Dean v. DIRECTOR OF FINANCE OF MONTGOMERY CTY.

ROSALYN B. BELL, Judge. Is a remainder interest in real property subject to farmland transfer taxes in Montgomery County? If so, was the tax correctly computed under the facts presented in this case? Appellants, Mary Gore Dean, James Grafton Gore, and Beatrice Louise Gore, bring these questions to us after the Circuit Court for Montgomery County affirmed a decision of the Maryland Tax Court, confirming the refusal of appellee, the Department of Finance of Montgomery County, to refund transfer taxes of $154,800.

We shall affirm and explain. The subject of this case is the land and premises known as the Gore Property or the Marwood Estate (Marwood). At the time in question, Marwood was composed of about 187.8877 acres on River Road in Potomac. In June 1988, H. Grady Gore, Jr. died, owning an undivided one-quarter interest in Marwood.

His Last Will and Testament granted life estates from that interest to his surviving brother and sisters, James ⁸³ Grafton Gore, Beatrice Louise Gore, and Mary Gore Dean (Life Tenants), 1 and a remainder to his children, Jefferson A. Gore, Christopher A. Gore, Beverly A.G. Thomas, and Courtney C. Graham (Remaindermen), or their issue. American Security Bank, N.A. was designated as the personal representative, but later resigned and thereafter the Life Tenants were appointed Successor Personal Representatives. In March 1990, in accordance with an agreement of distribution by and between the Life Tenants and the Remaindermen, the Remaindermen agreed to convey, renounce, release, and quitclaim to the Life Tenants all of their interest, both legal and equitable, in the land and premises and to the fixtures and personal property for a consideration of $2,580,000. The transfer was evidenced by a deed of distribution dated March 6, 1990, and recorded March 8, 1990 in liber 9225 at folio 800 among the land records for Montgomery County.

The deed provides in pertinent part: “THIS DEED OF DISTRIBUTION, made this 6th day of March, 1990, by and between MARY GORE DEAN, JAMES GRAFTON GORE and BEATRICE LOUISE GORE, Successor Personal Representatives of the Estate of H. Grady Gore, Jr., he having died testate on the 18th day of July, 1988, parties of the first part; and JEFFERSON A. GORE, CHRISTOPHER A. GORE, BEVERLY ASHBY GORE (also known of record as Beverly A.G. Thomas) and COURTNEY C. GRAHAM, parties of the second part, and MARY GORE DEAN, JAMES GRAFTON GORE AND BEATRICE LOUISE GORE, parties of the third part: “WHEREAS, the parties of the first part were appointed as the Successor Personal Representatives by the Register of Wills for Montgomery County, Maryland, on the 6th day of March, 1990, in connection with the administration of the Estate of H. Grady Gore, Jr. (Estate No. 052-07-88); and “WHEREAS, in accordance with the Last Will and Testament of H. Grady Gore, Jr., the parties of the third part ⁸⁴ were named as the life tenants of said Estate, with the parties of the second part being named as the remainder-men of said Estate; and “WHEREAS, the parties of the second part intend by these presents to convey, renounce, release and quitclaim to the parties of the first part and the parties of the third part all of their interest, both legal and equitable, in the land and premises described herein; ‘WITNESSETH: That for and in consideration of the sum of TEN AND * * * NO/lOO DOLLARS ($10.00), and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties of the second part do hereby convey, renounce, release and quitclaim to the parties of the first part and to the parties of the third part all of their right, title and interest, legal and equitable in and to the herein described land and premises, and the parties of the first part do hereby grant and convey unto the parties of the third part, all of their interest, both legal and equitable, in that certain piece or parcel of land and premises situate in the County of Montgomery, State of Maryland, being more particularly described as follows: “All of that land and premises being more particularly described on ‘EXHIBIT A,’ attached hereto and made a part hereof. “BEING the same land and premises described in Liber 911 at folio 092, among the Land Records for Montgomery County, Maryland. “TO HAVE and TO HOLD said land and premises hereinabove described or mentioned and hereby intended to be conveyed unto and to the only proper use and benefit forever of the parties of the third part, in fee simple, as tenants in common; SUBJECT, HOWEVER, to all covenants, easements, conditions and other restrictions of record. “TOGETHER WITH all of the buildings and improvements thereupon erected, made or being, and each and every of the rights, alleys, ways, waters, privileges, appurtenances and advantages to the same belonging or in any way ⁸⁵ appertaining; AND FURTHER TOGETHER WITH all improvements, fixtures, tangible personal property, objects of art, household effects, furniture and furnishings located in or on said premises. “AND the parties of the second part do hereby covenant with the parties of the first part and the parties of the third part to execute such other and further assurances of said land and premises as may from time to time be requisite, and the parties of the first part do hereby further covenant with the parties of the third part to execute such other and further assurances of said land and premises as may from time to time be requisite. “IN WITNESS WHEREOF, the parties of the first part and the parties of the second part each have set their hands and seals and delivered these presents, all as of the year and day first above written.” As stated previously, the “other good and valuable consideration” set forth in the deed was $2,580,000. The Life Tenants 2 then paid $154,800 in farmland transfer taxes to the Director of Finance of Montgomery County (Director), pursuant to Montgomery County Code § 52-21 (1984, Supp. No. 8), which imposes a tax on “all transfers in the county of a fee simple interest in real property.” 3 ⁸⁶ The Life Tenants then filed with the Director a claim for refund of the transfer taxes paid, claiming that the remainder was a future interest and, thus, not taxable. The claim was disallowed. The Life Tenants appealed to the Maryland Tax Court, contending that the remainder was not a fee simple interest.

