(concurring).
I concur fully in the views expressed in the majority opinion. If, however, the principle of Dobson v. Commissioner, 320 U.S. 489, 64 S.Ct. 239, 88 L.Ed. 248, were inapplicable in the case at bar, I would conclude none the less that the decision of the Tax Court should be affirmed for it is clear that the decedent, Mrs. Henry, divested herself of taxable interest in the “Standard Oil Securities” and in the “nonStandard Oil Securities.” I shall deal in this opinion first with the Standard Oil securities, viz., the “extraordinary distributions” including stock dividends, stock rights, securities acquired upon the exercise of rights and the proceeds of rights which were sold, growing out of Henry H. Houston’s original ownership of Standard Oil voting trust certificates. I shall deal second with the extraordinary distributions received from non-Standard Oil securities. A portion of what will be stated in respect to the Standard Oil securities will possess pertinency in respect to the non-Standard Oil securities. The Tax Court, by Judge Mellott, has made such extensive findings of fact in its opinion, 4 T. C. 426-434, that comparatively little need be repeated here. The following will suffice.
As to the Standard Oil Securities.
Henry H. Houston created a trust by his will. His widow, Sallie S. Houston, the decedent, Mrs. Hem-y, and the decedent’s brother and sister, were to share equally in the income from the trust during Sallie S. Houston’s lifetime. Upon the latter’s death the income payable to Sallie S. Houston was to be paid to the decedent, Mrs. Henry, and to her brother and sister in equal shares until the death of the last survivor, when the principal was to be distributed to Henry H. Houston’s grandchildren. Following Henry II. Houston’s death in 1895 and before Sallie S. Houston’s death in 1913 the trustees received the extraordinary distributions hereinbefore referred to. A large part of them were distributable as income to Sallie S. Houston, to the decedent, Mrs. Henry, and to her brother and to her sister. The trustees, faced with a complex question as to what portions of the extraordinary distributions constituted principal or distributable income, simply added the whole of the extraordinary distributions to principal.
Sallie S. Houston died leaving a will. It provided for specific bequests and for the residue to be divided into twenty-one equal parts to he held in trust for her twenty-one grandchildren. The residuary clause clearly violated the rule against perpetuities. Mrs. Houston also underestimated the amount of the property which would fall into the residuary clause, exclusive of her share in the extraordinary distributions. If, specific bequests aside, the provisions of the will were declared invalid, the decedent, Mrs. Henry, and her brother and her sister would take all of Mrs. Houston’s property and Mrs. Houston’s grandchildren, some of whom were of age at the time of Mrs. Houston’s death, would be disinherited. The decedent, Mrs. Henry, and her brother and her sister and Mrs. Houston’s grandchildren who were of age decided that they would effect Mrs. Houston’s intention as well as they could and to that end entered into the “Deed of Family Settlement and Trust.”
The provisions of the deed will be discussed at some length hereinafter. The *580deed was signed on or about December 31, 1915, by the decedent, Mrs. Henry, and by her brother and by her sister, and by Mrs. Houston’s grandchildren who were then of age. It was not signed by one grandchild who came of age just before he was killed in the first World War. The youngest grandchild, Eleanor Houston [Smith], signed the deed approximately four months after the passage of the Joint Resolution of March 3, 1931, 46 Stat. 1516, 26 U.S. C.A. Int.Rev.Code, § 811 (c), shortly after she had become of age.
The deed purported to dispose of the decedent’s, Mrs. Henry’s, interest and that of her brother and that of her sister as life tenants in the extraordinary distributions of Standard Oil securities. Mrs. Henry, her brother and her sister were entitled to their share of these distributions not only from the estate of their father, Henry H. Houston, but also from the estate of their mother, Sallie S. Houston. The interests of the grandchildren, and those claiming under them, also were purported to be disposed of by the deed. These claims also rested on both estates. The Commissioner agrees that the deed did dispose of Mrs. Henry’s interest as a life tenant in her share of the extraordinary distributions. The difference of opinion between the trustees of Mrs. Henry’s estate and the Commissioner is when the deed legally effected its express purpose. The trustees of Mrs. Henry’s estate contend that Mrs. Henry made effective disposition of her interest at the instant that she signed the deed on or about December 31, 1915. The Commissioner asserts that the deed was not effective to dispose of Mrs. Henry’s interest until it had been signed by Mrs. Eleanor Houston Smith after the passage of the Joint Resolution.
