1. The Estate Tax Act of 1916 did not apply to transfers in
contemplation of death made before its passage. P. 258 U. S. 540
Shwab v. Doyle, ante, 258 U. S. 529
2. A collector of internal revenue is not liable to an action
for recovery of a tax collected by his predecessor in office. P.
258 U. S. 541
Smietanka v. Indiana Steel Co., 257 U. S.
273 F. 733 reversed.
Error to a judgment of the district court sustaining a demurrer
and dismissing the complaint in an action to recover a sum
collected as an estate tax.
Page 258 U. S. 538
MR. JUSTICE McKENNA delivered the opinion of the Court.
This case was argued at the same time and submitted with No.
200, Shwab v. Doyle, ante, 258 U. S. 529
involves, as that case did, the Estate Tax Act of September 8,
1916, and its different facts illustrate and aid the principle upon
which that case was decided.
Plaintiffs in error are executors of the last will and testament
of Henriette S. Lachman, deceased. They were also parties to a
trust deed made by her during her lifetime. They sued defendant in
error Wardell, he then being United States Collector of Internal
Revenue for the First District of California, to recover the sum of
$4,545.50, that being the amount of a tax assessed against the
estate of Henriette S. Lachman, upon the value of 4,895 shares of
stock transferred in trust by Henriette S. Lachman to trustees,
upon the assumption that the Act of Congress of September 8, 1916,
was applicable to the trust.
The following is a summary of the facts stated narratively:
On May 31, 1901, Henriette S. Lachman was the owner of 7,475
shares of the capital stock of the S. & H. Lachman Estate, a
corporation. On that date, she executed and delivered to Albert
Lachman and Henry Lachman, her sons, the following instrument:
"Alameda, Cal., May 31, 1901"
"To Albert Lachman and Henry Lachman, My Sons:"
"This is to certify that I have delivered to you seven thousand
four hundred and seventy-five (7,475) shares of
Page 258 U. S. 539
the capital stock of the S. & H. Lachman Estate, represented
by certificates numbers eleven(11), twelve(12), and thirteen(13)
respectively, however, upon the following trust:"
"To pay to me during my lifetime all the income earned and
derived therefrom, and, upon my death, to deliver two thousand four
hundred and ninety (2,490) shares, respectively by certificate
number eleven(11) unto Henry Lachman, thenceforth for his absolute
property; two thousand four hundred and ninety-five (2,495) shares,
represented by certificate number thirteen(13) unto Albert Lachman,
thenceforth for his absolute property, and yourselves, to-wit,
Albert Lachman and Henry Lachman, to hold two thousand four hundred
and ninety (2,490) shares, represented by certificate number
twelve(12) upon my death, in trust paying the income derived
therefrom unto my daughter, Rebecca, wife of Leo Metzger, and upon
the death of my said daughter, the income and earnings derived from
said two thousand four hundred and ninety (2,490) shares shall be
held, or expended, by you, according to your judgment, for the
benefit of my grandchildren, the children of my said daughter,
Rebecca Metzger, and upon the youngest of said children attaining
the age of majority, all the then surviving children of my said
daughter, Rebecca Metzger, shall be immediately entitled to said
two thousand four hundred and ninety (2,490) shares in equal
The requirements of the deed were performed upon the
contingencies occurring for which it provided.
On November 14, 1916, Henriette S. Lachman died, being then a
resident of Alameda county, California, leaving an estate of the
value of $302,963.64, which included 2,490 shares of the stock that
passed to her upon the death of her husband and 25 shares of stock
in a business that had been conducted by her husband, but did not
include the transfer of the 4,985 shares included in the trust
Page 258 U. S. 540
The will was duly probated, and the tax under the Act of
September 8, 1916, was paid on the property which passed under her
will, but no tax was paid on the 4,985 shares transferred 15 years
before by the trust deed.
The Commissioner, having ruled that those shares were subject to
a tax, assessed against them the sum of $4,545.50. It was paid
under protest and this action was brought for its recovery.
Wardell demurred to the complaint on the ground that it did not
state facts sufficient to constitute a cause of action against him.
The demurrer was sustained, and judgment entered dismissing the
Stating the contention of the plaintiffs, the court said it was
that "The act should not be so construed as to include transfers
made prior to its passage, and that, if it be so construed the act
is unconstitutional." The court observed that:
"both of these questions were determined adversely to the
plaintiffs by the Circuit Court of Appeals for the Eighth Circuit
in Schwab, Executor v. Doyle,
269 F. 321."
And said further:
In that case, the transfer was made in contemplation of death,
whereas, in the present case, the transfer was intended to take
effect in possession or enjoyment at or after death, but manifestly
the same rule of construction will apply to both provisions, and
the same rule of constitutional validity.
273 F. 733.
The court, while apparently relying on Schwab v. Doyle, declared
that it entertained--
"no doubt that the act was intended to operate retrospectively,
and a contrary construction could only be justified on the
principle that such a construction would render the act
The same contentions are made against and for the ruling of the
court as were made in Shwab v. Doyle.
It is not necessary
to repeat them. They are, with but verbal variations, the same as
in Shwab v. Doyle,
Page 258 U. S. 541
and the collector so considering, submits this case upon the
brief in that.
We have there stated them and passed judgment upon that which we
think determines the case -- that is, the retroactivity of the Act
of September 8, 1916. The facts in this case fortify the reasoning
in that. In this case, the act is given operation against an
instrument executed 15 years before the passage of the act.
The record exhibits proceedings that should be noticed. The
demurrer of Wardell was sustained to the complaint, and a judgment
of dismissal entered January 13, 1921.
On February 2, 1921, plaintiffs gave notice of a motion to
substitute John S. Flynn as defendant in the place and stead of
Wardell insofar as the action was against Wardell in his official
capacity, and to permit it to be continued and prosecuted against
him so far as it was against him personally.
The grounds of the motion were stated to be that he had
resigned, and Flynn had been appointed his successor and was then
the acting collector.
On February 7, 1921, the motion was granted. The order of the
court recited the resignation of Wardell and the succession of
Flynn. And, it being uncertain as to whether this was a proper case
for the substitution of Flynn or was one which should proceed
against Wardell, and it appearing to the court, on motion of
plaintiffs, that it was necessary for the survivor to obtain a
settlement of the questions involved, it was ordered that, so far
as the action was against Wardell in his official capacity, it
might be sustained against Flynn as his successor, and that, so far
as it was against Wardell personally, it should be continued
against him. And it was ordered that the action should thereafter
proceed against Flynn and Wardell without further pleadings or
On February 9, 1921, Flynn filed an appearance by attorneys
which recited that he had been substituted in
Page 258 U. S. 542
the place of Wardell insofar as the action was against Wardell
in his official capacity, and thereby appeared in the action as
It will be observed that there was no resistance to the motion
of substitution of Flynn, nor exception by him, and that he almost
immediately appeared in the action in compliance with the order of
the court. The subsequent proceedings were directed as much against
him as against Wardell, the bond upon the writ of error running to
However, this Court decided, in Smietanka v. Indiana Steel
Co., 257 U. S. 1
, that a
suit may not be brought against a collector of internal revenue for
the recovery of a tax, in the collection and disbursement of which,
such officer had no agency. We think the bringing of Flynn into the
case was error. Therefore, upon the return of the case to the
district court, he shall be permitted to set up the defense of
nonliability, if he be so advised, and, if he set up the defense,
it shall be ruled as sufficient for the reasons we have given.
Judgment reversed, and cause remanded for further proceedings in
accordance with this opinion.