|
30 F.2d 600, 65 A.L.R. 1354 Circuit Court of Appeals, Second
Circuit. MOORE, Treasurer of Grant County,
Ind., v. MITCHELL et al. February 4, 1929. Appeal from the District Court of the United States for the
Southern District of New York. Action by Harry C. Moore, as Treasurer of Grant County,
Ind., against Sidney Z. Mitchell and another, as executors of the last will and
testament of Richard Edwards Breed, deceased, to recover for taxes assessed and
not paid. From a judgment for defendants by the District Court of the Southern
District of New York (28 F.(2d) 997), dismissing the complaint, plaintiff
appeals. Affirmed. [*601] COUNSEL: Russell H. Robbins, of New York City (Henry M. Dowling,
of Indianapolis, Ind., of counsel), for appellant. Simpson, Thacher & Bartlett, of New York City (Louis
Connick and JUDGES: Before MANTON L. HAND, and AUGUSTUS N. HAND, Circuit Judges. OPINION BY: MANTON, Circuit Judge. This action is by the county treasurer of Grant county,
Indiana, to recover taxes alleged to be due and unpaid. The complaint was
dismissed on motion because it did not state a cause of action of which the
court would take jurisdiction. The appellees are executors of the last will and
testament of Richard Edwards Breed, who is alleged to have resided in Grant
county, Indiana, during the years 1903 to 1926, and did not pay a tax as
required by Sess. Laws Ind. 1903, c. 29, Sec. 23 (section 14288, Burns’ Rev.
Stat. Ind. for 1926). The statute provides that ‘all the property, both real
and personal, situated in any county, shall be liable for the payment of all
taxes, penalties, interest and costs charged to the owner thereof in such
county, and no partial payment of such taxes, penalties, interest or costs
shall discharge or release any part or portion of such property until the whole
is paid; which lien shall in nowise be affected or destroyed by any sale or
transfer of any such personal property, and shall attach on the first day of
March, annually, for the taxes of such year.’ The assessment was made after Breed’s death by the Grant
county taxing assessors. Authorization to commence the suit is found in Sess.
Laws 1927, p. 141, c. 54, Sec. 1, which was passed after the -death of Breed.
It authorizes the treasurer, in his name, as such officer, to institute and
prosecute to final judgment and execution all suits and proceedings necessary
for the collection of delinquent taxes owed by any person residing outside the
state of Indiana, and provides that for his services in so doing the treasurer
shall charge and receive 25 per centum of the moneys so collected. There is no allegation in the bill that any of the
deceased’s property, referred to therein, was ever physically within the state
of Indiana, or that the deceased died there. The first cause of action is based
upon an alleged indebtedness of the deceased, due for the taxes alleged to have
been assessed against the deceased after his death, and the second on an
alleged unjust enrichment of the deceased and the appellees as executors,
because of failure to pay the taxes. No lien is claimed to have been imposed
upon any property of the deceased by reason of the proceedings for the
assessment of taxes. Thus only a personal [*602] liability is asserted for taxes
which were not liquidated until after the death of the deceased. Taxes are imposts, not debts, collected for the support of
the government. Meriwether v. Garrett, 102 U.S. 472, 26 L.Ed. 197. The form of
procedure to collect them cannot change their character. No contractual or
quasi contractual obligation to pay arises out of the assessment. The
enforcement of revenue laws rests, not on consent, but on force and authority.
State of Colorado v. Harbeck, 232 N.Y. 71, 133 N.E. 357. An action for debt
cannot be maintained to collect a tax in the New York state courts. City of New
York v. McLean, 170 N.Y. 374, 63 N.E. 380; Matter of Maltbie v. Lobsitz Mills
Co., 223 N.Y. 227, 119 N.E. 389. See, also, City of Boston v. Turner, 201 Mass.
190, 87 N.E. 634. With the appellees and the property without the state, and
the estate being administered in New York, the effort to collect a tax, for a
political subdivision of Indiana, is repugnant to the settled principles of
private international law, which preclude one state from acting as a collector
of taxes for a sister state, and from enforcing its penal or revenue laws as
such. The revenue laws of one state have no force in another. The taxing power
of a state is, by the federal Constitution (Amendment 14), limited to persons
and property within its jurisdiction. Wisconsin v. Pelican Ins. Co., 127 U.S.
