KELLY, State Treasurer, et al.
BASTEDO. KELLY, State Treasurer, et al.
Frank W. Beer and William G. Christy, of Phoenix, for appellants.
Snell, Wilmer, Walsh & Melczer, of Phoenix, for appellees.
De Concini, Justice. La Prade, C. J., and Udall, Stanford and Phelps, JJ., concurring.
De Concini, Justice.
[70 Ariz. 373] In 1927, August Heckscher became interested in the Westward Ho Hotel in Phoenix, Arizona, by loaning $ 275,000.00 to one Charles V. Bob. Bob pledged to Heckscher 10,000 shares of stock of the Pacific Hotels Company, an Arizona corporation, whose sole property was the Westward Ho Hotel. In 1940, the name of the Pacific Hotels Company was changed to Westward Ho Hotel Company. Bob disappeared leaving Heckscher to learn that his stock was not an authorized issue, and that the authorized stock was pledged to a Chicago bank. Heckscher took up Bob's notes at that bank and became the owner of the stock. Later he loaned money to the Corporation and at the time of his death he had over $ 1,100,000.00 invested in it.
On April 4, 1938, Heckscher made a gift of all of his stock in the company to his wife Virginia. This stock was all of the outstanding stock except for qualifying shares in some other persons. Heckscher made a gift tax return to the U. S. Bureau of Internal Revenue but paid no tax thereon because the stock was considered worthless. At that time the company was indebted to Heckscher in the sum of $ 613,000.00, which debt was evidenced by promissory notes and secured by mortgages upon the corporate property.
August Heckscher died April 26, 1941 in the city of New York leaving his wife, Virginia, the residuary legatee under the terms of his will. Up to the time of his death he was president and director of the company and through his office in New York which managed his many corporate interests and properties in various cities, [70 Ariz. 374] and a resident manager in Phoenix, Arizona, he directed the affairs of the corporation. One and one half (1 1/2) months after his death, his wife took over the presidency and the directorship and managed the corporation in the same manner. On July 10, 1941, Mrs. Heckscher died. Both estates were probated in New York. After litigation in New York between the two estates, the stock was transferred to the executor of the estate of Virginia Heckscher by order of the Surrogate Court. George Thompson, executor of her estate, sold the stock to the purchasers of the Hotel in December of 1943. The said purchasers also paid the indebtedness of the company
owed to August Heckscher, to Arthur Smadbeck, executor of his estate.
The Estate Tax Collector of the State of Arizona claimed that both estates must pay a tax upon the transfer of the shares of stock in the Arizona corporation and the transfer of the debt of the Arizona corporation owing to decedent August Heckscher. The executors of both estates brought separate actions against the state treasurer and the estate tax collector seeking declaratory judgments to ascertain whether or not the estates were liable for estate taxes under the Estate Tax Act of 1937 and amendments, being Chapter 40, Article 1, A.C.A.1939. The cases were consolidated for trial, judgment was entered in favor of the plaintiffs and they are both here on appeal. The plaintiffs executed a bond of $ 50,000.00 in favor of the State of Arizona for payment of any tax due by said estates pending the outcome of this appeal.
Appellants raise several questions on this appeal. The first concerns the right of the appellees to maintain these declaratory judgment actions against the Estate Tax Collector. The appellants claim a declaratory judgment action does not lie here because an exclusive remedy for settling these disputes has been set up in the Estate Tax Act. It is true that section 40-118, A.C.A.1939, provides a method for objecting to a determination by the Estate Tax Commissioner of the amount of the tax. However appellees here are interested only in finding out whether or not the commissioner has the power to require them to file an estate tax return. This determination involves the jurisdiction or power ...