Fisher v. Brucker

• Decision Date: 20 June 1930
• Docket Number: No. 4013.,4013.
• Citation: 41 F.2d 774
• Parties: FISHER et al. v. BRUCKER et al.
• Court: U.S. District Court — Western District of Michigan

41 F.2d 774 (1930)

FISHER et al. v. BRUCKER et al.

No. 4013.

District Court, E. D. Michigan, S. D.

June 20, 1930.

Beaumont, Smith & Harris, of Detroit, Mich., for plaintiffs.

Wilber M. Brucker, Atty. Gen., and Emerson R. Boyles, Deputy Atty. Gen., for defendants.

Before DENISON, Circuit Judge, and TUTTLE and SIMONS, District Judges.

TUTTLE, District Judge.

This suit, in which the jurisdiction of the court is properly invoked on the grounds both of diversity of citizenship and the presence of a federal question, involves the construction and constitutionality of the Michigan Inheritance Tax Statute, and is now before this court, constituted and sitting pursuant to the provisions of section 380 of title 28 of the United States Code (section 266 of the Judicial Code), on an application for an interlocutory injunction to restrain the enforcement of such statute on the ground of its unconstitutionality, if construed according to the contentions of the defendants. The plaintiffs are Marion H. Fisher, a citizen and resident of New York, and the Union Trust Company of Cleveland, an Ohio corporation, executors and trustees under the will of James W. Packard, deceased; and the defendants are the Attorney General and the auditor general of Michigan and the Union Trust Company of Detroit (the transfer agent of the Packard Motor Company, hereinafter mentioned), a Michigan corporation, all citizens and residents of Michigan. The material facts are not in dispute, the only contested questions being questions of law.

James W. Packard (hereinafter called the testator) died in the state of New York, while a resident of such state, on March 20, 1928. His will was duly admitted to probate on March 29, 1928, by the Surrogate's Court in that state, which also appointed the plaintiffs as executors under said will. At the time of his death, the testator was not engaged in any business in Michigan and owned no property of any kind within that state, unless his shares of corporate stock hereinafter mentioned, the taxability of whose testamentary transfer is here involved, should be held to have had a situs, for purposes of taxation, in said state, as is asserted by the defendants and denied by the plaintiffs. This stock consisted of 80,000 shares of the capital stock of said Packard Motor Company, a corporation organized and doing business under the laws of Michigan. The certificates evidencing said shares of stock were, at the time of the death of the testator, in his actual possession in the state of New York, where he then had his domicile. By the terms of said will, the testator bequeathed said stock to the plaintiffs as trustees for certain purposes and beneficiaries therein specified. Under the inheritance tax laws of New York, a tax was imposed upon this testamentary transfer of said stock, which tax has been paid by the plaintiffs.

The defendants having asserted the claim of a lien on this stock, to secure payment of the tax claimed by them to be payable, under the Michigan inheritance tax laws, on the aforesaid testamentary transfer thereof, which claim hinders and interferes with the beneficial use and disposal of such stock by the plaintiffs, the latter commenced this suit, seeking to restrain the defendants, temporarily and permanently, from attempting to enforce such claimed lien, from hindering the transfer of said stock, and from attempting to enforce against the plaintiffs, with respect to such stock or the transfer thereof, any of the penalties or other provisions of the Michigan inheritance tax laws, such relief being sought on the grounds that such laws, properly construed, do not impose such a tax, and that, if construed as imposing said tax, they abridge the privileges and immunities of the plaintiffs as citizens of the United States, deprive them of property without due process of law, and deny them the equal protection of the laws, and are therefore in conflict with the Fourteenth Amendment to the United States Constitution and void. Whether any of these contentions of the plaintiffs are correct, as applied to the circumstances of the present case, is the question presented for consideration.

The applicable provisions of the Michigan Inheritance Tax Statute (Act No. 188 of the Michigan Public Acts of 1899), in effect at the time of the death of the testator, March 20, 1928, and material here, were section 1 (section 14524 of the Michigan Compiled Laws of 1915), as amended by Act No. 257 of the Michigan Public Acts of 1923, and section 18 (section 14541 of the Michigan Compiled Laws of 1915), as amended by Act No. 111 of the Michigan Public Acts of 1925.

Section 1 of the statute, just cited, as so amended, then provided as follows:

"After the passage of this act a tax shall be and is hereby imposed upon the transfer of any property, real or personal, of the value of one hundred dollars or over, or of any interest therein or income therefrom, in trust or otherwise, to persons or corporations, not exempt by law in this state from taxation on real or personal property in the following cases:

"First, When the transfer is by will or by the intestate laws of this state from any person dying seized or possessed of the property while a resident of this state;

"Second, When the transfer is by will or intestate law of property within the state, and the decedent was a non-resident of the state at the time of his death."

Section 18, just mentioned, as so amended, included a provision that: "Whenever any non-resident shall die leaving property or any interest therein, in this state which has not been duly administered under the laws of this state and it shall be necessary to have the question of the taxation of the transfer thereof determined, such question may be presented and determined upon petition to be filed by the attorney general in any probate court of this state."

After the death of the testator both of the sections of the statute just quoted were amended by the Michigan Legislature, by Act No. 231 of the Public Acts of 1929, approved May 21, 1929, and taking immediate effect. Section 1 was so amended by the addition thereto of the following proviso:

"Provided, however, That no tax shall be imposed in respect of personal property (except tangible personal property having an actual situs in this state), if

"(a) The transferor at the time of the transfer was a resident of a state or territory of the United States, or of any foreign country, which at the time of the transfer did not impose a transfer tax or death tax of any character in respect of personal property of residents of this state (except tangible personal property having an actual situs in such state or territory or foreign country), or

"(b) If the laws of the state, territory or country of residence of the transferor at the time of the transfer contained a reciprocal exemption provision under which non-residents were exempted from transfer taxes or death taxes of every character in respect of personal property (except tangible personal property having an actual situs therein), provided the state, territory or country of residence of such non-residents allowed a similar exemption to residents of the state, territory or country of residence of such transferor. * * * For the purposes of this section, the term `tangible personal property' shall be construed to exclude all property commonly classed as intangible personal property, such as money, deposits in banks, mortgages, debts, receivables, shares of stock, bonds, notes, credits, evidences of an interest in property, evidences of debt and like incorporeal personal property."

At the same time, and by the same amendatory act, section 18 of the Inheritance Tax Statute was amended by the insertion therein of the following provision: "No proceedings in probate court shall be required and no inheritance tax shall hereafter be fixed and determined or collected, upon the estate of a non-resident decedent, or on the beneficiaries thereof, if such estate does not include any tangible assets, real or personal, located in the state of Michigan, and if at the time of the death of such non-resident decedent, whether occurring before or after the enactment of this section as amended, the laws of the state of his domicile contained a provision granting exemption from transfer or death taxes on intangible personal property owned by non-residents of that state, either absolutely or on the basis of reciprocity, (as defined in section one of this act); and in all such cases the attorney general and the auditor...