Petition for Writ of Certiorari — Commercial National Bank of Kansas City v. United States

‘LIBRARY a ee Ge ee

: ay pas % i wee pa.

se COUR tia ieee | OCT 7 196g

. F. DAMS, CLERK

‘ _ SUPREME COURT OF THE : UNITED 5

| OCTOBER 1 TERM, 1968

THE COMMERCIAL NATIQNAL BANK oF

KANSAS CITY and THE BOATMEN’S | ) -

oo" NATIONAL BANK OF ST. LOUIS, oe |

ae ae Petitioners,

Fs - VS.

THE UNITED STATES OF AMERICA,

eT |

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

- FOR THE TENTH CIRCUIT

-Rosert B. LANGWORTHY

————3 = James J. MELCHING

Floor Three, Union National Bank-

Building |

Kansas City, Missouri 64106

Attorneys sisi Petitioners

* Of Counsel:

‘Linvz, THOMSON, VANDYKE, Farcunp &. Saunier

Floor, Three, Union National Bank Building

__ Kansas City, Missouri 64106

Homer Davis — |

Leavenworth, Kansas |

‘Lewis, Rice, TUCKER, ALLEN & CHUBB : a

611 Olive Street a Skee meas

St. Louis, Missouri 63101. = Nee ere

bn

E. L. Menpewwars, Inc., 926 Cherry Street, Kansas City, Mo, 64106, HArrison 1-8080

4 ‘ :

EE a, San,

—_——~

«

J

jth Dash, Sd

Opinions BelOW nineteen

Jutiadistion: ia’ 2g

ie Questions Presented. | ,

"Statement of the Matter Involved | ee

Reasons Relied On for the Allowance of the Writ —... 8

| Conclusion vel Jalglecon : ie “Sows

“Certificate of Counsel....... pidaan ; ee

Appendix A-1—Revised Opinion eS at States

Court of Appeals for the Tenth Circuit 7 a 3

‘Appendix A-2—Unrevised Pages of. Opinion. vi the

United States Court of Appeals for the Tenth Cir- *

cuit ....... A13.

Sn

Appendix B—The Petition for Reheating of Petition- |

ers ° Al5

pene C—The J udgment of the United States Court ae

of. Appeals ; A25 g ff?

Appendix D—The Opinion of the United States Dis- | Va

trict Court for the District of Kansas : _ i

Table of ‘Authorities.

Berryv. Kuhl, i74F. 2d 565 (1949, C C.A..ath) .. 3, 14, 15, 2.

Blanchard v. Commonwealth Oil Co., 294 F. 2a 834 satel 4

Carnes v. United States, 279 F. 2d 378 &. eg?

County of Imperial, ‘State of ‘California v. United — ‘

States, 384 F. 2d 904 <2 4.

Week: ‘ INDEX’ —

~ Ernst v. Foster, 58 Kain, 438 -vicccecwcerecnenntenneee Mh

£. 7, CO stienenpolte-Heeegneet Regulator Co., 344 —

US. 206 4.

a en v. Hassett, 121 ° ‘2a 229, certiorari denied

314 US, 678 ....: scans 15, 28, 17

’ Henslee v. Union. Planters Bank, 335 US. 595 ES

_Henslee v. Union Planters National Bank & Trust Co., |

69 S. Ct. 290"... ned 13, 14, 15

Th re Estate of Buckner, 186 Kan. en ;

Imre Estate of Ellertson, 157 Kan. 492 eeccncoccenteenee 2

‘In re Estate of Woods, 181 Kan. 271, 311 P. 2d '359’........ a

: 3; 4, 18, 24, 25, 27, 28,29, 30 ,

Ithaca Trust Compary v. United States, 279 US. 171, 49

', + Bee 01 3, 9, 15, 16 |

Lucas v. Meréantile Trust Co., 43 F. fd 39 ............ 4,17, 31, 32

Merchants National Bank of Boston v. Commissioner

, of Internal Revenue, 320 US. 256 ....3, 10, 13, 14, 15, 18, 19

Morse v. Henlon, 97 Kan. 399 ..-scrcu----- ek ae :

‘National Life Ins. Co. v. Watson, 141 Kan. 908 ........... jens, ae

Shanny v. Strong, 160 Kani. ‘206 . spiieceapiic . 24

; Union Trust Co.-v. Tomlinson, 355 F. 2d 40 (CA. 5th) 3

United States v. F. & M: Schafer Brewing Co., 78 S.

. Ct. 674 ....... 4, 35

United States v. Poiwell, 307. F. 2d 821 (1962, C.C.A.

10th) > v--eousy 4, 17, 18, 19, 21, 22, 23, 24

United States v. Wissahickon Tool Works, 200 F: 2d

936 . eae, a

Wiliams v. MeKinney, 4 Kan, Si S betigil oppo gle

te. 5

, err he ne ree es Ae

STATUTES © | ey. :

“Internal er Code, 1930, Sec. 811 (now Sec. 2041 of me

+ 1954°Code) «2... ..18

Revenue Ruling 54-285 Cumulative Bulletin 1954, Part

i II, Page 302 , «+35 9, 15

Rule 73(a), Federal Rules of Civil Procedure nw 34 — |

Scott on Trusts, 2nd BA, Vol. I; paregreph 183 won fe

?

~ SUPREME cout OF THE UNITED STATES

OCTOBER TEM, 1968 -

% No. xe : ; - : °

THE ‘COMMERCIAL NATIONAL BANK OF

KANSAS CITY and THE BOATMEN’S .

- Bie NATIONAL BANK OF ST.LOUIS, —

. Petitioners,

THE UNITED STATES OF AMERICA,

Fo RE YAS aes at

eee ae ae $ L

"PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS ©

FOR THE TENTH CIRCUIT

“'To wHe HONORABLE, THE Curie Justice AND THE AssocIATE

* JUSTICES OF THE SUPREME COURT OF THE.UNITED STATES:

. Petitioners, The Commercial National Bank of Kan- ©

__ sas City and The Boatmen’s Natjonal. Bank ‘of. St. Louis,

pray that a Writ of Certiorari issue to the United States

Court of Appeals for the Tenth Circuit,:which ‘Court, on ..

- appeal from the judgment for Petitioners in the United

__. States District Court for .the- “District of Kansas holding

a E. Washburn Estate was entitled to a charitable

re) ion for a bequest in trust, ‘teversed ‘said judgment .

inst Petitioners.

; 2

.

A timely Petition for Rehearing was } filed, but was de-

nied by the Court.of Appeals. ©

- This suit involves a claim for refund of Estate Taxes

_ . unlawfully assessed by the United States Government but ©

paid by Putitonem in the principal amount of $19,614.05.

OPINIONS. BELOW

The revised opinion of the-United States Court of Ap-

peals for the Tenth Circuit is reported in ........ i am :

and appears in the appendix to this Petition as Appendix

A, page Al. Only pages 12 and 13 of the final opinion

were, revised. These unrevised pages appear also in Ap-

pendix A, pages Al3-Al15. | ei

' ‘The petition for rehearing of Petitioners filed June

17, 1968, spyram Se the sgpanitiz to tile Puttiion ss Ap-

pendix B, page Alb. ©

The judgment of the United States Court of Appeals

to be reviewed was entered on the docket. July 5, 1968,.

and appears in the — to this. Petition as Agpentx

C, page A25.

The opinion of the United States District Court for

the District of Kansas is.reported in 265 F.. Supp. 806

(1966), and’ appears: in the eppendix tp: this petition os

Appendix D, page A27.

