In re Cope's Estate

• Decision Date: 24 April 1899
• Docket Number: 390
• Parties: Estate of Marmaduke C. Cope, deceased. Appeal of the Commonwealth of Pennsylvania
• Court: Pennsylvania Supreme Court

43 A. 79

191 Pa. 1

Estate of Marmaduke C. Cope, deceased. Appeal of the Commonwealth of Pennsylvania

No. 390

Supreme Court of Pennsylvania

April 24, 1899

Argued January 20, 1899

Appeal, No. 390, Jan. Term, 1898, by the commonwealth of Pennsylvania, from decree of O.C. Phila. Co., July T., 1898 No. 240, dismissing exceptions to adjudication. Affirmed.

Exceptions to adjudication.

At the audit the commonwealth claimed a tax of two per cent upon $917,519.88, under the Direct Inheritance Tax Act of May 12 1897, P.L. 56. The auditing judge, HANNA, P.J., disallowed the claim.

Error assigned was in dismissing exceptions to adjudication.

Decree affirmed and appeal dismissed at appellant's costs.

Francis A. Osbourn and John P. Elkin, with them John C. Grady and Henry C. McCormick, attorney general, for appellant. -- The act is not unconstitutional because it contains an exemption of property from taxation not enumerated in section 1 of article 9 of the constitution: Com. v. Germania Brewing Co., 145 Pa. 83; Minot v. Winthrop, 162 Mass. 113.

In collateral and direct inheritance tax statutes exemptions have always been favored by lawmaking bodies, and have generally been sustained by the courts. The title to the direct inheritance tax act is not defective: Horner v Webster, 33 N.J. Law, 413; Allegheny County Home's Case, 77 Pa. 77; Com. v. Green, 58 Pa. 226; Yeager v. Weaver, 64 Pa. 425; Mauch Chunk v. McGee, 81 Pa. 433.

It does not offend against that provision of the constitution which requires uniformity of taxation: Com. v. Delaware Division Canal Co., 123 Pa. 594; Orcutt's App., 97 Pa. 179; Magoun v. Illinois Trust & Savings Bank, 170 U.S. 283; Com. v. Brush Electric Light Co., 145 Pa. 147.

The question of interest and penalty cannot be successfully raised in the case now before the court: Merchants' & Manufacturers' Bank v. Penna., 167 U.S. 461.

The act may be passed under the power to regulate the transmission of estates: Strode v. Com., 52 Pa. 181; U.S. v. Perkins, 163 U.S. 627; Com. v. Gilpin, 3 Dist. Rep. 711; Com. v. Herman, 16 W.N.C. 210; Mager v. Grima, 8 Howard, 490; Minot v. Winthrop, 26 L.R.A. 259; State v. Dalrymple, 3 L.R.A. 375; Kochersperger v. Drake, 47 N.E. 321; Eyre v. Jacob, 14 Gratt. 422; Wallace v. Myres, 38 F. 184; Pullen v. Commissioners of Wake County, 66 N.C. 361; Peters v. City of Lynchburg, 76 Va. 927; Schoolfield v. City of Lynchburg, 78 Va. 366; Mixter's Est., 28 W.N.C. 182.

The 16th section is not in conflict with the 1st section of the act if construed with it.

Charles E. Morgan, Jr., for appellee. -- The act of May 12, 1897, in so far as it provides for exemption from taxation thereunder of all estates of decedents where the balance for distribution, after payment of debts, does not exceed $5,000, is obnoxious to the constitution of 1874, whether such legislation be treated as a statute imposing a tax, or a law amendatory of the existing general laws regulating the succession to estates of decedents.

Treating it as a statute imposing a tax, it violates the requirements of uniformity contained in article 9, sections 1 and 2.

If regarded as an act amendatory of the existing laws regulating the succession to estates of decedents, it is forbidden by article 3, section 7 of the constitution, by which it is ordained that "the General Assembly shall not pass any local or special law . . . changing the law of descent or succession."

1. Unless it be held that a succession tax, such as is sought to be imposed by the commonwealth by the said act of assembly, was not contemplated by, and is not within the scope of article 9, sections 1 and 2 of the constitution of 1874, the act is unconstitutional.

The act is unconstitutional because:

(a) It provides for a discrimination in favor of estates of $5,000 and less, against larger estates, and therefore is not uniform in its operation upon all subjects in the same class; and

(b) The exemption contained in the first proviso to the act is not only forbidden by said article 9, section 2, but renders the entire statute void.

By the first proviso it is enacted: "Provided, That personal property to the amount of $5,000 shall be exempt from the payment of this tax in all estates."

Whether the term "personal property," as used in the statute, was intended to refer to the entire balance of an estate of a decedent for distribution among legatees and distributees, or to the right, interest or estate of each legatee, is unimportant, as in either case the exemption destroys the uniformity of tax required by the constitution.

