and the net
income from the principal of such fund shall be paid by
the trustee to the Memorial Park. The Memorial Park
covenants and agrees to use the income so received from
the Perpetual Maintenance Fund for the perpetual care
and preservation of the grounds, and the repair and
renewal of the buildings and property of the Memorial
Park.

“The principal of such Perpetual Maintenance Fund
shall be invested and re-invested from time to time by
the trustee in such securities as from time to time shall
constitute a legal investment for trustees under the laws
of the State of Pennsylvania.

* * *

““* * * 90% of the total selling price of all sections
or lots in the Memorial Park shall be set aside and
shall constitute an Improvement Fund. The moneys so
set apart for the Improvement Fund shall be expended

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for the purpose of developing, enlarging, improving and
beautifying the Memorial Park, including the landscap-
ing of the grounds, construction of roads, entrances, walls
and a memorial chapel, the purchase or (sic.) equipment,
and for any other charges which, in the judgment of the
Board of Directors of the Memorial Park, shall be neces-
sary or proper for the establishment of a Memorial Park
or burial ground to he known as National Memorial Park.

‘*Payments from sueh Improvement Fund shall be
made by trustee upon the following terms and conditions:

‘*(a) Upon presentation of a certificate of the arehi-
tects or engineers having supervision of the particular
work or improvement, certifying that the amount. or
amounts specified are due for labor and material fur-
nished, or expenses incurred in the improvement of the
Memorial Park provided, however, that such certificate
shall be accompanied by the written approval of the of-
ficers of the Memorial Park who shall be authorized to
approve the same.

‘*(b) Upon presentation of bills or statements of archi-
tects, engineers, attorneys or any other persons who have
performed services or incurred expenses in connection
with the improvement of the Memorial Perk, under the
direction of the proper officers of the Memorial Park,
where such services are not performed under the super-
vision of any architect or engineer, and where such bills
or statements are accompanied by the written approval
of the officers of the Memorial Park who shall be author-
ized to approve the same.

‘“*(e) Upon presentation by the officers of the Memorial
Park of cancelled checks or other evidence satisfactory
to the trustee showing amounts expended in purchasing
and acquiring title to real estate for the purpose of the
Memorial Park, together with a certified copy of a resolu-
tion of the Board of Directors of the Memorial Park

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certifying that the amounts specified have been expended
for such purpose, and requesting the trustee to reimburse
the Memorial Park out of the Improvement Fund for such
expenditures.

‘*(d) Payments not in excess of the sum of $1 50.00 shall
he made upon receipt of a written requisition, signed by
the President and Comptroller.”’

The moneys deposited in the General Fund were sub-
ject to the disposition of petitioner with no supervision
or control by the trustee. Nor was the trustee under any
obligation to see to the application of any of the money
so paid to petitioner. A further provision of the agree-
ment provided:

‘Tt is agreed by and between the parties hereto, how-
ever, that in order that lots may be properly conveyed
as sold that the said Memorial Park will immediately
upon the execution hereof and from time to time there-
after as the same may become necessary, convey to the

‘trustee by good and sufficient deed of conveyance title

in fee to the ground upon which are located no less than
three thousand (3,000) lots free of mortgage lien, and
does hereby covenant and agree to and with the said
trustee not to sell or dispose of the right of sepulchre
to any section or lot other than those lots to which title
has been conveyed to the trustee as aforesaid, and the
trustee for its part agrees that it will hold title to such
ground as’may be conveyed to it in accordance with the
terms hereof as trustee for the said Memorial Park and
its assigns, and that it will upon receipt of the purchase
price from individual purchasers convey by approved deed
sections or lots and the right of sepulchre therein to the
purchasers thereof, and that it will not in any manner
or form alien or encumber the said ground, but will hold
it solely for the uses and purposes herein specified.’’

On December 10, 1934, in compliance with the terms
of the trust agreement, petitioner conveyed 3,004 lots to
the nominee of City National Bank, and on December 6,

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1937, the entire property of the cemetery was conveyed
to the bank’s nominee.

