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ARGUED AND DETERMINED

IN THE

UNITED STATES SUPREME COURT

OCTOBER TERM, 1919

(250 U. 8. 519)

CENTRAL OF GEORGIA RY. CO. v.
WRIGHT, Comptroller General of
State of Georgia.

(Argued Jan. 21, 1919. Reversed with Costs
Feb. 3, 1919. Rehearing Granted as to Cer-
tain Specified Points and Denied as to All
Others Order of April 21, 1919. Reargued
Oct. 13 and 14, 1919. Decided Oct. 27, 1919.)
No. 30.

CONSTITUTIONAL LAW 137-TAXATION
365-MERGER OF RAILROADS NOT AFFECTING

EXEMPTION FROM TAXES BY CHARTER.

Under the charters granted in 1845 to the Southern and the Muscogee Railroad Companies, making their roads taxable only in a certain way and to a certain amount, held, though the companies were later merged, there could be no further taxation of the leasehold of the lessee of the roads.

Mr. Justice McKenna, Mr. Justice Pitney, Mr. Justice Brandeis, and Mr. Justice Clarke dissenting.

from taxation upon the fee of the same roads.

524

Wright v. Central of Georgia R. Co., *236
U. S. 674, 35 Sup. Ct. 471, 59 L. Ed. 781. A
rehearing was granted on the question wheth-
er the exemption thus adjudged to exist ex-
tends to portions of the plaintiff in error's
road let to it by the Southwestern Railroad
and the Muscogee Railroad, which were as-
sumed to be embraced in the decision but
were not specially discussed. The considera-
tion of the court was directed especially to
the charter of the Augusta and Waynesboro
Rail Road granted in 1838 and having fea.
tures characteristic of the conception of rail-
roads then entertained. 236 U. S. 678, 679,
35 Sup. Ct. 471, 59 L. Ed. 781. It is argued
that the charters of the other lessors just
named, granted at a later date, even when
limiting the corporation's liability to taxa-
in a different way.
tion in similar words, should be construed

The charters of the Southwestern and the
Muscogee Railroads were not granted until

In Error to the Supreme Court of the State 1845, and while like the earlier ones they proof Georgia.

On rehearing. Decree on original hearing (248 U. S. 525, 39 Sup. Ct. 181, 63 L. Ed. 401)

to stand.

See also, 249 U. S. 590, 39 Sup. Ct. 387, 63 L. Ed. 791.

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vided that the said railway and its appurtenances and all property therewith connected, or the capital stock of the said Rail Road Company, should not be subject to be taxed higher than one-half of one per cent. upon its annual net income, they did not contain the provisions that showed the Legislature *Messrs. T. M. Cunningham, Jr., and A. R. in 1838 to contemplate indifferently a revenue Lawton, both of Savannah, Ga., for plaintiff derived from using, from sharing, or from in error. letting the special privileges granted-proviMr. Warren Grice, of Macon, Ga., for sions that were of weight in the decision of defendant in error.

⚫520

523

the Court.

But we are satisfied that between 1838 and

*Mr. Justice HOLMES delivered the opin- 1845 there had been no such change in the ion of the Court.

In this case it was decided at the last term that the plaintiff in error, the railway company, was exempt from liability to taxation as lessee of certain roads, 248 U. S. 525, 39 Sup. Ct. 181, 63 L. Ed. 401, as it had been decided a few terms earlier that it was exempt

policy of Georgia as to require the same
words to be given a different meaning at the
later date from that which we have decided
that they had at the former. Circumstances
had not changed when express power to let
was given in 1852. The Muscogee was merg-
ed in the Southwestern under an act of

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes
40 Sup.Cr.-1

1856, but the exemption remained superior | Amendment, recognizing a distinction between to legislative change. Southwestern R. R. citizenship of the United States and citizenship Co. v. Georgia, 92 U. S. 676, 23 L. Ed. 762. of one of the states, places beyond abridgAs remarked by Chief Justice Waite in a ment by the states, are those which owe their like suit between the same parties, the lan-existence to the federal government, its national character, its Constitution, or its laws. guage of the exempting clause is somewhat unusual, and means the railroad specified in 4. CONSTITUTIONAL LAW 206 (1), 207(4)— STATE TRANSFER TAX DOES NOT INFRINGE ON RIGHTS OF CITIZENS.

525 the charter and none other. Southwestern R. R. Co. v. Georgia, 116 U. S. 231, 6 Sup. Ct. 375, 29 L. Ed. 626. But conversely it means that that road shall be exempt while owned by this corporation whether used or demised.

