Fisher, Trustee v. State , 106 Md. 104 ( 1907 )

This is a suit by the State of Maryland to recover the collateral inheritance tax, alleged to be due from the estate of the late Henry E. Johnston.

The facts are undisputed and the question for determination rests upon the construction to be given to sec. 117, Art. 81, of the Code of Public General Laws.

The substance of the statute is as follows: All estates * * passing from any person who may die seized and possessed thereof, being in this State, or any part of such estate * * or interest therein transferred by deed, will, grant, bargain, gift or sale, made or intended to take effect in possession after the death of the grantor * * devisor or donor, to any person or persons, bodies politic * * in trust or otherwise, other than to or for the use of the father, mother, husband, wife, children and lineal descendants of the grantor * * testator, donor * * *, shall be subject to a tax of two and a half per centum on every hundred dollars, of the clear value of such estates, money or securities.

Mr. Johnston died on the 5th of May, 1884, leaving a large and valuable estate, consisting of real and personal estate.

The will was duly admitted to probate in the Orphans' Court of Baltimore City, and the trustees under the will duly qualified as such.

By his will he gave and devised the entire rest and residue of his estate, real and personal, to certain trustees (Messrs. Josiah L. Johnston, Wm. A. Fisher and W. Graham Bowdoin), in trust, for his wife, Harriet Lane Johnston, for and during the term of her natural life and after the death of his wife, "in trust to hold the entire corpus of the residuum of the estate to the use of such person and persons, whether natural or corporations, to whom my wife may give and appoint, by any instrument in the nature of her last will and testament;" and if she should fail to execute a last will and to make such appointment, then, in trust, to hold the corpus of the residuum of the estate, to the use of the Harriet Lane Home for Invalid Children of Baltimore City."

On the 11th of May 1885, upon the settlement of the estate his executors transferred to the trustees under the will, the rest and residue of the personal estate, amounting to $188,395.44.

The real property comprising a part of the estate, amounting to $43,000.00 also passed to the trustees, thus making the total value of the residuum of the estate transferred to the trustees, under the will, the sum of $231,395.44.

Mrs. Johnston died on July 3rd, 1903, leaving a last will and testament, which was duly admitted to probate in the city of Washington, on November 3rd, 1903.

By her will, she executed the power of appointment vested in her by the will of her husband by devising and bequeathing the entire rest and residue of the estate, real and personal of her husband, to her executors, in trust, to allow her brother-in-law, to enjoy a life estate therein, if he so desired, and as to the rest and residue, to the Harriet Lane Home for Invalid Children of Baltimore City,

On the 14th of March 1904, Mr. Fisher, the surviving trustee, transferred all the residuum of the estate to Mrs. Johnston' executors, except the sum of $25,000. retained by him to meet any claim of the State for the collateral inheritance tax, here in controversy.

It is admitted, by the record, and charged in the declaration, that the residuum of Mr. Johnston's estate had increased, until at the time of the death of Mrs. Johnston it amounted to $734,439.36. That Josiah L. Johnston and W. Graham Bowdoin are dead, and the defendant, D.K. Este Fisher is the surviving trustee, and that no collateral inheritance tax has been paid to the State, by the trustees of the estate.

The case was tried before the Court, without a jury, and the judgment being in favor of the State, the defendant has appealed.

The declaration, in the case contains two counts. The first count charges that the State is entitled to recover a tax, on the value of the rest and residue of the estate transferred by the executors of Mr. Johnston to the trustees on the 11th of May, 1885.

The second count claims the tax on the rest and residue of the estate, at the date of the death of Mrs. Johnston, on July 3rd, 1903.

It is contended on the part of the appellant 1st, that upon a proper construction of the Maryland statutes, relating to the payment of collateral inheritance tax, in connection with the facts of this case, the State cannot recover any part of the amount claimed in either count, in the declaration. Secondly: that if the state can recover at all, it can only recover two and one-half per cent on the value of the reversionary interest in the rest and residue of the estate, at the time of the death of the testator, Henry E. Johnston and upon the value of the estate as then ascertained.

In the case of Tyson et al v. State, 28 Md. 577, andState v. Dalrymple, Admrs., 70 Md. 298, this Court held, that such a tax was free from all constitutional objection. In the latter case, it was said, in permitting property within the State, upon the death of its owner, to pass by devise or descent or distribution, the Legislature has seen fit, where strangers or collateral kindred receive it, to exact as the condition upon which that privilege is granted, the tax in question.

