Coolidge v. Long 1930

• Citation: 51 S.Ct. 306,75 L.Ed. 562,282 U.S. 582
• Decision Date: 24 February 1931
• Docket Number: Nos. 33,34,s. 33
• Parties: COOLIDGE et al. v. LONG, Commissioner of Corporations and Taxation of Massachusetts. Argued Dec. 8-9, 1930
• Court: U.S. Supreme Court

282 U.S. 582

51 S.Ct. 306

75 L.Ed. 562

COOLIDGE et al.

v LONG, Commissioner of Corporations and Taxation of Massachusetts.

Nos. 33, 34.

Argued Dec. 8-9, 1930.

Decided Feb. 24, 1931.

[Syllabus from pages 582-584 intentionally omitted] Messrs. Robert G. Dodge and Harold S. Davis, both of Boston, Mass., for appellants.

[Argument of Counsel from pages 584-589 intentionally omitted] Messrs. James S. Eastham, of Lawrence, Mass., and Joseph E. Warner, of Boston, Mass., for appellee.

[Argument of Counsel from pages 589-593 intentionally omitted] 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, Mass., entered in accordance with a rescript from the Supreme Judicial Court of the commonwealth. 167 N. E. 757, 758. In each appellants presented to the probate court an application for the abatement of an inheritance tax assessed under section 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 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 (126 N. E. 276).

'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 excuted, on 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 section 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 section 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 which the excise is claimed. The commonwealth was without authority by subsequent legislation, whether enacted under the guise of its power to tax or otherwise, to alter their effect or to impair or destroy rights which had vested under them. Appleby v. City of New York, 271 U. S. 364, 46 S. Ct. 569, 70 L. Ed. 992; Fletcher v. Peck, 6 Cranch, 87, 136, 3 L. Ed. 162; Dartmouth College v. Woodward, 4 Wheat. 518, 624, 656, 4 L. Ed. 629; Farrington v. Tennessee, 95 U. S. 679, 683, 24 L. Ed. 558; Carondelet Canal Co. v. Louisiana, 233 U. S. 362, 373, 378, 34 S. Ct. 627, 58 L. Ed. 1001.

This Court has held that the Revenue Act of 1924, §§ 319-324 (26 USCA §§ 1131 note to 1133 note, 1134, 1135 note, 1136 note), in so far as it undertook to impose a tax on gifts fully consummated before its provisions came before Congress (Blodgett v. Holden, 275 U. S. 142, 48 S. Ct. 105, 72 L. Ed. 206) or before its passage (Untermyer v. Anderson, 276 U. S. 440, 48 S. Ct. 353, 72 L. Ed. 645), was arbitrary and repugnant to the due process clause of the Fifth Amendment. In Nichols v. Coolidge, 274 U. S. 531, 47 S. Ct. 710, 71 L. Ed. 1184, 52 A. L. R. 1081, we considered the trust deed of Mrs. Coolidge that is now before us. The question in that case was whether the value of the property so conveyed prior to the enactment should be included in her estate for the purpose of ascertaining the federal estate tax thereon. We said (page 542 of 274 U. S., 47 S. Ct. 710, 714):

'This court has recognized that a statute purporting to tax may be so arbitrary and capricious as to amount to confiscation and offend the Fifth Amendment. Brushaber v. Union Pacific R. R., 240 U. S. 1, 24, 36 S. Ct. 236, 60 L. Ed. 493, L. R. A. 1917D, 414, Ann. Cas. 1917B, 713; Barclay & Co. v. Edwards, 267 U. S. 442, 450, 45 S. Ct. 135, 348, 69 L. Ed. 703. See, also, Knowlton v. Moore, 178 U. S. 41, 77, 20 S. Ct. 747, 44 L. Ed. 969. And we must conclude that section 402(c) of the statute here under consideration, in so far as it requires that there shall be included in the gross estate the value of property transferred by a decedent prior to its passage merely because the conveyance was intended to take effect in possession or enjoyment at or after his death, is arbitrary, capricious and amounts to confiscation.'

See Levy v. Wardell, 258 U. S. 542, 544, 42 S. Ct. 395, 66 L. Ed. 758. The states are similarly restrained by the due process clause of the Fourteenth Amendment.

In its opinion, the state court suggests that the federal estate tax was upon property of the deceased transferred at his death, and that it was levied upon a subject 'quite different from the succession to property by a beneficiary, which is the subject of the present excise.' Undoubtedly the state has power to lay such an excise upon property so passing after the taking effect of the taxing act. The fundamental question here is whether rights had so vested prior to the taking effect of the tax statute that there was thereafter no occasion in respect of which the excise might constitutionally be imposed. The state court held that the succession was not complete until the death of the survivor of the grantors, and that therefore the tax is valid. It is well understood that, 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 in violation of the Fourteenth Amendment, and the question turns upon the existence or 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. That rule is necessary in order that this court may properly enforce these provisions of the Constitution. Railroad Commission v. Eastern Texas R. R., 264 U. S. 79, 86, 44 S. Ct. 247, 68 L. Ed. 569, and cases cited.

By the deed of each grantor one-fifth of the remainder was immediately 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. Blanchard v. Blanchard, 1 Allen (Mass.) 223; Clarke v. Fay, 205 Mass. 228, 91 N. E. 328, 27 L. R. A. (N. S.) 454; McArthur v. Scott, 113 U. S. 340, 379, 5 S. Ct. 652, 28 L. Ed. 1015, and cases cited. And see United States v. Fidelity Trust Co., 222 U. S. 158, 32 S. Ct. 59, 56 L. Ed. 137; Henry v. United States, 251 U. S. 393,...