dissenting: I am unable to agree with the conclusion reached in the majority opinion for the reason that if a valid, completed gift of the mortgage in question was made by the decedent to her husband prior to death and not in contemplation of death, *1313then the result is to construe the statute as requiring the inclusion in the gross estate of the value of property which did not belong to the decedent ,at the time of her death and was not transferred or affected thereby.
This case presents two fundamental questions, namely (1) whether or not the execution and delivery of the note and mortgage by decedent to her husband constituted a valid, completed gift, and, if so, (2) whether or not such transfer was in fact made in contemplation of death.
If a valid gift was made, respondent does, not contend-that it was in fact made in contemplation of death, nor would the facts support such a contention. Decedent was then a young woman in good health, and might reasonably have been expected to live for many years. She desired for sufficient reason to provide her husband with a permanent, independent income, and to that end executed and delivered the instruments in controversy. Plainly she was not moved by contemplation of death.
That she intended to and did make a valid, irrevocable gift must be conceded, we think, unless her acts, as a matter of fact of law, fell short of the intended goal. Whether decedent succeeded in her intention depends upon whether a mortgage, with the accompanying note representing the indebtedness secured thereby, may be the subject of a gift under the facts of this case.
It has been held that a mortgage resting upon a consideration of love and affection may be enforced where the relationship between the parties is such as would support an absolute deed, and it is well settled by the weight of authority that a conveyance from one spouse to the other requires no pecuniary consideration to make it valid; that their relationship is sufficient to render love and affection between them a good consideration. Monroe v. Page, 111 U.S. 117; Atwater v. Seely, 2 Fed. 133; Hellyer v. Hellyer (Ia.), 112 N.W. 196; Fitzgerald v. Fitzgerald (Mass.), 47 N.E. 431; Woodsworth v. Tanner (Mo.), 7 S.W. 104; Fretz v. Roth (N.J.), 64 Atl. 152; Morris v. Patterson (N.C.), 105 S.E. 25; Kent v. Tallent (Okla.), 183 Pac. 422; Arbaugh v. Alexander (Ia.), 146 N.W. 747. Where a conveyance is made by one spouse to the other a valuable consideration is necessary only when the rights of third persons otherwise would be prejudiced. Koopman v. Mansolf (Mont.), 149 Pac. 491; Acker v. Pridgen (N.C.), 74 S.E. 335. “ It is elementary that the consideration of love and affection will support a deed by á husband to his wife, there being no rights of third persons intervening.” Paulus v. Reed (Ia.), 96 N.W. 757. And a presumption of fraud does not arise from a gift by a wife to her husband of real property in testimonial of love and affection. Donlon v. Donlon, 138 N.Y.S. 1039.
*1314The mortgage in this case, then, can not be said to have been invalid merely because it was given by the wife to her husband, without pecuniary consideration. But may such a mortgage be the subject matter of a gift? Does it represent an executed gift, or, prior to payment, is it merely in the nature of a voluntary executory agreement to give in the future ?
A mortgage given without valuable consideration is invalid if the parties never intended that it should be enforced, Colt v. McConnell (Ind.), 19 N.E. 106, or if it was fraudulently obtained, Moffet v. Parker (Minn.), 73 N.W. 850, but the authorities are in agreement that a mortgage may be the subject of a gift if the parties so intend, and is enforceable, irrespective of money consideration, where the rights of third parties are not infringed.
In Campbell v. Tompkins, 32 N.J.Eq. 170; 172 (aff'd., 33 N.J.Eq. 362), the doctrine is stated by the court as follows:
It can not be doubted that even now a valid mortgage may be given where no valuable consideration exists. Otherwise the absolute control o£ the owner over his property is taken away, for he would not be permitted to give it away In his lifetime by deed. The mere fact that there was no consideration would not now render the mortgage invalid. A mortgage may be sustained as against all except creditors whose claims existed at the time of giving it, although it was intended merely as a gift; and, when executed and delivered, it is as valid as if it were based upon a full consideration, and it is not open to the objection that it is a voluntary executory agreement, but it may be enforced according to its terms as an executed conditional transfer of the real estate mortgaged [Citing authorities]. [Emphasis supplied.]
