1. When a treaty provision fairly admits of two constructions,
one restricting, the other enlarging, the rights which may be
claimed under it, the more liberal interpretation is to be
preferred. P.
279 U.S.
52.
2. As the treatymaking power is independent of and superior to
the legislative power of the states, the meaning of treaty
provisions, liberally construed, is not restricted by any necessity
of avoiding possible conflict with state legislation, and, when so
ascertained, must prevail over inconsistent state enactments. P.
279 U.S. 52.
3. When the meaning of treaty provisions is uncertain, recourse
may be had to the negotiations and diplomatic correspondence of the
contracting parties relating to the subject matter, and to their
own practical construction of it. P.
279 U.S. 52.
4. Article 7 of the Treaty of April 26, 1826, with Denmark,
providing
"that hereafter no higher or other duties, charges, or taxes of
any kind shall be levied in the territories or dominions of either
party upon any personal property, money or effects, of their
respective citizens or subjects, on the removal of the same from
their territories or dominions reciprocally, either upon the
inheritance of such property, money, or effects, or otherwise,
Page 279 U. S. 48
than are or shall be payable in each state, upon the same, when
removed by a citizen or subject of such state, respectively,"
was intended to prohibit not merely taxes on removal, but also
discriminatory taxes like the
droit de detraction (applied
only to alien heirs of a resident decedent and substantially
equivalent, as to them, to the modern inheritance tax), and is
violated by a state inheritance tax discriminating against
nonresident alien heirs of a resident decedent and constituting a
lien upon the property. Pp.
279
U.S. 52,
279 U. S.
57.
205 Ia. 324 reversed.
Certiorari, 277 U.S. 583, to a judgment of the Supreme Court of
Iowa affirming a judgment imposing an inheritance tax.
Page 279 U. S. 49
MR. JUSTICE STONE delivered the opinion of the Court.
This case is here on certiorari, granted June 4, 1928, 277 U.S.
583, under § 237 of the Judicial Code, to review a judgment of the
Supreme Court of Iowa affirming a judgment of the Plymouth District
Court imposing an inheritance tax on the estate of petitioner's
intestate. Anders Anderson, the intestate, a citizen of the kingdom
of Denmark residing in Iowa, died there February 9, 1923, leaving
his mother, a resident and citizen of Denmark, his sole heir at law
and entitled by inheritance, under the laws of Iowa, to his net
estate of personal property, aggregating $3,006.37. By § 7315, Code
of Iowa (1927), c. 351, the estate of a decedent passing to his
mother or other named close relatives, if alien nonresidents of the
United States,
Page 279 U. S. 50
is subject to an inheritance tax of 10 percent, but, by § 7313,
an estate of less than $15,000, as was decedent's, passing to a
parent who is not such a nonresident alien is tax-free. In the
proceedings in the state court for fixing the inheritance tax,
petitioner asserted that the provisions of the statutes referred
to, so far as they authorized a tax upon this decedent's estate,
were void as in conflict with Article 7 of the Treaty of April 26,
1826, between the United States and Denmark, 8 Stat. 340, 342,
renewed in 1857, 11 Stat. 719, 720, reading as follows:
"ARTICLE 7. The United States and his Danish Majesty mutually
agree that no higher or other duties, charges, or taxes of any kind
shall be levied in the territories or dominions of either party
upon any personal property, money, or effects of their respective
citizens or subjects on the removal of the same from their
territories or dominions reciprocally, either upon the inheritance
of such property, money, or effects or otherwise, than are or shall
be payable in each state upon the same when removed by a citizen or
subject of such state respectively."
The Supreme Court of Iowa, 205 N.W. 324, following its earlier
decision,
In re Estate of Pedersen, 198 Iowa, 166, upheld
the statute as not in conflict with the treaty.
In
Petersen v. Iowa, 245 U. S. 170,
this Court held, following
Frederickson v.
