
    BENJAMIN F. JONES, Jr., ADMINISTRATOR, v. THE UNITED STATES.
    [No. 30296.
    Decided March 23, 1914.]
    
      On the Proofs.
    
    The plaintiff is the administrator of the estate of Adelaide P. Dalzell, and as such brings this suit for the recovery of taxes alleged to have been unlawfully collected under the act of June 30, 1898, SO Stat. L., jg¡-8, as amended by the act of March 2, 1902, 32 Stat. L., 96h known as the Spanish War revenue act.
    I.Nothing is actually vested in the heirs of a decedent until after the debts are provided for and the legitimate costs and expenses of the administration are ascertained and discharged.
    II.The beneficial interests in the estate to which the heirs or dis-tributees are entitled were technically vested at the date of the intestate’s death by relation back to the date of the death of the decedent, as the heirs’ interest came by descent from the intestate and not from the administrator, who was a personal representative.
    III.Where the statute qualifies the words “ absolutely vested, ” with the further words “ in possession or enjoyment ” thereby defining the nature of the vested estate prior to the refunding act, the statute must be taken in a broad sense and as referring to the time when the beneficial interests were capable of being received into absolute possession or enjoyment and not referring necessarily to the strict legal character of the interest.
    
      IY. Tlie rate of the tax assessable could only be determined after the debts and. legitimate cost of the administration of the estate are known, and when these are known and deducted, the share of each distributee is established, and the rate of the tax fixed.
    Y. Where the right to tax is uncertain, indefinite, and doubtful the public right is subordinated to the claim of exemption for the private right, and the right to tax must be so clear as to avoid the forfeiture of any part of the estate.
    VI. Taxes illegally collected are nothing more nor less than forfeiture to the extent of the illegal exaction and should be refunded.
    
      The Reporter’s statement of the case:
    The following are the facts of the case as found by the court:
    I. Claimant is a citizen of the United States and a resident of the city of Pittsburgh in the State of Pennsylvania.
    II. On the 28th day of June, 1902, Adelaide P. Dalzell, a widow, a citizen of the United States and resident of the city of Pittsburgh, State of Pennsylvania, departed this life. Said Adelaide P. Dalzell died intestate leaving surviving as her sole next of kin two daughters, Virginia C. Dal-zell and Sue D. D. Jones, each of whom is still living.
    By proceedings duly had in the orphans’ court in the city of Pittsburgh, said court having full, complete, and exclusive jurisdiction over the estate of the said deceased, letters of administration upon said estate were thereafter, to wit, on July 14, 1902, duly and lawfully issued to claimant, who duly qualified as such administrator; and claimant is still administrator of said estate. Upon qualifying as administrator as aforesaid claimant immediately became entitled to the actual possession of the personal property belonging to the estate of said deceased and accordingly had actual and exclusive possession thereof, and claimant thus acquired and held title to and exclusive possession of all of said personal property as administrator as aforesaid until the date hereinafter shown, by virtue of the laws of the State of Pennsylvania, which provide as follows:
    “No administrator shall be compelled to make distribution of the goods of an intestate until one year be fully expired from the granting of the administration of the estate.” Act Feb. 24,1834, sec. 38, P. L 80, Purd,. 44T.
    III. Under and by virtue of the laws of the State of Pennsylvania in force at the time of. the death of said deceased and still in force the said Virginia C. Dalzell and Sue D. D. Jones, her daughters, would each ultimately receive one-half of the net personal estate of said deceased, after the payment of all debts and charges for which the estate of said deceased might be legally liable.
    IV. Said deceased died seized and possessed of personal property of the gross value of $226,115.29, subject to deductions for legal debts and charges for which she or her estate was liable. Such debts and charges were subsequently ascertained to amount to $6,773.55. Each and all of said debts and charges were ascertained and paid by claimant, as administrator as aforesaid, at various dates subsequent to the granting of letters of administration to claimant and during the period allowed by the laws of said State for the presentation and payment of such claims and charges. Prior to the approval of said debts and charges and during the period allowed by law for the filing of claims against said estate the amount, if any, which said Virginia C. Dalzell and Sue D. D. Jones would be ultimately entitled to receive from the estate of the said deceased could not be determined.
    The value of the net personal estate remaining in claimant’s possession as administrator, as aforesaid, after approval and payment of the said debts and charges, amounted to $219,341.74, and such net personal estate, less the sum of $3,290.12 paid to the United States, as hereinafter set forth, was by claimant as administrator as aforesaid, divided equally between said Virginia C. Dalzell and Sue D. D. Jones, share and share alike, but said pei'sonal estate remained in the exclusive possession and control of claimant as administrator as aforesaid, until the 4th day of May, 1903, when he made distribution thereof as aforesaid, pursuant to an account filed by him as such administrator in said orphans’ court, which said account and distribution were duly approved by said court.
    
