I adhere to the views expressed in my opinion submitted to Chief Justice PRICE and Associate Justice SUTTON for approval. In that opinion an affirmance of the trial court's judgment was recommended. No reference was made to appellee's plea in abatement, but subsequently a memorandum was submitted which was in full accord with the disposition of this plea made by the Court and the reasons therefor. That opinion was also in accord with the Court's view that the holding of the Supreme Court of the United States in Lang v. Commissioner of Internal Revenue, cited by the Court, is controlling in a determination of the amount of the Federal estate tax due on the proceeds of life insurance policies taken out by the husband on his own life in which the wife is named beneficiary, where the premiums are paid from community funds in Texas. Since the Attorney General took a different position in his brief, I shall amplify the reasons for this view.
In Hopkins v. Bacon, Poe v. Seaborn, and Bender v. Pfaff, cited by the Court, the basis of the decisions is that under the local laws of Texas, Washington and Louisiana, as interpreted by the State courts of last resort, the interest of the wife in the community is a present vested interest, as distinguished from a mere expectancy, as in California. United States v. Robbins, 269 U.S. 315, 46 S. Ct. 148, 70 L. Ed. 285.
Since the United States Supreme Court has recognized no distinction in the interest of the wife in the community in Texas, Washington and Louisiana in respect to the Federal income tax, it must logically follow that that Court will recognize no such distinction in respect to the Federal estate tax, and therefore its decision in Lang v. Commissioner of Internal Revenue will be followed if and when a similar case from Texas comes before that high tribunal.
It does not follow that the decision in Lang v. Commissioner of Internal Revenue should control or even be persuasive in the interpretation of our State inheritance tax statute.
In the opinion submitted it was conceded that because of the similarity of the language employed in the Federal and State statutes, the conclusion is irresistible that the 1939 amendment to art. 7117, R.C.S., was in fact adopted from the Federal Estate Tax Law. City of Tyler et al. v. St. Louis, S.W. Ry. Co., 99 Tex. 491, 91 S.W. 1, 13 Ann.Cas. 911. But the general rule that a statute adopted from another jurisdiction will ordinarily be given the same construction in Texas that it had received in the jurisdiction from which it was adopted (Tex.Jur. p. 264, § 140) is subject to the well recognized exception, and is inapplicable where the statute was enacted for a different purpose and applied to a different subject matter. 59 C.J. 1070, § 628; In re Pacific Telephone Telegraph Co., D.C., 38 F.2d 833.
The distinction between the nature of the Federal estate tax and our State inheritance tax is fundamental.
The Federal estate tax is imposed upon the right of grantor or transferer to transfer property; while our inheritance tax is imposed upon the right to receive or succeed to the possession or enjoyment of property.
"Under the Federal Estate Tax Law, the primary question to determine is when the decedent or grantor parted with all property rights. Under our State Inheritance or Succession Tax Statute, the primary question is whether the transfer was made or intended to take effect in possession or enjoyment after the death of grantor." Bethea v. Sheppard, Tex. Civ. App.143 S.W.2d 997, 998, 1002, writ refused.
This fundamental difference in the nature of the tax is explanatory of the Federal decisions following the reasoning of the Court in Chase National Bank v. United States, 278 U.S. 327, 49 S. Ct. 126, 73 L. Ed. 405, 63 A.L.R. 388, and those *Page 961 following the case of Lewellyn v. Frick, 268 U.S. 238, 45 S. Ct. 487, 69 L. Ed. 934.
In the first line of decisions, the Federal estate tax has been sustained on the proceeds of insurance policies made payable to a named beneficiary where the insured paid the premiums and reserved the right to cancel the policy, or to secure a loan on it, or to obtain the cash surrender value, or to change the beneficiary. These decisions are based on the theory that until the time of his death the insured retained incidents of ownership in the policy which were terminated at his death, and that, therefore, at the time of his death, there was a shifting of beneficial interest or economic benefits which were subject to the transfer tax.
In the other line of decisions, where the insured did not reserve the right to change the beneficiary or any other incidents of ownership which he could have exercised at the time of his death, the proceeds were held not subject to the estate tax. See annotation 118 A.L.R. 324, at page 325 et seq.
Under our inheritance tax statute it is immaterial whether the insured retained the right to change the beneficiary or any other incidents of ownership. The interest of the beneficiary may have been completely vested during the lifetime of the insured. When the insured creates such vested interest is immaterial — if he postpones the right of possession or enjoyment of the beneficiary until after his death, the proceeds are subject to the inheritance or succession tax at or after his death. Such a situation is no different than the "irrevocable trust" mentioned in Bethea v. Sheppard, supra.