We see nothing in the later statutes or Constitutions that attempts to substitute a new contract or to impair the obligation of the one originally made. Different opinions were entertained on the mam question which this rehearing does not reopen; but taking that as settled we cannot believe that any real distinction can be made between the charter of the Augusta and Waynesboro and those of the Southwestern and Muscogee roads.

The decree of last term must stand and that of the state Court must be reversed. Decree reversed.

Mr. Justice MCKENNA, Mr. Justice PITNEY, Mr. Justice BRANDEIS and Mr. Justice CLARKE dissent.

(250 U. S. 525)

MAXWELL et al. v. BUGBEE, Comptroller of Treasury of State of New Jersey et al. HILL v. SAME.

(Argued March 18 and 19, 1919. Decided Oct. 27, 1919.)

Nos. 43, 238.

1. TAXATION 856, 859(1)-TRANSFER TAX IS ON RIGHT OF SUCCESSION WITHIN TAXING POWER OF STATE.

The tax imposed by Act N. J. April 20, 1909 (P. L. p. 325), §§ 1, 12, as amended by Act April 9, 1914 (P. L. p. 267), on the transfer by will or intestate law of property in the state of a nonresident decedent, is on the right of succession, a creature of local laws, and within the taxing power of the state, and is constitutional.

Act N. J. April 20, 1909 (P. L. p. 325), as amended by Act April 9, 1914 (P. L. p. 267), regulating and taxing the right to succeed to property in the state on the death of a nonresident owner, does not infringe any of the rights of citizenship, either of the states or of the United States, secured by Const. art. 4, § 2, par. 1, or the Fourteenth Amendment.

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5. CONSTITUTIONAL LAW 206(1), 207(4) —
DISCRIMINATION IN TRANSFER TAX BASED ON
CITIZENSHIP AND RESIDENCE NOT UNCONSTI-
TUTIONAL.

Any discrimination in Act N. J. April 20, 1909 (P. L. p. 325) §§ 1, 12, as amended by Act April 9, 1914 (P. L. p. 267), being based on deceased's residence within or without the state, Const. art. 4, § 2, par. 1, and the Fourteenth Amendment, as to privileges and immunities of citizens, are not strictly applicable. 6. CONSTITUTIONAL LAW

283-TRANSFER

TAX ON PROPERTY IN STATE OF NONRESIDENT
DECEDENT NOT WANTING IN DUE PROCESS.

Act N. J. April 20, 1909 (P. L. p. 325) §§ 1, 12, amended by Act April 9, 1914 (P. L. p. 267), by adopting as a measure of the tax on the transfer of property within the state of a nonresident decedent the proportion which does not in effect tax property beyond its juristhe local property bears to the entire estate, diction, and so amount to a deprivation of property without due process of law.

7. CONSTITUTIONAL LAW 229(1)-TRANSFER
TAX ON PROPERTY IN STATE OF NONRESIDENT
DECEDENT NOT WANTING IN EQUAL PROTEC-
TION OF LAW.

The equal protection of the law, which must be decided as between resident and nonresident decedents as classes, rather than by the incidents of a particular estate, is not denied by Act N. J. April 20, 1909 (P. L. p. 325), §§ 1, 12, as amended by Act April 9, 1914 (P. L. p. 267), adopting as the measure of the tax on the transfer of property within the state of a nonresident decedent the proportion of the local estate in certain property to the entire estate; the difference in the manner of assessment as between the two classes not being so wholly arbitrary and unreasonable as to be beyond the

2. CONSTITUTIONAL LAW 207(1) STATES legitimate authority of the state.

PROHIBITED TO DISCRIMINATE AGAINST CITI-
ZENS OF OTHER STATES.

Const. art. 4, § 2, par. 1, is intended to prevent discrimination by the several states against citizens of other states in respect of the fundamental privilege of citizenship.

3. CONSTITUTIONAL LAW

206(1)-PRIVILEG

ES AND IMMUNITIES PRESERVED TO CITIZENS
OF THE UNITED STATES ARE THOSE BASED
ON ITS CONSTITUTION AND LAWS.

The privileges and immunities of citizens of the United States, which the Fourteenth

The Chief Justice, Mr. Justice Holmes, Mr. Justice Van Devanter, and Mr. Justice McReynolds, dissenting.

In Error to the Court of Errors and Appeals of the State of New Jersey.

