Beals v. State

• Decision Date: 22 May 1909
• Citation: 121 N.W. 347,139 Wis. 544
• Parties: BEALS v. STATE.
• Court: Wisconsin Supreme Court

139 Wis. 544

121 N.W. 347

BEALS

v.STATE.

Supreme Court of Wisconsin.

May 22, 1909.

Action in the Supreme Court by Abbie E. Beals against the State of Wisconsin. On demurrer to the complaint. Action dismissed.

Timlin, J., dissenting.Winkler, Flanders, Bottum & Fawsett, for plaintiff.

F. L. Gilbert, Atty. Gen., and Russell Jackson, Deputy Atty. Gen., for the State.

WINSLOW, C. J.

The plaintiff, having paid a large inheritance tax under protest, presented her claim to the Legislature for a refund of the tax on the ground that the inheritance tax law was unconstitutional. The claim was rejected, and she now brings action in this court under the terms of section 3200, Wis. St. 1898, to recover the tax so paid, and the state demurs to her complaint. At the threshold of the case the state claims that the order of the county court of Milwaukee county, fixing the amount of the tax and assessing the same against the estate, is res adjudicata on the question, and that the plaintiff should have appealed directly therefrom, and hence cannot prosecute this independent action. We do not regard this point as well taken. The inheritance tax law is a law providing for the levying of a state tax; for very palpable reasons of convenience some of the matters concerning the administration of the law are committed to the county court in which the estate is being administered. Among these matters are the determining of the value of the estate and the assessment of the tax thereon. While these matters are closely connected with the settlement of the estate and the court acts upon them in a judicial manner, and thus it may properly be said, as held in the Nunnemacher Case, 129 Wis. 190, 108 N. W. 627, 9 L. R. A. (N. S.) 121, that the acts are so far judicial in their nature that their performance may properly be committed to the county court, still it seems plain that both of these acts are really but steps in the enforcement of a tax law of the state rather than judgments in judicial controversies. Hence we conclude that the preliminary objection must be overruled.

Upon the merits of the case the only question is as to the constitutionality of the inheritance tax law (chapter 44, p. 65, Laws 1903, as amended by chapter 249, p. 403, Laws 1903). This question was presented to the court in very full and able arguments in the case of Nunnemacher v. State, 129 Wis. 190, 108 N. W. 627, 9 L. R. A. (N. S.) 121. The case was given long and careful consideration in this court, and the present case might perhaps be now decided by simply referring to the Nunnemacher Case and applying the doctrine of stare decisis. However, owing to the fact that several new and interesting arguments are now presented, and in deference to the ability and earnestness of the counsel who have presented the present case for the plaintiff, we have deemed that it was our duty to thoroughly re-examine the question and review the former holding carefully in order to correct the ruling then made, if convinced that it was erroneous. Inheritance taxation was held to be constitutional in the Nunnemacher Case on the ground that it is excise taxation levied on the transfer of property, and not on the property itself, and hence not subject to the rule of uniformity as applied to taxation of property, but subject alone to the general rule of uniformity in legislation, namely, the rule that there must not be unjust discrimination or purely arbitrary classification, or, in other words, that the law must operate alike on all persons similarly situated.

The first argument made in the present case is one not made in the former case, and is, in effect, that, while the law in section 2 provides for the taxation of the transfer of estates not exceeding in value $25,000, it provides in section 3 in effect that the transfer of the first $25,000 in an estate exceeding that sum shall not be taxed, and that only the transfer of the amount exceeding $25,000 shall be subject to taxation. If this be true, the law is manifestly bad under the ruling in the case of Black v. State, 113 Wis. 205, 89 N. W. 522, 90 Am. St. Rep. 853, because it discriminates unjustly between persons in the same situation. The law provides in section 2 that when the property or interest transferred exceeds in value the exemption allowed by the law, but does not exceed in value $25,000, the tax imposed shall be according to a table of rates following, which are called the primary rates, and range from 1 to 5 per cent. according to the nearness of relationship of the beneficiary to the decedent. In section 3 it is provided that, “when the amount of the clear value of such property or interest exceeds $25,000, the rates upon such excess shall be” according to a certain table of rates progressive in their nature as the amount of the property increases. Then follows a table of exemptions applicable to all estates. It is very plain that, if sections 2 and 3 be considered alone, there is a hiatus. By the words used transfers of property not exceeding $25,000 in value are taxed, while no specific provision appears for taxation of the transfer of the first $25,000 of an estate exceeding that sum. Exact construction of the language of the two sections can lead to no other result. There are, however, other provisions of the law which deserve and must receive consideration before a construction so manifestly unintended should be adopted. If, by the express language of other provisions, it conclusively appears that the intent of the Legislature was to tax the first $25,000 (except exemptions) in all estates, great or small, and that the apparent hiatus in sections 2 and 3 is the result merely of an inaccurate and careless use of language, then the court will be justified in construing the law as the Legislature intended it, notwithstanding the lapse in sections 2 and 3. We think the language of other sections of the act actually forbids such a construction of sections 2 and 3 as the plaintiff contends for. It is very significant that section 4, which provides for exemptions, is a general section fixing the exemptions to be allowed in all estates, both great and small, and is intended to cover the whole subject of exemptions. It is manifestly unreasonable to suppose that the Legislature imagined, when they provided this careful and complete code of exemptions, that they had already made an enormous exemption of $25,000 in favor of all beneficiaries who were fortunate enough to receive more than that sum. But the first section of the act is quite conclusive. This section is the section which imposes the tax and enumerates the transfers which come within the law. Leaving out matters immaterial here, it provides that “a tax shall be and is hereby imposed upon any transfer of any property, real, personal, or mixed, or any interest therein * * * in the following cases [here follow five clauses defining the transfers which are to be subject to the tax] the tax so imposed shall be upon the clear market value of such property at the rates hereafter prescribed, and only upon the excess of exemptions hereinafter granted.” No warrant can here be found for leaving out any transfer from the operation of the tax, whether large or small, except only transfers of property thereinafter specifically exempted. The tax is imposed upon any transfer of any property except the exemptions, and this must be held to be controlling. After so sweeping a declaration of the purpose of the law, it would take something more than a technical hiatus in the details of the act to take property out of the provisions of that section which is evidently intended to be the effectual and potent section. This construction makes the law reasonable and constitutional, and relieves the Legislature of any charge of inconsistency or favoritism, and we have no hesitation in adopting it.

Another new argument is made in the present case to this effect: It is said that, because this court held in the Nunnemacher Case that the right to inherit or devise property was a natural right which could not be entirely abrogated by the Legislature, therefore it was a property right, and hence an inheritance tax must logically be held to be a tax upon a property right and subject to the provision that it must be absolutely uniform. It is admitted that the universal current of authority holds that inheritance taxes are not taxes levied upon property, though their amount may be measured by the value of the property involved, but are excise taxes levied upon the transfer of property, or, as it is sometimes said, upon the transaction; but it is said (as the fact is) that the decisions so holding have all been rendered by courts which hold that the right to receive property by inheritance or will is the creation of the Legislature and may be totally abrogated at will, and as this court holds that these rights are natural rights, not subject to abrogation by the Legislature, the principle cannot logically apply. The conclusion does not follow from the premises. Taxes frequently are levied upon transactions or occupations which are matters of inherent and natural right, as well as upon transactions and occupations which are made lawful or possible only by virtue of statutory law. In other words, the Legislature is not limited to the levying of excise taxes upon privileges, transactions, or occupations...