      V. On or about October 24, 1905, the collector of internal revenue in tbe city of Pittsburgh, as aforesaid, acting for and on behalf of the United States and assuming to act as such, under the provisions of the act of Congress approved June 13, 1898, entitled “An act to provide ways and means to meet war expenditures and for other purposes,” 30 Stat. L., 448, and amendments thereof approved March 2, 1901, 31 Stat. L., 938, 946, collected from claimant as administrator as aforesaid the sum of $3,290.12, claiming the same to be lawfully assessed and payable under said act on account of the alleged interests of Virginia C. Dalzell and Sue D. D. Jones, as aforesaid, in said personal estate, being a tax of $1,645.06 upon each of said alleged interests.
    Said sum of $3,290.12 was paid by claimant to said collector of internal revenue without protest and was duly turned over and delivered to the United States by said collector.
    VI. On or about the 24th day of May, 1906, claimant, by his attorneys, duly filed an application in the Treasury Department praying the refundment of all of said moneys. No action having been taken upon said application, claimant, by his attorneys, under date of November 21, 1908, in a letter to the Commissioner of Internal Revenue, pursuant to regulations approved by the Secretary of the Treasury, on July 15, 1902, Department Circular No. 86, Int. Rev. No. 630, inter alia, stated:
    “ We also have the honor to request the action of the Secretary of the Treasury upon this claim. Under the laws of the State of Pennsylvania the distributees of this estate whose interests were taxed were not entitled to receive into their possession their respective interests until after the expiration of one year from the date of the granting of letters of administration, and such taxes are refundable under the provisions of the act of Congress approved June 27, 1902, 32 Stat. L., 406.”
    Said application was in all respects complete, regular, and in accordance with the requirements of the aforesaid act of Congress approved June 27, 1902, and with the regulations in regard to such applications and said application was accompanied by all necessary evidence and proof of facts. The facts as alleged in said application were not traversed or denied by the Secretary of the Treasury or by any representative of the United States. Although said application was in all respects complete and in due form, nevertheless, on the 21st day of November, 1908, the Secretary of the Treasury rejected and denied said application.
    
      Mr. Barry Mohun for the plaintiff. Maddox <S¡ Gatley were on the brief.
    • Mr. George M. Anderson, with whom was Mr. Assistant Attorney General Huston Thompson, for the defendants.
    The questions of law in the case of Hertz v. Woodman, 218 U. S., 205-232, are identical with the questions of law in the case at bar. In that case the claimant’s decedent, Woodman, died at Chicago on March 15, 1902, leaving a will which was duly probated on May 3, 1902, under which the Illinois Trust and Savings Bank qualified as executor. The clear value of the legacies payable under the will to the claimant was $166,250. On January 17, 1905, before the payment of the legacies, the collector of internal revenue collected upon said legacies under section 30 of the act of June 13, 1898, supra, the sum of $2,812.49.
    The Supreme Court held that:
    “The fact that the testator died within one year immediately prior to the taking effect of the repealing act of April 12, 1902 c. 500, 32 Stat., 96, does not relieve from taxation legacies otherwise taxable under sections 29 and 30 of the war-revenue act of June 13, 1898 c. 448, 30 Stat., 448, as amended by the act of March 2, 1901, c. 803, 31 Stat., 895.”
    The claimant contends that because the testamentary laws of the State of Pennsylvania, act of Feb. 24, 1834, sec. 38, Brightley and Purdons Digest of Laws of Pa., vols. A to J, p. 447, provide that “no administrator shall be compelled to make distribution of the goods of an intestate until one year be fully expired from the granting of the administration of the estate,” the personal estate of the intestate in the case at bar became a “ contingent beneficial interest, ” which had not vested prior to July 1, 1902, within the meaning of section 3 of the act of June 27, 1902, 32 Stat., 406, familiarly known as the “inheritance tax refunding act,” which reads as follows:
    “Seo. 3. That in all cases where an executor, administrator, or trustee shall have paid, or shall hereafter pay, any tax upon any legacy or distributive share of personal property under the provisions of the act approved June thirteenth, eighteen hundred and ninety-eight, entitled 'An act to provide ways and means to meet war expenditures, and for other purposes,’ and amendments thereof, the Secretary of the Treasury be, and he is hereby, authorized and directed to refund, out of any money in the Treasury not otherwise appropriated, upon proper application being made to the Commissioner of Internal Revenue, under such rules and regulations as may be prescribed, so much of said tax as may have been collected on contingent beneficial interests which shall not have become vested prior to July first, nineteen hundred and two. And no tax shall hereafter be assessed or imposed under said act approved June thirteenth, eighteen hundred and ninety-eight, upon or in respect of any contingent beneficial interest which shall not become absolutely vested in possession or enjoyment prior to said July first, nineteen hundred and two.”
    The case of Farrell v. United States, 167 Fed., 639, cited by claimant, was very properly dismissed, hut it should have been upon the ground that the legacy was vested in possession. The obiter dicta relied upon by the claimant in this case was demolished by the decision in Hertz v. Woodman, supra.
    