The Tax Court affirmed the decision of the Director and denied the Life Tenants’ claim for a refund. The Life Tenants then appealed the Tax Court’s decision to the circuit court, which affirmed the decision of the Tax Court. This appeal followed. THE TRANSFER The Life Tenants argue that the release and quitclaim by the Remaindermen of their remainder interest in Marwood to the Life Tenants/Successor Personal Representatives was neither a fee simple interest in real property nor a transfer of land and, thus, not a taxable event.

The Life Tenants claim that the Remaindermen only had a future interest, which would give them a right to possess the property at some future date. To support this contention the Life Tenants cite Myers v. Myers, 185 Md. 210, 221 , 44 A.2d 455 (1945), in which the Court of Appeals stated: “It is ... well settled that a vested remainder is a present, fixed right to future enjoyment, and is an estate which the owner can convey or devise or which descends in case of intestacy to his heirs.” (Citations omitted.) In addition, the Life Tenants argue that a vested remainder interest, while freely alienable, devisable, and descendible, see ⁸⁷ Culver v. Culver, 47 Mc.App. 579, 538-89, 425 A.2d 222 , cert. denied, 290 Md. 713 (1981), is not a fee simple estate in real property. They claim that a fee simple interest is an estate in real property, whereas a vested remainder is not a fee simple interest, but a future interest. Thus, they contend that the Remaindermen did not have a fee simple interest in the property and that all they received from the Remaindermen was the waiver of a contingent future interest in Marwood.

We disagree. The interest that the Remaindermen received upon the death of H. Grady Gore, Jr. was a vested remainder in fee simple. When the Remaindermen conveyed their interest to the Life Tenants, they transferred a fee simple interest in Marwood. H. Grady Gore, Jr. devised the remainder to his children per stirpes. 4 The devise of the remainder to the children and their heirs created a fee simple estate.

Maryland Real Prop. Code Ann. § 4-105 (1974, 1988 Repl. Vol.), provides: “No words of inheritance are necessary to create an estate in fee simple or an easement by grant or by reservation. Unless a contrary intention appears by express terms or is necessarily implied, every grant of land passes a fee simple estate, and every grant or reservation of an easement passes or reserves an easement in perpetuity.” This principle has been recognized in Maryland case law for over 100 years.

See Hawkins v. Chapman, 36 Md. 83, 94-95 (1872); Farguharson v. Eichelberger, 15 Md. 63, 73 (1860). Here, the Remaindermen took a vested remainder in fee simple as described by C. Moynihan, Law of Real Property, 118 (2d ed. 1988): ⁸⁸ “Thus, A owning Blackacre in fee simple conveys it ‘to B for life and then to C and his heirs.’ B has a possessory life estate, called the particular estate, and C has a remainder in fee simple.” Professors T. Bergin and P. Haskell in their treatise, Preface to Estates in Land and Future Interests, 25 (2d ed. 1984), state that a remainder subject to a life estate is a fee simple interest: “0 transfers ‘to A for life, then to B and his heirs.’ Does A have an estate in fee simple absolute? Clearly not____ A owns a present estate for life. What about B?

B does own an estate in fee simple absolute. During A’s possession, B’s estate will be a future one. When A dies, B’s estate in fee simple absolute will become a present one. If B dies before A, B’s future estate in fee simple absolute will pass either to his heirs or, if there is a will, to those whom he named in it as takers.” Professors Bergin and Haskell also explain that a remainder is a fee simple interest lacking only present possession: “A remainder is a future interest created in someone other than the transferor that, according to the terms of its creation, will become a present estate (if ever) immediately upon, and no sooner than, the expiration of all prior particular estates created simultaneously with it.

That is quite a mouthful, so let us give an example. Suppose 0 transfers ‘to A for life, then to B and his heirs.’ Is B’s interest a remainder? Since B is someone other than the transferor, our first requirement is met. B’s interest may become a present estate immediately upon, but not before, the expiration of A’s estate for life.

(Note that when B’s estate becomes a present estate, it will not cut short A’s estate for life; nor is there any gap between A’s death and the time when B’s estate will become present.) Therefore, our second requirement is met as well. A’s estate is prior in order of possession to B’s, and was created simultaneously with B’s. Finally, owing to the fact that A’s estate is shorter than an estate in fee simple — e.g., is merely part of an estate in fee simple, it is a particular estate. Since all ⁸⁹ our definitional requirements are met, B must have a remainder____ The language of the transfer gives the remainder ‘to B and his heirs’ so B has a remainder in fee simple absolute. * * * * * “His remainder ... may be transferred in whole or in part by inter vivos transfer; it may be devised, and it may be inherited by his general heirs under the laws of intestate succession.

