In re Harkness' Estate

• Citation: 204 P. 911,83 Okla. 107,42 A.L.R. 399,1921 OK 329
• Decision Date: 20 September 1921
• Docket Number: 12152-12154.
• Parties: IN RE HARKNESS' ESTATE (THREE CASES).
• Court: Oklahoma Supreme Court

204 P. 911

83 Okla. 107, 42 A.L.R. 399, 1921 OK 329

IN RE HARKNESS' ESTATE (THREE CASES).

Nos. 12152-12154.

Supreme Court of Oklahoma

September 20, 1921

Petition for Rehearing Withdrawn February 21, 1922.

Syllabus by the Court.

A state has inherent power to impose an inheritance tax.

The power to impose an inheritance tax inheres in both the regulatory and revenue-raising power of a state.

Sovereign regulation of inheritances and successions to estates is not essential to the existence of government, but sovereign control and protection in such matters is conducive of a higher and better state of government than could be attained without such control and protection, and to such extent the power to control is inherent. Likewise, if sovereign protection be necessary in order to attain a higher and better state of government, then the power to raise revenue for the expense of protection is inherent in the sovereignty which affords the protection.

Under article 7 of the Constitution of Oklahoma, the state has power to regulate inheritances, and, under article 10, of the Constitution, has power to raise revenue by an inheritance tax.

It may regulate inheritances without imposing any tax or it may impose the tax solely as a revenue-raising measure independent of the right to inherit, or it may regulate inheritances in part by directly taxing the right to inherit making the payment thereof a condition precedent to the right to inherit.

Whether an inheritance tax constitutes a price paid for the privilege of inheriting or is a property tax depends upon constitutional and statutory provisions.

Section 13, art. 10, of the Constitution authorizes the state to select its "subjects of taxation"; section 12 of said article defines the "subjects of taxation" which the state may select and names inheritances as one of the "subjects"; section 22 of said article authorizes the classification or arrangement of "subjects of taxation" into classes for the purpose of assessment and taxation and the adoption of different means or measures for ascertaining the amount of tax upon any specific "subject"; and section 5 of said article provides that taxes shall be uniform upon "subjects" of the same class.

The uniformity clause of the Constitution is not violated by a different rate upon different "subjects," but is violated where a different rate or measure is applied to "subjects" of the same class.

Inheritances being a rightful "subject of taxation," an inheritance tax is sustainable so far as the rate is concerned if, in computing the amount of tax, the same rate is levied upon or same measure applied to all inheritances.

Under section 10, c. 162, Laws 1915, as amended by section 7, c 296, and section 8, c. 162, Laws 1915, as amended by section 5, c. 296, Laws 1919, heirs may be deprived of their right to inherit unless the inheritance tax is paid, and is therefore equivalent to a price paid in order to inherit.

Where the decedent was a resident of the state of New York, and his property, consisting of certain certificates of stock in corporations foreign to this state, was actually situated in New York and was willed by decedent to his heirs, who are residents of New York, his will admitted to probate under the laws of New York and his property distributed to his heirs under the terms of said will according to the laws of New York by order of the Surrogate Court of New York, this court is without jurisdiction to interfere with said order.

"Jurisdiction" means authority over the matter to be determined; it means power to hear, to determine, and to enforce judgment.

The extent of jurisdiction of state courts is ascertained from two sources, namely, from the power conferred by express or implied provisions of state law and by express or implied limitations of federal law.

To give a court authority to impose an inheritance tax, it must have jurisdiction of the parties or of the subject-matter.

Property must have either an actual or constructive situs within a state in order to give it a taxable situs therein.

A state has power to fix the time at which property within its jurisdiction may acquire a taxable situs, but it cannot fix the taxable situs of a thing which has never come into the state and over which it is without power to control.

It is in the obligation of a state or sovereign government to protect its citizens in the enjoyment of their property and their rights that the power to tax them inheres.

Section 1, c. 162, S. L. 1915, provides:

"A tax is hereby laid upon the transfer to persons or corporations of property or any interest therein or income therefrom:

When the transfer is of tangible property in this state made by any person, or of intangible property made by a resident of this state at time of transfer:

First. By will or the intestate laws of this state," etc.