    The contention of the claimant, in our opinion, merits very little consideration, for the reason that section 111 of the Revised Statutes of Illinois, page 132, under which the executor made settlement in the case of Hertz v. Woodman, supra, provided that “All executors and administrators shall exhibit accounts of their administration for settlement to the county court from which the letters testamentary or of administration were obtained at the first term thereof after the expiration of one year after the date of their letters and in like manner every twelve months thereafter, or sooner, if required, until the duties of their administration are fully completed,” etc.
    If anything further need be said concerning this proposition of law presented by the claimant in his petition, we would call tbe attention of the court to the comparatively recent case of the United States v. Fidelity Trust Company, 222 U. S., 158-160, in which it was held that a life estate in a legacy was not a contingent beneficial interest within the meaning of section 3 of the act of June 27, 1902, supra, but was subject to the tax imposed by section 29 of the act of June 13, 1898, supra.
    
    The personal estate in this case was subject to the testamentary laws of the State of Pennsylvania and to the provision relied upon by the claimant in the case at bar.
    Considered independently of either of the authorities to which I have referred, it would seem a rather startling proposition that a legacy should be considered as contingent merely because the executor or administrator has been given a definite period within which to settle up the estate of the deceased. ^
    Mr. Fearne, in his work on Contingent Remainders, vol. 1, p. 216, says:
    “ It is not the uncertainty of ever taking effect in possession that makes a remainder contingent; for to that every remainder in life or in tail is ana must be liable; as the remainder man may die, or die without issue before the death of the tenant for life. The present capacity of taking effect in possession, if the possession were to become vacant, and not the certainty that the possession will become vacant before the estate limited in remainder determines universally distinguishes a vested remainder from one that is contingent.”
    Mr. Smith, in his discussion of the rule laid down by Mr. Fearne, Fearne on Contingent Remainders, vol.-' 2, sec. 177, says:
    “The nonexistence, in a vested remainder, and the existence, in a contingent remainder; of a contingency irrespective of its own duration, on which the possession or enjoyment strictly depends, is that which constitutes the fundamental distinction between them, as regards the mode of their creation, and that which forms a true, tangible, and practical criterion for determining to which of the two species a remainder belongs.”
    In the case of Fairfax v. Brown, 60 Md., 60, the testator left his property to his wife for life, and upon her death after giving certain portions to his sons, he left the residue of bis estate in trust for bis two daughters, and tbe court beld that .this provision of tbe law gave to tbe daughters an estate in fee.
    Tbe Supreme Court, in tbe case of tbe United States v. Fidelity Trust Company, 222 U. S., 158-150, discussing tbe refunding act of June 27, 1902, said:
    “Tbe statute does not invite speculation in a new nomenclature, or attempt to reach profounder conceptions than those familiar to tbe law. When it speaks of interests absolutely vested in possession we presume that it uses familiar legal expressions in then familiar legal sense.”
    As was said by tbe Supreme Court in Reid v. United States, 211 U. S., 529:
    “Jurisdiction is not a matter of sympathy or favor. Tbe courts are bound to take judicial notice of tbe limita of their authority.
   Howet, Judge,

delivered the opinion of the court:

This action is for tbe recovery of taxes alleged to have been unlawfully collected under tbe act of June 30, 1898, 30 Stat., 448, as amended by tbe act of March 2, 1901, 32 Stat., 964, known as the Spanish War revenue act. After tbe filing of the original and an amended petition, defendants demurred upon the ground that neither petition alleges sufficient facts to constitute a cause of action. On tbe final hearing tbe parties moved tbe court for permission to file an agreed statement of facts, and this motion was allowed. Treating tbe demurrers as withdrawn and abandoned, the court makes the findings as agreed to by tbe parties and now disposes of tbe case on tbe merits.

