Saltonstall v. Saltonstall

• Decision Date: 20 February 1928
• Docket Number: No. 144,144
• Citation: 72 L.Ed. 565,48 S.Ct. 225,276 U.S. 260
• Parties: SALTONSTALL et al. v. SALTONSTALL et al
• Court: U.S. Supreme Court

276 U.S. 260

48 S.Ct. 225

72 L.Ed. 565

SALTONSTALL et al.

v SALTONSTALL et al.

No. 144.

Argued Jan. 5, 6, 1928.

Decided Feb. 20, 1928.

Messrs. Thomas Hunt and Robert H. Holt, both of Boston, Mass., for plaintiffs in error.

[Argument of Counsel from pages 261-264 intentionally omitted] Messrs. Edwin H. Abbot, Jr., and Arthur D. Hill, both of Boston, for defendants in error.

[Argument of Counsel from pages 265-267 intentionally omitted] Mr. Justice STONE delivered the opinion of the Court.

Plaintiffs in error are beneficiaries of a trust created by deed of Peter C. Brooks. After the death of the settlor the trustees, who, with certain Massachusetts tax officials, are defendants in error, filed in the Supreme Judicial Court of Massachusetts a petition for instructions which joined the beneficiaries of the trust and the officials as respondents, and asked a determination that the Massachusetts statutes taxing inheritances did not affect the property passing to the beneficiaries under the trust, or, if applicable, were 'unconstitutional.' The beneficiaries joined in the prayer of the bill and it was opposed by the state officials. The Supreme Judicial Court held the taxing acts applicable and valid. We may disregard the ambiguity of the trustees' contention below that the statutes were 'unconstitutional,' in so far as the state court understood that the Federal Constitution was the basis for the objection and in its opinion sustained the statutes under that instrument. Cissna v. Tennessee, 246 U. S 289, 38 S. Ct. 306, 62 L. Ed. 720; compare Miedreich v. Lauenstein, 232 U. S. 236, 34 S. Ct. 309, 58 L. Ed. 584. To that extent the case is properly here on writ of error. Judicial Code, § 237(a), being 28 USCA § 344 (Comp. St. § 1214).

In brief and argument here plaintiffs in error have stated various constitutional objections to the taxing acts. But as on the record none of them before the Supreme Judicial Court appear to have been based on the Federal Constitution, we consider only the single objection discussed as a federal question by that court in its opinion, viz., that the statutes as applied deprive plaintiffs in error of their property without due process of law because retroactive as to them.

On various dates between 1905 and 1907 Peter C. Brooks by indenture transferred to the trustees, defendants in error, or their predecessors, certain property upon trust, to pay the income to him for life or, at his option, to allow it to accumulate, and upon the death of himself and his wife to pay the income to his children, the plaintiffs in error, without any liability for their debts and without power of alienation or anticipation, with gifts over.

The trust instrument provided that its terms might be changed and the trust terminated in whole or in part by Peter C. Brooks, with the concurrence of one trustee. Before his death, on January 27, 1920, the trust was in fact thrice altered, the last time in 1919 by providing that during the life of Peter C. Brooks the income should be accumulated and added to the principal, so that from that date his interest in the trust was terminated, except for the power with one trustee to alter or terminate it.

At the time of the several transfers there were no Massachusetts statutes imposing an inheritance or transfer tax upon property passing to children, but before the death of Peter C. Brooks the statutes now assailed were enacted. By St. Mass. 1909, c. 527, § 8, printed in the margin,¹ the transfer of property passing to any one on the exercise of a power of appointment or the failure to exercise it is made taxable as though a disposition or transfer of property taxable under the provisions of the statute taxing inheritances. St. Mass. 1907, c. 563.

St. Mass. 1916, c. 268, § 1, amending St. Mass. 1907, c. 563, § 1, as amended, imposes a tax on all property passing by will, intestate succession, or gift 'made or intended to take effect in possession or enjoyment after the death of the grantor or donor.' By section 4 of this act the tax is made applicable only to property or interests therein 'passing or accruing upon the death of persons who die subsequently to the passage hereof.'

In this and earlier cases the Massachusetts court has held that the tax authorized by these statutes is a tax upon 'succession' which includes the 'privilege enjoyed by the beneficiary of succeeding to the possession and enjoyment of property.' See Attorney General v. Stone, 209 Mass. 186, 190, 95 N. E. 395; Minot v. Winthrop, 162 Mass. 113, 124, 38 N. E. 512, 26 L. R. A. 259; Crocker v. Shaw, 174 Mass. 266, 267, 54 N. E. 549. It has held also that the provisions of the trust instrument for change or termination of the trust by Peter C. Brooks with the consent of one trustee created a power of appointment within the meaning of St. Mass. 1909, c. 527, § 8, and that the nonexercise of the reserved power in Brooks' lifetime as well as the fact that the interest of the beneficiaries took effect 'in possession or enjoyment' after his death within the meaning of St. Mass. 1916, c. 268, § 1, required the imposition of the tax as of the date of his death upon the entire interest in the trust passing to the plaintiffs in error. This construction of the statutes by the state court we accept, Stebbins v. Riley, 268 U. S. 137, 45 S. Ct. 424, 69 L. Ed. 884, 44 A. L. R. 1454; Chanler v. Kelsey, 205 U. S. 466, 477, 27 S. Ct. 550, 51 L. Ed. 882, as we do its construction of the trust deed. Nickel v. Cole, 256 U. S. 222, 225, 41 S. Ct. 467, 65 L. Ed. 900; Moffitt v. Kelly, 218 U. S. 400, 31 S. Ct. 79, 54 L. Ed. 1086, 30 L. R. A. (N. S.) 1179.

The plaintiffs in error contend that as interpreted the statutes deprive them of property without due process because they are taxed on an interest they had already received before the enactment of the taxing acts. It is said that they had vested interests or remainders subject only to being divested by the exercise of the reserved...