872
FEDERAL REPORTER.
to counsel authorizing a final decree to be entered perpetually enjoining the collection of all taxes assessed upon complainant's shares of stock for the year 1879. Further reflection satisfies me that such a decree would be erroneous, and that the decree should not be broader than just indicated. Since the case has evidently not been prepared or defended upon the theory that the proof should show the condition of each shareholder as to indebtedness at the time the assessment and valuation in question were made, the parties should have a fair opportunity to make such proof. The cause must, therefore, go to a master to ascertain and report the facts. Counsel may prepare the proper order of reference, indicating the opinion of the court as far as herein disclosed. There are many details connected with the convenience of counsel which should be considered in framing the order. I leave counsel to agree upon such details. If they cannot do so, I will receive from each side a draft of an order, and will adopt and have entered that one which meets my approval.
UNITED STATES V. RANKIN.
(Uirouit UOU1't, E. D. Missouri. 1.
October 7, 1881.)
LEGACY TAX-BEQUEST OF AN ALIEN NON-RESIDENT TO ALIEN NON-REstDENTS FOR LIFE, WITH REMAINDER TO RESIDENTS AND NON-RESIDENTS OF THE UNITED STA'rEs-AcTS OF CONGRESS CONSTRUED-EFFECT OF REPEALING ACT OF JULY 14, 1870.
An alien non-resident died in Ireland, July 18, 1870. By her will she bequeathed property, situated partly in Ireland and partly in Misso1,lri, to"A. and B., who were also alien non-re3idents, for the life of A., with remainder to alien non-residents and two resident citizens of the United States. Her will was probated in Ireland, and ancillary, letters of administration were granted in Missouri, November 2, 1870. On October 13, 1877, A. and B. conveyed their interests to the remainder-men. At the time of the conveyance, the portion of the estate situate in Missouri was still in the American executor's hands. Suit being brought to recover a legacy ta,x upon the estate in his hands, it was held that, under the acts of congress prior to the repealing act of 1870, the taxes would not have accrued, if at all, un'til the beneficiaries entered into possession or enjoyment of t'he property, and that as said legatees did not enter into possession or enjoyment of their legacies before 1877, the property then in said executor's hands was exempted by the repealing act of 1870 from the legacy tax imposed by the various prior acts. Whether or not the interests derived by either the foreign or American legatees as remainder-men were, under the facts stated, subject to a legacy tax,
qumre.
This is an action of debt for legacy tax. the petition, are as follows:
The facts, as set forth in
873
On the eighteenth of Jilly, 1870, Ann Orr Rankin, a subject and resident of Great Britain, who had never resided in the United States, died, testate, in Ireland. At the date of her death she owned real estate and personal esta.te both in Ireland and the United States. The latter .property, situate in St. I.ouis, had been long held and managed by her agent in said city. . By her will she left to her mother and sister, in equal shares, all the income of her estate during the natural life of the mother, and, at the death of the mother, one-half to go to her brother Robert, and the other half to be divided in seven parts, distributable as in the· will stated. The will llamed her three brothers·executors.. Said will was probated in Ireland, where twentyfour twenty-eighths of said estate, situate in that country, were distributed: On November 2, 1870, said will was probated in St. Louis and letters mentary granted, and such proceedings had thereunder that the defendant became sole executor in charge of the t'lstate. On October If!, 1877, the life:. tenants conveyed their interest to the remainder-men. From the death of the thec)a.te of said cpnveyance (1877) said executor paid to testatrix said mother and sister in Ireland, as income derived from the personal'property in St. Louis, the sum of $30,218.93, which sum was the value of said estate in the bands of the executor. All of the ·remainder-men who pur.chased the life estate aforesaid, except· two, were citizens and residents of Great Britain, and one of the two, Robert, conveyed his interest (when is not alleged) to a brother and sister, not eitizens or residents of the United States. In due conrse of administration the St. Louis probate court or4ered ftnal distribution of the legacies, accordance wi,th the foregoing. rights, to be paid by this defendant as executor.. rrhe petition sets out in detail'what sums the executor, pursuant to said or(1er, paid to the respective parties, etc. Al- ' though the date of said order and of said payment is not stated, yet it is understood it was snbsequent to 1877. .
