Amicus Curiae Brief — May v. Heiner

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GHARLLS E:

IN THE

Supreme Court of the United States

OCTOBER TERM, 1929.

No. 311.

WALTER A. MAY, et au., Executors or Pauine May,

Vs.

D. B. HEINER, Co.uector or INTERNAL REVENUE.

BRIEF OF ARTHUR W. MACHEN, JR., Attorney for SAFE

DEPOSIT AND TRUST COMPANY OF BALTIMORE,

Amicus Curiae.

/ ARTHUR W. MACHEN, JR.,

Attorney for Safe Deposit and

Trust Company of Baltimore,

Amicus Curiae.

King Bros., Inc., Printers, 208 N. Calvert St., Baltimore, Md.

uh coli te ne

DPieOMENT OF FACTS... . 0.0 ccccccsscessces Diab ans

I. Sec. 402(c) of the Revenue Act of 1918 in so far

as it Applies to Irrevocable Transfers Executed

Before its Passage Merely Because They Were

Intended to Take Effect in Possession or Enjoy-

ment After the Grantor’s Death is Arbitrary,

Capricious and Confiscatory, and Therefore in

Conflict With the Fifth Amendment...........

Historical Summary of Pertinent Portions of

Hstate Tax Legislation Down to Act of 1918,

Action of Treasury Department and Board of

ge REISE SE rte rere ee

Answers to Arguments for Defendant........

II. The Revenue Act of 1918 is Arbitrary, Capricious

and Confiscatory, in so far as it May Apply to

Transfers of the Kind Involved in This Case

Even Though Made After the Passage of the Act;

and is Therefore in Conflict With the Fifth

ee og ee ag

Ill. Mrs. May’s Deeds of Trust Were Present, Out-

right Transfers and Were Not Intended to Take

Effect in Possession or Enjoyment At or After

Her Death Within the True Construction of the”

meu Bee OF GIG iii is ih vee Ss se eeances cs

Transfer Not Taxable Because Remainders to

Children Art Limited to Vest In Possession

ANer Grantor’s Death... .. 2.0... ccccccyec

The Reservation of a Contingent Life-Estate

Wie INE no sn as due es bade cee Bes

It is Unnecessary Now to Determine How

Much, if Any, Less Than the Whole of the

Trust Property Should Be Included in the

INS iar Pi ieee Awe ek

see eS ee ee eee eeeeeeeeeeeeeeeeeeseeeeeeeeee

CASES CITED.

ee eb we beepes 2

Alsop v. Comm’r of Int. Rev., 7 B. T. A. 848

Anderson, Untermyer v., 276 U. S. 440

Bear Lake Irrigation Co. v. Garland, 164 U.S. 1....

Boone, Missouri Pac. R. R. Co. v., 270 U. S. 466

Bowers, Frew v., 12 Fed. (2d) 625

Bromley v. McCaughn, 280 U. 8. 124

Carnill v. MeCaughn, 30 Fed. (2d) 696

Comm’r of Int. Rev., Alsop v., 7 B. T. A. aed

Comm’r of Int. Rev., Duggan v., 8 B. T.

Comm’r of wit Rev., Guaranty. Trust C

A. 314. .

Comm’ r of Int. Rev. : Adana Vv. 11 ‘BL

ber ‘athe of Int. Rev.., McCormick v., 13 ‘BL T. A. 423

Comm ’r of Int. Rev., Morsman v., 14 B. T. A. 108....

a r of Int. Rev., Northern Trust Co. v., 9 B. T. A.

Comm’r of Int. Rev., Pacifie S. W. Trust, ete., Bank v.

16 B. T. A. 1437; 14 B. T. A. 1372

Coolidge, Nichols v., 274 U. 8S. 531. .5, 6, 14, 16, 20, 21, Pr

'28n, 37, 38

Curley v. Tait, 276 Fed. 840 28n, 31, 35, 36, 37

Dartmouth College v. Woodward, 4 Wheat. 625

Davis, Y. M. C. A. v., 264 U. S. 47

Delaware & Hudson Co., United States v., 213 U. 8.

366. .

Doyle, Shwab v., 258 U. 8S. 529

Duggan v. Comm’r of Int. Rev., 8 B. T. A. 482

Edwards v. Slocum, 264 U. 8. 61

Field, United States v., 255: U. S. 257

Flannery v. Willeutts, 25 Fed. (2d) 951

Frew v. Bowers, 12 Fed. (2d) 625

Frick, Lewellyn v., 268 U. S. 238

Garland, Bear Lake Irrigation Co, v., 164 U. 8.1...

Gould v. Gould, 245 U. 8, 151

Greiner v. Lewellyn, 258 U. S. 384

vere a Trust Co. vy. Comm’r of Int. Rev., 16 B. T.

Hanna v. United States, Ct. of Cl

Harris v. Comm’r of Int. Rev., 5 B. T. A. 41

iii

Johnson v. Comm’r of Int. Rev., 11 B. ‘i, A. 534

Joliffe, Steamship Co. v., 2 Wall. 450

Knox v. McElligott, 258 U. S. 546

Levy v. Wardell, 258 U. S. 542

Lewellyn v. Frick, 268 U. S. 238

Lewellyn, Greiner v., 258 U. S. 384

McCaughn, Bromley v., 280 U. S. 124

MeCaughn, Carnill v., 30 Se SED WN o'n0s wivenie ean

McCormick v. Comm "rv of Int. Rev., 13 B. T. A. 423, 436.

McElligott, Knox v., ;

Merriam v. United dates § 258 Ole Mec ee ec cndeceiveust

Missouri Pace. R. R. Co. v. Boone, 270 U. S. 466

Morsman v. Comm ’r of Int. Rev., 14 B. T. A. 108

Nichols v. Coolidge, 274 U. S. 531. .5, 6, 14, 16, 20, 21, 22,

25, 28n, 37

—" Trust Co. v. Comm’r of Int. Rev., 9 B. T. A.

ectharn Trust Co., Reinecke v., 278 U. S. 339. .22, 28n, 29,

30, 31, 32, 33, 34, 35, 36, 37, 38

Pacific 8S. W. Trust, ete., Bank v. Comm’r of Int. Rev.,

16 B. T. A. 1487; 14 B. T. A. 1372

Page v. Skinner, 298 Fed, 731

Reinecke v. Northern Trust Co., 278 U. S. 337. .22, 28n, 29,

30, 31, 32, 33, 34, 35, 36, 37

Shukert v. Allen, 273 U. S. 545 28n, 29

a er Se Bly Oh, Os. oo vewscccceseccancus 4,9

Skinner, Page v., 298 Fed. 731

Slocum, Edwards v., 264 U. S. 61

Steamship Co. v. Joliffe, 2 Wall. 450

Tait, Curley v., 276 Fed. 840

Union Trust Co. v. Wardell, 258 U. S

United States v. Delaware & 7“ Go. 213 U. S. 366. *

United States v. Field, 255 U. S

United States, Merriam v., 258 U. i: BIOx sock dancnas 38

United States, Hanna v., ie Ts ce ee 19, 20

—— — Wilmington Trust Co. v., 28 Fed. (2d)

Wardell, Union Trust Co, .

Wardell, Levy v., 258 U.

Willcuts, Flannery v., 25 Fed (38) 951

Wilmington Trust Co. v. United States, 28 Fed. (2d)

SraTures: =

Revenue Act of September 8, 1916, 39 Stat. 756... 2,4,

7, 8, 9, 11, 17, 18,19

ED Ole 6s4 bios bre ees ks din Wh ede k ose pees 6

Revenue Act of March 3, 1917, 39 Stat. 1000... .2, 4,7,

8, 9, 10, 11, 17, 18, 19

Revenue Act of October 3, 1917, 40 Stat. 300... .2,4,6,

8, 9, 10, 11, 15, 17) 19

EL isk bad ch bWed nd opin shar berhedes eens s 7

Revenue Act of 1918, 40 Stat. 1057... .2, 6,9, 11, 12,15

19, 20, 21, 22, 24

RPG cs actu teek obuscedoctipeces eee a 17

a RET a Sg eas pcre uP ep Fae 1

OE Ee eS reer ee 3, 4, 5, 12, 26, 27, 32

MEME CAL aes UNS OER Gie reddened esvesdeds 9

Ss Re ge eae Or Seer ye 10

EE SWELL b6s'p bans eedonséeecheneesocs 10

EEE GUC CCV cc sei Nencas dp sop bedvecect 10

EE Ge UU GU bat co ube cits ob be dueeens 10

ESET Sarr Pre ee ere ep oe 10

EAE aN cl ken pent bh oeenes veer a 8, 17, 18

GN eae sd es tenases ceases one 8,1

I FUE OE BEE oc so ceo wns secret cebes 13, 14, 19,

RS Sal Goa cas gaa k opie ak eae % be 14

A SG sc oc vu cespecean des cenns 12, 13, 2%

eg 6 ey rrr erry 12

Treasury Reeu.ations:

Treasury Regulations No. 37, Art. 24........... 12,33 ©

Treasury Regulations No. 63...............0006: 12

Treasury Regulations No. 63, Art. 19............. 33

Treasury Regulations No. 68............000e0085 12

Treasury Regulations No. 68, Art. 18............. 33

Treasury Regulations No. 70, Art. 18........... 12, 33

Treasury Decisions:

Treasury Decision No. 4064...............0000es 12

Treasury Decision No. 4065............00cee ewes 12

Treasury Decision No. 4066..............e00eees vie

IN THE

Supreme Court of the United States

OCTOBER TERM, 1929.