Certiorari by Lawrence Maxwell and an other, executors of James McDonald, deceased, against Newton A. K. Bugbee, Comptroller of the Treasury of the State of New Jersey, and another, to review an assess

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(40 Sup.Ct.)

ment of a transfer tax, with a like proceed-, testate law, of property within the state, and ing by Louis W. Hill, administrator of James the decedent was a nonresident of the state at J. Hill, deceased. In the former case, judg- the time of his death.” ment of the Supreme Court of New Jersey, affirming the tax, was affirmed by the Court of Errors and Appeals of that state (90 N. J. Law, 707, 101 Atl. 248); and in the latter case, judgment of the Supreme Court, modifying the tax, was affirmed by the Court of Errors and Appeals (92 N. J. Law, 514, 105 Atl. 893). Prosecutors bring error. Affirmed.

In No. 43:

Messrs. Joseph Coult, of Newark, N. J., Lawrence Maxwell, of Cincinnati, Ohio, and William A. Smith, of Newark, N. J., for plaintiffs in error.

Messrs. John W. Westcott, of Camden, N. J., and John R. Hardin, of Newark, N. J., for defendants in error.

In No. 238:

Messrs. E. C. Lindley, of St. Paul, Minn., and Joseph Coult and William A. Smith, both of Newark, N. J., for plaintiff in error.

The taxes thus imposed were at the rate of 5 per cent. upon the clear market value of the property, with exemptions not necessary to be specified, and were payable to the treasurer for the use of the state of New Jersey.

And by section 12 it was provided that upon the transfer of property in that state of a nonresident decedent, if all or any part of the estate, wherever situated, passed to persons or corporations who would have been taxable under the act if the decedent had been a resident of the state, such property located within the state was made subject to a tax bearing the same ratio to the entire tax which the estate of such decedent would have been subject to under the act if the non

resident decedent had been a resident of the state, as the property located in the state

#532

bore to the entire estate of such nonresident

Mr. John R. Hardin, of Newark, N. J., for decedent wherever situated. defendants in error.

⚫530

The act, having first been amended by an act approved March 26, 1914 (P. L. 1914, p.

*Mr. Justice DAY delivered the opinion of 91), not necessary to be recited, was again the Court.

These cases were argued and submitted together, involve the same constitutional questions, and may be disposed of in a single opinion. The attack is upon the inheritance tax law of the state of New Jersey, and is based upon certain provisions of the federal Constitution. The statute has reference to the method of imposing inheritance taxes under the laws of the state. The constitutionality of the law upon both state and federal grounds was upheld in the McDonald Case by

*531

the Court of Errors and *Appeals. 90 N. J. Law, 707, 101 Atl. 248. In the Hill Case the judgment of the Supreme Court of New Jersey (91 N. J. Law, 454, 103 Atl. 861) was affirmed by the Court of Errors and Appeals (92 N. J. Law, 514, 105 Atl. 893).

The statute under consideration is an act approved April 9, 1914, (P. L. 1914, p. 267), being an amendment to an act approved

April 20, 1909 (P. L. 1909, p. 325), for taxing the transfer of property of resident and nonresident decedents by devise, bequest, descent, etc., in certain cases. The 1909 act is found in 4 Comp. Stat. N. J. p. 5301 et seq; the amendment, in 1 Supp. Comp. Stat. N. J. pp. 1538-1542. The act of 1909, in its first section, imposed a tax upon the transfer of any property, real and personal, of the value of $500 or over, or of any interest therein or income therefrom, in trust or otherwise, to persons or corporations including the following

cases:

"First. When the transfer is by will or by the intestate laws of this state from any person dying seized or possessed of the property

while a resident of the state.

"Second. When the transfer is by will or in

amended by the act approved April 9, 1914, which is now under consideration (P. L. 1914, p. 267; 1 Supp. Comp. Stat. N. J. pp. 15381542). Sections 1 and 12 were amended, the former by confining the tax on the transfer of property within the state of nonresident decedents to real estate, tangible personal property and shares of stock of New Jersey corporations and of national banks located within the state; and by modifying the former rate of 5 per centum upon the clear market value of the property passing, which was subject to exemptions in favor of churches and other charitable institutions, and of parents, children, and other lineal descendants, etc., by making 5 per centum the applicable rate, but subject to numerous exceptions, and in the excepted cases imposing different rates, dependent upon the relationship of the beneficiary to the deceased and the amount of the property transferred. Thus:

dren, husband or wife, of a decedent, or to the

"Property transferred to any child or chil

issue of any child or children of a decedent,
shall be taxed at the rate of one per centum
on any amount in excess of five thousand dol
lars, up to fifty thousand dollars;
one and
one-half per centum on any amount in excess
to [of] fifty thousand dollars, up to one hun-
dred and fifty thousand dollars; two per
centum on any amount in excess of one hun
dred and fifty thousand dollars, up to two hun-
dred and fifty thousand dollars; and three per
centum on any amount in excess of two hundred
and fifty thousand dollars."