266, 8 S.Ct. 1370, 32 L.Ed. 239. This court, in New York Trust Co. v. Island Oil &
Transport Corp., 11 F. (2d) 698, considered a request for instructions as to
whether equity receivers should pay the franchise taxes of a corporation in
receivership where the corporation was organized in the state of Virginia, and
there we said that, ‘if the receivers in the exercise of their business
discretion deem it expedient to pay this tax, they are authorized so to do; but
they are not required to do it, because the state of Virginia has no legal
right to demand payment from them.’ A further question was there presented as
to the lawful right to collect taxes out of the estate not within the taxing
jurisdiction and from representatives of the taxpayers not within the taxing
jurisdiction, and we concluded that there was no legal liability to pay. In State of Colorado v. Harbeck, supra, it was held that the
state court could not be used to collect taxes due a sister state. The action
was brought to recover an inheritance tax upon the estate of Harbeck, a
resident of Colorado. He died in New York. The will and codicils were probated
in New York, transfer tax proceedings were had in New York, and the taxes were
assessed as upon the estate of a nonresident and paid. No provision was made in
the accounts finally settled for the payment of transfer tax to the state of
Colorado, which had notice of the proceedings in New York. The estate which was
assessed for taxation consisted of stocks and bonds, none of which were
physically present in Colorado at the time of the decedent’s death or
thereafter. The complaint was dismissed. The tax laws of one state cannot be
given extraterritorial effect, so as to make collections through the agency of
the courts of another state. Indiana’s political subdivision, Grant county, is
limited in the payment of taxes to property found within its boundaries. State
of Iowa v. Slimmer, 248 U.S. 115, 39 S.Ct. 33, 63 L.Ed. 158; Ashley v. Ryan,
153 U.S. 436, 14 S.Ct. 865, 38 L.Ed. 773; Matter of Anita Bliss, 121 Misc.Rep.
773, 202 N.Y.S. 185; Walker v. Treasurer & Receiver General, 221 Mass. 600,
109 N.E. 647; People v. Kellogg, 268 Ill. 489, 109 N.E. 304. In Wisconsin v. Pelican Ins. Co., 127 U.S. 265, 8 S.Ct.
1370, 32 L.Ed. 239, the state of Wisconsin commenced an action of debt in the
Supreme Court of the United States against a corporation of Louisiana, in which
it sought to collect upon a judgment recovered in a Wisconsin court for
penalties imposed by the statutes of Wisconsin for not making returns to the
insurance commissioner of that state as required by law. Granting judgment for
the defendant upon demurrer, the Supreme Court pointed out that ‘the rule that
the courts of no country execute the penal laws of another applies, not only to
prosecutions and sentences for crimes and misdemeanors, but to all suits in
favor of the State for the recovery of pecuniary penalties for any violation of
statutes for the protection of its revenue. * * * ’ The appellant’s argument that the extraterritorial
imposition of tax is to be distinguished from the extraterritorial collection
or enforcement of the tax, is without merit. The appellant attempted to impose
a tax prior to the commencement of the action. The taxing authorities went
through the forms prescribed by the statutes of Indiana, but Breed was dead
before the assessment, and the attempt was fruitless. The property was not
physically there. Under the due process clause of the United States [*603]
Constitution (Amendment 14), Indiana had no jurisdiction to impose a tax,
because neither the property nor the deceased was within its jurisdiction at
the time the tax was assessed. It may not now use the national District the
time the tax was assessed. It may not now use the national District Court outside
of the state to collect such tax. But it is said that Blodgett v. Silverman, 277 U.S. 1, 48
S.Ct. 410, 72 L.Ed. 749, overrules what is said in the Harbeck Case. The
Blodgett Case did not deal with the question of extraterritorial enforcement of
state tax statutes, which is presented in this case. That case involved the
question of whether the state of Connecticut could tax the transfer of certain
intangible personal property under a will probated in Connecticut, and collect
the tax in a Connecticut court against executors appointed by the Connecticut
court of probate. The deceased was domiciled in Connecticut at the time of his
death. The court decided that intangible personalty has such a situs as the
domicile of its owner, and its transfer on his death may be taxed there. No
question of jurisdiction of the state of Connecticut over the executors was
presented. The decision in the Blodgett Case was limited to upholding a
transfer tax upon intangibles in a court which had jurisdiction to tax. That principle
is recognized in the cases we have referred to. Assuming Breed was domiciled in Indiana, as alleged in the
complaint, the taxes were not assessed until after his death and until after
the appellees were administering his estate in the jurisdiction of the New York
Surrogate’s Court. The amount of the tax had not been ascertained and not
attempt was made to impose the taxes prior to death. The Indiana statute
imposes a duty upon the resident to report taxable property. It creates no
liability before the amount of taxes claimed is determined. It was necessary
for the taxing authorities to assess the taxes and determine the amount claimed
to be due. It is not a transfer tax or a succession tax claimed, but a personal
property tax. The application of the fiction of ‘mobilia sequuntur personam’
would require an assessment during each of the years for which taxes are
claimed, during the lifetime of the decedent, to reach the conclusion that
there was a personal liability to pay these taxes during his life. Jurisdiction
is not to be founded upon a multiplication of fictions, and in no true sense
can it be said that Indiana had jurisdiction to impose the taxes for which this
suit is brought. Certainly the court below had no jurisdiction of the cause of
action alleged, and the complaint was properly dismissed. Judgment affirmed. L. HAND, Circuit Judge (concurring). Although the Supreme
Court of Indiana has not passed upon the question, I think that a personal
liability was imposed upon Breed before his death, which was after March 1st.
