« ForrigeFortsett »
within the meaning of § 207 (a) (2); the exclusion of higher estimated values and of the further contention that such -as productive of arbitrary discriminaincreased value can properly be re- tions raising a doubt about its constitugarded as "paid-in or earned surplus tionality under the due process clause of and undivided profits" under § 207 (a) the 5th Amendment. The difficulty of (3).
adjusting any system of taxation so as It is urged that this construction, de- to render it precisely equal in its bearfining invested capital according to the ing is proverbial, and such nicety is not original cost of the property instead of even required of the states under the its present value, has the effect of ren- equal protection (393] clause, much less dering the  act "glaringly un- of Congress under the more general reequal” and of doubtful constitutionality; quirement of due process of law in taxathe insistence being that, so construed, tion. Of course it will be understood it operates to produce baseless and arbi- that Congress has very ample authority trary discriminations, to the extent of to adjust its income taxes according to rendering the tax invalid under the due its discretion, within the bounds of geoprocess of law clause of the 5th Amend- graphical uniformity. Courts have no ment. Reference is made to cases decided authority to pass upon the propriety of under the equal protection clause of the its measures; and we deal with the 14th Amendment (Southern R. Co. v. present criticism only for the purpose of Greene, 216 U. S. 400, 418, 54 L. ed. 536, refuting the contention, strongly urged, 542, 30 Sup. Ct. Rep. 287, 17 Ann. that the tax is so wholly arbitrary as to Cas. 1247; Gast Realty & Invest. Co. amount to confiscation. v. Schneider Granite Co. 240 U. S. The act treats all corporations and 55, 60 L. ed. 523, 36 Sup. Ct. Rep. partnerships alike, so far as they are 254); but clearly they are not in point. similarly circumstanced. As to one and The 5th Amendment has no equal pro- all, Congress adjusted this tax, genertection clause; and the only rule of ally speaking, on the basis of excluding uniformity prescribed with respect to from its operation income to the extent duties, imposts, and excises laid by of a specified percentage (7 to 9 per Congress is the territorial uniformity cent) of the capital employed, but uprequired by art. 1, § 8. Pollock v. on condition that such capital be valued Farmers' Loan & T. Co. 157 U. S. 429, according to what actually was em557, 39 L. ed. 759, 810, 15 Sup. Ct. Rep. barked at the outset or added thereafter, 673; Knowlton v. Moore, 178 U. S. 41, disregarding any appreciation in values. 98, 106, 44 L. ed. 969, 992, 995, 20 Sup. If in its application the tax in particular Ct. Rep. 747; Flint v. Stone Tracy Co. instances may seem to bear upon one 220 U. S. 107, 150, 55 L. ed. 389, 413, 31 corporation more than upon another, Sup. Ct. Rep. 342, Ann. Cas. 1912B, this is due to differences in their cir. 1312; Billings v. United States, 232 U. cumstances, not to any uncertainty or S. 261, 282, 58 L. ed. 596, 605, 34 Sup. want of generality in the test applied. Ct. Rep. 421; Brushaber v. Union P. R. Minor distinctions—such those Co. 240 U. S. 1, 24, 60 L. ed. 493, 504, turning upon the particular dates of L.R.A.1917B, 713, 36 Sup. Ct. Rep. 236. January 1, 1914, and March 3, 1917—are That the statute under consideration easily explained, as we have seen. The operates with territorial uniformity is principal line of demarcation that obvious and not questioned.
based upon actual costs, excluding esAppellant cites Looney v. Crane Co. nimated appreciation-finds reasonable 245 U. S. 178, 188, 62 L. ed. 230, 235, support upon grounds of both theory 38 Sup. Ct. Rep. 85, and International and practice, in addition to the imporPaper Co. v. Massachusetts, 246 U. S. tant consideration of convenience in ad135, 145, 62 L. ed. 624, 630, 38 Sup. Ct. ministration, already adverted to. There Rep. 292, Ann. Cas. 1918C, 617, but these is a logical incongruity in entering upon cases also are inapplicable, being based the books of a corporation as the capital upon the due process clause of the 14th value of property acquired for permaAmendment, with which state taxing nent employment in its business and still laws were held in conflict because they retained for that purpose, a sum correhad the effect of imposing taxes on the sponding not to its cost, but to what property of foreign corporations located probably might be realized by sale in and used beyond the jurisdiction of the the market. It is not merely that  taxing state. There is no such infirmity the market value has not been realized or here.