JURISDICTION ;

The 6 Settotiatlens of this Court is invoked under Title

28, Section 1254 (1). :

QUESTIONS PRESENTED |

1. Whether this Court should grant certiorari to re-

_ view the determination made by the Court of Appeals for

the Tenth Circuit which determination: » in direct con-

coe

flict with an earlier decision of this Court. involving

whether the value of a charitable transfer allowable as a

deduction for federal te tax purposes may be disal- :

lowed where, the charit ble corporation being the dis-

tributee of the principal of a trust, the’ trust permits

invasion of the principal by the trustees for the benefit

of the life beneficiary. The allowance and disallowance

of.charitable deductions with respect to estate tax returns

under instruments which create benefits for both chari-

table and private purposes have been disputed in the ”

Courts throughout the Land for many years. The Ithaca

Trust Company case’ has been cited at least once.every _

three months for over thirty years. It appears that it is

time for this Court to take up the matter and permanently___{

resolve the issues which have. resulted in numerous in-

consistent decisions arid ave plagued the legal profession

both in and out of Government over the decades. .

Ithaca Trust Company v. United States, 279 U.S. 171. .

' United States v. Powell, 307 F. 2d 821 (1962, GLA.

10th).

In ré Estate of Woods, 181 Kan. 271, 311 P. 2d 359.

Berry v. Kuhl, 174 F. 2d 565 (1949, C.C.A. 7th).

Revenue Ruling 54-285 Cumulative Bulletin 1954, Part

Il, Page 302.

Bastien ¢,.Unien Planters Bank, 335 U.S. 595.

Merchants National Bank of Boston v. Commnigntonsr

of Internal Revenue, 320 U.S. 256. -

Gdmmons v. Hassett, 121 F. 2d 229, certiorari denied

314 U.S. 673, .

Union Trust Co. v. ‘Tomlinson, 355 F..2d 40 (C.A. 5th).

2. Thedecision below of the Tenth Circuit conflicts,

not only with applicable decisions of this Court, but with its

4

s

own decision (Powell) involving the interpretation of trust

_ provisions governed by Kansas law that may or may not

limit the invasion of principal to the standard-of-living

criterion. “Also the Tenth Circuit’s decision is in conflict

| with Lucas v. Mercantile Trust Co., 43 F. 2d 39, a decision

by the Eighth Circuit: decided July 30, 1930; wherein sub-

. stantially the same questién was presented by the gov-

erning instruni@t with respect to powers of invasion for

the life beneficiary

United States.v. Powell, 307 F. 2d 821.

In re Estate of Woods, 181 Kan. 271, |

Lucas v. Mercantile Trust Co., 43 F. 2d 39,

3. The Court of Appeals erred in dismissing Peti-

tioner’s Motion To Dismiss Appeal which motion was

filed on the grounds that the Notice of Appeal by the

United States was not filed within sixty (60) days from

the date of the judgment appealed from in the District

geass “dhe |

Blanchard v. Commonwealth Oil Co., 294 F. 2d 834.

Carnes v. United States, 279 F. 2d 378..

. « United States v. Wissahickon Tool Works, 200 F. 2d

7 936.

County of Imperial, State of California v. United

States, 384 F. 2d 904.

F. T. C. v. Minneapolis-Honeywell Regulator Co., 4

US. 206.

United. States v. F. & M. Schafer Brewing Co., "8 S.

Ct. 674. -

+ eeennrmaceennen anemmnanatt

. 5

_ STATEMENT OF THE MATTER INVOLVED

On June 19, 1954, Frank E. Washburn executed his

will bequeathing his residuary estate to his wife, Lucy

Tullock Washburn, or, if she failed to survive him, one-

sixth each to four nephews and one-sixth each to the Cush-

ing Memorial Hospital _Corporation, ‘of Leavenworth,

Kansas, and to the University of Wisconsin.

Also on June 19, 1954, Mr. Washburn established a

revocable trust the income from which was payable to

himself during his lifetime, to his surviving spouse there-

after, but if she predeceased him or after her death, to

his (Mr. Washburn’s) sister, if she survived. The Trust

‘Agreement provided that upon the death of the wife and

the sister, or upon decedent’s death if both predeceased

him, the trust estate was to terminate and the net prin-

cipal and net undistributed income remaining would go

one-sixth each to four nephews and one-sixth each to the

Cushing Memorial Hospital Corporation and to the Uni-

versity of Wisconsin.

_ Paragraph 5 of the aforementioned Trust Agreement

provided (R-23):

“5. In the ohne that the Grantor’ s wife, Lucy

Tullock Washburn, shall survive the Grantor, and the °

_ Trust Estate hereby created shall not have thereto-

‘fore been terminated, then in that event, if at any

time or times during the lifetime of the Grantor’s said

wife, some emergency or contingency shall arise mak-

ing it necessary or advisable in the sole judgment of

the Trustee to pay or distribute to or apply for the

benefit of the Grantor’s said wife for her comfort,

welfare, contentment and happiness, a portion or por-

tions of the principal of said Trust Estate, the Trus-

tee shall have full power and authority to pay or

distribute to her, or to use or apply for her benefit

6

‘A for, her comfort, welfare, contentment and happiness,

\ guch portion of the principal of said Trust Estate as

. the Trustee in its sole discretion shall deem neces-

sary or advisable in all of the circumstances then ex- -

isting. In determining the necessity or advisability

of making such payments or distributions out of prin-

cipal to the Grantor’s said wife from the Trust Estate,

the Trustee may take into consideration other income

and cash resources available to’ the Grantor’s said .

wife, and the Trustee shall take into consideration

that said Trust Estate is created by the Grantor for

the purpose and with the intention of providing for .

the comfort, welfare, contentment and happiness of the :

Grantor’s said wife throughout her entire lifetime, ' )

and in order that she may continue to live in x

the manner in which she has been accustomed io live;

and that while 'said Trust Estate should not be de-

pleted by payments or distributions from principal to ©

-the extent: that the ‘carrying out-of said purposes and _ .

intentions will be endangered so long as. the Grantor’s .

wife shall live, her enjoyment of the benefits-of said

Trust Estate should be considered as paramount to

the conserving of assets in said Trust Estate forthe

benefit ‘of the distributees hereinafter named in para- _

ph 9 of this Trust Agreement.”

At the date of. death of Frank E. Washburn, his sur- ©

"viving spouse, Lucy Tullock ‘Washburn, had on deposit in

her own revocable inter vivos trust at the Boatmen’s Na-

' tional Bank of ‘St. Louis, cashable income producing se-

curities worth $533,000.00; cash on deposit at that bank

of $15,000.00; immediately saleable government: and mu-

nicipal bonds worth $99,000.00; an immediate. interest of

$110,316.91 in her husband’s estate; and real estate in her

, Own name worth $39,500.00. At the date of her husband’s

death, Lucy Tullock Washburn, had an annual income ‘of

more than $29,000.00 consisting of $15,600.00 per year.

from her own trust at The Boatmen’s National Bank of

7

St. Louis, $7,500.00 per year.from the Frank E. Wash- .

burn Trust, more than $3,000.00 ‘per year in interest in- -

come from government and municipal bonds, and approxi-

mately $3,000.00 per year starting at the date of his death eS

on the $110,316. 1 inherited from her husband. (R. 10-11,

41-42) ,

Prior to the death of the decedent, the living ex-

penses of Mr. and Mrs. Washburn averaged about $21,000.00

per year of which the wife paid two-thirds and the hus-

band paid one-third. From the, date of death of Mr.

