Petition — First National Bank of Omaha v. United States

henne Court, U.S.

FILED

ocr 1 1982

82-588

ALEXANDER L. STEVAS,

CLERK

In The

Supreme Court of the United States

October Term, 1982

Ly

—

THE FIRST NATIONAL BANK OF OMAHA, Executor

of the Estate of Glenn W. Melninch, Deceased,

Petitioner,

vs.

UNITED STATES OF AMERICA,

Respondent.

8

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ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

ra

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Frank Matruews of

Matruews, Cannon & Riepmayy, P. C.

318 South 19 Street

Omaha, Nebraska 68102

Atiorney for Petitioner

|

COCKLE PRINTING co., 2311 Douglas St., Omaha 68102

QUESTIONS PRESENTED FOR REVIEW

(1) Whether the equal protection provisions of the

Fifth and Fourteenth Amendments preclude the denial by

the Federal Government of estate tax deductions for be-

quests for perpetual care trusts for the benefit of public,

non-profit cemetery associations while at the same time it

grants such deductions for similar bequests for the bene-

fit of church-operated cemeteries.

(2) Whether federal courts are required to give full

faith and credit to state enabling acts restricting the use

which can be made of assets in state-authorized perpetual

care trusts for public cemeteries.

TABLE OF CONTENTS

Pages

Opinions delivered by the Courts Below 1

Grounds for Jurisdiction 3

Constitutional and Statutory Provisions the Case

Involves 3

Statement of the Case 5

Reasons for Allowance of the Writ:

I. The Cireuit Court opinion conflicts with State

Court rulings and with the ruling of this Court. 6

II. The Circuit Court ruling does not give full faith

and credit to a controlling State statute 8

III. Grant of deduction benefit to church-operated

cemeteries while denying same benefit to non-

‘profit, non- church operated cemeteries violates

the U. S. Constitution 1

Conclusion — 10

Appendix:

-( - App. 1

—T—T—T—T—T—rĩĩ——ĩ j App. 8

Exhibit C App. 23

Exhibit D App. 24

TABLE OF AUTHORITIES

Cases:

Pages

Bliss v. Linden Cemetery Asso. (1913), 81 N. J.

Eq. 394, 87 A. 224 7

Bushong v. Taylor (1930), 161 Tenn. 522, 33 S. W.

2d 80 7

Carlisle County v. Norris (1923), 200 Ky. 338, 254

S. W. 1044, 38 A. L. R. 41 „

Chapman v. Newell (1910), 146 Iowa 415, 125 N. W.

ee

Child v. United States, 540 F. 2d 579

Delaware Land & Development Co. v. First and

Central Presbyterian Church of Wilmington,

Del., 16 Del. Ch. 410, 147 A. 165

Drury v. Sleeper (1929), 84 N. H. 98, 146 A. 645

Estate of Elizabeth Audenried, 26 T. C. 120 (1956)

Estate of W. Robert Amick v. Commissioner, 67

USTCR 924 (1977)

Holton v. Elliott, 193 N. C. 708, 138 S. E. 32222

Hopkins v. Grimshaw, 165 U. S. 342, 352

In re Close's Estate, 26 Pa. Dist. 280, affirmed 103

A. 822, 260 Pa. 269

In re Johnson's Estate, 265 N. V. S. 395, 148 Misc. 218

In re Lubbins Estate, 186 Cal. 326, 199 P. 15, 16,

citing Matter of Estate of Edwards, 151 Cal.

Rptr. 770

a

iv

AUTHORITIES—Continued

In re Upham’s Will, 289 N. V. S. 518, 160 Mise. 126

Johnson v. Holifield (1885), 79 Ala. 423, 58 Am.

Rep. 596

McElwain v. Atty. Gen. (1922), 241 Mass. 112, 134

N. E. 620

Mecker v. Lawrence, 203 Towa 409, 212 N. W. 688

Newton v. Newton Burial Park, 326 Mo. 901, 34

NR EL Se ee eR

Parker v. Fidelity Unior Trust (1944), 2 N. J.

nenne...

Re Deaner (1930), 98 Pa. Super. 360

Re Harris (1928), 49 R. I. 289, 142 A. 374 aes

Re Lyon (1916), 159 N. V. S. 951, 173 App. Div. 473

Re Scott (1948), 240 Iowa 35, 34 N. W. 2d 177

Stewart v. Coshow (1911), 238 Mo. 662, 142 S. W.

Stubblefield v. Peoples Bank of Bloomington (1950),

een

Tacoma v. Tacoma Cemetery (1902) 28 Wash. 238.