Adelaide P. Dalzell, a widow and resident of Pittsburgh, Pa., died June 28,1902, intestate, leaving as her sole next of bin her two daughters, each of whom is still living. Proceedings were had in a local court having jurisdiction over the estate of the deceased, and letters of administration were issued to . the plaintiff, who qualified as administrator and took possession of the personal property. The statutes of Pennsylvania under which possession was taken provided that “no admisitrator shall be compelled to make distribution of the goods of an intestate until one year be fully expired from the granting of the administration of the estate.” Act 24th Feb., 1834, sec. 38, P. L. 80, Purd., 447.

Under the local law in force at the time of the death of the deceased her daughters were entitled each to receive one-half of the net personal estate after the payment of all debts and charges for which the estate might be legally liable. The debts and charges were ascertained and paid by the administrator. After their payment the net personal estate amounted to $219,341.74. The personal estate remained in the exclusive possession and control of the administrator until May 4, 1903, when the assets were distributed. But in October, 1905, the collector of internal revenue, acting for and on behalf of the United States, and assuming to act under the provisions of the act of Congress approved June 13, 1898, entitled “An act to provide ways and means to meet war expenditures, and for other purposes,” 30 Stat., 448, and amendments thereto approved March 2, 1901, 31 Stat., 938, collected from the administrator $3,290.12, claiming the same to be lawfully assessed and payable on account of the interests of the two surviving daughters. The sum stated was paid by the administrator to the collector without protest and placed in the Treasury. Subsequently, in May, 1906, the administrator applied for a refund of the amount of the tax. No action was taken upon this application, but on November 21, 1908, a letter was addressed to the Commissioner of Internal Bevenue, pursuant to regulations, as follows: “We also have the honor to request the action of the Secretary of the Treasury upon this claim” — predicating the application upon the fact that the distributees of the estate whose interests were taxed were not entitled to receive into their possession their distributive shares -until after the expiration of one year from the date of the grant of letters of administration and that such taxes were refundable under the act of Congress approved June 27, 1902, 32 Stat., 406. The Secretary of the Treasury rejected the application and this action is the result.

Section 29 of the act of June 13, 1898, 30 Stat., 448, and under which the tax was collected, provides as follows:

“ That any person or persons having in charge or trust, as administrators, executors, or trustees, any legacies or distributive shares arising from personal property, where the whole amount of such personal property as aforesaid shall exceed the sum of ten thousand dollars in actual value, passing, after the passage of this act, from any person possessed of such property, either by will or by the intestate laws of any State or Territory, or any personal property or interest therein, transferred by deed, grant, bargain, sale, or gift, made or intended to take effect in possession or enjoyment after the death of the grantor or bargainer, to any person or persons, or to any body or bodies, politic or corporate, in trust or otherwise, shall be, and hereby are, made subject to a duty or tax, to be paid to the United States, as follows— that is to say: Where the whole amount of said personal property shall exceed in value ten thousand dollars and shall not exceed in value the sum of twenty-five thousand dollars the tax shall be:
“ First. Where the person or persons entitled to any beneficial interest in such property shall be the lineal issue or lineal ancestor, brother, or sister to the person who died possessed of such property, as aforesaid, at the rate of seventy-five cents for each and every hundred dollars of the clear value of such interest in such property.
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“ Fifth. Where the person or persons entitled to any beneficial interest in such property shall be in any other degree of collateral consanguinity than is hereinbefore stated, or shall be a stranger in blood to the person who died possessed, as aforesaid, or shall be a body politic or corporate, at the rate of five dollars for each and every hundred dollars of the clear value of such interest: Provided, That all legacies or property passing by will, or by the laws of any State or Territory, to husband or wife of the person died possessed, as aforesaid, shall be exempt from tax or duty.”

The above section was amended by act approved March 2, 1901, 31 Stat., 938, 947, by adding a proviso to the effect that the section should not be held applicable to bequests or legacies for uses of a religious, literary, charitable, or educational character, nor should it apply to the estate of any person who died prior to June 13, 1898, the date when section 29 first went into effect.

Section 29 as amended was repealed, to take effect on July 1,1902, by an act approved April 12,1902, 32 Stat., 96, 97.

On June 27, 1902, the President approved an act entitled “An act to provide for refunding taxes paid upon legacies and bequests,” etc., 32 Stat., 406, tbe third section of which is as follows:

“That in all cases where an executor, administrator, or trustee shall have paid, or shall hereafter pay, any tax upon any legacy or distributive share of personal property under the provisions of the act approved June thirteenth, eighteen hundred and ninety-eight, entitled ‘An act to provide ways and means to meet war expenditures, and for other purposes,’ and amendments thereof, the Secretary of the Treasury be, and he is hereby, authorized and directed to refund, out of any money in the Treasury not otherwise appropriated, upon proper application being made to the Commissioner of Internal Kevenue, under such rules and regulations as may be prescribed, so much of said tax as may have been collected on contingent beneficial interests which shall not have become vested prior to July first, nineteen hundred and two. And no tax shall hereafter be assessed or imposed under said act approved June thirteenth, eighteen hundred and ninety-eight, upon or in respect of any contingent beneficial interest which shall not become absolutely vested in possession or enjoyment prior to said July first, nineteen hundred and two.”

