Potter v. Chambers

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] Jesse S.L. Potter, a son of the deceased, Melissa A. Potter, appeals from an order of the superior court fixing the amount due from him under the inheritance tax law, upon the property received by him under the will of the decedent and upon certain property transferred to him by the decedent prior to her death. The case involves the question of the rates of computation of inheritance tax upon the valuations of the property given at the death of the decedent and that given prior to her death, respectively.

Melissa A. Potter died testate on November 30, 1916. By her will she gave to Jesse S.L. Potter, and he has received it, property of the value of $146,773.57. On October 22, 1908, she transferred to him certain other property, without any valuable consideration therefor, which at that date and also at the time of her death was of the value of $850,300. The parties stipulated in the lower court that ever since said transfer said Jesse S.L. Potter has been the owner and in possession of said property; that he had, up to the time of her death, collected and delivered to her all the income therefrom, and that the property was liable to taxation under the inheritance tax law of 1905. (Sec. 1, Stats. 1905, p. 341.)

The cause was submitted upon this stipulation and thereupon the court below found or concluded that the gift was "intended to take effect in possession and enjoyment after her death and was made in contemplation of death," within the meaning of the inheritance tax law.

This finding or conclusion is not sustained by the stipulation on which it was based, except so far as it declares that the gift was intended to take effect in "enjoyment" after death. The stipulation states that he immediately took and ever afterward held the possession; it says nothing whatever that raises the inference that it was made "in contemplation of death," and it implies that possession was to be taken at once by the donee. (Carpentier v. Small, 35 Cal. 346.) [1] However, the fact that it was intended to take effect in "enjoyment" after her death is sufficient to make it taxable under the law of 1905, then in force, so the error is not important on the subject of its liability to taxation at the time it was made.

The transfer of October, 1908, immediately passed to Jesse S.L. Potter the title to the property as of that date. [2] It is settled law that the tax is levied on the transfer of title, or on the exercise of the right to transfer the title, including, of course, the right of the transferee to receive it, and not on the property itself, and that while the provisions imposing the tax on prior transfers in contemplation of death or with intent that they take effect in enjoyment at death are but safeguards against attempts to evade the tax, the recipient of a present transfer of that character is bound only for the inheritance tax due upon it under the law in force at the time the title passes, and the legislature has no power to raise the rate or increase the tax on such transfer by a subsequent act. (Hunt v. Wicht, 174 Cal. 205 [L.R.A. 1917C, 961, 162 P. 639]; Estate of Felton, 176 Cal. 663 [169 P. 392]; Estate of Gurnsey, 177 Cal. 214 [170 P. 402]; Nickel v.State, 179 Cal. 128 [175 P. 641]; Estate of Brix, 181 Cal. 671,672 [186 P. 135]; Estate of Murphy, 182 Cal. 746 [190 P. 46]; Estate of Miller, 184 Cal. 674 [16 A. L. R. 694,195 P. 413]; Chambers v. Gibb, 186 Cal. 196 [198 P. 1032];Chambers v. Lamb, 186 Cal. 261 [199 P. 33].)

Counsel for the respondent make an elaborate argument the purpose of which seems to be to induce this court to overrule these decisions or in some way to qualify the rule just stated, or to convince the court that the legislature has done so. [3] We are of the opinion that the decisions are sound and should be adhered to and that the legislature cannot change a rule established by constitutional provisions. We see no force in the argument that the present case can be differentiated fromHunt v. Wicht, supra, on the ground that the transfer involved in that case was made prior to the enactment of the act of 1905, while the transfer here involved was made subsequent thereto, and that since that act imposed a tax on that transfer, it is competent for the legislature to increase the rate by a subsequent law. This theory is based on the proposition that under the act of 1905 there became vested in the state an interest in the property transferred to the extent necessary to enable it to afterward impose thereon a succession tax greater than was imposed by that act. [4] This would be doubtful, at best, in any event, but it is based on the untenable premise that the act of 1905 creates in the state, during the life of the donor, an interest in property giveninter vivos in contemplation of death, or with the intent that it shall take possession or enjoyment after death. The act has no such effect; it merely gives the state a lien upon the property, not for any tax afterward imposed by subsequent acts, but for the tax imposed by that act.

