1. Acts of Congress are to be construed, if possible, so as to
avoid grave doubts of their constitutionality. P. 268 U. S.
2. The provisions of the Revenue Act of February 24, 1919,
purporting to include policies insuring the life of a decedent in
Page 268 U. S. 239
gross value of his estate as a basis for fixing the transfer tax
thereon, though the policies be payable to beneficiaries other than
the estate, and allowing the executor to recover from such
beneficiaries their proportions of such tax and making them
personally responsible therefor if not paid when due, are to be
construed as inapplicable to transactions antedating the passage of
the Act. P. 268 U. S.
3. A declaration in an Act that a provision in it shall be
retroactive helps the conclusion that the same provision in an
earlier Act, lacking such declaration, was not retroactive. P.
268 U. S. 252
298 F. 803 affirmed.
Error to a judgment recovered in the district court by the
defendants in error in an action to recover the amount of taxes
collected by duress.
Page 268 U. S. 249
MR. JUSTICE HOLMES delivered the opinion of the Court.
This is a suit by the executors of Henry C. Frick to recover the
amount of taxes collected by duress under the supposed authority of
the Revenue Act of February 24, 1919, c. 18, 40 Stat. 1057, on the
ground that the Act is unconstitutional so far as it purports to
tax the matters here concerned. The district court gave
Page 268 U. S. 250
for the plaintiffs for the whole sum demanded. 298 F. 803. The
case was tried without a jury, and the court adopted as its
findings, among others, the following facts which were agreed:
Henry C. Frick died on December 2, 1919, and his will was admitted
to probate on December 6. There were outstanding policies upon his
life, four payable to his wife and seven to his daughter. The total
amount received under them was $474,629.52, and as his estate apart
from this was more than ten million dollars, an additional tax of
$108,657.88, or twenty-five percent of the sum received less the
statutory deduction of $40,000, was required to be paid. All the
policies were taken out before the Revenue Act was passed. The
largest one, for $114,000, was a paid-up policy issued in 1901,
payable to Mrs. Frick without power in Mr. Frick to change the
beneficiary. Another, similar so far as material, was for $50,000.
Others were assigned or the beneficiary named (Frick's estate) was
changed to Frick's wife or daughter before the date of the statute.
All premiums were paid by Mr. Frick, and some seem to have been
paid after the statute went into force.
The tax imposed by the Act is a tax "upon the transfer of the
net estate" of the decedent. Section 401; 40 Stat. 1096. "For the
purpose of the tax, the value of the net estate shall be
determined" by deducting certain allowances from the gross estate.
Section 403. By § 402,
"the value of the gross estate of the decedent shall be
determined by including the value at the time of his death of all
property . . . (f) To the extent of the amount receivable by the
executor as insurance under policies taken out by the decedent upon
his own life, and to the extent of the excess over $40,000 of the
amount receivable by all other beneficiaries as insurance under
policies taken out by the decedent upon his own life."
These last words are the ground of the Collector's claim.
Page 268 U. S. 251
By § 408; 40 Stat. 1100:
"If any part of the gross estate consists of proceeds of
policies of insurance upon the life of the decedent receivable by a
beneficiary other than the executor, the executor shall be entitled
to recover from such beneficiary such portion of the total tax paid
as the proceeds, in excess of $40,000, of such policies bear to the
"By § 409, a personal liability is imposed upon the
beneficiaries if the tax is not paid when due. The defendants in
error say that, if these policies are covered by the statute these
sections show that the beneficiaries are taxed upon their own
property, under the guise of a tax upon the transfer of his estate
by Mr. Frick, and that this is taking their property without due
process of law, citing Matter of Pell,
171 N.Y. 48, and
other cases. In view of their liability, the objection cannot be
escaped by calling the reference to their receipts a mere measure
of the transfer tax. The interest of the beneficiaries is
established by statutes of the states controlling the insurance,
and is not disputed. It also is strongly urged that the tax would
be a direct tax. In view of our conclusion, it is not necessary to
state the position of the defendants in error more in detail."
We do not propose to discuss the limits of the powers of
Congress in cases like the present. It is enough to point out that
at least there would be a very serious question to be answered
before Mrs. Frick and Miss Frick could be made to pay a tax on the
transfer of his estate by Mr. Frick. There would be another if the
provisions for the liability of beneficiaries were held to be
separable and it was proposed to make the estate pay a transfer tax
for property that Mr. Frick did not transfer. Acts of Congress are
to be construed if possible in such a way as to avoid grave doubts
of this kind. Panama R. Co. v. Johnson, 264 U.
, 264 U. S. 390
Not only are such doubts avoided by construing the statute as
Page 268 U. S. 252
to transactions taking place after it was passed, but the
general principle "that laws are not to be considered as applying
to cases which arose before their passage" is preserved when to
disregard it would be to impose an unexpected liability that, if
known, might have induced those concerned to avoid it and to use
their money in other ways. Schwab v. Doyle, 258 U.
, 258 U. S. 534
This case and the following ones, Union Trust Co. v.
Wardell, 258 U. S. 537
Levy v. Wardell, 258 U. S. 542
Knox v. McElligott, 258 U. S. 546
far toward deciding the one how before us. They also indicate that
the Revenue Act of 1924, c. 234, § 302(h); 43 Stat. 253, 305,
making(g) (the equivalent of (f) above) apply to past transactions,
does not help, but, if anything, hinders the Collector's
construction of the present law. Smietanka v. First Trust &
Savings Bank, 257 U. S. 602