Petition for Review of Decision of the United States Board of Tax Appeals.
Before BUFFINGTON and THOMPSON, Circuit Judges, and MARIS, District Judge.
This is a petition to review a decision of the United States Board of Tax Appeals, in which the Board determined that there was a deficiency of $3,004.25 in estate tax due by the estate of Patrick J. Lawler, deceased. There was no real dispute in the facts, which were as follows:
On November 21, 1922, Patrick J. Lawler, the decedent, executed a written pledge coincident with and in consideration of subscriptions of others, whereby he subscribed and promised to pay to the treasurer of St. Joseph's College Foundation, for the purpose of providing land, new buildings, and equipment for St. Joseph's College in Philadelphia, the sum of $100,000; $10,000 to be paid at the signing of the pledge, and the balance to be paid at the rate of $20,000 per year. The $10,000 to be paid at the time of the signing of the pledge was actually paid by the decedent on December 1, 1922. On December 24, 1928, he paid an additional $50,000 to the treasurer of St. Joseph's College, making a total of $60,000. At the time of his death there was a balance of $40,000 due the college and a claim for that amount was entered by the college within the statutory period of one year, was admitted by the executors of the estate, and listed in their petition for distribution. On February 1, 1933, the executors paid $5,000 of the balance due, leaving $35,000 to be paid.
There were approximately 1,400 other pledges made in connection with this foundation fund drive.The total amount pledged to the foundation fund was $1,154,000, and the amount which had been paid to the college at the time of the hearing before the Board of Tax Appeals was approximately $800,000. The money so subscribed and paid, including the amount paid on the pledge of the decedent, was used by the college for the purposes for which it was subscribed. On October 4, 1927, the decedent made a further pledge to St. Joseph's College in the amount of $20,000, which pledge was made coincident with and in consideration of the pledges of others in attendance at a meeting held on that date at the Philadelphia Country Club. Pledges made at this meeting totaled $102,000, and were made for the specific purpose of building a stadium and improving the athletic field at St. Joseph's College. All of the pledges have been paid with the exception of $23,400. At the date of his death decedent had not paid anything on this pledge. Within the statutory period of one year after decedent's death the college entered its claim for the $20,000 pledged by the decedent, which amount was admitted by the executors of the estate, and was included as an admitted claim in their petition for distribution. The money so subscribed and paid was used by the college for the purposes for which it was subscribed.
St. Joseph's College is an educational institution operated by the Order of Jesuits of the Roman Catholic Church exclusively for educational purposes and not for profit.
Decedent died April 8, 1932. In the federal estate tax return filed by the respondents as executors of the decedent, the unpaid balance of the pledges above mentioned amounting to $60,000 was claimed as a deduction from gross estate. In auditing the return the Commissioner of Internal Revenue disallowed this deduction, made certain other adjustments not now in controversy, and determined a deficiency of $6,604.25 in estate tax. The Board of Tax Appeals, after hearing, allowed the $60,000 as a deduction from gross estate and reduced the deficiency to $3,004.25. The Commissioner of Internal Revenue thereupon filed the present petition to review its decision.
The Revenue Act of 1926, under which the tax here in controversy was imposed, provides in section 303 (a) (1), (26 U.S.C.A. § 412 note) that in computing the taxable net estate of a decedent there shall be allowed as deductions from gross estate, inter alia, "such amounts for * * * claims against the estate * * * to the extent that such claims * * * were incurred or contracted bona fide and for an adequate and full consideration in money or money's worth."
The sum of $60,000 remaining due by the decedent at the time of his death upon the pledges above described was claimed by the respondents to be deducted from the gross estate as a claim against the estate contracted for an adequate and full consideration in money's worth. Its disallowance by the petitioner was based upon his contention that the pledges did not represent claims against the estate of that character. No objection was made to the pledges on the ground that they were not contracted bona fide, so that the question raised on this appeal is whether the claims based upon the pledges made under the circumstances above recited are claims contracted for an adequate and full consideration in money or money's worth within the meaning of the statute.
The great weight of authority in regard to subscriptions to charitable objects is to the effect that if on the faith of the subscription the promisee expends money or incurs liability in furtherance of the enterprise the promisor intended to promote, consideration for the subscription is supplied and it is thereby rendered valid, binding, and enforceable. Capelle v. Trinity M. E. Church, Fed. Cas. No. 2,392, 11 N.B.R. 536; Sturges v. Colby, fed. Cas. No. 13,566, 2 Flip. 163; Norton v. Janvier, 5 Har. (Del.) 346; Beatty's Estate v. Western College, 177 Ill. 280, 52 N.E. 432, 42 L.R.A. 797, 69 Am. St. Rep. 242; Robinson v. Nutt, 185 Mass. 345, 70 N.E. 198; New Jersey Orthopaedic Hospital & Dispensary v. Wright, 95 N.J. Law 462, 113 A. 144; Keuka College v. Ray, 167 N.Y. 96, 60 N.E. 325; In re Griswold's Estate, 113 Neb. 256, 202 N.W. 609, 38 A.L.R. 858, and cases cited in note page 881 et seq. This is the law of Pennsylvania in which state the pledges were made. Presbyterian Board of Foreign Missions v. Smith, 209 Pa. 361, 58 A. 689; University of Pennsylvania's Trustees v. Coxe's Ex'rs, 277 Pa. 512, 121 A. 314.
In the case just cited the rule was stated as follows: (277 Pa. 512, at page 516, 121 A. 314, 315): "The trustees, relying upon the subscriptions of decedent and others, proceeded to incur obligations in carrying out the purposes for which the funds were intended, and in fact had expended the greater part of the total amount subscribed. This action on their part constituted a consideration which made the gift irrevocable and binding, not only upon the donors, but upon their representatives after their death (Board of Foreign Missions v. Smith, 209 Pa. 361, 58 A. 689; Converse's Estate, 240 Pa. 458, 87 A. 849); consequently, discussion of the question whether the subscription of one was a consideration for the subscription of other parties to the agreement becomes unnecessary. Assuming each to have been made individually, and not in consideration of the subscription of others, acceptance by the museum of the gift and the incurring of obligations in reliance upon it created a valid, binding contract, and the subscription became irrevocable thereafter.Converse's Estate, supra, and cases cited."
In the case before us it appears that the Trustees of St. Joseph's College expended all the money subscribed and paid by the decedent and others for the purposes which the decedent intended to promote. There was, therefore, consideration, which was adequate under the law, for his promises and which rendered them fully enforceable against his estate.
It has also been held that the mutual promises of persons contributing to a fund for the accomplishment of a common object, which can only be accomplished through their aggregate efforts, constitute reciprocal obligations, which are each a sufficient consideration to support the validity of the others and which are enforceable by the payee. Capelle v. Trinity M. E. Church, supra; Edinboro's Academy v. Robinson, 37 Pa. 210, 78 Am. Dec. 421; and cases cited in note to In re Griswold's Estate, supra, 38 A.L.R. ...