
    Tax Commission of Ohio v. Corwin, Admr., et al.
    (Decided January 30, 1929.)
    
      Mr. W. II. Middleton, Jr., for plaintiff in error.
    
      Messrs. McMahon, Corwin, Landis & Markham, for defendants in error.
   Kunkle, J.

The question presented, to this court for determination relates to the right of the state of Ohio to tax the succession to certain promissory notes belonging to the estate of Charles Morgan Wood, deceased.

The question was first submitted to the probate court of Montgomery county, where it was held that the said notes were not subject to an inheritance tax. Prom such decision of the probate court the Tax Commission of Ohio appealed to the common pleas court of Montgomery county, Ohio. The common pleas court rendered the same judgment as was rendered in the probate court, and from such judgment the Tax Commission of Ohio prosecutes error to this court, seeking to reverse the judgment of the court of common pleas.

The facts upon which the case rests are practically undisputed. In brief, it appears from the record that Charles Morgan Wood, deceased, was u resident of Ipswich, Massachusetts, and that the promissory notes in question, amounting to $115,000, were given as a partial payment under a contract for the sale of certain real estate in the city of Dayton, Ohio.

The testimony of Robert G-. Corwin, the ancillary administrator of the estate of Charles Morgan Wood, as found on pages 6 and 7 of the bill of exceptions, is as follows:

“Q. I will ask you whether or not you had an agreement with Mr. Charles M. Wood, the decedent, whereby you were to collect these notes as they became due. A. No, I agreed to hold the notes over the time of the payment of the note next due, that is, over November, 1926, and if the notes were all paid at that time and he was out in Arizona I was to take care of the collection of the whole thing. If only one note was paid I was to take care of the collection of that one note and remit the proceeds to him, and our agreement was that whatever happened, as soon as he got back to Massachusetts I was to send them all out there to him, but not to send it to him out in Arizona.
“Q. And he died before he got back to Massachusetts, and you still hold the notes? A. Yes.
“Q. You collected the first two notes? A. Yes.
“Q. Do you still retain those notes in your possession? A. No — well, yes and no. They are in the safety-deposit box of the Old Colony Trust Company in Boston, Massachusetts.
“By the Court: Q: Are they under your control? A. They are under my control, as administrator of his estate in Massachusetts, Mr. Neville having joint access to the safety-deposit box with me.”

Victoria H. Wood, the mother of Charles Morgan Wood, owned the real estate in question and sold the same for $150,000. Fifteen thousand dollars was paid in cash, and notes were given for the balance, in amounts varying from ten to twenty thousand dollars, and falling due at the times specified in said contract of sale. These are the notes in question. The mother of Charles Morgan Wood died before any of these notes became due, and the notes came into the possession of the administrator of her estate, viz., Robert G-. Corwin. Her estate was fully settled with the exception of filing the final account by said administrator, and the notes were held by such administrator as the property of Charles Morgan Wood, who became the owner of the same under the circumstances, and for the purposes designated in the testimony of Robert G. Corwin, above quoted.

Charles Morgan Wood was the sole beneficiary in the estate of his mother. Counsel state that Charles Morgan Wood gave his mother’s administrator a receipt both for the contract and the notes in question, and that the notes were indorsed by the administrator to Charles Morgan Wood. The residence of Charles Morgan Wood was in Massachusetts, although on account of his health he spent a portion of his time in Arizona. It is apparent from the record that these notes were retained by Mr. Corwin as a matter of convenience, so that he might receive the payments as they became due, or if paid in advance of their maturity under the terms of the contract. Shortly after the second note was collected, Charles Morgan Wood died in Arizona, and before the notes were returned to him by Mr. Cor-win. There were other interests in Montgomery county outside of the notes in question, belonging to Mr. Wood, and Mr. Corwin was appointed ancillary administrator of the estate of Charles Morgan Wood. This was on the 11th day of March, 1927, and on March 22, the uncollected notes were sent to the representative of the estate of Mr. Wood in Boston. Mr. Corwin’s authority over the notes consisted merely in collecting the same. He had no authority to reinvest the funds, and, as above stated, his possession of the notes at the date of the death of Mr. Wood was for convenience in collecting same, and it was understood that the notes were to be sent to Mr. Wood as soon as he returned to his home in Massachusetts.

Are these notes, under the above circumstances, subject to a succession tax?

The determination of this question requires a construction of Sections 5331 and 5332 of the Ohio Code. These sections of the Code have for their basis the constitutional provision found in Article XII, Section 7, of the Ohio Constitution, to the effect that, “Laws may be passed providing for the taxation of the right to receive, or to succeed to, estates.”

Section 5331, General Code, reads as follows:

“As used in this subdivision of this chapter:
“1. The words ‘estate’ and ‘property’ include everything capable of ownership, or any interest therein or income therefrom, whether tangible or intangible, and, except as to real estate, whether within or without this state, which passes to any one person, institution or corporation, from any one person, whether by a single succession or not.
“2. ‘Succession’ means the passing of property in possession or enjoyment, present or future.
“3. ‘Within this state,’ when predicated of tangible property, means physically located within this state; when predicated of intangible property, that the succession thereto is, for any purpose, subject to, or governed by the law of this state.
“4. ‘Decedent’ includes a testator, intestate, grantor, assignor, vendor or donor.
“5. ‘Contemplation of death’ means that expectation of death which actuates the mind of a person on the execution of his will.”