Trustees of Methodist Episcopal Church of Mil-

ford v. Williams, 96 A. 795, 6 Boyce (2

Tuttle's Petition, 80 N. H. 36, 112 A. 397

AUTHORITIES—Continued

Srarurrs:

Pages

Section 12-509 Reissue Revised Statutes of Ne-

braska 1943 4,5,9

Section 12-511 Reissue Revised Statutes of Ne-

braska 1943 4,5

26 U. S. C. § 2055 2,3

26 U. S. C. § 7422 4

28 U. S. C. § 1254 (i) 1 3

28 U. S. C. § 1346 (a) (1) 6

Trxrs:

Fifth Amendment, United States Constitution — 3

Fourteenth Amendment, United States Constitution... 3

1

—0

In The

Supreme Court of the United States

October Term, 1982

0

THE FIRST NATIONAL BANK OF OMAHA, Executor

of the Estate of Glenn W. Melninch, Deceased,

Petitioner,

vs.

UNITED STATES OF AMERICA,

Respondent.

LY.

—

ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

*

—

OPINIONS DELIVERED BY THE COURTS BELOW

1. United States District Court for the District of

Nebraska (Albert G. Schatz, Judge).

(a) Judgment and Memorandum Opinion filed on

September 16, 1981 (Exhibit “A”). The district

court found that a $100,000 bequest in trust for the

2.

Cireuit

benefit of a non-profit, nonsectarian, publie ceme-

tery association was not for charitable purposes

and thus the bequest was not deductible for estate

tax purposes under 26 U. S. C. 5 2055.

United States Court of Appeals for the Eighth

(a) Opinion of a three-judge panel, filed on June

28, 1982, affirming the judgment of the district

court, reported at 681 F. 2d 534 (Exhibit “B”).

The Court of Appeals determined that while a

fund for the maintenance of cemetery plots in a

non-profit, nonsectarian, public cemetery is argu-

ably in the community’s interest and thus chari-

table, a provision by the testator that the fund “to

the extent permitted by Nebraska law” be applied

first toward maintenance of the testator’s family

plot and then toward maintenance of the entire

cemetery does not primarily serve a charitable

purpose. The court declined to give meaningful

effect to Section 12-509 Reissue Revised Statuies

of Nebraska, 1943 restricting the use of such funds

„solely for the general care, maintenance and em-

bellishment of the cemetery.”

(b) Order of July 30, 1982 denying appellant’s

petition for rehearing and suggestion for rehear-

ing en bane (Exhibit D“).

The judgment of the United States District Court for

the District of Nebraska was entered on September 16,

1981. Timely appeal was effected by petitioner to the

Court of Appeals for the Eighth Cireuit. Its opinion af-

firming the district court judgment was entered on June

28, 1982. Petitioner filed a timely petition for rehearing

and suggestions for rehearing en bane which were denied

by the Court of Appeals by order dated July 30, 1982.

The jurisdiction of this court is invoked under 28

U. S. C. 5 1254 (i), which authorizes the review of civil

eases by writ of certiorari granted upon the petition of

any party thereto after judgment of the Court of Appeals.

Lh

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CONSTITUTIONAL AND STATUTORY PROVISIONS

THE CASE INVOLVES

1. The Fifth Amendment to the United States Constitution.

No person shall . . . be deprived of life, liberty, or

property, without due process of law:

2. The Fourteenth Amendment to the United States Con-

stitution.

... No state shall. . . deprive any person of life, lib-

erty, or property, without due process of law; nor deny

to any person within its jurisdiction the equal protec-

tion of the laws.

3. 26 U. S. C. 5 2055 (a).

“For purposes of the tax imposed by section 2001

, the

value of the taxable estate shall be determined by de-

4

ducting from the value of the gross estate the amount

of all bequests, legacies, devises, or transfers—

(3) toa trustee or trustees, ... but only if such

contributions or gifts are to be used by such trus-

tee or — exclusively for . . . charitable, .

purposes. .

4. Section 12-511 3 Revised Statutes of Nebraska

1943.