Washburn through the date of death of Mrs. Washburn,

some six years later, living expenses never exceeded

$21,000.00 per year for Mrs. Washburn. Included in this |

$21,000.00 figure were taxes in the approximate amount —

of $10,000.00 per year and contributions to ae of

about $750.00 per year. (R. 42) |

ul Federal Estate tax return was timely filed on be-

— half of the estate on June 25, 1958, disclosing an estate

tax liability of $31,920.44, which sum was remitted “—_

the return. . , : ,

Upon subsequent audit of the return, a deficiency in

tax of $39,212.04, together. with interest of $7,508.30, a

- total of $46,720.34, was assessed and paid by the repre-

sentatives of the estate. The deficiency was based on

the disallowance of charitable deductions with respect to

the remainder interests passing to the Cushing Memorial

Hospital Corporation and the University of Wisconsin un-

der the aboye-mentioned trust, and on several other ad-

justments which are no longer in controversy.

Following the payment of a refund by the Commis-

sioner upon issues not relevant here, the estate’s repre-

sentatives on September 17, 1963 filed a second timely

claim for’ refund ‘in the. amount of $19,614.05, which was

i)

: disallowed by panitory notice: of sanbooue dated De-

-cember 16, 1963. An action was filed in the Federal Dis-

- trict Court for the District of Kansas which resulted ina

summary judgment in favor of the taxpayers. The Dis-

trict Court found from the undisputed facts that at the |

"date of the decedent’s death, his widow was. possessed of

.& personal estate more than twice the size of that con-

stituting the corpus of the Frank E. Washburn Trust; that

the widow’s estate alone produced income in excess of

that required to-maintain the widow's standard of living; . .

thatthe size of her personal estate iricreased during the

period between her husband’s death and. her own; that she

~ received outright a bequest of better than $100,000.00 from

her husband’s estate; and that her standard of living was

- modest. The District Court further found that the pos-

sibility of invasion of the corpus by the Tfustee was so

unlikely -as to be neglible. The ‘United States appealed

the decision of the District Court to the Tenth Circuit

' Court of Afpeals: which court reversed the lower court’s.

decision and remanded the case for — of judgment .

consistent with its opinion _

—" RELIED ON FOR THE ALLOWANCE

3 OF THE WRIT

are” Whether this Court should grant certiorari to re-

view the determination made by.the Court of Appeals

for the Tenth Circuit which is in direct conflict with an

' earlier decision of this court, the. nature of. the contro-

-versy being whether the value of a charitable transfer

. allowable as.a deduction for federal estate tax purposes

- may be disallowed where, the charitable corporation be-

ing the distributee of the principal of a trusé, the trust

permits’ invasion of the principal by the trustees for’ the

wis eee ee

3

The controlling Jegal decision applicable to the facts

of this“tase was announced in Ithaca Trust Company Vv.

United States, 279 U.S. 171, 49 S. Ct. 291, wherein this

Court held that. where a provision in the governing in- --

strument contains a standard of living clause the chari-

table deduction is to be allowed if at the date of the

., decedent’s death there is enough money in sight to con- °

tinue that standard of living without invading the corpus

of the trust estate. The Tressury Department has devel-

oped a ruling in accordance with the Ithaca holding, Reve-

nue Ruling 54-285 Cumulative Bulletin 1954, Part II, Page

302, which recites that where there is an ascertainable.

standard. governing comfort and support, the charitable «

deduction is allowed wheré the. probability of: invasion of

the corpus is so remote as to be negligible. In the case

at hand, the probability of invasion of the trust corpus

is so remote as to be negligible in view of the surviving is

pina individual wealth, annual income and her living

In Ness the acted gave to a corporate trustee the

residue of his estate for the benefit of his.wife for life -

with authority to use from the principal any sum “that _

may Ue necessary to suitably maintain her in as much.

_ comfort as she now enjoys.” After the wife’s death the’

remainder interests were to go to certain charities.

In this monumental decision this Court held that prin-

cipal of the trust could be used for the wife, only if nec- —

essary and then only to continue the standard of living -

enjoyed at the time of decedent’s death. It was also. held .

that the standard was fixed in fact and capable of being

‘stated in definite terms of money AND IT was. not left. to

the widow’s ‘discretion. It was further determined that

since funds were available to pay debts, specific legacies

. e

10.

‘and expenses of administration with sufficient amounts

thereafter to maintain the widow as required, there was

no uncertainty appreciably greater than the ena un-

saga that attends human affairs.

‘From this it must be. concluded that (1) if a standard -

‘exists, (2) there’ are adequate - assets available, and

_ (8) the discretion to. invade is not in the widgy but in

one who must act in accordance with trustee standards,

the Government bears no risk appreciably greater than

.. the general uncertainty that attends human affairs.

- ‘There is no doubt but that the provisions of para-

graph 5 of. the Trust’ Agreement set out an ascertainable

standard and the discretion to invade is solely in. the

Trustee. The widow was entitled to distributions from’

corpus only if she could show she was in need of funds ©

to continue the standard of living she enjoyed at the time

of her husband’s death. In view of Mrs. Washburn’s sub-

stantial estate in her own right, it is virtually inconceiva-

ble that an invasion of principal would ever have taken

place for. her benefit. “

The United States eliée heavily on two decisions of

this Court..to support its ‘contention for disallowance of

‘the charitable deduction. - The first case, Merchants Na-

tional - Bank of Boston v: Commissioner, 320°U.S. 256, in- -

uy olved an-in ent that permitted invasion of principal—

“at such time or times as my said Trustee shall in its

‘sole discretion deem wise and proper for the comfort, — .

\. support, maintenance, and/or happiness of my said -

_ \ wife, and it is my wish and will that in the exercise of

a3 \its discretion with reference. to such payments from

| the principal of the Trust fund to my said wife, May

_ L. Field, my said Trustée ‘shall exercise its discretion

- -with liberality te my said wife, and consider her wel-

fare, comfort and happiness prior to claims of resid-

uary beneficiaries wacer this Trust. sa

In { deveiontne' the anita to be ceatiovel this ‘Court ee

determined that the case turned on: whether the bequests

to the charities had, as of the testator’s death, a presently

ascertainable value. In other «words, whether, as of that

_ time, the extent to which the widow would divert. the .

. .corpus from the charities could be measured: accurately.

It was reasoned that the aforementioned, provisions

__ of the governing instrument were not restricted by a fixed

- standard based on the widow’s prior way of life. (In Ithaca,

of course, as in the case at hand, a definite standard is spelled

out unequivocally.) From this it is obvious that a decision

disallowing. the charitable deduction was in order.. em -

- “trustee was instructed to honor the wishes of the ee

and without a standard to go by, it, of course, was . |

i discernible that the risk was on the Government, despite .

the fact the widow’s previous mode of life was modest

‘and her own resources substantial, | .

TE te to! be notod thet: this Comet: Qian the

widow’s happiness as being a factor which the trustee had.

to consider in making any, distributions. Such a word by

itself, of course, could not be controlling with respect to

allowariée . or disallowance: of the deduction but when no

_ ‘Standard has been provided as a guide, it then becomes |

apparent that the purposes for which the widow could, ©

_ and might wish to have the funds spent do not lend them-

_selves to reliable prediction. This would follow, it seems,

irtespective’ of the words used, whether they be _—

ness, benefit, enjoyment, welfare, etc.

The second ‘case on which. the United States relies is

Henslee: v. Union Planters National Bank & Trust Co., 69

-S. Ct. 290. There the governing instrument left the de-

cedent’s estate to the bank in trust for his mother for life

with the following provisions and ‘directions to the trus-

12

AT. hereby direct both my executors ‘and my “Trustee |

to pay to my mother the sum of Seven Hundred Fifty |

($750.00) Dollars a.month to be used by her as she

sees fit. In the event the income from my estate is

‘not sufficient to pay the said Seven Hundred Fifty

($750.00) Dollars each month, then my executors and:

‘trustees are hereby empowered, authorized and di-, -

rected to encroach on the corpus of the estate to. pay”

said amount and to sell any of my property, real or

personal, for this purpose.

