Hill v. Martin Dorrance v. Same

Decision Date16 December 1935
Docket Number194,Nos. 193,s. 193
Citation80 L.Ed. 293,296 U.S. 393,56 S.Ct. 278
PartiesHILL v. MARTIN, State Tax Commissioner, et al. DORRANCE et al. v. SAME
CourtU.S. Supreme Court

Appeals from the District Court of the United States for the District of New Jersey.

Mr. Wm. A. Schnader, of Philadelphia, Pa., for appellants.

Messrs. Duane E. Minard and Geo. S. Hobart, both of Newark, N.J., for appellee.

Mr. Justice BRANDEIS delivered the opinion of the Court.

These suits were brought, on April 1, 1935, under section 266 of the Judicial Code (28 U.S.C.A. § 380), to enjoin the collection of an inheritance tax in the sum of $12,247,333.52, assessed by New Jersey upon the estate of John T. Dorrance, which was valued at more than $115,000,000. The bills charge that its Transfer Inheritance Tax Act, as construed and applied, violates the full faith and credit clause of the Federal Constitution (art. 4, § 1) and the due process clause of the Fourteenth Amendment. The defendants are the State Tax Commissioner and other New Jersey officials.1 In No. 193, the plaintiff is a daughter of the decedent and a beneficiary under his will. In No. 194, his executors are the plaintiffs. A temporary restraining order issued. An appli- cation was made for an interlocutory injunction; answers were filed; and the case was heard before three judges upon an elaborate record. But the injunction was denied for want of jurisdiction upon the allegations of the bill, because of the prohibition contained in section 265 of the Judicial Code (28 U.S.C.A. § 379).2 Dorrance v. Martin (D.C.) 12 F.Supp. 746. The cases are here on appeal.

The material allegations are substantially the same in the two suits: Dorrance died on September 21, 1930, at his residence in Cinnaminson, Burlington county, N.J., leaving a will in which he named his wife, two brothers, and the Camden Trust Company executors. On October 2, 1930, his will was, upon petition of the executors, admitted to probate in the Orphans' Court of that county; letters testamentary issued; and the executors have administered the estate ever since under the jurisdiction of that court. Their petition for probate, like the will, had recited that Dorrance's domicil was in New Jersey. On April 6, 1931, they filed with the Inheritance Tax Bureau of New Jersey their return as a basis for the assessment of the inheritance tax. The estate consisted almost wholly of bonds, stocks, and other evidence of title to intangible personal property; and these were then, and still are located in New Jersey. On October 17, 1931, the Tax Commissioner, finding, upon evidence presented by the executors, that Dorrance was at the time of his death domiciled in New Jersey, assessed the amount stated as the tax on direct transfers payable under the New Jersey Transfer Inheritance Tax Act of April 20, 1909, c. 228, as amended (4 Comp.St.N.J. 1910, p. 5301 et seq., § 537 et seq., Comp.St.Supps.N.J. 1924, 1930, and N.J.St.Annual 1931, § 208—537 et seq.).

On December 12, 1931, the assessment so made was, upon request to the executors, opened for the purpose of enabling them to submit additional information concerning the decedent's dom cil; and, introducing in evidence the judgment of the Supreme Court of Pennsylvania hereafter referred to, first rendered September 26, 1932, they claimed that Dorrance was, or must be deemed to have been, domiciled in Pennsylvania, in view of that judgment and other evidence. On October 10, 1932, the New Jersey Tax Commissioner again assessed upon the estate the tax of $12,247,333.52. The executors appealed to the Prerogative Court, which, by final decree entered May 11, 1934, affirmed the assessment, subject to a modification not here material. In re Dorrance's Estate, 115 N.J.Eq. 268, 170 A. 601; Id., 116 N.J.Eq. 204, 172 A. 503. The executors procured, by writ of certiorari, a review of the assessment by the New Jersey Supreme Court. On February 8, 1935, that court affirmed the decree of the Prerogative Court and dismissed the writ of certiorari with costs. Dorrance v. Martin, 176 A. 902, 13 N.J.Misc. 168. On February 13, 1935, the executors notified the defendant Martin that they intended to take an appeal to the New Jersey Court of Errors and Appeals. They have not done so; but under the state practice an appeal may be taken at any time prior to February 11, 1936.3

