State v. Jones

• Decision Date: 23 November 1927
• Docket Number: 6175.
• Parties: STATE ex rel. v. JONES. WALKER et al.
• Court: Montana Supreme Court

261 P. 356

80 Mont. 574

STATE ex rel. WALKER et al. v. JONES.

No. 6175.

Supreme Court of Montana

November 23, 1927

Appeal from District Court, Cascade County; W. H. Meigs, Judge.

Action by the State of Montana, on the relation of J. W. Walker and others, against Homer H. Jones, executor of the estate of Ebenezer G. Ranney, deceased. Judgment for defendant, and plaintiffs appeal. Reversed.

L. A Foot, Atty. Gen., and A. H. Augstman, Asst. Atty. Gen., for appellants.

Cooper Stephenson & Hoover and S. B. Chase, Jr., all of Great Falls for respondent.

CALLAWAY C.J.

This is an appeal by the state from a judgment entered in favor of the defendant in a controversy submitted to the district court of Cascade county on an agreed statement of facts, under section 9872, R. C. 1921.

The facts are that Ebenezer G. Ranney died testate at his domicile in New York, in May, 1925, and pursuant to the provisions of his will letters testamentary were issued to the defendant. As the decedent owned land in Cascade and other counties of this state, ancillary letters were issued to the defendant by the district court of Cascade county.

Among decedent's assets were promissory notes payable to his order, executed by residents of Montana and secured by mortgages upon real estate in Montana, duly recorded. Some of the notes were made payable in New York, others in Montana. The notes and mortgages were, at the time of the death of decedent, and ever since their delivery by the makers have been, located at the residence of the decedent in New York. These were not included in the probate proceedings in Cascade county.

The state contends that the notes and mortgages are subject to an inheritance, or succession, tax; the defendant contends that they are not. The trial court rendered judgment for defendant, and the state has appealed.

The question for determination has not hitherto been presented to this court. Montana has had an inheritance tax law in some form or other for 30 years. The present law was adopted from Wisconsin in 1921.

Section 1 of the 1921 act (Session Laws, Ex. Sess. 1921, c. 14, p. 772, being section 10377, R. C. 1921, re-enacted Session Laws 1923, c. 65, p. 140, re-enacted Session Laws 1925, c. 150, p. 265, re-enacted Session Laws 1927, c. 105, p. 353) provides in part:

"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, association or corporation, * * * in the following cases, except as hereinafter provided: (1) * * * When the transfer is by will or by 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."

Subdivision 3 of section 12, as amended by section 3 of the 1925 act (Session Laws 1925, p. 271), applicable to this case, provides that any personal representative, trustee, heir, devisee, or legatee of a nonresident decedent leaving no estate requiring administration in this state, desiring to transfer any stocks, bonds, mortgages, or other securities, or other personal property in this state, or within the jurisdiction of this state, may make application to the state board of equalization "for the determination whether there is any tax due upon account of the transfer thereof, and the amount of any such tax," and shall furnish the board certain information, the character of which is prescribed. "From the information so furnished them and such other information as they may be able to obtain with reference thereto," the board shall ascertain and determine the amount of the tax. The next subdivision provides that if the personal representative, trustee, heir, devisee, or legatee of such "nonresident decedent" has not complied with the provisions of subdivision 3, "upon such matter being called to its attention," the board shall proceed to obtain information and assess the tax on its own initiative.

Terms are defined in section 22 of the 1923 act (Session Laws, p. 164), as follows:

"The words 'estate' and 'property' as used in this act shall be taken to mean the real and personal property or interest therein passing or transferred to individual legatees, devisees, heirs, next of kin, grantees, donees, or vendees, and not as the property or interest therein of the decedent, grantor, donor, or vendor, and shall include all personal property within or without the state. The word 'transfer' as used in this act shall be taken to include the passing of property or any interest therein, in possession or enjoyment, present or future, by inheritance, descent, devise, succession, bequest, grant, deed, bargain, sale, gift, or appointment in the manner herein prescribed to each individual or corporation. The word 'decedent' as used in this act shall include the testator, intestate, grantor, bargainer, vendor, or donor. 'Intangible' or 'intangible property' when used in this act without other qualifications, shall be taken to include all moneys, stocks, bonds, notes, securities and credits of all kinds, secured or unsecured. * * *"

