Source: https://www.legalcrystal.com/case/96273/binney-vs-long
Timestamp: 2018-05-25 15:09:39
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Matched Legal Cases: ['§ 1', '§ 1', '§ 2', '§ 2', '§ 10', '§ 2', '§ 1', '§ 1', '§ 2', '§ 2', '§ 1', '§ 25']

Binney Vs Long - Citation 96273 - Court Judgment | LegalCrystal
Binney Vs. Long - Court Judgment
LegalCrystal Citation legalcrystal.com/96273
Case Number 299 U.S. 280
Appellant Binney
binney v. long - 299 u.s. 280 (1936) u.s. supreme court binney v. long, 299 u.s. 280 (1936) binney v. long no. 77 argued november 17, 1936 decided december 14, 1936 299 u.s. 280 appeal from the probate court county of norfolk, of massachusetts syllabus 1. massachusetts succession tax (gen.laws, ter. ed., c. 65, § 1), on transfers made to take effect in possession and enjoyment after the donor's death held consistent with the contract clause of the federal constitution and the due process clause of the fourteenth amendment, as applied upon the death, intestate, of a life tenant, to remainders then vesting but theretofore contingent, under a trust inter vivos antedating the taxing legislation. coolidge.....
Binney v. Long - 299 U.S. 280 (1936)
U.S. Supreme Court Binney v. Long, 299 U.S. 280 (1936)
1. Massachusetts succession tax (Gen.Laws, Ter. Ed., c. 65, § 1), on transfers made to take effect in possession and enjoyment after the donor's death held consistent with the contract clause of the Federal Constitution and the due process clause of the Fourteenth Amendment, as applied upon the death, intestate, of a life tenant, to remainders then vesting but theretofore contingent, under a trust inter vivos antedating the taxing legislation. Coolidge v. Long, 282 U. S. 582 , distinguished. P. 299 U. S. 286 .
2. In assessing a graduated succession tax, there is no constitutional objection to aggregating various interests passing and accruing to the same beneficiary from or on account of the death of the same decedent, and thus increasing the rate over that which would be applicable if the interests were assessed separately. P. 299 U. S. 288 .
3. Under the Massachusetts succession tax law (§ 2, supra ), succession to property through the failure of an intestate to exercise a power of appointment under a nontestamentary conveyance of the property by deed of trust, made after September 1, 1907, is not taxed, whereas if the conveyance was made before that date, the succession is not only taxable, but the rate of tax may be greatly increased by aggregating the value of that succession with other interests derived by the transferee by inheritance from the donee of the power. Held repugnant to the equal protection clause of the Fourteenth Amendment. P. 299 U. S. 288 .
4. Under the Massachusetts succession tax law (§ 2, supra ), where property passes to a lineal descendant as remainderman under his ancestor's will through the failure of a deceased life tenant to exercise a power of appointment, the property is treated as coming from the donee of the power if the bequest antedated September 1, 1907; otherwise, as coming from the testator; with the result that, in the one case, the rate of tax being graduated, the tax may be increased by aggregating with the bequest the value of other interests inherited by the same beneficiary from the donee of the power, whereas, in the other case there is not such aggregation and increase. Held repugnant to the equal protection clause of the Fourteenth Amendment. P. 299 U. S. 292 .
This appeal is from an order denying abatement of succession taxes assessed in respect of the estate of Hetty S. L. Cunningham, late a resident of Brookline, Massachusetts. Mrs. Cunningham died intestate in August, 1931, leaving as her sole heirs four children who, with the trustees and certain beneficiaries of three trusts wherein she had life estates, were the petitioners below and are the appellants here. She left a substantial estate of her own which descended to her four children. Their succession to this estate was taxed, the tax was paid, and its legality is not questioned. Pursuant to the terms of the three trusts, her four children succeeded, upon her death, to the ownership and possession of certain property whereof she had been life tenant with power of appointment of principal, and succeeded to the enjoyment as life beneficiaries of other property as to which she had preceded them as life tenant. The appellee held the succession to the trust property taxable, and added the value of the corpus of Mrs. Cunningham's own estate and that of the interests to which the appellants succeeded upon her death, with the result that the trust interests took a higher rate. The taxes assessed upon the three trust interests were paid, and a petition was filed in the probate court for abatement in the view that the exaction was forbidden by article 1, § 10, and the Fourteenth Amendment of the Federal Constitution. The probate court reserved the questions, the Supreme Judicial Court decided them adversely to appellants, [ Footnote 1 ] and upon its rescript, the petition was denied.