No. 311.

WALTER A. MAY, er au., Execurtors or Pauiine May,

vs.

D. B. HEINER, Cotuector or Inrernat Revenue.

BRIEF OF ARTHUR W. MACHEN, JR., Attorney for SAFE

DEPOSIT AND TRUST COMPANY OF BALTIMORE,

Amicus Curiae.

Statement of Facts.

The case made by the ‘‘Statement of Claim’’ (R. 2-9) and

the exhibits therewith filed (R. 9-31) is briefly as follows:

Pauline May, on May 15, 1917, executed an agreement

under seal to transfer certain property to trustees upon

trusts therein outlined, and covenanted to execute a more

formal instrument of trust (R. 12).

On October 1, 1917, she executed a formal agreement or

deed of trust (R. 13-16), transferring certain securities

therein mentioned to the same trustees upon almost identi-

cal trusts, viz: in trust to pay the income to Barney May,

her husband, for his life, and thereafter to the grantor

if she should survive him for her life, and upon the death

of the survivor to transfer the corpus to their four chil-

dren, equally, or the issue of such of them as might be then

deceased. The only substantial difference between the

trusts declared is that the paper of October 1, unlike the

informal paper of May 15, gave to each child who should die

before the survivor of the grantor and her husband, a

power of testamentary appointment over his or her share,

No power of revocation or alteration or management was

reserved to the grantor. Both instruments were executed

while the Act of September 8, 1916 (39 Stat. 756, 777-780)

as amended by the Act of March 3, 1917 (39 Stat. 1000,

1002) was in force, and before the passage of either the

Revenue Act of 1918 (40 Stat. 1057, 1096-1101) or the

Revenue Act of October 3, 1917 (40 Stat. 300).

The Record does not distinctly disclose whether the Deed

of October 1, 1917, was simply the ‘‘formal instrument of

trust’’ contemplated in the earlier paper, or whether the

two instruments were separate and independent transfers.

We assume that the former was the case, as the Commis-

sioner valued at zero the property passing under the earlier

instrument (R. 21).

Pauline May died on March 25, 1920, when the Revenue

Act of 1918, approved February 24, 1919 (40 Stat. 10657,

1096-1101) was in force.

The Commissioner of Internal Revenue inckaded the

property passing under these instruments in the gross

estate of the decedent for purposes of the Estate Tax under

the Revenue Act of 1918; and accordingly collected an al-

leged deficiency of $5,524.42 (R. 18, 7) which the plaintiffs,

executors of Pauline May, paid under protest on September

11, 1923 (R. 8). After claim for refund duly filed (BR.

27-9), which was refused on February 20, 1924, by the Com-

missioner (R. 8, 29-31), the plaintiffs as executors insti-

tuted this suit on July 15, 1924 (R. 1).

A motion to strike out the Statement of Claim (R. 31),

was granted and judgment entered for the defendant by

the District Court (R. 38). The Cireuit Court of Appeals

for the Third Circuit affirmed this judgment on a per curiam

opinion (R. 41), 32 Fed. (2d), 1017. The case is before

this Court on writ of certiorari granted on October 21,

1929 (R. 43). )

The only question is whether the property passing under

the two instruments above mentioned is to be included in

the gross estate for purposes of Estate Tax under the Rev-

enue Act of 1918, (sec. 402 (c), 40 Stat. 1097), as property

of which the decedent had made a transfer or created a

trust intended to take effect in possession or enjoyment

at or after her death. The transfers were made more than

two years before Mrs. May’s death and there is no claim

or suggestion that they were in contemplation of death.

The Record does not distinctly show that Barney May

survived his wife, the grantor, Pauline May, so ‘that she

did not in her lifetime receive any of the income or enjoy

any benefit from the trust property after the execution of

the deeds. But as it appears that he was living when the

deeds were executed and as there is nothing to indicate that

he died before his wife, the presumption is that he was still

living when she died. At all events, it is stated in the

Petition for Certiorari (p. 3) that he survived his wife and

actually joined in filing the estate tax return as one of her

executors, and certainly after his wife’s death the Com-

missioner addressed to him a letter as one of the executors

of his wife (R. 18). We stress this point because in the

view we take of the case, the fact of his survivorship is of

very great importance. The case would have been very

different if Barney May had predeceased his wife, and if

she had thus become entitled to the usufruct of the prop-

erty during her life.

We respectfully submit:

1, That Section 402(c) of the Revenue Act of 1918, if

construed to apply retroactively to transfers such as those

in this case, is to that extent unconstitutional under the

Fifth Amendment.

2. That the Act of 1918 is unconstitutional in so far as

it may apply to transfers of the kind involved in this case,

though made after its passage.

3. That the transfers in this case passed both posses.

sion and enjoyment from Pauline May in her lifetime, and

did not take effect either in possession or enjoyment at or

after her death.

Sec. 402 (c) of the Revenue Act of 1918 in so far as it Applies

to Irrevocable Transfers Executed Before its Passage Merely

Because They Were Intended to Take Effect in Possession

or Enjoyment After the Grantor’s Death is Arbitrary, Ca.

pricious and Confiscatory, and Therefore in Conflict With the

Fifth Amendment.

Historical Summary of Pertinent Portions of Estate Tax

Legislation Down to Act of 1918.

Section 402(c) of the Revenue Act of 1918 is applicable

by its terms to transfers intended to take effect in posses-

sion or enjoyment at or after death ‘‘whether such trans-

fer or trust is made or created before or after the passage

of this Act.’’

The prior estate tax law—that is to say, the Act of

September 8, 1916 (39 Stat. 756), as amended by the Act

of March 3, 1917 (39 Stat. 1002), with the additions thereto

made by the Act of October 3, 1917 (40 Stat. 300), did not

contain the words printed in quotation marks in the fore-

going paragraph, but was expressed to be applicable mere-

ly to property in respect of which the decedent ‘‘has at

any time made a transfer’’ of the character specified. This

Court held that the Act of 1916 by its proper construction

was not intended to be retroactive so as to tax transfers

executed before it was passed.

Shwab v. Doyle, 258 U. S. 529;

Union Trust Co. v. Wardell, 258 U. S. 537;

Levy v. Wardell, 258 U. S. 542;

Knox v. McEHligott, 258 U. S. 546.

It being apparent by reason of the words ‘‘whether such

transfer or trust is made or created before or after the

passage of this Act’’ in the Revenue Act of 1918, that that

Act was intended to apply retroactively 'to transfers of the

kind specified made prior to its passage, the constitution-

ality of the Act in that respect was challenged in Nichols

v. Coolidge, 274 U. 8. 531; and the conclusion of this Court

was expressed as follows:

‘‘We must conclude that Section 402(c) of the stat-

ute here under consideration,’’—i.e., the Revenue Act

of 1918, approved February 24, 1919 (40 Stat, 1057)—

‘tin so far_as it requires that there shall be included in

the gross estate the value of property transferred by

a decedent prior to its passage’’—i. e., the passage of

the Act of 1918 on February 24, 1919—‘‘merely be-

cause the conveyance was intended to take effect in

possession or enjoyment at or after his death, is arbi-

trary, capricious and amounts to confiscation. Whether

or how far the challenged provision is valid in re-

spect of transfers made subsequent to the enactment,

we need not now consider’’ (274 U. S. 542-3).

The ‘‘statute here under consideration’’ was the Revenue

Act of 1918, approved February 24, 1919. In a previous

part of the opinion the Court quoted in full the ‘‘relevant

portions of ‘Title [V—Estate Tax’ Act, February 24, 1919”’

(274 U. S. 534-6).

It is said, however, that the transfers involved in Nichols

vs. Coolidge, were executed long prior, not merely to the

passage of the Act of 1918, but also to the passage of the

Act of 1916, and that the language of the Court should be

construed as applicable only to transfers prior to Septem-

ber, 1916, and is at any rate a mere dictum so far as it may

apply to transfers after September 8, 1916.

It is, indeed, almost inconceivable that this Court used the

language ‘‘prior to its passage’’ inadvertently, and without

considering the distinction between transfers executed be-

fore and after September 8, 1916; for one of the points most

strongly emphasized by the defendants in error in Nichols

vs. Coolidge, as well as in briefs of amici curiae, was that

the provision of the Act of 1918 that transferred property

should be included ‘‘whether such transfer or trust is made

or created before or after the passage of this Act’’ should

be construed to apply only to such transfers prior to the

passage of the Act of 1918 as were made subsequent to

the passage of the first Federal Estate Tax Law—i. e¢,

subsequent to September 8, 1916. See brief for the De.

fendants in Error in Nichols vs. Coolidge, p. 27, and brief

of Mr. Russell L. Bradford, amicus curiae, pages 13 to 20,

This Court overruled this point as to the construction

of the Statute; and, its attention having been thus directed

to the question of transfers made before the passage of

the Act of 1918, but after September 8, 1916, concluded its

discussion with the declaration that the Act is unconstitu-

tional as to any such transfers made ‘‘prior to its passage”

—4i. e., the passage of the Act of 1918.

As, however, the transfers involved in Nichols vs. Cool-

idge were executed before the passage of the Act of 1916,

anything which fell from this Court as to transfers after

September 8, 1916, and before February 24, 1919, may be

in a sense a dictum; and therefore we shall endeavor to

show that on principle there is no justification for distin-

guishing in this regard between transfers before and after

September 8, 1916.

