A, who died in October, 1846, devised his real estate to his
daughter for life, with remainder in fee to her son B., should he
survive her. She died in September, 1865. B. was duly notified to
make the return required by sec. 14 of the Internal Revenue Act of
June 30, 1864, 13 Stat. 226, and on his refusal to do so was
summoned in June, 1867, to appear before the assessor of the proper
district. He appeared, and claimed "that the estate was not liable
to assessment for a succession tax." Thereupon the assessor
assessed a tax of one percent upon the full value of the property,
and added thereto a penalty of fifty percent and costs, all of
which B., July 20, 1867, paid under protest to the collector. The
Commissioner of Internal Revenue, to whom B. appealed, rendered a
decision adverse to his claim, July 3, 1873. B. brought this
action, June 24, 1875, against the collector to recover the amount
so paid.
Held:
1. That the action was not barred by the statute of
limitations.
2. That the tax was properly assessed and the penalty
erroneously imposed.
The facts are stated in the opinion of the Court.
MR. JUSTICE BRADLEY delivered the opinion of the Court.
This is an action brought by B. Huntington Wright, the plaintiff
in error, against Blakeslee, the defendant, formerly collector of
internal revenue for the twenty-first revenue district of New York,
to recover the amount of a succession tax collected from the
plaintiff and his sister in 1867, the latter having assigned her
interest to the plaintiff.
A jury was waived, and the cause was tried by the court. From
the findings the following facts appear:
Henry Huntington, of Oneida County, New York, died in October,
1846, leaving a will by which, amongst other things, he devised
to
Page 101 U. S. 175
his executors certain real estate in trust to receive the rents
and profits and apply the same to the sole and separate use of his
daughter Henrietta (if a
feme covert at his death) during
the term of her natural life, and at her decease, if she should
leave issue surviving, the testator gave and devised the said real
estate to such issue absolutely and in fee. When the testator died,
his daughter Henrietta was the wife of one Benjamin H. Wright, and
had two children living, B. Huntington Wright (the plaintiff) and a
daughter. Henrietta died in September, 1865, leaving her said two
children and her husband surviving. In June, 1867, the plaintiff
and his sister were notified by the assessor to make return, as
required by the fourteenth section of the Internal Revenue Act of
June 30, 1864, 13 Stat. 226, and they both refused and declined to
make any return or give any knowledge or information as to the
quantity, location, or value of the real estate, and thereupon they
were summoned to appear before the assessor in relation thereto.
They appeared accordingly, and claimed that the estate was not
liable to assessment for a succession tax. The assessor decided
against them, and assessed a tax of one percent on the full value
of the property, and added thereto a penalty of fifty percent and
expenses, making in all $595.59. In June, 1867, the assessor
notified the parties of the tax imposed, the value of the property,
and the penalty affixed. The assessment or tax, with the penalty,
was placed upon the assessment roll, and delivered to the collector
(the defendant) for collection, and he notified the parties to pay
the tax.
On the 31st of July, 1867, the parties paid the tax under
protest, the tax paid amounting to $595.59, of which $389.56 was
tax, $194.78 was penalty, and $11.25 was the expenses for making
the assessment and valuation. The amount assessed upon each,
viz. B. Huntington Wright and Henrietta H. Wright, was
$297.29.
On the 5th of October, 1872, the Commissioner of Internal
Revenue wrote the parties that the claim to have the tax refunded
had not been submitted to the department, and forwarded them a
blank to be filled up and transmitted to the department, and they
would then pass upon the case upon its merits.
Page 101 U. S. 176
About the 3d of January, 1873, the appeal was perfected and
filed with the Commissioner.
On the 3d of July, 1873, the Commissioner rendered his decision
upon the merits, rejecting the whole claim, and gave notice
thereof.
On the 15th of June, 1875, Henrietta D. Wright, one of the
parties against whom one-half of the tax had been levied and
collected, transferred her claim to the plaintiff.
On the same day a summons was delivered to the sheriff of New
York to serve on defendant.
On the 24th of June, 1875, the summons was actually served on
defendant. The action was originally brought in the state court,
but was removed into the circuit court of the United States upon
proceedings had under the statute.
Upon these facts the court decided as matter of law that the tax
and penalty were properly assessed and collected and that the
plaintiff ought not to recover.