To authorize the enforcement of the foregoing statute, the transfer must be of tangible property in this state made by any person, or intangible property made by residents of this state at the time of the transfer, and be made by will or the intestate laws of this state.

Chapter 162, Laws 1915, as amended by chapter 296, Laws 1919, and section 6193, Revised Laws of 1910, held to be valid and enforceable as to transfers of all tangible property in this state made by any person, and as to all intangible property made by a resident of this state at the time of the transfer, and made by will or the intestate laws of this state.

The terms of the foregoing statute do not include the transfer of certificates of stock in a foreign corporation where such transfer is made in another state and the certificates of stock situated in another state, and where the decedent owner of such stock was a resident of another state, and the heirs thereto were residents of another state, and the transfer made by will or intestate laws of another state.

Appeal from District Court, Oklahoma County; Edward D. Oldfield, Judge.

In the matter of the estates of William L. Harkness, Harry S. Harkness, and Charles W. Harkness, deceased. Application was made in the county court by the State Auditor for the appointment of an administrator to ascertain and determine the amount of inheritance tax to be collected in each, and each case was appealed to the district court, which sustained objection to the jurisdiction in each case and ordered that the probate decree appointing an administrator be reversed, and denied the applications for appointment of an administrator to ascertain and collect inheritance tax, and the Auditor appealed in each case to the Supreme Court, and the three cases were consolidated. Judgment of the district court affirmed.

To give a court authority to impose an inheritance tax, it must have jurisdiction of the parties or of the subject-matter.

S. P. Freeling, Atty. Gen., and C. W. King, Asst. Atty. Gen., for State Auditor.

Ames, Chambers, Lowe & Richardson, of Oklahoma City, for the executor of William L. Harkness, deceased, and Harry S. Harkness, deceased.

Murray, Prentice & Aldrich, of New York City, for executor of William L. Harkness, deceased, and Charles W. Harkness, deceased.

Nicoll, Anabel, Fuller & Sullivan, of New York City, for the executor of Harry S. Harkness, deceased.

HARRISON C.J.

This appeal involves the validity of our inheritance tax laws, viz., chapter 162, S. L. 1915, as amended by chapter 296, S. L. 1919; the direct question being whether the state can impose an inheritance tax upon the right of nonresident heirs to inherit shares of corporate stock owned by a nonresident decedent in a foreign corporation doing business in this state.

For example: Certain foreign corporations, organized under the laws of and domiciled in other states, are each doing business in this state and have corporate property located within the state. A resident of another state owns shares in such corporations. He dies. His heirs reside in the state of his residence and inherit his property, including such shares of stock, under the laws of the state of his and their residence. Question, can this state impose a tax upon said shares or upon the right of the heirs to inherit said shares of stock, the certificates of same having been kept in the state of his resdience and having been transferred to him on the corporate books of a corporation chartered and domiciled in a foreign state? A determination of this general question necessitates a determination of certain other basic questions presented by counsel.

That a state has the power to impose an inheritance tax is now quite uniformly recognized. 26 R. C. L. 198; 37 Cyc. 1554; In re Sanford's Estate, 90 Neb. 410, 133 N.W. 870, 45 L. R. A. (N. S.) 228; Matter of McPherson, 104 N.Y. 306, 10 N.E. 685, 58 Am. Rep. 502; In re McKennan's Estate, 27 S.D. 136, 130 N.W. 33, 33 L. R. A. (N. S.) 620, Ann. Cas. 1913D, 745; Booth's Ex'r v. Commonwealth ex rel. Jefferson County Attorney, 130 Ky. 88, 113 S.W. 61, 33 L. R. A. (N. S.) 592; Corporation Com. et al. v. Dunn et al., 174 N.C. 679, 94 S.E. 481, L. R. A. 1918F, 498, Ann. Cas. 1918D, 1086. So that phase of the question may be considered as definitely settled.

Another phase, however, has been the subject of much discussion, namely, whether the power to regulate inheritances is a power essentially inherent in government itself, or whether it is merely the exercise of a regulatory power which the sovereignty has arbitrarily assumed and arbitrarily exercises, but the reasoning in the decisions shed but little light upon the question. They appear for the most part to be conclusions based upon some evolved theory rather than results growing out of actual conditions.

Looking at the question for what it actually is, it cannot be said that...