Ruckgaber v. Moore

• Decision Date: 07 November 1900
• Citation: 104 F. 947
• Parties: RUCKGABER v. MOORE, Collector.
• Court: U.S. District Court — Eastern District of New York

104 F. 947

RUCKGABER v. MOORE, Collector.

United States Circuit Court, E.D. New York.

November 7, 1900

F. W. &amp A. E. Hinrichs, John G. Carlisle, William Edmond Curtis, and Henry M. Ward, for plaintiff.

George H. Pettit, U.S. Atty., for defendant.

THOMAS District Judge.

A testatrix, sojourning in the state of New York, duly made her last will, which was admitted to probate in the county of Kings, in that state, where the person confirmed as executor resided. The testatrix was a creditor of persons residing in such county, and the owner of some shares of stock and bonds issued by American corporations. The executor collected the debt, and received the shares and bonds. The will gave all the estate to the testatrix's daughter, and on such gift the collector of internal revenue of the district embracing Kings county laid and collected a tax under the war revenue act of 1898. This action is to recover the sum paid under protest, and the present questions arise upon demurrer that the complaint does not state a cause of action. The plaintiff alleges that the gift was not subject to the tax because it was made by a woman, who was a resident of, and domiciled in France, to her daughter, who was a resident of, and domiciled in, Germany. The complaint does not indicate whether the testatrix or her daughter ever resided within the United States. However, from statements made upon the argument and in the briefs submitted, if not from the allegations of the complaint, the court may interpret the complaint as declaring that the testatrix, formerly an American citizens, married a French citizen, that thereafter her residence was abroad, and that for several years immediately preceding her death it had been in France. By the several statutes of America, France and Great Britain, the marriage of a citizen of such country with an alien wife confers upon the latter the citizenship of the husband; and this policy of three great powers, in connection with section 1999 of the Revised Statutes, which proclaims that expatriation is an inherent right, establishes that the political status of the wife follows that of her husband, with the modification that there must be withdrawal from her native country, or equivalent act expressive of her election to renounce her former citizenship as a consequence of her marriage. Some serious objections to this, or even the opposite conclusion, exist, but it has been reached after due consideration of the subject, and pertinent authorities, including Shanks v. Dupont, 3 Pet. 243, 7 L.Ed. 666; Pequignot v. City of Detroit (C.C.) 16 F. 211; and Comitis v. Parkerson (C.C.) 56 F. 556. Hence the testatrix must be regarded as having been a nonresident alien at the time of her death. For the same reason the daughter of the deceased, and her legatee, who had intermarried with a citizen of Germany, and for eight years previous to her mother's death had resided there, should be regarded as a citizen of that country.

Hence the discussion will be undertaken at the outstart upon the assumption that the gift was by a nonresident alien to a nonresident alien. It is undoubtedly true that neither a state legislature nor congress may lay an inheritance tax unless it has the jurisdiction of the donor or donee or the property donated. In the present case there is no dominion over the donor or the legatee. Hence there can be no proper tax unless there is a relation to the property justifying it. It will be assumed for the moment that the property was within the state of New York. In such case the state of New York could lay a direct tax upon it, which would be a usual exercise of the power of taxation. But the inheritance tax laid by the state is not based upon the theory of direct taxation of the property. It has been deemed a tax on the transmission of the property, based upon the right of the state to regulate the disposition of the same upon the owner's death. While the United States has no such power of regulation, yet it may lay a tax similar to that here involved upon property of a nonresident which was in the state at the time of his death. This follows from the statement of principles in Knowlton v. Moore, 178 U.S. 41, 20 Sup.Ct. 747, 44 L.Ed. 969.