Louisiana, 23 How. 445, that Article 7 was intended
to apply only to the property of citizens of one country located
within the other, and so placed no limitation upon the power of
either government to deal with its own citizens and their property
within its own dominion. Hence, it did not preclude the inheritance
tax there imposed upon the estate of a resident citizen of Iowa at
a higher rate upon legacies to a citizen and resident of Denmark
than upon similar legacies to citizens or residents of the United
States. The Court said (p.
245 U. S. 172):
"Conceding that it [Article 7] requires construction to
determine whether the prohibitions embrace taxes, generically
Page 279 U. S. 51
considered, or death duties, or excises, on the right to
transfer and remove property, singly or collectively, we are of the
opinion that the duty of interpretation does not arise, since in no
event would any of the prohibitions be applicable to the case
before us."
But, in the present case, the decedent was a citizen of Denmark,
owning property within the state of Iowa, and Article 7, by its
terms, is applicable to charges or taxes levied on the personal
property or effects of such a citizen; hence, its protection may be
invoked here if the discrimination complained of is one embraced
within the terms of the treaty.
That there is a discrimination based on alienage is evident,
since the tax is imposed only when the nonresident heirs are also
aliens. But it is argued by respondent, as the court below held,
that the present tax is not prohibited by the treaty, since it is
one upon succession,
In re Estate of Thompson, 196 Iowa
721,
In re Meinert's Estate, 204 Iowa 355, and not on
property or its removal, which, it is said, is alone forbidden, and
that, in any case, since the only tax discrimination aimed at by
Article 7 in cases of inheritance is that upon the power of
disposal of the estate, and not the privilege of succession, the
particular discrimination complained of is not forbidden, for the
statutes of Iowa permit a citizen of Denmark to dispose of his
estate to citizens and residents of Denmark on the same terms as a
citizen of Iowa to like nonresident alien beneficiaries.
The narrow and restricted interpretation of the treaty contended
for by respondent, while permissible and often necessary in
construing two statutes of the same legislative body in order to
give effect to both so far as is reasonably possible, is not
consonant with the principles which are controlling in the
interpretation of treaties. Treaties are to be liberally construed
so as to effect the apparent intention of the parties.
Jordan v.
Tashiro, 278
Page 279 U. S. 52
U.S. 123;
Geofroy v. Riggs, 133 U.
S. 258,
133 U. S. 271;
In re Ross, 140 U. S. 453,
140 U. S. 475;
Tucker v. Alexandroff, 183 U. S. 424.
When a treaty provision fairly admits of two constructions, one
restricting, the other enlarging, rights which may be claimed under
it, the more liberal interpretation is to be preferred.
Asakura
v. Seattle, 265 U. S. 332;
Tucker v. Alexandroff, supra; Geofroy v. Riggs, supra. And
as the treatymaking power is independent of and superior to the
legislative power of the states, the meaning of treaty provisions
so construed is not restricted by any necessity of avoiding
possible conflict with state legislation, and, when so ascertained,
must prevail over inconsistent state enactments.
See Ware v.
Hylton, 3 Dall. 199;
Jordan v. Tashiro, supra;
cf. Cheung Sum Shee v. Nagle, 268 U.
S. 336. When their meaning is uncertain, recourse may be
had to the negotiations and diplomatic correspondence of the
contracting parties relating to the subject matter and to their own
practical construction of it.
Cf. In re Ross, supra, at
140 U. S. 467;
United States v. Texas, 162 U. S. 1,
162 U. S. 23;
Kinkead v. United States, 150
U. S. 486;
Terrace v. Thompson, 263 U.
S. 197,
263 U. S.
223.
The history of Article 7 and references to its provisions in
diplomatic exchanges between the United States and Denmark leave
little doubt that its purpose was both to relieve the citizens of
each country from onerous taxes upon their property within the
other and to enable them to dispose of such property, paying only
such duties as are exacted of the inhabitants of the place of its
situs, as suggested by this Court in
Petersen v. Iowa,
supra, p.
245 U. S. 174,
and also to extend like protection to alien heirs of the
noncitizen.
