Court Opinion

ID: 9299157
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:05:45.309474+00
Date Added: 2024-06-11T17:13:36.921480
License: Public Domain

STRONG, Circuit Justice.
This case has been elaborately argued, and I have received all the assistance that counsel can give. There is no controversy between the parties respecting the material facts. The testator at his death was domiciled in New Jersey. His will was proved and administered there, and there his executors have settled their final accounts. They sought no aid, and they had none from the intestate laws of Pennsylvania, from the courts of the state, or from any will proved in the state. At the time of his death the testator owned loans, stocks and other personal property, consisting of state loans of Pennsylvania, municipal bonds of that state, bonds and stocks of its corporations. shares of stock in national banks located in that state, and various claims against Pennsylvania debtors. These stocks and loans were transferred by the executors of the testator's will by virtue of the letters testamentary granted to them in New Jersey. No letters of administration were ever taken out in Pennsylvania. Such are the material facts, and the sole question of the case is. whether the property is subject to a tax under the laws of Pennsylvania, it having passed by the will to collateral heirs or legatees of the testator.
The collateral inheritance tax laws of the state are obscure, needlessly so, and the obscurity has not been removed by the decisions of its supreme court. The original legislative act of the state, enacted April 7, 1820, imposed a tax of two and an-half per cent (subsequently raised to five) "upon all estates, real personal and mixed, of every kind whatsoever, passing from any person who may die seized or possessed of such estate, being within this commonwealth, either by will, or under the intestate laws thereof, * * &e., to any person or persons, or to bodies politic or corporate, in trust or otherwise, other than to or for the use of father, mother, husband, wife, children, and lineal descendants, born in lawful wedlock;” and it made it the duty of all executors, administrators and their sureties, to pay the tax. It expressly enacted that “all executors, administrators and their sureties, shall only be discharged from liability for the amount of the tax on estates, the settlement of which they may be charged with by having paid the same,” as directed by the laws in 1847. Strangely enough, it was said by the supreme court of the state that the words of the statute, “being' within this commonwealth,” referred to the estate and not to the decedent, that it was the estate within the commonwealth, and not the person, on which the tax was levied. In view of this declaration, probably, the legislature (in 1850) passed a declaratory act, enacting “that the words in the act of 1826,” being within this commonwealth, “should be construed as relating to all persons who had been at the time of their decease or then might be domiciled within the commonwealth, as well as to estates.” Other statutes, respecting the tax and the mode of its collection, have, from time to time, been enacted, but none of them affect the present ease. The act of April 10, 1840, which would be important if it remained in force, was repealed by the act of April 22, 1S58.
The question I have to determine, then, is, whether, under the act of 1826, as construed by the act of 1850, the choses in action of a decedent, not domiciled at his death in Pennsylvania, passing to collateral heirs or legatees, but not passing under the intestate laws of that state, nor under any will proved and administered in that state, are subject to a tax, if they are right in action against the state or its corporations, or against inhabitants of the state. I say choses in action, for all the property claimed in this case to be liable to a tax was intangible, mere rights in action. The question is primarily one of statutors7 construction, and I think exclusively such, for, in my view, it is unnecessary to inquire how far a state can impose a tax that operates extra-territorially.