Perpetual specia’ care trusts; funds; taxation; cer-

tain claims; exemptions; declaration of policy. The

perpetual care funds and perpetual special care trusts

shall be used and administered solely for cemetery

purposes, and shall be subject to the rules prescribed

by the association. They shall be exempt from taxa-

tion, execution, attachment or any other claim, lien

or process whatever, if used for the purpose hereinbe-

fore stated, and not for profit. The perpetual care

funds and perpetual special care trusts authorized by

section 12-510 are hereby expressly permitted and

shall be deemed to be for charitable and benevolent

uses. Such contributions are a provision for the dis-

charge of a duty due from the persons contributing

to the person or persons interred or to be interred in

the cemetery, and likewise a provision for the bene-

fit and protection of the public by aiding to preserve,

beautify and keep cemeteries from becoming unkempt

and places of reproach and desolation in the commu-

nities in which they are situated.”

5. Section 12-509 Reissue Revised Statutes of Nebraska

1943.

“Perpetual care fund; power to establish; sources; in-

vestment; protection; disbursement of income; re-

quirements, Such association shall have the power to

establish a fund to be known as the perpetual care

fund, placing therein such money as it may from time

to time determine, out of its general funds; and it shall

have the authority to receive gifts or bequests of

money and other personal property, and devises of

real estate and interests therein, to be placed in the

perpetnal care fund. The principal of the perpetual

care fund shall be forever held inviolate as a perpetual

trust by said association, and shall be maintained sep-

arate and distinct from any other funds. The prin-

cipal of the perpetual care fund shall be invested and

from time to time reinvested and kept invested in se-

eurities authorized by the laws of Nebraska for the

investment of trust funds, and the income earned

therefrom shall be used solely for the general care,

maintenance and embellishment of the cemetery, and

shall be applied in such manner as the association may

from time to time determine to be for the best inter-

est of the cemetery.”

LY

—

STATEMENT OF THE CASE

Testator bequeathed $100,000 to a trust for the bene-

fit of a public non-profit, nonsectarian cemetery. The trust

by the terms of testator’s will was to be established and

administered in accordance with Nebraska Revised Stat-

utes 12-509 and 12-511 ‘‘Perpetual Special Care Trusts.”

Said statutes provide the principal of said trusts shall be

kept invested and ‘‘the income earned therefrom shall be

used solely for the general care, maintenance and em-

bellishment of the cemetery, and shall be applied in such

manner as the association may from time-to-time deter-

mine to be in the best interests of the cemetery.”

The Internal Revenue Service disallowed the $100,000

deduction for estate tax purposes. The tax was paid and

the refund suit filed under § 7422 of the Internal Revenue

Code of 1954 (26 U.S.C.) and under 28 U. S. C. § 1346

(a) (1).

4.

2 ——

REASONS FOR ALLOWANCE OF THE WRIT

I.

The Circuit Court opinion conflicts with State

Court rulings and with the ruling of this Court.

Numerous state courts of last resort have ruled that

trusts established for the maintenance of public, non-profit,

nonsectarian cemeteries are charitable in nature and have

accorded them tax exemption and longevity privileges (ex-

emption from the rule against perpetuities) appropriate

thereto.' On the other hand, the Internal Revenue Service

1. Alabama.—johnson v. Holifield (1885), 79 Ala. 423, 58 Am.

Rep. 596 (implied).

California.—in re Lubbins Estate, 186 Cal. 326, 199 P. 15,

16, citing juris with full approval; Matter of Estate of

Edwards, 151 Cal. Rptr. 770.

Delaware.—Delaware Land & Development Co. v. First

and Central Presbyterian Church of Wilmington, Del., 16 Del.

Ch. 410, 147 A. 165; Trustees of Methodist Episcopal Church

of Milford v. Williams, 96 A. 795, 6 Boyce 62.

Iilinois.—Stubblefield v. Peoples Bank of Bloomington

(1950), 406 Ill. 374, 94 N. E. 20 127.

lowa. v. Newell (1910), 146 lowa 415, 125

N. W. 324; v. Lawrence, 203 lowa 409, 212 N. W. 688;

Re Scott (1948), 240 lowa 35, 34 N. W. 2d 177.

Carlisle County v. Norris (1923), 200 Ky. 338,

254 S. W. 1044, 38 A. L. R. 41 (recognized).

Massachusetts.—McElwain v. Atty. Cen. (1922), 241 Mass.

112, 134 N. E. 620.

(Continued on next page)

7

(Rev. Ruling 67-170 1967-1 Cum. Bull. 272), the district

court in this case, and the Eighth Circuit Court of Appeals

have denied that status to such trusts. The Second Circuit

earlier rendered a decision to the same effect (Child v.

