Williams v. State

Citation125 A. 661
Decision Date26 June 1924
Docket NumberNos. 1937, 1938.,s. 1937, 1938.
PartiesWILLIAMS et al. v. STATE. KLOUS et al. v. SAME.
CourtSupreme Court of New Hampshire

Transferred from Superior Court, Strafford and Cheshire Counties; Allen, Judge.

Separate appeals by Mary E. Williams and others, executors, and Henry Klous and others, executors, and Henry Klous and others, executors, and Henry Klous and others, executors, from a decree in favor of the State dismissing a petition for abatement of taxes and a decree approving an assessment made by state treasurer. Case transferred from trial term. Case discharged.

Hughes & Doe, of Dover, for executors Williams and others.

Philip H. Faulkner and Roy M. Pickard, both of Keene, for executors Klous and others.

Joseph S. Matthews, Asst. Atty. Gen., for the State.

Homer Albers, of Boston, Mass., and Snow & Cooper, of Rochester, amici curiae, in opposition to the assessments.

PARSONS, C. J. One case is an appeal from a tax assessment; the other is an appeal from a sefusal to abate an assessment previously made. No question as to procedure is raised. The cases are transferred upon sundry inquiries as to the law in concrete form as applicable to particular facts, which it does not appear to be necessary to examine in detail.

The substance of the questions raised are: (1) Are the provisions of section 1, chapter 37, Laws 1919, in conflict with the Constitution? (2) Should the federal estate tax be considered in assessing the state tax? (3) (a) Are shares of stock in nonresident corporations and deposits in banks outside the state or (b) Liberty Bonds to be considered in making the assessment?

The main controversy is as to the power of the Legislature to enact section 1, c. 37, Laws. 1919. After the adoption of the constitutional amendment in 1903 (part 2, art. 6), empowering the Legislature to impose taxes not only upon polls and estates, but also upon other classes of property, including franchises and property when passing by will or inheritance, the Legislature in 1905 (Laws 1905. c. 40) adopted "An act imposing a tax on collateral legacies and successions."

Section 1 of the act was subsequently amended so that at the date of the legislation in 1915 it read as follows:

"Section 1. All property within the jurisdiction of the state, real or personal, and any interest therein, belonging to inhabitants of the state, and all real estate within the state, or any interest therein, belonging to persons who are not inhabitants of the state, which shall pass by will, or by the laws regulating intestate succession, or by deed, grant, bargain, sale, or gift, made in contemplation of death, or made or intended to take effect in possession or enjoyment at or after the death of the grantor or donor, to any person, absolutely or in trust, except to or for the use of the father, mother, husband, wife, brother, sister, lineal descendant, adopted child, the lineal descendant of any adopted child, the wife or widow of a son, or the husband of a daughter, of a decedent, or to or for the use of educational, religious, cemetery, or other institutions, societies, or associations of public charity in this state, or for or upon trust for any charitable purpose in the state, or for the care of cemetery lots, or to a city or town in this state for public purposes, shall be subject to a tax of five per cent. of its value, for the use of the state; and administrators, executors, and trustees, and any such grantees under a conveyance made during the grantor's life, shall be liable for such taxes, with interest, until the same have been paid. An institution or society shall be deemed to be in this state, within the meaning of this act, when its sole object and purpose is to carry on charitable, religious, or educational work within the state, but not otherwise." Chapter 106, § 1, Laws 1915.

The section now under consideration is:

