Source: https://supreme.justia.com/cases/federal/us/183/278/
Timestamp: 2019-04-24 12:21:44+00:00

Document:
The provisions of subdivision 5 of the tax law of the State of New York, which became a law April 16, 1897, are not in violation of the Fourteenth Amendment to the Constitution, nor of Section 10 of Article I of the Constitution.
The opinion in Carpenter v. Pennsylvania, 17 How. 466, although decided before the adoption of the Fourteenth Amendment to the Constitution, correctly defines the limits of jurisdiction between the state and the federal governments in respect to the control of the estates of decedents, both as they were regarded before the adoption of the Fourteenth Amendment, and have since been regarded.
The holding of the Court of Appeals of New York that it was the execution of the power of appointment which subjected grantees under it to the transfer tax is binding upon this Court.
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 laws 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.
The view of the Court of Appeals in this case must be accepted by this Court as an accurate statement of the law of the state.
and testament designate and appoint, and in such manner and upon such terms as he might legally impose. In and by the eighth clause or paragraph of his said will, David Dows, Sr., devised and bequeathed the legal title to his residuary estate to his executors as trustees, to hold and manage the same, one-eighth part in trust during the lifetime of testator's widow and one eighth in trust for each of testator's seven children, one of whom was the said David Dows, Jr. It was made the duty of the trustees to pay over the net income to the respective persons named during their respective lives, and it was provided that, upon the death of each of said persons, the said one-eighth part of the residuary estate, with any accumulations and profits, should vest absolutely and at once in such of his or her children, or the issue of such children, as he or she might by his or her last will and testament designate and appoint, and in such manner and upon such terms as he or she may legally impose. It was provided in both the sixth and eighth clauses that, if the legatee for life shall die intestate. then the property should vest absolutely and at once in his or her children surviving, share and share alike.
David Dows, Junior, died January 13, 1899, leaving a last will and testament, which was duly admitted to probate by the Surrogate's Court of Westchester County, New York, by the third paragraph or clause whereof, in the exercise of the power of appointment given him in his father's will, he provided that the property mentioned and described in the said sixth and eighth clauses of the will of David Dows, Sr., should vest upon his death in his three children, David, Robert, and Kenneth, in a manner therein described.
"It is ordered, adjudged, and decreed that said report and order so appealed from be, and they are hereby, affirmed, and that the date when the transfers now taxed were effected was January 13, 1899, that date being fixed because it was the date of the death of David Dows, Junior, the donee of the power contained in the will of David Dows, Senior."
An appeal was taken from the order and decree of the surrogate to the appellate division of the Supreme Court of New York, and by that court, on March 22, 1901, the order of the surrogate was affirmed. On appeal duly taken, the Court of Appeals of the State of New York, on May 17, 1901, affirmed the order and judgment of the appellate division of the supreme court, and the judgment of the said Court of Appeals and the record of the proceedings were remitted into the Surrogate's Court of New York, to be enforced according to law, and the judgment of the Court of Appeals was, on May 28, 1901, made the judgment and order of the Surrogate's Court. And on June 13, 1901, a writ of error to that judgment was allowed, and the cause was brought to this Court.
This is the case of a so-called transfer tax imposed under the laws of the State of New York. The various contentions of the plaintiffs in error, attacking the validity of the tax, were overruled by the courts of the state, and the cause is now before us on the general proposition that, by the proceedings the plaintiffs in error, or those whom they represent as trustees and guardians, have been deprived of the equal protection of the laws of the State of New York, their privileges and immunities as citizens of the United States have been abridged, and their property taken without due process of law in violation of the Fourteenth Amendment to the Constitution of the United States, and likewise, as to a portion of the property affected, in violation of Section 10 of Article I of the Constitution of the United States.
though the persons or corporations thereby becoming entitled to the possession or enjoyment of the property to which such power related had succeeded thereto by a will of the donee of the power failing to exercise such power, taking effect at the time of such omission or failure."