That is the date when the tax is imposed, and when the lien attaches to any
property within the state. It can hardly be that the lien arises before the
liability, and the assessment may be, and in my judgment should be, considered
as no more than a liquidation of a liability already existing. Nor does the
actual location of the property taxed affect the validity of this tax, which
was personal. As to shares in corporations, there has, I think, never been any
doubt, and negotiable bonds are now to be considered in the same class.
Blodgett v. Silberman, 277 U.S. 1, 48 S.Ct. 410, 72 L.Ed. 749. Had any of the
property consisted of chattels, coin, or bank notes, situated outside Indiana,
another question would have arisen, but this was not the case. Hence it seems
to me that the liability was valid; it is not even argued that, if so, it did
not survive. We must therefore decide whether a tax lawfully imposed in a
foreign state can be collected by suit in a federal court sitting in another
state. Our jurisdiction is in this respect no different from that of a court of
the State of New York; the law to be administered is certainly not the law of
Indiana, whether it be the law of New York, or whether in such cases there is a
common law independent of the laws of any State. Generally it is, of course,
true that a liability arising under the law of a foreign state will be
recognized by the courts of another, and it is not here relevant whether
foreign liability is enforced, or another, precisely similar, raised by the law
of the forum. A recognized exception is in the case of criminal and penal
liabilities. The Antelope, 10 Wheat. 66, 123, 6 L.Ed. 268; Wisconsin v. Pelican
Ins. Co., 127 U.S. 265, 8 S.Ct. 1370, 32 L.Ed. 239; Huntington v. Attrill, 146
U.S. 657, 13 S.Ct. 224, 36 L.Ed. 1123; Huntington v. Attrill, (1893) A.C. 150;
Arkansas v. Bowen, 3 App.D.C. 537; Dicey, Conflict of Laws, rule 54. In some
few cases, this exception has been extended to include revenue laws as well.
Colorado v. Harbeck, 232 N.Y. 71, 133 N.E. 357; Municipal Council of [*604]
Sydney v. Bull, (1909) 1 K.B. 7; Gulledge Bros. Lumber Co. v. Wenatchee Land
Co., 122 Minn. 266, 142 N.W. 305, 46 L.R.A.(N.S.) 697; Canada v. Schulze, 9
Scotch L.T. 4. But so far as I can find the point has never been passed on by a
federal court. While the origin of the exception in the case of penal
liabilities does not appeal in the books, a sound basis for it exists, in my
judgment, which includes liabilities for taxes as well. Even in the case of
ordinary municipal liabilities, a court will not recognize those arising in a
foreign state, if they run counter to the ’settled public policy' of its own.
Thus a scrutiny of the liability is necessarily always in reserve, and the
possibility that it will be found not to accord with the policy of the domestic
state. This is not a troublesome or delicate inquiry when the question arises
between private persons, but it takes on quite another face when it concerns
the relations between the foreign state and its own citizens or even those who
may be temporarily within its borders. To pass upon the provisions for the
public order of another state is, or at any rate should be, beyond the powers
of a court; it involves the relations between the states themselves, with which
courts are incompetent to deal, and which are intrusted to other authorities.
It may commit the domestic state to a position which would seriously embarrass
its neighbor. Revenue laws fall within the same reasoning; they affect a state
in matters as vital to its existence as its criminal laws. No court ought to
undertake an inquiry which it cannot prosecute without determining whether
those laws are consonant with its own notions of what is proper. For these reasons I concur. |