Nielsen v. Johnson, 115

• Decision Date: 18 February 1929
• Docket Number: No. 115,115
• Citation: 73 L.Ed. 607,49 S.Ct. 223,279 U.S. 47
• Parties: NIELSEN v. JOHNSON, Treasurer of State of lowa
• Court: U.S. Supreme Court

279 U.S. 47

49 S.Ct. 223

73 L.Ed. 607

NIELSEN

v JOHNSON, Treasurer of State of lowa.

No. 115.

Argued Jan. 9 and 10, 1929.

Decided Feb. 18, 1929.

Mr. Nelson Miller, of Le Mars, Iowa, for petitioner.

Mr. John Fletcher, Atty. Gen. of Iowa, for respondent.

[Argument of Counsel from page 48 intentionally omitted] Mr. Justice STONE delivered the opinion of the Court.

This case is here on certiorari, granted June 4, 1928, 277 U. S. 583, 48 S. Ct. 600, 72 L. Ed. 999), under section 237 of the Judicial Code (28 USCA § 344), to review a judgment of the Supreme Court of Iowa, affirming a judgment of the Plymouth district court imposing an inheritance tax on the estate of petitioner's intestate. Anders Anderson, the intestate, a citizen of the kingdom of Denmark residing in Iowa, died there February 9, 1923, leaving his mother, a resident and citizen of Denmark, his sole heir at law and entitled by inheritance, under the laws of Iowa, to his net estate of personal property, aggregating $3,006.37. By section 7315, c. 351, Code of Iowa (1927), the estate of a decedent passing to his mother or other named close relatives, if alien nonresidents of the United States is subject to an inheritance tax of 10 per cent., but by section 7313 an estate of less than $15,000, as was decedent's, passing to a parent who is not such a nonresident alien is tax free. In the proceedings in the state court for fixing the inheritance tax, petitioner asserted that the provisions of the statutes referred to, so far as they authorized a tax upon this decedent's estate, were void as in conflict with article 7 of the Treaty of April 26, 1826, between the United States and Denmark (8 Stat. 340, 342), renewed in 1857 (11 Stat. 719, 720), reading as follows:

'Article 7. The United States and his Danish Majesty mutually agree, that no higher or other duties, charges, or taxes of any kind, shall be levied in the territories or dominions of either party, upon any personal property, money, or effects, of their respective citizens or subjects, on the removal of the same from their territories or dominions reciprocally, either upon the inheritance of such property, money, or effects, or otherwise, than are or shall be payable in each state, upon the same, when removed by a citizen or subject of such state respectively.'

The Supreme Court of Iowa, 218 N. W. 140, following its earlier decision, In re Estate of Pedersen, 198 Iowa, 166, 196 N. W. 785, upheld the statute as not in conflict with the treaty.

In Petersen v. Iowa, 245 U. S. 170, 38 S. Ct. 109, 62 L. Ed. 225, this court held, following Frederickson v. Louisiana, 23 How. 445, 16 L. Ed. 577, that article 7 was intended to apply only to the property of citizens of one country located within the other and so placed no limitation upon the power of either government to deal with its own citizens and their property within its own dominion. Hence, it did not preclude the inheritance tax there imposed upon the estate of a resident citizen of Iowa at a higher rate upon legacies to a citizen and resident of Denmark than upon similar legacies to citizens or residents of the United States. The court said (at page 172 of 245 U. S. (38 S. Ct. 110)):

'Conceding that it (article 7) requires construction to determine whether the prohibitions embrace taxes ge- nerically considered, or death duties, or excises, on the right to transfer and remove property, singly or collectively, we are of the opinion that the duty of interpretation does not arise since in no event would any of the prohibitions be applicable to the case before us.'

But, in the present case, the decedent was a citizen of Denmark, owning property within the state of Iowa, and article 7, by its terms, in applicable to charges or taxes levied on the personal property or effects of such a citizen; hence its protection may be invoked here if the discrimination complained of is one embraced within the terms of the treaty.

That there is a discrimination based on alienage is evident, since the tax is imposed only when the nonresident heirs are also aliens. But it is argued by respondent, as the court below held, that the present tax is not prohibited by the treaty since it is one upon succession (In re Estate of Thompson, 196 Iowa, 721, 195 N. W. 250, In re Meinert's Estate, 204 Iowa, 355, 213 N. W. 938), and not on property or its removal which, it is said, is alone forbidden; and that in any case since the only tax discrimination aimed at by article 7 in cases of inheritance is that upon the power of disposal of the estate, and not the provilege of succession, the particular discrimination complained of is not forbidden, for the statutes of Iowa permit a citizen of Denmark to dispose of his estate of citizens and residents of Denmark on the same terms as a citizen of Iowa to like nonresident alien beneficiaries.