A study of the foregoing provisions, with others not necessary to be considered in this opinion, leaves no doubt that the Legislature intended to exercise the utmost taxing power of the state in the imposition of excise, or succession, taxes. Tyler v. Dane County (D. C.) 289 F. 843; Hoyt v. Keegan, 183 Iowa, 592, 167 N.W. 521; State ex rel. Graff v. Probate Court, 128 Minn. 371, 150 N.W. 1094, L. R. A. 1916A, 901; Peabody v. Treasurer and Receiver General, 215 Mass. 129, 102 N.E. 435. Rhode Island Hospital Trust Co. v. Doughton,

187 N.C. 263, 121 S.E. 741; State ex rel. Graff v. Probate Court, supra.

That the lawmaking power of this state intended to impose a succession tax upon mortgages owned by a nonresident decedent is put beyond question by the express language of the statute. Subdivision 3, § 12, supra. If the state has the power to impose the tax and has required the imposition thereof, the courts are required to follow the law, regardless of what they may think of the law's policy.

The learned district judge, considering that as a mortgage is a mere security for a debt and passes with the debt to any lawful holder thereof (Gallatin County v. Beattie, 3 Mont. 173; Holland v. Commissioners, 15 Mont. 460, 39 P. 575, 27 L. R. A. 797; Hull v. Diehl, 21 Mont. 71, 52 P. 782; Monidan Trust Co. v. Sheehan, 45 Mont. 424, 123 P. 692), and that the situs of the notes under the doctrine of mobilia sequuntur personam is at the domicile of the owner, in this case being actually at his domicile, held that the mortgages were not within the jurisdiction of this state and consequently not subject to taxation in this state. This conclusion is sound so far as the imposition of taxes upon the property itself is concerned. But is it conclusive as to whether a transfer, or succession tax, may be imposed thereon?

It is true that the state may not impose a property tax upon the promissory notes which are evidences of debt secured by mortgages of record upon real property in Montana. Const. art. 12, § 2; section 1998, R. C. 1921.

A tax on property must be limited to property actually within the jurisdiction of the taxing power. State ex rel. Bankers' Trust Co. v. Walker, 70 Mont. 484, 226 P. 894; State ex rel. Rankin v. Harrington, 68 Mont. 1, 217 P. 681. An excise, or succession, tax is not a tax on property. "The burden or the tax is not imposed upon the property itself, but upon the privilege of acquiring property by inheritance." Gelsthorpe v. Furnell, 20 Mont. 299, 51 P. 267, 39 L. R. A. 170; In re Touhy's Estate, 35 Mont. 431, 90 P. 170. It is a tax upon the transfer, transaction, or right to receive property, as the Supreme Court of Wisconsin said in State v. Bullen, 143 Wis. 512, 128 N.W. 109, Matter of Penfold's Estate, 216 N.Y. 163, 110 N.E. 497, Ann. Cas. 1916A, 783; State of Colorado v. Harbeck, 232 N.Y. 71, 133 N.E. 357; Chaffin v. Johnson, 200 Iowa, 89, 204 N.W. 424; Walker v. People, 64 Colo. 143, 171 P. 747, 8 A. L. R. 855.

The precise question is, "Can it be held, for the purpose of imposing a succession or transfer tax thereon, that the property affected by this proceeding is within the jurisdiction of the state?

According to the fact of power" the question must be answered in the affirmative. The reason is that the state has jurisdiction of the person and property of the debtor, and the creditor must come into this state and apply to the jurisdiction of our courts if he is obliged to enforce his demand by process of law. This principle is recognized in State ex rel. Bankers' Trust Co. v. Walker, supra, and has been variously invoked. Blackstone v. Miller, 188 U.S. 189 , 47 L.Ed. 439; Liverpool & London & Globe Ins. Co. v. Board of Assessors, 221 U.S. 346 , 55 L.Ed. 762, L. R. A. 1915C, 903; Matter of Houdayer, 150 N.Y. 37, 44 N.E. 718, 34 L. R. A. 235 ; State ex rel. Graff v. Probate Court, supra; State ex rel. Marsh v. Probate Court, 168 Minn. 508, 210 N.W. 389; Hoyt v. Keegan, 183 Iowa, 592, 167 N.W. 521; Chaffin v. Johnson, 200 Iowa, 89, 204 N.W. 424; In re Rogers' Estate, 149 Mich. 305, 112 N.W. 931, 11 L. R. A. (N. S.) 1134, 119 Am. St. Rep. 677.

What of the character of the debt? The promissory notes are mere evidences of debt secured by mortgages. "The general rule of law is well settled, that for the purpose of founding administration all simple contract debts are assets at the domicile of the debtor; and that the locality of such a debt for this purpose is not affected by a bill of exchange or promissory note...