Downes v. Safe Deposit & Trust Co.

²⁹⁵ Pattison, J., delivered the opinion of the Court. William F. Southcomb of Baltimore City, died November 2nd, 1931, testate, leaving practically his entire estate to collaterals. Upon the issuance of letters testamentary upon his estate, an inventory was returned on December 15th, 1931. His estate consisted largely of stocks and bonds.

These were valued as of the date of the testator’s death. On July 15th, 1932, the orphans’ court passed its order, authorizing a reappraisal of the securities as of that date. This was done because of the great shrinkage in the value of the securities since their appraisal in December, 1931, and, as stated by the Attorney General in his brief, was done over his objections, in order that the questions hereinafter mentioned might be judicially determined. The executor, in distributing the estate, calculated the collateral inheritance tax as well as the executor’s commissions, of which a part is payable to the State, upon the value of the securities as shown by the appraisal made under the order of July 15th, 1932.

It is shown by a comparison of the two appraisals that the value of the securities shrunk to the extent of $60,121.35. If the collateral inheritance tax and the executor’s commissions should have been computed upon the earlier appraisal and not upon the later one, then there is due to the register of wills the sum of $2,945.90 by way of collateral inheritance tax, and $120.24 by way of taxes on commissions. The questions upon which of these appraisals the collateral inheritance tax and the executor’s commissions should be respectively computed were submitted on “case stated,” as was done in Williams v. State, 144 Md. 18 , 123 A. 457 , to the Superior Court of Baltimore City. That court, after a hearing, held that the collateral inheritance tax was properly computed upon the appraisal made under the order of July 15th, 1932, but held that the executor’s commissions should have been computed on the earlier appraisal.

As a result of this decision, the State has appealed from the judgment affecting the collateral inheritance tax (No. 99), and the ²⁹⁶ executor has appealed from the judgment affecting the executor’s commissions (No. 100). The questions therefore presented by this appeal are: • (1) Is the State entitled to additional collateral inheritance tax of five per cent, upon the difference between such re-appraised values of the securities distributed to the residuary legatee, and the higher values of the original inventory ? (2) Is the State entitled to additional tax on commissions, similarly computed? The following sections of article 81 of the present Code of Maryland reflect upon the first of these questions.

Section 105 of article 81 of the Code (Supp. 1929) provides that “all estates, real, personal and mixed * * * passing from any person who may die seised and possessed thereof * * * or any part of such estate or estates * * * transferred by deed, grant, bargain, gift or sale, made or intended to take effect in possession after the death of the grantor, bargainor, devisor or donor, to any person or persons * * * other than to or for the use of the father, mother, husband, wife, children and lineal descendants of the grantor, bargainor or testator * * * shall be subject to a tax of five per centum in every hundred dollars of the clear value of such estate * * * and all executors, administrators * * * shall only be discharged from liability for the amount of such tax, the payment of which they be charged with, by paying the same for the use of this State, as hereinafter directed; provided, that no estate which may be valued at a less sum than five hundred dollars shall be subject to the tax imposed by this section. Section 106 provides that “every executor to whom administration may be granted, before he pays any legacy or distributive share of any estate liable to' the tax imposed -by section 105, shall pay to the register of wills of the proper county or city, five per centum of every hundred dollars he may hold for distribution among the distributees or legatees, except as hereinafter provided, and at that rate for any less sum, for the use of the state; provided that such tux shall ²⁹⁷ not he paid or collected upon any increase in value of the estate or any income thereon accrued subsequent to the date of the death of the decedent.” Section 107 provides that “when any species of property other than money or real estate shall be subject to said tax, the tax shall be paid on the appraised value thereof as filed in the office of the register of wills of the proper county or city, which appraisement shall be subject to modification by the orphans’ court appointing such appraisers, for good cause shown. * * *” Section 105 is practically the same as section 102 of article 81 of the Code of 1888, except that the present Code increases the rate from two and a half (as provided in the earlier Code) to five per centum. What is said of section 105 is likewise true as to section 106 (Code 1888, art. 81, sec. 103), with the addition resulting from the Acts of 1927, chapter 43, which we have italicized. Section 107 is like section 104 of the Code of 1888, with the italicized words added thereto by the Acts of 1929, chapter 226.

In the determination of the different questions arising thereunder, this court has been called upon a number of times to construe the above-mentioned sections of the Code, and, while the questions here involved have never been directly decided by it, there have been statements in the decisions of those cases which we regard as very helpful in deciding the questions here presented. In State v. Dalrymple, 70 Md. 295 , 17 A. 82, 83 , where these provisions of the Code were before this court for its consideration, Judge McSherry said: “The act we are now considering plainly intended to require that a person taking the benefit of a civil right secured to him under our laws should pay a certain premium for its enjoyment-. In other words, one of the conditions upon which strangers and collateral kindred may acquire a decedent’s property, which is subject to the dominion of our laws, is that there shall be paid out of such property a tax * * * intojhe treasury of ²⁹⁸ the state.” It “is not a tax upon the property itself, but is merely the price exacted by the state for the privilege accorded in permitting property so situated to be transmitted by will, or by descent or distribution. That this is so is abundantly clear from the language of the statute and its several provisions. * * * And the amount of the tax will depend upon the sum in the hands of the appellees payable to the legatee.” Judge Briscoe, speaking for this court in Fisher v. State, 106 Md. 104 , 66 A. 661, 663 , said: “The tax is imposed upon the clear value of all estates passing by will or otherwise, at the time it is transferred and received by the collateral beneficiary. * * * In other words, the tax is imposed upon the clear value of the estate, at the ‘passing and transferring’ of the estate to the collateral beneficiary.” In Safe Dep. & Tr.

Co. v. State, 143 Md. 644 , 123 A. 50 , the estate of the decedent increased in value after his death, and its value at the time of distribution was greater.than the value placed upon it when the inventory was filed. The question was, Should the collateral inheritance tax be computed on such additional sum, or confined to the appraised value at the time of his death as shown by the inventory? Judge Urner, speaking for the court, said: “We can have no doubt as to the correctness of the lower court’s decision that the tax applies to the entire estate passing to the distributees. * * * In o,r(ier that the theory and purpose of the tax * * * may be given full effect, it seems clear that the tax should be-computed on the basis of the whole amount of the estate passing to> the collateral recipients. * * * It is with the estate as it passes to the beneficiary, and not merely with the estate as it passes from the person who dies ‘seised and possessed thereof,’ that the collateral inheritance tax law is concerned.” In Good Samaritan Hospital v. Dugan, 146 Md. 374 , 126 A. 85, 88 , this court said: “Under the statute * * * the tax is only levied against that part of the decedent’s estate-passing to those of a class specially named in the act, upon whom the requirement is made to- pay the tax thereon, and not against that part of his estate passing to others exempted ²⁹⁹ from its provisions. * * * The executor or administrator pays the tax, hut he pays it for the legatees or heir, either out of his legacy or' distributive share of the estate, 'or with money collected from him. * * * As it appears to us, the logical conclusion is that the tax thereby imposed is upon the right of the legatee or heir to receive his legacy or his share of the estate and not an estate tax. * * *” In Lilly v. State, 156 Md. 104 , 143 A. 661, 665 , Judge Digges, speaking for the court, repeating what had been said a number of times, stated that “the tax is imposed upon the clear value of all estates passing by will or otherwise, at the time it is transferred and received by the collateral beneficiary.” See Darnall v. Connor, 161 Md. 213 , 155 A. 894 . It is true that, after the decision in Safe Dep. & Tr.

Co. v. State, supra, in which it was held that the tax should be computed upon the whole amount of the estate