On March 5, 1924, Mr. Pedersen, Minister of Denmark to the
United States, presented to John Quincy Adams, Secretary of state,
a project of convention for the consideration of this government.
This project dealt with the commercial relations between the two
countries and their
Page 279 U. S. 53
territories and the appointment of consular officers, but did
not contain any provisions corresponding to Article 7. On January
14, 1826, certain citizens of the United States addressed to Henry
Clay, then Secretary of State, a memorial complaining of certain
taxes imposed by the Danish government with respect to property of
citizens of the United States located in the Danish West Indies,
known as "sixths" and "tenths," the former being one-sixth of the
value of the property, payable to the crown and the latter a
further one-tenth of the residue, payable to the town or county
magistrate, as a prerequisite to removal of property from the
Islands. Both taxes ere imposed on the property inherited by an
alien heir. Danish Laws, Code of Christian V, book V, c. 2, §§ 76,
77, 78, 79. The memorial prayed that an article be inserted in the
treaty then contemplated with Denmark, comparable to the similar
provisions of existing treaties between Denmark and Great Britain
and Denmark and France, forbidding the imposition of taxes of this
character.
Previously, on November 7, 1825, Mr. Clay had addressed a note
to the Minister of Denmark setting forth the conditions under which
the United States would be disposed to proceed with negotiations. 3
Notes to Foreign Legations, 451. The note included, in numbered
paragraphs, certain proposals which the government of the United
States desired to have considered in connection with the draft
convention submitted by the Danish Minister. Paragraph 5 was as
follows:
"When citizens or subjects of the one party die in the country
of the other, their estates shall not be subject to any
droit
de de traction, but shall pass to their successors, free from
all duty."
In a letter of April 14, 1826, shortly before the execution of
the treaty, the Danish Minister transmitted to Mr. Clay a copy of
what he termed "the additional article to the late convention
between Denmark and Great
Page 279 U. S. 54
Britain respecting the mutual abolition of the
droit de de
traction." This article, dated June 16, 1824, is substantially
in the phraseology of Article 7 of the present treaty between the
United States and Denmark. [
Footnote 1]
In the communication of Mr. Clay to the Danish Charge d'Affaires
of November 10, 1826, following the ratification of the treaty,
referring to Article 7; he said:
"The object which the government of the United States had in
view in that stipulation, was to secure the right of their citizens
to bring their money and movable property home from the Danish
islands, free from charges or duties and especially from the
onerous law, known in those islands under the denominations of
sixths and tenths. This object was distinctly known to Mr. Pedersen
throughout the whole of the negotiation, and was expressly
communicated by me to him in writing."
In the reply of the following day, the Danish Charge d'Affaires
stated:
"I have been authorized . . . to declare to you that measures
have been taken accordingly by the Danish government to secure the
due execution of the seventh Article of the Convention, conformably
to the intent and meaning thereof as by you stated. . . ."
The
droit de de traction referred to in the
communication of Mr. Clay of November 7, 1825, and in the note
of
Page 279 U. S. 55
the Danish minister of April 14, 1826, in which he identified
that phrase with the tax prohibited by the additional article of
the treaty between Denmark and Great Britain of June 16, 1824,
similar in terms to the article now before us, was a survival from
medieval European law of a then well recognized form of tax,
imposed with respect to the right of an alien heir to acquire or
withdraw from the realm the property inherited. [
Footnote 2] Although often referred to as a
tax on property or its withdrawal, the
droit de de
traction seems rather to have been a form of inheritance tax,
but one which, because of its imposition only with respect to
property of aliens who normally removed it from the realm, was
sometimes associated with the removal,
Page 279 U. S. 56
rather than the inheritance, of the property. It was limited to
inheritances, existed with and supplemented other taxes, the
droit de retraite or the
droit de sortie, imposed
on the removal of property other than inheritances (Guyot,
Repertoire de Jurisprudence (1785) Sortie; Galvo, Dictionnaire du
Droit International (1885) De traction; Oppenheim, International
Law (4th ed.1928) 559), and was, in most cases, applied regardless
of the subsequent disposition of the property (Merlin, Repertoire
de Jurisprudence (5th ed. 1827) De traction; Guyot,
supra,
De traction). Its origin and an examination of the commentators
likewise leave no doubt that the
droit de de traction --
the tax accrued upon the death of the decedent, and only after it
had been collected was the heir entitled to take possession of the
property and remove or otherwise dispose of it. [
Footnote 3] It was thus the
Page 279 U. S. 57
precursor of the modern inheritance tax, differing from it in
its essentials solely in that it was levied only where one of the
parties to the inheritance was an alien or nonresident. [
Footnote 4]
That the present discriminatory tax is the substantial
equivalent of the
droit de de traction is not open to
doubt. That it was the purpose of the high contracting parties to
prohibit discriminatory taxes of this nature clearly appears from
the diplomatic correspondence preceding and subsequent to the
execution of the treaty, although the "sixths and tenths" tax, with
which the parties were immediately concerned, was a removal
tax.
