State v. Pauwelyn (In re Tuohy's Estate)

• Decision Date: 27 May 1907
• Citation: 35 Mont. 431
• Parties: In re TUOHY'S ESTATE. STATE et al. v. PAUWELYN et al.
• Court: Montana Supreme Court

35 Mont. 431

In re TUOHY'S ESTATE.

STATE et al.

v.PAUWELYN et al.

Supreme Court of Montana.

May 27, 1907.

Appeal from District Court, Silver Bow County; Geo. M. Bourquin, Judge.

Proceedings to fix the amount of inheritance tax on the estate of James Tuohy. From an order fixing the amount, Cyril Pauwelyn, executor, and others, appeal. Affirmed.

Maury & Hogevoll, W. Y. Pemberton, John B. Clayberg, John J. McHatton, T. J. Walsh, M. D. Leehey, Wm. Scallon, John A. Coleman, and C. B. Nolan, for appellants.

Albert J. Galen, Atty. Gen., and E. M. Hall, Asst. Atty. Gen., for respondents.

BRANTLY, C. J.

James Tuohy died testate in Silver Bow county on October 2, 1893. Under the terms of his will Cyril Pauwelyn was made executor and residuary legatee. With the exception of one lot in the city of Butte and a small amount of personal property, the estate consisted of interests in patented mining claims, which were, all but one not mentioned in the will, specifically devised to Daniel Shields and the appellants other than Pauwelyn. Soon after Tuohy's death Cyril Pauwelyn qualified as executor, and the administration of the estate has been pending in the district court of Silver Bow county. On June 29, 1906, the court, in pursuance of the provisions of the act of the Fifth legislative assembly approved March 4, 1897 (Sess. Laws 1897, p. 83), appointed an appraiser to ascertain the value of the assets of the estate, for the purpose of enabling it to fix the amount of the inheritance tax to be paid by the executor prior to final distribution among the devisees; the administration having at that time reached the point at which a distribution was about to be made. The appraiser thereafter, on August 4, 1906, filed his report. From this it appears that at the time the act above referred to was approved the gross value of the estate was $37,294.82, but that at the date of the report it had a value of $171,294.82; the increase in value between the date of the passage of the act and the date of the appraisement thus appearing to be $134,000. When the report was filed, the court, after notice to the parties interested, by order fixed the amount of tax to be paid by charging the value found on March 4, 1897, less the amount of indebtedness, costs, and expenses of administration, at the rate of $5 per $1,000, and the $134,000 of increase in value at the same rate. Since the tax on the first valuation had not been paid within 18 months after it became due-that is, after March 4, 1897-interest on the amount due at the rate of 7 per cent. from that date until the date of the order was added. The court's figures are the following:

The amount so fixed the executor was directed to pay to the county treasurer. The correct difference between the value on March 4, 1897, to wit, $37,394.82, and the amount of indebtedness, etc., $30,514, is $6,880.82. Taking this as the basis upon which the amount due on March 4, 1897, should have been calculated, and comparing the result with the amount fixed by the court, it will be seen that the result reached by the court is not correct; but the error is in favor of the appellants, and is not a matter of complaint.

At the time the order was made Cyril Pauwelyn, the executor, and all the other legatees, objected to the method pursued by the court in ascertaining the amount of tax due, and reserved their exceptions; and from the order fixing the amount and directing its payment they have all appealed to this court. They make these two contentions: (1) The court erred in entering judgment for any tax at all, for that the entire property of the estate, at all times since March 4, 1897, has not been of a value in excess of $2,500, under the method of valuation prescribed for mining property by the Constitution. (2) The court erred in taxing the increase, there being no increase in property.

1. The state Constitution (section 3, art. 12) provides: “All mines and mining claims, both placer and rock in place, containing or bearing gold, silver, copper, lead, coal or other valuable mineral deposits, after purchase thereof from the United States, shall be taxed at the price paid the United States therefor, unless the surface ground, or some part thereof, of such mine or claim, is used for other than mining purposes, and has a separate and independent value for such other purposes, in which case said surface ground, or any part thereof, so used for other than mining purposes, shall be taxed at its value for such other purposes, as provided by law. ***” It is said by the appellants that this provision is mandatory, that no other basis or measure of value may be adopted for taxation for any purpose when the property to be taxed falls within the designation of “mines and mining claims” used exclusively for mining purposes, and that, had the court adopted this basis or measure, it would not have assessed any tax at all, since the value of the estate, after the payment of debts, costs, and expenses, does not exceed $500.

There is no controversy but that all the real estate listed and valued in the inventory, except the city lot valued at $250, falls within the designation of “mines and mining claims,” and that all of it is used for mining purposes exclusively. The area of all of it does not exceed 55 acres. If the position of appellants is correct, the tax could not in any event have been more than nominal. The fallacy of the contention, however, is that it assumes that an inheritance tax is a tax levied upon the property itself, like taxes for ordinary revenue purposes. This theory is, under practically all the decisions, not correct. Such a tax is defined to be an “impost, duty, or excise upon the privilege secured by law to devisees, legatees, grantees, heirs, and personal representatives of taking, holding, and enjoying all property, real and personal, or any interest therein, passing by will, by intestate law, or by any grant or gift made inter vivos and intended to take effect at or after the death of the grantor.” 27 Am. & Eng. Ency. Law (2d Ed.) 337. This court, in considering the nature of the imposition, in Gelsthorpe v. Furnell, 20 Mont. 299, 51 Pac. 267, 39 L. R. A. 170, said, through Mr. Justice Hunt: “The better view, as laid down by the authorities, is that a collateral inheritance or succession tax is a duty or bonus exacted in certain instances by the state upon the right and privilege of taking legacies, inheritances, gifts, and successions passing by will, by intestate laws, or by any deed or instrument, made inter vivos, intended to take effect at or after the death of the grantor. The burden or the tax is not imposed upon the property itself, but upon the privilege of acquiring property by inheritance. In nearly all inheritance tax laws the statutes provide for appraising the property to be inherited, but the object of such valuation is not to tax the property itself. It is to arrive at a measure of price by which the privilege of inheritance can be valued.” This view is so well established by the decided cases cited in the opinion that it is only necessary to refer to them. We cite, however, the following: Plummer v. Coler, 178 U. S. 115, 20 Sup. Ct. 829, 44 L. Ed. 998;Estate of Stanford, 126 Cal. 112, 54 Pac....