178 U.S. 41 (1900), 387, Knowlton v. Moore

Court:United States Supreme Court
Party Name:Knowlton v. Moore[1]
Case Date:May 14, 1900
Citation:178 U.S. 41, 20 S.Ct. 747, 44 L.Ed. 969
Docket Nº:No. 387
 
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Page 41

178 U.S. 41 (1900)

20 S.Ct. 747, 44 L.Ed. 969

Knowlton

v.

Moore
1

No. 387

United States Supreme Court

May 14, 1900

        Argued December 6-7, 1899

        ERROR TO THE CIRCUIT COURT OF THE UNITED

        STATES FOR THE EASTERN DISTRICT OF NEW YORK

        Syllabus

        The plaintiffs in error were the executors of the will of Edwin F. Knowlton, of Brooklyn, New York. The defendant in error was the United States Collector of Internal Revenue for the First Collection District for the New York. Mr. Knowlton died at Brooklyn in October, 1898, and his will was duly proved. Under the portion of the Act of Congress of June 13, 1898, which is printed at length in a note to the opinion of the Court in this case, the United States Collector of Internal Revenue demanded of the executors a return showing the amount of the personal estate of the deceased and the legatees and distributees thereof. This return the executors made under protest, asserting that the Act of June 13 was unconstitutional. This return showed that the personal estate amounted to over two and a half millions of dollars, and that there were several legacies, ranging from under $10,000 each to over $1,500,000. The collector levied the tax on the legacies and distributive shares, but, for the purpose of fixing the rate of the tax, considered the whole of the personal estate of the deceased as fixing the rate for each, and not the amount coming to each individual legatee under the will. As the rates under the statute were progressive from a low rate on legacies amounting to $10,000 to a high rate on those exceeding $1,000,000, this decision greatly increased the aggregate amount of the taxation. The executors protested on the grounds (1) that the provisions of the act were unconstitutional, (2) that legacies amounting to less than $10,000, were not subject to any tax or duty, (3) that a legacy of $100,000, taxed at the rate of $2.25 per $100, was only subject to the rate of $1.12 1/2. Demand having been made by the collector for payment, payment was made under protest, and, after the Commissioner of Internal Revenue had refused to refund any of it, the executors commenced suit to recover the amount so paid. The circuit court sustained a demurrer upon the ground that no cause of action was alleged, and dismissed the suit, which was then brought here by writ of error. Held:

        (1) That the statute clearly imposes the duty on the particular legacies or distributive shares, and not on the whole personal estate

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        (2) That it makes the rate of the tax depend upon the character of the links connecting those taking with the deceased, being primarily determined by the classifications, and progressively increased according to the amount of the legacies or shares.

        (3) That the court below erred in denying all relief, and that it should have held the plaintiffs entitled to recover so much of the tax as resulted from taxing legacies not exceeding ten thousand dollars, and from increasing the tax rate with reference to the whole amount of the personal estate of the deceased from which the legacies or distributive shares were derived.

        Death duties were established by the Roman and ancient law, and, by the modern laws of France, Germany, and other continental countries, England and her colonies, and an examination of all shows that tax laws of this nature rest, in their essence, upon the principle that death is the generating source from which the particular taxing power takes its being, and that it is the power to transmit or the transmission from the dead to the living on which such taxes are more immediately vested.

        When a particular construction of a statute will occasion great inconvenience or produce inequality and injustice, that view is not to be favored if another and more reasonable interpretation is present in the statute.

        The provision in Section 8 of Article I of the Constitution that "all duties, imports and excises shall be uniform throughout the United States" refers purely to a geographical uniformity, and is synonymous with the expression "to operate generally throughout the United States."

        The statute considered in this case embraces the District of Columbia.

        The case is stated in the opinion of the Court.

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        WHITE, J., lead opinion

        MR. JUSTICE WHITE delivered the opinion of the Court.