“tn addition to this amount my said ‘executors a

trustees are authorized and empowered to. use and -

. expend in their discretion any portion of my estate,

either income or principal, for the pleasure, combos me

and welfare of my mother.

“The first object to be: ‘accbmplished in the nen

_ -tration and manrgement of my estate and this trust is

to take care of and provide for my mother in. such _

mannér as she may desire and my executors ‘and trus-° *

:’ » $ees are fully authorized and likewise directed to

manage my estate primarily for this purpose. yo

Again we see.a most noticeable absence of a standard

as required by the Ithaca decision. This then throws the

matter into the same area that Merchants covered. With-

‘out an ascertainable standard and with power to. invade

resting in the life beneficiary: and the trustee being di-

tected to cater to the whims of the life beneficiary, it is

obvious that the remaindermen are not protected by: strict

trustee ‘standards as ifi Ithaca and the risk is appreciably

_ greater than the overiaas siege aah that attends human

SS

. This Court's detérminstion in H elite was again made

on the Absence of an. acceptable standard. hose 69 S. Ct.

292, s&s was stated: “= -

. It is, spies on. the face of the complaint that

‘thi testator’s will did not limit the trustee’s disburse-

id

Fy

*

e

eer oS

‘ments to conformity with’ some ready standard—as-

where, for example, trustees are to provide the prime

_beneficiary: with such sums as ‘may be necessary to -

suitably. maintain ‘her in as ‘much, comfort as she now

enjoys.” (Emphasis. supplied:) Ithaca Trust Cos v.c ~:~

Uriited States, 279 U.S. 151, 154, 49 S, Ct. 291, 73 L.

Ed. 647. The stated income here directgd to be paid

to the mother was.‘to be used by, her as she sees fit.

Beyond this the trustees were empowered to invade.

or wholly utilize the corpus of the estate for the

- mother’s ‘pleasure, comfort, and Welfare,’ bearing in

- mind the testator’s injunction that :

° whe first object to be accomplished * * * is to

take care of and provide for my mother in such manner.

-- as she may desire * * *.”.° As in the Merchants Na--

tional Bank of Boston case <( 320 US.’ 256, 64S. Ct.

111), where the trustees ‘have’ discretion to disburse

sums for the “comfort, support, maintenance, and/or

.’, happiness” of the prime beneficiary, so here we think .

fit the “salient fact * *\* that the purposes for which

“the’ widow ‘could, and might ‘wish to have the funds’

spent-do not lend themselves to reliable prediction.”

320 U.S. 256, 262, 64 S. Ct. 108, 112, 88. L. Ed. 35.

_ Petitioners are cognizant of the fact that’ Merchants

and Henslee_are two cases decided by a divided Court

and also go only to the extent that if the governing in-

strument fails to state an ascertainable standard, then the

‘charitable deduction’ fails. The late-Mr. Justice Frank-..

furter who reversed himself from the majority in Mer-.

chants to the dissenters in Henslee, stated—

-“Wisdorn too often never comes, and so one ought not.

to reject’ it merely because it comes late. Since I

’ now realize that I should have joined the Dissenters —

in the Merchants National Bank of Boston ‘case, 320

U.S. 256, 64S. Ct. 108, 88 L. Ed. 35, I shall. not com-

He ‘pound error by’ pushing that decision still farther. I |

* att 3 s Pa a

a» ' re a

14 ’

-would affirm ‘the judgment, substantially for the rea-

‘sons given below, 6 Cir., 166 F. 2d 993.”

Mr. Justice Minton, then Judge in the Circuit Court

- deciding Berry v. Kuhl, 174 F. 2d 565, after considering both

lines of decisions stated the rule to be:

“The charitable interést -is deductible in full where

the power of private beneficiary to invade the corpus

is limited by a standard fixed by. the terms of the

Will and capable of being stated in terms of money’

*and where the circumstances (resources) of the pri-

vate gs ote indicate emma d of invasion is re-

* mote. -

“Where, on the other hand, hy tenants dimetuvt ;

_ is fixed by the Will to limit the power of invasion,

no deduction for the charitable interest will be al-

From this it is therefore obvious, that, as the decisions

themselves hold, it is not the use of the word “happiness,”

or “desire,” or “wishies” that is of bone crushing importance.

No matter what the language is, the salient point as

pointed out in Merchants and as restated by Mr. Justice

' Minton, is whether or not there is a living standard fixed

in the governing instrument to measure what the Trus-

tee may withdraw from corpus. It is to be noted that

_J ustice Minton does not mention the words happiness, de-

‘sire, “wishes or the like, he specks only of the presence .

or absence of a standard of living -clause.

It is true that Merchants, Henslee and the others dis- .

cuss the use of. the words happiness, pleasure, desire, -

wishes afd the like but then in the total absence of a

standard of living) clause there’ was simply nothing else

to discuss. %t seems correct to assume, after. analyzing

the Merchants line of cases, the result would necessarily

have been the same, even if the words happiness, pleas-

~

Sasa

15

ure, wishes or desire had not been used at all. -In each

of the cases the real or salient reason for the: disallowance

was the total absence of any standard by which the proba-

ble extent, if any, of ifivasion could beemeasured in money

as was succinctly stated in Berry.

The Ithaca case has been epitomized by the United

‘States Treasury Department in its Revenue Ruling 54-285,

Cumulative Bulletin 1954 Part II, fail 302, — states

* .as follows:

“(1) There must be an asecunainns standard

. covering comfort and support which may be either .

' express or implied, and

(2) The’ probability of invasion ris reinpte or the

extent of the invasion is calculable in accordance with

some ascertainable standard.” : @

The decisions denying charitable deductions with respect

to estate tax matters, are those having no standard of

living ‘clause. Such decisions are not relevant to this case.

The promulgation of this ruling must have been.

brought about in view of the problems presented in such

cases as Merchants and Henslee and the forerunner of

these two decisions, Gammons v. Hassett, 121 F. 2d 229,

certiorari denied, 314 U.S. 673. The will in the latter

case, after payment of debts, specific bequests, etc., pro-

vided as follows:

“1. All the rest,. pulies ath wantiiie da

‘property, of whatever ‘nature, and wherever situated,

including all property over which I now have, or may

hereafter acquire, the power of disposition, I give, .

devise and bequeath te my Trustees, in trust, never- ’

' theless, for the foll purposes: to be held by ~

them, the income thereof, after paying all reasonable

expenses of the trust, indulging a reasénable compen-

16 ei ee \

™“

sation for the services of my Trustees, and so much

of the principal thereof as my said wife may at any -

time and from time to time need or desire, to be paid

to my said wife during her life.

| . “3. I direct my said Trustees to transfer, make

over and distribute the rest, residue and remainder

of my estate to the New England Grenfell Association,

of 25 Huntington Avenue, Boston, Massachusetts, and

the Society for Prevention of Cruelty: to Animals, of

Boston, Massachusetts, share and share alike, free and

- discharged of any trust.”

The question presented to the was whether the be-

quests to the charities sufficiently definite and as-

- certainable as of the date of the death of the testator to

_ be deductible from the gross estate.

In reasoning that the charitable gift was not defi-

nitely ascertainable at time of testator’s death, the Court

recognized the fact that the language of the will did not

establish a standard required by Ithaca. The Court went

on to state:

(ihe peullt te tavclie ‘thn gelndigth to met 10

Hoehne Ma Seen Sm the widow may

invade it as she desires, We know of no standard

_ fixed in fact by which we could measure either the

éxtent of the life tenant’s desires or the likelihood

of an exercise of those desires, so that we could place -

‘a definite value on the charitable bequests. While

_ > we grant that the likelihood of invasion of the princi-

, pal was extremely remote: at the testator’s death,

still the possibility of invasion did exist and, there- |

Be es Sete wah would @ ws

charity was uncertain.”

