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UNITED STATES AMERICA v. BOARD FINANCE AND REVENUE (12/27/51)

December 27, 1951

UNITED STATES OF AMERICA
v.
BOARD OF FINANCE AND REVENUE, APPELLANT



Appeal, No. 40, May T., 1951, from decree of Court of Common Pleas of Dauphin County, 1946, commonwealth Docket No. 102, in case of United States of America by J. Howard McGrath, Attorney General of United States, as successor to Alien Property Custodian v. Board of Finance and Revenue of the Commonwealth of Pennsylvania. Decree reversed; reargument refused February 14, 1952.

COUNSEL

Harry F. Stambaugh, Special Counsel, with him Robert E. Woodside, Jr., Attorney General, for appellant.

Irwin A. Seibel, Attorney, Department of Justice, with him Harold I. Baynton, Assistant Attorney General, Arthur A. Maguire, United States Attorney, James D. Hill and George B. Searls, Attorneys, Department of Justice, and Thomas Wood, Jr., Assistant United States Attorney, for appellee.

Before Drew, C.j., Stern, Stearne, Jones, Bell, Ladner and Chidsey, JJ.

Author: Ladner

[ 369 Pa. Page 388]

OPINION BY MR. JUSTICE LADNER

The Commonwealth of Pennsylvania appeals from the order of the Dauphin County Court (see 61 Dauphin 127) reversing the Board of Finance and Revenue's refusal of the claim of J. Howard McGrath, Attorney General of the United States, as successor to the Alien Property Custodian for the sum of $16,280.37, paid into the State Treasury without escheat, under an award of the Orphans' Court of Philadelphia, made because of the absence of known next of kin.

The claim was denied because of the failure of the U.S. custodian to offer any proof that any next of kin existed who were enemy nationals or resided in any enemy country. The custodian takes the position that he need produce no proof and stands on the extreme proposition that he may be an administrative fiat seize money in a State Treasury by merely declaring it to be the property of unnamed, unidentified and perhaps nonexistent enemy heirs. The court below conceded that by such declaration alone the custodian might interfere with the state's constitutionally guaranteed right to exercise its control over the devolution of property within its borders. The implications of such a ruling are most serious and, affecting as it does the sovereignty of a state, must be carefully examined.

Historians have repeatedly asserted that the proud freedom of the individual American citizen has in no small measure been due to our dual form of government "which had no parallel in political history."*fn1 Originally the Federal Government was framed as and

[ 369 Pa. Page 389]

    intended to be one of limited specified powers; the Constitution so declares. It would never have been ratified by the requisite number of states if it had not been for the pledge made to append a Bill of Rights and to expressly guarantee (what Madison said was implied) that "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." This guarantee became the important 10th Amendment. Step by step we have seen the Federal Government invade the prerogatives of the states through the doctrine of implied powers, but never has it been thought possible that money left by a resident decedent awarded to the State Treasury in absence of known heirs, was subject to seizure by a mere say so of an administrative official without a shred of proof to justify such action.

The proposition becomes more astonishing when the facts are examined. Mary Zuercher died May 31, 1944, an admitted resident of Pennsylvania. Her estate of approximately $16,000 passed into the possession of her administrator. A vesting order on behalf of the Alien Property Custodian was served on the administrator by which he vested in himself " all the right title and interest of heirs and next of kin, names unknown, of Mary Zuercher, last known address Germany." It will be observed this vesting order while it designated no known heirs or next of kin alleged to be enemy nationals, nevertheless operated to protect fully the Federal Government in its undisputed right to prevent the money from getting into an enemy country. This vesting order was effective and yet respected the prerogative of the state courts to determine if there were or who were the heirs of the estate pending therein. When the estate was called for audit May 9, 1945, before Judge KLEIN of the Philadelphia Orphans' Court which had jurisdiction, the administrator reported his inability

[ 369 Pa. Page 390]

    to locate any next of kin here or elsewhere, whereupon the attorney for the Commonwealth asked that the balance for distribution be paid into the State Treasury without escheat under provisions of Sec. 1314 of The Fiscal Code.*fn2 The attorney representing the Alien Property Custodian stated to the court that he had the authority of the United States Attorney General to say, " If there is an award to the Commonwealth, without escheat, there will be no objection." This could only mean one thing, namely that the government wished more time to determine if there were any heirs and if so to locate them. Accordingly the balance was so awarded and the money paid into the Commonwealth's Treasury. This was a proper orderly procedure and recognized the State's right guaranteed by the 10th Amendment to determine the parties entitled to inherit property of resident decedents. The Alien Property Custodian had by that entirely proper vesting order substituted himself for any German or enemy nationals whom he might find or who might later appear and

[ 369 Pa. Page 391]

    claim to be next of kin. The Federal Government was thereby assured of full protection against that eventuality and the Commonwealth's sovereign right at the same time respected.