It is, in sum, full durational ownership, lacking only present possession.” Bergin and Haskell, supra, at 62-63, 65 (emphasis in original). The Maryland courts have held that vested remainder subject to a life estate is a fee simple interest. Bosley v. Burk, 154 Md. 27, 29-30 , 139 A. 543 (1927); Gill v. Wells, 59 Md. 492, 496 (1883); Downin v. Sprecher, 35 Md. 474, 480 (1872); Petrlik v. Petrlik, 43 Md.App. 222, 226 , 403 A.2d 850 (1979). For example in Gill , under a complex state of facts, most of which are irrelevant to the instant case, the decedent devised his farm to his wife and daughter.

Under the terms of the will the daughter was the owner in fee of the whole farm, subject to the wife’s life estate in one-half the farm. The daughter’s interest was a contingent remainder in that it was dependent on her reaching the age of 18. The Court of Appeals held that the daughter of the decedent, who was an infant at the time of his death, “became the owner in fee, of the whole estate, subject to a life estate of her mother in one-half of it.” Gill, 59 Md. at 496 . In Downin, 35 Md. at 478 , a testator made a devise to his daughter for her life and, after her death “to her male children, ... the said children to hold in fee simple after her death.” (Emphasis in original.) The Court held: “By this will the sons of ... [the testator’s daughter], living at the death of the testator, took vested remainders in fee subject to open and let in after-born sons.” Downin, 35 Md. at 480 (emphasis deleted).

In the instant case, the terms of the will provided that the Remaindermen would take after the death of those holding life ⁹⁰ estates in Marwood. Thus, under the case law the Remaindermen held a fee simple interest in the property. Montgomery County Code § 52-20 (1984, Supp. No. 8), authorizes the County to impose a tax upon the transfer of “any fee simple interest in real estate.” Section 52-21 imposes the tax upon all transfers of “a fee simple interest in real estate.” When the Remaindermen made a transfer to the Life Tenants of their fee simple interest, the transfer was subject to the transfer tax imposed under § 52-21. In affirming the decision of the Maryland Tax Court, the circuit court judge stated: “It is my view that when this transfer took place, and no one is disagreeing that it was indeed a transfer, from the children to the [Life Tenants], that a fee simple interest in real property was what was transferred and that the County properly levied a tax under Section 52-21.” We find no error in this conclusion.

The Remaindermen had a fee simple interest that they transferred to the Life Tenants for consideration. Under the plain language of the Montgomery County Code, such a transfer is taxable; thus, the County was entitled to levy a tax. -Merger- The Life Tenants argue that the transfer of the remainder interest to them was not a transfer of a fee simple interest, but was merely a merger of the life estate with the remainder interest, which, when completed, would create a fee simple estate. Professor Lewis Simes in his treatise, Law of Future Interests 35 (2d ed. 1966), states: “It is a recognized principle of the common law that, if two consecutive, vested, legal estates in land should, after their creation, come to be owned by the same person, the lesser estate is merged in the larger. Thus, where land was conveyed to A for life, with remainder to B and his heirs, and A thereafter conveyed his life estate to B, the life estate was said to be merged in B’s fee simple.

B did not have a ⁹¹ life estate and a remainder; he had merely a possessory fee simple.” To support their argument, that the conveyance at issue was a merger and not a taxable transfer, the Life Tenants cite Bosley, 154 Md. at 30 , 139 A. 543 in which the Court of Appeals stated: “ ‘Whenever a particular estate for life and the next vested estate in remainder or reversion expectant thereon meet in the same person, the former estate is merged, provided the estate in remainder or reversion is as large as the preceding estate. If the owner of a life estate acquires the fee to only a portion of the remainder there will be a merger pro tanto, but the life estate in the remainder of the property will not be affected.’ [16 Cyc. 667], ‘Merger is the absorption of one estate in another, and takes place usually when a greater estate and a less coincide and meeting in one and the same person without any intermediate estate, whereby the less is immediately merged or absorbed in the greater. To constitute a merger, it is necessary that the two estates be in one and the same person, at one and the same time, and in one and the same right.’ 10 R.C.L. 666. In 1 Tiffany’s Real Property (1st Ed.), 76, the learned author states: ‘It is a well-settled rule of law that whenever a greater estate and a less coincide and meet in one and the same person, without any intermediate estate, the less is immediately annihilated, or, in the law phrase, it is said to be “merged,” that is, sunk or drowned in the greater.’ ” (Some citations omitted.) In Bosley, 154 Md. at 28 , 139 A. 543 , the testatrix devised property to her three children “in fee, share and share alike,” reserving a life estate for her husband.

Bosley purchased the life estate from the husband and a one-third remainder fee interest from one of the children. He then brought suit, seeking partition of the land against the two remaindermen, who together held the other