McLaughlin v. Cluff

• Decision Date: 12 September 1925
• Docket Number: 4265
• Citation: McLaughlin v. Cluff, 66 Utah 245, 240 P. 161 (Utah 1925)
• Court: Utah Supreme Court
• Parties: McLAUGHLIN et al. v. CLUFF, Attorney General, et al

240 P. 161

66 Utah 245

McLAUGHLIN et al. v. CLUFF, Attorney General, et al

No. 4265

Supreme Court of Utah

September 12, 1925

Rehearing Denied November 14, 1925.

Appeal from District Court, Third District, Salt Lake County; Chris Mathison, Judge.

Action by Frederick C. McLaughlin and Rufus W. Sprague, Jr. administrators, against Harvey H. Cluff, as Attorney General and another, to recover inheritance taxes paid under Comp Laws 1917, § 6094. Judgment for plaintiffs, and defendants appeal.

AFFIRMED.

L. A. Miner, Asst. Atty. Gen., for appellants.

Booth, Lee, Badger, Rich & Rich, of Salt Lake City, for respondents.

FRICK, J. GIDEON, C. J., and THURMAN, CHERRY, and STRAUP, JJ., concur.

OPINION

FRICK, J.

The plaintiffs, as administrators of the estate of one Albert Prince de Monaco, deceased, late a resident of the republic of France, brought this action in the district court of Salt Lake county pursuant to Comp. Laws Utah 1917, § 6094, against the defendants, as Attorney General and state treasurer respectively of the state of Utah, to recover certain inheritance taxes paid under protest, by plaintiffs, as such administrators, to the defendants in their official capacity and in compliance with the laws of the state of Utah.

The plaintiffs, in their complaint, at great length and with much particularity, have set forth the facts, which, omitting all of the jurisdictional facts and matters of inducement, in substance, are: That deceased died testate at Paris, France, and that his last will and testament was duly admitted to probate in the city of Paris; that at the time of his death he was the owner and in possession (in the language of the complaint) of $ 100,000 in par value of Union Pacific Railroad Company (a corporation organized pursuant to the laws of the state of Utah) 4 per cent. first mortgage land grant bonds, maturing in 1947, and 225 Central Pacific Railroad Company (also a corporation organized pursuant to the laws of the state of Utah) 4 per cent. bonds, the par value of which is 500 francs, due in 1946; that the market value of said last bonds, at the time of the death of decedent, was $ 15,975, and the total market of all said bonds at said time was $ 110,725; that said Union Pacific Railroad Company * * * bonds, maturing July 1, 1947, were and are secured by a certain deed of trust dated the 1st day of July, 1897, covering all of the railroad property of the said Union Pacific Railroad Company * * *; and that said bonds of the Central Pacific Railroad Company are secured by a certain deed of trust dated the 1st day of July, 1896, covering all of the property of said Central Pacific Railroad Company, situate," etc.

It is then alleged that plaintiffs, as administrators of the estate aforesaid, on the 28th day of August, 1924, were, by the defendants in their capacity aforesaid, compelled to pay an inheritance or transfer tax on said bonds amounting to the sum of $ 5,964.16, all of which was paid under protest, a copy of which protest is attached to and made a part of the complaint. It is further alleged that said tax is illegal and void, stating the reasons in that regard. It is also alleged that the aforesaid Union Pacific Railroad Company bonds were issued on July 1, 1897, and were secured by a deed of trust to the Mercantile Trust Company, as trustee, a corporation organized under the laws of the state of New York with its principal office in New York City; that said Union Pacific bonds were issued in the state of New York by said trustee and both principal and interest made payable at the office of the trustee in the city of New York; that said bonds were unregistered and that it is "expressly provided that the same shall pass by delivery or by transfer on the books of the railroad company in the city of New York if at any time the same be registered * * *; that said bonds are secured by the conveyance to said trustee of the * * * appurtenances, estates, lands, properties, rights, privileges, and franchises of the said Union Pacific Railroad Company situate in the states of Iowa, Kansas, Missouri, Nebraska, Colorado, Wyoming, and Utah, and that only a small proportion in value of said properties are physically situate in the state of Utah, and that all of said bonds could and would be satisfied if unpaid by the foreclosure of said trust deed on properties of said railroad company situate outside of the state of Utah; that it is expressly provided that in case of default in the payment of said bonds said mortgaged railroad's premises, rates, franchises, and interest, and all right, title, interest, claim, and demand therein, and right of redemption thereof, may be sold by said trustee at public auction at the city of Omaha, Neb." It is further alleged that the trustee, if it deems it necessary, may institute suit in any court of competent jurisdiction and that the remedies provided for in the trust deed shall be cumulative and not exclusive.