[5] It is also settled that the right to such tax vests in the state at the date of the taxable transfer, and that the legislature cannot by subsequent acts reduce the rate of taxation thereon, since to do so would be to make a gift of the property of the state to the extent of the reduction, contrary to section 31, article IV, of the constitution. (Estate ofStanford, 126 Cal. 118 [45 L.R.A. 788, 54 P. 259,58 P. 462]; Trippet v. State, 149 Cal. 521 [8 L.R.A. (N.S.) 1210,86 P. 1084]; Estate of Woodard, 153 Cal. 39 [94 P. 242];Estate of Martin, 153 Cal. 227 [94 P. 1053]; Estate ofKennedy, 157 Cal. 527 [29 L.R.A. (N.S.) 428, 108 P. 280];Estate of Rossi, 169 Cal. 149 [146 P. 430].) These were all cases where the title to the property vested in the successor, and the right to tax vested in the state at the death of the ancestor, but on this point no distinction can be made between such cases and those where the rights to the property and to the tax, respectively, vest on the passing of the title by gift in the lifetime of the ancestor. The fact that the collection of the tax is postponed, in the latter class of cases until the death of the ancestor, cannot affect the question of the vested right of the state thereto.

The result of these two propositions is that the right of the state to the tax on the property given to Jesse S.L. Potter in 1908, and the liability of Potter for such tax, were alike irrevocably fixed as of that date subject to the condition stated in the act of 1905 (sec. 7); that is to say, it was not to become payable until the death of the donor, but that, under section 1 of that act, the tax became a lien on the property at the time the gift was made, and so remained until the tax was paid. The act declared that if the person chargeable with the tax was an adult child of the decedent a part of the property transferred "of the clear value" of $4,000 should be exempt from the tax imposed by the act (sec. 4). Potter, an adult son, was entitled to this exemption. His liability, as fixed at the time of the transfer, was a liability to pay a tax measured by the value of the property given to him, less the $4,000 declared to be exempt, the tax on the remainder to be computed at the rates fixed by the act of 1905. These were the rights and liabilities vested and fixed by the law in force in 1908, and the legislature could not, by subsequent enactment, change them or either of them.

The legislature afterward amended the law on the subject of inheritance taxes. A complete revision was enacted in 1911. (Stats. 1911, p. 713.) This act repealed all prior acts, but provided that rights of the state, and pending proceedings, under such prior acts, should not be affected thereby. Another complete revision was enacted in 1913. (Stats. 1913, p. 1066.) This act also repealed prior acts, including that of 1911 and amendments thereto, and reserved the rights of the state under any prior act. Sections 1, 5, 6, 7, 9, and 14 of this act were amended in 1915 (Stats. 1915, pp. 418, 435), and an inheritance tax department to be maintained and directed by the controller was established. (Stats. 1915, p. 430.) It was the law as thus amended that was in force in 1916 at the date of the death of Melissa A. Potter.

The taxes on the gift of 1908 at the value fixed by the court below, if computed upon the rates and exemption fixed by the act of 1905, amounted to $22,094. The act of 1915 gave an adult son an exemption of $10,000. The court below was of the opinion that this exemption was applicable to the gift of 1908, and deducted that sum therefrom. This reduced the tax on that gift to $22,034, a decrease of $60 from the correct amount. In this respect the court erred against the respondent.

In computing the tax on the value of the property received by Potter from his mother at her death in 1916, $146,773.57, the court below allowed no deduction for exemption, being of the opinion that the exemption of $10,000 allowed under the amendment of 1915 was the total exemption allowed both on the gift of 1908 and the subsequent legacy. It was of the opinion, moreover, that for the purposes of ascertaining the rate of taxation on the legacy its value should be added to the value of the previous gift, and that the rate on the legacy should be ascertained upon the theory that it was included in the portion of the combined total in excess of $500,000, the rate upon which portion, by the amendment of 1915, was fixed at twelve per cent. Upon this theory it fixed the tax on that legacy at $17,612.83.

The appellant contends that this theory is erroneous, that the $10,000 exemption of 1915 is to be deducted from the value of the legacy, and that the rates of 1915 are to be computed on the balance in the same manner as if there had been no gift received in 1908, since the entire estate which vested in the son in 1916 was the $146,773.57 included in said legacy. By the rate of 1915 the tax thereon, so computed, would be $5,924.15.

The controller contends that the $850,300 given in 1908 is to be added to the $146,773.57 received in 1916, making a total sum of $997,073.57, and that the rate on the final $497,073.57 thereof is the rate chargeable on the $146,773.57 composing the legacy. These conflicting theories present the main question for decision.