SEE EEE Ea a

in the course of making its points. with respect to a stand-

ard and widow’s discretion:

e ‘ : - Q

17 .

“The principal that could be used was only so much

as might be mecessary to continue the comfort. then _

enjoyed. The standard was fixed in fact and capable

of being stated in definite terms of money. It was

* not left to the widow’s discretion.” :

From Gammons and the other landmark decisions involv-

ing charitable deductions for remainder interests, the

issues have necessarily. revolved around (1) the ascer-

tainable standard, (2) availability of assets and (3) the

life beneficiary’s power to invade to the detriment of the

charities. In resolving such issues the Courts have found

it necessary to interpret the governing instruments under

the applicable state law, since state laws create legal in-

terests and rights and the federal revenue acts designate

what interests or rights, so created, shall be taxed. With.

this in mind and applying the’ Kansas law to the provi-

_ sions of the instrument at hand, a second important fac-

tor for determination presents itself. The following

question Number Two of Petitioners is indeed a valid one

Ao A: Sa DS. CD SRN Oe ee ae

justice will prevail. :

_- 2. The decision of the Tenth Circuit. conflicts, not

ae with ‘applicable decisions of this Court; but with ifs .

own decision (Powell) involving the interpretation of, the

trust provisions governed by Kansas law that. may or

may not limit the invasion of: principal to the standard

of living criterion.’ Also the decision of the Tenth Cir-

cuit is th conflict with Lucas v. Mercantile Trust Com-

pany, 43 F. 2d 39, decided by the Eighth Circuit in 1930,

wherein substantially the same question was. presented |

by the governing instrument with respect to powers of

. invasion for the life beneficiary. 3

_ Considerable effort: has been expended by the re-

spondents in pressing for the application of Merchants‘

18

~ to the situation before us. And despite the fact the Tenth

Circuit in its decision has unequivocally stated~

“Thus our problem may be stated as whether, under

_ the law of Kansas, Paragraph 5.0f the trust limits the

- invasion of principal to the standard-of-living cri-

. terion.” |

it has based its decision on cases interpreting instruments

governed by Massachusetts law and other. jurisdictions.

In this connection it must be stated that whatever may

be the reach of the word happiness in a: Massachusetts

will (Merchants), which does not contain any semblance

of a standard of living clause, the established law of Kan-

' sas is that in a Kansas will which.does contain a standard

of living clause, the use of the word happiness does not

enlarge this standard. The controlling cases with respect

to instruments governed by Kansas law is In re Estate of

Woods, -181 Kan. 271 and United States v. Powell, 307. -

F. 2d 821. .

The Powell case did not involve a charitable re-

‘ mainder deduction question as was first thought by ‘the

Tenth Circuit on page “12 of.its original opinion. See Ap-

pendix Al, page Al0. Powell involved an. instrument

containing a Power of Appointment provision as contem-_

plated’ under Section 811 of the 1939 Internal Revenue

Code, now Section 2041.of the 1954 Code. The instru-

ment provided with. respect to invasion by the Grantor

for the benefit of the life tenants, as follows:

“Fifth: If, at any time during the continuance of

this trust, it is necessary or advisable to use some

portion of the principal for the maintenance, wel-

fare, comfort, or happiness of the Grantors wife,

* * * or Grantor’s daughters, * * * or for the educa-

tion of Grantor’s said daughters, the Trustee is hereby

authorized and empowered to use so much of the

O)

2

prineipel as in the discretion of thé! Trustee Je necte-

sary or advisable to be used to meet such

and provided that the Trustee shall deem the

purpose for which the payments are to be made, le, justi-

fies the reduction in-the prificipal of the trust prop-

“ee (Emphasis, added.) -

In view of the foregoing. provisions, the Givicaane con-

tended that a trust created by the decedent (Mr. Powell)

some 22 years before his death was includible in his gross

estate for Federal estate tax purposes. In creating the

trust, Mr. Powell named himself as a joint trustee with

certain powers that gave rise to the contention that for

virtually all intents and purposes the retention ‘of said

powers made him (Mr. Powell) the equitable owner of

the trust assets at his death and accordingly should be.

taxed pursuant to. the provisions of the tax laws. :

The Merchants case was discussed in the Powell de-

cision. ~The opinion of the Tenth Circuit among other

Cag eaten eit Seemot 2S ees een ne

“It is clear, we think, that the Court accorded such

broader connotation to the word ‘happiness,’ be-

cause of the context in which it was found, and, par-

ticularly, the instructions to the Trustee to exercise

its discretion with liberality to the wife and to con-

sider her welfare, comfort and happiness: prior to the

‘ claims of the residuary beneficiaries.”

The Tenth Circuit further. reasoned that the Powell in-

strument not only did not provide that the power to in-

vade the corpus should be exercised with liberality and

to gratify the wishes of the beneficiaries, but, on the con-

trary, indicated that the power should be exercised with

restraint and only when the purpose justified a reduction

ca Si EY ee nee ne ee

20

of discretion to indi the corpus with liberality and in

> accordance with the wishes of a beneficiary is not a power

ey

restricted by a fixed standard. Finally, with respect to the

power to:invade corpus, it was determined that there was

nothing in the:context of the Powell instrument in which

the term happiness is found, or in the instrument as a whole,

" that indicated an intent that: it should be given a broader

_. connotation than its usual and ordinary oe It was

are that the qualifying language—

. provided that the trustee shall deem that the

purpose for which the payments are to be made, justi-

Nes the the reduction in the principal of the trust aa

_ erties.” (Emphasis supplied.) . |

indicated the contrary. The Washburn instrument spe-

cifically admonishes the trustee not to deplete the trust

estate— —

“by payments or distributions from iii to the

_»extent that the carrying out of said purposes and in-

tentions will be endangered. so long as the Grantor’s _

said wife shall live.”

From this it follows, that any reduction in corpus would

have to be justified and in this respect it is important to

‘note that the Grantor’s wife (Mrs. Washburn) had noth-

_ ing to say in regard to invasions for her benefit. The

final portion of paragraph § of the Trust Agreement—

“her enjoyment of the benefits of said Trust Estate

should, be considered as paramount to the conserving

of assets in said Trust Estate for the benefit of the

distributees hereinafter named in paragraph 9 of this

Trust Agreement.” (Emphasis supplied.)

“means nothing more than (1) the Grantor’s wife (Mrs.

Washburn) is entitled to the trust assets first, but not in

excess of the standard of living requirement previously

set forth and (2) the ‘Trustee iq protected from a re-

;

mainderman who might claim that the Trustee faved

one beneficiary over another without sufficient authori-—

zation.

- The Powell opinion set forth cnnallons euceaee that.

is most appropriate for the case at hand and had it been 7

- applied properly, Petitioners would not be here involved :

as Petitioners. In Powell;the Government contended that

_ by using the word happiness, complete and unbridled au-

thority was vested in the Grantor. This was rejected

with the Court reasoning that Kansas law had to be con-

“[1] . The trust instrument was executed and was

to be carried out in the State of Kansas, for benefit .

of persons who were citizens. and residents of that.

state. It was governed, therefore, by Kansas law. —

i is well settled, under the law of Kan-

sas, that a court of equity has power to review the

exercise of discretionary powers conferred upon trus-

_ tees and to correct any abuse in the exercise of such

discretion. The Supreme Court of Kansas so held in

Keeler v. Lauer, 73 Kan. 388, 85 Pac. 541, 543, with

respect to a trust instrument which gave large dis-

cretionary powers to the trustee. It reiterated that

doctrine in In re Porter’s Estate, 164. Kan. 92, 187

P. 2d 520, 525, in which the court ‘said:

te . ‘Notwithstanding the powers and discretion given

to the trustee hhe te sublect to the Girention and cab:

trol of a court of equity, which will have full power

liLmMenue oO ee

rect any. abuses of the trust’ =

“13, 4] In our opinion, tiie instrument gave the

trustees no such unbridled discretionary power or

authority. It is well settled that where there are

two or more beneficiaries. of a trust, it is the duty

en oe ee ee

; 22

ce : between the beneficiaries, and where a’ Trustee un-

der a trust is directed to pay the income to a bene-

ficiary during his life and on his death to pay the

- income from the trust or the corpus to another bene-

ficiary, it is the duty of the trustee so to administer

the trust as to yreserve a fair balance between them.”