We think also that the language of Article 7, interpreted with
that liberality demanded for treaty provisions, sufficiently
expresses this purpose. It is true that the tax prohibited by the
treaty is in terms a tax on property or on its removal, but it is
also true that the modern conception of an inheritance tax as a tax
on the privilege of transmitting or succeeding to property of a
decedent, rather than on the property itself, was probably unknown
to the draftsmen of Article 7. But whatever, in point of present
day legal theory, is the subject of the tax, it is the property
transmitted which pays it, as the Iowa statute carefully provides.
[
Footnote 5] In the face of the
broad language embracing
"charges, or taxes of any kind, . . . upon any personal property
. . . on the removal
Page 279 U. S. 58
of the same . . . either upon the inheritance of such property,
. . . or otherwise,"
the omission at that time of words more specifically describing
inheritance taxes as now defined can hardly be deemed to evidence
any intention not to include taxes theoretically levied upon the
right to transmit or inherit, but which nevertheless were to be
paid from the inheritance before it could be possessed or removed.
Moreover, while it is true that the tax is levied whether the
property is actually removed or not, it is nevertheless imposed
only with respect to a class of persons who would normally find it
necessary so to remove the property in order to enjoy it, and since
payment of the tax is a prerequisite to removal, the tax is, in its
practical operation, one on removal. In the light of the avowed
purpose of the Treaty to forbid discriminatory taxes of this
character, and its use of language historically deemed to embrace
them, such effect should be given to its provisions.
The contention that the present discrimination is not one
forbidden by the language of Article 7, since the decedent's power
of disposal is the same as that of a citizen, leaves out of
consideration both the nature of the tax contemplated by the
contracting parties and the fact that the treaty provisions extend
explicitly to the withdrawal of such property by the alien heir
upon inheritance, and, as already pointed out, protect him in his
right to receive his inheritance undiminished by a tax which is not
imposed upon citizens of the other contracting party.
Reversed.
[
Footnote 1]
"Their Britannick and Danish Majesties mutually agree that no
higher or other Duties shall be levied in either of Their Dominions
. . . upon any personal property of Their respective Subjects on
the removal of the same from the Dominions of Their said Majesties
reciprocally (either upon the inheritance of such property, or
otherwise) than are or shall be payable in each state upon the like
property when removed by a Subject of such state respectively."
12 British and Foreign state Papers, 1824-1825 (1826) 49.
Article 40 of the Treaty of Commerce and Navigation, concluded
between France and Denmark August 23, 1742, provided that the
citizens of each of the two countries reciprocally should be exempt
in the other from the
droit d'aubaine or other similar
disability, under whatever name, and that their heirs should
succeed to their property without impediment. 1 Coercq, Recueil des
Traite § de la France (1864) 57.