"Section 1. All property within the jurisdiction of the state, real or personal, and any interest therein, belonging to inhabitants of the state, and all real estate within the state, or any interest therein, belonging to persons who are not inhabitants of the state, which shall pass by will, or by the laws regulating intestate succession, or by deed, grant, bargain, sale, or gift, made in contemplation of death, or made or intended to take effect in possession or enjoyment at or after the death of the grantor or donor, absolutely or in trust, to or for the use of the father, mother, husband, wife, lineal descendant, adopted child, the lineal descendant of any adopted child, the wife or widow of a son, or the husband of a daughter, of a decedent, shall be subject to a tax, for the use of the state, of one per cent. of its value up to $25,000; of two per cent. of its value in excess of $25,000 up to $50,000; of two and one-half per cent. of its value in excess of $50,000 up to $100,000; of three per cent. of its value in excess of $100,000 up to $250,000; and of five per cent. of its value in excess of $250,000; but no bequest, devise or distributive share of an estate which shall so pass to or for the use of a husband, wife or of any such person who is under twenty-one years of age at the time of the decedent's death shall be subject to such tax, except upon its value in excess of $10,000; and all such property which shall so pass to or for the use of any other person, except educational, religious, cemetery, or other institutions, societies or associations of public charity in this state, or for or upon trust for any charitable purpose in the state, or for the care of cemetery lots or to a city or town in this state for public purposes, shall be subject to a tax of five per cent. of its value for the use of the state; and administrators, executors, trustees and any such grantees under a conveyance made during the grantor's life, shall be liable for such taxes, with interest, until the same have been paid. An institution or society shall be deemed to be in this state, within the meaning of this act, when its sole object and purpose is to carry on charitable, religious, or educational work within the state, but not otherwise." Chapter 37, § 1, Laws 1919.

From a comparison of the two sections, it appears that by the act of 1919 property passing to brothers and sisters of the decedent upon which no tax was previously imposed is declared subject to a tax of 5 per cent. of its value and a tax is imposed upon property passing to other relatives also previously free from tax; the rate varying according to the value of the property passing with exemptions of considerable amount in certain cases.

The amendment of 1903 probably resulted from the decision in Curry v. Spencer, 61 N. H. 624, 60 Am. Rep. 337 (1882) that the imposition of an inheritance tax was not within legislative power under the Constitution as it then existed. Under the amendment, c. 40, Laws of 1905, was enacted. Section 1 of the act except for verbal changes immaterial in the present inquiry is identical with the law of 1915 above quoted. This act was sustained in Thompson v. Kidder, 74 N. H. 89, 65 Atl. 392, 12 Ann. Cas. 948, and is not now assailed by the appellants. The question raised is as to the validity of the classification by the value of the property passing and according to relationship to the decedent made in the act of 1919. No question as to the effect of the substantial exemptions has been raised or considered.

The state claims that the exaction by the state is an excise tax, if it is a tax; that in effect rather than a tax it is a provision for the disposition of property all of which belongs to the state at the death of the owner.

"If at the making of the social compact the right of property, as then understood and reserved, did not include any right of control over it at death—if the property right was merely a life estate, remainder in the survivors united in the corporate organization called the government—any power of testamentary disposition would be a grant from the many to the individual, a privilege which could be incumbered, limited, withdrawn, or regulated at will. If by natural right, or pre-existing compact, the right of property enjoyment does, or does not include the untrammeled power of disposition at death, the parties in revising or renewing the governmental compact may by mutual agreement add to, or detract from, the nature of the right. It might be agreed that all property on the death of the owner should be the property of the survivors. All inheritable quality might be taken from the conception of property as now understood. While such taking or such right of survivorship, if limited in. amount and for use for public purposes, would possess some of the elements of a tax, it would lack fundamental elements of taxation as understood in this state from 1784 to 1903. It would be an application of property for public charges, but not a proportional division of public expense." Thompson v. Kidder, 74 N. H. 89, 94, 65 Atl. 392, 395 (12 Ann. Cas. 948).

"All men have certain natural, essential, and inherent rights, among which are the enjoying and defending life and liberty, acquiring, possessing, and protecting property." Bill of Rights, art. 2.

If in 1784 the power of testamentary disposition was no part of the conception of the property right, the state's contention would be well founded. The state has furnished nothing and nothing is found to sustain fie idea that any one claimed or believed in 1784 that when the owner died his property belonged to the state or its surviving members. The power to dispose of property by will was declared by the provincial statutes, which also provided for its disposition among the next of kin in case there was no will. Act May 14, 1718, 2 N. H. Laws (Batch.) 295.

"The Liberties of the Massachusetts Colonie in New England" of 1641, at a time when practically all of New Hampshire in existence was in union with Massachusetts, contained the...

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