State v. Estate of Baldwin

19 S.W.2d 732, 323 Mo. 207, 72 A.L.R. 1303, 1929 Mo. LEXIS 660

• Court: Supreme Court of Missouri
• Decided: June 29, 1929
• Status: Published

Opinions

WHITE, C. J.

This proceeding was begun in the Probate Court of Lewis County to assess an inheritance tax against property belonging to the estate of Carrie Pool Baldwin, deceased.

Carrie Pool Baldwin died testate in Quincy, Illinois, October 4, 1926. Her will was probated in Illinois. At the time of her death she was a resident of Illinois, as was her son Thomas A. Baldwin, sole devisee and executor of the will.

Letters of administration with will annexed were issued on her estate October 22, 1926, to Harry Carstarphan, of Hannibal, Missouri, and the .will admitted to probate in Lewis County, Missouri. The Judge of the Probate Court of Lewis County appointed appraisers to fix the value of decedent’s property in Missouri, subject to inheritance tax. The executor, Mr. Baldwin, filed a motion in that court asking the court to order the administrator to turn over to him all the personal and intangible property in the estate of decedent in Missouri. The motion was overruled.

The appraisers proceeded, to appraise the property, made report to Mr. Carstarphan, the Missouri administrator, and Thomas A. Baldwin, executor, filed exceptions to that report. Exceptions were overruled and inheritance tax assessed against certain property belonging to the estate. The administrator appealed from the ruling of the probate court to the circuit court, where, September 5, 1927, judgment was rendered by that court setting aside that part of the appraiser’s report assessing inheritance tax against the intangible property of the estate, and from that judgment the State appealed to this court.

The total property listed by the appraiser consisted of certain real estate situated in Lewis County, Missouri, valued at $55,380, and certain personal property amounting to more than eighty-five thousand dollars; a total of $141,278.09. After deductions and exemptions- the. total estate listed for taxation in Missouri amounted to $121,358.80. Of this the real estate, valued as above, was held by the trial court to be properly listed and assessed for inheritance transfer tax, but held that the personal property listed, amounting to more than $65,000, was not subject to taxation.

The personal property which the circuit court held was not taxable included $15,937.51, deposited with the Southeast Missouri Trust Company at Cape Girardeau, Missouri; $1078.24 deposited in Advance Exchange Bank at Advance, Missouri; two Liberty Bonds of one thousand dollars each. The remainder consisted of about thirty promissory notes due- the deceased, signed by various parties, all of which, it is stated, were secured by mortgages on real estate in Missouri with the exception of five notes unsecured, three of them for small amounts. There was no evidence' as to why these deposits, notes and bonds were in Missouri, nor how they came into the possession of the Missouri administrator. It is not questioned that he was rightfully appointed administrator in this State and lawfully came into possession of the said evidence of debt. The only showing that they were in fact in Missouri was the motion filed by Thomas A. Baldwin, executor, to have the property turned over to him.

On trial in the circuit court the attorney for the executor introduced in evidence a list of the property, consisting of exactly the same cash in bank, bonds and, notes, listed by the executor in Missouri, as listed in the State of Illinois, and made subject to inheritance tax in that State.

I. As to the money deposited in the bank, the relation of debtor and creditor exists between the bank and the depositor. The money is in fact the property of the bank, and it owes the amount of its deposit to its depositor. ■ As to the notes, the simple relation of debtor and creditor exists. The Government bonds likewise are debts which the government owes to the bondholder. All these different kinds of property may be considered as of one class for the purposes of this case.

In recent cases we have held for the purpose of property tax that the situs of a credit is the domicile of the creditor, citing Railroad Co. v. Pennsylvania, 15 Wall. 300, where it was held that debts have no locality separate from the parties to whom they are due, and to tax them elsewhere might be unconstitutional as impairing the obligation of contract. [State ex rel. v. Gehner, 320 Mo. 702, 8 S. W. (2d) 1057, l. c. 1060, and cases cited; State ex rel. v. Gehner, 320 Mo. 691, 8 S. W. (2d) 1068.]

If we could apply the same rule to an inheritance tax we might have less difficulty in disposing of this case. The inheritance tax statute, Article XXI, Chapter 1, Revised Statutes 1919, provides an entirely independent method of ascertaining the property subject to inheritance tax from that applicable for general tax. The definition of the term “property” in the last Section, 589', of that Article, makes inapplicable any definition relating' to general property tax. An inheritance tax is not a property tax, but an excise tax, or a tax upon succession. [In re Zook’s Estate, 296 S. W. l. c. 780, and cases cited.]

