State ex rel. Murray v. Walker

MR. JUSTICE HOLLOWAY

delivered the opinion of the court.

James A. Murray died on May 11, 1921, and by the terms of his will, property within this state of the clear market value of more than $25,000 passed to his widow, Mary H. Murray. The administration of the estate has not been concluded and the exact amount of the inheritance has not been determined. In April of this year Mrs. Murray tendered to the state treasurer the sum of $150 in full discharge of the inheritance tax due from her to the state, but the tender was refused, and thereupon this proceeding was instituted.

The pleadings present a question the solution of which depends upon the construction to be placed upon certain provisions of our inheritance tax law. (Chap. 14, Laws of the Extraordinary Session of the Seventeenth Legislative Assembly, effective April 1, 1921; secs. 10377-10400, Rev. Codes 1921.) Only the first four sections of the statute are involved here:

Section 1 (see. 10377, Rev. Codes 1921) provides that a tax is imposed upon every transfer cf property except a transfer to the state or to one of its subdivisions or to an organization for religious, charitable or educational purposes exclusively. An enumeration of the transfers intended to be included follows, and the enumeration includes a transfer by will or by the intestate laws of this state, or by deed or gift made in contemplation of death, etc. The section provides further: “The tax so imposed shall be upon the clear market value of such property at the rates hereinafter prescribed and only upon the excess of the exemptions hereinafter granted. ’ ’

Section 2 (see. 10378, Rev. Codes 1921) provides: “When the property or any beneficial interest therein passes by any such transfer where the amount of the property shall exceed in value the exemption hereinafter specified, and shall not exceed in value twenty-five thousand dollars the tax hereby imposed shall be” according to certain tables of rates, referred to hereafter. Then follow five subdivisions by which all beneficiaries are arranged in classes, one class to each subdivision, the membership of each class depending upon the nearness of the relationship of the members to the decedent. Class 1, defined in subdivision 1, includes the husband or wife, as the ease may be, lineal issue, lineal ancestors, adopted children, and children recognized to be such as therein defined. Class 2 includes brothers and sisters of the deceased; class 3, uncles and aunts; class 4, granduncles and grandaunts; and class 5, all other collateral heirs. As indicated above, this section also provides the rate of taxation upon any inheritance which exceeds the exemption and does not exceed $25,000, and graduates the rate according to the class to which the beneficiary belongs; for instance, a member of class 1 pays one per cent, a member of class 2 pays two per cent, a member of class 3 pays three per cent, and so on. The rates enumerated in section 2 are called primary rates.

Section 3 (sec. 10379, Rev. Codes 1921) provides that when the amount of the clear value of such property exceeds $25,000 cmd the beneficiary entitled thereto shall belong to any of the classes mentioned in subdivisions 2, 3, 4 and 5 of section 2 of this Act, the rates of tax upon such excess shall be as follows: (1) Upon all in excess of $25,000 and up to $50,000, two times the primary rates. (2) Upon all in excess of $50,000 and up to $100,000, three times the primary rates. (3) Upon all in excess of $100,000 and up to $500,000, four times the primary rates. (4) Upon all in excess of $500,000, five times the primary rates. (5) No tax, however, shall exceed 15 per cent of the property tránsferred to any beneficiary.

Section 4 (sec. 10380, Rev. Codes 1921) creates the exemptions; $10,000 to the surviving widow, and $2,000 to every other member of class 1; $500 to every member of class 2; $250 to every member of class 3; $150 to every member of class 4, and $100 to every member of class 5, and declares that the exemption shall be taken out of the first $25,000. For convenience only, members of class 1 are called “direct heirs,” and all others “collateral heirs,” and the rates enumerated in section 3 will be called “secondary rates.”

It will be observed that section 3 applies only to an inheritance which exceeds in value $25,000, and that the rates fixed by it apply only to the excess over $25,000; in other words, that section does not prescribe any rate for the first $25,000 of an inheritance. Neither do the primary rates prescribed by section 2 apply expressly, for section 2 declares that it deals only with an inheritance which' does not exceed in value $25,000.

Beyond controversy, our statute was copied from the Inheritance Tax Law of Wisconsin (Laws Wis. 1903, Chap. '44), and though serious defects in that law had been pointed out by the supreme court of Wisconsin as early as 1909, yet when our lawmakers undertook to legislate upon the subject in 1921, they copied the vices as well as the virtues of the Act. The words in section 3 in italics are not found in the Wisconsin law, and for the purposes of this ease they will be termed “the amendment.” By extending the rules of statutory construction almost to the breaking point, the Wisconsin court was able to bridge over the palpable hiatus between the provisions of sections 2 and 3. It held, in effect, that section 1 imposes the tax' upon every inheritance (subject of the law) over and above the exemption; that section 4 defines the exemptions exclusively; that since the secondary rates apply only to the excess over $25,000, the language of section 2, “and shall not exceed in value twenty-five thousand dollars ($25,000),” defines the limit to which the primary rates apply, rather than the character of the inheritance to which they apply; in other words, that the primary rates apply to the first $25,000 of every inheritance without reference to the amount of the inheritance. (Beals v. State, 139 Wis. 544, 121 N. W. 347.) To the same effect is the decision of the California court, in Estate of Bull, 153 Cal. 715, 96 Pac. 366. Whether we agree with the Wisconsin court is not of consequence here. We may accept the conclusion as warranted, for .the purposes of this case.