This enactment became a law on April 16, 1897. David Dows, Senior, died March 30, 1890, leaving a will containing a power of appointment to his son, David Dows, Junior, which will was duly admitted to probate by the Surrogate's Court on April 14, 1890. David Dows, Junior, died on January 13, 1899, leaving a will in which he exercised the power of appointment given him in the will of his father, and apportioned the property which was the subject of the power among his three sons, who are represented in this litigation by the plaintiff in error.
It is claimed that, under the law of the State of New York as it stood at the time of his death in 1890, David Dows, Senior, had a legal right to transfer, by will, his property, or any interest therein, to his grandchildren, without any diminution or impairment then imposed by the law of the state upon the exercise of that right; that his said grandchildren acquired vested rights in the property so transferred, and that the subsequent law, whose terms have been above transcribed, operates to diminish and impair those vested rights. In other words, it is claimed that it is not competent for the state, by a subsequent enactment, to exact a price or charge for a privilege lawfully exercised in 1890, and to thus take from the grandchildren a portion of the very property the full right to which had vested in them many years before.
a power of appointment, it cannot be denied that, in reality and substance, it is the execution of the power that gives to the grantee the property passing under it. The will of Dows, Senior, gave his son a power of appointment to be exercised only in a particular manner, to-wit, by last will and testament. If, as said by the Supreme Court of the United States, the right to take property by devise is not an inherent or natural right, but a privilege accorded by the state, which it may tax or charge for, it follows that the rights of a testator to make a will or testamentary instrument is equally a privilege, and equally subject to the taxing power of the state. When David Dows, Senior, 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. That 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."
It will be perceived that, in putting this construction upon the will of David Dows, Senior, the Court of Appeals not merely construed the words of the will, but, by implication, applied to the case the provisions of the subdivision 5 of section 220 under which the transfer tax in question was imposed, and thus construed that tax law and affirmed its validity.
While it is settled law that this Court will follow the construction put by the state courts upon wills devising property situated within the state, and while it is also true that we adopt the construction of its own statutes by the state courts, a question may remain whether the statute, as so construed, imports a violation of any of the rights secured by applicable provisions of the Constitution of the United States. And such is the contention here.
This Court has no authority to revise the statutes of New York upon any grounds of justice, policy, or consistency to its own Constitution. Such questions are concluded by the decision of the legislative and judicial authorities of the state.
"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. . . ."
carefully prepared, and has been repeatedly announced since that time. Calder v. Bull, 3 Dall. 386; Fletcher v. Peck, 6 Cranch 87; 33 U. S. 8 Pet. 88, 36 U. S. 11 Pet. 421."
It is true that this case was decided before the adoption of the Fourteenth 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 Fourteenth 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.
"The Fourteenth 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; Slaughter House Cases, 16 Wall. 36."
"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."
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 Co., 170 U. S. 283, 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 Fourteenth Amendment to the Constitution. But these contentions were held by this Court to be untenable.
See likewise Knowlton v. Moore, 178 U. S. 41, and Plummer v. Coler, 178 U. S. 115, 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 Fourteenth 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.
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 sixth paragraph of the will of David Dows, Senior, was real estate, but under the powers conferred in the will of David Dows, Senior, the trustees had converted the real estate, and held the proceeds as personal property, before the death of David Dows, Junior, 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 insofar 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 Section 10 of Article I of the Constitution of the United States forbidding the states to pass laws impairing the obligation of contracts.
transfer tax in question was a tax upon property, and not upon the right of succession, and held that, when David Dows, Senior, 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 Co., 170 U. S. 283; Plummer v. Coler, 178 U. S. 115; Knowlton v. Moore, 178 U. S. 41; Murdock v. Ward, 178 U. S. 139.
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, Junior, are not legally subject to taxation until the precedent estates terminate and the remainders vest in possession.
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 Fourteenth 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 Co., 170 U. S. 283.
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.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.