The Revenue Act of September 8, 1916, Title II, (39

Stat. 756, 777), imposed a graduated estate tax at rates

ranging from 1% on ‘‘net estates’’ of less than $50,000 to

10% on estates of over $5,000,000. The Act of March 3,

1917 (39 Stat. 1000, 1002), amended this act by increasing

the rates from 14%2% in the lowest bracket to 15% in the

highest. The amendatory act provided however that the

estates of persons dying before its passage but after Sep-

tember 8, 1916, should continue to pay the old rates.

This was the state of the law when the informal trust

agreement of May 15, 1917 (R. 12) and the more formal

settlement of October 1, 1917 (R. 13-16) were executed.

Two days after the execution of the latter instrument, |

the Revenue Act of October 3, 1917 (40 Stat. 300) was

. 7

passed; and Title IX of this Act imposed an additional

‘“‘War Estate Tax’’ on the estates of all persons thereafter

dying, at rates beginning with 4%% in the lowest bracket

and going up to 10% on estates of more than $10,000,000

(40 Stat. 324). This act did not further amend the Act of

1916, but superadded a new and additional tax, as distinct

from the ordinary estate tax as the Excess Profits Tax was

from the Income Tax.

The combined rates of the ordinary Estate Tax and of

the War Estate Tax began with 2% in the lowest bracket

and ran up to 25% on estates of over $10,000,000.

Now, we opine that under the rule enunciated in Nichols

vs. Coolidge, 274 U.S. 531, that a retroactive tax of this kind

on transfers irrevocably made before the passage of the

taxing act merely because the transfer was to take effect in

possession or enjoyment at or after death is unconstitu-

tional, there can be no reasonable doubt that if Pauline

May had died while the Act of October 3, 1917 was in force,

the new and additional tax imposed by that act could not

have been collected from her estate, in respect to this

transferred property. Her estate would have been subject

to the tax imposed by the Act of September 8, 1916 as

amended by the Act of March 3, 1917; and for purposes of

that tax the transferred assets could have been constitution-

ally included in the gross estate, unless as urged infra pp.

20-7 the Act is unconstitutional even as to transfers exe-

cuted after its passage. But the additional tax imposed by

the Act of October 3, 1917, could not have been constitution-

ally applied retroactively to an irrevocable transfer made

before its passage; and for the purposes of that tax the

transferred assets could not have been included in the

‘‘gross estate.’’

Similarly, if an irrevocable transfer had been made after

September 8, 1916, and before March 3, 1917, and the gran-

tor had died while the amendatory act of the last men-

tioned date was in effect, it might have been possible to hold

that the amendment was unconstitutional as to the trans.

ferred property, leaving the lower rates fixed by the Act

of 1916 applicable to the transferred property.

But before the death of Pauline May on March 25, 1920,

the Revenue Act of 1918 (40 Stat. 1057) was passed. This

Act (Sec. 1400 (a), 40 Stat. 1149) repealed outright Title

II, called ‘‘Estate Tax’’ of the Act of 1916, Title ITI, called

‘‘Hstate Tax’’ of the Act of March 3, 1917 (being the

amendment increasing the rates imposed by the Act of

1916); and Title LX, called ‘‘War Estate Tax’’ of the

Revenue Act of October 3, 1917, which imposed the separate

and additional tax. In spite of the repeal, it was declared

that the said repealed provisions should ‘‘remain in force

for the assessment and collection of all taxes which have

accrued thereunder, and for the imposition and collection of

all penalties or forfeitures which have accrued and may

accrue in relation to any such taxes’’ (Revenue Act of 1918,

Sec. 1400 (b), 40 Stat. 1150). There was also a provision

that the method of assessing and collecting estate taxes

previously accrued under the Act of 1916 as amended by the

Act of March 3, 1917, or under the Act of October 3, 1917,

should be according to the Revenue Act of 1918.

But, for the future, the Revenue Act of 1918 provided in

substance a totally new system differing in rates and in

basis both from the Act of 1916 as originally passed and

as amended by the Act of March 3, 1917, and from those

acts as supplemented by the extra ‘‘War Hstate Tax’’ im-

posed by the Act of October 3, 1917.

The following is a table of rates as imposed by the vari-

ous Acts:

Act of Act of Act of Revenue

Sept. March Oct. Act of

Amount of Net Estate. 8, 1916. 3, 1917. 3, 1917, 1918.

plus the Act

of March 3,

1917.

Up to $50,000.............. 1% 1%% 2% 1%

$50,000 to $150,000......... 2 3 4 2

$150,000 to $250,000........ 3 4% 6 3

$250,000 to $450,000........ 4 6 8 4

$450,000 to $750,000........ 5 1% 10 6

$750,000 to $1,000,000....... 5 1% 10 8

$1,000,000 to $1,500,000..... 6 9 12 10

$1,500,000 to $2,000,000..... 6 9 12 12

$2,000,000 to $3,000,000..... 7 10% 14 14

$3,000,000 to $4,000,000..... 8 12 16 16

$4,000,000 to $5,000,000..... 9 13% 18 18

$5,000,000 to $8,000,000..... 10 15 20 20

$8,000,000 to $10,000,000.... 10 15 22 22

Over $10,000,000 ........... 10 15 25 25

This, however, is only half of the story; for the Revenue

Act of 1918 radically altered the method of computing the

“net estate’’ on the transfer of which the tax is laid, so that

in many cases a lower rate produced a larger tax.

The following are a few examples:

(1) The Revenue Act of 1918, unlike the Act of 1916,

either as originally passed (Shwab v. Doyle, 258 U.S.

529; Union Trust Company v. Wardell, 258 U. S. 537;

Levy v. Wardell, 258 U. S. 542; Knox v. McElligott,

258 U. S. 546) or as amended by the Act of March 3,

1917, and unlike the Act of October 3, 1917 (which ap-

plied to the same basis of taxation as the earlier acts)

undertakes to include, retroactively, in the gross estate

the value of property previously transferred in con-

templation of death or to take effect after death (Rev-

enue Act of 1918, Sec. 402(c), 40 Stat. 1097).

(2) The Revenue Act of 1918, unlike the earlier acts

(United States v. Field, 255 U. S. 257) requires prop-

erty passing under exercise of a general power of

testamentary appointment to be included in the gross

estate (Revenue Act of 1918, Sec. 402(e), 40 Stat.

1097).

(3) The Revenue Act of 1918 (Sec. 402(f), 40 Stat. ;

1097) requires that the gross estate shall include in.

surance taken out by the decedent on his own life and

payable to his executor or (in excess of $40,000) to

any other person; but none of the prior laws contain

any similar provision.

(4) The Revenue Act of 1918 (Sec. 402(b), 40 Stat,

1097) provides that the interest of a surviving spouse

by way of dower, curtesy, etc., shall be included in the

gross estate; but no prior act contained any such pro-

vision.

(5) The Act of 1918 (Sec. 403(a)1, 40 Stat. 1098) for.

bids the deduction of income taxes upon income re.

ceived after the death of the decedent, or any estate,

succession, legacy or inheritance taxes; but the earlier

laws contained no such clause.

(6) The Act of 1918 (Sec. 403(a)2, 40 Stat. 1098)

allows a deduction for the value of property previously

taxed, as part of the estate of another decedent dying

less than five years earlier, under this Act or the Act

of October 3, 1917; but no similar deduction was per.

mitted by any former Act,

(7) The Act of 1918 (Sec. 403(a)3, 40 Stat. 1098)

allows a deduction for charitable, ete., bequests; but

no such deduction was previously permitted.

(8) The Act of 1918 (Sec. 403(b)1, 40 Stat. 1098)

provides that in case of non-resident decedents, not

more than 10% of the value of the gross estate situated

in the United States shall be deducted for debts, ete.,

whereas in the earlier laws no limit was fixed.

Sundry other differences of greater or less importance

might be pointed out.

At all events, it is clear that irrespective of any question

of rates of tax it might often be better to be taxed under any

of the earlier acts, even the Act of October 3, 1917, anda

fortiori the Act of March 3, 1917, which was in force when

Mrs. May’s transfers were made, rather than under the

Act of 1918, under which it is now sought to tax her estate. ,

For instance, suppose property worth $1,000,000 was set-

tled upon the decedent with a general power of testament-

ary appointment, and he leaves $50,000 which he owned out-

right and having exercised by will the power of appoint-

ment. Under the Act of 1916 either as originally passed

or as amended and added to by the Acts of 1917, there would

be no tax. But under the Act of 1918 there would be a tax

of $51,500. ,

If such a person on, say, October 30, 1917, had trans-

ferred his $50,000 to a trustee in trust for himself for life,

with remainders over, he could do so with the ‘assurance

that no tax would be payable in respect of the transferred

property under the existing law; but the Act of 1918, if

valid, would sweep away the entire trust fund from the

beneficiaries, whose rights had vested at the time the deed

was executed.

Many other illustrations of the same kind might be given

in which there would be in all respects the same injustice

in applying the Act of 1918 retroactively to transfers made

between September 8, 1916, and February 24, 1919, as if the

transfer had been made prior to September 8, 1916, when

the first estate tax law took effect.

It may be said, indeed, that there is nothing to show that

the changes in the basis of taxation—. e., the method of

computing the ‘‘net estate’’—made by the Revenue Act of

1918 operated to the prejudice of this estate, so that her

estate being less than $750,000, the Act of 1918 may have

actually reduced the tax which would have been payable

under the Act of March 3, 1917, which was in force when

the transfers were made. But of course, it would be im-

possible in each individual case to ascertain whether the

Act of 1918 or the Act in force at the time of the deed

would produce the heavier tax, and hold the Act valid or

invalid according as it would produce in the particular

ease a smaller or a larger tax. The fact is that on large

estates, the Act of 1918 is almost sure to be more onerous

than the Act of March 3, 1917, and on small estates it may

or may not be more onerous according to circumstances.