        The Act of Congress of June, 1898, which is usually spoken of as the War Revenue Act (30 Stat. 448, c. 448), imposes various stamp duties and other taxes. Sections 29 and 30 of the statute, which are therein prefaced by the heading "Legacies and Distributive Shares of Personal Property," provide for the assessment and collection of the particular taxes which are described in the sections in question. To determine the issues which arise on this record, it is necessary to decide whether the taxes imposed are void because repugnant to the Constitution of the United States, and, if they be valid, to ascertain and define their true import.

        The controversy was thus engendered: Edwin F. Knowlton died in October, 1898, in the Borough of Brooklyn, State of New York, where he was domiciled. His will was probated, and the executors named therein were duly qualified. As a preliminary to the assessment of the taxes imposed by the provisions of the statute, the collector of internal revenue demanded of the executors that they make a return showing the amount of the personal estate of the deceased and disclosing the legatees and distributees thereof. The executors, asserting that they were not obliged to make the return because of the unconstitutionality of sections 29 and 30 of the statute, nevertheless complied under protest. The report disclosed that the personal estate was appraised at $2,624,029.63, and afforded full information as to those entitled to take the same. The amount of the tax assessed was the sum of $42,084.67. This was reached according to the computation shown in the table which is printed on the following page.

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        It is apparent from the table that the collector, whilst levying the tax on the legacies and distributive shares, or the right to receive the same, yet, for the purpose of fixing the rate of the tax, took into view the whole of the personal estate of the deceased. That is, whilst the tax was laid upon the legacies, the rate thereof was fixed by a separate and distinct right or thing, the entire personal estate of the deceased. The executors protested against the entire tax, and also as to the method by which it was assessed. The grounds of the protest were as follows:

1. The provisions of the act of Congress under which it is sought to impose, assess, and collect the said tax or duty are in

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violation of the provisions of Article I, Sections 8 and 9, of the Constitution of the United States, and are therefore void.

2. The legacies to George W. Knowlton, Charlotte A. Batchelor, the Unitarian Church of West Upton, Mass., each amount to less than $10,000, and are not subject to any tax or duty under the said provisions of the said act of Congress even if such provisions be not unconstitutional and void.

[20 S.Ct. 749]

3. The legacy to Eben J. Knowlton, a brother of the testator, amounts to only $100,000, and under the said provisions of the said act, should be taxed at the rate of $1.12 1/2 per $100, and not at the rate of $2.25 per $100, even if said act be not unconstitutional and void.

        Demand having been made by the collector for the payment, accompanied with a threat to distrain in case of refusal, the tax was paid under written protest which repeated the grounds above stated. In the receipt given, it was recited that the tax had been paid under protest to avoid the use of compulsory process. A petition for refunding was subsequently presented by the executors in which the grounds of the protest were reiterated. The commissioner of internal revenue having made an adverse ruling, the present suit was commenced to recover the amount paid. The facts as to the assessment and collection of the taxes were averred, and the refusal of the internal revenue commissioner to refund was alleged. The petition for refunding was made a part of the pleadings. The right to repayment was based upon the averment that the sections of the statute under authority of which the amount had been assessed and collected were unconstitutional. The circuit court sustained a demurrer on the ground that no cause of action was alleged. The claim was rejected, and the suit was dismissed with costs.

        The questions which arise on this writ of error to review the judgment of the circuit court are fourfold: first, that the taxes should have been refunded because they were direct taxes, and not being apportioned, were hence repugnant to Article I, Section 8, of the Constitution of the United States; second, if the taxes were not direct, they were levied on rights created solely by state law, depending for their continued existence on the consent of the several states, a volition which Congress

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has no power to control, and as to which it could not, therefore, exercise its taxing authority; third, if the taxes were not direct, and were not assessed upon objects or rights which were beyond the reach of Congress, nevertheless the taxes were void because they were not uniform throughout the United States, as required by Article I, Section 9, of the Constitution of the United States; fourth, because, although the taxes be held to have been in all respects constitutional, nevertheless they were illegal since, in their assessment, the rate of the tax was determined by the aggregate amount of the personal estate of the deceased, and not by the sum of the legacies or distributive shares or the right to take the...

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