And upon the question of the collection of the tax, the Court said that ample provision is made for every possible contingencythat may arise, whether the decedent be a resident of this State or not, provided the property be located here if he be a non-resident or be actually or constructively here, if he be a resident. No estate can escape administration if the law be enforced and when the property passes into the hands of the executor * * * his obligation to pay the tax is fixed and his bond at once becomes liable therefor.

There can be no doubt, it seems to us, that under sec. 117 of Article 81, above quoted, that the Johnston estate is liable for the collateral inheritance tax claimed by the State.

The language of the statute is plain and direct, that allestates passing from any person who may die seized and possessed thereof * * * transferred, by deed, will * * * to take effect in possession after the death of the grantor, devisor or donor, not within the excepted classes, shall be subject to this tax.

The manifest intention of the Legislature was to tax the transmission of all property to collaterals situate in the State, as provided by the statute, and to require the payment of the tax as a premium for the enjoyment of the benefit thereby secured.

In State v. Dalrymple, 70 Md. 295, it is said that one of the conditions upon which strangers and collateral kindred may acquire a decedent's property, which is subject to the dominion of our laws, is, that there shall be paid out of such property a tax of two and a half per cent. into the treasury of the State. This, therefore, is not a tax upon the property itself, but is merely the price exacted by the State, for the privilege accorded, in permitting property so situate to be transmitted by will or by descent, or distribution.

Because the statute does not contain a special provision for the ascertainment and collection of the tax cannot defeat the State's right to a recovery. It was distinctly held in Montague v. State, 54 Md. 487, that if an admistrator or executor actually pays over money of his decedent to a collateral distributee or legatee without retaining therefrom this tax, it becomes, to the extent of the tax, money had and received by him for the use of the State and an action may be maintained against such distributee or legatee therefor. Dashiell v. Baltimore,45 Md. 621; Bonaparte v. State, 63 Md. 475.

In the case at bar, we think it is plain that upon probate of the will of Mrs. Johnston, she having executed the power vested in her, by her husband's will, the estate thereupon became subject to the collateral inheritance tax, imposed by the Act.

It is urged, however, by the appellant, that upon whatever estate the collateral inheritance tax is imposed by the statute, it is imposed as of the death of the testator, (Mr. Johnston) from whom the estate comes, and not upon the value of the estate, at the time of the death of Mrs. Johnston.

This contention, we think, is answered by the statute itself. The tax is imposed upon the clear value of all estates passing by will or otherwise, at the time it is transferred and received by the collateral beneficiary.

The tax is on the transmission of the property, and upon the estate the beneficiary is to receive and enjoy. There could be no transfer or enjoyment of the property, by the beneficiary in this case` until the death of Mrs. Johnston, and this being so, the collateral inheritance tax was payable, upon the clear value of the estate, at her death, and at the time, the collateral beneficiary received the benefit of the bequest and devise, under the will. In other words, the tax is imposed upon the clear value of the estate, at the "passing and transferring" of the estate to the collateral beneficiary.

In Dalrymple's case, supra, this Court said, the amount of the tax will depend upon the sum in the hands of the administrators payable to the legatee.

It seems to be clear, therefore, without further discussion of the other questions raised on the record that the Court properly sustained the demurrer to the appellant's second plea, and committed no error in granting the State's first and sixth prayers, and in rejecting the defendant's prayer.

It will be seen that the plaintiff's first prayer properly announced the law of the case. It is as follows: "The State prays the Court to rule, as a matter of law, that as it is admitted that the trustees holding the residuary devise and legacy under the will of Henry E. Johnston, of whom D.K. Este Fisher is the surviving trustee, have received from the executors of Henry E. Johnston, the said residuary devise and legacy, under the said will, and as it appears from the wills of Henry E. Johnston and Harriet Lane Johnston, admitted in these proceedings, that the said residuary devise and legacy in the said will of the said Henry E. Johnston, after the termination of the life estate of Harriet Lane Johnston (which life estate has terminated) is subject, under the laws of the State of Maryland to a collateral inheritance tax, the verdict in this case must be for the plaintiff."

The sixth prayer, relates to the amount to be recovered, with interest from the date of the probate of the will of Harriet Lane Johnston, and there can be no question as to its correctness under the construction we have given the statute. The defendant's prayer was properly refused; it denied a recovery on any part of the amount claimed in either of the counts in the declaration.

For the reasons given the judgment will be affirmed, with costs.

Judgment affirmed with costs.