A demurrer to the petition is interposed, and has been fully argued. Bliss, Drummond et Smith, for the United States. . G. M. Stewart, for defendant. TREAT, D. J. On the foregoing statement of facts several intricate propositions arise, under the revenue laws of the United Sta.tes, concerning some of which decisions have been made apparently in conflict with each other. Prior to the repealing act of July 14, 1870, the several United States statutes, concerning succession and legacy taxes, provided that executors, etc., as to legacies or distributive shares from personal property, should be made subject to the duty or tax prescribed, when said property passed.. From any person possessed of such property, either by will or by the intestate laws of any state or territory, or any personal property or interest therein, transferred by deed, etc., made or intended to take effect in' possession or enjoyment after the death of the grantor or bargainer," etc. The first contention is as to the terms of the statute concerning
.874
REPORTER.
foreign wills. The United States ,contends that the clause of the statute above quoted should be iIiterpreted to 'mean that any legacy under a will, wherever made, is subject to a lega:cy tax, if the legacy enures to the benefit of an American citizen, a'nd he l'eceives the same; and that. the other words, "or by the intestate laws of any state or territory," are not restdctive as to wills. There. is no ade, quate reason, it is urged, why an American citizen, receiving a legacy through a foreign will, should not'pay a legacy tax when he would be subject theteto if the legacy was through a domestic will. To this argument may be suggested that the same r.eas()n would with respect to the intestate estates. The law of the domicile prevails as to personalty, whether the decedent is testate or intestate;, yet the same clause of the statute limits the liability of the executor; in cases of intestacy, to the transmi'ssion of property by the la.ws of the state or territory. Why should 'not 'property, passing by laws of descent in a foreign country to, an American citizen, be subject to tax as if passing by will? Is there, in the language of the statute,any distinction to be drawn between a foreign legacy and a foreigudistribu.:. tion of an intestate estate, or the terms used in the same sentenceto be interpreted as covering the same grolind? . . There·are. other provisions (jf the statutathat shed light :'o'p. subject. The executor was required to returns and pay the tax to the. collector of the district where the .decedent resided. The decedent in this case resided in Ireland, and nevet,was in the United States. CousQquently, the executor's returJls,nd payment could not be made in accordan.ce with law to any United States collector. Without expressly passing upon this point, ,but intimating merely that the statute. does not cover a case like the pres(;}I}t, it is important to cons{der tbeeffect of the repealing act of July 14, 1870. That act and. legacy ta,xes, withthi-s saving proviso--:"'rhat all the provisions of said lrepealed] acts shall continue ,in full iorce f0r levying lJ.nd collecting all taxes properly 'l\ssessed,pr liable to:be assessed, or Mcruingunder the provisions of. the forU?-er acts, "01: drawbacks, the right· to which has already accrued, or. which m3:Y hereafter, ' .
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Without ente'ring upon the nice distinctiolls between successioHs andlegacies,it}n.ust suffice that the ,taxes chargeable statutes, due. alld,payablewhell .the entered into the session or enjoyment of the property, and not before. It is obvious that the.valueof the succession orlegfwy could not be until the rightofpo.asel3sion accr:ued.
UNITED STATESV. RANKIN.
