Worcester County Trust Co. v. Long, 4292.

• Decision Date: 27 April 1936
• Docket Number: No. 4292.,4292.
• Parties: WORCESTER COUNTY TRUST CO. v. LONG, Com'r of Corporations, etc., et al.
• Court: U.S. District Court — District of Massachusetts

14 F. Supp. 754

WORCESTER COUNTY TRUST CO. v. LONG, Com'r of Corporations, etc., et al.

No. 4292.

District Court, D. Massachusetts.

April 27, 1936.

Merrill S. June and Bradley B. Gilman, both of Worcester, Mass., for plaintiff.

Norman W. Bingham, Jr., and George S. Fuller, both of Boston, Mass., for defendants Ray L. Riley, W. H. H. Gentry, and Frank P. Sproul.

W. H. H. Gentry, pro se.

Paul A. Dever, Atty. Gen. of Mass., and Raymond H. Favreau, Asst. Atty. Gen., for defendant Henry F. Long.

BREWSTER, District Judge.

This proceeding is brought under the new Federal Interpleader Act (Pub. No. 422, approved January 20, 1936, 49 Stat. 1096). This act amends section 24 of the Judicial Code as amended by inserting at the end a new subparagraph 26 (28 U.S. C.A. § 41 (26). The material provisions of this amendment follow:

It confers upon the court original jurisdiction —

"(a) Of suits in equity begun by bills of interpleader or bills in the nature of bills of interpleader duly verified, filed by any * * * corporation, * * * having in * * * its custody or possession money or property of the value of $500 or more, * * * or being under any obligation written or unwritten to the amount of $500 or more, if —

"(i) Two or more adverse claimants, citizens of different States, are claiming to be entitled to such money or property, or to any one or more of the benefits arising * * * by virtue of any such obligation; and

"(ii) * * *

"(b) Has given bond payable to the clerk of the court in such amount and with such surety as the court or judge may deem proper, conditioned upon the compliance by the complainant with the future order or decree of the court with respect to the subject matter of the controversy.

"Such a suit in equity may be entertained although the titles or claims of the conflicting claimants do not have a common origin, or are not identical, but are adverse to and independent of one another.

"(b) Such a suit may be brought in the district court of the district in which one or more of such claimants resides or reside.

"(c) Notwithstanding any provision of the Judicial Code Part I of this title to the contrary, said court shall have power to issue its process for all such claimants and to issue an order of injunction against each of them, enjoining them from instituting or prosecuting any suit or proceeding in any State court or in any United States court on account of such money or property or on such instrument or obligation until the further order of the court; which process and order of injunction shall be returnable at such time as the said court or a judge thereof shall determine and shall be addressed to and served by the United States marshals for the respective districts wherein said claimants reside or may be found.

"(d) Said court shall hear and determine the cause and shall discharge the complainant from further liability; and shall make the injunction permanent and enter all such other orders and decrees as may be necessary or convenient to carry out and enforce the same."

The complainant is the executor under the will of Robert H. Hunt. The respondents named in the proceeding are officials of the state of California and the commonwealth of Massachusetts. The respondent Long has appeared generally and filed an answer to the bill. A special appearance has been entered on behalf of the California respondents for the purpose of moving to dismiss the bill and to dissolve outstanding restraining orders. Inasmuch as the motion to dissolve injunctions will stand or fall with the motion to dismiss, it will only be necessary to consider the latter. The motion, of course, admits, for present purposes, all facts properly pleaded in the bill of complaint.

It is alleged that the respondent Henry F. Long is Commissioner of Corporations and Taxation in the Commonwealth of Massachusetts and a citizen of Massachusetts; that the respondent Riley is comptroller, the respondent Gentry, inheritance tax attorney, and the respondent Sproul, inheritance tax appraiser of the state of California, all citizens of California.

On June 11, 1935, Robert H. Hunt died testate, leaving real estate and bank deposits in California and bank deposits in Massachusetts and considerable intangible personal property, most of which is in the custody and possession of the complainant in Worcester, Mass.

On June 26, 1935, the will of said Hunt was admitted to probate in the probate court for the county of Worcester, Mass. On July 29, 1935, ancillary proceedings were instituted in California pursuant to which the Security-First National Bank of Los Angeles was appointed administrator with the will annexed of the estate of said Hunt by the superior court of the state of California in and for the county of Los Angeles.