It must be admitted that the language of the statute is broad and general. It embraces all estates, real, personal and mixed, being within the commonwealth, passing to collateral heirs or legatees, either by will, or under the intestate laws, or by deed, grant, bargain, or sale, intended to take effect in possession or enjoyment after the death of the grantor or bargainor. But, notwithstanding the generality of the statutory words, they must, 1 think, receive a reasonable construction, in harmony with the construction usually given to such statutes, and consistent with the legislative power of the state. The English act of parliament of 36 Geo. III. enacts that "every legacy given by any will or testa*648mentary instrument to any person” shall be liable to a succession tax, and “that any gift by will of any person, which shall, by virtue of such will, have effect, or be satisfied out of the personal estate of such person, shall be deemed a legacy within the meaning of the act.” Comprehensive as the act is, it is now firmly held by the English courts that English stocks, owned by non-resident testators, are not liable to the tax. So it was decided by the house of lords, in Thomson v. Advocate General, 12 Clark & F. 1, and the same construction was adopted in Attorney General v. Napier, 6 Exch. 217. The ruling is based upon the general doctrine of the common law, that personal property, having no situs of its own, attends the person and domicil of its owner, and hence that the law of the domicil of a testator or intestate must determine whether his personal estate is liable to a legacy duty. I shall spend no time in arguing that such is sound doctrine. It was asserted early, by Lord Thurlow, in Bruce v. Bruce, 2 Bos. & P. 231, note, where he said: “Personal property follows the person of the owner, and in case of his decease must go according to the law of the country where he had his domicil, for the actual situs of the goods has no influence;” such is the universally recognized rule alike of the common law, the civil law, and the jus gentium. I see no sufficient reason why it is not applicable to the' Pennsylvania statutes. The law of that state, respecting the legal situs of personal property, is the same as the law of England. No statute has attempted to change it. It is there held, as elsewhere, that transfers of right and devolutions of personalty by will, or intestacy, are always governed by the law of the owner’s domicil: Desesbats v. Berquier, 1 Bin. 336. To the same effect is McKeen v. Northampton Co., 49 Pa. St. 519. It is perfectly clear that the subject of taxation, whatever it may be, must be within the territorial jurisdiction of the state that imposes the tax. Hence a tax law must be construed as applying to nothing extra-territorial, no matter how general its language may be. If a tax be laid upon a person the person must be within the jurisdiction; if upon property, the situs of the property must be in the state. Neither personal nor real property can have a situs in two states.
A person domiciliated in another state, though he owns loans of the commonwealth of Pennsylvania, or stocks of its corporations, or claims against its citizens, has no estate by virtue thereof within the commonwealth. His estate or ownership is where he resides, and is taxable there because he resides there. Neither he nor his estate is within the jurisdiction of Pennsylvania.
Turning now to a more detailed examination of the act of 1826, I find in it, much that indicates the absence of any intention to tax any stocks, loans, or rights in action of decedents, domiciled in other jurisdictions. As I have noticed it imposes upon the executors and administrators of the decedent, whose estate is made liable to the tax, the duty of paying it. This must mean domestic executors and administrators. It is not to be supposed that the legislature intended to control or impose liabilities upon foreign personal representatives of foreign decedents. They are not subject to its jurisdiction, and if such an intention existed, the attempt to carry into effect would be vain, performance of the duties enjoined could not be enforced.
Again, the tax is laid, not upon the personal property found in the state, or (using the words of the statute) “being within the commonwealth,” but upon the estate therein, by whomsoever owned, if it passes to collaterals. Personal estate of a decedent, whether it passes by will or descent, is ownership of what may remain after the payment of debts and expenses of administration. This is the relation in which the owner stands to the property. It is not the property itself. It is intangible, and, as I have said, it has no legal situs apart from the person and domicil of the owner. The domiciled inhabitant of Pennsylvania is taxable, and he is taxed upon his stocks in extra state corporations, and upon the debts due to him by the citizens and corporations of other states. The reason, and the only justification for this is, that the situs of such property or rights, is with him at his domicil. This has been decided: McKeen v. Northampton Co., cited supra. The same is true of the collateral inheritance tax. But taxation levied upon a domiciliated inhabitant of the state for the loans of another state, or for the stocks of foreign corporations, or for rights in action he may have against debtors in another state, proceeds upon the assumption that the situs of such property is in the state where the tax is laid. It cannot be in that state and at the same time in another. No one can doubt that New Jersey might have taxed the identical estate which it now claimed on behalf of the defendants Pennsylvania has taxed. The truth is, it is impossible to disregard domicil when the inquiry is the situs of rights in action, or to personalty generally, and where is legislative jurisdiction over them. I think the act of 1826 did not disregard it. With the full knowledge that such rights have their situs with the person of the owner, the tax was laid only on personal property “being within the commonwealth.” That must mean legally being there. If not, no personal property, not actually in the state, is taxed. Yet the contrary is the ruling of its courts. No attempt has been made to change the common law respecting the situation of such property. Indeed, I am not prepared to admit that in all cases, personal property, not in action, but tangible, and capable of manucaption, is within the purview of the' statute. If a domiciled inhabitant of Ohio sends by rail through Pennsylvania, shipped for New York, a thousand barrels of flour, and dies intestate during its passage through the state, leaving only col*649lateral heirs, is the flour subjected by the act to a five per cent, tax? If a citizen of Mew Jersey crosses the Delaware with his horses and carriage to shop in Philadelphia, and dies before his return leaving a will bequeathing his property to collateral legatees, must a tax be paid to Pennsj'lvania of five per cent, on the value of the carriage and horses? I cannot believe that such was the intention of the law. If thus construed it would lead to the most absurd and unjust results. I think no such construction has ever been given to it. Yet the cases put are those in which the property has an actual situs within the state. In the case I have in hand, there was no actual situs apart from the legal situs with the owner.