For this reason he contends that Mrs. Henry’s interest in the extraordinary distributions is includible in her estate for estate tax purposes. The Commissioner concedes that if the deed became legally effective to “transfer” 1 Mrs. Henry’s rights prior to March 3, 1931 no estate tax is due from Mrs. Henry’s estate on her share of the extraordinary distributions. Indeed no other position is a tenable one for the Commissioner in view of May v. Heiner, 281 U.S. 238, 50 S.Ct. 286, 74 L.Ed. 826, 67 A.L.R. 1244, which held, in substance, that a retention of income from a trust irrevocable by the grantor could not result in estate tax, and in view of Hassett v. Welch, 303 U.S. 303, 58 S.Ct. 559, 82 L.Ed. 858, which held that the Joint Resolution could not take effect retroactively.
It should be pointed out that when the deed was drawn and was signed by Mrs. Henry, by her brother and by her sister and by Mrs. Houston’s grandchildren, then of age, on or about December 31, 1915, the federal estate tax was not in existence. No question of tax evasion or of tax avoidance, therefore, lies in the present case. I turn therefore to the deed. The document or indenture of 1915 is more than an agreement. It makes a settlement of family interests, effects the apparent intent of Mrs. Houston as expressed in her will, and creates a trust. It purports to resolve every aspect presented by the failure of the trustees of Henry H. Houston’s estate to distribute income during Mrs. Henry’s lifetime, to settle the questions presented by the invalid provisions of Mrs. Houston’s will, and to do justice to the respective persons who might have entered into a contest. The provisions of the deed were to the advantage of Mrs. Houston’s grandchildren for it is obvious that if the deed had not been entered into they could have received nothing from the estate of their grandmother.
The deed in a series of extensive preambles, expertly drawn, covers every pertinent fact upon which the settlement was based and the reasons for making it. After agreeing in Article First to indemnify The Real Estate Trust Company of Philadelphia, the trustee under the will of Henry H. Houston and the executor and trustee under the will of Sallie S. Houston, the decedent, Mrs. *581Henry, her sister and her brother, and the other signatories “assign, transfer and set over” to the Trust Company “all their right, title and interest of, in and to” the extraordinary distributions. These are words of deed and gift and were intended to convey and did presently convey interests. It should here be noted that the words of the lllh Whereas clause treat of the disposition of Mrs. Houston’s estate “from the date of the execution of this Agreement until its final consummation by ultimate division or its possibly being set aside under some future contest as hereinafter mentioned * * This language is consistent only with a presently operative deed. Article Second, paragraph fourth, provides for the distribution of Mrs. Houston’s residuary estate as specified “For so long a time as this present Deed of Family Settlement or Trust remains in operation and its provisions are being carried out without question * * It is clear that distributions made under this article were binding on the decedent, Mrs. Henry, on her brother ¡and on her sister, the three life tenants, when they signed the deed. Distributions were made in accordance with the terms of the article. Article Second, paragraph fourth, of the deed also possesses a “reserving clause,” reserving to the decedent, Mrs. Henry, and to her brother and to her sister, certain rights, but these arise only when and if the deed should be questioned by a person entitled to sign it and who might refuse to sign it.
Paragraph fifth of Article Second provides that no person can take any interest or have a claim under the deed unless he “shall have been bound and concluded by having become a party signatory thereto or barred thereby.” This means that any person signing the deed became “bound and concluded” and “barred” from any contest. The use of such words shows the intent of the signatories to give up and transfer any present interest which they might have had.
Paragraph sixth of Article Second expresses the “willingness” of the three life tenants, the decedent, Mrs. Henry, and her brother and her sister, “to forego the enforcement of their present right to the distribution and delivery to them” of the securities which are the object of the trust created by the deed because of the desire of the parties to it “to finally and forever settle the questions which have heretofore been attempted to be settled” by the deed. Paragraph sixth also provides that if any of the descendants of Henry H. Houston and Sallie S. Houston are not satisfied with the deed, are not willing to become signatories thereto and to acquiesce in the disposition of the assets of the estate of Sallie S. Houston then the decedent, Mrs. Henry, and her brother and her sister, and the other signatories, shall be “restored in their rights” and the assets of Sallie S. Houston’s estate shall stand as though the deed had never been “executed” with the right of the parties to require accounting, subject to interim distribution of income or principal as the same shall have been made.
