In re Petersen's Will

• Decision Date: 14 May 1919
• Docket Number: 31422
• Citation: 172 N.W. 206,186 Iowa 75
• Parties: IN RE WILL OF MAX D. PETERSEN
• Court: Iowa Supreme Court

172 N.W. 206

186 Iowa 75

IN RE WILL OF MAX D. PETERSEN

No. 31422

Supreme Court of Iowa, Des Moines

May 14, 1919

Appeal from Scott District Court.--WILLIAM THEOPHILUS, Judge.

THE question in this case involves the construction of Section 1481-a1, Code Supplement, 1913, and the real question is whether the exemptions found in that statute are limited only to institutions of the character involved in this suit within the state of Iowa. The district court held that the statute properly construed, limited the exemptions to institutions and societies within the state of Iowa. Appellant is a nonresident society or institution, and appeals.

Affirmed.

Miles M. Dawson, for appellant.

Bollinger & Block, H. M. Havner, Attorney General, and Henry H. Jebens County Attorney, for appellees.

GAYNOR J. LADD, C. J., WEAVER, EVANS, SALINGER, and STEVENS, JJ., concur.

OPINION

GAYNOR, J.

The determination of this case involves the construction of Section 1481-a1, Supplement to the Code, 1913, which excepts certain property from the operation of the collateral inheritance tax law found in Title VII, Chapter 4, of said Supplement. The part especially involved is Subdivision 4 of said section, and the section reads as follows:

"The tax imposed by this act shall not be collected * * *

"4. When the property passes to educational and religious societies or institutions, public libraries and public art galleries within this state and open to the free use of the public."

The controversy arose in this way: One Max D. Petersen, a resident of the city of Davenport in this state, died, leaving a will, in which he bequeathed $ 40,000 to the American Institute for Scientific Research of New York City, to be used for the purpose of the American Society for Psychical Research of the same city, a branch of said institute. The society to which the bequest is made is a corporation, duly organized and existing under and by virtue of the laws of the state of New York. Neither said society nor its branch is incorporated under the laws of the state of Iowa. It is an educational society, organized and conducted for purposes of scientific research.

It is the claim of said society that the amount bequeathed to it is not subject to the collateral inheritance tax, because of the exemption found in Subdivision 4 of Section 1481-a1 of the Supplement to the Code, 1913. It is the claim of the state treasurer that it is.

The question then is: Does the exception found in Subdivision 4 exempt all institutions of the character from the collateral inheritance tax, no matter where located, or does it exempt only such institutions as are within the state of Iowa? The contention of the society is that it exempts all institutions of the character of this institution, no matter where located. The contention of the state is that it exempts only such institutions of that character as are within the state of Iowa, and does not exempt such institutions not within the state of Iowa.

It is conceded that the institution here sought to be subjected is of the character of institution covered by the exemption. It is also conceded that it is not within the state of Iowa, so the question is clean cut: Does the statute exempt all institutions of the character of this, no matter where situated, or does it exempt those only that are within the state of Iowa? The question answered either way settles this controversy. If this subdivision of the statute relieves all institutions of the character described from tax, no matter where situated, the judgment must be for the appellant. If it excepts only such as are within the state of Iowa, then the judgment must be for the appellee. The court below found that nonresident institutions of the character described are subject to the tax, and that the exception protects only such institutions as are within the state.

It is well to have before us all the subdivisions of this exempting statute, in so far as they relate to public societies, associations, institutions, and corporations. They are as follows:

"4. When the property passes to educational and religious societies or institutions, public libraries and public art galleries within this state and open to the free use of the public;

"5. Property passing to or for hospitals within this state open to the public, and not operated for gain, or to societies within this state organized for purposes of public charity, including cemetery associations, but not including societies maintained by fees, dues, or assessments in whose benefits the public may not share.

"7. When the property passes to a municipal or political corporation within this state for a purely public purpose."

It will be noted that, in all these subdivisions, the thought is to protect from the operation of the collateral inheritance law all societies, associations, institutions, and corporations therein described, because of the benefit which the public is supposed to derive from their creation, preservation, and continuance; hospitals within the state not operated for gain; societies within the state organized for public charity; property passing to municipal or political corporations within the state for purely public purposes; property passing to educational and religious societies or institutions, public libraries and public art galleries within the state. The thought and purpose of the legislature seems to be to encourage bequests to institutions within the state which, in their character and purpose, serve the interests of the people of the state. The thought lying back of all the exemptions is that no institution or society within the state shall be subject to this tax when it has in it the elements of public service, subject, however, to the exemptions found in the statute. It recognizes that there are some institutions, though of a public character and rendering public service, that ought not to be within the protection of the exemption, for the reason that, though they be of a public character, and though they do render public service, they do it for private gain. To such institutions, corporations, or societies it seems to be the thought not to grant exemptions, because of the mercenary and commercial features attached. All bequests to institutions, libraries, art galleries, hospitals, societies organized for public charity, including cemetery associations, municipal or political corporations organized and carried on for purely public purposes, and institutions which are educational or religious in their character, were thought entitled to the protection provided by the exemption, if within the state and open and free to the use of the public. The word "free," as used in this statute, does not mean that no compensation is exacted for the benefits bestowed, but that they are open and free to all who desire to use them and derive through them the benefits which they are supposed to confer. They are free, though they exact something to maintain and preserve their integrity and continuance.

Coming now to the subdivision relied upon for the exemption, we find that the spirit of the statute exempts property that passes to educational and religious societies and institutions, public libraries and public art galleries within the state, open to the free use of the public, and that, in recognition of this spirit, they ought not to be subject to the collateral inheritance tax.

As has been frequently said, "Words are the vehicle of thought." They are used, and their purpose is, to convey ideas, and when used in a statute, they are intended to convey the thought and purpose of the legislature. The thought that prompted this exception was that all property ought not to be subject to the collateral inheritance tax; that some property ought to be exempted from it because it serves a useful public purpose: and to this end it named educational and religious societies or institutions, public libraries and public art galleries within the state, when open and free to the use of the public.

When we consider that taxes are levied, collected, and expended for the use and benefit of the people of the state, and that any property made subject to taxation in the state is made so for the purpose of revenue to be used by the government in the service of the people of the state, the thought arises: Why these exemptions? Not for the benefit of the institutions as such--surely not. It must, then, be because of the public need of them, and the service they give to the people of the state. It must be for the benefit of the people of the state, whose welfare is in the keeping of the state. The thought then comes: It is to institutions within the state,--institutions that render service to the people of the state,--that the exemptions should be given. The state, exercising its governmental functions, exacts revenue from the citizen of the state and his property to meet the obligations it assumes for the people in its governmental capacity. When it exempts, the exemption should be for public reasons, and because of some benefit to the people of the state, and not for the benefit of an institution exempted, unless it renders public service to the state or her people.

It is contended, however, that, prior to the enactment of the law as found in Section 1481-a1 of the Code Supplement, 1913, now...