= The latter part of the above-auoied portion of the Powell

.. Opinion was taken from Scott on Trusts, 2nd Ed., Vol. II,

at paragraph 183; perhaps the- foremost trust authority in

P modern American Jurisprudence,

The Powell opinion also delves into ‘the iiadcatens of

the word happiness as used in the wee instrument,

pages 826 and 827 of the report:

“The usual and ordinary meaning of hbase

is a ‘state of well-being characterized by relative

permanence.’ Webster’s New International Diction-

ary, Second Ed., Unabridged, p. 1136. It is synony- —

mous with ‘comfort’ or ‘welfare.’ Macmillan’s Modern -

Dictionary, Rey. Ed. 1944; Webster’s New Interna-

tional Dictionary, Second Ed, Unabridged, p: 2900.

It is ‘that more permanent enjoyment of life which

attends on, and ‘is almost identical with, welfare.’ 39

C.J‘S.. Happiness, p. 773. Webster’s New Collegiate

Dictionary, llth Ed., 1959, p. 375, defines ey as |

‘enjoying well-being, peace, and comfort.’ (

“Webster's New International ‘Dictionary, Sec-

' ond Ed. Unabridged, p. 2900,. defines ‘welfare’ as

‘ ‘state or condition in regard to well-being; esp, con-

dition of health, happiness, prosperity, or the like.’

In its ordinary sense ‘happiness’ ‘has the characteristic

of permanence or endurance, as distinguished from

pleasure, which is transitory. Funk and Wagnall’s . ~

Synonyms, Antonyms. and Prepositions, Rev, Ed. =. ; |

1947, delineates the objective qualities of ‘happiness,’

as contrasted with ‘pleasure,’ as follows: \

23 Me Ee pear pt

“Happinéss is-* * * more serene and rational than

pleasure; pleasure is of necessity transient; happi-

ness is abiding; thus, we speak of pleasures, but the

the full sense, is mental or spiritual or both, and

is viewed as resulting from some worthy gratifi-

_cation or satisfaction; we can speak of

re

of vicious

pleasure or delight, but not of vicious oe

ness * * *,’

There are many attadlenet. cases. + holding that the

terms ‘happiness,’ ‘wallere,. and ‘comfort’ are aynony-

mous.”

_ The Tenth Circuit in Powell nates that the word —

a . happiness, as it appeared in the applicable instrument,

was synonymous with welfare and comfort and recog-

‘ nized the fact that the words welfare and comfort pro-

vide an ascertainable and judicially enforceable external

Standard. It was further stated:

“We conelude that the provisions in the instew- |

-ment giving the trustees power to ‘the corpus

‘for the maintenance, welfare, comfort or happiness’

of the beneficiaries and for the education of the

_ daughters, the remaindermen, ‘provided * * * the

‘purpose for which the payments are to be made; jus-

tifies the reduction in the corpus, established an

ascertainable, external afid judicially enforceable

standard and that the trustees, in exercising such

power, were limited by such standard and the super-

vision and control of the .courts’ of Kansas in the

exercise of their equity powers.’”

From this opinion, which clearly set the record straight

‘ with reference to the use of the word happiness in a

‘Kansas instrument and as it applies to an ascertainable

standard, it is most difficult to understand why such a

radical turnabout can be pursued in the case at hand. It

24

is nothing more than verbal hairsplitting’ of the most

offensive type. The Tenth Circuit has ignored its inter-. —

pretation of the Kansas law as set -out in Powell and has ~

virtually based its decision on a use of the word. happi-

ness which is contrary to Kansas law,

’ ‘Under the law of Kansas, it is not permissible to pick

out some single words or phrases to determine intention

-but,on the contrary the whole instrument in its entirety

is to be considered. See Williams v. McKinney, 34 Kan.

_ B14; In re Estate of Buckner, 186 Kan. 183; In re Estate

of Ellertson, <BB7 Kan. 492; Morse 'v. Henlon, 97 Kan, 399;

Ernst v. Foster. 58 Kan. 438; Shanny v. Strong, 160:Kan. 206;.

National Life Ins. Co. v. Watson, 141 Kan. 903; In re Estate :

of Woods, 181 Kan. 271; United States v. Powell, 307 F. 2d

821. The Kansas law. is also clear on the point that it is ..

-’ not permissible to employ rules of construction where

_ the intention is expressed clearly and unequivocally in the

_will. See National Life Ins. Co. v. Watson, 141 Kan. 903;

Morse v. Henlon, 97 Kan. 399; and In re Estate of Ellert-

' . son, 157 Kan. 492.

The: fundamental Ritees ine sate the Phere:

.‘ tation of testamentary instruments must be realized.

. This rule is that the: intention of the testator is to be

gathered from the will as a whole and that intention must

__ prevail if it is consistent with the rules of law. As the

_ Kansas" Supremie Court stated in’ Ellertson:

“The will is to be-construed so as to give effect to

~ every part thereof, providing.an effect can be given

- to it which appears to be consistent with the purposes .

- Of the testator as gathered from the entire will, and

_ to effectuate rather than defeat the intention of the

testator. Controlling significance is not to be given

to one of the terms of devise or ‘haaiiia and other

terms ignored.” ae

ope 25

Fein’ this tt-to\ adparent. tf it if Mrs, Washburn hed 2

attempted to defeat the\interests of the remaindermen we

ee od the part—.

her enjoyment of: the benefits of said. ‘Trust

wciste should be considered as paramount to the con- |

serving of assets in said Trust Estate for the benefit: :

of the distributeés . Px ‘;

an insurmountable - obstacle in the form of the Kansas

~ Supreme Court decisign In. re Estate of Woods, 181 Kan. °

271, 311, P. 2d 359,,Wwould have. presented itself.

In Woods/’ ‘the decedent's: will provided for trust in-

come to his wife Frances for life then income to his daugh-

ter Catherine for life, remainder to charity. Paragraphs -

5 (d) and 5 (e) of the will provided for invasion of

-. Corpus: de :

mt) (d) Wherefore it is my will and desire that

thrgughout their lives my wife (Frances) and daugh-

ter (Catherine) shall possess all the necessities and

such luxuries as they have, generally speaking grown

accustomed to during my life and if after my death

‘the income from the trust estate shall fail to fully

provide such necessities, comforts and luxuries, it is ©

my will and desire that there shall be paid to my wife

-durihg her lifetime out of the funds of my estate and -

_ additional sums above the annual income, needed for.

her comforts,.and even for any desired luxuries. And —

_ the same generous treatment is to be given my daugh-

'. ter, Catherine, after my wife’s death, if there should

be: need, after considering her. own separate resources.

