Van Dyke v. Wis. Tax Comm'n

• Decision Date: 04 June 1940
• Citation: 292 N.W. 313,235 Wis. 128
• Parties: VAN DYKE et al. v. WISCONSIN TAX COMMISSION et al. FIRST WISCONSIN TRUST CO. v. SAME.
• Court: Wisconsin Supreme Court

235 Wis. 128

292 N.W. 313

VAN DYKE et al.

v.WISCONSIN TAX COMMISSION et al.

FIRST WISCONSIN TRUST CO.

v.SAME.

Supreme Court of Wisconsin.

June 4, 1940.

Appeals from judgments of the Circuit Court for Milwaukee County; Charles L. Aarons, Judge.

Actions by William D. Van Dyke, Jr., and others, trustees under trust agreement dated December 6, 1935, against the Wisconsin Tax Commission and others, and by the First Wisconsin Trust Company, trustee under trust agreement dated December 6, 1935, against the same defendants, concerning the right of the State of Wisconsin to levy a tax upon certain gifts. From a judgment confirming an assessment of taxes made by the Wisconsin Tax Commission, plaintiffs in each case appeal.-[By Editorial Staff.]

Affirmed.

These actions were begun by plaintiffs on the 14th day of December, 1938, by the service of a notice of appeal from the determination of the Wisconsin Tax Commission dated November 30, 1938. The assessment of taxes involved made by the Wisconsin Tax Commission was confirmed by judgment entered on December 15, 1939, from which the plaintiffs in each case appeal.

The facts will be stated in the opinion.Douglass Van Dyke, of Milwaukee (George D. Van Dyke, of Milwaukee, of counsel), for appellants.

John E. Martin, Atty. Gen., Harold H. Persons, Asst. Atty. Gen., and Neil Conway, Inheritance Tax Counsel, of Madison (Myron L. Silver, of Madison, of counsel), for respondents.

Ramsdell, King & Linderman, of Eau Claire, and Oppenheimer, Dickson, Hodgson, Brown & Donnelly, of St. Paul, Minn., amici curiae.

ROSENBERRY, Chief Justice.

George D. Van Dyke, a citizen of the United States, residing at Milwaukee, desired to create two trusts. He was the owner of United States first liberty loan 3 1/2% gold bonds of the par value of $270,000. He had intended transferring the bonds. Before any positive steps were taken, the bonds were called. Having ascertained on November 15, 1935, that he could collect the bonds in silver dollars, he went to Chicago on November 25, 1935, taking the bonds with him and appointed the First National Bank of Chicago his agent. Desiring to receive payment of the bonds in silver dollars he was advised that they were not at hand, but on December 3, 1935, he was notified that the silver dollars had been shipped to the Federal Reserve Bank at Chicago. On December 6, 1935, accompanied by his son, Douglass Van Dyke, who took with him a power of attorney from William D. Van Dyke, Jr., he went to Chicago where he met George B. Luhman of the First Wisconsin Trust Company of Milwaukee at the First National Bank of Chicago. The trust instruments were then executed in the presence of the officer of the First National Bank of Chicago with the exception of the signature of William D. Van Dyke, Jr., who had previously executed the instrument as one of the trustees at Milwaukee. George D. Van Dyke being informed that the silver dollars were in the private vaults of the First National Bank at the Federal Reserve Bank of Chicago, went with Mr. Luhman and Mr. Douglass Van Dyke to the Federal Reserve Bank where 270,000 silver dollars were delivered to George D. Van Dyke. Thereupon he delivered 135,000 of said silver dollars to Mr. Luhman on behalf of the First Wisconsin Trust Company and 135,000 silver dollars to Douglass Van Dyke, Trustee, and took receipts therefor from the trustees.

The donor, George D. Van Dyke, never had any intention of bringing the silver dollars to Wisconsin as they weighed approximately seven and one-half tons. There was no attempt at secrecy or evasion in the transaction and the trust instruments expressly provided that full disclosure should be made to the taxing authorities of the state of Wisconsin.

The First Wisconsin Trust Company delivered the 135,000 silver dollars to the First National Bank of Chicago and at its request they were credited to the account of the First Wisconsin National Bank of Milwaukee which bank thereupon credited the account of the First Wisconsin Trust Company. Douglass Van Dyke on the same day delivered the 135,000 silver dollars which he received, with the request that it open an account in the name of Douglass Van Dyke and William D. Van Dyke, Jr., Trustees. The fund remained there until two days after Christmas when the trustees bought $10,000 par United States Savings bonds for $7,500. They completed their investments about the middle of April, 1936, at which time they opened an account in the Marine National Exchange Bank of Milwaukee and transferred $3,000 or $4,000 of said amount to that bank. Douglass Van Dyke and William D. Van Dyke, Jr., trustees, are both residents of Milwaukee and the First Wisconsin Trust Company, the trustee of the other trust, is a Wisconsin corporation located at Milwaukee, Wisconsin.