In the case of May v. Slack, 16 Int. Rev. 134, it was held that, in the case of a pecuniary legacy, the tax "accrued" immediately on the death of the testator, although not due and payable until a subsequent period" and consequently the legatee was liable despite therepealing statute. So far as disclosed, that was a case of immediate bequest, subject only by operation of law to the usual course of administration,-a case different from that under consideration in this: that here the American legatees were to have possession only after the determination of a life estate. In the case of Clapp v. Mason, 94 U. S. 589, the foregoing case of May v. Slack was summarily disposed of, with th,e remark that it has no bearing on, the question then Why not? The repealing act pertained to legacies and successic)lls.' True, as to successions, there are some provisions not applica.ble to legacies; yet the main fact is common to both, viz., that the tans were not due and payable until the beneficiary entered into possession or enjoyment. The United States supreme court said: "It is manifest that the ,right does not accrue until the duty can be demanded; that is, when it is made payable." Hence it was held in that case that as \ the remainder-men did not enter into possession until 1872, after the determination of a life estate created in 1867, no succession tax accrued before the repealing act. In the case now before the court the remainder-men and their representatives did. not, as legatees, come into possession or enjoyment of the legacies until 1877, on the extinguishment of the life estate. The exception in the repealing act is clear and significant.' No taxes had been nor could lawfully be assessed on these legacies prior to August or October, 1870, for the legacies were not then due and payable, nor were they liable to be assessed. Certainly, the taxes had not accrued, for no possession or enjoyment accrued until 1877. The case of Clappv. Mason seemed to have been decisive of the question as to successions, and, by parity of reasoning, as to legacies also. But in the case of Mason v. Sargent, 23 Int. Rev. Ree. 155, the United States circuit court for Massachusetts held otherwise. That ruling was made before the decision of the United States supreme court was 'known, and followed the case of May v. Slack. The case of U. S. v. Hellman, 23 Int. Rev. Rec. 387, refers to Clapp v. Mason, and, for reasons given, follows Mason v. SiLrgent. ,Vhich line of reasoning or construction is the more cogent-that of the United States supreme court, or of the two circuit couds? If the United States supreme court had passed directly upon the point
818
its views wCluldbeconclusiv8; but every argnmentby it, with respect to a succession tax, applies witb-equal, if not .greater, force to a legacy tax. Take the case at bar for illustration. An alien non-resident bequeathed in 1870 her estate, situate mostly in Ireland, to her mother and sister for life, with remainder to several others, some of whom were alien non-residents, and only two citizens and residents of the United States. A very small portion of her estate was situate in this country, where ancillary administratioJl was had. None of the remainder-men, alien or resident, could come into possession or enjoyment of the estate until theJife estates disappeared. What the vahie of the estate would then be could not be previously ascertained, nor were the taxes.tl1ereon, in any event, due and paya, until the life,el'tates ceased. The legatees were citizens and aliens, and the execut9l' hl;l1'8 was, ordered to. distribute the personal to said and aliens acoordingly. Was he to pay a legacy or succession tax on the distributive shares going to non-resident aliens? It should be taken for gvanted, that, .as to the share of Robert, who was a resident citiz.en of this country, it could not escape tax, although bought by his alien kinsmen, if the same were taxable in 1877. The various provisions of the· revenue acts incline me to the opinion that the interests derived by the American legatees, as remainder-men; 'fnder the facts stated, were not subject to a legacy tax. But, whether that be so or not, I must hol.;1 that the repealing act of 1870 exempted the defendal;lt, and the: property in his hands, in 1877, from the legacy tax imposed by the, various ,acts prior to 1870. The demurrer is sustained.
LrCHTENAU;ER,
Assignee,v.
CHENEY
and others.
(Circuit Court, D. Minnesota. 1.
September, 1881.)
BANKRuPTCY-EQUITY PRACTICE-AMENDMENTS UNDER EQUITY J:{ULE
29. Amendments, regularly made under equity rule 29, cannot be avoided by a motion to strike from the record, or set aside, the order allowing them.
2.
EQUITY PLEADING,
Semble that a bill to set aside a conveyance by the bankrupt, on the ground of fraud, is demurrable in the absence of any allegation that the fraud was discovered within the time prescribed by the statute.
W. P. Warner and Himm F. Stevens, for complainant. J. B. <t W. H. Sanborn, for defendant bank.