The only possible course, therefore, is to hold that Section

402(c) of the Act of 1918 in so far as it requires that there

shall be included in the gross estate the value of property

transferred by the decedent ‘‘prior to its passage,” be.

cause the decedent reserved the income for his life, is wholly

unconstitutional.

Action of Treasury Department and Board of Tax Appeals.

After Nichols v. Coolidge, 274 U. S. 531, amendments to

Treasury Regulations 63 (as to the Act of 1921), Regula-

tions 68 (as to the Act of 1924), and Regulations 70 (as to

the Act of 1296) were promulgated which undertake to ap-

ply those acts retroactively to all transfers made after Sep-

tember 8, 1916, even though made before the passage of the

particular act in question.

T. D. Nos. 4064, 4065 and 4066, Cum. Int. Rey.

B-'L VI-2, pp. 345-6, 340-1, 337-8.

Even the Treasury Department, however, has not pre

sumed to make similar amendments to Regulations 37, re-

lating to the Act of 1918, which this Court explicitly de

clared to be unconstitutional as to transfers executed prior

to ‘‘its passage,’’ and which is the Act involved in this case.

Moreover, the Board of Tax Appeals has refused to fol-

low these amended regulations, and has repeatedly applied

Nichols v. Coolidge to transfers made before the passage

of the Act under which the tax is sought to be levied, even

though made after September 8, 1916.

Alsop v. Comm’r of Int. Rev., 7 B. T. A. 848

(as to Act of 1921);

Duggan, Executor, v. Comm’r. of Int. Rev., 8

B. T. A. 482 (as to Act of 1921);

Northern Trust Co., Executor of Van Schaick,

v. Comm’r of Int. Rov., 9 B. T. A. 96 (as to

Act of 1921);

Johnson v. Comm’r of Int. Rev., 11 B. T. A. 534

(as to Act of 1921);

McCormick v. Comm’r of Int. Rev., 13 B. T. A.

423, 436 (as to Act of 1924);

Morsman v. Comm’r of Int. Rev., 14 B. T. A.

108 (as to Act of 1924);

Pacific S. W. Trust, etc., Bk., Executor of Sykes,

v. Comm’r of Int .Rev., 16 B. T. A. 1437,

modifying S. C., 14 B. T. A. 1372 (as to Act

of 1921). '

The impossibility of construing the Revenue Acts of

1918 or 1921 as continuations of the pre-existing laws and

the necessity for regarding them as entirely new enact-

ments, is illustrated by—

Harris v. Comm’r of Int. Rev., 5 B. T. A. 41.

In that case, the decedent in 1912 had taken out a policy

of insurance on his own life, but by changing the beneficiary

had made it payable to his wife on September 30, 15 20.

Under the Act of 1918, which was in force at the time of t!

change of beneficiary, the proceeds of this policy in exc.»

of $40,000 would have been liable to estate tax as part of his

estate; but the Revenue Act of 1921 repealed the Act of

1918, as the Act of 1918 had repealed the Act of 1916,

although repeating in totidem verbis the insurance provi-

sions of the Act of 1918. This Court had held that the

Act of 1918 was not retroactive as to insurance policies

taken out before its enactment unless the beneficiary had

been changed after its passage (Lewellyn v. Frick, 268 U.

S. 238) i and the Board of Tax Appeals held that the same

construction must be given to the Act of 1921, although the

result was that a policy which (at least in the view of the

Board) would have been taxable if the Act of 1918 had

continued in force, escaped taxation. The opinion states:

‘We are of the opinion that with the repeal of Title

IV of the Revenue Act of 1918, the authority to include

in the gross estate the proceeds of the policy of insur-

ance here in question was lost and that the right ceases

and determines with the statute upon which it depends.

The effect of the repeal of Title IV of the Revenue

Act of 1918 was to obliterate the repealed statute just

as completely as if it had never been enacted into law,

and it must be considered as a statute that never ex-

isted, except for the purpose set forth in Section

1400(b) of the Revenue Act of 1921”’ (5 B. T. A. 44),

This decision was acquiesced in by the Commissioner of

Internal Revenue.

Cum. Int. Rev. Bull, VI-1, p. 3.

Answers to Arguments for Defendant.

The argument for the Defendant must be that although,

as held in Nichols v. Coolidge, 274 U. S. 531, Congress has

no power retroactively to impose a tax of this kind on irre.

vocable transfers previously executed, yet if it has once

adopted an estate tax it may retroactively increase the rates

and change the basis even as to transfers irrevocably made

before the passage of the amendatory act. The argument

must be that the presence of any estate tax on the statute

books operates as a red flag to warn every citizen that the

rates may be increased and the basis changed, so that the

provision of the Fifth Amendment (as construed in Nichols

v. Coolidge, 274 U. S. 531) against retroactive legislation

of this kind may be circumvented.

If this argument needs any answer, it may be found, we

submit, in—

Untermyer v. Anderson, 276 U. S. 440.

This Court there held that even the pendency of a bill in

Congress retroactively taxing gifts is not such a warning to

taxpayers as to avoid the prohibition of the Fifth Amend-

ment against a retroactive tax of this sort, or make the

tax constitutionally applicable to a gift made only a week

before the bill was signed by the President.

Mr. Justice McReynolds, delivering the opinion of the

Court said:

‘“‘The taxpayer may justly demand to know when

and how he becomes liable for taxes—he cannot fore-

see and ought not to be required to guess the outcome

of pending measures’’ (276 U. S. 445-6).

If this be true, how could Mrs. May ‘‘be required to

guess’’ that Congress would increase the rates in force at

the time of her gifts from a maximum of 6% on a net estate

of some $300,000 to 8% as was done by the Act of October

3, 1917, or that Congress would increase the basis by re-

quiring the inclusion of property passing under a general

power of testamentary appointment, property passing to

her husband by courtesy or the like, and the amount of in-

surance taken out on her own life, as was done by the Reve-

nue Act of 1918?

Reliance is placed by the Government on cases such as

Bear Lake Irrigation Co. v. Garland, 164 U.S. 1, 11-12 and

Steamship Co. v. Joliffe, 2 Wall. 450, 459, holding that when

a statute is repealed and simultaneously re-enacted in sub-

stance, but with minor changes, the repeal and re-enactment

operate substantially as an amendment, so that as to trans-

actions covered by the old law it may be enforced with the

amendments.

But such cases have nothing to do with the question of

constitutional power. They raised,—at least this branch

of them raised—no constitutional question whatsoever.

They give absolutely no countenance to the contention

that Congress can cireumvent a prohibition of retroactive

legislation of any kind by passing it either as an amendment

to, or as a repeal and re-enactment of, existing legislation.

For example, who has ever supposed that the constitu-

tional prohibition of ex post facto laws can be got around

by making an amendment to existing laws?

Who has ever dreamed that the prohibition of that form

of retroactive legislation known as laws impairing the

obligation of contracts can be evaded by calling the im-

pairment of obligation an amendment to existing laws?

Indeed, the Dartmouth College Case itself (4 Wheat. 518)

invalidated an amendment to the charter of Dartmouth

College.

If such cases as Bear Lake Irrigation Co. v. Garland, su-

pra, had any bearing on the case at bar, they would lead

to the conclusion that the Act of 1916 as amended by the

Act of March 3, 1917, should be applied to Mrs. May’s

Estate, with only such changes as could constitutionally be

made,

But this, of course, was not what the Bureau of Internal

Revenue did in the present case. No one claims that the

Act of 1916 as amended should apply. The decision of the

lower court is, not that the Act of 1916 as amended by the

Act of March 3, 1917, should apply, but that the Act of

1918 should apply m toto—both as to rate and basis, in- ‘

cluding property irrevocably transferred before its passage.

Our point is that this is forbidden by the Fifth Amend-

ment as construed in Nichols v. Coolidge, 274 U.S. 531, and

Untermyer v. Anderson, 276 U. 8S. 440. That contention is

not affected by the question whether the Act of 1918 can

be regarded under the rule in the Bear Lake Irrigation

Case as an amendment to the Acts of 1916 and 1917. The

contention would be just as strong if the Act of 1918 were

an amendment.

We do not believe, however, that the Act of 1918 is within

the rule in the Bear Lake Irrigation Case. It is in form at

least entirely new legislation, expressly declared to be ‘‘in

lieu’’ of all the earlier tax laws. It is not substantially the

same, but radically different, both as to the basis and as to

the rate of taxation. |

It would be perfectly impracticable to hold that the Acts |

of 1916 and 1917 remain in force as to Mrs. May’s Estate

except as constitutionally altered by the Act of 1918. Con-

gress contemplated but one estate tax, not two, on Mrs.

May’s Estate. There is no doubt that as to all property

except the transferred assets, the tax must be computed

under the Act of 1918, and it would defeat the intention of

Congress to compute separately a tax on the transferred

assets under the Act of 1916 as amended by the Act of

March 3, 1917.