Section 5 of the act, as amended by the law of 1915, fixes the rate on estates of $25,000 or less, given to a child of the decedent, at one per centum of the clear value of the property such child receives. The language is the same as that of the act of 1905, and under the rule stated in Estate of Timken, 158 Cal. 51. [109 P. 608], that rate is to be computed only on the amount of the difference between the exemption and the sum of $25,000, where the value of the property received equals or exceeds the latter sum. Section 6 of the act of 1915 fixes the rates on the excess over $25,000 of the property received by the particular person, as follows: (a) On all over $25,000 up to $50,000, two per cent; (b) over $50,000 up to $100,000, four per cent; (c) over $100,000 up to $200,000, seven per cent; (d) over $200,000 up to $500,000, ten per cent; (e) over $500,000 up to $1,000,000, twelve per cent. It will be observed that under the theory of the controller the $146,773.57 is to be considered as the last part of the combined sum of the gift of 1908 and legacy of 1916, and the two are to be taxed together as a single transfer, or as two transfers made at the same time, in which case it would come within the excess over $500,000 and under $1,000,000.

[6] It must be conceded at the outset of the inquiry that the legislature had power by the act of 1915 to impose a succession tax of twelve per cent upon all inheritances or successions that might occur after its passage, regardless of the value and without any exemption. [7] The so-called right of inheritance and also the right of testamentary disposition are not inherent rights of the individual, nor are they safeguarded or securedin futuro by any provision of our constitution. They are both subject to legislative control and are creatures of legislative will. Consequently, the legislature has the power to take away both rights and to make the state the successor to all property upon the death of the owner. The right and power to impose a succession tax rests on this principle.

It must be remembered, however, that the legislature has not, by the inheritance tax law, attempted to impose a tax on any ordinary disposition of property inter vivos. The sole reason for mentioning dispositions inter vivos made with out adequate consideration is to prevent the evasion of the tax imposed on inheritances, bequests and devises by such dispositions. In contemplation of that law, the gifts inter vivos therein mentioned are all presumed to have been made with the intent to evade the tax imposed on transfers taking effect by succession at death.

The question for consideration, therefore, is whether or not the law in force in 1916, when Mrs. Potter died, does expressly or by reasonable construction or implication provide that in computing the tax on the $146,773.57, received by appellant at her death, the $850,300, given to him in 1908, shall be added to the $146,773.57, for the purpose of subjecting the $146,773.57 to the rate of taxation imposed on that part of a succession which exceeds $500,000 in value, so that it shall all be taxed at twelve per cent, instead of being subjected to a tax computed at the graduated rates set forth for property not exceeding $200,000 in value.

It is proper to first state the established rules of statutory construction applicable to the case. [8] It is said that authority to impose and collect taxes upon the person or upon the property of an individual for public purpose "must find an express statutory warrant, and all laws having this object are to be construed strictly in favor of the individual as against the state. Whether his property is to be taken by seizure or by suit, the rule is the same. In the one case the officer must show his warrant for the seizure, and in the other the plaintiff must establish every fact essential to the maintenance to his right of recovery." (Merced Co. v. Helm,102 Cal. 165 [36 P. 399]; approved in Hellman v. Los Angeles,147 Cal. 657 [82 P. 313], and Connelly v. San Francisco, 164 Cal. 106 [127 P. 834].) "All tax laws are construed rigidly, and must be closely followed, in order to divest or vest title." (Bensley v. Mountain etc. Co., 13 Cal. 316 [73 Am. Dec. 575].) "Laws imposing taxes are strictly construed, and doubts are resolved in favor of the taxpayer. . . . Duties are never imposed upon a citizen upon vague or doubtful interpretations." (Lewis' Sutherland on Statutory Construction, sec. 537, formerly sec. 363.) The notes show that the courts of Michigan, Connecticut, and Idaho have made statements not entirely consistent with the rule of the text, but that it is uniformly followed in other jurisdictions. Mr. Cooley states the doctrine thus: "Strict construction is the general rule in the case of statutes which may divest one of his freehold by proceedings not in the ordinary sense judicial, and to which he is only an enforced party. It is thought to be only reasonable to intend that the legislature in making provisions for such proceedings would take unusual care to make use of terms which would plainly express its meaning, in order that ministerial officers might not be left in doubt in the exercise of unusual powers, and that the citizen might know exactly what were his duties and liabilities. A strict construction in such eases seems reasonable, because presumptively the legislature has given in plain terms all the power it has intended to be exercised." (1 Cooley on Taxation, p. 453.) This rule is, of course, to be applied only where some ambiguity exists or doubt arises from the language used as to the meaning intended. "Beyond the words employed, if the meaning is plain and intelligible, neither officer or court is to go in search of the legislative intent." (Ibid., 450.)

