Magoun v. Illinois Trust Savings Bank

This is a bill in equity filed in the circuit court of the United States in and for the Northern district of Illinois by Jessie Norton Torrence Magoun, a resident and citizen of New York, against the trust company, as executor of, and trustee under, the last will and testament of Joseph T. Torrence, deceased, and the county treasurer of Cook county, Ill., both residents and citizens of Illinois, to remove a cloud from the real estate devised by said decedent to the complainant, and to enjoin the first-named defendant from voluntarily paying, and the county treasurer from collecting or receiving, the inheritance tax, amounting to more than $5,000, alleged to be due upon the entire estate of said decedent, and for which the complainant's interest in said estate was contended by the county treasurer to be liable.

The bill set forth the will of the decedent; a description and valuation of the real estate and personal property left by him, amounting in all to $600,000 above his debts; and the demand of the county treasurer for the inheritance tax, which by the act in question is made a lien upon all of said property; the request of the complainant to the defendant trust company not to pay the same, and to contest the constitutionality of the act, to refrain from paying the same voluntarily and without protest, and to await the commencement of legal proceedings to enforce the same; the refusal of the trust company to comply with this request, and its threat and intention to pay said tax at once, voluntarily, which payment could not be recovered if said law should hereafter be declared unconstitutional.

The bill also alleged that such payment would result in waste of the estate, and would be a breach of trust on the part of said executor, to the irreparable loss an injury of the complainant; that the alleged lien of the tax clouds the title to the real property, and renders the same unmarketable; and that the act is in conflict with the provisions of the fourteenth amendment.

The trust company answered, admitting the allegations of fact in the bill, but submitting the question of the constitutionality of the law to the court, and praying to be advised of its rights and duties in the premises as executor and trustee aforesaid, and as an officer of the court.

The county treasurer denied that the act was unconstitutional, and admitted the allegations respecting the estate of the deceased, the interest of the complainant therein, the lien of the inheritance tax thereon, and the demand made therefor.

The cause was heard on bill and answers, and a decree was entered dismissing the bill, from which an appeal was prayed to this court, and allowed.

The act under which the taxes complained of were levied is entitled 'An act to tax gifts, legacies and inheritances in certain cases and to provide for the collection of the a me.' Acts 1895, p. 301. It is only necessary to quote its first and second section, which are as follows:

'Section 1. Be it enacted by the people of the state of Illinois, represented in the general assembly: all property, real, personal and mixed which shall pass by will or by the intestate laws of this state from any person who may die seized or possessed of the same while a resident of this state or, if decedent was not a resident of this state at the time of his death, which property or any part thereof shall be within this state or any interest therein or income therefrom, which shall be transferred by deed, grant, sale or gift made in contemplation of the death of the grantor or bargainor or intended to take effect, in possession or enjoyment after such death, to any person or persons or to any body politic or corporate in trust or otherwise, or by reason whereof any person or body politic or corporate shall become beneficially entitled in possession or expectation to any property or income thereof, shall be, and is, subject to a tax at the rate hereinafter specified to be paid to the treasurer of the proper county for the use of the state, and all heirs, legatees and devisees, administrators, executors and trustees shall be liable for any and all such taxes until the same shall have been paid as hereinafter directed. When the beneficial interest to any property or income therefrom shall pass to or for the use of any father, mother, husband, wife child, brother, sister, wife or widow of the son or the husband of the daughter, or any child or children adopted as such in conformity with the laws of the state of Illinois, or to any person to whom the deceased, for not less than ten years prior to death, stood in the ackowledged relation of a parent, or to any lineal descendant born in lawful wedlock, in every such case the rate of tax shall be one dollar on every hundred dollars of the clear market value of such property received by each person and at and after the same rate for every less amount, provided that any estate which may be valued at a less sum than twenty thousand dollars shall not be subject to any such duty or taxes, and the tax is to be levied in above cases only upon the excess of twenty thousand dollars received by each person. When the beneficial interests to any property or income therefrom shall pass to or for the use of any uncle, aunt, niece, nephew or any lineal descendant of the same, in every such case the rate of such tax shall be two dollars on every one hundred dollars of the clear market value of such property received by each person on the excess of two thousand dollars so received by each person. In all other cases the rate shall be as follows: On each and every hundred dollars of the clear market value of all property and at the same rate for any less amount; on all estates of ten thousand dollars and less, three dollars; on all estates of over ten thousand dollars and not exceeding twenty thousand dollars, four dollars; on all estate over twenty thousand dollars and not exceeding fifty thousand dollars, five dollars, and on all estates over fifty thousand dollars, six dollars: provided, that an estate in the above case which may be valued at a less sum than five hundred dollars shall not be subject to any duty or tax.

'Sec. 2. When any person shall bequeath or devise any property or interest therein or income therefrom to mother, father, husband, wife, brother and sister, the widow of the son, or a lineal descendant during the life or for a term of years or remainder to the collateral heir of the decedent, or to the stranger in blood or to the body politic or corporate at their decease, or on the expiration of such term, the said life estate or estates for a term of years shall not be subject to any tax and the property so passing shall be appraised immediately after the death at what was the fair market value thereof at the time of the death of the decedent in the manner hereinafter provided, and after deducting therefrom the valu of said life estate, or term of years, the tax transcribed by this act on the remainder shall be immediately due and payable to the treasurer of the proper county, and, together with the interests thereon, shall be and remain a lien on said property until the same is paid: provided, that the person or persons or body politic or corporate beneficially interested in the property chargeable with said tax elect not to pay the same until they shall come into the actual possession or enjoyment of such property, or, in that case said person or persons or body politic or corporate shall give a bond to the people of the state of Illinois in the penalty three times the amount of the tax arising upon such estate with such sureties as the county judge may approve, conditioned for the payment of the said tax, and interest thereon, at such time or period as they or their representatives may come into the actual possession or enjoyment of said property, which bond shall be filed in the office of the county clerk of the proper county: provided, further, that such person shall make a full, verified return of said property to said county judge, and file the same in his office within one year from the death of the decedent, and within that period enter into such securities and renew the same for five years.' Two other cases were argued and submitted with this case, to wit, Drake v. Kochersperger, error to the supreme court of the state of Illinois (18 Sup. Ct. 942), and Sawyer v. Same, error to the circuit court of the United States for the Northern district of Illinois (Id. 946).

In the Drake Case the supreme court of the state of Illinois sustained the statute, as consonant with the constitution of the state. 167 Ill. 122, 47 N. E. 321.

Wm. D. Guthrie and Benjamin Harrison, for appellant.

Edward C. Akin and Thomas A. Moran, for appellees.

Mr. Justice McKENNA, after stating the case, delivered the opinion of the court.