Perhaps it would have been constitutionally possible

for Congress to declare that a tax should be computed under

the Act of 1918 but excluding the transferred assets from

the gross estate, and that another tax should be computed

under the Act of 1916 as amended by the Act of March 3,

1917, including the transferred assets as part of the estate,

and that the higher of the two should be paid. But most

certainly it has done nothing of the kind. The courts, it is

submitted, cannot rewrite the law so as to produce that

result. = ~~

Indeed, the intention of Congress that the Acts of 1916

and 1917 should be altogether inapplicable to Mrs. May’s

estate is clear. Section 401 of the Revenue Act of 1918

provides as follows:

‘Sec. 401. That (in lieu of the tax imposed by

Title II of the Revenue Act of 1916, as amended, and

in lieu of the tax imposed by Title IX of the Revenue

Act of 1917) a tax equal to the sum of the following

percentages of the value of the net estate (determined

as provided in Sec, 403) is hereby imposed upon the

transfer of the net estate of every decedent dying after

the passage of this Act, whether a resident or a non-

resident of the United States.’’

. As Mrs. May died after the passage of the Act of 1918,

it is clear that her estate is subject to the tax imposed there-

by, and that the tax so imposed is ‘‘in lieu’’ of any tax im-

posed under the Acts of 1916 and 1917. Congress has clear-

ly declared that the Acts of 1918, and it alone, shall govern

Mrs. May’s estate. In so far as it can not constitutionally

apply thereto, there is no law in force taxing the same.

Further, Section 1400 of the Revenue Act of 1918 pro-

vides as follows:

_ “See. 1400. (a) That the following parts of Acts

are hereby repealed, subject to the limitations pro-

vided in subdivision (b): * * *

**(1) The following titles of the Revenue Act of

1916: * * °

‘Title II (called ‘Estate Tax’); * * *

**(2) The following parts of the Act entitled ‘An

Act to provide increased revenue to defray the ex.

penses of the increased appropriations for the Army

and Navy and the extensions of fortifications, and for

other purposes,’ approved March 3, 1917:

‘‘Title III (called ‘Estate Tax’); * * *

‘*(3) The following titles of the Revenue Act of

YF Palatten

‘‘Title IX (called ‘War Estate Tax’); * * *

‘**(b) Such parts of Acts shall remain in force for

the assessment and collection of all taxes which have

accrued thereunder, and for the imposition and collec.

tion of all penalties or forfeitures which have accrued

and may accrue in relation to any such taxes, and

except that the unexpended balance of any appropria-

tion heretofore made and now available for the ad-

ministration of any such part of an Act shall be avail-

able for the administration of this Act or the corre-

sponding provision thereof: * * * Provided further,

That the assessment and collection of all estate taxes,

and the imposition and collection of all penalties or

forfeitures, which have accrued under Title II of the

Revenue Act of 1916 as amended by the Act entitled

‘An Act to provide increased revenue to defray the

expenses of the increased appropriations for the Army

and Navy and the extensions of fortifications, and for

other purposes,’ approved March 3, 1917, or Title IX

of the Revenue Act of 1917, shall be according to the

provisions of Title IV of this Act. In the case of any

tax imposed by any part of an Act herein repealed, if

there is a tax imposed by this Act in lieu thereof, the

provision imposing such tax shall remain in force until

the corresponding tax under this Act takes effect under

the provisions of this Act.’’

Now Congress has expressly declared that the Acts of

1916 and 1917 shall remain in force for the assessment and

collection of all taxes which have accrued thereunder, and

until the estate tax imposed in lieu of the taxes imposed

by the ‘earlier Acts shall take effect under the provisions

of the Act of 1918. As Mrs. May was not dead at the date

of the passage of the Act of 1918, so that no tax had ac

erued under the Acts of 1916 and 1917, and as before she

died the Estate Tax imposed by the Act of 1918 had taken

effect, this provision is not applicable.

Congress has in effect said that the Acts of 1916 and

1917 shaii be repealed except as to the estates of persons

dying before the passage of the Act of 1918, and that even

in that case the method of assessing and collecting the taxes

imposed by the earlier laws shall be according to the Act

of 1918.

Having therefore expressly declared that the Acts of

1916 and 1917 shall remain in force for a particular pur-

pose which does not touch the case at bar, Congress has by

necessary implication declared that the Acts of 1916 and

1917 shall not remain in force for any other purpose. Ez-

pressio unius exclusio alterius.

Some difference of judicial opinion has existed as to

whether the parallel clause in the Act of 1921 had the effect

of relieving from any payment of tax the estates of persons

who had died within one year prior to the passage of the

Act of 1921. The contention that it did so was based on

the provision of the saving clause in the Act of 1921 to the

effect that the Act of 1918 should remain in force for the

assessment and collection of all taxes which had ‘‘acerued”’

under the Act of 1918. It was contended that a tax could

not be said to have accrued until it was due. This argu-

ment prevailed in Wilmington Trust Co. v. U. S., 28 Fed.

(2d), 205, but the weight of authority is to the contrary.

Hanna v. United States, Court of Claims

decided Nov. 4, 1929;

Flannery v. Willeuts, 25 Fed. (2d), 951;

Page v. Skinner, 298 Fed. 731.

Both lines of authorities, however, agree that the

earlier Act is absolutely repealed except as to matters with-

in the saving clause—the only point in these cases bearing

upon the matter now in hand. The Court of Claims, after

quoting the saving clause, said:

‘‘A casual survey of the provisions set forth above

clearly shows that the intent and purpose of Congress

was that the estates of all those who died prior to the

enactment of the 1921 Act should be taxed under the

1918 Statute, and the estates of those who died after

the enactment of the 1921 Act taxed under the pro-

visions of the later Act. In fact, this intent is so plain

that he who runs may read and understand.”’

The Board of Tax Appeals, in reaching the same con-

clusion, fully recognized that the earlier act is absolutely

repealed except as to cases within the saving clause:

‘The question is thus narrowed to whether the tax

involved here had accrued on November 23, 1921. If

it had not accrued, the decedent’s estate is not subject

to any estate tax, regardless of the amount of the net

estate.’’

Guaranty Trust Co. v. Commr. of Int. Rev., 16

B. T. A. 314, 317-8.

If, therefore, as we contend, the Act of 1918 can not con-

stitutionally be applied to transfers irrevocably consum-

mated by Mrs. May before its passage, it follows neces-

sarily that those transfers can not be taxed at all.

IT.

The Revenue Act of 1918 is Arbitrary, Capricious and Con-

fiscatory, in so far as it May Apply to Transfers of the Kind

Involved in This Case Even Though Made After the Pas-

sage of the Act; and is Therefore in Conflict With the

Fifth Amendment.

In Nichols v. Coolidge this Court left open the question

whether the Revenue Act of 1918 is unconstitutional even

as to subsequent transfers. ‘The opinion of the Court con-

cludes as follows:

‘Whether or how far tie challenged provision’’—

i. e.,the provision that property transferred irrevocably

by a decedent prior to his death shall be included in the

taxable estate at its valtte at the time of the decedent’s

death merely because thé conveyance was intended to

take effect in possession or enjoyment at or after his

death—‘‘is valid in respect of transfers made subse-

quent to the enactment we need not now consider’’

(274 U. S. 543).

We start with the proposition upon which the decision in

Nichols v. Coolidge is based, that—

‘“‘A statute purporting to tax may be so arbitrary

and capricious as to amount to confiscation and offend

the Fifth Amendment’’ (274 U. S. 542).

To show the ‘‘arbitrary and capricious’’ character of

the present ‘‘tax,’’ let us take a few illustrations. A man

worth, say; $1,000,000 settles one-half of his fortune upon

trust for himself for life, with remainder to a collateral

relative, or strangers to his blood. The trustee by wisely

retaining the original investments, or by wisely changing

investments, succeeds in augmenting the trust estate, orig-

inally $500,000, to $4,000,000. The estate which the grantor

retains does not increase in value. If the trust estate is in-

cluded at its value at the time of the grantor’s death, the

tax under the Revenue Act of 1918 would be $542,500, and

thus the estate which the grantor had reserved for his wife

and family would be absolutely wiped out by circumstances

over which he had no control whatsoever.

The recent Federal Revenue Acts have remained in force

only a comparatively few years, but their constitutionality

must be judged, of course, by supposing them to be, as they

are on their face intended to be, permanent. For example,

if the Revenue Act of 1918 would be valid as to a decedent

who had made a transfer on the day after its passage, and

was struck by lightning the next day, it would necessarily

also be valid if the same decedent had lived for forty years

afterwards. Conversely, if it would be invalid in the latter

case, it must also be invalid in the former.

In other words, in order to determine whether the Act is

arbitrary and capricious in character, we cannot take into

account the fact that it remained in force for only a few

years. It can’t be valid for a brief period, and invalid

after the lapse of a time.

According to its terms, if a man made a transfer in 1919,

reserving the income to himself for life, but no power what-

soever over the property, the estate which he might leave,

say, in 1950, would be affected by what the trustee had done

during the intervening years.

It may be said that the provision is necessary to pre-

vent evasion; but is it not true that all legitimate purposes

of tax evasion may be accomplished by taxing only trans-

fers made after passage of the statute in contemplation of

death—that is, transfers made when death from some exist-

ing peril other than the natural frailty of the human body

is anticipated in the ‘‘near future,’’ and when such antici-

pation is the moving cause of the deed? As said by this

Court in Nichols v. Coolige:

‘*Undoubtedly, Congress may require that property

subsequently transferred in contemplation of death be

treated as part of the estate for purposes of taxation.

This is necessary to prevent evasion and give practical

effect to the exercise of admitted power, but the right

is limited by the necessity’’ (274 U.S. 542).

If, in addition, property is taxed over which the decedent

reserved dominion, as by a power of revocation, as the law

undoubtedly does (Reinecke v. Northern Trust Co., 278 U.

S. 339), surely the requirements of the prevention of tax

evasion would be met.