When the trusts were created, Massachusetts imposed no inheritance or succession tax. The first statute imposing such a tax [ Footnote 2 ] applied only to collateral inheritance, and excluded devolution to lineal descendants. In 1907, a law was enacted taxing testamentary devolution of property to lineal descendants; [ Footnote 3 ] this made no mention of powers of appointment; the tax was graduated according to amounts and relationships, but there was no requirement of aggregation of various interests passing and accruing to a single beneficiary from or on account of the death of a decedent to ascertain the rate of tax. Such a provision for uniting interests was enacted in 1924, [ Footnote 4 ] and incorporated with the first section of the act of 1907 as amended into a single section. [ Footnote 5 ]
The act of 1907 and its amendments were prospective in operation, and exempted estates of those who had died prior to its effective date. [ Footnote 6 ] This exemption has extended to all interests which passed or accrued upon the death of Sarah E. Lawrence, the intestate's mother.
In 1909, provision was made for a succession tax upon the occasion of the exercise of, or nonexercise of, powers of appointment. [ Footnote 7 ] This, in its present form, is § 2 of chapter 65 of the General Laws. [ Footnote 8 ] The effective date of this provision was declared to be September 1, 1907, which was the effective date of the 1907 act, and was twenty-one months prior to the effective date of the 1909 act, in which the provision is embodied. It is conceded that there are no other statutes purporting to tax succession under nontestamentary gifts.
The trust created by the intestate in 1877, by deed inter vivos, reserved no power of revocation or alteration and, in this respect, differed from that, under consideration in Saltonstall v. Saltonstall, 276 U. S. 260 . The appellants
insist that the invalidity of § 1, supra, as applied to their succession is established by Coolidge v. Long, 282 U. S. 582 , since to tax them would, under the doctrine of that case, impair the obligation of the intestate's contract, and deprive them of property without due process. The court below thought that case not controlling because there, the remainders were vested from the date of the gift, whereas here, the interests of appellants were executory or, at the best, contingent remainders which never vested until the intestate's death. In Coolidge v. Long, this Court concluded that the tax laid by the act of 1907 offended the contract and due process clauses of the federal Constitution because the interests of the remaindermen had vested at the date of the creation of the trust many years prior to the passage of the taxing act. It was held that the mere taking possession of that which had been vested in the beneficiaries for many years did not amount to a taxable occasion, and constitutionally could not be so designated by the Commonwealth in view of the complete vesting of the beneficiaries' estates in remainder at the date of the execution of the deed.