As indicated above, we borrowed this statute from Wisconsin practically twelve years after it had received this construction by the highest court of that state, and under the rule universally recognized and applied, we adopted the construction as a part of the law itself. In other words, the presumption must be indulged that it was the intention of our legislature that the same construction should be given to the Act in this state. (Mares v. Mares, 60 Mont. 36, 199 Pac. 267.) Applying the Wisconsin rule to the facts of this case, it follows that Mrs. Murray must pay the primary rate on the first $25,000 of her inheritance over the amount of her exemption. The amount of the exemption granted to her by the express terms of section 4 is $10,000, and the rate fixed by subdivision 1 of section 2 is one per cent, so that she must pay one per cent on $15,000, or $150, and this much is conceded by counsel for both parties. The crux of the whole controversy arises over the inquiry: What, if anything, must she pay on the excess over $25,000? It is contended in her behalf that, since the primary rate extends only to the first $25,000, that the secondary rates apply only to the amount of an inheritance over $25,000, and by the language in section 3 in italics she is excepted from the classes which are required to pay the secondary rates, she cannot be called upon to pay any tax upon the excess over $25,000, however great that excess may be.

Counsel for the state insist that the construction given the statute by the Wisconsin court will justify us in extending the primary rates to the entire inheritance received by Mrs. Murray above the exemption. It is perfectly apparent, however, that under the Wisconsin statute and under our statute without the amendment to section 3 the primary rates cannot be extended beyond the first $25,000, for the secondary rates are not intended as a surtax. The primary rates are exclusive so far as they extend, and the secondary rates are exclusive so far as they operate. Under the Wisconsin Act and under our statute without the amendment, Mrs. Murray would be compelled to pay the primary rate of one per cent upon the first $25,000 above the exemption and the secondary rates upon the excess over $25,000. If, then, the primary rates do not extend beyond the first $25,000 in the absence of the amendment, the query suggests itself: Does the amendment operate to extend them beyond that limit? That it does not is self-evident. The amendment does not apply to section 2 at all. It has to do only with section 3, and with the application of the secondary rates therein enumerated. What, then, was the purpose of our legislature in making the amendment to section 3? As the section stood before the amendment, it dealt with but one subject—the rates upon an inheritance exceeding in value $25,000. It created the secondary rates and applied them exclusively to the excess over $25,000 in every inheritance without regard to the relationship of the beneficiary to the benefactor. By the amendment the secondary rates are made to apply only to an inheritance received by a collateral heir. In other words, our legislature declared that a direct heir shall not be required to pay the secondary rates under any circumstances. The amendment cannot be construed as extending primary rates, for that was not its purpose. Those rates remained just as they were before the amendment was introduced.

Counsel for the state misread section 1. It does not declare that every inheritance is subject to tax', but only that every inheritance above the exemption is to be taxed “at the rates hereinafter prescribed,” and the only rates prescribed by the Act are the primary and secondary rates to which reference has been made. The secondary rates are applied only to an inheritance tax by a collateral heir, and the primary rates apply only to the first $25,000 of any inheritance, so that even though it may have been assumed that every inheritance above the exemption would be subject to the tax at some rate, the legislature simply failed to provide any rate for the excess over $25,000 of an inheritance to a direct heir. To make a concrete application of the Act to the facts of this case, the legislature has said to Mrs. Murray: You must pay a tax upon the amount of your inheritance over and above the exemption allowed you. You must pay one per cent on $15,000 of the first $25,000—and there our lawmakers stopped, without making any provision fixing a rate upon the excess.

While it is a general rule that it is the duty of this court to ascertain the intention of the legislature, if possible, and construe the Act with reference to that intention, it is equally true that the intention must be gathered from the language employed by the lawmakers and not from street rumors. The language of our Act is not susceptible of a construction different from that indicated above. Whatever may have been the Undisclosed purpose of the legislature, the actual effect of the amendment to section 3 is to emasculate the Act for all practical purposes, and to leave it a jumble of contradictory and inconsistent provisions. The construction contended for by counsel for the state cannot be considered without a material amendment to section 2—something which this court is not authorized to make.

Although a tax of the character of the one under consideration is not a property tax, but an excise upon an inheritance —a duty imposed upon the privilege of receiving property by inheritance (Gelsthorpe v. Furnell, 20 Mont. 299, 39 L. R. A. 170, 51 Pac. 267; In re Touhy’s Estate, 35 Mont. 431, 90 Pac. 170), it is nevertheless subject to the general rules which determine when a tax of any character is imposed. Under the Constitution and laws of this state, taxation consists in determining the rate of the levy and imposing it (Hilger v. Moore, 56 Mont. 146, 182 Pac. 477), and it follows that in so far as the legislature failed to fix a rate, it failed to levy a tax.

The question of the constitutionality of the statute is not raised, and is not considered.

The amount tendered by Mrs. Murray is the correct amount of the tax due from her. She is entitled to have the obligation discharged, and the peremptory writ will issue accordingly.

Associate Justices Farr, Cooper and Galen and Honorable Roy E. Ayers, District Judge, sitting in place of Mr. Chief Justice Brantly, disqualified, concur.