Orr v. Gilman/Opinion of the Court
'The validity of the act as affecting successions to open after its enactment is not contested; nor is the authority of the state to levy taxes upon personal property belonging to its citizens, but situated beyond its limits, denied. But the complaint is that the application of the act of 1826 by that of 1850 to a succession already in the course of settlement, and which had been appropriated by the last will of decedent, involved an arbitrary change of the existing laws of inheritance to the extent of this tax, in the sequestration of that amount for the uses of the state; that the rights of the residuary legatees were vested at the death of the testator, and from that time those persons were nonresidents, and the property taxed was also beyond the state; and that the state has employed its power over the executor and the property within its borders to accomplish a measure of wrong and injustice; that the act contains the imposition of a forfeiture or penalty, and is ex post facto.
'It is in some sense true that the rights of donees under a will are vested at the death of the testator, and that the acts of administration which follow are conservatory means directed by the state to ascertain those rights, and to accomplish an effective translation of the dominion of the decedent to the objects of his bounty; and the legislation adopted with any other aim than this would justify criticism, and perhaps censure. But, until the period for distribution arrives, the law of the decedent's domicil attaches to the property, and all other jurisdictions refer to the place of the domicil as that where the distribution should be made. The will of the testator is proven there, and his executor receives his authority to collect the property by the recognition of the legal tribunals of that place. The personal estate, so far as it has a determinate owner, belongs to the executor thus constituted. The rights of the donee are subordinate to the conditions, formalities, and administrative control prescribed by the state in the interests of public order, and are only irrevocably established upon its abdication of this control at the period of distribution. If the state, during this period of administration and control by its tribunals and their appointees, think fit to impose a tax upon the property, there is no obstacle in the Constitution and laws of the United States to prevent it. Ennis v. Smith, 14 How. 400, 14 L. ed. 472. . . .
'The act of 1850, in enlarging the operation of the act of 1826 and by extending the language of that act beyond its legal import, is retrospective in its form; but its practical agency is to subject to assessment property liable to taxation, to answer an existing exigency of the state, and to be collected in the course of future administration; and the language retrospective is of no importance, except to describe the property to be included in the assessment. And, as the supreme court [of Pennsylvania] has well said, 'in establishing its peculiar interpretation, it (the legislature) has only done indirectly what it was competent to do directly.' But if the act of 1850 involved a change in the law of succession, and could be regarded as a civil regulation for the division of the estates of unmarried persons having no lineal heirs, and not as a fiscal imposition, this court could not pronounce it to be an ex post facto law within the 10th section of the 1st article of the Constitution. The debates in the Federal convention upon the Constitution show that the terms 'cx post facto laws' were understood in a restricted sense relating to criminal cases only, and that the description of Blackstone of such laws was referred to for their meaning. 3 Madison Papers, 1399, 1450, 1579. This signification was adopted in this court shortly after its organization, in opinions carefully prepared, and has been repeatedly announced since that time. Calder v. Bull, 3 Dall. 386, 1 L. ed. 648; Flctcher v. Peck, 6 Cranch, 87, 3 L. ed. 162; 8 Pet. 88, 8 L. ed. 876, 11 Pet. 421, 9 L. ed. 774.'
It is true that this case was decided before the adoption of the 14th Amendment, but we think it correctly defines the limits of jurisdiction between the state and Federal governments, in respect to the control of the estates of decedents, both as they were regarded before, and have been regarded since, the adoption of the 14th Amendment. It has never been held that it was the purpose or function of that amendment to change the systems and policies of the states in regard to the devolution of estates, or to the extent of the taxing power over them.
In Re Kemmler, 136 U.S. 436, 34 L. ed. 519, 10 Sup. Ct. Rep. 930, it was stated by the present Chief Justice that—
'The 14th Amendment did not radically change the whole theory of the relations of the state and Federal governments to each other, and of both governments to the people. The same person may be at the same time a citizen of the United States and a citizen of a state. Protection to life, liberty, and property rests primarily with the states; and the amendment furnishes an additional guaranty against any encroachment by the states upon those fundamental rights which belong to citizenship, and which the state governments were created to secure. The privileges and immunities of citizens of the United States, as distinguished from the privileges and immunities of citizens of the states, are indeed protected by it; but those are privileges and immunities arising out of the nature and essential character of the national government, and granted or secured by the Constitution of the United States. United States v. Cruikshank 92 U.S. 542, 23 L. ed. 588; Slaughter House Cases, 16 Wall. 36, 21 L. ed. 394.'
It was said in De Vaughn v. Hutchinson (165 U.S. 566, 41 L. ed. 827, 17 Sup. Ct. Rep. 461), that 'it is a principle firmly established that to the law of the state in which the land is situated we must look for the rules which govern its descent, alienation, and transfer, and for the effect and construction of wills and other conveyances.'
In Clarke v. Clarke, 178 U.S. 186, 44 L. ed. 1028, 20 Sup. Ct. Rep. 873, the proposition was again announced as one requiring only to be stated, that the law of a state in which land is situated controls and governs its transmission by will, or its passage in case of intestacy; and that in this court the local law of a state is the law of that state, as announced by its court of last resort.
In Magoun v. Illinois Trust & Sav. Bank, 170 U.S. 283, 42 L. ed. 1037, 17 Sup. Ct. Rep. 594, the validity of a law of the state of Illinois imposing a legacy and inheritance tax, the rate progressing by the amount of the beneficial interest acquired, was assailed in the courts of Illinois as being in violation of the Constitution of that state requiring equal and uniform taxation. The state court having decided that the progressive feature did not violate the Constitution of that state, the case came to this court upon the contention that the establishment of a progressive rate was a denial both of due process of law and of the equal protection of the laws, within the meaning of the 14th Amendment to the Constitution. But these contentions were held by this court to be untenable.