Dorrance had a residence also in Pennsylvania. That state claimed that he was domiciled there at the time of his death; and promptly commenced proceedings to subject his estate, including the intangible property, to the Pennsylvania inheritance tax. In March, 1933, it recovered in its Supreme Court a final judgment against the executors which, adjudging that Dorrance's domicil was at the time of his death in Pennsylvania, imposed an inheritance tax upon the intangible property, as well as upon the real estate and tangible personal property situ- ated there. In re Dorrance's Estate, 309 Pa. 151, 163 A. 303. No question under the Federal Constitution was presented. Certiorari was denied by this Court, Dorrance v. Pennsylvania, 287 U.S. 660, 53 S.Ct. 222, 77 L.Ed. 570; Id., 288 U.S. 617, 53 S.Ct. 507, 77 L.Ed. 990. In satisfaction of the judgment, the executors paid to Pennsylvania $14,394,698.88, and $104,278.03 as interest thereon; and they also gave a bond in the sum of $4,000,000 to pay additional amounts, if upon final determination of the federal estate tax they should appear to be due.

In the suits at bar, the plaintiffs insist that the Pennsylvania judgment was in rem and bond New Jersey and the defendants although they were not parties to that litigation; that the New Jersey courts and administrative authorities, in refusing to give effect to the Pennsylvania judgment holding that Dorrance was domiciled in the latter state, violated the full faith and credit clause of the Federal Constitution; and that if they construed the New Jersey Transfer Inheritance Tax Act as applying to intangible property the situs of which was outside New Jersey, they violated the due process and equal protection clauses of the Fourteenth Amendment. The plaintiffs contend further that if the Pennsylvania judgment is not in rem, the federal court is now free to ascertain the facts as to domicil and reach its conclusion independently of the prior decisions of the courts of the two states; and that the evidence introduced below establishes that Dorrance's domicil was in Pennsylvania.

The plaintiffs claim that the District Court erred in holding that section 265 of the Judicial Code (28 U.S.C.A. § 379) prevents the federal court from granting the injunctions prayed for, since at the time of the institution of these suits in the federal court the proceedings in New Jersey had not passed into the judicial stage; and since, in any case, an independent judicial proceeding was necessary to collect the tax. The defendants concede that section 265 would not bar federal courts from staying collection of the tax if the state pro- ceedings had not passed from the administrative into the judicial stage. See City Bank armers' Trust Co. v. Schnader, 291 U.S. 24, 54 S.Ct. 259, 78 L.Ed. 628; Id., 293 U.S. 112, 55 S.Ct. 29, 79 L.Ed. 228. But they assert that the proceedings in the Supreme Court of New Jersey reviewing by certiorari the final decree of the Prerogative Court (itself a judicial tribunal) were proceedings judicial in their nature; and that the stay sought is of proceedings pending in a court of New Jersey. The defendants contend also that the judgment of the New Jersey Supreme Court to which the executors were parties is res judicata as to the domicile of the deceased and as to the liability of the estate for the taxes assessed by New Jersey; and they set up other reasons why the relief prayed should be denied. We have no occasion to consider any of these defenses, since we agree with the District Court that it was without jurisdiction to grant the injunction.

First. To determine whether a judicial proceeding was pending when these suits were brought, we turn to the law of New Jersey. The proceedings, administrative and judicial, governing the assessment and the collection of its inheritance tax are, in substance, these: The assessment is made by the State Tax Commissioner, his duty being to 'assess and fix the cash value of such estate and levy the tax to which the same is liable.' He performs this duty after receiving the report of an appraiser appointed by him. The appraiser makes the appraisal and essential findings after notice to the interested parties and hearing evidence and argument.4 Any person dissatisfied with the appraisal or the assessment may appeal therefrom to the 'Ordinary,' that is, the Prerogative Court. Bugbee v. Van Cleve, 99 N.J.Eq. 825, 834, 134 A. 646. Upon that court is conferred jurisdiction 'to hear and determine all questions in relation to any tax levied under the provisions of' the act.5 The decree of the Prerogative Court is reviewable on writ of certiorari by the New Jersey Supreme Court;6 and its judgment is reviewable by the Court of Errors and Appeals.7

As to the collection of the tax, section 21 of the Transfer Inheritance Tax Act provides that 'if it shall appear to the State Tax Commissioner that any tax * * * has not been paid according to law,' he shall report such fact to the register of the Prerogative Court, who must issue a citation citing the interested paties to 'show cause why such tax should not be paid.'8 The Attorney General, if he has probable cause to believe that a tax is due and unpaid, and is so notified by the commissioner, shall prosecute the proceeding before the Prerogative Court.9 The service of the citation, and subsequent proceedings thereon, shall conform to the practice prevailing in the Prerogative Court, including the power to commit for contempt.10 Such proceedings would be the same in character whether the review of the original assessment had ended with the appeal to the...

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