282 U.S. 582 (1930), Coolidge v. Long
|Citation:||282 U.S. 582, 51 S.Ct. 306, 75 L.Ed. 562|
|Party Name:||Coolidge v. Long|
|Case Date:||February 24, 1931|
|Court:||United States Supreme Court|
APPEAL FROM THE PROBATE COURT
OF NORFOLK COUNTY, MASSACHUSETTS
By voluntary deeds of trust, a husband and wife transferred real and personal property, owned by them severally in certain proportions, to trustees, in trust to pay the income in those proportions to the settlors during their joint lives and then the entire income to the survivor of them, and upon the death of the survivor to divide the principal equally among the settlors' five sons, provided that, if any of the sons should predecease the survivor of the settlors, the share of that son should go to those entitled to take his intestate property under the statute of distribution in force at the death of such survivor. The deeds reserved no power of revocation, modification, or termination prior to the death of the survivor of the settlors. After both settlors had died, the state imposed succession taxes upon the remainder interests of the sons, under a statute passed before the deaths of the settlors but after the creation of the trusts (Gen.Laws
Mass. 1921, c. 65, § 1) which provides that all property within the jurisdiction of the state which shall pass by deed, grant or gift (except in cases of bona fide purchase for full consideration in money or money's worth) made or intended to take effect in possession or enjoyment after the death of the grantor, to any person, absolutely or in trust, shall be subject to a tax. The court below decided that the tax was valid as an excise on the succession.
1. The trust deeds are contracts within the meaning of the Federal Constitution. The state cannot by subsequent legislation, alter their effect or impair or destroy rights that had vested under them. P. 595.
2. Under the due process clause of the Fourteenth Amendment, a gift cannot be taxed by a state under a law that was enacted after the gift was fully consummated. P. 595.
3. When the jurisdiction of this Court is invoked to determine whether a state law impairs the rights of the litigant under a prior contract, or whether the state is depriving him of his property without due process of law and the question turns upon the existence and terms of a contract, this Court is bound to determine for itself whether there is a contract, and to ascertain its true meaning and effect. P. 597.
4. The succession of each son was complete when the trust deeds took effect, and the enforcement of the statute imposing the excise would be repugnant to the contract clause of the Constitution and the due process clause of the Fourteenth Amendment. Pp. 597-605.
By the deed of each grantor, one fifth of the remainder was vested in each of the sons, subject to be divested only by his death before the death of the survivor of the settlors. It was a grant in praesenti, to be possessed and enjoyed by the sons upon the death of such survivor. The provision for the payment of income to the settlors during their lives did not operate to postpone the vesting in the sons of the right of possession or enjoyment. The deaths of the settlors were not a generating source of any right in the remaindermen; nothing moved from them, or either of them, or from their estates, when either of them died. The succession, when the time came, did not depend upon any permission or grant of the state. While the sons, if occasion should arise, might by suit require the trustees to account, the property was never in the custody of the law or of any court, and the state was powerless to condition the possession or enjoyment of what had been conveyed to them by the deeds. The fact that each son was liable to be divested of the
reminder by his own death before that of the survivor of the grantors, does not render the succession incomplete. The vesting of actual possession and enjoyment depended upon al event that must inevitably happen by the efflux of time, and nothing but his failure to survive the settlors could prevent it. Succession is effected as completely by a transfer of a life estate to one and remainder over to another, as by a transfer in fee. No Act of Congress has been held by this Court to impose a tax upon possession and enjoyment, the right to which had fully vested prior to the enactment, nor has this Court sustained any state law imposing an excise upon mere entry into possession and enjoyment of property where the right to such possession and enjoyment upon the happening of a specified event had fully vested before the enactment.
28 Mass. 443, 167 N.E. 757, reversed.
Appeals from final decrees sustaining inheritance taxes. The decrees were entered by the Probate Court upon rescripts from the Supreme Judicial Court.
BUTLER, J., lead opinion
MR. JUSTICE BUTLER delivered the opinion of the Court.
