Wachovia Bank Trust Co v. Doughton

• Decision Date: 29 November 1926
• Docket Number: No. 49,49
• Citation: 47 S.Ct. 202,71 L.Ed. 413,272 U.S. 567
• Parties: WACHOVIA BANK & TRUST CO. et al. v. DOUGHTON, Commissioner of Revenue of North Carolina
• Court: U.S. Supreme Court

272 U.S. 567

47 S.Ct. 202

71 L.Ed. 413

WACHOVIA BANK & TRUST CO. et al.

v DOUGHTON, Commissioner of Revenue of North Carolina.

No. 49.

Argued May 6, 1926.

Decided Nov. 29, 1926.

Mr. Wm. M. Hendren, of Winston-Salem, N. C., for plaintiffs in error.

[Argument of Counsel from Pages 568-569 intentionally omitted] Mr. Dennis G. Brummitt, of Oxford, N. C., for defendant in error.

[Argument of Counsel from Page 570 intentionally omitted] Mr. Justice McREYNOLDS delivered the opinion of the Court.

Stanford L. Haynes, of Springfield, Mass., died May 21, 1920, leaving a will which was duly probated at that place. The fifth clause gave to the Springfield Safe Deposit & Trust Company, Massachusetts corporation, the residue of the estate in trust, one-half to be set aside and the net income paid to his daughter, Theodosia, so long as she should live, and at her death to be transferred to 'such person or persons and in such proportions as said Theodosia shall by will appoint, or in the event that said Theodosia shall fail to exercise the power of appointment hereby conferred upon her and shall leave issue surviving her, such payment and transfer shall be made to such issue by right of representation.' The corporation accepted the trust and received a large fund.

After her father's death Theodosia intermarried with Taylor and resided at Morgantown, N. C. She died there June 23, 1921, leaving an infant child. By will dated March 18, 1921, executed in North Carolina and adequate under the laws of the state and of Massachusetts, she directed that the property described by the fifth clause of her father's will should be divided between her husband and child. She also disposed of some land and personal property in North Carilina. The will was duly probated in the latter state and plaintiff in error became administrator of the estate. The fund held by the trust company and subject to appointment was made up of stocks and bonds valued at $395,279.93.

Section 6, c. 34, Public Laws N. C. 1921, ratified March 8, 1921, directs that all real and personal property passing by will or the intestate laws of the state shall be subject to a tax, and—

'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 the rate shall be determined by the relationship between the beneficiary under the power and the donor; and whenever any person or corporation possessing such 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.'

Acting under this statute, the proper officer demanded payment of a tax computed upon the value of the property which passed under the appointment by Mrs. Taylor. The Supreme Court of North Carolina approved the demand and specifically held that enforcement would not offend the Fourteenth Amendment by depriving the interested parties of property without due process of law. It declared that the statute taxed the exercise of the power of appointment made by permission and under direct protection of local laws. 189 N. C. 50, 126 S. E. 176.

In Orr v. Gilman, 183 U. S. 278, 22 S. Ct. 213, 46 L. Ed. 196, and Chanler v. Kelsey, 205 U. S. 466, 27 S. Ct. 550, 51 L. Ed. 882, this court held that by an act passed subsequent to the instrument which created a power of appointment New York might tax its execution without violating the Fourteenth Amendment. But in each of these causes the first testator, or creator of the trust, and the trustees thereunder were residents of New York and the fund was there held. Here the original testator resided in Massachusetts, his will was probated there, and the trustee holds the funds there for disposition under the local laws. The power of appointment was exercised by a resident of North Carolina by a will there executed and that state has attempted to impose the tax. These circumstances differentiate the causes.

In Chanler v. Kelsey the statute, chapter 284, Laws N. Y. 1897, provided:

'Whenever any person or corporation shall exercise the 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...