and inecome~a full report of which should be: apie at

any time’ asked by“ny executor.” 7 . |

3 a) (a) To my executor and to. ‘his successors, if

any, I make it plain that the essence. of this testament

_ is that-the funds of my estate are to be used first to

' provide: for the comfort _and — of my wife,

during her lifetime,»and after my

} for the comfort, and happi-

aughter, Catherine Billings: That in

become mentally or otherwise in-

shall be constantly provided with the

THE

Hine

edie

k i

i

Fe

$3

ee

applied without stint or quibble. This

responsibility. and I direct that it be

after my death to the last penny of my

estate, if necessary to serve my wife, whose active

intelligent and self sacrificing help in building that

estate is hereby gratefully and lovingly acknowl-

gr28

Ezs

ize

z

luxuries as they had, generally speaking grown accus-

tomed to during testator’s life, saying at page 277 of the

* State Reports: |

+, “As has often been said, the intentions of a testator

"= faust be determined from the whole Will—from the

"four corners of the instrument. Had the Will stopped

. with sub-paragraph (b) (relating to the income only)

such a conclusion: as that reached by the trial

may

.

court

have been more tenable but the further pro-

of and

a7 :

“,., to. possess (that is enjoy): all the necessities,

comforts and such luxuries as they had generally

speaking grown accustomed to during his life.” (Em-

phasis supplied.) da,

Of special. import is the fact that the Kansas Court did

not consider that the word happiness used in the will was

of any particular significance. The decision was based

upon the entire language as modified by the standard of

living clause. This treatment is in accordance with the

Federal SERS Oh SN, Ae. ees 174

F. 2d 565.

Inasmuch s the state court decision is controlling in

/ the interpretation of a testamentary disposition, we are

forced to conclude that Woods occupies the position of

the ruling case in interpreting the Frank EZ. Washburn

Trust Agreement, ‘since both of the governing instru-

ments substantially match each other in the critical parts.

For example, the Woods language comfort and happiness

is matched by the Washburn language comfort, welfare,

‘contentment and happiness; Woods language grown ac-

. customed is matched by the Washburn phrase she has

been accustomed; Woods Trustees were instructed to in-.

vade corpus if need be for the wife and daughter to pos-

sess all the necessities, comforts and such luxuries as they

had generally speaking grown accustomed to while the

- .Washburn Trustee was instructed to invade corpus if need

be for the wife to continue to live in the manner in

which she has been accustomed; and finally, the Woods

Trustees were instructed that to effect these requirements

they could invade corpus without stint or quibble—to the

last penny which provision is matched by the Washbu?n.

instruction to his Trustee—her enjoyment of the’ benefits

of said Trust Estate should be considered as paramount

to the conserving of assets in said Trust Estate for the

|

\

-énafit of the ditributees hereafter named in paragraph

| ‘9 of this Trust, Agreement.

‘While the ot tn: ‘Westiene-tieen. Agree-

ment which statés that her enjoyment of the benefits of

the Trust Estate are to be considered paramount to the

conserving of assets for distributees is probably more law-

yerlike than the use of the words without stint or quibble

—to the last penny, both provisions mean the same and

‘perform the same function. Such a provision is to pro-

tect the Trustée from possible claim for surcharge, if and

when the Trustee should find it necessary or advisable to

use corpus for enabling the wife and daughter in Woods |

ee ee Rene, cpee-

tively: - «

to possess all the necessities and such luxuries as

they have generally speaking grown accustomed to

Or | " . °

may continue to live in the manner

is been accustomed to live. "

’ A provision of this: sort, expressed in some way or

other is a legal requirement of a properly prepared testa-

mentary instrument containing provisions for lifetime .

support and remainder over to charity or in any other

case where there is a possibility that the Trustee may

possibly have to choose whether to prefer the rights of

re ee oe ene te Garlienge

in the absence of such provisions.

In its opinion in the case at hand the Tenth Circuit

‘in discussing. Woods found—

“Woods does offer some support for the proposition .

50. ss Rae mata pam lamaatimaaanialaat

| ig oe eat

broaden the standard-of-living-test. However, it is .

far from a direct holding to that effect. The court

those necessary to maintain her standard of living.

Only if it had, would the questions before us have

been decided. In view of the almost unanimous hold-

ings of the courts that happiness creates a broader,

. more subjective test than the standard-of-living clause

- we are unable. to conclude from Woods that Kansas

~would limit invasion of corpus in the instant case to

~~ the “empiri Ol criterion.” (Emphasis sup-

plied.)

Petitioners cannot “accept such a ‘finding in we ‘a

a ee

the opinion—

“We can see no other result to this phase of the law-

suit than that Catherine is entitled to the net pro-

ceeds of testator’s estate and if the executor-trustee

is of the opinion that such a : & share. 35 too large, then

it is his right to request, and her duty to furnish, a

report so that it can be determined by the’ executor-

trustee, and in turn by the court, to what sums she

is entitled from time to time to keep her in that po-

sition in life intended by the testator.”

This pronouncement by the Supreme Court of Kansas is

conclusive to the effect that the provisions in the will estab-

lished an ascertainable standard and the life beneficiaries -

were entitled to only that amount necessary to keep them

in that position of life ‘intended by the testator, ie., the -

standard of living enjoyed at the time of testator’s death.

Also the Kansas Supreme Court acknowledged the well-

. 30

settled law of Kansas that a Court of equity has power to

’ review the exercise of discretionary powers conferred upon

_ trustees and to correct any abuse in the exercise of such:

discretion. 7

‘So from the Woods case, it must be concluded that the

trustees, in the case at hand, would have invited surcharge

and litigation had they indiscriminately administered the

trust in favor of the life beneficiary to the detriment of the

remaindermen, i.e., had they provided more than what was

- necessary-to maintain that certain standard of living of the

life beneficiary.

It has. always been the rule and practice in the federal -

judicial system that when a question of state law is in-

volved, the federal courts will generally defer to the deci- .

_ sion of a jurist sitting in a court (state or federal) located

in the state in question, especially where such jurist has a

background ‘of long years of practice as an attorney at the

bar of the state in question. In the present case, District

Judge Arthur Stanley, Jr., who rendeted the decision in the

trial court, eminently meets these qualifications, and ruled

in this case that as a matter of Kansas state law, the instru-

ment in question is to be interpreted as providing an ascer- -

tainable standard, and that the word “happiness” is governed

‘and limited by the standard of living clause. Yet the Court

‘of Appeals, speaking through a panel of judges none of -

- whom has ever practiced in Kansas or sat as a judge in a

_ Kansas state court.or the United States District Court for

' Kansas, saw. fit to reject and disregard Judge — s

decision on 9 question of Kansas state law.

We had thought that this Court had long since made

clear its policy that federal courts should defer to jurists

experienced in the law of the state in question in cases

like this, but since the Court of Appeals has’ ignored this

31

__ policy, we submit that it is important for this Court to

clarify, amplify and re-emphasize its policy in this area,

which is one of general importance to the federal judicial -

Where there is a standard of living clause in the gov-

erning instrument, or even where from the manifest but

unexpressed intention of the testator a standard of living

- clause can be implied, the charitable deduction has been

allowed even though the widow is expressly authorized to «

take what she wants. Thus in Lucas v. Mercantile Trust

Company, 43 F. 2d 39, the will left remainder to charity and

_ directed the Trustees to pay the widow all net income, or

if need be such part of the corpus as may be necessary for

the comfort, maintenance and support of my wife:

_ “a request in writing to my Trustee made by my wife

stating that the sum requested by her is needed for her

comfort, maintenance and support shall be authority

in my. amc, daar ees sgrcine

(Emphasis supplied.)

The government contended that the widow was as piven the

unlimited right to invade the corpus of the trust and absorb

any part or all thereof for.her comfort, support, and mainte-

nance and therefore the value of the charitable bequests

could not be ascertained, and hence could not be deducted

from the gross estate for the purpose of computing the net.

estate subject to tax.