However, not content with the protection thus achieved and contrary to his acquiescence to the court's award, the Alien Property Custodian later under date of August 21, 1945, filed a new vesting order which he called a supplemental vesting order. The new order instead of claiming the right title and interest of any German heirs, now claimed the specific fund of $16,279.77 theretofore paid into the treasury of the state and of course commingled with other state funds. That new vesting order declared said sum "payable... to... or owing to... nationals of a designated enemy country, Germany, namely, Nationals: Heirs-at-law and next-of-kin, names unknown, of Mary Zuercher, deceased. Last Known Address: Germany" Upon filing this new order the sum claimed was demanded of the State Treasurer, though money once paid into the State Treasury can only be paid out in the manner provided by the Constitution and statutes of the Commonwealth.

It was argued before us that under the "war power" the custodian by such mere declaration, without any showing that such heirs in fact exist or ever existed, may now compel the State to make payment to him. It was even argued by the learned counsel for the government that this power of the custodian is so absolute that if the fund had actually been escheated to the Commonwealth he might even set that escheat aside by his mere demand. That is to say, that even if the alleged heirs were but a figment of imagination, the sovereign State of Pennsylvania would be concluded by the custodian's mere declaration that there were enemy heirs. We cannot believe that Congress ever so intended. We

[ 369 Pa. Page 392]

    freely grant that the power exists in the custodian to seize property of living individuals, and corporations in the first instance without proof but there is no case that holds this power extends to seizure of funds of a decedent's estate that have been escheated or are escheatable and actually paid into the treasury of a State.

The right to seize enemy property is nowhere expressly given by the Constitution. It is implied solely from the right of Congress to declare war. But no one provision of the Constitution express or implied is superior to the others. In Com. v. First Nat. Bk. and Trust Co. of Easton, 303 Pa. 241, 246, 154 A. 379 (1921), our late Chief Justice (MAXEY) said, "'In the United States, the powers of sovereignty are divided between the government of the union, and those of the states. They are each sovereign with respect to the objects committed to it, and neither sovereign with respect to the objects committed to the other.'

"Article X of the federal Constitution provides that 'the powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.' The United States government has no powers except those 'expressly given, or given by necessary implication.' MARSHALL, Chief Justice, in Martin v. Hunter's Lessee, 1 Wheat. 304, 326, 4 L. edition 97, 103. The respective supremacies of the state and national government in their respective spheres of sovereignty have been meticulously observed by the nation and each individual state. Within their individual spheres they are as sovereign as if they were two independent foreign states. There are many governmental activities in respect to which the federal government is not the states' superior or sovereign. McLEAN, J., in License Cases, 5 How. 504, 588, 12 L. edition 256, 293, says: 'The powers

[ 369 Pa. Page 393]

    of the general government and of the state, although both exist and are exercised within the same territorial limits, are yet separate and distinct sovereignties, acting separately and independently of each other, within their respective spheres.'"

Among these rights and powers thus reserved to the states perhaps none had earlier recognition nor none so well established as that of the field of inheritance law. The U.S. Supreme Court has consistently recognized the several states' right to determine how property, real or personal within its confines shall be permitted to be transmitted by descent or will. See for example Mager v. Grima et al., 49 U.S. 490 (1850).*fn3 So supreme are the states in this field that in U.S. v. Fox, 94 U.S. 315 (1876), a statute of New York confining devises of lands to natural persons was held to exclude the United States from taking a devise that a testator made to it. And the same was held true as to personal property bequests, U.S. v. Burnison et al., 339 U.S. 87 (1950). Recent adherence to this doctrine may also be found in the escheat cases. See In re Escheat of Moneys in Custody of U.S. Treasury, 322 Pa. 481, 186 A. 600 (1936), 326 Pa. 260, 192 A. 256 (1937), aff. 303 U.S. 276 (1937), nom. U.S. v Klein; Cunnius v. Reading School District, 206 Pa. 469, 56 A. 16 (1903), aff. 198 U.S. 458 (1904); Com. v. Dollar Savings Bank, 259 Pa. 138, 102 A. 569 ...


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