The Supreme Judicial Court, following an unbroken line of authority in Massachusetts, and in accordance with the common law [ Footnote 9 ] and the law as declared by this Court, [ Footnote 10 ] holds that the appellants' estates, under the trust instrument of 1877 were, at most, contingent remainders which did not vest until after the intestate's death, and hence the transfers to them fell clearly within the statutory definition as made to take effect in possession or enjoyment after the donor's death. The appellants urge that, in imposing a succession tax, the state should disregard technical rules relating to the vesting of interests and look to the substance and they insist that, for many
The act of 1907 (§ 1, supra ) does not purport to tax complete and irrevocable transfers inter vivos, not in contemplation of the donor's death, made subsequent to the effective date of the act. The 1862 contract was not made in contemplation of the grantor's death; it became effective when executed. Such a transfer, made today, would result in no tax upon the interest acquired by the
life tenant or upon those interests resulting from her exercise or nonexercise of her power of appointment. By the act of 1909, however (§ 2, supra ), the legislature, while not attempting to tax the interests of the appellants as derived in succession to Amos A. Lawrence, does essay to tax those interests as derived from the intestate as the holder of a power of appointment under Amos A. Lawrence's contract. But the statutes do not tax similar interests the enjoyment of which depends upon the exercise or nonexercise of a power embodied in a deed effective after September 1, 1907. The law therefore creates two classes -- the one composed of beneficiaries who take at the death of the donee of a power created by an instrument antedating 1907, who are taxed, and the other of beneficiaries who take in succession to the donee of a power conferred by a deed executed subsequent to 1907, who are not taxed. Upon its face, the statute arbitrarily selects a past date, taxing the beneficiaries of an act if done prior to, and leaving untaxed beneficiaries of a precisely similar act if done subsequent to that date. In justification of the discrimination, the court below suggests that any change in the state's policy of taxation must take effect at some point of time. The truth of this statement is obvious, but the appellants' complaint is not directed at the fact that inheritances occurring prior to the effective date of the act of 1907 have escaped taxation, while those happening thereafter are subjected to the exaction. The claim that the statutes deny equal protection is based upon quite another sort of discrimination. Succession consequent upon testamentary gifts (that is, those made by will or in contemplation of death or to take effect in possession or enjoyment after death) made or to take effect after the date of the act is the subject of the excise. The succession to nontestamentary gifts made subsequent to the effective date of the act of 1907 is not taxed whether the
As we have noted, the only basis for the classification is the time when the estate was created. This Court has said that a tax on gifts inter vivos, so laid as to hit those made within a given period prior to the donor's death and exempting all others, would be wholly arbitrary. Schlesinger v. Wisconsin, 270 U. S. 230 . And we have also said that a discrimination in the taxation of loans based solely upon the time when the loan was made would clearly be arbitrary and capricious. Colgate v. Harvey, 296 U. S. 404 , 296 U. S. 425 .
When Mrs. Lawrence died in 1891, the interests created in her lineal descendants were wholly exempt from taxation. When, in 1907, the Commonwealth adopted a policy of taxing succession by lineals, the statute said nothing of powers of appointment. Nevertheless, under that act, had it been in force when Mrs. Lawrence died, the intestate, her daughter, would have paid a tax upon the value of the life estate given her by her mother's will, and the appellants, when they came into possession of remainder interests upon the intestate's death, would likewise have been compelled to pay a tax upon their succession to Mrs. Lawrence's estate. The act of 1909 (§ 2, supra ), recognizing that the act of 1907 (§ 1, supra ) does not apply to the succession generated at the death of Mrs. Lawrence, nevertheless pitches upon the fact that, under her will, the intestate had a power of appointment, and
Wright v. Blakeslee, 101 U. S. 174 , 101 U. S. 177 .