II. Section 558, Revised Statutes 1919, imposes a transfer or inheritance tax in the following cases:

“When the transfer is by will or by the intestate laws of this within tne state or within tne jurisdiction oi me state from any person dying possessed of the property while a resident of this state. When the transfer is by will, or intestate law of property state and decedent was a non-resident of the state at the time of his death.”

We are concerned only with the second sentence, which applies to non-residents whose property at the time of death is within the State or within the jurisdiction of the State. There is no difficulty in ascertaining when property is within the State. According to the doctrine moMlia personam sequuniur, which we have held to prevail for purpose of general taxation in cases above cited, it might be said that the property in question here was not within the State, although it might be within the jurisdiction of the State. There was no claim at the time the executor filed his motion to have the property transferred to him, that the money in bank and the eyi- dences of debts were in this State only temporarily. The decedent, Carrie Pool Baldwin, had large possessions in this State including the real estate mentioned; the only personal property listed upon which an inheritance tax was levied in Illinois was the very property listed here. These notes, bonds and cash were all in the possession of the administrator in Missouri. For what purpose they are in Missouri is not shown. We cannot assume that they were in the State of Missouri for the purpose of escaping taxation in the State of Illinois. It is a reasonable inference that the cash and notes in such large quantities in Missouri, when none of it was held in Illinois, was retained in this State for the purpose of investment. They may have established a business situs in this State, in which case it would be subject to a general tax as well as the inheritance tax.

III. Was the property under consideration here within the jurisdiction of the State? The notes were in this State in the custody of the Missouri administrator. The debts were secured by mortgage on Missouri real estate except a few of the notes which with the bonds were also in the custody of the administrator; the money was in banks in Missouri.

Some of the adjudications on the subject are important:

In New York, in the Matter of Whiting, 150 N. Y. 27, it was held that money deposited in bank in New York of a resident of Rhode Island, was subject to the tax. The court (l. c. 30) delivered this proposition, construing an act of the legislature: ‘ ‘ Thus the legislature intended, as I think, to repeal the maxim mobilia personam sequuntur, so far as it was an obstacle, and leave it unchanged, so far as it was an aid, to the imposition of a transfer tax.”

The ruling in the Whiting case was affirmed by the Court of Appeals. The principle announced in the quotation would lead to inequitable results and make possible double taxation. New York later amended its statute. And it was held in In Re Colt’s Estate, 211 N. Y. Supp. 541, l. c. 543, ’that money of a non-resident lent to a firm doing business in New York was not subject to a transfer tax in New York.

In the State of Iowa that rule formerly prevailed, but a different rule is announced in later cases. It was held in Chaffin v. Johnson, 200 Iowa, 89, that a promissory note executed by a resident of the State, secured by mortgage on Iowa real estate,, the note and mortgage belonging to a non-resident, having never been kept in Iowa “is subject to the jurisdiction of the courts of this State,” and subject to the tax. The clause is similar in significance to that in our statute.

In Hoyt v. Keegan, 183 Iowa, 592, it was held that a bank deposit in Iowa was subject to collateral inheritance tax, though the pass book and the certificate of deposit were in the actual possession of the decedent at the time of his death in Illinois. The reason was the same in both cases; the creditor was protected in the security of his debt by the courts of the State-of Iowa, and he was obliged to resort to those courts in order to secure his debt and enforce its payment. Therefore it was subject to the jurisdiction of the courts of that state.

In State v. Jones, 261 Pac. 356, l. c. 357 and 359, the Supreme Court of Montana held promissory notes secured by mortgage in Montana, although the notes at the time were located in New York, the home of the decedent, were subject to the transfer tax. That was under a statute which subjects to the tax a non-resident’s “property in the state or within Us jurisdiction” — the exact phrase in our statute.

The Supreme Court of Colorado, In Re Waldron’s Estate, 267 Pac. 191, construed a statute providing for such a tax on property “within the state.” It was held that cash in a safe deposit box and United States bonds, certificates of deposit of a non-resident, was property within the state. The court considered the proposition that in a bank deposit the relation of debtor and creditor exists between the banker and the depositor, and the situs of the property for some purposes is the domicile -of the depositor, but that principle has no force under the inheritance tax law.

The Federal Supreme Court, in Blackstone v. Miller, 188 U. S. 189, had under consideration the right of a state to impose a transfer tax upon bank deposits of the decedent whose domicile was in another state, although it might be so taxed in the state of the domicile. The court (l. c. 203) notes that the property when found was not in transitu, in such sense as to withdraw it from the power of the state; it was delayed within the jurisdiction of New York an indefinite time.