Finally, if it be necessary for the prevention of tax eva-

sion to include property which th decedent had trans-

ferred, reserving the income to himself for life, the only

reasonable way would be to make the tax depend upon the

then value of the property, rather than its value as en-

hanced by subsequent circumstances over which the grantor

had no control whatsoever.

The Revenue Act of 1918 provides that the value of the

gross estate shall be determined by including the value at

the time of the decedent’s death of all property of which he

has at any time, whether before or after the passage of the

Act, made a transfer or created a trust intended to take

effect in possession or enjoyment at or after his death:

‘‘That the value of the gross estate of tlie decedent

shall be determined by including the value at the time

of his death of all property, real or personal, tangible

or intangible, wherever situated.

* » ~ * * * . o .

‘*(c) To the extent of any interest therein of which

the decedent has at any time made a transfer, or with

respect to which he has at any time created a trust—

(1) in contemplation of or (2) intended to take effect

in possession or enjoyment at or after his death

(whether such transfer or trust is made or created

before or after the passage of this Act), except in the

case of bona fide sale for a fair consideration in money

or money’s worth. * * *”’

Now, if property is transferred to a trustee upon trust

for the grantor for life with remainders over upon his

death, and the power to vary investments is given to the

trustee, the question arises whether the value at the time

of the grantor’s death is to be computed with reference

to the prpperty which he transferred, or to the property

which the trustee holds by change of investments, at the

time of his death. In either event, the Act is equally arbi-

trary and capricious. F

If the Act means that the property originally transferred

is to be included at its value at the time of the decedent’s

death, irrespective of the fact that it has been sold by the

trustee in the meantime,—and such is certainly what the

act says—then the tax will be levied in respect of prop-

erty which has passed entirely out of the hands not merely

of the grantor, but of all those whom he intended to benefit,

. 80 that perhaps for years before his death neither he nor

they had any interest whatsoever in it.

For example, suppose a deed of trust is made of certain

stock worth at the time $10,000. The Trustee immediately

exercises a power of sale, and invests the $10,000 thus ob-

tained in bonds which are worth at the time of the grantor’s

death exactly the amount paid for them. But, suppose the

stock of which the trust estate originally consisted greatly

increases in value, and is worth at the time of the grantor’s

death $500,000. Is a tax to be levied with respect to this

$500,000, and thus completely wipe out the trust estate?

Nothing could be more absurd or irrational. Yet such js

certainly the literal language of the statute. The property

which the testator transferred was the stock and not the

bonds. The Act declares that the gross estate shall be eal-

culated by including the value at the time of the decedent's

death of all property of which he has at any time made a

transfer or created a trust to take effect in possession or

enjoyment at or after his death. The only property which

he so transferred was the stock.

If on the other hand the taxable estate is to be computed

by taking the value of the trust investments as they exist

at the time of the testator’s death—as was assumed in

Frew v. Bowers, 12 Fed. (2d) 625, 628, (2nd C. C. A., June

1, 1926), and made the basis for concluding that the Act is

unconstitutional—the result is equally arbitrary and ¢a-

pricious. In Frew v. Bowers, just cited, the property had

increased in value by prudent reinvestments by the trustee

from $200,000 at the time of the transfer to $500,000 at the

time of the grantor’s death. Where the grantor reserves

no power to control the investments, his estate is thus to be

taxed by reason of circumstances over which he had no con-

trol and from which he could derive no benefit. Could any-

thing be more arbitrary and capricious?

Judge Hough in Frew v. Bowers, said:

‘*A tax on a transfer by A, but measured by any-

thing other than the estate of A, may be a duty or

excise in form, but it is a palpable effort to tax some-

thing other than the transfer’? (12 Fed. (2nd) 625,

628).

When it is borne in mind that the Act of 1918 is by its

terms a permanent enactment intended to last for an indefi-

nite period, it will be seen that all the circumstances which

this Court mentioned as showing the ‘‘arbitrary, whimsical

and burdensome character of the challenged tax’’ would

apply as well to subsequent transfers as to transfers pre-

viously executed.

This Court said in Nichols v. Coolidge, 274 U. 8. 531:

‘‘An excise is prescribed, but the amount of it is

made to depend upon past lawful transactions, not

testamentary in character, and beyond recall. Prop-

erty of small value transferred before death may have

become immensely valuable, and the estate tax, swollen

by this, may leave nothing for distribution. Real estate

transferred years ago, when of small value, may be

worth an enormous sum at the death. If the deceased

leaves no estate there can be no tax. If, on the other

hand, he leaves ten dollars both that and the real

estate become liable. Different estates must bear dis-

proportionate burdens determined by what the de-

ceased did one or twenty years before he died” (274

U. S. 542).

If the Act had been limited to transfers made within some

reasonable period anterior to the grantor’s death—say, one

or two years—a somewhat different question would have

been raised. But applicable as the Act is, not merely to such

transfers made within a reasonable time prior to his death,

but to all transfers made after its enactment, whether made

within one, or ten, or twenty, or thirty years before death,

it is submitted that the provision is ‘so arbitrary and ca-

pricious as to amount to confiscation and offend the Fifth

Amendment.’’

The only reason for holding the tax valid as to transfers

made after its passage which does not apply to transfers

made before it became effective, is that in the former case

both the grantor and the grantees know that the transferred

estate at its value at the time of his death will] be included

as part of his taxable gross estate. But what good does it

do them to know this? They cannot foretell what the value

will then be, or what estate the grantor may leave. There-

fore, nobody can in any possible way compute what the tax

will be. They cannot even tell whether there will be any tax.

They are in quite as bad a fix as if there had been no estate

tax law in effect; for even then they would know, of course,

that Congress might pass such an act.

This makes the arbitrary character of the statute stil]

more apparent. If property which was transferred by an

irrevocable transfer, and which is absolutely vested (sub.

ject to an equitable life estate in the grantor) is to be

taxable or not according to whether the grantor subsequent-

ly has successes or reverses in business, then indeed you

have a tax laid by chance rather than according to any

conceivable rule of reason. It would be just as sensible

to say that the liability to tax should be determined by

flipping a coin or throwing a die.

Moreover, this Court has repeatedly held that the Fed.

eral Estate Tax is levied upon a transfer by death or upon

an interest which ceased by reason of death.

Y. M. C. A. v. Davis, 264 U. S. 47, 50;

Edwards v. Slocum, 264 U. 8. 61, 62-3;

Greiner v. Lewellyn, 258 U. 8. 384, 387.

This being true, how can the tax be constitutionally im-

posed on the full value of transferred property although

the only interest which the decedent reserved and the only

interest which came to an end with his death was a remote

contingent interest infinitesimal in value in comparison

with the value of the whole property transferred?

The recent decision of this Court, upholding the Gift

Tax provisions of the Revenue Act of 1924, as apylied to

gifts made after the passage of the Act (Brovaley v. Me-

Caughn, 280 U. S. 124) may be thought to have some ad-

verse bearing; but in point of fact it only brings into

sharper relief the vice in Section 402 (c) of the Revenue Act

of 1918. Both laws, indeed, ‘‘tax’’ gifts; but there the

resemblance stops. The amount of the Gift Tax was fixed

at the time of the gift, and was measured by the value of

the property given, and by its value at that time. But the

provision now challenged grades the rate of tax according

to purely fortuitous circumstances—namely, the amount

of other property which the donor may happen to own

at the time of his death. Moreover, the rate of tax is

fixed not by the value of the property given—nor even by

the value of the donor’s remaining property—at the time

of the gift, but by values at some date in the perhaps remote

future, and by values affected by the character of manage-

ment—prudent or imprudent re-investments—in the mean-

time.

Ill,

Mrs. May’s Deeds of Trust Were Present, Outright Transfers and

Were Not Intended to Take Effect in Possession or Enjoy-

ment At or After Her Death Within the True Construction

of the Revenue Act of 1918.

We trust we have demonstrated that Sec. 402 (c) of the

Revenue Act of 1918, in so far as it undertakes to exact

estate tax in respect of Mrs. May’s transfers, irrevocably

executed before the passage of that Act, on the ground that

they were to take effect in possession or enjoyment at or

after her death, are unconstitutional under the decisions of

this Court. At all events, it can hardly be denied that the

foregoing contentions raise ‘‘a grave constitutional ques-

tion.’’ And of course, as every law-student knows, if there

is any reasonable way, by construction or otherwise, of

avoiding the decision of ‘‘a grave constitutional question,’’

this Court conceives it its duty to adopt it.

United States v. Del. & Hudson Co., 213 U. 8.

366, 407-8;

Lewellyn v. Frick, 268 U. 8. 238, 251;

Missouri Pac. R. R. Co. v. Boone, 270 U. 8. 466,

471-2.

Indeed, in Reinecke v. Northern Trust Co., 278 U. 8. 339,

348-9, this Court held that this very constitutional question

is such ‘‘a grave constitutional question”’ as to necessitate

any reasonable construction of the Statute in order to avoid

its decision.

We shall now endeavor to show that it is quite unneces-

sary to decide any constitutional question, because the trans-

fers here involved are not within the Revenue Act of 1918,

Sec. 402 (c), properly construed.

Tranfer Not Taxable Merely Because Remainders to Chil.

dren Are Limited to Vest in Possession After

Grantor’s Death.

