Maxwell v. Bugbee Hill v. Same

• Decision Date: 27 October 1919
• Docket Number: Nos. 43,238,s. 43
• Citation: 40 S.Ct. 2,63 L.Ed. 1124,250 U.S. 525
• Parties: MAXWELL et al. v. BUGBEE, Comptroller of Treasury of State of New Jersey et al. HILL v. SAME
• Court: U.S. Supreme Court

250 U.S. 525

40 S.Ct. 2

63 L.Ed. 1124

MAXWELL et al.

v BUGBEE, Comptroller of Treasury of State of New

Jersey et al.

HILL

v. SAME.

Nos. 43, 238.

Argued March 18 and 19, 1919.

Decided Oct. 27, 1919.

[Syllabus from pages 525-527 intentionally omitted] Messrs. Joseph Coult, of Newark, N. J., Lawrence Maxwell, of Cincinnati, Ohio, and William A. Smith, of Newark, N. J., for plaintiffs in error.

Messrs. John W. Westcott, of Camden, N. J., and John R. Hardin, of Newark, N. J., for defendants in error.

In No. 238:

Messrs. E. C. Lindley, of St. Paul, Minn., and Joseph Coult and William A. Smith, both of Newark, N. J., for plaintiff in error.

[Argument of Counsel from pages 527-530 intentionally omitted] Mr. John. R. Hardin, of Newark, N. J., for defendants in error.

Mr. Justice DAY delivered the opinion of the Court.

These cases were argued and submitted together, involve the same constitutional questions, and may be disposed of in a single opinion. The attack is upon the inheritance tax law of the state of New Jersey, and is based upon certain provisions of the federal Constitution. The statute has reference to the method of imposing inheritance taxes under the laws of the state. The constitutionality of the law upon both state and federal grounds was upheld in the McDonald Case by the Court of Errors and Appeals. 90 N. J. Law, 707, 101 Atl. 248. In the Hill Case the judgment of the Supreme Court of New Jersey (91 N. J. Law, 454, 103 Atl. 861) was affirmed by the Court of Errors and Appeals (92 N. J. Law, 514, 105 Atl. 893).

The statute under consideration is an act approved April 9, 1914 (P. L. 1914, p. 267), being an amendment to an act approved April 20, 1909 (P. L. 1909, p. 325), for taxing the transfer of property of resident and nonresident decedents by devise, bequest, descent, etc., in certain cases. The 1909 act is found in 4 Comp. Stat. N. J. p. 5301 et seq; the amendment, in 1 Supp. Comp. Stat. N. J. pp. 1538-1542. The act of 1909, in its first section, imposed a tax upon the transfer of any property, real and personal, of the value of $500 or over, or of any interest therein or income therefrom, in trust or otherwise, to persons or corporations including the following cases:

'First. When the transfer is by will or by the intestate laws of this state from any person dying seized or possessed of the property while a resident of the state.

'Second. When the transfer is by will or intestate law, of property within the state, and the decedent was a nonresident of the state at the time of his death.'

The taxes thus imposed were at the rate of 5 per cent. upon the clear market value of the property, with exemptions not necessary to be specified, and were payable to the treasurer for the use of the state of New Jersey.

And by section 12 it was provided that upon the transfer of property in that state of a nonresident decedent, if all or any part of the estate, wherever situated, passed to persons or corporations who would have been taxable under the act if the decedent had been a resident of the state, such property located within the state was made subject to a tax bearing the same ratio to the entire tax which the estate of such decedent would have been subject to under the act if the nonresident decedent had been a resident of the state, as the property located in the state bore to the entire estate of such nonresident decedent wherever situated.

The act, having first been amended by an act approved March 26, 1914 (P. L. 1914, p. 91), not necessary to be recited, was again amended by the act approved April 9, 1914, which is now under consideration (P. L. 1914, p. 267; 1 Supp. Comp. Stat. N. J. pp. 1538-1542). Sections 1 and 12 were amended, the former by confining the tax on the transfer of property within the state of nonresident decedents to real estate, tangible personal property and shares of stock of New Jersey corporations and of national banks located within the state; and by modifying the former rate of 5 per centum upon the clear market value of the property passing, which was subject to exemptions in favor of churches and other charitable institutions, and of parents, children, and other lineal descendants, etc., by making 5 per centum the applicable rate, but subject to numerous exceptions, and in the excepted cases imposing different rates, dependent upon the relationship of the beneficiary to the deceased and the amount of the property transferred. Thus:

'Property transferred to any child or children, husband or wife, of a decedent, or to the issue of any child or children of a decedent, shall be taxed at the rate of one per centum on any amount in excess of five thousand dollars, up to fifty thousand dollars; one and one-half per centum on any amount in excess to [of] fifty thousand dollars, up to one hundred and fifty thousand dollars; two per centum on any amount in excess of one hundred and fifty thousand dollars, up to two hundred and fifty thousand dollars; and three per centum on any amount in excess of two hundred and fifty thousand dollars.'

