State ex rel. Smith v. Probate Court
| Decision Date | 06 February 1914 |
| Docket Number | Nos. 18,559 - (308).,s. 18,559 - (308). |
| Citation | 124 Minn. 508 |
| Parties | STATE ex rel. LYNDON A. SMITH, as Attorney General, v. PROBATE COURT OF COUNTY OF RAMSEY and Another.<SMALL><SUP>1</SUP></SMALL> |
| Court | Minnesota Supreme Court |
Lyndon A. Smith, Attorney General, and William J. Stevenson, for relator.
Charles P. Hall, for respondent.
Certiorari to review an order of the probate court of Ramsey county determining the amount of inheritance tax to be paid by the legatees of George S. Heron, deceased. The undisputed facts appear from the return of respondents to the writ, and are as follows:
More than 15 years ago Sarah Heron, a resident of Kentucky, died, leaving a will which was probated in that state. By this will, the testatrix gave to her executor in trust for the use and benefit of her two sons, William and George S., the residue of her estate. The trustee was given the management and control of the property, with power to sell and reinvest the proceeds. The income of the trust estate, the testatrix bequeathed to her two sons, to be paid to them equally as it was collected by the trustee. She gave to these sons the right of disposing of by will the entire trust estate. Each was given the right to make his will, disposing of as he might choose one moiety of said trust estate. If both died intestate, the entire trust estate was to descend and be distributed according to the laws of Kentucky. If one son should die testate and the other intestate, the moiety of the one dying testate was to descend as he should direct by his will, and the remaining moiety should descend and be distributed according to the laws of Kentucky.
William Heron was at the time of his mother's death and still is a resident of the state of Tennessee. George S. Heron was then and until his death a resident of the state of Minnesota, living in St. Paul. The trustee was and still is a resident of Kentucky. George S. Heron died May 10, 1912, leaving real and personal property in Ramsey county. At the time of his death the corpus of the entire trust estate was $104,870.05. It consisted entirely of personal property, bonds and mortgages, all in the possession of the trustee in Kentucky. George S. Heron died testate. After making certain specific bequests, the will gave to the testator's brother William, during his lifetime, one-half of "what would be my share, if living, of the income derived from the estate of my deceased mother." Upon the death of William, the will provided that "my said interest in my said mother's estate shall pass to and be vested in my nephews, Shirley S. Heron and William Edgar Heron * * * sons of my said brother, in equal shares forever." There was a residuary clause in which these nephews were named as beneficiaries, in equal shares.
The question is whether this exercise by George S. Heron of the power of appointment given to him by the will of his mother, was a transfer of property that is taxable under the inheritance tax law of this state. The probate court held that it was not.
Our statute, Laws 1905, p. 427, c. 288, as amended, (G. S. 1913, § 2271) provides in section 1: "A tax shall be and is hereby imposed upon any transfer of property, real, personal or mixed, or any interest therein or income therefrom in trust or otherwise, to any person * * * in the following cases:
(1) "When the transfer is by will or by the intestate laws of this state from any person dying possessed of the property while a resident of the state.
(2) "When a transfer is by will or intestate law of property within the state or within its jurisdiction, and the decedent was a nonresident of the state at the time of his death."
(3) (Relates to transfers in contemplation of death)
(4) (When tax to be imposed)
(5) "Whenever any person * * * shall exercise a power of appointment derived from any disposition of property made either before or after the passage of this act, such appointment when made shall be deemed a transfer taxable under the provisions of this act in the same manner as though the property to which such appointment relates belonged absolutely to the donee of such power, and had been bequeathed or devised by such donee by will," etc.
1. George S. Heron by his will clearly exercised the power of appointment created by the will of his mother. It is the exercise of the power of appointment which effects the transfer, gives the grantee the property, and not its creation. The language of the statute is that "such appointment when made shall be deemed a transfer." The authorities are uniform on this point. Matter of Dows, 167 N. Y. 227, 60 N. E. 439, 52 L.R.A. 433, 88 Am. St. 508; Matter of Fearing, 200 N. Y. 340, 93 N. E. 956; Matter of Delano, 176 N. Y. 486, 68 N. E. 871, 64 L.R.A. 279; Chanler v. Kelsey, 205 U. S. 471, 27 Sup. Ct. 550, 51 L. ed. 882; Attorney General v. Upton, L. R. 1 Ex. 224.
Had the property transferred by this exercise of the power by Heron been real estate in Minnesota, or personal property having its actual situs in the state, there can be no doubt that the transfer would be taxable under our statute. The statute says that such appointment shall be deemed a transfer taxable under the provisions of the act "in the same manner as though the property to which such appointment relates, belonged absolutely to the donee of such power and had been bequeathed or devised by such donee by will." We must treat the case, therefore, as though the bonds, and mortgages which constituted the corpus of the trust estate, though in the actual custody of a nonresident, belonged absolutely to George S. Heron, and he had bequeathed them to his nephews. Matter of Cooksey, 182 N. Y. 92, 74 N. E. 880; Matter of Fearing, 200 N. Y. 340, 93 N. E. 956.
Heron was a resident of Minnesota, and exercised the power of appointment here. Treating the indebtedness evidenced by these securities as the absolute property of Heron, as, under the statute, we must for the purposes of this case, their situs as between the debtor and the creditor was the domicile of the latter. State Tax on Foreign Held Bonds, 15 Wall. 300, 21 L. ed. 179; Matter of Bronson, 150 N. Y. 1, 44 N. E. 707, 34 L.R.A. 238, 55 Am. St. 632; Matter of Fearing, 200 N. Y. 340, 93 N. E. 956. It is well settled, however, that in modern times the old rule that the situs of personal property is the domicile of the owner, "has yielded more and more to the lex situs, the law of the place where the property is kept and used." Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18, 11 Sup. Ct. 876, 35 L. ed. 613. For the purposes of taxation, the law may separate personal property from the person of its owner, and give it a situs of its own. Tappan v. Merchants National Bank, 19 Wall. 490, 22 L. ed. 189; Savings & Loan Society v. Multnomah County, 169 U. S. 421, 18 Sup. Ct. 392, 42 L. ed. 803; New Orleans v. Stempel, 175 U. S. 309, 20 Sup. Ct. 110, 44 L. ed. 174; Bristol v. Washington County, 177 U. S. 133, 20 Sup. Ct. 585, 44 L. ed. 701; In re Jefferson, 35 Minn. 215, 28 N. W. 256; 2 Notes on Minnesota Cases, 872. As stated by Chief Justice Gilfillan in the Jefferson case, the rule that the domicile of the owner is deemed the situs of his personal property In the Bristol case, in which the Jefferson case was upheld and followed, Mr. Chief Justice Fuller said [p. 145]: "Personal property, as this court has declared again and again, may be taxed, either at the domicile of its owner, or at the place where the property is situated, even if the owner is neither a citizen nor a resident of the state which imposes the tax." It is doubtless true, under these decisions, that the state of Kentucky could...
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