The first and principal question in the case is whether the
devolution of the property to the children of Henrietta Wright on
her death in September, 1865, was a "succession" within the meaning
of sec. 127 of the Internal Revenue Act then in force. 13 Stat.
287. The language of that section is as follows:
"That every past or future disposition of real estate by will,
deed, or laws of descent by reason whereof any person shall become
beneficially entitled in possession or expectancy to any real
estate or the income thereof upon the death of any person dying
after the passing of this act shall be deemed to confer on the
person entitled by reason of any such disposition a 'succession,'
and the term 'successor' shall denote the person so entitled, and
the term 'predecessor' shall denote the grantor, testator,
ancestor, or other person from whom the interest of the successor
has been or shall be derived."
Comparing the terms of the devise of Henry Huntington with the
language of this section, we do not see where there is any room for
doubt. The will clearly gave to the trustees an estate for the life
of Henrietta Wright, with remainder in fee to her children
surviving her. At her death, in 1865, those children did "become
beneficially entitled in possession,"
Page 101 U. S. 177
and every condition of the law was fulfilled. There was a "past"
"disposition of real estate by will," "by reason whereof" the
children of Henrietta Wright became "beneficially entitled, in
possession," to the property devised, "upon the death of [a] person
dying after the passage of this act." We think the case is directly
within the terms and meaning of the act. Up to the moment of
Henrietta Wright's death, her children had no interest in the land
except a bare contingent remainder expectant upon her death and
their surviving her. At her death, it came to them as an estate in
fee in possession absolute. We cannot imagine a plainer case of
devolution within the description of the law.
It is suggested that as the act refers to the acquisition of
estates "in possession or expectancy," it cannot mean to embrace
estates which had already accrued as estates "in expectancy" before
the act was passed. But such an implication cannot be allowed to
prevail against the express words of the act, which include all
estates to which a person should become beneficially entitled upon
the death of any person dying after the passage of the act. In the
present case, the children of Henrietta Wright first became
"beneficially entitled" to the property in question at their
mother's death. They then became "beneficially entitled in
possession."
It is also suggested that the case is more aptly described in
sec. 128 of that act, which is as follows:
"That where any real estate shall, at or after the passage of
this act, be subject to any charge, estate, or interest,
determinable by the death of any person, or at any period
ascertainable only by reference to death, the increase or benefit
accruing to any person upon the extinction or determination of such
charge, estate, or interest shall be deemed to be a succession
accruing to the person then entitled beneficially to the real
estate or income thereof."
We do not assent to this view. This section is evidently
intended to meet the cases of estates burdened by determinable
encumbrances, such as rent charges, leases for years, and qualified
interests, which do not suspend the taking effect of the estate in
the land, but only subject it to some burden. Where,
Page 101 U. S. 178
however, a remainder is dependent upon a life estate in the
land, it does not take effect as an estate in possession until the
life estate is determined. Till then, it is a mere expectancy. The
present case is one of this kind, and we think clearly comes within
the description of sec. 127.
Another point made by the plaintiff against the assessment
relates to the fifty percent added to the amount of the succession
tax, and exacted by way of penalty for refusing to make a return as
required by the statute. This penalty we think was erroneously
imposed. The assessor evidently thought that he was authorized to
impose the penalty prescribed by the fourteenth section of the act
of 1864 (as amended by the act of July 13, 1866), which was, it is
true, a penalty of fifty percent of the tax for refusal or neglect
to make a list or return. But an inspection of that section and of
the context to which it belongs shows that it related to the annual
and monthly lists and returns to be made by parties taxable under
the law. So sec. 118 (as amended by the Act of March 2, 1867),
which also imposed a penalty of fifty percent for such neglect and
refusal, and was relied on by the court below, related only to the
income tax. But the penalty for failing to return and give notice
of a succession tax is provided for in a distinct section, to-wit,
sec. 148 of the act of 1864 (as amended by the act of 1866), which
is found in immediate collection with the sections relating to the
succession tax. This section declares that if any person required
to give such notice [of a succession] should willfully neglect to
do so within the time required by law, he should be liable to pay
to the United States a sum equal to ten percent upon the amount of
tax payable by him. This is the specific penalty provided for the
special case, and necessarily excludes any other. We are satisfied,
therefore, that the penalty of fifty percent which was actually
imposed was wrong, and ought not to have been exacted. There is
therefore no doubt of the plaintiff's right to recover the amount
of this penalty if, when paid, the protest against its exaction was
sufficient.