See, likewise, Knowlton v. Moore, 178 U.S. 41, 44 L. ed. 969, 20 Sup. Ct. Rep. 747, and Plummer v. Coler, 178 U.S. 115, 44 L. ed. 998, 20 Sup. Ct. Rep. 774, wherein were considered the nature of inheritance-tax laws and the extent of the powers of the states and of Congress in imposing and regulating them.
In the light of the principles thus established we are unable to see in this legislation of the state of New York, as construed by its highest court, any infringement of the salutary provisions of the 14th Amendment. There are involved no arbitrary or unequal regulations prescribing different rates of taxation on property or persons in the same condition. The provisions of the law extend alike to all estates that descend or devolve upon the death of those who once owned them. The moneys raised by the taxation are applied to the lawful uses of the state, in which the legatees have the same interests with the other citizens. Nor is it claimed that the amount or rate of the taxation is excessive to the extent of confiscation.
But it is further urged that the tax law of the state of New York, § 221, expressly exempts from taxation or charge all real estate passing to lineal descendants by descent or devise, and all such descendants so taking title to real estate from ancestors; and it is said that under the interpretation of this law by the courts of the state of New York all property which was real estate at the time of the death of the person owning it continues, as to the lineal descendants, to be real estate, and is therefore exempt from taxation, though such descendants may not enter into possession and enjoyment of the property until years after the death of the ancestor who owned it, and the property in the meantime has been converted into cash or securities.
It is true that the property described in the 6th paragraph of the will of David Dows, Sr., was real estate, but under the powers conferred in the will of David Dows, Sr., the trustees had converted the real estate, and held the proceeds as personal property, before the death of David Dows, Jr., and it was this personal property which became vested in the grandchildren under the exercise of the power of appointment. The court of appeals held that it was the execution of the power of appointment which subjected grantees under it to the transfer tax. This conclusion is binding upon this court in so far as it involves a construction of the will and of the statute. Nor are we able to perceive that thereby the plaintiffs in error were deprived of any rights under the Federal Constitution. The rule of law laid down by the New York courts is applicable to all alike, and even if the view of the court of appeals respecting the question was wrong, it was an error which we have no power to review.
Another objection made to the judgment of the court of appeals affirming the surrogate's order is that the tax imposed upon transfers made under a power of appointment is a tax upon property, and not on the right of succession; and that, as a portion of the fund was invested in incorporated companies liable to taxation on their own capital, and in certain bonds of the state of New York, and in bonds of the city of New York exempt by statute from taxation, such exemption formed part of the contract under which said securities were purchased, and the tax imposed and the proceedings to enforce it were in violation of § 10 of article 1 of the Constitution of the United States forbidding the states to pass laws impairing the obligation of contracts.
The court of appeals overruled the proposition that the transfer tax in question was a tax upon property, and not upon the right of succession, and held that when David Dows, Sr., devised this property to the appointees under the will of his son, he necessarily subjected it to the charge that the state might impose on the privilege accorded to the son of making a will, and that the charge is the same in character as if it had been laid on the inheritance of the estate of the son himself; that is, for the privilege of succeeding to property under a will.
In reaching this conclusion the court of appeals cited not only various New York cases, but several decisions of this court, the principles of which were thought to be applicable. Magoun v. Illinois Trust & Sav. Bank, 170 U.S. 283, 42 L. ed. 1037, 18 Sup. Ct. Rep. 594; Plummer v. Coler, 178 U.S. 115, 44 L. ed. 998, 20 Sup. Ct. Rep. 774; Knowlton v. Moore, 178 U.S. 41, 44 L. ed. 969, 20 Sup. Ct. Rep. 747; Murdock v. Ward, 178 U.S. 139, 44 L. ed. 1009, 20 Sup. Ct. Rep. 775.
We think it unnecessary to enter upon another discussion of a subject so recently considered in the cases just cited, and that it is sufficient to say that, in our opinion, the court of appeals did not err when it held that a transfer or succession tax, not being a direct tax upon property, but a charge upon a privilege exercised or enjoyed under the law of the state, does not, when imposed in cases where the property passing consists of securities exempt by statute, impair the obligation of a contract within the meaning of the Constitution of the United States.
A further contention is made that the legatees or devisees of the remainders created by the will of David Dows, Jr., are not legally subject to taxation until the precedent estates terminate and the remainders vest in possession.
The court of appeals held that the doctrine invoked had no application to the remainders given to the sons of David Dows, Jr.; that they are absolute, and not subject to be devested, or to fail in any contingency whatever; that by statute they are alienable, devisable, descendible, and if the property were real estate, they could be sold on execution against their owners; that by the aid of the table of annuities, upon the faith of which large sums are constantly distributed by the courts, the present value of these remainders is capable of ready computation; and that therefore they are subject to present taxation.
These views of the court of appeals must be accepted by us as accurate statements of the law of the state; and though it is claimed in the brief of counsel for the plaintiffs in error that such a construction of the transfer-tax law brings it into conflict with the 14th Amendment of the Constitution of the United States, we are unable to approve such a contention. The subject dealt with is one of state law expounded by state courts. The laws and the construction put upon them apply equally to all persons in a like situation, and cannot be regarded as conflicting with the provisions of the Federal Constitution. Magoun v. Illinois Trust & Sav. Bank, 170 U.S. 283, 42 L. ed. 1037, 18 Sup. Ct. Rep. 594.
Other contentions made in the brief of counsel for the plaintiffs in error seem, so far as our jurisdiction is concerned, to be phases of those heretofore considered, and thereby disposed of.
The judgment of the Court of Appeals of the state of New York affirming the judgment of the Surrogate's Court of New York county is affirmed.
Mr. Justice Harlan concurs in the result.