The opinion of the court was delivered by: WOOLLEY
On September 21, 1930, John T. Dorrance died. His place of business had been Camden, New Jersey. During the later years of his life he maintained at the same time three domestic establishments: one at Cinnaminson in the State of New Jersey, another at Radnor in the Commonwealth of Pennsylvania, and still another at Bar Harbor in the State of Maine. He spent a portion of the summer of the year 1930 at his Bar Harbor residence and, on returning, died at his New Jersey residence where he had been staying while his Pennsylvania residence was being made ready for occupancy.
Dorrance, by his will, declared himself a resident of the Township of Cinnaminson, in the County of Burlington and State of New Jersey and, by express provision, required his executors, under severe penalties for disobedience, to offer his will for probate in that state. Accordingly, on October 1, 1930, they offered his will for probate before the Surrogate of Burlington County, New Jersey, and in due course that official granted them letters testamentary. Thereupon the executors, acting under the jurisdiction of the Orphans' Court of Burlington County, New Jersey, set about to administer the vast estate of the testator which consisted almost entirely of intangible personal property.
The State of New Jersey evidently took it for granted that, as Dorrance had, on his own declaration, been a resident of that state and as his estate was being administered under letters testamentary granted in a county thereof, the situs of his intangible personal property was New Jersey and, accordingly, the property was subject to inheritance tax under the laws of that state (4 Comp. St. N.J. 1910, p. 5301, § 537 et seq., Comp. St. Supps. N.J. 1924, 1930, § 208 -- 537 et seq.). On the other hand, the Commonwealth of Pennsylvania, acting more promptly, claimed that Pennsylvania was the domicile of Dorrance and therefore was the situs of his intangible personal property, and for that reason his property was subject to inheritance tax under the laws of that commonwealth (72 PS Pa. § 2301 et seq.). The State of Maine, evidently recognizing that the extablishment of Dorrance at Bar Harbor was only a summer residence, has made no claim for taxes.
Thus there arose a controversy, nominally between persons but actually between states, which by reason of the stake has grown to major proportions. An understanding of its present phase can be had only by giving in brief outline the admnistrative and judicial proceedings which have been pursued concurrently and along somewhat paralled lines in the two states.
Early in the New Jersey administration of the Dorrance estate the Commonwealth of Pennsylvania formally claimed that the decedent was at the time of his death domiciled in Radnor Township, Pennsylvania. Acting under claim of authority of Pennsylvania inheritance tax laws the Register of Wills of Delaware County, Pennsylvania, appointed an appraiser who, on April 20, 1931, filed an appraisement of the Dorrance estate at $199,999,000 upon which was computed and assessed inheritance tax due Pennsylvania in the sum of $31,465,200.
On May 14, 1931, the executors, resisting taxation in Pennsylvania, appealed from this assessment to the Orphans' Court of Delaware County, Pennsylvania. That court sustained the executors' appeal and set aside the assessment. Thereupon the Commonwealth of Pennsylvania appealed to the Supreme Court of Pennsylvania. On September 26, 1932, that court reversed ( In re Dorrance's Estate, 309 Pa. 151, 163 A. 303) the decree of the Orphans' Court and reinstated, in a modified amount, the tax assessment which the Register of Wills of Delaware County had made. On petition, the Supreme Court of the United States, denying the State of New Jersey a right to intervene, refused the executors a writ of certiorari ( Dorrance v. Pennsylvania, 287 U.S. 660, 53 S. Ct. 222, 77 L. Ed. 570) because (it was thought) it could not find that a federal question had been presented to and passed upon by the Supreme Court of Pennsylvania. Thereupon the Supreme Court of Pennsylvania on March 27, 1933, entered judgment for the Commonwealth of Pennsylvania and against the executors of the will of John T. Dorrance for transfer inheritance tax in the amount of $14,394,698.88, subject to an additional tax if and when the final determination of the amount of the federal estate tax should disclose that 80 per cent. thereof exceeded the above amount. The judgment included a tax upon the transfer of all of Dorrance's intangible personal property. On mandate a like judgment was entered in the Orphans' Court of Delaware County and on March 31, 1933, the executors paid the tax with $104,278.03 interest and gave bond for $4,000,000 to meet the eventuality of an additional assessment because of the federal estate tax.
During all these proceedings in Pennsylvania, taxing officials and courts in New Jersey had been active in an endeavor to assess, sustain and collect from the Dorrance estate the inheritance tax in that state. Of this Pennsylvania officials and the executors of the will were fully informed.