By the terms of the sales contracts used by petitioner
during the years in question, petitioner agreed, upon full
payment being made by the purchaser, to deliver ‘*good
and sufficient deed*’ to the allotted section, and further
to set aside and build up a maintenance and an improve-
ment fund. The contracts of sale were received in peti-
tioner’s office, together with the down payments.

When, and only when, 20 percent or more of the sales
price had been paid, petitioner deposited the money col-
lected in the Hamilton National Bank for the account of
City National Bank, at which time a statement called
a ‘collection advice,"’ listing the amounts received from
each customer and the allocation of these amounts to the
various funds, was prepared and sent to City National
Bank. If the purchaser did not complete payments up to
20 percent of the purchase price, the money was retained
by petitioner.

When the final payment was made by the purchaser,
petitioner delivered a deed, executed by the bank or its
nominee, to the purchaser. These deeds provided in part
as follows:

‘That the said Grantor for and in consideration of
the sum of $10.00... * * * and other good and valuable
considerations * * * has granted, bargained, sold, re-
leased.conveyed and confirmed, and by these presents does
grant, bargain, sell, release, convey and confirm unto the
said Grantee his heirs and assigns, subject to the eondi-
tions and restrictions hereinafter set forth, the right of
sepulehre and the right to the exelusive use, occupation
and possession for that purpose only in the lot of ground
in the said National Memorial Park. * * *

“The said Grantor as aforesaid, hereby covenants to
and with the said party of the second part, his heirs and
assigns, that of the purchase price of all cemetery lots in

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this said Park there will be set aside thirty (30%) per-
cent, of which fund the City National Bank of Philadel-
phia shall be trustee; one third of this said fund shall
be capitalized and held intact and the income therefrom
shall be used solely and perpetually for the purpose of
maintenance and preservation of the said Memorial Park
and for the proper upkeep thereof and the other two-
thirds thereof shall be used to erect buildings and make
improvements.”’

When petitioner expended money for improvements it
forwarded to the City National Bank a statement called
‘‘improvement certificate’? which showed the amount ex-
pended for each improvement and certified that such
amounts had been so spent. These certificates were either
approved or disapproved by the bank and then, as money
accumulated in the improvement fund, the bank made reim-
bursement to petitioner and applied the reimbursement
against the sum which had been certified to the bank by
petitioner.

The amounts of the improvement certificates certified
by petitioner, and the amounts paid thereon by City Na-
tional Bank during the taxable years, are as follows:

Improvement Certificate Amount Paid

i ictiincinsnincsinsisitetnondl $31,625.05 $13,794.82
erie ensieminsnenssicivens 46,603.15 57,761.85
Fe scotanssintcismeincnnsenn 52,425.69 51,887.52

During the same period petitioner spent the following
amounts for improvements:

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PRT CRE A € 39,582.57
pet RES I

In filing its returns for the taxable years, petitioner
took the position that it was regularly engaged ‘in selling

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personal property. In its returns petitioner answered the
question as to the basis of the return by writing in the
word “‘installment’’. Petitioner’s books were kept on the
accrual basis. In computing its gross income for these
years petitioner excluded 30.64 percent of its cash collec-
tions for each year. The figure, 30.64 percent, was com-
puted in this manner: maintenance fund, 10 percent; im-
provement fund, 20 percent; and land cost, .64 percent.
Petitioner's returns for the years 1935 and 1937 were not
filed within the time preseribed by law.

It was the Commissioner’s contention that petitioner
was engaged in selling realty, not personalty, and thus
ix brought within the ambit of section 44(b) of the Reve-
nue Acts of 1934, 1936 and 1938, and Articles 44-2 and
44-3 of Regulations 86, 94 and 101; that petitioner was
not permitted to use the installment basis for reporting
profit from lot sales. The Commissioner further con-
tended that the amounts representing 20 percent of the
sales price of lots sold in the taxable vears were not im-
pressed with a trust in the ‘‘Improvement Fund”’,

The Tax Court sustained the position of the Commis-
sioner in every instance except one, (with which we are
not here concerned) and from this decision the petitioner
has duly appealed.