In Kinney v. Treasurer, 207 Mass. 368, it was held that promissory notes secured by mortgages on real estate in that state belonging to a non-resident decedent were subject to transfer tax. The court mentioned the rule in Massachusetts that the mortgage holds the title to the property until it is redeemed (l. c. 370), but also called attention to similar rulings in states where it was held that a mortgage is only a lien on the real estate.

Blaekmoor and Bancroft on Inheritance Tax, pages 157-158, cites eases where a distinction is made between the property of a nonresident placed in the hands of an agent within the state for management and control, and-where that condition does not apply, and Section 219 (p. 180) in regard to mortgage liens, states the rule that: “The succession may be taxable either at the home of the mortgagee, or in the jurisdiction where the land lies, although the note and mortgage are actually in the possession of the mortgagee at his domicile.”

The late cases cited above are samples of the prevailing doctrine in other states. But there are cases where it is held that a transfer tax cannot be imposed on promissory notes and other debts of a 'nonresident. Chambers v. Mumford, 187 Cal. 228, was such a case, where it was held that a note executed by a resident, payable to a non-resident, was not subject to a transfer tax. The court calls attention to the statute under which that ruling was reached (l. c. 232), which permitted such taxation upon property “within this state/’ and held the maxim “mohilia personam' sequuntur” applied.

The same ruling in Pennsylvania, In Re Helena, 236 Pa. 213, 46 L. R. A. (N. S.) 1167 et seq. It was held that the personal property of a non-resident in the hands of trustees in that state maintains a situs at the decedent’s domicile and is not subject to collateral inheritance tax, because it was not “situated within this state.” Copious notes in 46 L. R. A. (N. S.) at the pages cited considers eases from many jurisdictions. Attention is called to a tendency to adopt legislative action so as to prevent double taxation in such cases. Some, states have enacted statutes which would prevent an inheritance tax upon property so taxed in another state.

The rule in Michigan is that a debt secured by mortgage in that state, payable to a non-resident, is subject to the inheritance -tax (Bradley v. Merriam Estate, 9 L. R. A. (N. S.) 1104), and in that case the notes and mortgages were in the possession of the decedent at the time of his death.

We find no authority denying the right to impose the tax under a statute containing a clause similar to our ‘‘within the jurisdiction of the State,” where the evidence of the debt and the debtor are in the State imposing it, and the creditor is a non-resident. In this ease the notes secured by mortgages were on land in this State, an asset in the estate of the decedent, protected by the laws of this. State. The creditor or his devisee or legatee must have recourse to the courts and laws of this State to protect his rights in a debt to secure its payment. That is equally true of the money in bank. That is likewise true of the bonds and the unsecured notes which ■were physically present in the State where the debtor resides. All this property was inventoried by the administrator in Missouri. Tt was properly and lawfully in his custody, which indicates that it was not in transitu, nor temporarily within the State. All of it was properly within the jurisdiction of a probate court in this State, and therefore “within the jurisdiction of the State” in the terms of the statute. Such evidences of debt could not remain in this State without being in the custody of some person or corporation who had authoritv over it as an agent of the owner, otherwise it would not have been here so as. to bo accessible to the administrator. It possibly acquired a business situs in this State. Whether it did or not it was within the jurisdiction of the State and property subject to the transfer tax. It would have been a proper subject of inquiry by the trial court to determine how and why and under what conditions these evidences of debt were in this State, but whatever the determination of that question the property was legally within the jurisdiction of the Probate Court of Lewis County in this State and subject to the tax.

That Illinois taxed it does not affect the right of Missouri to tax aS s^10wn *n several °f the cases cited. That such double taxation is inequitable and should be remedied by statute does not affect the legal right to impose the tax. We are obliged to declare the law as the lawmakers have enacted it.

Two principal cases in this State are cited, In Re Zook’s Estate, 317 Mo. 986, 296 S. W. 778, and Richardson v. Busch, 198 Mo. 174. In both those cases this court had under consideration the inheritance tax applied to certificates of stock in a foreign corporation. Stock and certificates of stock are quite different from evidences of debt such as bonds -and notes, although the reasoning in the Zook’s case would apply here.

The judgment is reversed and the cause remanded with directions to the trial court to proceed in accordance with this opinion.

Frank, Blair and Gantt, JJ., concur; Walker, J., concurs in a separate opinion; Atwood,, J., not sitting; Bagland, J., dissents.