Each of these appeals brings here for review a decree of the probate court of Norfolk county, Massachusetts, entered in accordance with a rescript from the Supreme Judicial Court of the Commonwealth. 208 Mass. 443, 167 N.E. 757, 758. In each, appellants presented to the probate court an application for the abatement of an inheritance tax assessed under § 1, c. 65, General Laws. There was drawn in question the validity of the statute on the ground of its being repugnant to the contract clause of the federal Constitution and the due process and equal protection clauses of the Fourteenth Amendment. The probate court reserved for the consideration of the Supreme Judicial Court all questions of law and the matter of what decrees should be entered. That court held the statute valid, and sustained the taxes.
The opinion states the facts as follows:
The petitioners [appellants here] are trustees under a deed and declaration of trust executed on July 29, 1907, by J. Randolph Coolidge and Julia Coolidge and the petitioners.
By that deed, a large amount of real and personal estate was transferred to the trustees by the settlors voluntarily, and not as a bona fide purchase for full consideration in money or in money's worth. The trustees were given extensive powers of management, investment, and reinvestment with the right to determine finally what receipts and payments should be credited to income or principal. The part of the trust fund furnished by J. Randolph Coolidge was four-sevenths, and the part furnished by Julia Coolidge was three-sevenths.
By the terms of the trust, the income was to be paid in these proportions to each of the settlors during their joint lives and then the entire income to the survivor, and,
upon the death of the survivor, the principal was to be [51 S.Ct. 308] divided equally among their five sons, provided that, if any of the sons should predecease the survivor of the settlors, his share should go to those entitled to take his intestate property under the statute of distributions in force at the death of such survivor, with a further provision to the effect that in no event should a widow of such deceased son take as distributee more than half of such share.
There was in the declaration of trust no power of revocation or modification or termination prior to the death of the survivor of the settlors. Coolidge v. Loring, 235 Mass. 220.
By instrument executed on April 6, 1917, the settlors assigned their interest in the trust to the five sons, all of whom eventually survived the termination of the trust.
Julia Coolidge died in January, 1921, and J. Randolph Coolidge on November 10, 1925, both being residents of this Commonwealth.
The defendant determined that the petitioners were subject to excise taxes under G.L. c. 65, § 1, as amended, upon the four-sevenths and upon the three-sevenths of the trust estate furnished respectively by each settlor as of November 10, 1925.
When the declaration of trust was executed, no statute was in effect under which the succession to the trust property could have been subjected to this tax. The statutes then in force provided for the imposition of an excise only where the succession was to collateral relatives and strangers. The first relevant statute was approved June 27, 1907 (St.1907, c. 563), and took effect September 1, about five weeks after the date of the declaration of the trust. It did not apply to property passing by deed, grant, sale, or gift made prior to its effective date. But, by § 3, c. 678, St.1912, it was made applicable
to all property passing by deed, grant or gift . . . made or intended to
take effect in possession or enjoyment after the death of the grantor or donor if such death occurs subsequent to the passage hereof.
And see § 1, c. 563, St.1914.
Chapter 65, General Laws, effective since January 1, 1921, provides:
Section 1. All property within the jurisdiction of the commonwealth . . . which shall pass by . . . deed, grant or gift, except in cases of a bona fide purchase for full consideration in money or money's worth . . . made or intended to take effect in possession or enjoyment after his [grantor's] death . . . to any person, absolutely or in trust . . . shall be subject to a tax. . . .
* * * *
Section 36. This chapter shall apply only to property or interests therein passing or accruing upon the death of persons dying on or after May fourth, nineteen hundred and twenty. . . .
The Supreme Judicial Court sustained the exaction as an excise. It held that possession or enjoyment upon the death of the survivor of the settlors was a taxable commodity under the statute enacted after the creation of the trust.
The trust deeds are contracts within the meaning of the contract clause of the federal Constitution. They were fully executed before the taking effect of the state law under...
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