The Cireuit Court of Appeals affirmed the decision of
the Tax Court of the United States and held:

1. That the improvement fund of 20% of the annual
collections from the sales of ‘rights of sepulture’* could
not be exeluded from the petitioner's gross income because
the improvement fund was not a trust fund or for the
henefit of the owners of ‘‘rights of sepulture”’.

2. That petitioner could not report its income as a deal-
ex in personal property because the petitioner’s sales of
“rights of sepulture’’ constituted sales of real property
rather than sales of personai property.

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QUESTIONS PRESENTED

The case presents the following questions:

1. Whether the Improvement Fund was a trust fund for
the benefit of the owners of ‘‘rights of sepulture’’ and
thus properly excluded by petitioner from its gross in-
come. .

2, Whether the sales by petitioner of ‘‘rights of sepul-
ture’? constituted sales of personal property or sales of
real estate.

SPECIFICATION OF ERRORS TO BE URGED
The Cireuit Court of Appeals erred:

1. In deciding that the Improvement Fund was not a
trust fund for the benefit of the owners of ‘‘rights of
sepulture’’ and thus properly excluded by petitioner from
its gross income for the years here involved.

2. In deciding that petitioner was not a dealer in per-
sonal property within the meaning of Section 44(a) of
the Revenue Acts of 1934 and 1936.

3. In deciding that the sales by petitioner of ‘‘rights of
sepulture’’ constituted sales of real property rather than
sales of personal property.

4. In failing to follow for Federal tax purposes the
weight of modern authority throughout the United States
that sales of certificates of ‘‘rights of sepulture’’ consti-
tute sales of securities and thus sales of personal property
rather than sales of real estate.

5. In affirming the decision of the Tax Court of the
United States.

SRE ATM, TON A PS REE eth tri

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REASONS RELIED ON FOR THE ALLOWANCE
OF THE WRIT

1. The decision of the Circuit Court of Appeals herein
is in direct conflict with the decision of the United States
Cireuit Court of Appeals for the Ninth Cireuit in Port-
land Cremation Association vy. Commissioner, 31 F. (2d)
843.

2. Under the law of the State of Virginia (where the
cemetery here involved is located) sales of ‘‘rights of
sepulture’’ do not convey ‘tan estate in Jand’’, but the
law is not settled as to whether such sales constitute sales
of personal property or sales of real estate. Grinnan v.
Fredericksburg Lodge, No. 4 A. F. & A. M., 118 Va. 588,
88S. KE. 79; Roanoke Cemetery v. Goodwin, 101 Va. 605,
44.8. E. 796; Goldman vy. Mollen, 168 Va. 345, 191 S. E.

627.

However in the construction of a taxing statute of the
United States, the law of the state in which the land in-
volved is situated does not necessarily govern and need
not be followed with respect to interests transferred by
sale. Rosenberger v. McCaughn (C. C. A. 3) 25 F. (2d)
699, certiorari denied, 278 U. S. 604.

The Federal law or the weight of authority throughout
the United States rather than State law should be fol-
lowed in construing sales contracts such as those here
involved for Federal tax purposes. Burnet v. Harmal,
287 U.S. 103; Burke-Waqgoner Oil Assn. v. Hopkins, 269
U.S. 110. Please see also Von Baumbach vy. Sargent Land
Co., 242 U.S. 508; Stratton’s Independence v. Howbert,
231 U.S. 399; and Stanton v. Baltic Mining Co., 240 U.
S. 103.

4. Under the weight of authority throughout the United
States, sales of ‘‘rights of sepulture’’ constitute sales of
personal property. Holloway et al. v. Thompson et al.,
decided by the Appellate Court of Indiana on June 16,

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1944 and reported in 42 N. E. (2d) 421; Paul v. Walkerton,
etc. Cemetery Assn., 1933 204 Ind. 693, 184 N. E. 537;
Clarke v. Keating, 170 N. Y. S. 187, 193 App. Div. 212.
In re Waldstein, 160 Mise. 763, 291 N. Y. 8. 697; 10 Ameri-
can Juris, Section 22, page 503; 14 C. J. S., Cemeteries,
Section 25, page 84+. Please see also the following earlier
authorities: Kincaid’s Appeal, 66 Pa. St. 411, 5 Am. Rep.
377: Partridge v. The First Independent Church of Balti-
more, 29 Md. 631; Bessemer Land Co. v. Jenkins, 111 Ala.
35. 18 South. 565, 56 Am. St. Rep. 26.