The learned Judge of the District Court’ rested his deei-

sion squarely on the ground that if a deed of trust contains

such limitations that estates in remainder are bound to vest

in possession after the death of the grantor, then the whole

deed is deemed to be intended to take effect in possession

or enjoyment at or after the grantor’s death, even though

the grantor reserved no interest in, or benefit from, the

property during his lifetime. He said:

**Tt is certainly true, that the property covered by

the gift included in the gross estate, came into

sion or enjoyment of the donees only after the death of

the donor. It seems to be settled by the authorities

that the phrase ‘to take effect in possession or enjoy-

ment at or after death,’ is used to designate a situation

in which the donee’s rights with respect to the prop-

erty (as distinguished from an estate or interest in the

property) change at, or after, and because of, the

donee’s death. It is perfectly clear that the donor by

adopting a trust form of conveyance, manifested her

intention that the property should not come into the

present possession of the beneficiaries. By providing

in effect for the termination of the trust after death,

the possession is made to take effect at that time.

While it is true that the trust may be said to take effect

in enjoyment at once, the settlor by imposing the trust

has made a transfer of the corpus, which not only was

intended to, but actually does, take effect in possession

after death. From its very nature a trust deprives the

beneficiaries of possession as long as the trust con-

tinues.’’ (R. 34-5.)

* It should be added that the learned Judge of the District Court in his

opinion cites the case of Shukert v. Allen, 6 Fed. (2d) 561, in the Cirenit

Court of Appeals (R. 36), but seems unaware of the fact that this decision

had been reversed by this Court in Shukert v. Allen, 273 U. 8. 545. Strange

too, - cites Nichols vr. Coolidge, 4 Fed. (2d) 112, in the District Court

(R. 37), but

reviewed by this Court on writ of error. Nichols v. Coolidge, 274 U.

531. It is also strange that Judge Thomson, although he cites cases

sundry State Courts as to State statutes, nowhere mentions the

of the Circuit Court of Appeals for the Eighth Circuit

Northern Trust Co., 24 Fed. (2d) 91, which was later affi

material to the present case, by this Court. Nor does he ci

the decision of Judge Rose in Curley v. Tait, 276 Fed. 840,

which was absolutely on all fours with the case at bar.

And again, later on in his opinion, he says:

‘The persons who were to take the corpus could not

be determined until after the founder’s death. How

could it be said, therefore, that either the property or

an interest therein is in possession or enjoyment at a

time when the person who is to own the property is not

ascertained’’? (R. 37.)

Now, of course, it is obvious that this reasoning is alto-

gether inconsistent with the decision of this Court in—

Reinecke v. Northern Trust Co., 278 U. 8. 339.

That case involved five irrevocable trusts, in all of which

it was provided that the corpus should not come into the

possession of the beneficiaries until after the grantor’s

death. Some of them provided for accumulation of the in-

come in whole or in part during the grantor’s lifetime (see

report of same case in the lower Court, 24 Fed. 2d 91, 92),

and some of them provided that some or all of the income

should be paid to beneficiaries during the grantor’s lifetime,

though the corpus was not to come to them until after her

death. This Court said:

‘But the question much pressed upon us remains,

whether, the donor having parted both with the posses-

sion and his entire beneficial interest in the property

when the trust was created, the mere passing of pos-

session or enjoyment of the trust fund from the life

tenants to the remaindermen after the testator’s death,

as directed, and after the enactment of the statute, is

included within its taxing provisions. That question,

not necessarily involved, was left unanswered in Shu-

kert v. Allen, 273 U. S. 545. There the gift of a re-

mainder interest, having been made without reference

to the donor’s death, although it did in fact vest in pos-

session and enjoyment after his death, was held not to

be a transfer intended to take effect in possession or

enjoyment at or after the donor’s death, and for that

reason not to be subject to the tax. But here the gift

was intended to so take effect, although the transfer

which effected it preceded the death of the settlor and

was itself not subject to the tax unless made so by the

circumstances that the possession or enjoyment passed

as indicated.’’ (278 U. S. 347.)

Again, this Court said:

‘‘One may freely give his property to another by ab-

solute gift without subjecting himself or his estate to a

tax, but we are asked to say that this statute means

that he may not make a gift inter vivos, equally abso-

lute and complete, without subjecting it to a tax if the

gift takes the form of a life estate in one with remain-

der over to another at or after the donor’s death. It

would require plain and compelling language to justify

so incongruous a result and we think it is wanting in

the present statute.’’ (278 U. 8S. 347.)

After this authoritative interpretation of the law, it is

obvious that the foundation of Judge Thomson’s opinion is

cut away, and that the superstructure must fall.

Under such circumstances it would be a waste of time

to discuss decisions of State Courts construing State stat-

utes which were relied upon by Judge Thomson in the Court

below (R. 36). We may remark in passing, however, that

one patent fallacy in attempting to apply State cases as

authorities upon the construction of the Federal statute

is that the State cases related to taxes upon the several

estates or legacies, whereas the Federal Tax is on the

estate as a whole. In other words, if a statute taxes the

transfer of any individual estate which vests in possession

after the grantor’s death, it may plausibly be contended

that where a remainder is to vest in possession after death,

the remainder must be taxable, though supported by a par-

ticular estate which vested in the grantor’s lifetime; but

where the tax is laid upon the passing of the estate as an

entirety, it makes absolutely no difference to whom it goes

so long as it passes from the grantor, and the shifting of

estates in the property from one Gee RLdb to another is

quite immaterial.

The distinction made in the last paragraph is not the

technical distinction between a tax on the right to transmit

and a tax on the right to receive, but between a tax on the

transfer (or receipt) of the estate as a whole and a tax on

the transfer (or receipt) of particular legacies, shares or

estates.

The late Judge John C. Rose in Curley v. Tait, 276 Fed.

' 840, one of the earliest cases construing the Federal estate

tax laws, a case practically identical on the facts with the

case at bar, with that legal perspicacity which was so

characteristic of him, anticipated the decision of this Court

in Reinecke v. Northern Trust Co., 278 U. 8. 339, saying:

‘Tf all beneficial ownership and possession irrevoca-

bly passes from the transferor at the time of the trans-

fer, it would seem to be immaterial whether it goes to

one person or to several, and, if to several, whether

their enjoyment is to be simultaneous or successive,

and, if the latter, at what time or upon the happening

of what event the rights of one give place to those of

the other’’ (276 Fed. 842).

The Reservation of a Contingent Life-Estate in Remainder.

The only possible distinction between the present case

and Reinecke v. Northern Trust Co. is that here a contin-

gent equitable life estate was reserved to the grantor if

she should survive her husband, Barney May,—an event

which never happened—whereas in Reinecke v. Northern

Trust Co. nothing was reserved to the grantor beyond a

power to alter the trusts with the consent of all or a ma-

jority of the beneficiaries, and a power to supervise the

investment of the trust funds and vote the trust stocks.

Now we have the simple case where a woman settles

property upon trust for her husband for his life with re-

mainder to herself for her life if she should survive him,

and after her death to her children or their issue. In order

to support the decision below the Government must con-

tend that the reservation of this contingent life estate to

the grantor, a reservation which never came into effect

and from which she never derived the least benefit, never-

theless makes the entire transfer taxable.

In this connection, when we speak of the equitable life

estate in remainder reserved to Mrs. May as ‘‘contingent,”’

we are not using that word in the sense in which it is used

in the law of real property. Technically, no doubt, the

remainder was vested, as the only contingency was the

termination of the preceding estate before the expiration

of the life estate in remainder. But tax laws are practical

matters, and do not regard the technicalities of the feudal

law of real property. For all practical purposes, Mrs,

May’s estate in remainder was a contingent one, and of

very problematical value. So, where property is limited

to A for 2,000 years, remainder to B for life, remainder

to C in fee, the remainder to B is technically vested, but

not even an antediluvian patriarch could have the remotest

hope of ever enjoying it, and it could not be sold for the

tenth part of 1a peppercorn.

Under Section 402 (c) of the Revenue Act of 1918, that

which is to be included in the gross estate is ‘‘any interest

** * of which the decedent has at any time made a transfer

or with respect to which he has at any time created a trust

* * * intended to take effect in possession or enjoyment at

or after his death’’—that is to say, ‘‘any interest’’ of which

the decedent has reserved to himself the benefit during his

life.

As demonstrated by Reinecke v. Northern Trust Co., 278

U. 8S. 339, an ‘‘interest’’ in property is transferred, or

setlted in trust, so as to take effect in possession or enjoy-

ment at or after the grantor’s death, only when the bene-

ficial enjoyment of that ‘‘interest’’ is reserved to the

grantor during his life. It is immaterial that a remainder

can vest in possession only after the grantor’s death if it is

supported by a particular estate which vests in possession

during his lifetime.

Now, in the ordinary case where the grantor reserves to

himself a certain proportion or part of the income for his

life, it is quite clear that the ‘‘interest’’ which is settled to

take effect in possession or enjoyment after his death, is the

same proportion, or corresponding part of the principal. |

This has been consistently recognized by the Treasury Regu-

lations :

‘Where the grantor reserves a proportionate part

of the income, only a corresponding proportion of the

property should be included in the gross estate, unless

the transfer was made in contemplation of death. If,

for example, he reserves one-half of the income, the

value of one-half of the property transferred should be

included in the gross estate. If he reserves an annuity,

so much of the property as is necessary to produce the

annuity should be included in the gross estate. Where

the property does not produce income, its value as of

the date of the decedent’s death should be ascertained,

and so much of this sum as is necessary to produce the

annuity should be included in the gross estate.’’

Regulations 37, Art, 24 (as to the Act of 1918).

Cf. Regulations 63, Art. 19 (as to the Act of 1921);

Regulations 68, Art. 18 (as to the Act of 1924) ;

Regulations 70, Art. 18 (as to the Act of 1926).