In Betts v. Betts, 41 N.Y.S. 285 (aff'd., 159 N.Y.S. 547; 54 N.E. 1089), the court held that a husband could malee a valid gift to his wife of mortgages on property owned by him, saying:
That the mortgages could be made the subject of a gift from the husband to the wife appears to be settled by authority. Bucklin v. Bucklin, 1 Abb. Dec. 242; Van Amburgh v. Kramer, 16 Hun. 205; Bolen v. Bolen, 44 Hun. 362. In the case first cited a mortgage by a father to a trustee, in order to make a voluntary provision for his infant child, was upheld as being as valid in every respect as would be a transfer for a full pecuniary consideration, the contract being executed, and there being no intervening rights of creditors. Chief Justice Denio, who wrote the opinion of the court, said: “There are cases in which a voluntary executory gift will not be enforced by the courts, but an executed one is as valid as though based on a full pecuniary consideration.” In the second ease, which arose in this department, Gilbert, J., said: “ The evidence in this case merely shows that the bond and mortgage in suit were not made upon a valuable consideration. But there are other considerations which are sufficient in equity to support transactions between husband and wife, when the claims of creditors do not interfere. Indeed, it has been held that a bond and mortgage may be made by way of a gift.” In the third case, which was also decided by the general term of the second department, the facts were distinguished from those of Bucklin v. Bucklin, supra, but the *1315authority of that decision was fully recognized. It seems to us that it must be deemed controlling here in support of the validity of the gift of the mortgages in suit.
While it is true in the instant case that decedent executed and delivered to her husband both a promissory demand note and a mortgage, the note alone was not the subject of the gift. The note represented merely the obligation secured by the mortgage. The note itself was an executory agreement to pay in the future, and, so far as it involved personal liability apart from the mortgage, did not constitute an executed gift, but, as stated by the court in Campbell v. Tompkins, supra, the mortgage constituted “ an executed conditional transfer of the real estate mortgaged.” And see Bucklin v. Bucklin, 1 Abb. Dec. 242, where it was also stated that “A mortgage is an executed conditional transfer of the real estate mortgaged.”
This point was considered by the Supreme Court of Michigan in Goethe v. Gmelin, 239 N.W. 347, in which state the theory of the law of mortgages is substantially the same as in Connecticut. It is said in the court’s opinion:
Tbe trial court found that the mortgage was given to secure a note executed by the mortgagors without consideration therefor. This holding is supported by the evidence. Based upon the holding of this court in Graham v. Alexander, 123 Mich. 168, 81 N.W. 1084, he held that the note was but a promise to mate a gift in the future, and such gift not having been executed during the lifetime of the donor, it is not valid as a contract to be executed. * * * Were the claim here made against the estate of the mortgagors based upon the note, the rule as stated would apply. We find no authority extending this rule to a mortgage, although it be security for the payment of a note.
On the question whether a voluntary mortgage may be the subject of a gift, the court further stated:
In Brigham v. Brown, 44 Mich. 59, 62, 6 N.W. 97, 98, it was said: “ Nevertheless, a man may give a voluntary mortgage if he chooses, and it is fraudulent only as to those who are or would be defrauded by it (Gale v. Gould, 40 Mich. 515); and no one would be defrauded in contemplation of law, who was merely a subsequent mortgagee with notice, actual or constructive, of the voluntary instrument.”
The rule thus stated has been accepted by text-book writers.
“A mortgage may be made by way of a gift, when the rights of creditors are not thereby interfered with.” Aldrich, Beal Property Mortgages, §180.
“A mortgage may be made by way of a gift, when the rights of creditors are not thereby interfered with. When executed and delivered it is as valid as if it were based upon a full consideration. It is not open to the objection that it is a voluntary executory agreement, hut may he enforced according to its terms as an executed conveyance.” 2 Jones on Mortgages (8th Ed.), §756. [Emphasis supplied.]