It is contended by appellant that section 2, article 9 of the constitution applies only to exemptions from all taxation, and does not prohibit an exemption from a tax upon a right to a legacy, the property constituting it being subject to the general property tax.

In reply we suggest that the tax imposed by the act is a tax upon the right to take the property of a decedent, and is the only kind of tax imposed, or which can be imposed, upon such right, and that, therefore, if the statute be sustained, a legatee taking $5,000 or under will be exempt from all taxation whatever upon his right to take.

With reference to the cases cited and relied upon by appellants, decisions of the courts of the United States and states other than Pennsylvania, we have only to remark that the language used in our constitution of 1874 differs substantially from that of the fourteenth amendment of the constitution of the United States, and the constitutions of other states considered in said cases.

Directly to the contrary of these cases are the following: Fox's Appeal, 112 Pa. 337; Missouri v. Switzler, 45 S.W. 245; City of Westport v. McGee, 30 S.W. 523; Minnesota v. Gorman, 40 Minn. 232; Wisconsin v. Mann, 76 Wis. 469. See also Curry v. Spencer, 61 N.H. 624, and Ohio v. Ferris, 53 Ohio 314.

The reasoning of Mr. Justice BREWER, who delivered the dissenting opinion in Magoun v. Illinois Trust & Savings Bank, reported in full in appellant's paper-book, 170 U.S. 283, is directly in point (quoting from Justice BREWER'S decision). The statute originally imposing the collateral inheritance tax was enacted in 1826. The subsequent statutes relating to this subject, including the act of 1887, are but amendments thereof and are therefore not in conflict with the constitution of 1874.

2. As a statute "changing the law of descent or succession" to decedent's estates it is unconstitutional, because it is special legislation in favor of one class and against another, based upon a distinction wholly unreasonable, arbitrary and capricious: Article 3, section 7 of the Constitution; Ayars's Appeal, 122 Pa. 266.

The Supreme Court of New Jersey, in Wanser v. Hoos, 60 N.J. Law, 482, says: "The test of the generality of a law adopted, is that it shall embrace all and exclude none whose conditions and wants render such legislation equally appropriate to them as a class."

An act excluding perpetually from its operation counties containing more than 150,000 and also less than 10,000 inhabitants, is a local law. The perpetual exclusion of certain counties from the operation of law is not a classification of counties: Morrison v. Bachert, 112 Pa. 322; McCarthy v. Commonwealth, 110 Pa. 243; Commonwealth v. Patton, 88 Pa. 258; Davis v. Clark, 106 Pa. 377.

The division of the cities of this state into three classes by the act of 1874, held to be constitutional in Wheeler v. Philadelphia, 77 Pa. 338, is a necessary provision to meet the different needs of cities differing widely in population, but its effect is to distinguish municipalities in one class from those in another for purposes of municipal government only. Hence an act which applies to one class of cities only is unconstitutional if it relates to matters not under municipal control or affecting the municipal government: Weinman v. Railway Co., 118 Pa. 192; Ayars's Appeal, 122 Pa. 266; Ruan Street, 132 Pa. 257; Van Loon v. Engle, 171 Pa. 157; Chalfant v. Edwards, 173 Pa. 246; Phila. v. Haddington M.E. Church, 115 Pa. 291; Commonwealth v. Heckert, 7 Dist. Rep. 186; Wyoming Street, 137 Pa. 495; Philadelphia v. Cemetery Co., 162 Pa. 105.

R. C. Dale, on behalf of sundry distributees in estates now pending in the orphans' court, in which final judgment has been postponed until the determination of the question.

The legislature has thus divided the estates of decedents into two classes:

(1) Those having a distributive balance in personalty not exceeding $5,000. This class composes by far the larger portion of estates administered.

(2) Those having a distributive balance in personalty exceeding $5,000.

Upon the first class no tax is imposed. Upon the second class a tax of two per cent is imposed on that portion of the distributive balance which exceeds $5,000.

It is to be observed that the tax is not imposed upon each legacy, or distributive share, exceeding $5,000, but in gross upon the distributive balance exceeding $5,000, even though the sum coming to each distributee is less than $5,000.

Is this scheme of taxation within the constitutional powers of the legislature?

The constitutional provisions which must be considered are article 9, section 1: "All taxes shall be uniform upon the same class of subjects," etc., article 9, section 2: "All laws exempting property from taxation, other than the property above enumerated, shall be void," and article 3, section 7: "The general assembly shall not pass any local or special law . . . changing the law of descent or succession."

How does the commonwealth reply to these provisions?

1. By the suggestion that the tax is not on property but on the right of succession, and by assuming that a tax imposed by the legislature upon property must be...