United States, 540 F. 2d 579). As a result, bequests to

non-profit, public, non-sectarian cemeteries are routinely

denied estate tax deductible status by the Internal Revenue

Service. Such rulings not only are in conflict with the hold-

ings of many state courts of last resort but are contrary

to the only pronouncement on the subject by this Supreme

Court wherein it ruled land held in trust for use by such

a cemetery was “in the nature of a dedication for ...a

charitable use” and rendered the trust not subject to the

rule against perpetuities (Hopkins v. Grimshaw, 165 U. S.

342. 352).

(Continued from previous page)

Missouri.—Stewart v. Coshow (1911), 238 Mo. 662, 142

S. W. 283; Newton v. Newton Burial Park, 326 Mo. 901, 34

S. W. 2d 118, citing Corpus Juris.

New Hampshire.—tuttle’s Petition, 80 N. H. 36, 112 A.

397; Drury v. (1929), 84 N. H. 98, 146 A. 645.

New jersey.—Bliss v. Linden Cemetery Asso. (1913), 81

N. J. Eq. 394, 87 A. 224; Parker v. Fidelity Union Trust (1944),

_2N.). 362, 63 A. 2d 902.

New York.—Re we (1916),159 N. v. S. 951, 173 App. Div.

473; in re Upham’s ll, 289 N. V. S. 518, 160 Misc. 126; In re

Johnson's Estate, 265 N. V. S. 395, 148 Misc. 218.

North Carolina.—Holton v. Elliott, 193 N. C. 708, 138 S. k. 3.

Pennsylvania.—Re Deaner (1930), 98 Pa. Super. 360 (dic-

8 Estate, 26 Pa. Dist. 280, affirmed 103 A. 822,

Rhode Island.—Re Harris (1928), 49 R. |. 289, 142 K. 374.

Tennessee.—Bushong v. Taylor (1930), 161 Tenn. 522, 33

S. W. 2d 80.

Washin, -—Tacoma v. Tacoma Cemetery (1902), 28

Wash. 238, 68 P. 723 (recognized).

This recurring issue is one which has not been but

should be settled by this court.

II.

The Circuit Court ruling does not give full

faith and credit to a controlling State statute.

The Eighth Cireuit, although it suggested that the

subject trust “is arguably in the community’s interest,”

cited as ‘ts reason for denial of the deductions in this in-

stance the provision in the will of the testatur that

“The earnings on the Fund established by dais bequest

to the extent permitted by Nebraska law shall be ap-

plied first toward maintenance of the Melninch fam-

ily plot and the balance of the earnings shall then be

used for the general beautification and maintenance of

the entire cemetery.” (Emphasis added.)

The court held such language established a “prece-

dence to non-public beneficiaries” and thus did not primar-

ily serve the interest of the community.

Such ruling did not give full faith and credit to the

Nebraska Statutes pursuant to which the trust was estab-

lished nor to the wording of the bequest specifically re-

stricting any invasion for “non-public” use only “to the

extent permitted by Nebraska law.”

The ‘‘Nebraska law” is contained in the enabling act

for such trusts and provides

The principal of the perpetual care fund shall be in-

vested and from time-to-time reinvested and kept in-

vested in securities authorized by the law of Ne-

braska for the investment of trust funds, and the in-

come earned therefrom shall be used solely for the

general care, maintenance and embellishment of the

cemetery and shall be applied in such manner as the

association may from time-to-time determine to be in

the best interests of the cemetery.” (Emphasis added.)

§ 12-509 Reissue Revised Statutes of Neb. 1943.

The Cireuit Court did not recognize the limitation

placed on the use of the funds by the state statute under

which the trust was created. This Court by its ruling

should reestablish the validity of such state statutory limi-

tations.

III.

Grant of deduction benefit to church- operated

cemeteries while denying same benefit to non-

profit, non-church operated cemeteries violates

the U. S. Constitution.

Deductions for estate tax purposes are rorvtinely al-

lowed for perpetual-care fund bequests made to chureh-

operated cemeteries.’ The lower court’s act of denying the

same deduction for the subject bequest made to public,

non-profit but non church-operated cemetery constitutes a

denial of equal protection under the law in contravention

of the due process clause of the Constitution.

2. Estate of Elizabeth Audenried, 26 T. C. 120, 1956.

Estate of W. Robert Amick v. Commissioner, 67 USTCR

924 (1977).

10

CONCLUSION

For the foregoing reasons, the petitioner’s application

for writ of certiorari should be granted.

Respectfully submitted,

By: Frank Marruews of

Matruews, Cannon & Rrepmany, P. C.

318 South 19 Street

Omaha, Nebraska 68102

(402) 341-1211

Attorney for Petitioner

Member of the Bar