United states v. Board of Finance & Revenue

• Decision Date: 27 December 1951
• Citation: 369 Pa. 386,85 A.2d 156
• Parties: UNITED STATES v. BOARD OF FINANCE AND REVENUE.
• Court: Pennsylvania Supreme Court

85 A.2d 156

369 Pa. 386

UNITED STATES v. BOARD OF FINANCE AND REVENUE.

Supreme Court of Pennsylvania.

December 27, 1951

Rehearing Denied Feb. 14, 1952.

The United States of America, by J. Howard McGrath, Attorney General of the United States as successor to the Alien Property Custodian, filed with the Board of Finance and Revenue of the Commonwealth of Pennsylvania a claim to money of a decedent's estate paid into the state treasury without escheat, under an award of the Orphans' Court of Philadelphia, and the claim was denied on ground that the custodian failed to offer any proof that any next of kin existed who were enemy nationals. The Board of Finance and Revenue appealed from an order of the Court of Common Pleas of Dauphin County, Karl E. Richards, P. J. O. C., at No. 102 Commonwealth Docket, 1946, reversing the Board's refusal of the claim. The Supreme Court, Ladner, J., at No. 40, May term, 1951, held that under the Trading with the Enemy Act the custodian was not entitled to funds paid into the state treasury without escheat.

Reversed.

Jones and Allen M. Stearne, JJ., dissented.

H. F. Stambaugh, Sp. Counsel, Harrisburg, Robt. E. Woodside, Atty. Gen., for appellant.

Arthur A. Maguire, U.S. Atty., Scranton, Irwin A. Seibel, Asst. U.S. Counsel, Harold I. Baynton, Asst. Atty. Gen., James D. Hill, George B. Searls, Attorneys, Department of Justice, Washington, D. C., for appellee.

Before DREW, C. J., and STERN, STEARNE, JONES, BELL, LADNER, and CHIDSEY, JJ.

LADNER Justice.

The Commonwealth of Pennsylvania appeals from the order of the Dauphin County Court, see 61 Dauph.Co. 127 reversing the Board of Finance and Revenue's refusal of the claim of J. Howard McGrath, Attorney General of the United States, as successor to the Alien Property Custodian for the sum of $16,280.37, paid into the State Treasury without escheat, under an award of the Orphans' Court of Philadelphia, made because of the absence of known next of kin.

The claim was denied because of the failure of the U.S. custodian to offer any proof that any next of kin existed who were enemy nationals or resided in any enemy country. The custodian takes the position that he need produce no proof and stands on the extreme proposition that he may by an administrative fiat seize money in a State Treasury by merely declaring it to be the property of unnamed, unidentified and perhaps nonexistent enemy heirs. The court below conceded that by such declaration alone the custodian might interfere with the state's constitutionally guaranteed right to exercise its control over the devolution of property within its borders. The implications of such a ruling are most serious and, affecting as it does the sovereignty of a state, must be carefully examined.

Historians have repeatedly asserted that the proud freedom of the individual American citizen has in no small measure been due to our dual form of government ‘ which had no parallel in political history.'^[1]Originally the Federal Government was framed as and intended to be one of limited specified powers; the Constitution so declares. It would never have been ratified by the requisite number of states if it had not been for the pledge made to append a Bill of Rights and to expressly guarantee (what Madison said was implied) that ‘ The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.’ This guarantee became the important 10th Amendment. Step by step we have seen the Federal Government invade the prerogatives of the states through the doctrine of implied powers, but never has it been thought possible that money left by a resident decedent awarded to the State Treasury in absence of known heirs, was subject to seizure by a mere say so of an administrative official without a shred of proof to justify such action.