The narrow and restricted interpretation of the treaty contended for by respondent, while permissible and often necessary in construing two statutes of the same legislative body in order to give effect to both so far as is reasonably possible, is not consonant with the principles which are controlling in the interpretation of treaties. Treaties are to be liberally construed, so as to effect the apparent intention of the parties. Jordan v. Tashiro (No. 13, October Term, 1928), 278 U. S. 123, 49 S. Ct. 47, 73 L. Ed. —; Geofroy v. Riggs, 133 U. S. 258, 271, 10 S. Ct. 295, 33 S. Ct. 642; In re Ross, 140 U. .S. 453, 475, 11 S. Ct. 897, 35 L. Ed. 581; Tucker v. Alexandroff, 183 U. S. 424, 22 S. Ct. 195, 46 L. Ed. 264. When a treaty provision fairly admits of two constructions, one restricting, the other enlarging, rights which may be claimed under it, the more liberal interpretation is to be preferred. Asakura v. Seattle, 265 U. S. 332, 44 S. Ct. 515, 68 L. Ed. 1041; Tucker v. Alexandroff, supra; Geofroy v. Riggs, supra. And as the treaty-making power is independent of and superior to the legislative power of the states, the meaning of treaty provisions so construed is not restricted by any necessity of avoiding possible conflict with state legislation and when so ascertained must prevail over inconsistent state enactments. See Ware v. Hylton, 3 Dall. 199, 1 L. Ed. 568; Jordan v. Tashiro, supra, cf. Cheung Sum Shee v. Nagle, 268 U. S. 336, 45 S. Ct. 539, 69 L. Ed. 985. When their meaning is uncertian, recourse may be had to the negotiations and diplomatic correspondence of the contracting parties relating to the subject-matter and to their own practical construction of it. Cf. In re Ross, supra, 140 U. S. at page 467, 11 S. Ct. 897, 35 L. Ed. 851; United States v. Texas, 162 U. S. 1, 23, 16 S. Ct. 725, 40 L. Ed. 867; Kinkead v. United States, 150 U. S. 486, 14 S. Ct. 172, 37 L. Ed. 1152; Terrace v. Thompson, 263 U. S. 197, 223, 44 S. Ct. 15, 68 L. Ed. 255.

The history of article 7 and references to its provisions in displomatic exchanges between the United States and Denmark leave little doubt that its purpose was both to relieve the citizens of each country from onerous taxes upon their property within the other and to enable them to dispose of such property, paying only such duties as are exacted of the inhabitants of the place of its situs, as suggested by this court in Petersen v. Iowa, supra, 245 U. S. 174, 38 S. Ct. 109, 62 L. Ed. 225, and also to extend like protection to alien heirs of the noncitizen.

On March 5, 1924, Mr. Pedersen, Minister of Denmark to the United States, presented to John Quincy Adams, Secretary of State, a project of convention for the consideration of this government. This project dealt with the commercial relations between the two countries and their territories and the appointment of consular officers, but did not contain any provisions corresponding to article 7. On January 14, 1826, certain citizens of the United States addressed to Henry Clay, then Secretary of State, a memorial complaining of certain taxes, imposed by the Danish government with respect to property of citizens of the United States located in the Danish West Indies, known as 'sixths' and 'tenths,' the former being one-sixth of the value of the property, payable to the crown, and the latter a further one-tenth of the residue, payable to the town or county magistrate, as a prerequisite to removal of property from the Islands. Both taxes ere imposed on the property inherited by an alien heir. Danish Laws, Code of Christian V, book V, c. 2, §§ 76, 77, 78, 79. The memorial prayed that an article be inserted in the treaty then contemplated with Denmark, comparable to the similar provisions of existing treaties between Denmark and Great Britain and Denmark and France, forbidding the imposition of taxes of this character.

Previously, on November 7, 1825, Mr. Clay had addressed a note to the Minister of Denmark, setting forth the conditions under which the United States would be disposed to proceed with negotiations. 3 Notes to Foreign Legations, 451. The note included, in numbered paragraphs, certain proposals which the government of the United States desired to have considered in connection with the draft convention submitted by the Danish Minister. Paragraph 5 was as follows:

'When citizens or subjects of the one party die in the country of the other, their estates shall not be subject to any droit de de traction, but shall pass to their successors, free from all duty.'

In a letter of April 14, 1826, shortly before the execution of the treaty, the Danish Minister transmitted to Mr. Clay a copy of what he termed 'the additional article to the late convention between Denmark and Great Britain respecting the mutual abolition of the droit de de traction.' This article, dated June 16, 1824, is substantially in the phraseology of article 7 of the present treaty between the United States and Denmark.¹

In the communication of Mr. Clay to the Danish charge d'affaires of November 10, 1826, following the ratification of the treaty, referring to ...