5. The Cirenit Court of Appeals has decided two im-
portant questions of Federal tax law which have not heen
but should be settled by this Court. The questions in-
volved are important to all cemeteries and _ sellers of
‘rights of sepulture”’.

BRIEF IN SUPPORT OF PETITION
I.

IF A PRESCRIBED PART OF THE SALES PRICE
OF THE ‘RIGHTS OF SEPULTURE”’ WAS RE-
CEIVED IN TRUST, SUCH PART HAS BEEN
PROPERLY EXCLUDED BY PETITIONER FROM
GROSS INCOME.

The following appears well settled by the decisions of
the courts: where a trust, recognized by law, whether
express or implied, is created or exists, and a prescribed
portion of the contract price received for a cemetery lot
or ‘‘right of sepulture’’ is received under or in trust for
the maintenance or improvement of the cemetery or lots,
such portion of the contract price is excluded from the
gross income of the cemetery company. If no portion of
the contract price is received in trust, but a part thereof
is immediately turned over to an established trust, such
portion is deductible. American Cemetery Co. v. U. &.
(D. C.) 28 F. (2d) 918; Troost Ave. Cemetery Co. v. U.

13

S., (D. C.) 21 F. (2d) 194; Los Angeles Cemetery Assn.
2 B. T. A. 495, Dee. 713 (Aeq.) ; Greenwood Cemetery Assn.,
2 B. T. A. 910, Dee. 869 (Aeq.) ; Metairie Cemetery Assn.,
+ B. T. A. 903, Dee. 1634 (Aeq.); Troost Ave. Cemetery
Assn., 4 B. T. A. 1169, Dee. 1732 (Acq.); Inglewood Park
Cemetery Assn., 6 B. 'T. A. 386, Dee. 2213 (Non-aeq.).
Evergreen Cemetery Assn. of Chicago, 21 B. T. A. 1194;
G.C.M. 8446, Cumulative Bulletin 1X-2, pages 370, 371.

In G.C.M. 8446, supra, the General Counsel of the
Bureau of Internal Revenue concluded: ‘‘that a trust fund
was created in which the purchaser of a lot had such an
equitable interest as might be enforced upon application
to a court-of equity by petition asking for specifie per-
formance, \and that such trust fund was irrevocable, both
as to principal and income therefrom’’.

The General Counsel then held that monies from the
sale of lots passing into the trust fund did not constitute
part of the taxpayer’s gross taxable income.

II.

AN EXPRESS TRUST WAS CREATED, ESTABLISHED
AND CARRIED OUT IN THIS CASE.

It is respectfully submitted that the Findings of Fact
made by the Tax Court demonstrates that an express
trust was created and carried out in this case and that
the improvement funds here involved were both received
in trust and turned over to the trustee of the trust which
had been created. (R. 23-36).

City National Bank of Philadelphia was designated by
petitioner’s Board of Directors as trustee.

A trust agreement was made and entered into by peti-
tioner with City National Bank of Philadelphia on June
22, 1934. The City National Bank of Philadelphia was
designated in this trust agreement as trustee.

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The petitioner operated under this trust agreement dur-
ing the years 1935, 1936 and 1937 and under the trust
agreement as amended in the month of December, 1937.

The trust agreement of June 22, 1934 was ratified by
a special meeting of petitioner’s Board of Directors.

On December 10, 1934 the petitioner, pursuant to the
provisions of the trust agreement, conveyed 3004 lots to
the nominee of the City National Bank.

On December 6, 1937, pursuant to the provisions of the
trust agreement as amended, petitioner deeded to the
nominee of the City National Bank the balance of the
tracts or parcels of land in the cemetery.

The indentures or deeds to the purchaser of ‘‘rights of
sepulture’’ were executed by the City National Bank or
by its nominee as grantor and delivered by the petitioner
to the purchaser.