[9] It is also an established rule that a statute is not to be construed so as to have a retroactive effect unless the intent that it is to be retroactive clearly appears from the statute itself. The rule is expressly declared in section 3 of each of our codes. "The statute should not be given a retrospective effect unless the language demands such a construction." (Chambers v. Gibb, 186 Cal. 196 [198 P. 1032].) All the decisions are to the same effect. (8 Kerr's Dig., p. 8496, title "Statutes," sec. 101.)

[10] Another rule of interpretation that is important to this case is that the courts will never, if it can be avoided, impute to the legislature an intent to enact a law that is contrary to the constitution. "If a particular construction has the effect to declare the act or any part of it unconstitutional, such construction must be avoided, when it can be fairly done, for the legal presumption is that the legislature could not have so intended. . . . If the language upon its face is ambiguous and susceptible of different constructions, it may be forced, so to speak, to the extent of adopting the less obvious construction, in order to uphold the law." (French v. Teschemaker, 24 Cal. 554. See, also, Bates v.Gregory, 89 Cal. 394 [26 P. 891]; People v. Frisbie, 26 Cal. 139; Bacon v. Bacon, 150 Cal. 486 [89 P. 317]; and Chesebrough v. San Francisco, 153 Cal. 568 [96 P. 288].)

The respondent relies on section 2 of the act. The parts of this section material to the case are as follows:

"A tax shall be and is hereby imposed upon the transfer of any property . . . to persons, institutions or corporations, . . . in the following cases:

"(1) When the transfer is by will, descent or succession from a resident of the state; (2) When the succession comes from a nonresident, but is of property within the state.

"(3) When the transfer is of property . . . within this state, by deed, grant, bargain, sale, assignment or gift, made without valuable and adequate consideration in contemplation of the death of the grantor, vendor, assignor or donor, or intended to take effect in possession or enjoyment at or after such death. When such person, institution or corporation becomes beneficially entitled in possession or expectancy to any property or the income therefrom, by any such transfer,whether made before or after the passage of this act."

It is claimed that the italicized clause of the last sentence shows the legislative intent to impose a tax on previous transfers, so far as lawfully possible, and that it supports the contention that in computing the tax on the value of the transfer of 1916, the value of the transfer of 1908 is to be added to it and the rates of the 1915 act extended on the whole sum to find the tax on the transfer of 1916 so as to treat it as a transfer exceeding $500,000 in value. It may be remarked that the insertion of a period instead of a comma, preceding the word "when" and so dividing subdivision 3 into two distinct sentences, as above shown, is obviously a typographical or clerical mistake and that it should be read as if the comma were inserted. This does not change the effect, but it makes the meaning clearer.

We have seen that the legislature had no power to add to or take from the tax upon the gift of 1908 after it was made. If taken literally and apart from its immediate context, the clause above italicized would express the intent to do so, but the result would be that under the rule established byHunt v. Wicht, and the other cases first above cited the act would be to that extent unconstitutional and void. Such a result, as we have seen, is to be avoided, when it can be fairly done. We must, therefore, look to the context to ascertain if a meaning is apparent that would produce a result that does not make the subdivision retroactive in effect and brings it within the scope of the legislative power. The first part of this final sentence or clause, in connection with the opening part of the subdivision, states that such transfer tax is to be imposed "when such person, institution or corporation becomes beneficially entitled in possession or expectancy to any property." In a very common acceptation of its meaning the word "becomes" betokens futurity; something that is yet to happen. The right of the state to the tax is not to vest until the person to be charged therewith "becomes beneficially entitled" to the property. This evidently refers to some time after the passage of the act, and in view of the fact that it would be void if it referred to a past vesting of title, it must be presumed that it was intended to refer to a future vesting of title in possession or expectancy. This would make it inconsistent with the literal meaning of the last clause unless we find that there may be a vesting of title, a becoming entitled, after the passage of the act, which vesting arises from a "deed, grant, bargain, sale, assignment or gift" executed before the passage of the act whereby the words may have literal effect upon transfers vesting in future. It is obvious that the phrase "such transfer" in the last clause refers back to these methods of transfer, and that the clause is to be understood as if it read: "by any such deed, grant, bargain, sale, assignment or gift, whether made before or after the passage of this act."