On this point it is to be observed that the case stands on a
different ground from that of the illegal exaction of duties on
imports. To recover these, the statute makes it necessary that
Page 101 U. S. 179
the party interested should give notice in writing to the
collector, if dissatisfied with his decision, setting forth
distinctly and specifically the grounds of his objection thereto.
Act of June 30, 1864, sec. 14; 13 Stat. 214; Rev.Stat. sec. 2931;
Westray v. United
States, 18 Wall. 322;
Barney v. Watson,
92 U. S. 449;
Davies v. Arthur, 96 U. S. 148. No
such written notice or protest is required of a party paying
illegal taxes under the internal revenue laws. He must pay under
protest in some form, it is true, or his payment will be deemed
voluntary.
City of Philadelphia v. The
Collector, 5 Wall. 720;
The
Collector v. Hubbard, 12 Wall. 1. But whilst a
written protest would in all cases be most convenient, there is no
statutory requirement that the protest shall be in writing. In the
present case, the court merely finds that the payment of the tax
and penalty was made under protest, which may have been either
written or verbal. We think that this finding is sufficient to show
that the payment was not voluntary. It is apparent from the
findings, it is true, that the objection of the parties was
particularly made against the legality of the tax, and not against
the penalty as distinct therefrom. But, of course, the objection
included the penalty as well as the tax, and as the latter was
clearly illegal, we think that the plaintiff should have had
judgment for the amount thereof unless barred by the statute of
limitations.
We think that the defense of the statute of limitations cannot
be maintained. Under the nineteenth section of the Act of July 13,
1866, 14 Stat. 152, no suit could be maintained for the recovery of
a tax illegally collected until appeal should have been duly made
to the Commissioner of Internal Revenue and his decision had
thereon. The act contained other provisions not material to this
case. In July, 1867, when the tax was paid, there was no statutory
limitation of time for presenting claims for remission of taxes to
the Commissioner of Internal Revenue.
On the 6th of June, 1872, an act was passed, by the forty-fourth
section of which it was provided that all suits for the recovery of
any internal tax alleged to have been erroneously assessed or
collected, or any penalty claimed to have been collected without
authority, should be brought within two years
Page 101 U. S. 180
next after the cause of action accrued, and not after, and all
claims for refunding any internal tax or penalty should be
presented to the Commissioner within two years next after the cause
of action accrued, and not after,
provided that actions
for claims which had accrued prior to the passage of the act should
be commenced in the courts or presented to the Commissioner within
one year from the date of such passage,
and provided
further that where a claim should be pending before the
Commissioner, the claimant might bring his action within one year
after such decision, and not after. 17 Stat. 257. When this act was
passed, the claim in the present case had not been formally
presented to the Commissioner, and so did not come within the last
proviso; but, for the purpose of presentation to the Commissioner,
it was embraced in the first proviso. The parties, therefore, had
by the act one year to present their claim to the Commissioner, and
it was thus presented on the third day of January, 1873, within the
time allowed for that purpose.
The Commissioner rendered his decision on the third day of July,
1873, and then, for the first time, the parties had a right to
bring suit against the collector. Then their cause of action first
accrued against him. It is manifest, therefore, that the cause of
action against the collector was not embraced within either the
first or the second proviso of the section just cited, and that it
stood upon the primary enactment of that section, requiring that
suit should be brought within two years next after the cause of
action accrued. This would give the plaintiff until the 3d of July,
1875, to bring his action.
Thus the matter stood when the Revised Statutes went into effect
on the 22d of June, 1874, and there is nothing in them to change
the plaintiff's right. The forty-fourth section of the act of 1872
is substantially reenacted in sec. 3227 of the Revised Statutes,
which contains no modifications of phraseology that affect the
present case. And as it appears from the findings of the court that
this suit was commenced by delivery of the summons to the sheriff
on the 15th of June, 1875, it is apparent that the defense of the
statute of limitations cannot be maintained.
The judgment of the Circuit Court will be reversed, and the
Page 101 U. S. 181
case remanded with instructions to enter judgment in favor of
the plaintiff for the amount of the penalties exacted from the
plaintiff and Henrietta H. Wright, with interest and costs, and it
is
So ordered.