The petitioner’s collections on contract sales were de-
posited to the account of City National Bank.

A collection advice was prepared by petitioner’s officers
and sent to the trustee bank, showing the amounts received
from each customer and allocation of the collections and
the funds to which they were applicable was made by peti-
tioner in accordance with the trust agreement.

When the final payment was made on a contract, the
indenture to the purchaser was forwarded to the trustee
bank for execution and then was delivered by petitioner
to the purchaser.

When the collections were received by the bank from
the petitioner, the bank then notified the petitioner that
the same had been received and that the monies had heen
allotted to the various funds provided for by the trust
agreement.

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The City National Bank, Trustee, maintained an account
with the Pennsylvania Company, in which the trust funds
were deposited and upon which the checks to petitioner for
improvements were drawn.

The petitioner maintained a separate and distinct bank
account for its own purposes, entitled National Memorial
Park Operating Account.

It became necessary for the petitioner to spend its own
funds and make advances for improvements prior to the
time when there were sufficient accumulations in the im-
provement fund. However, the petitioner prepared and
sent to the trustee certificates for these monies spent for
improvements certifying that the monies had been spent.

The certificates for improvements were checked and
verified by the bank’s representatives and adjustments
were, in certain instances, as required by the bank.

When the certificates for improvements had been ap-
proved by the bank, funds were remitted to the petitioner
from the improvement fund by the bank to cover the
advance made by petitioner. Such funds were remitted
by the bank when the accumulations in the improvement
fund reached a sufficient amount to reimburse the peti-
tioner and when the expenditures by petitioner for im-
provements as shown by the certificates were approved
by the bank.

The Tax Court also found that the bank, as trustee,
actually executed the deed or indenture to the purchaser
(R. 31), and that the said deed itself referred to the fund
of which the bank was trustee which the grantor actually
covenanted would be set aside for maintenance and im-
provements (R. 32).

16

IIl.

THE DECISION OF THE CIRCUIT COURT OF AP-
PEALS IS IN DIRECT CONFLICT WITH THE
DECISION OF THE UNITED STATES CIRCUIT
COURT OF APPEALS FOR THE NINTH CIRCUIT
IN PORTLAND CREMATION ASSOCIATION v.
COMMISSIONER, 31 F. (2d) 843.

The Cireuit Court of Appeals held that the Improve-
ment Fund here involved was not received upon trust or
impressed with a trust substantially because of the dis-
cretion and eontrol lodged in petitioner with respect to
the Improvement Fund (R. 74). We think that the deci-
sion of the court below is in direct conflict with the decision
of the United States Cireuit Court of Appeals for the
Ninth Cireuit in Portland Cremation Association v. Com-
missioner, supra (31 F. (2d) 848).

In the Portland Cremation Association case it was held
that a covenant, in the Cremation Association’s deed to
the purchaser of sepulture rights, providing that a portion
of the purchase price would be placed in a maintenance
fund, without indicating any specific portion to be used,
was sufficient to impress the fund to be set aside with a
trust. The provisions with respect to creating the fund
or trust were contained in the resolutions of the company’s
Board of Directors and in the deed to the purchaser.

In the ease at bar the trust was express. <A trust agree-
ment was actually entered into and the deed from the
trustee to the purchaser contained the following provi-
sion (R. 31-32):

* * *

“The said Grantor as aforesaid, hereby covenants
to and with the said party of the second part, his
heirs and assigns, that of the purchase price of all
cemetery lots in this said Park there will be set aside
thirty (30%) percent, of which fund the City National

17

Bank of Philadelphia shall be trustee; one third of this
said fund shall be capitalized and held intact and the
income therefrom shall be used solely and perpetually
for the purpose of maintenance and preservation of
the said Memorial Park and for the proper upkeep
thereof and the other two-thirds thereof shall be used
to erect buildings and make improvements.’’ (Ttalies
supplied )

* * *

Thus, there was a covenant between the trustee and the
purchaser providing that twenty percent of the purchase
price would be used to erect buildings and make lnprove-
ments. The case at bar is a mueh stronger case than
Portland Cremation Association vy. Commissioner, supra,
because in the instant case there was not only a covenant
in the deed providing for the improvement fund but a
trust agreement was actually executed and the trustee or
its nominee conveyed the property to each purehaser.
In Portland Cremation Association v. Commissioner the
Cireuit Court of Appeals for the Ninth Cireuit regarded
the element of control as immaterial and in its opinion
stated in part as follows:

* * *

‘‘We cannot agree that the fund so set aside by the
petitioner here is not essentially a trust fund.

