Source: https://supreme.justia.com/cases/federal/us/279/47/
Timestamp: 2019-04-22 08:05:44+00:00

Document:
1. When a treaty provision fairly admits of two constructions, one restricting, the other enlarging, the rights which may be claimed under it, the more liberal interpretation is to be preferred. P. 279 U. S. 52.
2. As the treatymaking power is independent of and superior to the legislative power of the states, the meaning of treaty provisions, liberally construed, is not restricted by any necessity of avoiding possible conflict with state legislation, and, when so ascertained, must prevail over inconsistent state enactments. P. 279 U. S. 52.
3. When the meaning of treaty provisions is uncertain, recourse may be had to the negotiations and diplomatic correspondence of the contracting parties relating to the subject matter, and to their own practical construction of it. P. 279 U. S. 52.
than are or shall be payable in each state, upon the same, when removed by a citizen or subject of such state, respectively,"
was intended to prohibit not merely taxes on removal, but also discriminatory taxes like the droit de detraction (applied only to alien heirs of a resident decedent and substantially equivalent, as to them, to the modern inheritance tax), and is violated by a state inheritance tax discriminating against nonresident alien heirs of a resident decedent and constituting a lien upon the property. Pp. 279 U. S. 52, 279 U. S. 57.
Certiorari, 277 U.S. 583, to a judgment of the Supreme Court of Iowa affirming a judgment imposing an inheritance tax.
"ARTICLE 7. The United States and his Danish Majesty mutually agree that no higher or other duties, charges, or taxes of any kind shall be levied in the territories or dominions of either party upon any personal property, money, or effects of their respective citizens or subjects on the removal of the same from their territories or dominions reciprocally, either upon the inheritance of such property, money, or effects or otherwise, than are or shall be payable in each state upon the same when removed by a citizen or subject of such state respectively."
The Supreme Court of Iowa, 205 N.W. 324, following its earlier decision, In re Estate of Pedersen, 198 Iowa, 166, upheld the statute as not in conflict with the treaty.
considered, or death duties, or excises, on the right to transfer and remove property, singly or collectively, we are of the opinion that the duty of interpretation does not arise, since in no event would any of the prohibitions be applicable to the case before us."
But, in the present case, the decedent was a citizen of Denmark, owning property within the state of Iowa, and Article 7, by its terms, is applicable to charges or taxes levied on the personal property or effects of such a citizen; hence, its protection may be invoked here if the discrimination complained of is one embraced within the terms of the treaty.
That there is a discrimination based on alienage is evident, since the tax is imposed only when the nonresident heirs are also aliens. But it is argued by respondent, as the court below held, that the present tax is not prohibited by the treaty, since it is one upon succession, In re Estate of Thompson, 196 Iowa 721, In re Meinert's Estate, 204 Iowa 355, and not on property or its removal, which, it is said, is alone forbidden, and that, in any case, since the only tax discrimination aimed at by Article 7 in cases of inheritance is that upon the power of disposal of the estate, and not the privilege of succession, the particular discrimination complained of is not forbidden, for the statutes of Iowa permit a citizen of Denmark to dispose of his estate to citizens and residents of Denmark on the same terms as a citizen of Iowa to like nonresident alien beneficiaries.
U.S. 123; Geofroy v. Riggs, 133 U. S. 258, 133 U. S. 271; In re Ross, 140 U. S. 453, 140 U. S. 475; Tucker v. Alexandroff, 183 U. S. 424. When a treaty provision fairly admits of two constructions, one restricting, the other enlarging, rights which may be claimed under it, the more liberal interpretation is to be preferred. Asakura v. Seattle, 265 U. S. 332; Tucker v. Alexandroff, supra; Geofroy v. Riggs, supra. And as the treatymaking power is independent of and superior to the legislative power of the states, the meaning of treaty provisions so construed is not restricted by any necessity of avoiding possible conflict with state legislation, and, when so ascertained, must prevail over inconsistent state enactments. See Ware v. Hylton, 3 Dall. 199; Jordan v. Tashiro, supra; cf. Cheung Sum Shee v. Nagle, 268 U. S. 336. When their meaning is uncertain, recourse may be had to the negotiations and diplomatic correspondence of the contracting parties relating to the subject matter and to their own practical construction of it. Cf. In re Ross, supra, at 140 U. S. 467; United States v. Texas, 162 U. S. 1, 162 U. S. 23; Kinkead v. United States, 150 U. S. 486; Terrace v. Thompson, 263 U. S. 197, 263 U. S. 223.
