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LAMADE v. BROWNELL

September 21, 1965

Howard J. Lamade, Jr. and West Branch Bank and Trust Company, now Northern Central Bank and Trust Company, Co-Executors of the Estate of Howard J. Lamade, Deceased, Plaintiffs
v.
Richard P. Brownell, Defendant


Follmer, District Judge.


The opinion of the court was delivered by: FOLLMER

This is a suit for a refund of federal estate taxes collected by defendant from plaintiffs. The case was tried to the Court without a jury.

 From the pleadings, the testimony, a Stipulation, the briefs and arguments of counsel, the Court makes the following:

 Findings of Fact

 1. The plaintiffs are Howard J. Lamade, Jr., and the West Branch Bank and Trust Company, now Northern Central Bank and Trust Company. Both are residents of Williamsport, Pennsylvania. They are and they bring this suit as the co-executors of the estate of Howard J. Lamade, who died testate at Williamsport on May 14, 1958.

 2. The defendant is Richard P. Brownell who resides at 1744 Capouse Avenue, Scranton, Pennsylvania. He was the District Director of Internal Revenue in and for the District of Scranton, Pennsylvania, from September 10, 1956 to April 30, 1962.

 3. On July 24, 1959, the plaintiffs timely filed with the defendant a federal estate tax return for the estate of their decedent and therewith paid to the defendant $26,914.32 in federal estate taxes. Additional federal estate taxes were paid to the defendant with respect to the estate on July 26, 1960, in the amount of $12,757.47 together with interest of $688.48.

 4. Pursuant to the defendant's letter of July 25, 1960, advising the plaintiffs of an "unagreed deficiency" in the estate of Howard J. Lamade, the plaintiffs filed a protest and on February 3, 1961, paid to the defendant $5,967.43 in federal estate tax together with interest of $690.14. These amounts were paid with respect to that portion of the "unagreed deficiency" attributable to the inclusion in the gross estate of Howard J. Lamade for federal estate tax purposes of the value of an ordinary life insurance policy issued in 1955 by the Metropolitan Life Insurance Company and numbered 21,851,253A. This policy was in the face amount of $40,000.00.

 5. On October 2, 1961, the plaintiffs filed a claim for refund with the defendant on Form 843 seeking a refund of the $5,967.43, together with interest. The defendant did not allow this claim.

 6. On July 14, 1937, the decedent applied to the Metropolitan Life Insurance Company for a $50,000.00 term policy on his life and as of that date said insurance company issued to him policy No. 11,651,016A for $50,000.00 on a renewable convertible term plan.

 7. On August 16, 1937 the decedent absolutely assigned said $50,000.00 policy and any policies which might be issued subsequently, pursuant to any right to convert said term policy, to Muriel B. Lamade, the insured's wife.

 8. On August 26, 1937 the insured's wife as settlor created a revocable Insurance Trust with George R. Lamade and West Branch Bank and Trust Company as trustees in which the trust res was said original $50,000.00 term policy No. 11,651,016A.

 9. In 1939 Muriel B. Lamade, the insured's wife, applied for a change in said policy into a $10,000.00 whole-life-paid-up-at-85 policy and a $40,000.00 convertible term policy on the original plan.

 11. In 1939, after the reissuance of the $10,000.00 whole-life-paid-up-at-85 policy and the $40,000.00 term policy, the reissued policies were substituted as the trust res by the insured's wife with the trustees under said Life Insurance Trust Agreement.

 12. On April 8, 1949 the insured's wife revoked the Insurance Trust Agreement, designated her children, Howard J. Lamade, Jr. and Clara Anne Lamade (now Robison), as the beneficiaries on said $40,000.00 term policy and named herself beneficiary on the $10,000.00 whole-life-paid-up-at-85 policy.

 13. On April 20, 1949 the insured's wife absolutely assigned said $40,000.00 term policy, No. 12,652,576A, to her children, Howard J. Lamade, Jr. and Clara Anne Lamade (now Robison).

 14. On August 11, 1955 a Change Application executed by Howard J. Lamade, the insured, and Howard J. Lamade, Jr. and Clara Anne Lamade Robison, the owner-assignees, was filed with the Metropolitan Life Insurance Company directing that the policy be changed in one particular, from $40,000.00 term to 20-pay life.

 15. The Metropolitan Life Insurance Company acted on said Change Application and issued as of July 14, 1955 policy No. 21,851,253A on the life of the decedent.

 16. The original $50,000.00 term policy and its three successor policies were held from 1937 to the insured's death by Northern Central Bank and Trust Company and its predecessor in safekeeping for the owners of the policies.

 17. The insurance company form for change of the policy executed August 11, 1955 required on its face that the insured ...


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