The New Jersey proceedings, stated as shortly as possible, were these: On various dates the executors of the will of Dorrance, aiding the taxing authorities in New Jersey, made returns to the Comptroller of the Treasury of New Jersey showing their testator was domiciled in New Jersey and supplying data for transfer inheritance tax purposes under the laws of that state, particularly that the decedent left no real property; that his entire estate, the market value of which was estimated at $115,121,518.92, consisted of personal property and almost entirely of intangible personal property; that all securities of the estate except a small amount not then important were located in New Jersey; and that after deductions for debts and expenses the net amount for distribution was $112,055,400.86. On this and other information the State Tax Commissioner of the State of New Jersey, on October 17, 1931, made an assessment of transfer inheritance tax against the decedent's estate in the sum of $12,247,333.52 with a notice that if the tax was not paid before a named date interest would be added at the rate of ten per cent. per annum, and made an additional assessment in the sum of $4,521,143.90 on account of certain contingent remainders.
In December, 1931, the State Tax Commissioner of New Jersey opened this assessment pending the decision of the Pennsylvania courts of Pennsylvania's claim for inheritance tax and for the purpose of permitting additional information to be submitted regarding the domicile of Dorrance. However, on October 10, 1932, after the judgment of the Supreme Court of Pennsylvania had been rendered and offered in evidence, the State Tax Commissioner of New Jersey again made an assessment of transfer inheritance tax against the estate in the same amounts as before and with like penalty for nonpayment, which, as before, included tax on intangible personal property.
On December 9, 1932, the executors, being charged with a tax due Pennsylvania and now resisting taxation by New Jersey, challenged this (the final) assessment by appeal to the Ordinary of the State of New Jersey. On May 11, 1934, the Ordinary entered judgment in the Prerogative Court sustaining the State Tax Commissioner's final assessment ( In re Dorrance's Estate, 116 N.J.Eq. 204, 172 A. 503), which was a decision opposed to and without giving credit to the decision of the Supreme Court of Pennsylvania on the issue of domicile. Thereupon the executors obtained a writ of certiorari from the Supreme Court of New Jersey ( Dorrance v. Martin, 176 A. 902, 13 N.J.Misc. 168) which after hearing sustained the judgment of the Prerogative Court. Although having notified the State Tax Commissioner of their intention to appeal to the Court of Errors and Appeals of New Jersey, the executors, with ample time yet to do so, have turned abruptly from the state courts of New Jersey to the federal courts in proceedings to which, in this rather long recital, we have at last arrived.
After the decision by the Supreme Court of New Jersey sustaining the inheritance tax imposed by the taxing authorities of that state upon the intangible personal property of John T. Dorrance, his executors in one suit and Elinor Dorrance Hill, his daughter and a beneficiary under his will, in another suit in the District Court of the United States for the District of New Jersey pray by their bills that injunction issue, temporary until hearing and perpetual thereafter, enjoining the defendants, officials of the State of New Jersey vested with power to assess and collect taxes, from collecting or attempting to collect inheritance tax on the transfer of intangible personal property of the estate of John T. Dorrance, deceased. The plaintiffs seek this relief in the federal district court upon the assertion that the administrative proceedings of the State of New Jersey in respect to the assessment of the tax against the estate of John T. Dorrance had been completed with the decision of the Supreme Court of that state and that judicial proceedings thereon have not since been commenced, and on the contention that in such case the federal district court, specially constituted with three judges sitting, has jurisdiction under section 266 of the Judicial Code, 28 USCA § 380, of the constitutional questions raised.
The constitutional question which the plaintiffs particularly urge is to the effect that lawful inheritance taxation of intangible personal property of a decedent depends on its situs and its situs depends on the domicile of the owner at the time of his death; that the domicile of John T. Dorrance, the decedent in these cases, has been judicially determined by the Supreme Court of Pennsylvania to be the Commonwealth of Pennsylvania, and accordingly the situs of his intangible property is there also; that only Pennsylvania, the state of domicile, can impose the tax; that if the New Jersey Inheritance Tax Act of April 20, 1909, c. 228, p. 325, as amended (4 Comp. St. N.J. 1910, p. 5301, § 537 et seq., Comp. St. Supps. N.J. 1924, 1930, § 208 -- 537 et seq.), in force at the time of the assessment of the tax in New Jersey, has been properly construed by the defendants (and by other administrative agencies of New Jersey) as applying to property the situs of which is outside of the State because the owner was not domiciled in New Jersey at the time of his death, it is unconstitutional under the ...