See also the decision of the same court in Cooklin v. Cooklin, 244 N.W. 232, where it was pointed out that it is not even necessary that a mortgage be accompanied by a note, provided the mortgage itself contains a promise to pay.
*1316. By execution and delivery of the mortgage in controversy, decedent definitely decreased the value of her estate to the extent of $700,000, and her husband acquired unconditional ownership of property of that value as effectively as if the subject matter of the gift had been tangible property. She could not recover the mortgage except by payment in accordance with its terms. It was a presently executed gift, not intended to and did not in fact take effect in possession oxen joyment at or after the donor’s death. The transfer was complete upon delivery of the instrument, and no incident of ownership was affected by her death, nor was there any shifting of economic benefit in the property which was the subject of the gift, as a result of death. It is true that under the mortgage decedent had a right to redeem the real estate, which right had a value of $66,000, aixd this equity of redemption passed to her estate upon her death, but such transfer or shifting of that property right did not pertain to nor affect the ownership and rights of the husband in the $700,000 mortgage. Admittedly the property right so transmitted from the dead to the living as a result of decedent’s death is includable in her gross estate at its agreed value of $66,000, but death was not the “ generating source ” of the gift of the mortgage. Such gift bore no relation whatever to death.
In Heiner v. Dorman, 285 U.S. 812, the Court held that section 302 (c) of the Revenue Act of 1926, in so far as it required that certain transfers made without consideration within two years of the donor’s death should be deemed made in contemplation of death, was void under the due process clause of the Fifth Amendment, and that transfers inter vivos, not in contemplation of death, can not be made subject to a death duty, though the donor’s death occurs thereafter. The question considered by the court in that case was substantially the same as is presented here, and the principles applied there, it seems to me, are equally applicable here. In pertinent part the Court said:
Sec. 301 (a) of tlie Revenue Act of 1926 * * * imposes a tax “upon the transfer of the net estate of every decedent ” etc. There can be no doubt as to the meaning- of this language. The thing taxed is the transmission of property from the dead to the living. It does not include pure gifts inter vivos. The tax rests in essence “ upon the principle that death is the generating source from which the particular taxing power takes its being, and that it is the power to transmit, or the transmission from the dead to the living, on which such taxes are more immediately rested. * * * It is the power to transmit or the transmission or receipt of property by death which is the subject levied upon by all death duties.” * * * The value of property transferred without consideration and in contemplation of death is included in the value of the gross estate of the decedent for the purpose of a death tax, because the transfer is considered to be testamentary in effect. * * * But such a transfer, not so made, embodies a transaction begun and completed wholly by and between the living, taxable as a gift * * * hut obviously *1317not subject to any death duty, since it bears no relation whatever to death. The “ generating source ” of such a gift is to be found in the facts of life and not in the circumstance of death. And the death afterward of the donor in no way changes the situation; that is to say, the death does not result in a shifting, or in the completion of a shifting, to the donee of any economic benefit of property, which is the subject of a death tax * * *; nor does the’ death in such case bring into being, or ripen for the donee or anyone else, so far as the gift is concerned, any property right or interest which can bo the subject of any form of death tax. * * * Complete ownership of the gift, together with all its incidents, has passed during the life of both donor and donee, and no interest of any kind remains to pass to one or ceases in the other in consequence of the death which happens afterward.
V ‡ -I* ¥ ^* ¡!* ^*
That a federal statute passed under the taxing power may be so arbitrary and capricious as to cause it to fall before the due process of law clause of the Fifth Amendment is settled. Nichols v. Coolidge, 274 U.S. 531, 542* * *
* * * * *
Moreover, under the statute the value of the gift when made is to be ignored, and its value arbitrarily fixed as of the date of the donor’s death. The result is that upon those who succeeded to the decedent’s estate there is imposed the burden of a tax, measured in part by property which comprises no portion of the estate, to which the estate is in no way related, and from which the estate derives no benefit of any description. Plainly this is to measure the tax on A’s property by imputing to it in part the value of the property of B, a result which both the Schlesinger and Hoeper Cases condemned as arbitrary and a denial of due process of law. Such an exaction is not taxation bur, spoliation.
