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December 21, 1955

Florence A. DUFFIELD, Executrix of the Estate of H. Alan Dawson, Deceased

The opinion of the court was delivered by: DUSEN

This suit for refund of federal estate taxes is now before the court on plaintiff's motion for summary judgment under Fed.Rules Civ.Proc. rule 56, 28 U.S.C.A.

In 1930, Henrietta Garrett died intestate, leaving an estate of several million dollars. During the next several years, many thousands of persons laid claim to this fortune as the heirs and next-of-kin of Mrs. Garrett. In 1932, H. Alan Dawson, the decedent herein, entered into fee contracts with three persons who were among the many claimants. The contracts provided that Dawson was to prosecute the claims of these three and, if he proved successful, he was to receive a certain percentage of any recovery effected. The Orphans' Court of Philadelphia County appointed a Master and examiners to inquire and to hear testimony in order to ascertain the distributees of Mrs. Garrett's estate. Thousands of claims were prosecuted, including those of Dawson's clients. In 1949 Dawson died; the following year the Master's report in the Garrett estate was filed in which the Master concluded that the three parties represented by Dawson were Mrs. Garrett's nearest next-of-kin and recommended distribution of the estate to them. The auditing judge of the Orphans' Court adopted the conclusions of the Master and his position was affirmed by the Supreme Court of Pennsylvania in 1952. Petitions for certiorari were taken and filed in the Supreme Court of the United States and the last of these was dismissed in 1953, at which point the rights of Dawson's clients were finally fixed. Upon this final adjudication, Dawson's estate received approximately $ 800,000 under the fee contracts. Shortly thereafter, plaintiff filed an estate tax return in which Dawson's property was valued as of the date of his death and in which the contingent fee contracts were returned as having 'no value.' *fn1" The Commissioner examined the return, valued the contracts as being equal to the fees received under them, and assessed additional estate taxes. Plaintiff challenged the validity of this assessment but, nevertheless, chose to pay the additional tax and sue here for refund. *fn2"

 Plaintiff's contentions in this motion for summary judgment are three-fold. First, plaintiff argues that, as a matter of law, these fee contracts were not includible in the gross estate. Second, he argues that even if they are includible, the contracts were incapable of valuation as a matter of law. Finally, plaintiff asserts that even if includible in the gross estate, these contracts were valueless as a matter of fact.

 I. Argument that the fee contracts are not includible in the gross estate as a matter of law.

 Plaintiff bases this argument primarily on the case of Bull v. United States. *fn3" In that case, decedent, at the time of his death, was a member of a partnership whose articles of association provided that on the death of any partner his estate was entitled to share in the profits of the firm for a period of one year next following.

 Plaintiff here asserts that the court held as a matter of law that this right to share in future contingent profits could not be subjected to federal estate tax. *fn4" From this, the plaintiff reasons that in his case the rights of Dawson under the Garrett estate fee contracts were not includible in the gross estate. However, a careful reading of the Bull case clearly indicates that the imposition of the estate tax was struck down by the Supreme Court because the Commissioner failed to distinguish between income actually received after death and the value as of the time of death of the right to receive income in the future. In so doing, he levied an estate tax on the former before it was actually received and thus was not part of decedent's estate at his death. *fn5" The Supreme Court held such a levy improper. *fn6" In the case before this court, however, the Commissioner assessed the estate tax on the value at Dawson's death of his right to compensation under the fee contracts, not on the fees themselves. *fn7" Thus, plaintiff's contention that no value resulting from the fee contracts is includible in the gross estate as a matter of law cannot be maintained.

 II. Argument that these fee contracts are incapable of valuation as a matter of law.

 Plaintiff contends that the valuation of these fee contracts at the time of Dawson's death was a matter of such great speculation and conjecture that the Commissioner was, as a matter of law, precluded from placing a worth on them. Plaintiff's argument is this: At the time of Dawson's death, the Master's report had not yet been filed, and an adverse report could have issued. Also, even a favorable Master's report could have been overturned either by the Orphans' Court or by any of the appellate courts to which appeals were eventually taken. Plaintiff argues that these factors made valuation as of the date of Dawson's death a matter of mere guesswork. *fn8" There is nothing in the record, however, to indicate the possibilities, at the time of Dawson's death, of occurrence of any of the events suggested by plaintiff. *fn9" Perhaps the best answer to this contention is the uncontradicted affidavit filed by defendant on December 16, 1955, stating that these contingent fee contracts had substantial value, as explained more fully below.

 III. Argument that these fee contracts are valueless as a matter of fact and, thus, summary judgment is proper.

 Plaintiff argues that these fee contracts are valueless as a matter of fact, thus making summary judgment proper, and has submitted affidavits in support of this contention. *fn10" However, defendant has filed an affidavit on December 16, 1955, which states that the contracts had substantial value at the date of Dawson's death. *fn11" This affidavit shows that a potential purchaser of contingent interests in the estate of Henrietta E. Garrett, deceased, who had investigated the relative merits of the various claimants to the estate in 1949, concluded that it had become 'substantially certain' by August 1949 that the three persons represented by H. Alan Dawson would receive all or part of the above-mentioned estate. The affidavit further states that 'at the time of the death of H. Alan Dawson on August 26, 1949, his contingent fee contracts above described had substantial value and your deponent would have at that time been willing to purchase the same at a mutually satisfactory price.' In view of this affidavit, a factual issue is raised by the affidavits and summary judgment cannot be granted.

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