I think it is clear, as the Tax Court held, that the deed was intended to convey and did convey the interest of Mrs. Henry when she signed it. It also conveyed the interests of the other signatories at the time they signed the deed. The provisions of paragraph sixth of Article Second are typically those of a condition subsequent. The grantees, tlie trustees, took the property conveyed on the terms prescribed subject to termination on operation of the condition set forth by paragraph sixth, namely, that one of Mrs. Houston’s grandchildren2 should object to the provisions and dispositions of the deed, as prescribed by paragraph sixth. Mrs. Henry held “no string” on the property for she retained no control whatever over it. At no time *582could she have regained the property by any act of hers. The covenants of the deed became and remained binding on Mrs. Henry. This, I think, is a complete answer to the contention of the Commissioner that the deed was not effective to convey Mrs. Henry’s interest as a life tenant in the extraordinary distributions of the Standard Oil securities until the deed had been signed by Mrs. Smith, approximately four months after the passage of the Joint Resolution in 1931. See Restatement, Property, vol. 1, sec. 24 and comment b, Tiffany Real Property, 3d ed., vol. 1, sec. 194, and Commissioner of Internal Revenue v. Irving Trust Co., 2 Cir. 147 F.2d 946. It is unnecessary to discuss the confirmatory deed of 1922. If it possesses any pertinency it demonstrates the intention of Mis. Henry to execute a conveyance by the 1915 deed.
I am of the opinion that the Commissioner’s position stems from a misapprehension of two decisions, the first being the Adjudication by the Orphans’ Court of Philadelphia County hereinbefore referred to. When the first account of the trustees of Henry H. Houston’s estate was filed and came on for audit the executors of the decedent, Mrs. Henry, askfed, inter alia, that “her share of the stock dividends and other extraordinary corporate distributions” added to the. corpus of the trust estate “in accordance with the family agreement of 1915 and the supplemental agreement of 1922” be awarded to them on the ground that under the terms of the sixth paragraph of the Article Second of the 1915 deed the deed was revocable by any descendant “not satisfied with it and not willing to become a signatory thereto and acquiesce in the disposition of the Standard Oil Company securities in accordance therewith.” The Orphans’ Court denied this claim but stated by way of obiter that when Mrs. Smith executed the deed in 1931 “At that time the agreement became forever final and binding * * The Commissioner takes the position that this is the equivalent of a ruling by the Orphans’ Court that Mrs. Henry conveyed no estate by the 1915 deed until 1931 when Mrs. Smith signed it. The Commissioner’s contention in this regard clearly is wide of the mark. The Commissioner also seeks support in the decision of the Estate of Henry v. Commissioner, 47 B.T.A. 843, 849, wherein Member Harron stated that “ * * * the dividend [one of the Standard Oil distributions] belonged to the trustees as principal of the trust under the 1915 agreement, which became binding on Sallie Houston- Henry and others in 1931.” 3 But the Board of Tax Appeals was not considering the precise date on which Mrs. Henry executed the transfer but only whether it was made by her on or before January 1, 1935. The fact is that neither the Orphans’ Court nor the Board of Tax Appeals had the precise question sub judice in focus.
As to the Non-Standard Oil Securities.
In the adjudication of the Orphans’ Court, hereinbefore referred to, the following appears: “The trustees of the estate of Henry H. Houston also received stock dividends on corporate securities other than those of the Standard Oil Company. Samuel F. Houston testified that the life tenants, including Sallie H. Henry, had discussed the matter, with knowledge of their rights to an apportionment, and concluded that the stock should be retained as principal in the same manner as the Standard Oil Company stock dividends. (Notes of Testimony, pp. 88-89.) The life tenants who, in the absence of such an agreement, would be entitled to the stock dividends, made no demand for such dividends, and executed annual waivers and approvals of the trustees’ accounts for the years 1928 to 1936, inclusive. Each of the accounts so approved showed in the principal account the amount, value and purchase or sale of all corporate securities, and all stock dividends and warrants received by them. In 1929 a detailed account, prepared by certified public accountants, setting forth principal and income transactions from the inception of the trust, in 1895, to December 31, 1928, was prepared and submitted to each of the life tenants. Thereafter similar accounts were submitted annually, up to and including 1936, to the life tenants. It *583was testified that these accounts were carefully examined and discussed by the life tenants, and that they understood the' accounts to conform to the family settlement as to what was to be carried as principal, as was manifested by their signing the annual waivers and approvals of the accounts. (Notes of Testimony, pp. 76, 83, 89, 91, 92.)
“None of the life tenants, including Sallie H. Ilenry, at any time protested the retention of all stock dividends as part of the principal of the trust.