That the statute involved here is arbitrary, capricious, and confiscatory, when applied to the facts of the instant case, is easily demonstrable. It measures the tax on property of the decedent’s estate by imputing to it in part the value of property belonging to decedent’s husband, which he acquired by gift from his wife during her lifetime and in respect of which property no interest of any kind, in so far as concerns the gift, remained to pass to the one or ceased in the other in consequence of decedent’s death.
The statute also, in the circumstances here, is unreasonably discriminative. If A die leaving an estate of $800,000, without debts, and B die leaving an estate of the same amount, against which there is a mortgage for $700,000, given without money consideration and therefore not deductible under the provisions of the statute, each estate would pay the same tax, notwithstanding B during his life had made a completed and valid gift of the mortgage, the value of which belonged to and inevitably went to the donee, leaving only $100,000 of property belonging to B’s estate or in which the estate had any interest. Or, if A die leaving an estate of $800,000 but having debts contracted or mortgages given for money consideration in the amount of $700,000, A’s estate would pay a tax on the basis of *1318a net value of $100,000, while B’s estate would pay a much larger tax on the basis of a net value of $800,000, yet in each case the net value of the property transmitted to his estate by the decedent would be the same.
And, further, it is apparent that cases might well arise where the value of the property remaining over and above the amount of the nondeductible mortgage would not be sufficient to pay the tax imposed by the statute, leaving nothing for distribution. Such a situation, where an excise tax is imposed on the transfer of property and no property is transferred as a result of death, would indeed be anomalous. This would be true in the instant case if the gross value of the decedent’s estate had not exceeded $750,000. As stated by the Court in Nichols v. Coolidge, 274 U.S. 531:
Certainly Congress may lay an excise upon the transfer of property by death reckoned upon the value of the interest which passes thereby. But under the mere guise of reaching something within its power Congress may not lay a charge upon what is beyond them.
. * * * * * * *
The statute requires the executors to pay an excise ostensibly laid upon transfer of property by death * * *■ to them but reckoned upon its value plus the value of other property conveyed before the enactment in entire good faith and without contemplation of death. * * *
Under the theory advanced by the United States, the arbitrary, whimsical and burdensome character of the challenged, tax is plain enough. An excise is prescribed, but the amount of it is made to depend upon past lawful transactions, not testamentary in character and beyond recall. Property of small value transferred before death may have become immensely valuable, and the estate tax, swollen by this, may leave nothing for distribution.
The case at bar, I think, is readily distinguishable from Tyler v. United States, 281 U.S. 497, where it was held that statutes requiring the inclusion in the gross estate, for estate tax purposes, of the value of property held by tenants by the entirety were not unconstitutional as imposing a direct tax without apportionment, nor so arbitrary and capricious as to result in deprivation of property without due process of law. In that case the court pointed out that as a direct result of the death of one spouse there passed to the survivor substantial rights in respect of the property, including exclusive possession, use, and enjoyment, and the power, not theretofore possessed, of disposing of the property unconditionally. “Thus the death of one of the parties to the tenancy became the generating source ’ of important and definite accessions to the property rights of the other.”
Here the death of the decedent was not the “ generating source ” of any accession to the property rights of the husband in respect of the gift, and as a result of her death he did not acquire the exclusive possession, use, and enjoyment of the property, nor did he acquire *1319thereby the power not theretofore possessed of disposing of the property according to his sole will. On the contrary, he possessed all of those things prior to the death of his wife.
For the reasons hereinabove indicated, it is my opinion that the statute under consideration is ineffective to require the inclusion in decedent’s estate, subject to tax, of the real estate referred to at a valuation in excess of $66,000, which represents the value of the interest of the decedent therein which was transmitted as a result of death.