"A future interest is either: 1. Vested; or, 2. Contingent." (Civ. Code, sec. 693) "A future interest is vested when there is a person in being who would have a right, defeasible or indefeasible, to the immediate possession of the property, upon the ceasing of the intermediate or precedent interest." (Civ. Code, sec. 694) "A future interest is contingent, whilst the person in whom, or the event upon which, it is limited to take effect remains uncertain." (Civ. Code, sec. 695) It is competent for the legislature to impose a tax upon any transfer of this character, where the property passing by transfer does not become vested under it until after the act imposing the tax is enacted. Transfers are often made under these sections by some instrument in writing, whereby contingent interests are created to pass in the future and which do not become vested until years after the execution of the instrument. Transfers of this character were considered in Estate of Rogers, 94 Cal. 530 [29 P. 962], Estate of Winter, 114 Cal. 186 [45 P. 1063],Estate of Blake, 157 Cal. 460 [108 P. 287], Estate ofCarothers, 161 Cal. 588 [119 P. 926], Taylor v. McCowen,154 Cal. 804 [99 P. 351], Hall v. Wright, 17 Cal.App. 504 [120 P. 429], and Estate of Washburn, 11 Cal.App. 740 [106 P. 415]. Bearing in mind the aforesaid constitutional limitations upon legislative power, we may easily see that the phrase "becomes beneficially entitled in possession or expectancy" was intended to include, among others, estates or interests of this character where the instrument creating them was made before the passage of the act and the contingent title thereby provided for should not become vested until after its passage. With this possibility in mind, we see at once the occasion and purpose of the insertion of the clause "whether made before or after the passage of this act." It was intended to make it clearly include instruments of transfer of this character. Thus all the words of the section may have a clear practical effect in full harmony with the constitution. This, we think, must be held to be its true meaning. [11] The result is that it is not retroactive in effect, that it was not so intended, and that this section does not, by implication or otherwise, refer to or affect the gift which vested in 1908, or authorize the value thereof to be added to the value of the legacy of 1916 for the purpose of boosting the latter into a higher tax rating value.

Another consideration confirms this conclusion. [12] "When a statute is adopted from another state or country and such statute has previously been construed by the courts of such state or country, the statute is deemed, as a general rule, to have been adopted with the construction so given to it." (Lewis' Sutherland on Statutory Construction, 2d ed., sec. 404;Silva v. Campbell, 84 Cal. 420-424 [24 P. 316].) Section 2 of the law was first enacted in this state in 1911. (Stats. 1911, p. 713, sec. 1.) Subsequent acts have re-enacted it without change, except as to the number. The language is taken from section 1 of the New York Taxable Transfer Act of 1892 (Laws 1892, c. 399), of which it is substantially a literal copy. The court of appeals of that state, in Matter of Curtis, 142 N.Y. 219 [36 N.E. 887], decided in 1894, considered a case where an estate in remainder had been left to one Racey upon condition that he should survive his aunt or should die leaving issue, failing which it passed to persons exempted from the tax. He died without issue and therefore never became vested of any estate in the property. He left other property and an attempt was made to hold his estate liable for the inheritance tax upon the value of the remainder so left to him. It was held that this could not be done, the court saying that he took no beneficial estate, that his estate could take nothing, and that to compel payment of the tax by the estate was a thing too unjust to be tolerated. This case came under a previous tax law of that state, that of 1885. (Laws 1885, c. 483). A year later the court considered a case where a tax was claimed under the act of 1892, upon an estate in remainder which had become vested in interest in 1876, before there was any inheritance tax law, but which did not vest in possession or enjoyment until 1894. The court held that the words of the act of 1892, from which our section 2 aforesaid is copied, could not lawfully be given a retroactive effect so as to apply to an estate which vested prior to its passage, that they "have their full and natural force when applied to . . . grants and gifts causa mortis," made prior to the act, but not passing a vested title until afterward, and that the remainder vested in 1876 was not taxable under the act. (Matter of Seaman, 147 N.Y. 69 [41 N.E. 401].) As was said in Silva v. Campbell, supra, referring to a part of section1161 of the Code of Civil Procedure, which had been taken literally from the statutes of New York, "we presume that subdivision 1, supra, was enacted in this state with an understanding of the construction which had been placed upon it in the state from which it was taken." The same presumption applies here. The act must be understood to have the same meaning that at the time of its passage here had already been given to its language by the courts of New York.

