State v. Brooks
| Decision Date | 26 September 1930 |
| Docket Number | No. 28034.,28034. |
| Parties | STATE v. BROOKS. |
| Court | Minnesota Supreme Court |
Appeal from District Court, Ramsey County; Jas. C. Michael, Judge.
Action by the State of Minnesota against Mary Brooks as executrix of the last will and testament of Margaret Thompson, deceased. From an adverse order, defendant appeals.
Affirmed.
Essie W. Williams, of St. Paul, for appellant.
Henry N. Benson, Atty. Gen., and John F. Bonner, Asst. Atty. Gen., for the State.
Action to recover an inheritance tax wherein the state's complaint was held good on general demurrer, and, the question involved having been certified by the district court as important and doubtful, defendant appeals.
February 17, 1896, Charles Thompson, by the trust deed hereinafter referred to, transferred to trustees what probably was the bulk of his rather large estate. He was then a bachelor but married in the following September. He died, a resident of this state, in 1915. His widow followed him in death June 13, 1929. No inheritance tax has ever been determined or collected on the transfer of the property involved in the trust above referred to. One was collected upon the estate of Charles Thompson not included in that trust. The question whether the transfer of the trust property was subject to the tax was reserved by stipulation for determination by action and is now before us in this one against the estate of Mrs. Thompson.
The instrument creating the trust recited that Charles Thompson was "unequal to the care and management * * * liable to mismanage" the property and income and "desirous to make provision whereby an ample support would be secured during his lifetime to himself and any family that he may have," and the property preserved "for the benefit of such family after his death." It then transferred the property to the trustees with full power of management and a direction to apply income "or so much thereof as may be necessary, from time to time, to the ample support and maintenance of said Charles Thompson and any family that he may have, to invest and accumulate, during the life of the said Charles Thompson, any surplus of income that may arise." The trustees were given an unrestricted power to sell free of the trust, to apply the proceeds "to the support of said Charles Thompson or to the payment of any debt" of his "properly enforceable" against the trust property.
A provision of the instrument especially important is this: "At the death of said Charles Thompson the trustees shall convey and transfer unto such person as he by his last will * * * shall direct or appoint, all and singular the said trust estate, and in default of such direction or appointment said trustees shall, upon the death of said Charles Thompson, convey all said trust estate and property unto his lawful heirs."
Mr. Thompson died intestate without having made any appointment under the trust deed. There being no children or grandchildren, his wife as only heir took the whole property. It is on that transfer or succession that a tax is now sought under Laws 1905, c. 288, Laws 1911, c. 372 (sections 2292-2321, Mason's Minn. St. 1927). As amended in 1911, the law contains this provision (section 2292(5), Mason's Minn. St. 1925):
"Whenever any person or corporation 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; and whenever any person or corporation possessing such a power of appointment so derived shall omit or fail to exercise the same within the time provided therefor, in whole or in part a transfer taxable under the provisions of this act shall be deemed to take place to the extent of such omission or failure, in the same manner as though the persons or corporations thereby becoming entitled to the possession or enjoyment of the property to which such power related had succeeded thereto by a will of the donee of the power failing to exercise such power, taking effect at the time of such omission or failure."
1. The tax imposed by our statute was characterized in State v. Probate Court of Hennepin County, 137 Minn. 238, 163 N. W. 285, L. R. A. 1917F, 436, as one "upon the privilege of succession or inheritance, and not upon the estate." See also State v. Probate Court of Kandiyohi County, 143 Minn. 77, 172 N. W. 902. It is always helpful and sometimes important to keep in mind that inheritance taxes may be and are "imposed on either, or both, of two entirely different subjects." One is the mere "transmission of property by a deceased person," and the other "the privilege of taking property by will or by inheritance or by succession in any other form upon the death of the owner." In the latter case it "is imposed upon each legacy or distributive share of the estate as it is received," and "is called a legacy or succession tax." 26 R. C. L. 195.
Our inheritance tax law purports in one part to impose a tax upon "any transfer of property," (section 2292, Mason's Minn. St. 1927) but the whole statute makes it plain that a main subject of the tax is the right of succession as well as that of transmission. By section 2294 the value of a gift in trust is made the basis of the valuation, and the tax is referred to as one "on any devise, bequest, legacy, gift or transfer." The same characterization appears in sections 2295 and 2296. By section 2297 the tax is made a lien, not upon the whole estate, but only "upon the property embraced in any inheritance, devise, bequest, legacy or gift until paid," and by section 2299 executors, administrators, and trustees are empowered to sell only "so much of the property embraced in any inheritance, devise, bequest or legacy" as will enable him to pay the tax imposed. So the tax is properly to be characterized as "an excise tax, imposed not only upon the right of the owner of property to transmit it after his death, but also upon the privilege of his beneficiaries to succeed to the property thus dealt with." Attorney General v. Stone, 209 Mass. 186, 190, 95 N. E. 395, 397.
So, whatever else it may be, the duty levied by subdivision 5 of section 2292, above quoted, is a succession duty. As to property subject to a power of appointment, there is considered to take place a taxable succession on the death of the donee and a consequent vesting in the beneficiary of complete title either by reason of the exercise of the power or a failure to exercise it. There being no question as to the meaning of the statute and no doubt that it was the legislative intent to reach just such a succession as that now before us, the only issue is as to the constitutional power of the legislature to do what it has attempted.
The argument contra is that, the Thompson trust having been created in 1896, long before we had any inheritance tax law in this state, the transfer took effect then in such fashion that to impose a tax thereon by a subsequent law would impair the obligation of a contract and result in a deprivation of property without due process of law. The claim is that, when Mrs. Thompson married the settlor a few months after the execution of the deed of trust, her rights vested thereunder, and thereafter were beyond the reach of any subsequent attempt to levy an inheritance tax.
2. Counsel say that we took the statute now involved, section 2292(5), Mason's Minn. St. 1927, from New York, and it is argued that we are bound in consequence to adopt the view of the court of last resort of that state that it is unconstitutional as applied to successions of the kind presently involved. In re Craig, 97 App. Div. 289, 89 N. Y. S. 971, affirmed 181 N. Y. 551, 74 N. E. 1116; In re Pell, 171 N. Y. 48, 63 N. E. 789, 57 L. R. A. 540, 89 Am. St. Rep. 791; In re Lansing, 182 N. Y. 238, 74 N. E. 882. "It is a well-recognized principle that where a statute, the construction of which has been judicially determined," has been taken from another state, there is a presumption "that the legislature adopted the statute with that settled construction." Nicollet Natl. Bank of Minneapolis v. City Bank, 38 Minn. 85, 35 N. W. 577, 579, 8 Am. St. Rep. 643. But that rule does not touch the question of the statute's validity. It is simply impossible to think that the Legislature adopted from another state a given statute and with it a decision holding its adoption futile. We must then decide for ourselves the question of constitutionality.
3. We need not discuss either the distinctions between vested and contingent remainders, or those between estates in possession and expectancy. Neither need we determine just how accurately to characterize the interest in the trust fund acquired by Mrs. Thompson on her marriage to the settlor. There is no uncertainty either as to what she got or what she did not. She did take an irrevocable right to reasonable support while she remained the wife of the settlor and during his lifetime. She did not take any right to succeed to the corpus including accumulated income, if any, on the death of the settlor. As to that Charles Thompson reserved the unconditional power to appoint by will the person or persons who should take, or by not appointing any to transmit the property to his "lawful heirs." So far as the deed of trust is concerned, by an appropriate appointment, he could have...
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