Gelsthorpe v. Furnell

Decision Date15 November 1897
PartiesGELSTHORPE, County Treasurer, v. FURNELL et al.
CourtMontana Supreme Court

20 Mont. 299

GELSTHORPE, County Treasurer,
v.
FURNELL et al.

Supreme Court of Montana.

Nov. 15, 1897.


Appeal from district court, Cascade county; J. B. Leslie, Judge.

Proceeding by W. H. Gelsthorpe, county treasurer, against Della M. Furnell and others, to enforce payment of an inheritance tax. From a judgment sustaining a demurrer to the complaint, plaintiff appeals. Reversed.


M. M. Lyter and C. B. Nolan, Atty. Gen., for appellant.

Wm. T. Pigott, for respondents.


HUNT, J.

The legislature of Montana, by an act approved March 4, 1897, enacted a law establishing a tax on direct and collateral inheritances. The law substantially provides that “all property” which shall pass by will, or by the intestate laws of the state, from any person who may die seised or possessed of the same, shall be, and is, subject to a tax at a fixed rate on every $100 of the clear market value of such property: provided, that an estate valued at a less sum than $7,500 shall not be subject to any such “tax or duty.” It is also provided that the tax shall be levied “upon all estates which have been probated before, and shall be distributed after the passage and taking effect of this act”; and, again, that the act should apply to all estates remaining undistributed at the time the law took effect, and that in such estates the tax should be determined and collected as in other cases. The act went into effect March 4, 1897. Sess. Laws 1897, p. 83. Matthew Furnell, a citizen of Cascade county, Mont., died testate May 6, 1896, nearly one year before the passage of this law; leaving his property to the respondent, his wife, in her own right, and as trustee for his minor children. The value of the estate greatly exceeds $7,500. The will was duly proven in 1896, and administration was had. On July 19, 1897, after the inheritance tax law was in force, the district court ordered a distribution of the estate and the discharge of the executors. Before this order was made, however, the county authorities took steps to collect the inheritance taxes, and thereupon it was agreed between the respective counsel for the interested parties that the order of distribution and discharge should in no way prejudice or delay the state in the collection of the inheritance taxes, if found to be justly due. This proceeding was then instituted to enforce the payment of the taxes. The district court held that, as applied to the estates of persons who might die after the law took effect, the statute was constitutional, but that where, as in this case, the decedent died before March 4, 1897, the tax or assessment could not be collected, for as to such case the law was invalid. The learned judge said that the legatees under the will took immediately at the death of the decedent a vested estate, and that, although the beneficiaries under the will were postponed in the matter of present possession and enjoyment, their interest was none the less a vested one, charged only with the burdens imposed by laws existing and in force at the time such interests vested. As the validity of the act affecting successions opening since its enactment, as well as its application to successions already in the course of settlement when the law was passed, is contested, it devolves upon this court to review each of the respondents' principal contentions.

It is urged that the law attempts to impose a tax upon property, as distinguished from the right or privilege of succession; that, if it be held to pay a tax on the right of succession, still it is invalid, because the legislature is limited in its right to tax only such property as is defined by section 17 of article 12 of the state constitution; that, as applied to estates remaining undistributed at the time the act took effect, it disturbs and lessens vested rights, and impairs the obligations of contracts; and that the act is repugnant to the fourteenth amendment to the constitution of the United States, in that it denies to persons within Montana the equal protection of the laws.

The better view, as laid down by the authorities, is that a collateral inheritance or succession tax is a duty or bonus exacted in certain instances by the state upon the right and privilege of taking legacies, inheritances, gifts, and successions passing by will, by intestate laws, or by any deed or instrument, made inter vivos, intended to take effect at or after the death of the grantor. The burden or the tax is not imposed upon the property itself, but upon the privilege of acquiring property by inheritance. In nearly all inheritance tax laws the statutes provide for appraising the property to be inherited, but the object of such valuation is not to tax the property itself. It is to arrive at a measure of price by which the privilege of inheriting can be valued. State v. Hamlin, 86 Me. 495, 30 Atl. 76. In speakingof the inheritance tax law of New York state, Judge Wallace, of the United States circuit court, said: “Such a tax is no more one upon the bonds than an income tax is one upon the property out of which the income is derived, or an exercise tax is one upon the articles manufactured or sold. The bonds are the subject of the appraisal, but the privilege is the subject of the tax. Inasmuch as it is lawful for the state to withhold altogether the privilege of acquiring property within its dominion by will or inheritance, whether the property consists of government bonds or anything else, it is lawful for the legislature to annex any conditions to the privilege which may seem expedient, and do not conflict with the organic law of the state or the constitution or laws of the United States.” Wallace v. Myers, 38 Fed. 184. The courts generally approve of this doctrine. In the early case of Eyre v. Jacob, 14 Grat. 422, the court said that such a tax could not be regarded, in a proper, legal sense, as a tax upon property, but as one “upon the transmission of...

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