E. L. O'MALLEY, as Special Administrator of the Estate of JAMES P. O'MALLEY, Deceased, Appellant,
MIT SIMS, Treasurer of the State of Arizona, Appellee
APPEAL from an order of the Superior Court of the County of Maricopa. J. C. Niles, Judge. Order appealed from reversed and cause remanded with instructions.
Mr. William G. Christy, Mr. Hess Seaman and Mr. M. L. Ollerton, for Appellant.
Mr. Joe Conway, Attorney General, Mr. J. B. Sumter and Mr. Allan K. Perry, his Special Assistants, for Appellee.
[51 Ariz. 157] LOCKWOOD, J.
James P. O'Malley, hereinafter called deceased, died at Billings, Montana, on January 2, 1928. At the time of his death he was a bona fide resident of Montana and was the owner of, and had in his possession in that state, 1,996 shares of the capital stock of the O'Malley Lumber Company, a corporation organized under the laws of Arizona, with its principal place of business in Phoenix, but owned no property of any nature, real or personal, within the state of Arizona. His will was duly probated in the district court in Montana, and his estate was there administered. On May 14, 1929, the attorneys for the executrix wrote to Charles R. Price, then state treasurer of Arizona, requesting that the inheritance or transfer tax on the estate of deceased due the state of Arizona be fixed, and inclosed an affidavit by the executrix showing the above facts, and stating that the stock referred to had been appraised at approximately $299,000. Thereafter, the state treasurer informed the executrix that the inheritance tax was fixed tentatively at the sum of $10,024.54. A check for that amount was immediately sent by the executrix to the state treasurer, and a receipt forwarded by the latter to her, with the information that this would authorize her to have the stock in question transferred on the books of the corporation. Nothing further was done in the matter until February 28, 1935, when E. L. O'Malley filed a petition in the superior court of Maricopa county that he be appointed a special administrator of the estate of the deceased. The reason stated in his petition for [51 Ariz. 158] the necessity of this appointment was that it was the contention of the legatees of the deceased that no inheritance tax was ever due to the state of Arizona from the estate of deceased, and that the appointment of a special administrator was asked for the purpose of securing an adjudication by the proper courts of Arizona as to whether any inheritance tax was due, and, if it were not, to recover the $10,024.54 paid in error as above. The court granted such petition, appointing E. L. O'Malley such special administrator of the said estate, as of February 28, 1935. Thereafter, the special administrator filed a further petition, asking determination and adjudication that no inheritance tax was due from said estate, which was duly
served upon the state treasurer, who promptly appeared and demurred thereto. The matter was taken under advisement by the court, and under date of August 10, 1936, an order made denying the relief prayed for in such petition, whereupon this appeal was taken.
There are three questions of law for our consideration: (1) Was any inheritance or transfer tax due to the state of Arizona from the O'Malley estate under the circumstances above set forth; (2) if no tax was due, does the payment made by the executrix under the circumstances above set forth, being voluntary in its nature, bar the estate from a recovery of an amount erroneously paid; and (3) if the estate was never entitled to recover such payment, has the statute of limitations now run against the claim.
Beginning with the case of Blackstone v. Miller, 188 U.S. 189, 23 S.Ct. 277, 47 L.Ed. 439, decided in 1903, the Supreme Court of the United States for years held that stock in a corporation, even though owned by a nonresident of the state of domicile of the corporation who held the certificates of stock at all times outside of such state, was subject to the inheritance or transfer tax imposed by that state. In the [51 Ariz. 159] later case of Farmers' Loan & Trust Co. v. State of Minnesota, 280 U.S. 204, 50 S.Ct. 98, 74 L.Ed. 371, 65 A.L.R. 1000, decided January 6, 1930, the court definitely overruled the law laid down in Blackstone v. Miller, supra, and held that, under the circumstances above set forth, stock was subject to taxation on a testamentary transfer in the state of the domicile of the owner, but not in the state of the domicile of the corporation which issued the stock. The decisions of the Supreme Court of the United States on this point are, of course, conclusive on the state courts.
The answer to the first question we have stated, therefore, depends upon whether the decision in the case last cited applies only to taxes which the state attempted to levy and collect after January 6, 1930, or whether it also affects taxes which, under the state statute, had accrued or been paid before that date. Whether a decision of the Supreme Court of the United States holding a state statute unconstitutional, so far as it applied to a given situation, has a retrospective effect upon actions taken and rights arising, on the theory that the statute was a valid one before such decision, has been before the courts several times. In the case of First Nat. Bank & Trust Co. v. Maine, 284 U.S. 312, 52 S.Ct. 174, 76 L.Ed. 313, 77 A.L.R. 1401, the majority opinion intimated very strongly that the effect of the decision in Farmers' L. & T. Co. v. State of Minnesota, supra, was retrospective, although this was not specifically held. While three of the justices of the Supreme Court dissented from the opinion of Mr. Justice SUTHERLAND, they did not apparently question his dicta on that point. But so far as we are advised, there has been a definite adjudication of this question in four and only four, cases. The first case is Harris v. Jex, 55 N.Y. 421, 14 Am. Rep. 285. Therein the court held that the effect of such a [51 Ariz. 160] decision was not retrospective, in the following language:
"The plaintiff had a right to repose upon the decision of the highest judicial tribunal in the land. It was, as applied to the relations between these parties and to this case, the law, and not the mere evidence of the law."
In the case of Stockton v. Dundee Mfg. Co., 22 N.J. Eq. 56, on virtually the same state of facts as in Harris v. Jex, supra, the New Jersey court held that the later decision was retrospective in its operation. In the later case of People ex rel. Rice v. Graves, 242 A.D. 128, 273 N.Y.S. 582, 588, a similar question again arose. In May, 1928, the Supreme Court of the United States had held that states had no right to impose an income tax on income from royalties and copyrights. ( Long v. Rockwood, 277 U.S. 142, 48 S.Ct. 463, 72 L.Ed. 824.) Following this rule, one Elmer L. Rice showed in his state income tax return large sums received by him from royalties on copyrights, but paid no state income tax thereon. On May 16, 1932, the United States Supreme Court, in the case of Fox Film Corp. v. Doyal, 286 U.S. 123, 52 S.Ct. 546, 76 L.Ed. 1010, expressly overruled its former decision, and held that income from copyrights was subject to a state income tax. The state of New York demanded from Rice that he pay an income tax on his earnings by royalties on copyrights for the years 1929, 1930, and 1931. The New York court said:
"The general principle is that a decision of a court of supreme jurisdiction overruling a former decision is retrospective in its operation, and the effect is not that the ...