The act contains another definition of the subject it intended to tax, which is very significant. The subject is not generally “estates” being -within the commonwealth, but estates being within the commonwealth “passing” to collateral heirs or legatees, “either by will, or under the intestate laws thereof.” Estates not passing by will or under the intestate laws of the state, or by deed or grant intended to take effect after the death of the decedent, are not1 embraced within the statute. This is very clear, and it is equally clear that no estate of Mr. Hutchinson passed at his death under the intestate laws of Pennsylvania or by virtue of any deed or grant he made, intended to take effect after his death. Nor did the estate pass by any will known to the laws of Pennsylvania. The transmission to collaterals was effected by a New Jersey will, never proved, or administered in Pennsylvania. It is no more to be admitted that the act speaks of foreign wills than it is that it speaks of foreign executors and administrators. Devolution under the intestate laws of the state, or under wills authorized by the state, were, in my opinion, alone intended.
For these reasons I conclude that the-statute of 1826 has no reference to such estates or property as passed to these defendants for distribution under the will of their testator, and which is now claimed was taxable. And I think Com. v. Smith, 5 Barr [5 Pa. St.] 142, if carefully examined, will be found not necessarily inconsistent with this conclusion, whatever may be said of some of the observations of the judge who delivered the opinion. That was a case of testacy. The testator, after having been domiciled in Philadelphia, acquired a domicil in France, where he died. By his will, after describing himself as of Philadelphia, he appointed his brother of that city the executor, and bequeathed a legacy to a subject of France. The property of the testator consisted of a bond secured by mortgage upon Philadelphia property, together with bills and notes of persons residing there, and stocks of Pennsylvania and New Jersey corporations. The will was proved in Philadelphia where the administration of the estate was to be settled. The court held that all the testator’s estate in Philadelphia at the time of his decease was subject to • the collateral inheritance tax. but for what reasons is not verj-el early stated. I' do not understand the decision to have rested solely on the ground, that the bonds and stocks were an estate being within the commonwealth. It seems rather to have rested on the fact that the will was proved and administered in the state. Thus the judge said: “It is the amount of the estate being within the commonwealth, passing either by will or descent, that the act makes subject to the collateral tax, and the domicil has nothing to do with the question. If it is an intestate estate, and administration is granted in Pennsylvania, to enable the administrator to collect the assets, the administrator pays the tax out of the aggregate of the estate. If a will be proved and administered in Pennsylvania, the executor deducts the collateral inheritance tax from the devices, unless the will directs otherwise.” Thus it appears the place of administration and authority for it were considered important. Concede that the case is authority for all it decided. The present case differs materially in its facts. Here there was no administration in the state, no letters testamentary, and no ancillarj- administration, and no personal representatives amenable to the law. So in Re Alexander’s Estate, 4 Pa. Law J. 448, in the orphans’ court of Philadelphia, all that was decided was, that countj' stock and Pennsylvania state stock, belonging to a decedent domiciled at his death in London, is subject to the collateral inheritance tax, where there has been a new administration in the state. It was because the aid of the state laws had been invoked, and there had been an election to consider the fund as being within the commonwealth. Such is not the present case.
I shall therefore decree in favor of the complainants, and in accordance with the third prayer of the bill.
Let a decree be prepared.