The Court announced two eciadubis Whtlle aie-tattl-

cant in considering the Frank E. trae tpt

ment. The Court stated:

“Someone must determine what the term ‘if need be’

means, also what the phrase ‘may be necessary’ for the

_ comfort, maintenance and support means and the one

~~

~~

“32 . ha

‘to determine that within ‘reasonable bounds is the

Trustee.” (Emphasis: supplied.) (In the case at hand

- that is The Boatmen’ s National Bank of St. Louis.)

It' was further held by the Court that under the will the

widow could not cut off thé charitable bequest at her whim,

because if the sum requested was not found, in* the good

faith judgment of the trustee, ‘to be. needed to maintain

_ the widow in a manner befitting her station in life, then no

invasion could be made.. The charitable deduction was al-

lowed in full. .

It is to be ‘noted 1 that in Lisoae,' the will. itself did not

limit the invasion to the manner befitting her station,

ie, the manner in which ‘she has been accustomed’ to

live, but the Court determined that such was the intent

of the testator. . The Court further stated that if the

. Trustee should pay to the widow any sum stated by her

to be required for her living, without itself determining

the need thereof, the Trustee would be in violation of its

. statutory duty and could be surcharged for the amount. -

_ Again there is no other conclusion to be reached but

that paragraph 5 of the trust agreement furnishes an as-

certainable standard and accordingly the charitable de-

duction must be allowed. That portion of the Lucas opin-

ge caring anadenerra

. The entire will shows that the power of the

saliis is limited and restricted by the: judgment of —

- the trustee. The desire of the testator is apparent.

_ His humane purposes* after. providing amply for his

widow, to assist unfortunate and afflicted humanity

should not be destroyed by a strained and almost

_ ‘ridiculous construction of the will.”

Fe: “The purpose and interit of paragraph 5 of the Trust _

Agreement, and therefore its meaning, is to provide that —

Lucy Tullock Washburn is to have everything needed to

-_w@

enable her to live in the manner in which she had been

accustomed to live, but only, and not otherwise, if the

Trustee should determine in good faith that her financial

circumstances were such as to make it necessary or ad-

visable to invade the corpus of the Trust Estate for such

purpose. In making such determination of necessity or

advisability the Trustee had to consider that Lucy Tul-

lock Washburn owned outright, over 1/2 million. dollars

in assets invested in income producing property, that she

_ would and did receive another $110,000.00 at the death of

Frank E. Washburn; and that she would have in addition

: thereto the income for life from another quarter of a mil-

lion dollars in assets from his Trust Estate.

The litigation history of the ascertainable standard

relating to charitable remainders, as partially herein-

‘before set out, can be summarized with the phrase on

whom does the risk fall or wherein lies the risk. If the

- Government, by the. terms of the instrument, is at the

mercy or whim of a beneficiary who can. lawfully divert

_ the charitable interest then surely no deduction should

., be allowed. If, however, the instrument provides ade-

_ quate safeguards in the form of a disinterested trustee .

who must perform within the limits prescribed by the ap-

plicable state law with respect to that portion designated

for charity and no beneficiary is enabled to divert such

portion for noncharitable purposes, then clearly the Gov-

ernment bears no risk other than the general uncertainty |

‘that attends human affairs. (Ithaca).

3. The Tenth Circuit Court of Appeals erred in dis-

missing Petitioner’s Motion to Dismiss Appeal which Mo-

tion was filed on the grounds that the Notice of Appeal

by the United Staté#” was not filed within sixty (60)

days from .the date of -” judgment appealed from in

_the District Court.

ceo

Petitioners request this Court to declare the denial

of Petitioner’s Motion to Dismiss the appeal by the United

States from the District Court to be error. Consideration

of this point does not appear in the Tenth Circuit’s de- —

cision. Grounds for said motion to dismiss are that the no-

tice of appeal was not filed. within sixty (60) days from

the date of the judgment appealed from as required by

Rule 73(a) of the Federal Rules of Civil Procedure.

“ The United States contends that since a. monetary

figure did not appear in the Memorandum of Decision

handed down by the District Court on December 23, 1966, _

a judgment as. contemplated for the purposes of appeal

was not in existence at that time. It is the Government’s.

contention that the critical point of time began on June

1, 1967, when an entry, showing the amount of money

to be refunded was entered in conformity with the’ judg-

ment rendered December 23, 1966. Consequently, the No-

tice of Appeal filed July 28, 1967, was timely in its view.

; The District_Court in its order for summary judg-

ment, stated; | .

“There is no dispute among ‘the parties as to the

amount of the refund to which plaintiffs. (petitioners

herein) would be entitled should this court find that

the claimed deduction should be allowed. Having so

found, and there remaining nothing further for de-

termination, the court directs that the plaintiff's mo-

tion for summary judgment be granted, and that

the motion: of the defendant be denied. It is so or-

dered. ws (Emphasis supplied.)

The June 1, 1967 entry. did nothing more than to recite i

in dollars and cents the amount to’.be refunded which —

amount was known by all concerned and was not in dis-

pute... :- aggre

3 + BB |

In United States v. F. & M. Schafer Brewing Co., 78

S.Ct. 674, Mr.- Justice Whittaker stated that a judgment

\\ for money is final for the purposes of Rule 73 (a) if the . :

_ amount is either shown in dollars and cents or the means .

: for, determining the amount is stated.

|The Memordndum of Decision by the’ District Court

"states: \ 5

‘Thete is no dispute among the partie as to th

amount of the refund: . .

Cioctabry’ Gio eas ‘ob WIA ie: tana wig

‘both parties and was a fixed figure to be obtained by

’ strictly mechanical means. This figure (the refund) simply

depends upon the allowance of the charitable deduction:

~- Claimed. ‘In granting the Summary Judgment to the plain- _

tiffs, the charitable deduction clainied on the estate tax re-

turn. was given judicial sanction thus paving the way or

affording the means for determining the amount. Accord-

ingly, the time to appeal under Rule 73 (a) began to run

from the date of docket entry by the Clerk of the Court:

“There was entered on the docket December 23, 1966,

a MEMORANDUM OF DECISION—granting plain-

tiff’s motion for summary judgment and denying de- |

‘fendant’s motion for summary Rr 4 copy -

which is enclosed.’ ”

| This is another area x of general inipertatpe to the fed-

eral judicial system. Litigants should be entitled to know |

when a case is at rest. The action of the Court of Appeals

—in accepting this long-delayed appeal, if left undisturbed,

will continue in federal judicial procedure the existing

‘uncertainty of the -_ on which a case hes been finally

' decided.

S

°

a

. “CONCLUSION

‘Wherefore your petitioners pray that a writ of cer-

tiorari issue under the seal ‘of this Court, directed to the. -

United.States Court of Appeals for the Tenth Circuit to

a ee ee may be reversed.

Roserr B. LANGWORTHY

GLENN THOMAS

JAMES J. MELCHING

Floor Three, Union National Bank

Building ;

- Seat City, Missouri 64106

Attorneys for Petitioners

Of. Counsel: “~.

Laoz, TuoMson, VANDYKE, FAIRCHILD & LANGWORTHY

Floor Three, Union National Bank Building

ns Kansas City, Missouri. 64106

_ Homer Davis

Leavenworth, Kansas: °

' Lewis, RIce, eraah Arteti & Cause

‘611 Olive Street ~ :

St. Louis,. Missouri 63101

CERTIFICATE OF COUNSEL |

“The undersigned, Robert -B. Langworthy, counsel of

__ ‘record for petitioners, hereby certifies that the above and

_ .. foregoing petition ‘for writ of certiorari to. the United _

Re, ‘States Court.of Appeals for the Tenth Circuit is submitted

in ie faith and believed to be meritorious, '

Rosear B. LANGWORTHY | |