The proposition becomes more astonishing when the facts are examined. Mary Zuercher died May 31, 1944, an admitted resident of Pennsylvania. Her estate of approximately $16,000 passed into the possession of her administrator. A vesting order on behalf of the Alien Property Custodian was served on the administrator by which he vested in himself ‘ all the right title and interest of heirs and next of kin, names unknown, of Mary Zuercher, last known address Germany.’ It will be observed this vesting order while it designated no known heirs or next of kin alleged to be enemy nationals, nevertheless operated to protect fully the Federal Government in its undisputed right to prevent the money from getting into an enemy country. This vesting order was effective and yet respected the prerogative of the state courts to determine if there were or who were the heirs of the estate pending therein. When the estate was called for audit May 9, 1945, before Judge Klein of the Philadelphia Orphans' Court which and jurisdiction, the administrator reported his inability to locate any next of kin here or elsewhere, whereupon the attorney for the Commonwealth asked that the balance for distribution be paid into the State Treasury without escheat under provisions of Sec. 1314 of the Fiscal Code.^[2] The attorney representing the Alien Property Custodian stated to the court that he had the authority of the United States Attorney General to say, ‘ If there is an award to the Commonwealth, without escheat, there will be no objection .’ This could only mean one thing, namely that the government wished more time to determine if there were any heirs and if so to locate them. Accordingly the balance was so awarded and the money paid into the Commonwealth's Treasury. This was a proper orderly procedure and recognized the State's right guaranteed by the 10th Amendment to determine the parties entitled to inherit property of resident decedents. The Alien Property Custodian had by that entirely proper vesting order substituted himself for any German or enemy nationals whom he might find or who might later appear and claim to be next of kin. The Federal Government was thereby assured of full protection against that eventuality and the Commonwealth's sovereign right at the same time respected.

However, not content with the protection thus achieved and contrary to his acquiescence to the court's award, the Alien Property Custodian later under date of August 21, 1945, filed a new vesting order which he called a supplemental vesting order. The new order instead of claiming the right, title and interest of any German heirs, now claimed the specific fund of $16,279.77 theretofore paid into the treasury of the state and of course commingled with other state funds. That new vesting order declared said sum payable . . . to . . . or owing to . . . nationals of a designated enemy country, Germany, namely,

Nationals:

Last Known Address:

Heirs-at-law and next-of-kin, names unknown, of Mary Zuercher, deceased.

Germany'

Upon filing this new order the sum claimed was demanded of the State Treasurer, though money once paid into the State Treasury can only be paid out in the manner provided by the Constitution and statutes of the Commonwealth.

It was argued before us that under the ‘ war power’ the custodian by such mere declaration, without any showing that such heirs in fact exist or ever existed, may now compel the State to make payment to him. It was even argued by the learned counsel for the government that this power of the custodian is so absolute that if the fund had actually been escheated to the Commonwealth he might even set that escheat aside by his mere demand. That is to say, that even if the alleged heirs were but a figment of imagination, the sovereign State of Pennsylvania would be concluded by the custodian's mere declaration that there were enemy heirs. We cannot believe that Congress ever so intended. We freely grant that the power exists in the custodian to seize property of living individuals, and corporations in the first instance without proof but there is no case that holds this power extends to seizure of funds of a decedent's estate that have been escheated or are escheatable and actually paid into the treasury of a State.

The right to seize enemy property is nowhere expressly given by the Constitution. It is implied solely from the right of Congress to declare war. But no one provision of the Constitution express or implied is superior to the others. In Commonwealth v. First Nat. Bk. & Trust Co. of Easton, 1921, 303 Pa. 241, 246, 154 A. 379, our late Chief Justice (Maxey) said,

" In the United States, the powers of sovereignty are divided between the government of the union, and those of the states. They are each sovereign with respect to the objects committed to it and neither sovereign with respect to the objects committed to the other.'

‘ Article X of the federal Constitution provides that ‘ the powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.’ The United States government has no powers except those ‘ expressly given, or given by necessary implication.’ Marshall, Chief Justice, in Martin v Hunter's Lessee, 1 Wheat. 304, 326, 4 L. edition 97, 103. The respective supremacies of the state and national government in their respective spheres of sovereignty have been meticulously observed by the nation and each individual state. Within their individual spheres they are as sovereign as if they were two independent foreign states. There are many governmental activities in respect to which the federal government is not the states' superior or sovereign. McLean, J., in License Cases, 5 How. 504, 588, 12 L. edition 256, 293, says: ‘ The powers of the general government and of the state,...