* * *

“While the petitioner here may be said to have
had control of the money which it had placed in the
maintenance fund, diversion of that fund for cor.
poration purposes or any purpose other than that
designated by its promise to maintain the same, and
the specific resolution of its board of directors to
devote to that purpose 20 per centum of its receipts
from sales might be enjoined by a suit in equity as a
violation of the trust agreement. The crucial question
is, Did the petitioner’s patrons possess the right to
proteg@® themselves and demand the preservation of

APRA ERAS

1S

the fund which the petitioner had covenanted with
them to maintain and by its resolution had set apart
for maintenance? That question is by the authorities
answered in the affirmative, 26 R. C. 4. 1359; Rodney
v. Shankland, 1 Del. Chi. 35, 12 Am. Dee. 70; Linne-
mann v. Moross, 98 Mich. 178, 57 N. W. 108, 39 Am.
St. Rep. 528.’’

* * *

In the instant case, as in the Cremation Association case,
the purchasers had the right to rely on the covenant in
the deed transferring the property to them and could
protect themselves by demanding the preservation of the
Improvement Fund and the use of the same for the
erection of buildings and improvements and, as pointed
out in the case of the Cremation Association, supra, they
could have enforced these rights in a court of equity.

IV.

THE SALES OF ‘‘RIGHTS OF SEPULTURE’’ IN-
VOLVED HEREIN CONSTITUTED SAL=S OF
PERSONAL PROPERTY.

In filing its income tax returns for the vears here in-
volved the petitioner treated its sales as sales of personal
property and filed its returns on the installment basis
under Section 44(a) of the Internal Revenue Code. In this
connection it is important to note just what was sold to
purchasers. This is shown by the first paragraph of the
indentures executed by City National Bank of Philadelphia
or its nominee and delivered by the petitioner’s repre-
sentatives to the purchaser. The first paragraph of the
indenture provides as follows:

19

receipt whereof is hereby acknowledged, has granted,
bargained, sold, released, conveyed and confirmed,
and by these presents does grant, bargain, sell, re-
lease, convey and confirm unto the said Grantee heirs
and assigns, subject to the conditions and restrictions
hereinafter set forth, the right of sepulture and the
right to the exclusive use, occupation and possession
for that purpose only in the lot of ground in the said
National Memorial Park situate in Fairfax County,
Virginia, and designated as .”’ (Ttalies
supplied)

From the above it appears that what the customer
received was a certificate of the “right of sepulture.”* In
urging that the sale of a ‘tright of sepulture’’ is a sale
of personal property, the petitioner relies on the Virginia
case of Grinnan and Others vy. Fredricksburg Lodge No. 4,
Ancient, Free and Accepted Masons and Others, 118 Va.
O88, 88.8. K. 79. This case involved the right of the order
of Masons to remove certain bodies from a portion of a
Masonic cemetery and inter them in other portions of the
cemetery, the land from which said bodies were to he
removed being used for the purpose of erecting a Masonic
temple. Relatives of the deceased persons filed a chancery
suit to enjoin the removal of the bodies. In the lower
court a temporary injunction was awarded, which was
dissolved on final hearing and the final decree of the lower
court was affirmed on appeal.

In affirming the lower court Judge Harrison said the
following at page 592-593 of the opinion:

“There is nothing in our statute law applicable to
the facts here presented, nor is there anything in such
statutes showing that the policy of this Commonwealth
is averse to the removal of graves in a reverent and
proper manner under all cireumstances. Code 1904,
see. 1416-a. There can, however, be no question of the
power of a court of equity to deal with a situation
like the present, notwithstanding the absence of legis-
lation on the subject, and authorize, in its sound judi-

SUAS MET DF. cas |

20

cial diseretion, the removal of graves or cemeteries
in a proper case, after the consideration of all facts
and with due regard to the rights and feeling of all
concerned.