[
Footnote 2]
The
droit de de traction was derived from the
droit
d'aubaine, one of the many harsh feudal laws and customs
directed against strangers and which, in its narrowest sense, was
the right of the sovereign, as successor of the feudal lords, to
appropriate all the property of a nonnaturalized alien dying,
either testate or intestate, within the realm. 1 Calvo,
Dictionnaire de Droit International (1885) 67, Aubaine; 1 Merlin,
Repertoire de Jurisprudence (5th ed. 1827) 523, Aubaine; Halleck,
International Law (1861) 155; 2 Ferriere, Oeuvres de Bacquet (1778)
8
et seq. This right was exercised to the exclusion of all
heirs, whether they were citizens or aliens or resided within or
without the realm, with the single exception of resident legitimate
offspring, and continued to be exercised long after aliens had been
accorded unrestricted power of disposition of goods
inter
vivos. Demangeat, Historie de la Condition Civile des
E'Trangers en France (1844) 110, 125; Loisel, Institutes
Contumiers, liv. 1, regle 50. The term has, however, sometimes been
applied to all the varying disabilities of aliens, Fiore, Le Droit
International Prive (1907) 14, and more often used to include not
only the inability of the alien to transmit, but the complementary
incapacity of an alien to inherit, even from a citizen, Merlin,
supra, Aubaine.
But commercial expediency led at an early date to a mitigation
of the rigors of the
droit d'aubaine. This process took
several forms, the exemption of alien merchants in certain trading
centers, of certain classes of individuals (ex-soldiers, etc.) and,
most prominently, treaties providing for its reciprocal abandonment
or contraction. In these treaties, the
droit de de
traction was recognized as a tax of from five to twenty,
usually ten, percent of the value, imposed on the right of an alien
to acquire by inheritance (testate or intestate) the property of
persons dying within the realm. Demangeat,
supra at 219,
225; 2 Masse, Le Droit Commercial (1844) 14; 1 Calvo,
supra, De traction; Fuzier-Herman, Repertoire General
Alphabetique du Droit Francaise (1890) Aubaine, 6; Guyot,
Repertoire de Jurisprudence (1785) De traction; Merlin,
supra, De traction; Oppenheim, International Law (4th
ed.1928) 560; Halleck,
supra at 155; Wheaton, Elements of
International Law (8th ed. 1866) 138. The
droit d'aubaine
and the
droit de de traction were abolished in France by
decrees of the Assembly in 1790 and 1791, but subsequently
reappeared in the Civil Code, Arts. 726, 912, with provision for
abandonment as to a nation according similar treatment to French
nationals. They were again abolished, with certain protective
provisions for French heirs, by the Law of Jury 14, 1819.
See Dalloz, Repertoire Pratique (1825) Succession;
Demangeat,
supra at 239,
et seq., and citations,
supra.
[
Footnote 3]
"C'est un droit par leguel le souverain distrait a son profit
une certaine parties de succession qu'il permet aux etrangers de
venir receueiller dans ses etats."
4 Merlin,
supra, 518, De traction; Guyot,
supra, De traction. "Ce droit . . . consistait dans un
prelevement opere par le gouverment . . . sur le produit net des
successions transferes a l'etranger." Calvo,
supra, De
traction;
see also Fuzier-Herman, Repertoire General du
Droit Francaise (1890) Aubaine, 6.
[
Footnote 4]
A number of early treaties of the United States clearly
recognize this essential characteristic of the
droit de de
traction, either by providing in terms for the abolition of
both removal duties and the
droit de de traction, cf.
Treaties with: France of 1778, 2 R.S. 203, 206; Wurttemberg of
1844, 2 R.S. 809; Saxony of 1845, 2 R.S. 690; or by words of
similar import,
cf. Treaties with: France of 1853, 2 R.S.
249, 251; Switzerland of 1850, 2 R.S. 748, 749, 750; Honduras of
1864, 2 R.S. 426, 428; Great Britain of 1900, 31 Stat. 1939.
[
Footnote 5]
"The tax shall be and remain a legal charge against and a lien
upon such estate, and any and all the property thereof from the
death of the decedent owner until paid."
Code Iowa (1927) c. 351, § 7311.
See also §§ 7309,
7363.