Other parts of the act of 1911, re-enacted in 1913, and again in 1915, show that the legislature understood that this interpretation of this language in subdivision 3 aforesaid had been made in New York and that provision was made for the application thereof. Section 9 of the act provides that when the transfer to be taxed consists of an estate in expectancy "the entire property or fund by which such estate" is supported shall be appraised immediately after the death of the decedent and the market value thereof determined; that the person chargeable with the tax may elect not to pay it until he shall come into actual possession or enjoyment of such property, in which case he must give bond to secure such payment, and renew the same every five years thereafter until he comes into such possession and enjoyment. (Subd. a.)

Subdivision d reads as follows: "Estates in expectancy which are contingent or defeasible and in which proceedings for the determination of the tax have not been taken or where the taxation thereof has been held in abeyance, shall be appraised at their full, undiminished value when the persons entitled thereto shall come into the beneficial enjoyment or possession thereof, without diminution for or on account of any valuation theretofore made of the particular estates for purposes of taxation, upon which said estates in expectancy may have been limited."

It is plain from this provision in connection with those of subdivision a aforesaid, that subdivision d was intended to provide for the taxation of estates in expectancy which had been created by instruments of conveyance, executed before the death of the decedent, but which did not become vested in the donee or grantee or person beneficially interested until some time subsequent to such death, as suggested in Matter ofSeaman, supra. Thus the reference in section 2 to gifts made either "before or after the passage of this act" are shown to be effective upon the estates mentioned in subdivision d aforesaid, and to have been intended to refer thereto. No occasion, therefore, arises for giving the act a retrospective effect.

It is also to be noted that the statute that was in force in 1916 contains nothing expressly declaring that in computing the tax due upon a transfer by gift which had completely vested before the death of the donor, the value of that property is to be added to the value of property received by descent, devise, or bequest at the death of the donor and the sum of the two taxed at the same rate as if they had constituted a single transfer. Provision is made for the appraisentent of the property of the decedent immediately after the death of the decedent for the taxation of all ordinary transfers of present vested interests taxable under the act. (Secs. 16 and 17.) InChambers v. Lamb, 186 Cal. 261 [199 P. 33], where there was a gift inter vivos which passed a present title at its execution, and taxable under the act of 1905, we held that the property must be appraised at its value as of the time the title vested, and not at the value as of the time of the death of the deceased donor. The subsequent act could not change or affect this rule so as to require the value to be fixed as of the time of the death, for if it purported to do so and could have that effect, it would either add to or take from the vested right of the state to the tax, according to whether the value had increased or diminished in the meantime, and correspondingly diminish or increase the liability of the donee therefor, neither of which can be done, under the authorities already cited on that point. It is obvious, in view of the rules of statutory construction hereinbefore stated, that the above provisions cannot be taken to require the value of the gift of 1908 to be fixed according to its value in 1916. Likewise it is clear that the language does not indicate an intent to declare that for the purpose of taxing the property received at the death of Mrs. Potter in 1916 it shall be raised into the class above $500,000 in value in order to tax it at twelve per cent on the whole thereof.

[13] The only statute which purports to authorize such a combination of values for computing the tax is the act of 1917. (Stats. 1917, p. 880.) Section 2 of that act declares that when, "either before or after the passage of this act" more than one transfer has been made by a decedent to one person, the tax shall be imposed upon the aggregate market value of all such transfers as if the property had passed by one transfer. (Subd. 9.) This act cannot be given a retroactive effect upon transfers vested in 1916, so as to increase the tax thereon. Any attempt to do so would, of course, be void.

The method of computation contended for by counsel for the controller would in many cases result in a discrimination between persons similarly situated in point of law. For illustration, assume that in the present case Mrs. Potter had died possessed of an estate worth $300,000 which had descended in equal shares to two sons, the appellant and a brother, the latter having received no gift from the mother in her lifetime. By the rates in force at her death, the brother would be taxed in the sum of $6,150 for his moiety. But the appellant, having received a gift in 1908 of the value of $800,000 which could only be taxed at the rates fixed in 1905, which tax he had paid, would be compelled to pay a tax of twelve per cent on his half of the estate, amounting to $18,000, on a transfer of the same value as that upon which his brother had paid only $6,150. This would seem to put the legislature in the position of attempting to do indirectly what it could not do directly; that is, to increase the burden of his tax on his share of the estate and discriminate between him and his brother in that respect, solely upon the ground that he had received a prior gift taxed at a lower rate, which the state was unable to increase by the subsequent statute. A construction imputing to the state a design so indicative of resentment or regret should not be adopted. Such meaning, if intended by the legislature, should be clearly expressed in the statute.