“The courts are much divided as to the character
of the estate one may have in a burial lot in a ceme-
tery. It is certain that it is not a fee. The weight
of authority is, and we think the better view, that it
is a mere privilege or license to make interments in
the lot exclusively of other's as long as the burying
eround or cemetery remains as such. Kineaid’s Ap-
peal, 66 Pa. St. 411, 5 Am. Rep. 377; Partridge v. The
First Independent Church of Baltimore, 39 Md. 631;
Bessemer Land Co. v. Jenkins, 111 Ala. 135, 18 South.
565, 56 Am. St. Rep. 26.

‘In Kineaid’s Appeal, supra, the court held that
‘The lot holder purchased a license—nothing more—
irrevocable as long as the place continued a burying
cround, but giving no title to the soil—But if in the
course of time it should become necessary to vacate
the ground as a burying ground, all that he eould
claim, in law or equity would be that he should have
due notice and the opportunity afforded him of re-
moving the bodies and monuments to some place of
his own selection, or that, on his failing to do so,
such removal should be made by others. He accepted
the grant or license subject to this necessary con-
dition!’

‘In Roanoke Cemetery Co. v. Goodwin, 101 Va.
610, 44S. FB. 770, this court says ‘that a purchaser of
a lot in a cemetery does not acquire absolute right in,
or dominion over, such lot, but merely a qualified and
unsufruetuary right for the purposes to which the
lots are devoted.” ”’

It is respectfully noted that the Court pointed out in
the Grinnan ease that the character of an interest in a
burial lot of a cemetery is a mere privilege or license.
Also. the Court made it clear that the weight of authority
ix to the effect that such an interest is a mere privilege
or license.

21

In Virginia, title to cemetery lots is not ordinarily
absolute and a deed is not necessary. Goldman et al. v.
Mullen et al., 168 Va. 345, 191 S. EE. 627.

The statment of the Court in the Virginia ease of Grin-
nan and Others v. Fredricksburg Lodge No. 4, Ancient,
Free and Accepted Masons and Others, supra, to the effect
that the sale of a cemetery lot transfers a mere privilege
or license is strengthened by the decisons of the New York
Courts.

In Clarke v. Keating, WON. Y.S. 187, 193 App. Div. 212,
the court held that the holder of a deed to a cemetery lot,
however strong may be the wording of grant, even with
the habendum using terms of inheritance, acquires only
a privilege or license, exclusive of others to make inter-
ments in a lot purchased, so long as the lot remains a
part of a cemetery.

While it appears that under the earlier decisions there
Was a division of sgh Bi on the proposition whether
the purchaser of a cemetery lot or ‘‘right of seputure”’
acquires personal or real property, the recent decisions
appear conclusive that the purchaser acquires personal
property rather than real property.

The latest decision which counsel has been able to find
is the case of Holloway et al. v. Thompson et al. decided
by the Appellate Court of Indiana on June 16, 1942 and
reported in 42 N. EF. (2d) 421. In that ease the Court
held that the relation of an owner of a cemetery lot to the
corporation having supervision over the cemetery is in
many respects that of a corporation and a ‘‘stockholder,’
the interest of the stockholder being represented by lots
instead of stock. The Court further held in that ease that
the sale of cemetery lots constituted sales of securities
under the Indiana Securities Acts and that the seller was
liable under the penalties, ete, preseribed by said Acts.
At page 425 of 42 N. FE. (2d) the Court declared:

OAS eS ENS

99

“The owner of a cemetery lot is in a somewhat
different position than the owner of an ordinary
parcel of real estate. As our Supreme Court said in
the case of Paul v. Walkerton, ete. Cemetery Assn.,
1933, 204 Ind. 693, 184 N. K. 537, his relation to the
corporation having supervision over the cemetery is
in many respects that of a corporation and stock-
holder, the interest of the stockholder being repre-
sented by lots instead of stock. See also Certia v.
University of Notre Dame Du Lae, 1925, 82 Ind. App.
542, 141 N. EK. 381; and 10 American Juris, Section
22, page 503; 14 C. J. S., Cemeteries, Section 25,
page S4.

