Opinion
No. 36895
Decided December 27, 1961.
Jurisdiction — Probate Court — Proceeding to apportion state succession and federal estate taxes — Gift causa mortis — Out-of-state heirs of donee — Not summoned or appearance entered — Not individually liable for tax apportioned — Court without jurisdiction.
In a proceeding in the Probate Court to apportion, among several persons, state succession taxes and federal estate taxes paid out of the assets of a decedent's estate in connection with a gift made by decedent during his lifetime and determined to be in contemplation of death, the out-of-state heirs and legatees of the donee of the gift who have not been summoned personally and who have not voluntarily entered their appearance may not be held individually liable for the payment of the taxes apportioned to the donee, the Probate Court being without jurisdiction to impose such liability.
APPEAL from the Court of Appeals for Franklin County.
The question presented on this appeal is primarily one of jurisdiction, namely, whether the Probate Court of Franklin County, in the circumstances involved, could validly impose liability on George W. Stratton, John M. Stratton and Margaret Hatfield, nonresidents of Ohio and the appellees herein and herein referred to as such, for the payment of their claimed share of certain federal estate taxes and state succession taxes imposed on 1950 gifts made by John S. MacLean, which taxes had been paid by Jane S. MacLean, administratrix of the estate of John S. MacLean, deceased, out of the probate assets of his estate.
As disclosed by the record, the J.S. MacLean Company was incorporated in 1923 with 1,000 shares of capital stock. Pursuant to an agreement, 512 shares were issued to John S. MacLean and 122 shares to each of his four children, two sons and two daughters, including Margaret Stratton. Such agreement provided further that upon the death or retirement of John S. MacLean his 512 shares should become the property of his two sons on the condition that they pay to each of his two daughters an amount of money equal to the value of one-fourth of the 512 shares.
John S. MacLean retired in 1950, and the 512 shares of stock were transferred to his surviving son and to the widow of a deceased son, and, in conformity with a 1934 agreement, each of his two daughters was paid an appreciable sum of money. Margaret Stratton, one of the daughters, resided in Lawrence, Kansas.
John S. MacLean died in December 1952, and it was determined that the 1950 transaction involving the 512 shares of stock constituted a gift in contemplation of death, which gift was subject to federal and state taxation as such.
Margaret Stratton died testate in the state of Kansas in March of 1954. Her estate was administered there, with her husband, George Stratton, as the fiduciary, and was closed in 1955.
Jane S. MacLean, administratrix of the estate of John S. MacLean, paid out of the assets of that estate the federal and state taxes charged to the gift made in 1950. She collected from three of the donees their proportionate share of the taxes paid but was unsuccessful in making collection of the share claimed to be due from the heirs and legatees of Margaret Stratton, the appellees herein. Thereupon, in December 1957, the administratrix filed an application in the Probate Court of Franklin County for apportionment of such estate and succession taxes and in such application asked for and later obtained a temporary injunction restraining the J.S. MacLean Company from paying dividends on or transferring shares of stock in that company held by John Stratton and Margaret Hatfield and which came to them through their mother, Margaret Stratton. These were the 122 shares received by Margaret Stratton in 1923. Notice of the filing of such application was sent by certified mail to the appellees. None of these persons were beneficiaries of the probate estate of John S. MacLean or had any interest therein. The appellees made a special and limited appearance by counsel, filed a motion to quash the mail service upon them, and challenged the jurisdiction of the Probate Court over them and to grant the relief prayed for. Their motion was overruled, and the court proceeded to determine and adjudge the matter adversely to appellees over their continuing protests as to the jurisdiction of the court.
On appellees' appeal to the Court of Appeals on questions of law, that court reversed the judgment below for want of jurisdiction and rendered final judgment for the appellees; it also dissolved and held for naught the temporary injunction granted by the Probate Court.
The cause is now here for review and determination on its merits, following the allowance of the motion to require the Court of Appeals to certify the record.
Messrs. Knepper, White, Richards, Miller Roberts and Mr. Milton S. Bartholomew, for appellees.
Messrs. Hengst Ball, for appellant.
Messrs. Wilson Rector and Mr. Harrison W. Smith, Sr., for J. Norman MacLean, Flora M. Reeder, Eleanor H. MacLean and the J.S. MacLean Company.
It would seem clear from the record that the appellees were never individually in the Probate Court of Franklin County.
On the hearing before the Probate Court of the application of Jane S. MacLean, administratrix of the estate of John S. MacLean, for an apportionment of the federal and state taxes mentioned above, the Columbus attorney, who participated in the events described, testified that "the only fees I have ever received from the Strattons were those fees way back in 1950 in connection with the working out of the gift transaction between Mr. MacLean and the four children." He testified further that he had never represented the appellees personally.
As to the representation of the estate of Margaret Stratton, the attorney testified: "I was specifically employed by the Kansas counsel for the estate of Margaret MacLean Stratton to defend her along with the other donees in the declaratory judgment proceeding brought by the administratrix [of the John S. MacLean estate] seeking the return to the estate of the 512 shares of stock here discussed, that being so closely allied with other matters, I continued to assume that I represented the estate of Margaret MacLean Stratton in all the ramifications of that matter and my letters were addressed that way."
In addition, the attorney testified that he was never specifically engaged as an attorney at law by the estate of Margaret Stratton for the purpose of determining an allocation of either federal estate taxes or state succession taxes in connection with the estate of John S. MacLean.
In these circumstances, did the Probate Court of Franklin County possess jurisdiction to impose personal liability on appellees, nonresidents of Ohio, for the payment of their alleged share of the federal and state taxes paid out of the probate assets of the John S. MacLean estate and growing out of the gift made in 1950? We do not think so. That gift took place when John S. MacLean and Margaret Stratton were still alive and Margaret Stratton was the recipient of her father's bounty. Margaret Stratton survived her father, and no claim was ever asserted against her personally or against her estate, which was not closed until 1955, for the payment of the state and federal taxes imposed in connection with the 1950 gift. Any finding that the appellees herein entered their appearances personally or by individual representation in the Probate Court of Franklin County is not supported by the evidence. It is our opinion that the appellees may not be individually charged with the payment of the federal and state taxes asserted against them in an ex parte proceeding. The collection of such taxes would depend on a proper adversary proceeding wherein personal service or voluntary entry of appearance would be required, with the opportunity accorded defendants of asserting any defense they might have.
As has already been remarked, Margaret Stratton was the recipient of the 1950 gift, and the benefit thereof accruing to the appellees personally was derivative. The appearance of Margaret Stratton and her estate in the regular settlement of the John S. MacLean estate and in the declaratory judgment action involving the 512 shares of stock would hardly operate as an entry of appearance by the appellees herein individually in the separate proceeding to collect from them the estate and succession taxes growing out of the 1950 gift to Margaret Stratton. Here an attempt is being made to fix personal liability on the nonresident appellees, and it is axiomatic that "there is an entire lack of power in the court to render a valid judgment in personam against a resident of another state, who has neither been summoned nor voluntarily entered his appearance." Oil Well Supply Co. v. Koen, 64 Ohio St. 422, 429, 60 N.E. 603, 604.
The judgment of the Court of Appeals is affirmed.
Judgment affirmed.
RADCLIFF, TAFT, MATTHIAS, BELL, HERBERT and O'NEILL, JJ., concur.
ZIMMERMAN, J., sitting in the place and stead of WEYGANDT, C.J.
RADCLIFF, J., of the Fourth Appellate District, sitting by designation in the place and stead of ZIMMERMAN, J.