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below treated the claim of the Railway Company against the Bank as acquired by the defendant after the insolvency. The defendant, however, contends that upon its payment to the Railway Company its subrogation related back to the date of its contract; and we will assume for purposes of argument that this is true. But suppose it is, the right of the Railway Company was simply that of a depositor, a right to share with other unsecured creditors in the assets of the Bank, of which the bond now in suit was a part. There would be no equity in allowing the Railway Company a special claim against this bond. We will assume that if the Railway Company had insured the honesty of the Bank's officers the Bank might have offset the obligation of the company against its claim as a depositor. But it is impossible to treat the succession of the defendant to the Railway Company's claim as effecting such an absolute identification with the Railway Company that one and the same person insured the Bank and made the deposits. The doctrine of relation “is a legal fiction invented to promote the ends of justice. . . . It is never allowed to defeat the collateral rights of third persons, lawfully acquired.” Johnston v. Jones, 1 Black, 209, 221.

Judgment affirmed.

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LEWELLYN, FORMER COLLECTOR OF INTER

NAL REVENUE, v. FRICK ET AL.

ERROR TO THE DISTRICT COURT OF THE UNITED STATES FOR

THE WESTERN DISTRICT OF PENNSYLVANIA.

No. 681. Argued April 16, 1925.-Decided May 11, 1925.

1. Acts of Congress are to be construed, if possible, so as to avoid

grave doubts of their constitutionality. P. 251. 2. The provisions of the Revenue Act of February 24, 1919, pur

porting to include policies insuring the life of a decedent in the

238

Argument for Plaintiff in Error.

gross value of his estate as a basis for fixing the transfer tax thereon, though the policies be payable to beneficiaries other than the estate, and allowing the executor to recover from such beneficiaries their proportions of such tax and making them personally responsible therefor if not paid when due, are to be construed as inap

plicable to transactions antedating the passage of the act. P. 251. 3. A declaration in an act that a provision in it shall be retroac

tive helps the conclusion that the same provision in an earlier act,

lacking such declaration, was not retroactive. P. 252. 298 Fed. 803, affirmed.

ERROR to a judgment recovered in the District Court by the defendants in error in an action to recover the amount of taxes collected by duress.

Mr. James A. Fowler, Special Assistant to the Attorney General, with whom the Solicitor General, Messrs. Nelson T. Hartson Solicitor of Internal Revenue, and Merrill E. Otis, Special Assistant to the Attorney General, were on the briefs, for plaintiff in error.

Section 402 (f) of the Revenue Act of 1918 provides a reasonable measure of an excise tax imposed upon a transmission of a decedent's property by death. The tax is not a direct tax but an excise measured by the value of the net estate. New York Trust Co. v. Eisner, 256 U. S. 345; Greiner v. Lewellyn, 258 U. S. 384; Edwards v. Slocum, 264 U. S. 61; Y. M. C. A. v. Davis, 264 U. S. 47; United States v. Woodward, 256 U. S. 632. Congress has provided a measure for that tax based not solely upon the transfer of the decedent's property, but upon transactions, whether transfers from a decedent or not, which accomplished the same results as testamentary dispositions would accomplish. Pennsylvania Company V. Lederer, 292 Fed. 629; McElligott v. Kissam, 275 Fed. 545; Farmers' Loan & Trust Co. v. Winthrop, 238 N. Y. 488. A measure which bears a reasonable relation to the subject matter of the tax is constitutional although the

Argument for Plaintiff in Error.

268 U.S.

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property affording the measure could not itself be taxed. Maxwell v. Bugbee, 250 U. S. 525; Flint v. Stone Tracy Co. 220 U. S. 107; Greiner v. Lewellyn, supra; Plummer v. Coler, 178 U. S. 115; United States v. Perkins, 163 U. S. 625; Orr v. Gilman, 183 U. S. 278; Bullen v. Wisconsin, 240 U. S. 625. The measure of the tax bears a reasonable and proper relation to the occasion of the tax. Penn Mutual Life Ins. Co. v. Lederer, 252 U. S. 523.