“In the case of In re Waldstein, 1935, 160 Mise.
763, 291 N. Y. S. 697, the Supreme Court of New
York examined a situation quite similar to the one
here presented. The sale scheme was practically the
same, The document issued to the purchaser was a
certificate or deed gratiting rights of burial. Because
the circumstances clearly disclosed that the sales were
for investment and promotion that court held that
securities were being issued under a New York Statute
giving the Attorney General the right to investigate
sales of securities within that state.”’

We think that under the haw of Virginia, as well as the
weight of modern authority throughout the United States,
the sales in this case did not convey ‘tan estate in land.”
Grinnan and Others v. Fredricksburg Lodge No. 4, Ancient,
Free and Accepted Masons and Others, supra, and cases
cited therein: Clarke v. Keating, supra; Holloway et al.
vy. Thompson et al., supra; In re Waldstein, 160 Mise. 765,
991 N. Y. 8. 697, (Supreme Court of New York, 1935).

The document issued to the purchaser was a certificate
granting the “‘right of sepulture’* and the transaction
between the petitioner and the purchaser constituted a
sale of personal property. Holloway ef al. v. Thompson
et al., supra: In re Waldstein, supra. We believe that
regardless of whether “the right of sepulture™’ is a mere

5
3
'

eee eee

————

eran Ne

23

license or privilege that nevertheless the sales of the eerti-
ficates constitute sales of securities and thus ‘tsales of
personal property’’ under the decisions of the Courts
cited hereinabove construing the meaning of the term
**securities’’ under the various State statutes enacted for
the protection of investors. The salesmen of the peti-
tioner were **security’*’ salesmen; the petitioner regularly
sold and disposed of **seeurities’’ on the installment plan;
and accordingly the petitioner was a ‘*Dealer in Personal
Property’* within the meaning of Section 44(a) of the
Internal Revenue Code. The salesmen certainly did not
sell an interest in land.

We think that the Federal law or the weight of authority
throughout the United States rather than State law should
he followed in construing sales contracts for Federal tax
purposes. Burnet v. Harmal, 287 U.S. 103; Burke-Wagq-
goner Oil Assn. Vv. Hopkins, 269 U.S. 110. Please see also
Von Baumbach vy. Sargent Land Co., 242 U. S. 503:
Stratton’s Independence v. Howbert, 231 U.S. 399: and
Stanton vy. Baltic Mining Co., 240 U.S. 103; Rosenberger
v. MeCanghn, 25 F. (2d) 699, certiorari denied, 278 U. S.
604.

We also believe that under the weight of authority
throughout the United States sales of ‘‘rights of sepul-
ture’ constitute sales of personal property. Holloway et
al. v. Thompson et al., supra, Paul vy. Walkerton, ete.
Cemetery Assn., 1933, 204 Ind. 693, 184 N. KE. 537: Clarke
v. Keating, supra; In re Waldstein, supra; 10 American
Juris, Section 22, page 503; 14 C. J. S., Cemeteries, See-
tion 25, page 84; Kineaid’s Appeal, 66 Pa. St. 411, 5 Am.
Rep. 877; Partridge v. The First Independent Church of
Baltimore, 39 Md. 631: Bessemer Land Co. v. Jenkins, 111
Ala. 135, 18 South. 565, 56 Am. St. Rep. 26; Words and
Phrases, Vol. 14, Page 54 et seq.: Duff v. Keaton, 124
Pacifie 295, 33 Okla. 485, 16 Okla. 485: 184 Pacifie 786.

24
Counsel for petitioner certifies that in his opinion this
petition is well founded and is not interposed for delay.
It is respectfully submitted that this petition should be

granted.
LurweLttyn A. Luce,

937 Munsey Bldg.,
Washington, D. C.,

Counsel for Petitioner.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA34806415_2479%3A1. Public record. Not legal advice.