The history of Article 7 and references to its provisions in diplomatic exchanges between the United States and Denmark leave little doubt that its purpose was both to relieve the citizens of each country from onerous taxes upon their property within the other and to enable them to dispose of such property, paying only such duties as are exacted of the inhabitants of the place of its situs, as suggested by this Court in Petersen v. Iowa, supra, p. 245 U. S. 174, and also to extend like protection to alien heirs of the noncitizen.
territories and the appointment of consular officers, but did not contain any provisions corresponding to Article 7. On January 14, 1826, certain citizens of the United States addressed to Henry Clay, then Secretary of State, a memorial complaining of certain taxes imposed by the Danish government with respect to property of citizens of the United States located in the Danish West Indies, known as "sixths" and "tenths," the former being one-sixth of the value of the property, payable to the crown and the latter a further one-tenth of the residue, payable to the town or county magistrate, as a prerequisite to removal of property from the Islands. Both taxes ere imposed on the property inherited by an alien heir. Danish Laws, Code of Christian V, book V, c. 2, §§ 76, 77, 78, 79. The memorial prayed that an article be inserted in the treaty then contemplated with Denmark, comparable to the similar provisions of existing treaties between Denmark and Great Britain and Denmark and France, forbidding the imposition of taxes of this character.
"When citizens or subjects of the one party die in the country of the other, their estates shall not be subject to any droit de de traction, but shall pass to their successors, free from all duty."
"The object which the government of the United States had in view in that stipulation, was to secure the right of their citizens to bring their money and movable property home from the Danish islands, free from charges or duties and especially from the onerous law, known in those islands under the denominations of sixths and tenths. This object was distinctly known to Mr. Pedersen throughout the whole of the negotiation, and was expressly communicated by me to him in writing."
"I have been authorized . . . to declare to you that measures have been taken accordingly by the Danish government to secure the due execution of the seventh Article of the Convention, conformably to the intent and meaning thereof as by you stated. . . ."
That the present discriminatory tax is the substantial equivalent of the droit de de traction is not open to doubt. That it was the purpose of the high contracting parties to prohibit discriminatory taxes of this nature clearly appears from the diplomatic correspondence preceding and subsequent to the execution of the treaty, although the "sixths and tenths" tax, with which the parties were immediately concerned, was a removal tax.
of the same . . . either upon the inheritance of such property, . . . or otherwise,"
the omission at that time of words more specifically describing inheritance taxes as now defined can hardly be deemed to evidence any intention not to include taxes theoretically levied upon the right to transmit or inherit, but which nevertheless were to be paid from the inheritance before it could be possessed or removed. Moreover, while it is true that the tax is levied whether the property is actually removed or not, it is nevertheless imposed only with respect to a class of persons who would normally find it necessary so to remove the property in order to enjoy it, and since payment of the tax is a prerequisite to removal, the tax is, in its practical operation, one on removal. In the light of the avowed purpose of the Treaty to forbid discriminatory taxes of this character, and its use of language historically deemed to embrace them, such effect should be given to its provisions.
The contention that the present discrimination is not one forbidden by the language of Article 7, since the decedent's power of disposal is the same as that of a citizen, leaves out of consideration both the nature of the tax contemplated by the contracting parties and the fact that the treaty provisions extend explicitly to the withdrawal of such property by the alien heir upon inheritance, and, as already pointed out, protect him in his right to receive his inheritance undiminished by a tax which is not imposed upon citizens of the other contracting party.
"Their Britannick and Danish Majesties mutually agree that no higher or other Duties shall be levied in either of Their Dominions . . . upon any personal property of Their respective Subjects on the removal of the same from the Dominions of Their said Majesties reciprocally (either upon the inheritance of such property, or otherwise) than are or shall be payable in each state upon the like property when removed by a Subject of such state respectively."