It is alleged that the complainant is under obligations to pay any and all estate, inheritance, and succession taxes to the officials of the state of California and the commonwealth of Massachusetts, and that the officials of each state are asserting the right to assess and collect succession and inheritance taxes upon the transfer of intangibles upon the theory that the decedent, at the time of his death, was domiciled in the respective state; that there is involved in this controversy over $100,000, which sum the complainant has in its custody, and the complainant has given bond in accordance with the provisions of the said Interpleader Act.

It is further alleged that the threatened collection of both the California and Massachusetts taxes, each based upon an inconsistent claim of domicile, will deprive the estate of property without due process of law and will deny to it equal protection of the law in contravention of the Fourteenth Amendment to the Constitution of the United States.

The complainant has caused process to issue to the respondents in Massachusetts and in California and has secured a temporary restraining order against each from taking any further proceedings to assess, determine, or collect the inheritance taxes due from the estate. Complainant prays that this court require the respondents to plead their adverse claims to the money and property in the possession of the complainant, or to the benefits arising by virtue of the complainant's obligation to pay the inheritance taxes. The complainant further prays that the court determine the domicile of the decedent, the persons entitled to the said money, property, or benefits, and the sum owed to any of the respondents; and that the court permanently enjoin respondents of the nondomiciliary state from taking any action to determine or collect inheritance taxes based upon domicile except as determined by this court.

Complainant furthermore asks that it be discharged of all further obligations to the respondents upon compliance by it with such decree as the court may make in the case.

It thus appears from the allegations of the bill that the taxing authorities in the two states are asserting conflicting rights to compute a legacy and succession tax, based upon the assumption that the decedent was domiciled in their respective state, and this court is asked not only to determine which of the states is entitled to tax transfers of intangibles, but it is also required to determine the amount of the tax due each state and enter a decree requiring the payment of the taxes thus determined, which payment shall operate to discharge the Massachusetts executor of all liability for such taxes.

It is now settled law that intangibles have only one situs for the purpose of inheritance or succession taxes, and that that situs is the domicile of the decedent at the time of his death. First National Bank of Boston, Ex'r, v. Maine, 284 U.S. 312, 52 S.Ct. 174, 76 L.Ed. 313, 77 A.L.R. 1401; Farmers' Loan & Trust Co., Ex'r, v. Minnesota, 280 U.S. 204, 50 S.Ct. 98, 74 L.Ed. 371, 65 A.L.R. 1000; City Bank Farmers' Trust Co., Ex'r, v. Schnader, 291 U.S. 24, 54 S.Ct. 259, 78 L.Ed. 628.

It is equally well settled that a person can have at one time only one domicile, however many places of residence he may have maintained in his lifetime. Tax Collector of Lowell v. Hanchett, 240 Mass. 557, 134 N.E. 355; Commonwealth v. Bogigian, 265 Mass. 531, 164 N.E. 472; United States ex rel. Thomas v. Day (C.C.A.) 29 F.(2d) 485.

It is, therefore, obvious that if the taxing officials of both of these states carry out their threat of imposing an inheritance tax upon the transfer of decedent's intangibles, one or the other of the states will be violating the Fourteenth Amendment. First National Bank of Boston, Ex'r, v. Maine, supra; Anglo-California Trust Co. v. Riley, 220 Cal. 26, 29 P.(2d) 186.

I fully appreciate the difficulties encountered in preventing this unconstitutional exaction if the complainant cannot avail itself of the Interpleader Act. The difficulties are well illustrated in the case of Estate of John T. Dorrance where the states of Pennsylvania and New Jersey have each exacted a tax of several million dollars upon the transfer of intangibles which Dorrance left at the time of his death. The Pennsylvania courts of last resort (In re Dorrance's Estate, 309 Pa. 151, 163 A. 303) held that Dorrance was domiciled in that state, and, so far as the litigation has proceeded in the New Jersey courts, they have been unanimous in holding that Dorrance was domiciled in New Jersey. In re Dorrance's Estate, 115 N.J.Eq. 268, 170 A. 601; Id., 116 N.J.Eq. 204, 172 A. 503; Dorrance v. Martin, 176 A. 902, 13 N.J. Misc. 168. See, also, Hill v. Martin, 296 U.S. 393, 56 S.Ct. 278, 80 L.Ed. ___, affirming (D.C.) 12 F.Supp. 746.

I can very readily agree with complainant's counsel that the question here presented is one of unusual public interest. A short cut to the answer would be to hold that the two states were the adverse claimants, and that consequently the jurisdictional requirement of the statute was not met since a state cannot be a citizen. I do not believe, however, that the...