On September 1, 1907, the Commonwealth of Massachusetts laid a tax upon the subject of any transfer to take effect in possession or enjoyment after the death of a donor, whether the succession was brought about by will or intestacy or gift inter vivos. Acts 1907, c. 563. This Court held in Coolidge v. Long, 282 U. S. 582 , that, as to remainders already vested but dependent upon an estate for life, the tax so imposed is a denial of due process, though the life estate did not end until after the passage of the statute. In 1909, the legislature of the Commonwealth enacted another statute providing in substance that, where the transfer becomes complete through the exercise or nonexercise of a power of appointment ( cf. Saltonstall v. Saltonstall, 276 U. S. 260 , 276 U. S. 270 -271; Guaranty Trust Co. v. Blodgett, 287 U. S. 509 , 287 U. S. 511 ) the succession shall be deemed to have been derived from the donee of the power, if the power had its origin in a disposition of property made before September 1, 1907, and,
Matter of Dows, 167 N.Y. 227, 231, 60 N.E. 439, aff'd sub. nom. Orr v. Gilman, 183 U. S. 278 , 183 U. S. 287 ; Matter of Delano, 176 N.Y. 486, 68 N.E. 871, aff'd sub. nom. Chanler v. Kelsey, 205 U. S. 466 , 205 U. S. 478 . This Court has held that a legislature does not violate the Fourteenth Amendment by giving heed to these realities when taxing a succession. Orr v. Gilman, supra; Chanler v. Kelsey, supra. The cases that have been cited had their origin in New York. For a time, the tax laws of Massachusetts were drawn along stricter lines. Emmons v. Shaw, 171 Mass. 410, 413, 50 N.E. 1033. Until the act of 1909, a transfer through a power, if made under an instrument effective before September, 1907, escaped taxation altogether, though the gift, in substance and reality, may have had its origin thereafter. Acts 1907, c. 563, § 25; cf. Saltonstall v. Saltonstall, supra; also Saltonstall v. Saltonstall, 256 Mass. 519, 522, 525, 153 N.E. 4. This was unfair to the Commonwealth. It was perhaps unfair to legatees who were taxable under gifts of later date. But the evil, however patent, was not subject to correction through the medium of a uniform rule taxing the succession under every power of appointment exercised thereafter, and taxing it as derived from the primary donor. Such a method of assessment would be adequate in its application to instruments to be executed in the
The rule is elementary that a state, in adopting a system of taxation, is not confined to a formula of rigid uniformity. Swiss Oil Corp. v. Shanks, 273 U. S. 407 , 273 U. S. 413 . It may tax some kinds of property at one rate, and others at another, and exempt others altogether. Bell's Gap R. Co. v. Pennsylvania, 134 U. S. 232 ; Stebbins v. Riley, 268 U. S. 137 , 268 U. S. 142 ; Ohio Oil Co. v. Conway, 281 U. S. 146 , 281 U. S. 150 . It may lay an excise on the operations of a
particular kind of business, and exempt some other kind of business closely akin thereto. Quong Wing v. Kirkendall, 223 U. S. 59 , 223 U. S. 62 ; American Sugar Refining Co. v. Louisiana, 179 U. S. 89 , 179 U. S. 94 ; Armour Packing Co. v. Lacy, 200 U. S. 226 , 200 U. S. 235 ; Brown Forman Co. v. Kentucky, 217 U. S. 563 , 217 U. S. 573 ; Heisler v. Thomas Colliery Co., 260 U. S. 245 , 260 U. S. 255 ; State Board of Tax Comm'rs v. Jackson, 283 U. S. 527 , 283 U. S. 537 -538. What is true of division into classes according to subject matter must be true of division into classes dependent upon time. The temporal arrangement must have its origin, to be sure, in something more than whim or fantasy -- a tyrannical exhibition of arbitrary power. If that reproach has been avoided, the classification does not fail because the burdens before and after are not always and everywhere in perfect equilibrium.
to take effect in possession or enjoyment through the exercise or nonexercise of a power of appointment after the death of the donor ( Guaranty Trust Co. v. Blodgett, supra ) will gain nothing from the fact that a nontestamentary conveyance brought the power into being. The only reason why this particular interest would be exempt if the deed of 1862 had been made after August, 1907, is because the remainder was so limited that the power might be exercised while the donor was yet alive. Such untoward accidents do not take a method of division out of the domain of the rational into the land of whim and fantasy. Eccentricities of incidence are common, and perhaps inevitable, in every system of taxation. The future would have to be scanned with miscroscopical powers of vision to foresee and forestall every possible diversity. For present purposes, it is enough that the order of events removes the stigma of caprice from a system of classification whereby donees of a power before the passage of the act are treated as grantors, the tax to be laid upon that basis, whereas donors of a power are recognized as the source of the succession in respect of transfers afterwards. Emmons v. Shaw, supra.
Maxwell v. Bugbee, 250 U. S. 525 , 250 U. S. 543 . Cf. Metropolis Theater Co. v. Chicago, 228 U. S. 61 , 228 U. S. 69 -70; Salomon v. State Tax Commission, 278 U. S. 484 , 278 U. S. 491 .