The modified formula for computing the assessment upon the transfer of the estate of a nonresident decedent prescribed in section 12 as amended by the act under consideration, is as follows:

"A tax shall be assessed on the transfer of, 018.43. Following the statute, the tax was

⚫533

property made subject to tax as aforesaid, in this state of a nonresident decedent if all or

any part of the estate of such decedent, wherever situated, shall pass to persons or corporations taxable under this act, which tax shall bear the same ratio to the entire tax which the said estate would have been subject to under this act if such nonresident decedent had

been a resident of this state, and all his prop erty, real and personal, had been located within this state, as such taxable property within this state bears to the entire estate, wherever situated: Provided, that nothing in this clause contained shall apply to any specific bequest or devise of any property in this state."

An amendatory act, approved April 23, 1915 (P. L. 1915, p. 745; 1 Supp. Comp. Stat. N. J. p. 1542), repeated the provision last quoted, and made no change in the act pertinent to the questions here presented.

first ascertained on the entire estate as if it were the estate of a resident of the state of

New Jersey, with all the decedent's property both real and personal located there; the tax was then apportioned and assessed in the proportion that the tazable New Jersey estate bore to the entire estate.

the apportionment formula fixed by the statThe thing complained of is that applying ute, in the cases under review, results in a greater tax on the transfer of property of the estates subject to the jurisdiction of New Jersey, than would be assessed for the transfer of an equal amount, in a similar manner, of property of a decedent who died a resident of New Jersey. The cause of this inequality is said to arise because of imposing the graduated tax, provided by the statute, upon estates so large as these. If a resident, in the case of a wife or children, the first $5,

It is this method of assessment in the case of nonresident decedents which is the subject-000 of property is exempt, the next $45,000 matter in controversy.

James McDonald died January 13, 1915, owning stock in the Standard Oil Company, a New Jersey corporation, valued at $1,114,965, leaving an entire estate of $3,909,333.25, which included some real estate in the state of Idaho. Of the entire estate, $279,813.17 went to pay debts and expenses of administration. Mr. McDonald was a citizen of the United States and a resident of the District of Columbia, and left a will and a codicil which were admitted to probate by the Supreme Court of that District. The executors are Lawrence Maxwell, a citizen of Ohio, and the Fulton Trust Company, a New York corporation. The principal beneficiaries under the will are citizens and residents of states of the United States other than the state of New Jersey. Under the will the wife takes by specific legacies; the other beneficiaries are specific and general legatees not related to the deceased and a son and two grandchildren, who take the residuary estate.

James J. Hill died May 29, 1916, intestate,

#534

a resident and citizen of the state of Minnesota, leaving a widow and nine children. Under the laws of Minnesota, the widow inherited one-third of the real estate and personal property, and each of the children two twenty-sevenths thereof. The entire estate descending amounted to $53,814,762, which included real estate located outside of New Jersey, and principally in Minnesota and New York, valued at $1,885,120. The only property the transfer of which was subject to taxation in New Jersey was stock in the Northern Securities Company, a New Jersey corporation, valued at $2,317,564.68. The debts and administration expenses amounted to $757,571.20.

The amount of the assessment in the McDonald Case was $29,071.68. In the Hill Case the tax assessed amounted to $67,

is taxed at the rate of 1 per cent., the next $100,000 at the rate of 11⁄2 per cent., the next $100,000 at the rate of 2 per cent., and the remainder at the rate of 3 per cent. The contention is that, applying the apportionment rule provided in the case of nonresident estates, a larger amount of tax is assessed.

*535

*The correctness of the figures deduced from the application of the statute as made by the counsel for plaintiff in error is contested, but in our view the differences are unimportant, unless the state is bound to apply the same rule to the transmission of both classes of estates.

Counsel for plaintiffs in error sum up their objections to the statute, based on the federal Constitution, as follows:

(1) It taxes the estates of nonresidents more than those of residents, and therefore gives to residents privileges and immunities denied to nonresidents.

(2) It provides for a tax which bears unequally, and therefore is not imposed upon a uniform rule, and it therefore denies to nonresidents the equal protection of the laws.

(3) It taxes the transfer of a nonresident's property over which the state of New Jersey has no jurisdiction while it expressly omits like property of residents, that is, real estate without the state, and thereby deprives the nonresident of his property without due process of law.

[1] Before taking up these objections it is necessary to briefly consider the nature of the tax. In Carr v. Edwards, 84 N. J. Law, 667, 87 Atl. 132, it was held by the New Jersey Court of Errors and Appeals to be a tax upon the special right, the creation of the statute, of an executor or administrator of a nonresident decedent to succeed to property having its situs in New Jersey. Of section 12, as it stood in the original act of 1909, the court said:

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