In re Peterson's Estate
| Decision Date | 22 January 1915 |
| Docket Number | No. 29828.,29828. |
| Citation | 151 N.W. 66,168 Iowa 511 |
| Parties | IN RE PETERSON'S ESTATE. |
| Court | Iowa Supreme Court |
OPINION TEXT STARTS HERE
Appeal from District Court, Plymouth County; Wm. Hutchinson, Judge.
Appeal from an order subjecting the estate of John Peterson, deceased, to the payment of an inheritance tax. Decedent's heirs appeal. Affirmed.Nelson Miller, of Le Mars (G. T. Struble, of Sioux City, of counsel), for appellants.
George Cosson, Atty. Gen., C. A. Robbins, Asst. Atty. Gen., and Clarence D. Roseberry, of Le Mars, for appellee.
John Peterson, a native of Sweden, but a naturalized citizen of the United States, died intestate in Plymouth county, Iowa, on March 13, 1909, unmarried, and without any direct heirs. His heirs were nephews and nieces, or their surviving spouses or children, who took from one-fourth to one-eighteenth of his estate. One nephew and one niece are naturalized citizens, living in the states of Illinois and Wisconsin, respectively. The other heirs are nonresident aliens, living in Sweden. The estate consisted of 80 acres of land, appraised at $8,800, and personal property valued at $5,386.42. The administrator of the estate tendered to the state treasurer the sum of $848.95 in full of the collateral inheritance tax due to the state, being 5 per cent. of the valuation of the property, with interest, which the treasurer refused to receive, claiming that, under the law, the estate passing to nonresident aliens was subject to a 20 per cent. tax.
Conceding that the law of this state in force at the time of testator's death, and at the time of the hearing in the district court, exacted a 20 per cent. tax upon property passing to collateral heirs who were nonresident aliens, counsel for these heirs, and for the administrator, insist that this law was and is invalid, because of a treaty between the United States and the kingdom of Sweden first concluded in the year 1783 (8 Stat. 60) between the proper authorities of the two governments, and afterward revived, first in the year 1816 (8 Stat. 232), and again in 1827 (8 Stat. 346). As the treaty now stands, it reads as follows:
Article VI of the original treaty, revived by article 17 of the present one, provided:
The sixth article of this treaty is the one relied upon by appellants. Appellants' counsel seem to concede that the entire estate is subject to the 5 per cent. tax imposed generally upon all collateral inheritances; but they argue that anything in excess of that is contrary to both the letter and the spirit of the treaty. On the other hand, it is contended that the treaty does not apply to real estate in any event, and that there is no provision therein which deprives the state of its power to collect inheritance taxes upon property within its borders, and nothing either in the treaty or in either the federal or state Constitution which inhibits the imposition of a greater tax where the property passes to nonresident aliens from that imposed where it passes to either resident citizens or aliens.
[1][2] Some of the propositions involved are not the subject of debate. It is conceded that the state has plenary power over the descent or succession of property within its borders, save as such right may be limited by some constitutional or treaty provision; that an inheritance tax is not fundamentally a tax upon property, but upon the right of succession or the right to receive property by will or descent; and that there is no provision, unless it be found in the treaty, requiring inheritance taxes to be uniform. In other words, it is practically agreed that our inheritance tax law is valid unless, when properly construed, it be found to conflict with the treaty rights and obligations.
[3] We may here pause long enough to dispose of one of the contentions made for the state, to the effect that real estate passing either by will or descent is not covered by the provisions of the treaty relating to “goods and effects.” It may be conceded that, generally speaking, these terms are not broad enough to cover real estate; but they may be, and often are, construed to include real estate. They have often been so construed when found in treaties. See cases cited in Re Anderson's Estate, 147 N. W. 1098, 52 L. R. A. (N. S.) 686.
A different interpretation seems to have been placed upon them in Meier v. Lee, 106 Iowa, 303, 76 N. W. 712, but the case seems to be treated as one of first impression and little attention was given the authorities upon the proposition. The matter is fully and exhaustively covered in Adams v. Akerlund, 168 Ill. 632, 48 N. E. 454, with the result that real estate was held to be included within the terms of the treaty. As shown in that case, this treaty, like all the early ones, was written in French, and the French terms for goods and effects include all kinds of property, both real and personal. Story on Conflict of Laws (8th Ed.) 13, note 1.
[4][5] II. The fundamental question here is: Does the treaty deprive the state of its right to impose what are known as inheritance taxes where the property within its borders passes to collateral heirs, or does it require that such taxes, if imposed, be uniform; that is, at the same ratio upon alien and citizen alike, or upon residents and nonresidents in equal proportions? Appellants do not contend that the state has no right under this treaty to impose any inheritance tax, but rather that it has no right to impose one tax upon the property passing to residents and another and higher tax upon nonresident aliens, asserting in this connection that the difference in rate is in effect a droit de detraction, or duty of detraction, and for that reason prohibited by the treaty. This right of detraction seems to have acquired a well-established meaning in international law. As we understand, it is a tax levied upon the removal from one state or country to another of property acquired by succession or testamentary disposition, and it does not cover taxes upon the succession to or transfer of property. Frederickson v. Louisiana, 23 How. 445, 16 L. Ed. 577;In re Strobel's Estate, 5 App. Div. 621, 39 N. Y. Supp. 169.
The sentence in article VI of the original treaty quoted beginning with the words “these inheritances” clearly has reference to removal taxes or duties, or, as they are called in the language of diplomacy, “droit de detraction,” and not to succession or inheritance taxes. If there be anything in the treaty which forbids the levy of inheritance or succession taxes by the state, it is found in the first sentence of article VI, which provides for the free disposition by will, gift, or otherwise, by the subjects of the contracting parties in the respective states, in favor of such persons as they think proper, and that their heirs, no matter where resident, may receive the succession without taking out letters of naturalization. The words “ab intestato” mean from an intestate. If this provision is to be given the effect contended for, it would relieve the property of a subject of this country dying intestate, of all collateral or other inheritance taxes, provided his heirs are subjects of the kingdom of Sweden, no matter where their residence.
Another possible construction of this treaty is that it applies only to a subject of one of the contracting parties resident in the territory of the...
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