Another reason for rejecting the method of combining the two values in computing the tax arises from the complications that would ensue concerning the exemption allowed. The act of 1905, which alone can be applied to the gift of 1908, allowed an exemption of $4,000 to an adult child. This, as we have seen, could not have been increased or diminished by a statute enacted after 1908. The acts of 1913-1915, in force when the legacy was received, allows an exemption of $10,000 to an adult child. If the legacy is to be considered as a distinct taxable unit, to be entirely separated from the gift of 1908 in ascertaining the rate and computing the tax, the exempt $10,000 of the value would be taken from the first $25,000 thereof, taxable at one per cent, and would result in a deduction of only $100 from the tax otherwise chargeable. The tax thereon, in that case, would amount to $5,924.15. But if, for computation of the tax on the legacy, the gift and legacy are to be combined, the total would be $997,073.57; and if the legacy, by any permissible construction, is to be considered as composing what may be styled the "upper crust" of the total, it would be taxed at twelve per cent. Various theories have been suggested as to the method of disposing of the exemption in such a case. One theory is that the $10,000 exemption of 1915 cannot be allowed to apply in full, but that it must be reduced by deducting the $4,000 exemption allowed by the act of 1905, which this theory concedes is applicable only to the gift of 1908, so that the exemption on the legacy is only $6,000 instead of $10,000 as the 1915 act prescribes. Such a construction would convict the legislature of again attempting to discriminate where it could not change, and again endeavoring to increase the tax on the legacy of 1916 for the sole reason that it could not raise the tax on the prior gift. It would also be a work of judicial legislation, for the statute contains no language indicating that any diminution of the $10,000 exemption is to be made under any circumstances, and nothing purporting to authorize an inference of a design to produce a result so novel and remarkable. This plan is wholly without statutory warrant, and, since it would add to the burden of tax, it must be rejected, under the authorities heretofore cited.

Another theory is that the twelve per cent is first to be computed on the entire value of the legacy, $146,773.57, without deduction, producing the sum of $17,612.83; that the deduction from the tax on account of the exempt $10,000 is then to be found by computing the lowest rate, one per cent, on that sum, amounting to $100, and that the balance, $17,512.83, is the lawful tax on the legacy. The act (sec. 7) declares that "property of the clear value" of $10,000 going to an adult child shall be exempt "from the tax." It is the property of that value that is exempt. To that extent there is no tax on the transfer. There is no provision that one per cent of that sum shall be deducted from the tax computed at twelve per cent on the value of the whole. It is plain that the above theory, if applied, would impose a tax of eleven per cent, or $1,100, on the exempt property itself. It must be conceded that this theory is untenable.

The only remaining method of disposing of the exemption, under respondent's theory of the other provisions of the act, is that usually followed where the title to all the property is received at death by the person to be taxed. The $10,000, or whatever the exemption may be in the particular case, is first deducted from the property value, as being a nontaxable part thereof, and the rates, according to the graduated scale in force at the death, are then computed on the balance. If, still following respondent's theory as to the rate, the twelve per cent rate is applied, the result would be this: Value remaining for taxation, $136,773.57; tax thereon at twelve per cent, $16,412.83; or $1,200 less than the court below found to be chargeable on the legacy. In that case the order appealed from would be to that extent erroneous.

[14] Upon a consideration of all that has been said in the preceding portion of this opinion the only reasonable, practical, and lawful solution of the main question is to hold that in a case where a gift from a parent to a child, made in 1908, vests the title to and possession of the property at that date, but is made with the intent that it should not take effect in possession or enjoyment until after the death of the parent, so that neither the tax rate thereon nor the amount thereof exempt from such tax can be afterward changed by the legislature, and thereafter and before the death of the parent, the law in force at the date of such gift is amended by changing both the tax rate and the amount exempted from the tax, and upon the death of such parent such child succeeds to other property, the value of the parcel of property transferred by the gift and the value of the parcel transferred at death cannot be combined for the purpose of ascertaining the rate chargeable upon the property left to the child at the death, but that the rate thereon is to be calculated and the exemption therefrom allowed solely upon the value of the property vesting in the child at the death of the parent, without adding the value of the previous gift. In such cases the two transfers are to be treated as separate taxable units having no relation to each other.