Section 5332, General Code, in so far as the same has application to the case at bar, contains the following provisions:

“A tax is hereby levied upon the succession to any property passing, in trust' or otherwise, to or for the use of a person, institution or corporation, in the following cases: * * *
“2. When the succession is by will or by the intestate laws of this state or another state or country, to property within this state, from a person who was not a resident of this state at the time of his death * * *.”

As above stated, there is no dispute that Charles Morgan Wood, a resident of the state of Massachusetts, died testate owning the notes in question, and that they were in the physical possession of Mr. Cor-win in the city of Dayton at the time of the death of Mr. Wood in Arizona, and for the purposes above recited.

Were they property within the state of Ohio, as defined by Section 5331, General Code, above quoted?

Counsel have favored the court with unusually helpful and exhaustive briefs, reviewing, not only the Ohio decisions, but also those of the federal courts and of the supreme courts of different states. Some of these decisions are of little benefit in determining the question at issue, for the reason that the statutes of the different states differ upon this subject. It may be conceded that the Legislature of Ohio had the right to impose a succession tax upon the notes in question, although the same would result in a double succession tax upon these particular notes, viz., one succession tax in Massachusetts and another in Ohio.

Has the Legislature of Ohio, by the enactment of Sections 5331 and 5332, General Code, so done? These sections of the Code are somewhat ambiguous, and, as this case involves an interpretation of statutes which impose a burden, such interpretation must be governed by the rule of strict interpretation.

In the case of Cassidy v. Ellerhorst, 110 Ohio St., 535, at page 539, 144 N. E., 252, 253, 42 A. L. R., 372, our Supreme Court says: “In approaching the interpretation of statutes imposing taxes, it should be recognized at the outset that the rule of strict construction should be followed, and that, where there is ambiguity or doubt as to legislative intent, the doubt should be resolved in favor of the person upnn whom the burden of taxation is sought to be imposed, and that language employed in a taxation statute should not be extended by implication beyond its clear import, or to enlarge its operation so as to embrace subjects of taxation not specifically named. ’ ’

The first paragraph of the syllabus in the case above quoted is as follows: “Liberty bonds, bonds of municipalities of other states, and stocks and bonds of corporations organized under the laws of other states, owned by a non-resident decedent and deposited for safekeeping in this state, are not subject to Ohio inheritance tax laws under Section 5331, General Code, unless such securities are employed in commercial transactions within this state at the time of the death of such decedent.”

While the decision in 110 Ohio State did not involve property such as is embraced in the case at bar, yet upon a careful study of this case we are of opinion that the reasoning employed in such decision would exempt the notes in question from a succession tax under the circumstances disclosed by the record in this case.

Our attention is also called to a very recent decision of our Supreme Court in the case of the Tax Commission of Ohio v. Farmers’ Loan & Trust Co. of New York City, Exr., 119 Ohio St., 410, 164 N. E., 423, 425, 60 A. L. R., 546. This case was decided October 31,1928, and we are advised by the clerk of the Supreme Court that an application for a rehearing has been denied. This ease is cited by counsel for both plaintiff in error and defendant in error. The syllabus of the case is as follows: “Registered bonds of Ohio municipalities held by a person not a resident of Ohio at the time of his death, and which descend or are bequeathed to a person not a resident of Ohio, are not ‘within the State’ within the meaning of Sections 5331 and 5332 of the General Code of Ohio, and are therefore not subject to the succession tax.”

Judge Marshall, in rendering the decision of the court, near the close of the opinion, uses the following language: “We have no hesitation in saying that any property belonging to a non-resident decedent, which is lawfully subject to ancillary administration in Ohio, would necessarily be subject to the succession tax. ”

It is contended by counsel for plaintiff in error that the notes in question would fall within the reasoning of the court as above quoted.. It will be observed that the language of the court is that the property must be “lawfully subject to ancillary administration in Ohio.” From the facts disclosed by the record we are of opinion that the notes in question were not subject to administration in Ohio. There were portions of the estate of Charles Morgan Wood which it is conceded were subject to the succession tax, but in our opinion the notes in question do not fall within that class.

We assume from the statements of counsel that these notes were not inventoried, nor were they subject to be distributed through the probate court of Montgomery county, but were in the state of Ohio, as previously stated, in the hands of Mr. Corwin, merely for convenience and collection of the installments as they became due, which were to be sent to Mr. Wood at his home in Massachusetts up.on his return there.

In the first part of the decision in the Farmers’ Loan & Trust Co. case, Judge Marshall says:

“More specifically, it will be the task of this court to determine whether the language, ‘that the succession thereto, is for any purpose, subject to, or governed by the law of this state,’ is broad enough to include registered bonds of Ohio municipalities.
“It is not contended by any one that that language would include simple contract debts, promissory notes, either with or without collateral, bonds of private corporations, or coupon bonds of municipalities. The tax commission does not ground its claims •upon the power of the state over the debtor. Such a claim would result in all bonds, registered and unregistered, as well as simple contract debts, being held subject to the succession tax.”

Applying the reasoning found in this latest expression of the Supreme Court to the facts as disclosed in the bill of exceptions, and as conceded by counsel in their argument, we are of opinion that the promissory notes held in the state of Ohio under the circumstances disclosed by the record herein are not subject to a succession tax.

From a consideration of the entire record and the authorities we find no prejudicial error in the record.

The judgment of the lower court will therefore be affirmed.

Judgment affirmed.

Ferneding and Allread, JJ., concur.  