“By the oral agreements as to securities other than those of the Standard Oil Company, and the repeated affirmation of such agreements found in the approval of the various accounts, the life tenants released to the principal of the trust any claims to stock dividends and other extraordinary corporate distributions to which they might be entitled as the income beneficiaries of the trust. When made, this release was irrevocable and could not be set aside or revoked without the consent of all remainder interests which were benefited by such release.
“The stock dividends and other extraordinary corporate distributions on the Standard Oil Company stock, carried in the principal account, have been, and are, properly held as principal, by virtue of the irrevocable family settlement of 1915 and the supplemental agreement of 1922. Stock dividends and other extraordinary corporate distributions upon other corporate securities are likewise properly so held, pursuant to the equally irrevocable oral agreements, confirmed by the approvals of the various accounts, that such dividends should be held in the same manner as the Standard Oil Company stock dividends.”
Finding-of-fact 20 of the Tax Court, 4 T.C. at page 431, is as follows: “The trustees of the Houston estate regularly submitted statements of the transactions of the trust to decedent [Mrs. Henry], her brother and sister and all such statements showed all of the extraordinary distributions (both Standard Oil and others) retained in principal and the carrying charges on real estate charged against income. In 1929 the life tenants (including decedent [Mrs. Henry]) signed an approval of all these accounts from 1895 through 1928. In January 1931 they signed approvals covering all of the transactions of the trust through December 31, 1929. Annual approvals were regularly signed thereafter and decedent [Mrs. Henry], prior to her death, had signed an approval of all the transactions of the trust through December 31, 1936.”
The Tax Court in its opinion, supra at pp. 441-443, dealt with the problems presented by the non-Standard Oil securities as follows:
“The extraordinary distributions on securities other than those of the Standard Oil companies are in a different category. They were not referred to in, nor were they in our judgment affected by, the deed of family settlement (1915) or the deed of confirmation (1922). This was the view taken by the Orphans’ Court in its adjudication, which is probably binding upon us. Freuler v. Helvering, 291 U.S. 35, [54 S.Ct. 308, 78 L.Ed. 634]; Blair v. Commissioner, 300 U.S. 5, [57 S.Ct. 330, 81 L.Ed. 465]; Estate of Henry v. Commissioner, 47 B.T.A. 843. The two types of securities have been kept separate throughout this proceeding, including the notice of deficiency, the stipulation of the parties and the various exhibits. Apparently the only authorization ever given by decedent and her brother and sister to the trustees of Houston’s estate under which the nonStandard Oil securities were held as principal consisted of oral agreements to that effect, buttressed by subsequent written annual approvals. No evidence as to the oral agreements was adduced at the hearing before us, although such evidence seems to have been before the Orphans’ Court. It held, as set out in footnote 5, that the life tenants, by the annual approvals, had released these securities to the principal of the trust and that the ‘release was irrevocable and could not be set aside or revoked without the consent of all remainder interests which were benefited by such release.’
“The ‘remainder interests which were benefited’ were those specified in Houston’s will. They included not only the grandchildren — the class referred to in the 1915 and 1922 deeds — but also ‘children of any *584deceased grandchild.’ In that view, taken by the Orphans’ Court and in our judgment correctly so, the non-Standard Oil securities irrevocably passed from the decedent at or about the time they were received and became, for all purposes, part of the trust created by her father. Since there was no reservation of ‘possession or enjoyment of, or the right to the income from,’ this property, the Joint Resolution of March 3, 1931, is not applicable.
“Respondent has assumed throughout his argument that the non-Standard Oil securities were included in and covered by the 1915 and 1922 deeds. In doing so we think he has erred. The question is important only in the event we have erred in reaching the conclusion expressed in the earlier part of this opinion. At the risk of unnecessarily extending this discussion, it may be pointed out that the 1915 deed referred only to the ‘ “Standard Oil Securities,” * * * definitely mentioned in detail, which are now held undistributed in the possession of the Trustees of the Estate of Henry H. Houston, deceased, aggregating an approximate value of $14,000,000.’ The several paragraphs comprising the ‘premises’ of the. deed of 1915 — i. e., preceding the habendum — and the schedules attached, refer only to the securities received about June 1, 1899, ‘from the Trustees of the Standard Oil Trust’ and later exchanged for ‘Common Capital Stock of the Standard Oil Company of New Jersey,’ certificates of subsidiary companies of the Standard Oil Co. of New Jersey delivered to the Trustees of Houston’s estate on December 1, 1911, and stock dividends distributed by the Standard Oil subsidiary companies since December 1, 1911. Opinion had been requested from the attorneys, as recited in the deed ‘as to what portion, if any, of the said securities so received from the Standard Oil Company * * * constitute principal of such estate * * *.’ These were the only securities transferred by the 1915 deed. The 1922 deed is equally explicit in referring only to ‘the shares or securities representing or growing out of the testator's holdings of Standard Oil Trust Certificates * * *.’