The trust agreement under which William D. Van Dyke, Jr., and Douglass Van Dyke are trustees was created for the purpose of giving to the donor's only grandchild a broader education and more liberal support and maintenance than it is the legal duty of her parents to provide or within their financial ability to supply. The beneficiary of the trust it Louise Lawrence Van Dyke, the minor granddaughter of the donor and upon her death the remainder to her lawful issue, per stirpes, or if she leaves no issue then to Douglass Van Dyke, or if he is not then living, to his wife surviving, or if no wife survives him, then to the heirs at law of George D. Van Dyke.

The trust agreement under which the First Wisconsin Trust Company is trustee was created primarily for the support and education of the four foster children of Louise V. Hauxhurst, who, however, take no interest in the trust, the income to be disbursed at the direction of Louise V. Hauxhurst, or in case of her death by a successor named in the trust instrument. On the death of all of the children the balance of the trust estate, if any, is payable to Louise Van Dyke Hauxhurst, if living, or if she is deceased, to such persons as she shall have appointed by her last will and testament, and in default of such appointment to the heirs at law of George D. Van Dyke. The donor reserved no interest in or control of any kind or character over the trusts.

The plaintiff trustees made donees' returns to the proper taxing officers, attaching copies of the trust agreements and protesting that the transfers were not subject to the Wisconsin gift tax. The First Wisconsin Trust Company filed a donee's gift tax report on March 19, 1936. Douglass Van Dyke and William D. Van Dyke, Jr., filed a donee's gift tax report on March 10, 1936. J. H. Leenhouts, assessor of incomes, notified the plaintiffs trustees that the gifts were subject to a tax under the laws of Wisconsin and that taxes would be certified for collection unless within twenty days a written protest was filed in his office. Protests were filed, proceedings were had before the county board of review and the matter was brought before the Wisconsin Tax Commission, which entered an order confirming the assessment. The matter was then appealed to the circuit court where judgment affirming the assessment was entered on December 15, 1939.

The plaintiffs trustees allege that the judgment in each case is erroneous for the following reasons:

“(1st) The emergency gift tax by its express terms imposes no gift tax upon these transfers of tangible personal property located without this state, which said property was not without this state temporarily.

“(2nd) The Act, if construed as imposing gift taxes upon these transfers, is unconstitutional because:

“(a) The State of Wisconsin lacks jurisdiction to impose gift taxes upon gifts inter vivos made without the state;

“(b) The classifications and progressive rates are invalid as applied to taxes on gifts inter vivos not made in contemplation of death;

“(c) The State of Wisconsin may not impose a tax upon the transfer inter vivos of money coined in the United States.

“(3rd) The assessments are void because against the trustees personally as donees, instead of against the beneficiaries. The assessments are incomplete because the amounts payable have not been computed.”

The state of Wisconsin claims the right to levy a tax upon the gifts in question by virtue of sec. 4, ch. 363 of the Laws of 1933, as amended. The pertinent provisions of sec. 4 are as follows:

“Emergency gift tax. (1) An emergency tax is imposed upon transfers of property, real, personal or mixed, or any interests therein or income therefrom in trust or otherwise, to any person, association or corporation, which are made subsequent to the effective date of this act and prior to July 1, 1935, in the following cases, except as hereinafter provided:

“(a) When the transfer is by gift from any person who at the date of such gift was a resident of the state.

“(b) When the transfer is by gift of property within the state or within its jurisdiction and the donor was a nonresident of the state at the date of such gift.

“(c) No tax shall be imposed upon the transfer of any property which is taxable under the inheritance tax law of this state, and any tax paid upon the transfer of any property under the provisions of this section may be applied as a credit upon any inheritance tax which may be imposed under the inheritance tax law upon the same transfer, and no tax shall be imposed upon any tangible personal property of a resident donor when such property is located without this state; provided, however, such property is not without this state temporarily.”

Under the inheritance tax act, St.1939, § 72.01(3), gifts made in contemplation of death are regarded as a part of the estate of the deceased and taxed accordingly.

The plaintiff trustees contend that what the donor gave was silver dollars; that silver dollars are tangible personal property; that they were never within the state of Wisconsin nor did the donor ever have any intention to bring the silver dollars within the state; that the gift was not taxable...