As the personal estate remaining at the end of the year after the payment of debts and charges and costs of administration did not come into the actual possession or enjoyment of the two heirs entitled until after July 1, 1902, the amount they were to receive was uncertain for and during the time the administrator was in charge. Before that date they could not demand, nor were they entitled to receive in possession, any part of the inheritance under the law which kept the administrator in charge. Certainly there was nothing actually vested in these heirs until after the debts were provided for and the legitimate costs and expenses of the administration were ascertained and discharged. None of these things occurred prior to July 1,1902.

The question, then, is not whether the distributive interests were taxable under the law, but whether these interests upon which the taxes were levied were contingent beneficial interests not coming into possession or enjoyment of the parties entitled to them and should be refunded.

The court is of opinion that these beneficial interests in the estate to which the distributees were entitled were technically vested at the date of the intestate’s death by relation back to the. date of the death of the intestate, inasmuch as the distributees’ interests came by descent from the intestate and not from the administrator who was the personal representative.

But the authorities indicate that the language of the refunding statute must be taken in a broader sense and as referring to the time when the beneficial interests were received, or were capable of being received, into actual and absolute possession or enjoyment, and not referring necessarily to the strict legal character of the interest. The statute qualifies the words “ absolutely vested ” with the further words “in possession or enjoyment,” thereby defining the nature of the vested estate prior to the refunding act. The courts have said that the tax is leviable at the time the rate could be ascertained. The rate of the tax assessable could only be determined after the debts and legitimate incidents of the administration of the estate became known. In the collection of debts due an estate the administrator may incur expenses, chargeable against the assets in his'hands, and in resisting claims interposed against the estate expenses and costs may be incurred, and there are, of course, certain costs and legal expenses attaching to an administration. When these are known and deducted from the whole amount of the assets the distributive share of each distributee can then only be known and the rate of the death duty be fixed. Until that time the “ beneficial interest ” was necessarily contingent in that sense which relates tó the amount of it, and consequently the rate of tax in the present instance was' uncertain until the beneficial interest could be paid. If the tax could only be levied at the time the dis-tributees receive, or could rightfully demand possession or enjoyment, it must follow here that these distributive shares were contingent beneficial interests which did not come into possession or enjoyment prior to July 1,1902.

The amendatory act of 1901, it was said in Vanderbilt v. Eidman, 196 U. S., 498, enlarged the act of 1898 so as to cause that act to embrace subjects of taxation which were not included prior to the amendment. The amendatory act contained new provisions not expressly found in the original act, such as the proviso- at the close of section 30 of the original act. By the proviso at the close of section 30 the Supreme Court, in construing the following language, to wit: “Any tax paid under the provisions of sections 29 and 30 shall be deducted from the particular legacy or distributive share on account of which the sum is charged,” said it was a provision plainly importing a practically contemporaneous right to receive the legacy or distributive share and one which would be impracticable of execution if the tax was to be assessed and collected before the beneficiary and the rate of the tax could certainly be ascertained.

In the case of Hertz v. Woodman, 218 U. S., 205, the court, following what was said in the Vanderbilt case, declared that the tax or- duty did not attach to legacies or distributive shares until the right of succession became an absolute right of “immediate possession or enjoyment,” thus repeating the language of the statute in its literal terms.

Where the right to tax is uncertain, indefinite, and doubtful the public right ought to be subordinated to the claim of exemption for the private right. Assuredly, the right to tax should be so clear as to avoid the forfeiture of any part of an estate. Taxes illegally collected are nothing more nor less than forfeiture to the extent of the illegal exaction.

Everything considered, we think the claimant is entitled to recover.

The law imposing the tax did not operate to fasten at the moment the right of succession passed by death the liability on the amount of the distributive shares that the heirs subsequently received, not only because of the difficulty of fixing the rate before the estate was settled, but because the language of the refunding act is explicit in its terms. In some cases the uncertainty in fixing the rate would make the effort well-nigh impossible. In the present instance defendants recognized the uncertainty and impossibility of collecting anything at the outset by not attempting to make the levy until the net estate was distributed to those entitled to receive it.

It is ordered that claimants have and recover of and from the United States the sum of three thousand two hundred ninety dollars and twelve cents ($8,290.12).  