It can hardly be questioned that a deposit by A in a Savings Bank to be paid with accumulations to B on A's death would constitute a gift intended to take effect in possession or enjoyment at or after A's death, and therefore be properly included in A's gross estate under $ 402 (c) of the Act. Shukert v. Allen, 300 Fed. 754. Differences between a savings deposit and the taking out of a life insurance policy on one's own life for the benefit of another, are superficial, when used to differentiate such a contract from a gift intended to take effect in possession or enjoyment at or after death. It is, of course, true that the beneficiary has a vested interest in the policy. But the ownership of the policy as such is worthless. Its only value is the assurance that at the death of the insured a certain sum will be paid. There is no true

possession or enjoyment” of a policy. The possession or enjoyment attaches when, and only when, the money is paid. It is held that gifts are taxable, regardless of the vesting of title or of the right to future enjoyment, if the actual enjoyment of the property which comprised the present right to the earnings, income, and avails thereof is postponed until the donor's death. People v. Kellcy, 218 Ill. 509; Re Cornell, 170 N. Y. 423; State v. Probate Court, 102 Minn. 268; American Bd. Comm'rs v. Bugbee, 98 N. J. L. 84, 118 Atl. 700; People v. Shaffer, 291 Ill. 142; People v. Danks, 289 Ill. 542; In re Felton's Estate, 176 Cal. 663; Harber v. Il'helchel, 156 Ga. 601.

Assuming for the purposes of argument that the transfer of title to the insurance policies is the subject of the

238

Argument for Plaintiff in Error.

tax, the act is not unconstitutional. New York Trust Co. v. Eisner, supra; Knowlton v. Moore, supra; Caken. v. Brewster, 203 U. S. 543; Stockdale v. The Insurance Companies, 20 Wall. 323; Billings v. United States, 232 U. S. 261; Magoun v. Ill. Trust & Sav. Bank, 170 U. S. 283; Flint v. Stone Tracy Co., 220 U. S. 107, 145, 158, 169; Keeney v. New York, 222 U. S. 525, 536. The provisions effecting the collection of the tax do not affect its nature or render the act unconstitutional. There is nothing to indicate that any change in the nature of the tax was contemplated; none of the sections concern the imposition of the tax; they are merely details deemed proper for the effectual and practical operation of the law. Flint v. Stone Tracy Co., supra; In re Inman's Estate, 101 Ore. 182, 199 Pac. 615. The matter of who pays the tax is not primarily important. It is a matter which does not concern the Government. New York Trust Co. v. Eisner, supra; Edwards v. Slocum, 264 U. S. 61.

State cases holding retroactive excise laws unconstitutional are not in point. In the first place, such cases are decided under constitutional restrictions applicable to States but not to Congress. A State may not so legislate, whether in the form of taxation or otherwise, as to impair a vested right. To do so is to violate the constitutional limitations which prohibit the State from impairing the obligations of a contract. It is doubtful that this limitation prevents the imposition of a retroactive excise by a State. Nickel v. Cole, 256 U. S. 222. Certainly there is no such limitation upon the power of Congress. Its power to tax is exhaustive, and if the imposition be a tax, then, although it impair the obligations of contracts or interfere with vested rights, it is, neverthless, valid. License Tax Cases, 5 Wall. 462; United States v. Singer, 15 Wall. 111; Knowlton v. Moore, supra; Patton v. Brady, 184 U. S. 608; Mc Cray v. United States, 195 U. S.

Argument for Plaintiff in Error.

268 U.S.

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27; Flint v. Stone Tracy Co., supra; Billings v. United States, supra; Brushaber v. Union Pac. R. R. Co. 240 U. S. 1; United States v. Doremus, 249 U. S. 85.

The statute by its expressed words does not tax the transfer of policies. Furthermore, neither the policies nor their value are included in the gross estate. Their transfer, issuance, or assignment are entirely immaterial. What is included is the "amount receivable "—the money. Regardless of who owned the policies at the date of Mr. Frick's death, the moneys received were in substance the decedent's money, for it was the decedent's money that purchased the right to receive them, and that right was contingent upon the decedent's death. The amounts thus received were included under the statute, whether received by the beneficiaries or by the estate, the only difference being that when received by beneficiaries a part is exempt. The correct theory is that the decedent makes a gift, not of the policy but of his money (invested in insurance, it is true), and the gift is not complete until the money is received. For the purpose of measuring or levying a tax upon the transfer of the net estate, the moneys received by Mrs. and Miss Frick were a part of the Frick estate. They were accumulated or purchased by Henry C. Frick in his lifetime. The right to their possession and enjoyment was generated by his death precisely the same as the right to possession and enjoyment of a trust estate created by a testator to take effect upon his death is so generated. One can not receive money or property unless another part with it. A receipt is a part of a transfer. These moneys were in fact transferred after and because of Mr. Frick's death from the insurance companies to his wife and daughter. The statute does not say when the transfer shall occur, or from and to whom the moneys or property shall pass. It certainly does not contemplate that it shall pass from the decedent at the moment of and because of his death.

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