Bugbee v. Roebling

• Decision Date: 21 June 1920
• Parties: BUGBEE, Comptroller v. ROEBLING et al.
• Court: New Jersey Supreme Court

111 A. 29

BUGBEE, Comptroller

v. ROEBLING et al.

Court of Errors and Appeals of New Jersey.

June 21, 1920.

(Syllabus by the Court.)

Appeal from Supreme Court.

Proceedings between Newton A. K. Bugbee, Comptroller, and Karl G. Roebling and another, executors, relative to the determination of a transfer tax. Judgment for the latter, and the former appeals. Affirmed.

John R. Hardin, of Newark, for appellant.

Scott Scammell and Charles De F. Besore, both of Trenton (Herbert Noble, of New York City, on the brief), for respondents.

SWAYZE, J. The question in this case is somewhat narrower than those dealt with by the learned vice ordinary and ably discussed by counsel. No question arises as to priority of the lien for taxes between the federal inheritance tax and the state transfer tax. The question is simply the proper construction of the New Jersey statute as amended in 1914 (P. L. 267). The state contends that the clear market value on which the rate is to be calculated is the clear market value of the whole estate; the executors that it is the clear market value of what passes to the beneficiaries, subject to the statutory exemptions. It must be conceded that if the contention of the state is correct, the beneficiaries are compelled to pay as tax the statutory percentage on the value of assets that are subject to the lien of the federal government which is paramount to any claim of the beneficiaries. In other words, as argued by counsel, the state tax to that extent is a tax upon a tax. The difficulty cannot be avoided by treating the federal tax as an estate tax and the state tax as a succession tax. Disguise the situation as we may by the use of different names, we cannot avoid the fact, which must be painfully real to the legatees, that the same property bears a double burden. If each tax were 50 per cent. it would not help the legatees to be told that one tax was on the estate and the other on the succession; the estate and the succession would both be deprived of beneficial value to the legatees.

In this as in all other cases of statutory construction, we start with the fundamental assumption that the Legislature means to be just. It needs no argument to prove the injustice of double taxation. The Legislature certainly had no such result in mind when the act of 1909 (P. L. p. 325) or the amendment of 1914 was passed. At those times there was no federal inheritance tax. It is true, therefore, that the injustice, if there be injustice, is due to the subsequent enactment of the act of Congress, and equally true that the act of Congress is the act of a distinct sovereignty. As to the national government the state tax is no tax at all; as to the state government, the federal tax is no tax at all. Blackstone v. Miller, 188 U. S. 189, 23 Sup. Ct. 277, 47 L. Ed. 439. The injustice of the double taxation would result from the double allegiance due from citizens to the two different governments under which we live. This double allegiance was as well known to the members of the Legislature as it was to other citizens and the possibility of a federal inheritance tax must have been within their contemplation. Such taxes had, only 10 years prior to the present act, been imposed by Congress to meet the expenses of the Spanish War. We must assume that the Legislature not only desired to enact a just statute which should be just for the time being, but also a statute which could not be made an aid to injustice to citizens of New Jersey at the will of another sovereign, though that sovereign were the United States. Examining the act with these considerations in mind, we have no difficulty in holding that the Legislature used language to secure a just result. If we stopped with the first paragraph of section 1, we should indeed have difficulty. That imposes a tax upon the transfer of any property of the value of $500 or over to persons or corporations in certain enumerated cases. We had already decided that the Legislature meant by the act of 1909 to reach all transfers from a decedent to his successors, including the transfer to an executor or administrator of a nonresident decedent of property having its situs in New Jersey. This right of the executor or administrator to succeed to New Jersey assets was the creature of our law, and came therefore within the well-established right of the state to Impose conditions. As we said in Carr v. Edwards, 84 N. J. Law, 007, 87 Atl. 132, the transfer tax on the succession of the executor or administrator was necessary to make sure that the rate of taxation in case of nonresidents should equal the rate imposed in the case of resident decedents, since in the former case legacies were not taxable as such because created by foregin law. Neilson v. Russell, 76 N. J. Law, 655, 71 Atl. 286, 19 L. R. A. (N. S.) 887, 131 Am. St. Rep. 675. Other provisions were inserted to prevent the rate incase of nonresidents exceeding the rate in the case of residents. Carr v. Edwards, supra, 84 N. J. Law, at pages 669, 670, 87 Atl. 132. The Legislature was striving to be just and treat resident and nonresident alike. For the same purpose it provided that all taxes imposed by the act should be at the rate of 5 per centum upon the "clear market value of such property." This must mean the clear market value of the transfer to the executor or administrator. It does not mean the clear market value of the assets free and clear of all liens; it means the clear market value of the transfer in the condition in which it comes to the executor or administrator. Prior to the act of Congress, the transfer was not burdened with a federal lien; afterwards it was. No one could properly say that the clear market value of the transfer to the executor the day before the act of Congress was the same as the clear market value of the same assets transferred the day after the act subject to the lien of the federal tax. The property comes to the executor or administrator already burdened with the federal lien. The title of the executor accrues at the decedent's death; the title of the administrator dates only from the grant of his letters (1 Williams on Executors, 629), even though by a fiction it relates back to the time of death. In either case the Hen of the federal tax is already fixed. Mr. Justice White, speaking of the act of 1898, said in Knowiton v. Moore, 178 U. S. 41, at page 49, 20 Sup. Ct. 747, 751 (44 L. Ed. 969):.

"What it taxes is not the interest to which some person succeeds on a death, but the interest which ceased by reason of the death."

The tax becomes a Hen at that instant. We need not indulge in metaphysical niceties as to whether the cessation of the decedent's interest by death is anterior to the title acquired by the executor. It would be more natural to say that for this purpose a perceptible time elapses as it necessarily elapses in the case of an administrator; it is, however, quite enough to say that the two events are simultaneous, and that the executor never has or can have a title free of the federal tax. The result is that to ascertain the clear market value of the taxable...