Where the reservation is of some definite proportion, or

some fixed part—e. g., an annuity—of the income, the com-

putation is comparatively easy, and the case perfectly clear.

If the grantor reserves one-half of the income during his

life, the “‘interest’? which the grantor has transferred in

such a way as to take effect ‘in possession or enjoyment

after his death is one-half of the corpus. If the grantor

reserves an amount of $10,000, the ‘‘interest’’ so settled is

so much of the corpus as will produce a net income of $10,000

a year.

If the reservation is of some trivial or insignificant right.

not affecting in any substantial degree ‘the economic

benefits or enjoyment of the property,” it may be wholly

disregarded. This is demonstrated by Reinecke v. North-

ern Trust Co., 278 U. 8. 339, where this Court held that the

reservation to the grantor of a right to control the trust

investments, and to vote the trust stocks, during his life,

and even to alter the trusts with the consent of a majority

of the cestuis que trust, is immaterial.

On the other hand, if the entire income is reserved to the

grantor subject only to some absurdly improbable contin-

gency —for example, unless ‘the independence of the

United States shall cease—-we suppose no one would

doubt but that the contingency should be disregarded and

the transfer as a whole held to take effect in possession or

enjoyment after the grantor’s death.

In the present case, the whole income was in a certain

contingency — which never happened — reserved to the

grantor. She never in fact received any benefit from the

reservation, and she had but a slim chance of ever doing

so—how slim we do not know.

The record does not disclose the age of either Mrs. Paul-

ine May, the grantor, or Barney May, her husband, so that

we can not compute by any mortality tables the value of

the chance that Mrs. May might survive her husband.

The contingent and problematical benefit reserved to

Mrs. May was even more illusory, uncertain and negligible

as a reservation of ‘‘economic benefits and enjoyment of

the property’? than the reservation of a right to control

investments and to vote in respect of the trust stocks, both

of which were held immaterial in Reinecke v. Northern

Trust Co., 278 U. 8. 339.

Three views are possible, indeed, in such a case as the

present, as it would seem to us:

1. That in view of the uncertain and problematical

character of Mrs. May’s reserved equitable life estate

in remainder,-it should be disregarded for Federal tax

purposes,

2. That regard should be had to the events which

have happened, so that if Barney May had predeceased

his wife and she had come into enjoyment of her equi-

table life estate, then the transfer should be deemed

to have taken effect in possession or enjoyment at or

after her death, but that in the events which have

actually happened in the present case, no tax in re-

spect of this transfer should be imposed.

3. That the Court should endeavor to calculate by

reference to mortality tables the value of Mrs. May’s

equitable life estate, and treat as taxable, at its value

at the time of her death, that portion of the trust prop-

erty a present estate in which for Mrs. May’s life

would, at the time of the execution of the deed, have

equalled the value of her contingent life estate in re-

mainder in the whole. .

The third of these alternatives seems to have been that

preferred by Judge Rose in Curley v. Tait, 276 Fed. 840,

842, but all that he decided, on this branch of the case, was

that the reservation of the contingent life estate in remain-

der did not render the whole property taxable. At all

events, this Court has said that mathematical formulas are,

if possible, to be avoided in matters of taxation, and the

complexities of any such method would seem to us to render

preferable one or the other of the other two possible views

above mentioned, both of which lead to the same result on

the facts of this case.

As laid down in Reinecke v. Northern Trust Co., if Mrs.

May had not in her lifetime ‘‘any control over the economic

benefits and enjoyment of the property’’ (278 U. S. 346),

no part of the trust property is taxable. The tax is imposed

upon the shifting of the economic interests in the trust prop-

erty (tbid.) ; and the question is whether in any proper sense

of the word Mrs. May could be held to have had during her

lifetime ‘‘any control over the economic benefits and enjoy-

ment of the property,’’ or whether there could be held to

have been upon her death any real passing of the economic

interest in the property from her. It would seem that the

contingent life estate reserved to Mrs. May was too uncer-

tain and illusory in character to be regarded at all, particu-

larly in view of the fact that Mrs. May predeceased her

husband, so that this estate never actually came into posses-

sion or enjoyment. In the events which have happened,

Mrs. May parted with the entire estate as completely as if

she had made an outright deed of the same. From the day

of the execution of the deed she never had one particle of

beneficial interest or enjoyment in the property. She de.

rived no economic benefit from the same.

If it be said that it is impossible to determine whether

Mrs. May reserved any substantial benefit, and if so how

much, the result would be that the transferred assets should

not be included in the gross estate. For, the rule, of course,

is well-settled that prima facie, a citizen is free from tax,

and that in order to hold him liable to tax all doubts must

be resolved in his favor.

Reinecke v. Northern Trust Co., 278 U. S. 339,

348 ;

Gould v. Gould, 245 U. S. 151, 153;

United States v. Merriam, 258 U. S. 179, 187.

It is Unnecessary Now to Determine How Much, if Any, of

the Trust Property Should Be Included in the

Gross Estate.

The Commissioner of Internal Revenue included the whole

value of the trust property in the gross estate, and the

Government assessed and collected a tax accordingly. If

any part of that value ought not to have been included in

the taxable estate, the tax so collected was excessive, and

the plaintiffs were entitled to recover something.

At the present time, therefore, all that it is necessary for

the Court to decide is that the whole value of the transferred

property cannot lawfully be included in the taxable estate.

If the tax on any portion of that value was improper, it

was error to strike out the statement of claim, and thus, in —

effect, sustain a demurrer thereto. In Curley v. Tait, 276

Fed. 840, 842, already cited, Mr. Grafflin, had made a deed —

of trust in trust for his wife for her life, with remainder —

to himself for his life, and with ultimate remainder in fee to

a charity. The case arose on demurrer to the declaration;

and Judge Rose, after pointing out that the utmost which

could be taxed was that interest, if any, in the property of

which the grantor retained the benefit during his life, and

after pointing out the difficulty in calculating the amount of

that interest, particularly in view of the fact that in the

events which had happened he actually had no benefit from

the trust property during his life, said:

‘‘At the hearing the government was so confident

that it was entitled to tax the full value of his interest,

and the plaintiff so certain that none of it should be

taxed, that neither of them discussed the question now

mooted. As from what has been said it follows that

the entire interest was not taxable, the demurrer to

so much of the plaintiff’s declaration as seeks to re-

cover the tax exacted on all of it must be overruled.

The question of whether the government was en-

titled to any part of the tax less than the whole need

not be passed upon, and should not be, until the Court

is enlightened by further argument’? (276 Fed. 842).

We submit, therefore, that beyond doubt, under the deci-

sion in Reinecke v. Northern Trust Co., this transferred

property cannot, to the extent of the full value thereof, be

treated as property of which Mrs. May made a transfer to

take effect at or after his death, and that at most only that

proportion of the trust property a life estate in which at

the time of the execution of the deed, for a woman of Mrs.

May’s age, would have been equal in value to a contingent

life estate in the whole to a person of her age, expectant

upon the determination of a preceding life estate to a per-

son of the age of her husband.

The decision of the Cireuit Court of Appeals in the

present case was rendered on January 9, 1929. The brief

per curiam opinion states merely ‘‘this case is distinguish-

able from Nichols v. Coolidge, 274 U. S. 531, on the facts’’

(R. 41), but makes no mention of Reinecke v. Northern

Trust Co., which had been decided in the Cireuit Court of

Appeals some months before, and must have been pendi

in this Court when the present case was argued below. In

fact, Reinecke v. Northern Trust Co. was decided by this

Court exactly one week before the Circuit Court of Ap.

peals announced its decision in the present case, and on

motion for a reargument, the decision of this Court in the

Reinecke Case was strongly pressed on the Circuit Court

of Appeals, but without avail. It is a matter of common

knowledge, however, that on motion for a reargument a

Court is apt to exercise the Christian virtue of persever-

ance, and it is therefore not incomprehensible that the Cir-

cuit Court of Appeals should adhere to a decision which

seems to us to ignore a controlling decision of this Court.

It is not surprising, therefore, that Judge Dickinson, in

the District Court for the Eastern District of Pennsyl-

vania, has refused to follow the decision of his own Circuit

Court of Appeals in the case at bar, on the ground that it

is inconsistent with the decisions of this Court in Nichols

v. Coolidge, 274 U. S. 531, and Remecke v. Northern Trust

Co., 278 U. S. 339.

Carnill v. MeCaughn, 30 Fed. (2d), 696, 699.

We are confirmed in the belief that the decision of the

Court below is inconsistent with the decision of this Court

in Reinecke v. Northern Trust Co., 278 U. 8. 339, by the

fact that the learned counsel for the Government in their

brief in the Circuit Court of Appeals, filed before the deci-

sion of this Court in Reinecke v. Northern Trust Co., con-

ceded that the decision of that case would in all probability

control this case. The brief stated:

‘«The attention of the Court is called to the fact that

the issue presented by the present case will probably

be settled by the decision of the Supreme Court in

Reinecke, Collector, v. The Northern Trust Co.,* * °.

It seems likely the decision of the Supreme Court in

this case will largely if not entirely settle the conten-

tion now existing between taxpayers and the Govern-

ment relative to transfers of the character under dis-

cussion in the case at bar.’’ (Brief for Appellee be-

low, pp. 24-5.)

CONCLUSION.

Upon the whole, therefore, we respectfully submit that on

each and all of the three grounds above set forth, the judg-

ment for the defendant should be reversed, and the cause

remanded for further proceedings.

ARTHUR W. MACHEN, JR.,

Attorney for Safe Deposit and

Trust Company of Baltimore,

Amicus Curiae.

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