The next inquiry, then, is, was the property within the state of New York? The property consisted of a certificate of stock issued by a New York corporation, bonds and coupons of corporations within one of the states, and an account current against citizens of New York. An account owing by a resident of the United States to a resident citizen of France does not and cannot have a situs in the state of New York, but its situs is that of its owner. There is no property here. What there is of property is abroad. The complaint states that the property taxed was in the state of New York at the decedent's death. This could not be true of a simple indebtedness to an alien, actually resident abroad at the time of his death. Such property is incapable of a situs apart from its owner, and is in this regard unlike public bonds and circulating notes of banking institutions (In re State Tax on Foreign-Held Bonds, 82 U.S. 300, 324, 21 L.Ed. 179); or bonds of private corporations (In re Whiting's Estate, 150 N.Y. 27, 44 N.E. 715, 34 L.R.A. 232); or certificates of stock (In re Bronson's Estate, 150 N.Y. 1, 44 N.E. 707, 34 L.R.A. 238; Tappan v. Bank, 86 U.S. 490, 22 L.Ed. 189); or tangible property, such as goods and chattels (Pullman Palace-Car Co. v. Pennsylvania, 141 U.S. 18, 11 Sup.Ct. 876, 35 L.Ed. 613; W. U. Tel. Co. v. Attorney General, 125 U.S. 530, 8 Sup.Ct. 961, 31 L.Ed. 790; State Railroad Tax Cases, 92 U.S. 575, 23 L.Ed. 669; Marye v. Railroad Co., 127 U.S. 117, 8 Sup.Ct. 1037, 32 L.Ed. 94; Coe v. Errol, 116 U.S. 517, 6 Sup.Ct. 475, 29 L.Ed. 715). But it may be asked, if a simple indebtedness can have no separate situs, how can a different conclusion be reached if the obligation be embodied in a writing, which is only evidence of a debt? Kirtland v. Hotchkiss, 100 U.S. 491, 498, 25 L.Ed. 558.

In Re State Tax on Foreign-Held Bonds, 82 U.S. 300, 21 L.Ed. 179, Mr. Justice Field said:

'But debts owing by corporations, like debts owing by individuals, are not property of the debtors in any sense. They are obligations of the debtors, and only possess value in the hands of the creditors. With them they are property, and in their hands they may be taxed. To call debts property of the debtors is simply to misuse terms. All the property there can be, in the nature of things, in debts of corporations, belongs to the creditors, to whom they are payable, and follows their domicile, wherever that may be. Their debts can have no locality separate from the parties to whom they are due. * * * It is undoubtedly true that the actual situs of its owner, will, in many cases, determine the state in which it may be taxed. The same thing is true of public securities consisting of state bonds and bonds of municipal bodies, and circulating notes of banking institutions. The former, by general usage, have acquired the character of, and are treated as, property in the place where they are found, though removed from the domicile of the owner. The latter are treated and pass as money wherever they are. But other personal property, consisting of bonds, mortgages, and debts generally, has no situs independent of the domicile of the owner, and certainly can have none where the instruments, as in the present case, constituting the evidences of debt, are not separated from the possession of the owners.'

The learned judge also illustrates by authorities, of which People v. Eastman, 25 Cal. 603, is a type, that a mortgage has no existence independent of the thing secured by it; that a payment of a debt discharges the mortgage; that the thing secured is intangible, and has no situs distinct and apart from the residence of the holder, but pertains to and follows the person. It may be observed that in the case then before the court the bonds were beyond the territorial jurisdiction of the taxing power.

The court of appeals of New York has determined that, when the owner is a nonresident, bonds of domestic corporations are taxable under the New York transfer act, if they are in fact in the state for safe-keeping, but not when they are actually without the state; and that the stock of such corporations is taxable in New York, irrespective of the actual situs of the certificate, and that deposits with a domestic trust company are taxable, although technically the property of the nonresident is a mere indebtedness from the trust company. See In re Bronson, 150 N.Y. 1, 44 N.E. 707, 34 L.R.A. 238; In re Whiting's Estate, 150 N.Y. 27 44 N.E. 715, 34 L.R.A. 232; In re Morgan's Estate, 150 N.Y. 35, 44 N.E. 1126; In re Houdayer, 150 N.Y. 37, 44 N.E. 718, 34 L.R.A. 235. Obviously the legislature in this instance left none of its taxing power unexercised, and expressed a policy to exact duties from such nonresidents as should lend their credit to the local enterprises of the state, provided the evidences of debt be within the state. The decision interpreting this act stops short of holding that an account current, due from a resident of New York to a resident of France, could be the subject of a death duty to the state government, although the holding respecting deposits with trust companies may be differentiated with difficulty. Yet, as is Beers v. Shannon, 73 N.Y. 292, it is high authority for holding that if the statute fairly include bonds of private corporations, having an actual situs within the state, although the owner be an actual nonresident, they would be subject to a death duty. That bonds of corporations may, for the purposes of taxation, have a situs separate from that of the owner, probably accords with...