12 British and Foreign state Papers, 1824-1825 (1826) 49. Article 40 of the Treaty of Commerce and Navigation, concluded between France and Denmark August 23, 1742, provided that the citizens of each of the two countries reciprocally should be exempt in the other from the droit d'aubaine or other similar disability, under whatever name, and that their heirs should succeed to their property without impediment. 1 Coercq, Recueil des Traite § de la France (1864) 57.
The droit de de traction was derived from the droit d'aubaine, one of the many harsh feudal laws and customs directed against strangers and which, in its narrowest sense, was the right of the sovereign, as successor of the feudal lords, to appropriate all the property of a nonnaturalized alien dying, either testate or intestate, within the realm. 1 Calvo, Dictionnaire de Droit International (1885) 67, Aubaine; 1 Merlin, Repertoire de Jurisprudence (5th ed. 1827) 523, Aubaine; Halleck, International Law (1861) 155; 2 Ferriere, Oeuvres de Bacquet (1778) 8 et seq. This right was exercised to the exclusion of all heirs, whether they were citizens or aliens or resided within or without the realm, with the single exception of resident legitimate offspring, and continued to be exercised long after aliens had been accorded unrestricted power of disposition of goods inter vivos. Demangeat, Historie de la Condition Civile des E'Trangers en France (1844) 110, 125; Loisel, Institutes Contumiers, liv. 1, regle 50. The term has, however, sometimes been applied to all the varying disabilities of aliens, Fiore, Le Droit International Prive (1907) 14, and more often used to include not only the inability of the alien to transmit, but the complementary incapacity of an alien to inherit, even from a citizen, Merlin, supra, Aubaine.
But commercial expediency led at an early date to a mitigation of the rigors of the droit d'aubaine. This process took several forms, the exemption of alien merchants in certain trading centers, of certain classes of individuals (ex-soldiers, etc.) and, most prominently, treaties providing for its reciprocal abandonment or contraction. In these treaties, the droit de de traction was recognized as a tax of from five to twenty, usually ten, percent of the value, imposed on the right of an alien to acquire by inheritance (testate or intestate) the property of persons dying within the realm. Demangeat, supra at 219, 225; 2 Masse, Le Droit Commercial (1844) 14; 1 Calvo, supra, De traction; Fuzier-Herman, Repertoire General Alphabetique du Droit Francaise (1890) Aubaine, 6; Guyot, Repertoire de Jurisprudence (1785) De traction; Merlin, supra, De traction; Oppenheim, International Law (4th ed.1928) 560; Halleck, supra at 155; Wheaton, Elements of International Law (8th ed. 1866) 138. The droit d'aubaine and the droit de de traction were abolished in France by decrees of the Assembly in 1790 and 1791, but subsequently reappeared in the Civil Code, Arts. 726, 912, with provision for abandonment as to a nation according similar treatment to French nationals. They were again abolished, with certain protective provisions for French heirs, by the Law of Jury 14, 1819. See Dalloz, Repertoire Pratique (1825) Succession; Demangeat, supra at 239, et seq., and citations, supra.
"C'est un droit par leguel le souverain distrait a son profit une certaine parties de succession qu'il permet aux etrangers de venir receueiller dans ses etats."
4 Merlin, supra, 518, De traction; Guyot, supra, De traction. "Ce droit . . . consistait dans un prelevement opere par le gouverment . . . sur le produit net des successions transferes a l'etranger." Calvo, supra, De traction; see also Fuzier-Herman, Repertoire General du Droit Francaise (1890) Aubaine, 6.
A number of early treaties of the United States clearly recognize this essential characteristic of the droit de de traction, either by providing in terms for the abolition of both removal duties and the droit de de traction, cf. Treaties with: France of 1778, 2 R.S. 203, 206; Wurttemberg of 1844, 2 R.S. 809; Saxony of 1845, 2 R.S. 690; or by words of similar import, cf. Treaties with: France of 1853, 2 R.S. 249, 251; Switzerland of 1850, 2 R.S. 748, 749, 750; Honduras of 1864, 2 R.S. 426, 428; Great Britain of 1900, 31 Stat. 1939.
"The tax shall be and remain a legal charge against and a lien upon such estate, and any and all the property thereof from the death of the decedent owner until paid."
Code Iowa (1927) c. 351, § 7311. See also §§ 7309, 7363.

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 § 7311