The modified formula for computing the assessment upon the transfer of the estate of a nonresident decedent prescribed in section 12 as amended by the act under consideration, is as follows:

'A tax shall be assessed on the transfer of property made subject to tax as aforesaid, in this state of a nonresident decedent if all or any part of the estate of such decedent, wherever situated, shall pass to persons or corporations taxable under this act, which tax shall bear the same ratio to the entire tax which the said estate would have been subject to under this act if such nonresident decedent had been a resident of this state, and all his property, real and personal, had been located within this state, as such taxable property within this state bears to the entire estate, wherever situated: Provided, that nothing in this clause contained shall apply to any specific bequest or devise of any property in this state.'

An amendatory act, approved April 23, 1915 (P. L. 1915, p. 745; 1 Supp. Comp. Stat. N. J. p. 1542), repeated the provision last quoted, and made no change in the act pertinent to the questions here presented.

It is this method of assessment in the case of nonresident decedents which is the subject-matter in controversy.

James McDonald died January 13, 1915, owning stock in the Standard Oil Company, a New Jersey corporation, valued at $1,114,965, leaving an entire estate of $3,969,333.25, which included some real estate in the state of Idaho. Of the entire estate, $279,813.17 went to pay debts and expenses of administration. Mr. McDonald was a citizen of the United States and a resident of the District of Columbia, and left a will and a codicil which were admitted to probate by the Supreme Court of that District. The executors are Lawrence Maxwell, a citizen of Ohio, and the Fulton Trust Company, a New York corporation. The principal beneficiaries under the will are citizens and residents of states of the United States other than the state of New Jersey. Under the will the wife takes by specific legacies; the other beneficiaries are specific and general legatees not related to the deceased and a son and two grandchildren, who take the residuary estate.

James J. Hill died May 29, 1916, intestate, a resident and citizen of the state of Minnesota, leaving a widow and nine children. Under the laws of Minnesota, the widow inherited one-third of the real estate and personal property, and each of the children two twenty-sevenths thereof. The entire estate descending amounted to $53,814,762, which included real estate located outside of New Jersey, and principally in Minnesota and New York, valued at $1,885,120. The only property the transfer of which was subject to taxation in New Jersey was stock in the Northern Securities Company, a New Jersey corporation, valued at $2,317,564.68. The debts and administration expenses amounted to $757,571.20.

The amount of the assessment in the McDonald Case was $29,071.68. In the Hill Case the tax assessed amounted to $67,018.43. Following the statute, the tax was first ascertained on the entire estate as if it were the estate of a resident of the state of New Jersey, with all the decedent's property both real and personal located there; the tax was then apportioned and assessed in the proportion that the tazable New Jersey estate bore to the entire estate.

The thing complained of is that applying the apportionment formula fixed by the statute, in the cases under review, results in a greater tax on the transfer of property of the estates subject to the jurisdiction of New Jersey, than would be assessed for the transfer of an equal amount, in a similar manner, of property of a decedent who died a resident of New Jersey. The cause of this inequality is said to arise because of imposing the graduated tax, provided by the statute, upon estates so large as these. If a resident, in the case of a wife or children, the first $5,000 of property is exempt, the next $45,000 is taxed at the rate of 1 per cent., the next $100,000 at the rate of 1 1/2 per cent., the next $100,000 at the rate of 2 per cent., and the remainder at the rate of 3 per cent. The contention is that, applying the apportionment rule provided in the case of nonresident estates, a larger amount of tax is assessed.

The correctness of the figures deduced from the application of the statute as made by the counsel for plaintiff in error is contested, but in our view the differences are unimportant, unless the state is bound to apply the same rule to the transmission of both classes of estates.

Counsel for plaintiffs in error sum up their objections to the statute, based on the federal Constitution, as follows:

(1) It taxes the estates of nonresidents more than those of residents, and therefore gives to residents privileges and immunities denied to nonresidents.

(2) It provides for a tax which bears unequally, and therefore is...