Substantially the same allegations in respect of the security and payment of the Central Pacific Railroad bonds are contained in the complaint. By what we have just stated we do not mean that the allegations are the same in language but what we do mean is that the legal effect of the allegations, so far as they are material to this decision, relating to the Central Pacific Railroad Company bonds, is the same as is the legal effect of the allegations relating to the Union Pacific Railroad Company bonds.

It is also alleged in the complaint that the deceased during his lifetime was not a resident or citizen of the state of Utah nor of the United States; that he purchased all of said bonds in the state of New York; and that the same "were never within the state of Utah at any time after their purchase by said deceased," but were at once by him taken to his place of residence in the principality of Monaco in the republic of France as before stated "and never were and are not property within the state of Utah."

The allegation that the said bonds were not and are not property within the state of Utah, the defendants insist, is an averment of a legal conclusion rather than an allegation of fact and hence they do not admit the same as a fact. There are many other allegations contained in the complaint which we do not deem it necessary to state or to more specifically refer to herein.

The defendants, hereinafter called appellants, interposed a general demurrer to the complaint, which was overruled by the district court, and appellants electing not to plead further, but to stand upon their demurrer, the court entered judgment in favor of the plaintiffs, hereinafter called respondents, for the full sum claimed and interest and costs. Appellants have appealed from the judgment and insist that the court erred in overruling their demurrer and in entering judgment in favor of respondents.

The tax in question was collected pursuant to the provisions of our statute (Comp Laws Utah 1917, § 3185, as amended by chapter 64, Laws Utah 1919, which, so far as material to the question involved on this appeal, reads as follows:

"All property within the jurisdiction of this state, and any interest therein, whether belonging to the inhabitants of this state or not, and whether tangible or intangible, which shall pass by will or by the statutes of inheritance of this or any other state, or by deed, grant, bargain, sale or gift, made in contemplation of the death of the grantor, vendor or donor, or intended to take effect in possession or enjoyment at or after the death of the grantor, vendor, or donor, to any person in trust or otherwise * * * shall be subject to the following tax, after the payment of all debts, for the use of the state. * * *"

The statute then provides the amount of property that shall be exempt from the tax and the amount that shall be paid, which is upon a graduated scale.

The controlling question is whether the bonds in question, at the time of the death of the decedent, was "property within the jurisdiction of this state" so as to make it subject to the inheritance or transfer tax imposed by our statute. The two appellants, in their brief and oral argument, insist that the bonds in question, at the time aforesaid, were within the jurisdiction of the state and subject to the tax, while respondents very urgently contend to the contrary. While many cases are cited by each side, yet we shall herein refer to such only as have passed upon the question under statutes which in effect are like ours.

The cases in which statutes like ours are passed on are the following: Matter of Blackstone, 69 A.D. 127, 74 N.Y.S. 508, affirmed in a memorandum opinion in 171 N.Y. 682 64 N.E. 1118, also affirmed on writ of error to the Supreme Court of the United States under the title of Blackstone v. Miller, 188 U.S. 189, 23 S.Ct. 277, 47 L.Ed. 439; Matter of Houdayer, 150 N.Y. 37, 44 N.E. 718, 34 L. R. A. 235, 55 Am. St. Rep. 642; Matter of Bronson, 150 N.Y. 1, 44 N.E. 707, 34 L. R. A. 238, 55 Am. St. Rep. 632; Matter of Whiting, 150 N.Y. 27, 44 N.E. 715, 34 L. R. A. 232, 55 Am. St. Rep. 640; In re Joyslin's Estate, 76 Vt. 88, 56 A. 281; Kinney v. Treasurer and Receiver General, 207 Mass. 368, 93 N.E. 586, 35 L. R. A. (N. S.) 784, Ann. Cas. 1912A, 902; Bliss v. Bliss, 221 Mass. 201, 109 N.E. 148, L. R. A. 1916A, 889; Gilbertson v. Oliver, 129 Iowa 568, 105 N.W. 1002, 4 L. R. A. (N. S.) 953; Walker v. People, 64 Colo. 143, 171 P. 747, 8 A. L. R. 855; Fuller v. South Carolina Tax Comm., 128 S.C. 14, 121 S.E. 478; State v. Chadwick, 133 Minn. 117, 157 N.W. 1077, 158 N.W. 637, L. R. A. 1916E, 1288. Appellants also cite and especially rely on the cases of In re Merriam's Estate, 147 Mich. 630, 111 N.W. 196, 9 L. R. A. N. S.) 1104, 118 Am. St. Rep. 561, 11 Ann. Cas. 119, and...