“From what has been said it is apparent we are of the opinion respondent erred in including in gross estate the value of the extraordinary distributions, received by Houston’s trustees, upon the non-Standard Oil securities and we so hold.”
In view of all of the foregoing I do not see how it can be contended successfully that Mrs. Henry did not divest herself of all of the non-Standard Oil securities prior to the critical date of March 3, 1931. What she and the two other life tenants, viz., 1 her brother and her sister, had consummated was an agreement or agreements that the non-Standard Oil securities should be as much a part of the trust as the Standard Oil securities. The Orphans’ Court specifically found that Mrs. Henry and the other life tenants entered into oral agreements that the non-Standard Oil securities should be treated as if they were part of the trust and repeatedly affirmed these agreements by the approval of the various accounts and the waivers. The Tax Court made the same findings and reached substantially identical conclusions of law. The repeated approval of the accounts of the trustees, both prior to March 3, 1931 and thereafter until 1936, did no more, as the Tax Court has said, than “buttress” the oral agreements theretofore made by Mrs. Henry and the other life tenants as to the disposition of the non-Standard Oil securities. The decision of the Orphans’ Court was binding upon the Tax Court as it is upon this court. Central Hanover Bank [& Trust] Co. v. Kelly, 319 U.S. 94, 97, [63 S.Ct. 945, 87 L.Ed. 1282].
Moreover, it should be pointed out that with three exceptions all of the non-Standard Oil securities had been received by the trustees and had been held by them in the principal of the trust prior to January 1, 1930 and that the trustees’ possession and the stated disposition were ratified by Mrs. Henry by her execution of the “Approval of Account and Waiver of Filing Same,” dated December 4, 1929. The excepted securities are set out in finding-of-fact 18 of the Tax Court and note “3” cited to that finding. See 4 T.C. at page 431. It appears from paragraph 36 of the stipulation filed by the parties with the Tax Court that the exceptions consisted of (1) 16,000 Pennsylvania Railroad rights, issued by the Pennsylvania Railroad on December 7, *5851929; (2) 259% shares of Standard Oil Company of California alleged by the Commissioner to have been received “for the account of the Estate of Sallie S. Houston in 1930”; and 2,817% shares of Mission Corporation asserted by the Commissioner to have been received “for the account of the Estate of Sallie S. Houston in 1935.” The presumption is unjustified that these securities did not become part of the Houston trust until Mrs. Henry had signed the “Approvals] of Account and Waiver[s] of Filing Same” of June 1932,4 or of June 27, 1933 or of July 3, 1936, respectively, or that she retained these securities divesting herself of them, as has been argued, only by executing the approvals and waivers referred to. The excepted securities probably constituted considerably less than 1% of the value of the corpus of the trust. As a practical matter therefore could a court hold that Mrs. Henry intended to retain or did retain the excepted securities until she executed the approvals and waivers of 1932, 1933 and 1936? I conceive that the answer assuredly must be in the negative. In the case at bar the minuscule cannot be important in determining the event of taxation.
For the reasons stated I am of the opinion that the rulings of the Tax Court should be supported on the merits.
I am authorized to state that Judge MARIS and Judge KALODNER concur in the views expressed in this opinion.
It should be pointed out that, strictly speaking, Mrs. Henry did not make a “transfer” of property, retaining for her life the right to the income therefrom. She did waive her right to question the disposition of tbe extraordinary distributions in the Standard Oil securities made by the trustees of the estate of Henry H. Houston.
Tli© Orphans’ Court of Philadelphia County, by Judge Sinklor, in an Adjudication (at No. 5 January Term 1896 in tho Estate of Honry H. Houston, deceased) filed October 8, 1941, becoming final two weeks later, held that the class of grandchildren entitled to become signatories of the 1915 agreement “was closed when the first grandchild reached the ago of thirty years, that is, when T. Charlton Henry became thirty on March 25, 1917.” Judge Sinkler also held that the word “descendants” used in the 1915 deed was the equivalent of “grandchildren” and that no great-grandchild possessed standing to sign the 1915 deed or to object to tho terms thereof.
Emphasis added.
The exact date cannot be ascertained from the photostatic copy in tile record.
Smith’s Estate v. Commissioner, 3 Cir., 1944, 140 F.2d 759.