[15] Against this conclusion the respondent invokes the rule that if a part of a statute is amended, such part is not to be considered as repealed and re-enacted, "but the portions which are not altered are to be considered as having been the law from the time they were enacted." (Pol. Code, sec. 325.) This rule, under some circumstances, has been extended so as to apply to a case where the new statute expressly repeals the whole of the former statute. (Estate of Martin, 153 Cal. 228 [94 P. 1053].) In the Martin case the Inheritance Tax Act of 1905 had expressly repealed the act of 1893 (Stats. 1893, p. 193) on that subject. In the latter act, however, there were two sections, one of which was a literal copy of a section of the prior act, and the other was the same as another section of the prior act, save a few words of trifling importance. These sections provided the mode of collecting the tax and were strictly remedial in character. It was held that the mode they prescribed could be adopted in collecting a tax after the act of 1905, which had accrued to the state under the act of 1893. The respondent points out that where the person who had received from a decedent a gift inter vivos, taxable under the act, also succeeds to a part of the estate of such decedent at death, the act of 1905 provided for an appraisement after such death of all taxable interests of such person, and he claims that it also provided that the computation of the graduated tax rates prescribed in that act should be made upon the combined value of the two transfers. This, however, is not expressly declared anywhere in the act. He asserts that this provision was, in substance, re-enacted by the revised law of 1911, the revision of 1913, and the amendment of 1915 thereto. The act of 1905 required the court to appoint an appraiser to ascertain and report the "value of any inheritance, devise, bequest or other interest subject to the payment of said tax," where the value was uncertain, and upon the report of the appraiser to "forthwith assess and fix the market value of all inheritances, devises, bequests or other interests, and the tax to which the same is liable." (Sec. 14.) The act of 1913 required the court to appoint an appraiser "to ascertain and report to said superior court the amount of inheritance tax due on any property passing in any probate proceeding or a lien thereon, or upon any other property transferred" within the meaning of subdivision 3 of section 2 of the act, to any person taking property under the probate proceedings. The appraiser was to report the value of the several interests in the estate of the decedent," and the "amount of inheritance or transfer tax chargeable against, or a lien upon such interests, acquired by virtue of said probate proceedings or by any transfer within the meaning of this act to any person" acquiring property by virtue of said probate proceedings. Thereupon, notice was to be given of the hearing upon the report and the court at the hearing was to determine the amount of the tax. (Sec. 16, Stats. 1913, p. 1077.) A comparison of the respective sections of the acts of 1905 and 1913 on this subject shows that while each act provides for an appraisement of all property subject to tax, including that passing by a prior gift as well as that passing at death, and perhaps the imposition of the tax on the whole thereof passing to the same person at the tax rates fixed by the respective acts, the language in which these provisions are expressed is not by any means the same in the two cases. The sections on the subject have been entirely recast; the 1913 section contains many things not included in that of 1905, and the provisions here in question are not couched in the same or similar language. It cannot be truly said that any part of the act of 1905 on this subject has not been altered, at least with respect to words, in the revision of 1913. The rule stated in the Political Code and in Estate of Martin, supra, applies in all proper cases, but, like all other rules of statutory construction, they are subject to the controlling principle that the object and purpose of all interpretation is to arrive at the intent of the legislature. [16] Applying this principle to the present case we think it cannot be reasonably believed that the legislature intended that the provisions of the act of 1913 should be considered as re-enacting those of 1905 in this particular, with regard to the present case, where the result of such assumed re-enactment would be that the $497,073.57, the value in excess of $500,000, would be divided into two parts, one of which, $350,300, would be taxed at the rate of three per cent, as provided in the act of 1905, and the other part, $146,773.57, would be taxed at the rate of twelve per cent, fixed by the act of 1915 upon the excess over $500,000. Certainly no such remarkable process of computation as this, in such cases, is expressed or directed in either of the acts. Furthermore, it could not reasonably be applied where the later act provides a higher exemption than the prior act and the constitution forbids any increase or decrease of the exemption on the prior gift, so that it is necessary, as we have seen, to allow the full exemptions on each portion of the combined properties vested. For these reasons we are of the opinion that the rule sought to be invoked cannot be applied to the present case.

The order appealed from is reversed.

Lennon, J., Shurtleff, J., and Lawlor, J., concurred.