If the Federal decisions on which appellant relies are applicable here she should recover the entire amount of the tax paid, if she had paid it under protest and sought to recover it, since the agreed stipulation does not disclose whether the insured reserved the right to change the beneficiary or any other incidents of ownership. And under these decisions, in the absence of such reservation, no tax can be imposed.
Prior to the amendment of art. 7117, R.C.S., by the Act of 1939, no tax was imposed on any property other than that which had belonged to the grantor or donor. The amendment specifically imposed a tax on the proceeds of life insurance policies taken out by the decedent upon his own life to the extent of the excess over $40,000 of the amount receivable by beneficiaries other than his estate. Prior to the amendment no property was taxable unless it passed absolutely or in trust by will or by the laws of descent and distribution or by deed, grant, sale or gift made or intended to take effect in possession or enjoyment after the death of the grantor or donor.
The amendment created another mode of transfer and subjected to tax property transferred other than property which had theretofore belonged to the grantor or donor. The new mode of transfer was by contract of the grantor or donor.
The theory advanced in the opinion of the Court, that in taking out the policies the husband was making a gift to the wife of his interest in community funds to which she succeeded upon his death, is repugnant to the contract of insurance itself. Receipt of proceeds of an insurance policy by a named beneficiary is not by reason of any gift of the insured, but because of the insurance contract; the transfer is made by the contract — not by gift. Contract has been recognized as a method of transfer in inheritance tax statutes. See In re Gemmell's Estate, 123 N.J. Eq. 315, 197 A. 428.
The amendment "does not impose the tax on the transfer of the property, nor on the passing of the property from the grantor, nor on the right to become beneficially interested in the property, but imposes the tax upon the passing of the property or interest therein when `made or intended to take effect in possession or enjoyment after the death of the grantor.'" Bethea v. Sheppard, supra.
Clearly, rights to the proceeds of life insurance policies created by contract of the insured are intended by the insured to take effect in possession or enjoyment by the beneficiary after the death of the insured.
It seems to me that it is a narrow construction and an unwarranted implication of legislative intention to hold that the source of the consideration paid by the insured for the benefits to be derived from such contracts should be determinative of the tax imposed. Courts, in determining the existence of the event upon which a succession tax has been based, should not permit themselves to be restricted by technical refinements of title arising from the consideration for which the transaction was effected, but should be more concerned with the practical advantages that accrue *Page 962 to the taxpayer from the devolution of the property which passed.
The opinion assumes that the purpose of Congress and of the Legislature in adopting the amendment was to subject to the tax property and capital that was being converted into assets not subject thereto. The court then reasons that since the community interest of a surviving spouse was not then and is not now subject to the tax, it cannot be supposed that the Legislature, by this amendment, intended to subject a community share to the tax when such share had not theretofore and is not now subject to it; that to do so would permit the taxing of an investment of the wife's one-half of community funds — not permitted in any other instance. In this assumption and conclusion the court fails to make any distinction between the payment of premiums on life insurance policies with community funds and the investment of community funds. The primary purpose of life insurance is not investment, but protection. If this were not so, there could be no valid reason for the $40,000 exemption on which all of the premiums may be paid by the husband's separate funds. The inclusion of this exemption in the statute negatives any legislative intention to regard the proceeds of life insurance policies as the fruits of investment.
I cannot approve a statutory construction which would impute to the Legislature a Lilliputian attempt to increase the revenues of the State by placing only that part of the premiums on life insurance policies which were paid by the insured and which had theretofore escaped taxation in an inheritance-tax straight jacket. The words, "taken out by the decedent," on which appellant relies, it seems to me, should be given no broader meaning than their literal equivalent, "contracted for by the decedent." Such construction does not require a strained interpretation of the language of the statute, and is in harmony with the general purposes of our inheritance-tax statute. The interpretation placed on these words by the Federal Courts should not be applied when they are used in a statute relating to a subject matter entirely different than that which the Federal Courts considered.
Believing that the court erred in reversing the judgment of the trial court, and that the opinion places a construction on our Inheritance Tax Statute contrary to the views expressed in the opinion in Bethea v. Sheppard, supra, approved by the Supreme Court by the refusal of a writ of error, and in response to the gracious request of the Court, these views are respectfully, yet confidently, recorded. *Page 965