tested by sale made, but that sale canNor can we regard the act-in basing not be made without abandoning the "invested capital” upon actual costs, to very purpose for which the property is
held, involving withdrawal from busi- | ELLIOTT FREDERICK, Trustee in Bank. ness so far as that particular property
ruptcy of the Estate of John E. Schmidt,
Petitioner, is concerned. Whether in a given case property.should be carried in the capital account at market value rather than at FIDELITY MUTUAL LIFE INSURANCE
COMPANY of Philadelphia. cost may be a matter of judgment, depending upon special circumstances and
(See S. C. Reporter's ed. 395–399.) the local law. But certainly Congress, in seeking a general rule, reasonably Bankruptcy rights of trustee in inmight adopt the cost basis, resting up- surance policy. on experience rather than anticipation. After the death of the insured pend
In organizing corporations, it is not ing bankruptcy, and payment of the stipuunusual to issue different classes of se
lated amount to the beneficiary named in curities, with various priorities as be- the policy, in strict conformity to its terms, tween themselves, to represent different made by the trustee, there is no liability
without notice of the bankruptcy or claim kinds of contribution to capital. In ex
on the part of the insurance company to change for cash, bonds may be issued; pay to the trustee the surrender value that, for fixed properties, like plant and on complying with the terms of the policy equipment, preferred stock may be giv- as to change of beneficiary, he might have en; while more speculative values, like demanded under the Bankruptcy Act of good will or patent rights, may be July 1, 1898, § 70a, by which the trustee represented by common stock. In the of the bankrupt is vested by operation of present case, for instance, when appel- rupt which is not exempt, or powers which
law with title to all property of the banklant took the estimated increase in value he might have exercised for his own benefit, of its ore lands as a basis for increased and all property which, before the filing of capitalization, it issued preferred stock the petition, he could, by any means, have to the amount of the former total, car- transferred, or which might have been levied rying those lands at cost, and issued a upon and sold under judicial process against like amount of common stock to rep-him, provided that when any bankrupt shall resent the appreciation in their mar
have any insurance policy which has a cash ket value. It does not appear that in estate or personal representatives, he may
surrender value payable to himself, his form the new issues were thus allocated; pay or secure the cash surrender value to but at least there was a recognition of the trustee, and continue to hold and own a higher claim in favor of one part of the policy free from claims of creditors. the book capital than of the other. Up- (For other cases, see. Bankruptcy, VI. a, in
Digest Sup. Ct. 1908.) on like grounds, it was not unreasonable for Congress, in adjusting the "excess
(No. 547.) profits tax," to accord preferential treatment to capital representing actual Submitted January 3, 1921. Decided May investments, as compared with capital
16, 1921. representing higher valuations based upon estimates, however confident and re- ON
N WRIT of Certiorari to the Supeliable, of what probably could be real- rior Court of the State of Pennized were the property sold instead of sylvania to review a judgment which retained.
affirmed a judgment of the Court of From every point of view, the tax in Common Pleas of Allegheny County, in question must be sustained. We in that state, in favor of defendant in a timate no opinion upon the effect of suit by a trustee in bankruptcy to re(395) the act with respect to deductions cover the surrender value of a policy from cost values of capital assets because of depreciation or the like; no
Note.—On life insurance as assets of question of that kind being here in- bankrupt-see notes to Burlingham v. volved.
Crouse, 57 L. ed. U. S. 920, 46 L.R.A. Judgment affirmed.
(N.S.) 148; Morris v. Dodd, 50 L.R.A.
33; Re White, 26 L.R.A.(N.S.) 451; Re Mr. Justice McReynolds concurs in Orear, 30 L.R.A.(N.S.) 990, and Re the result.
Andrews, 41 L.R.A.(N.S.) 123. 65 L. ed.
of insurance on the bankrupt's life. Super. Ct. 615; McKibben v. Doyle, 173 Affirmed.
Pa. 579, 51 Am. St. Rep. 785, 34 Atl. See same case below, 75 Pa. Super. Ct. 455; Cannell v. Smith, 142 Pa. 25, 12 77.
L.R.A. 395, 21 Atl. 793; Clapp.v. PineThe facts are stated in the opinion. grove Twp. 138 Pa. 35, 12 L.R.A. 618, 20
Atl. 836. Mr. Lowrie C. Barton submitted the cause for petitioner:
Mr. George Sutherland submitted the The cash surrender value of the policy, cause for respondent. Messrs. John C. $322, vested in the estate of the bank- Slack, 0. S. Richardson, and W. D. N. rupt on the filing of the petition in Rogers were on the brief. bankruptcy, and, on the adjudication, in the trustee.
Mr. Justice Pitney delivered the opinCohen v. Samuels, 245 U. S. 50, 62 ion of the court : L. ed. 143, 38 Sup. Ct. Rep. 36; Cohn v. John E. Schmidt having died pending Malone, 248 U. S. 450, 63 L. ed. 352, 39 bankruptcy, his trustee, the present petiSup. Ct. Rep. 141.
tioner, sued the Insurance Company, The fact that the defendant did not (396) respondent, in the court of comhave actual knowledge of the filing of mon pleas of Allegheny county, Pennsylthe petition in bankruptcy and the advania, to recover the proceeds of a cerjudication is immaterial.
tain policy of life insurance, with interAcme Harvester Co. v. Beekman Lum-est from the date of death. By an ber Co. 222 U. S. 303–306, 56 L. ed. 212, amended statement plaintiff limited his 213, 32 Sup. Ct. Rep. 96; Bailey v. Bak- claim to the surrender value of the policy er Ice Mach. Co. 239 U. S. 268,275, 60 at the time of the adjudication of bankL. ed. 275-286, 36 Sup. Ct. Rep. 50; ruptcy. The court of common pleas Lazarus v. Prentice, 234 U. S. 263-266, gave judgment in favor of defendant; on 58 L. ed. 1305–1307, 34 Sup. Ct. Rep. appeal the superior court affirmed the 851; Cameron v. United States, 231 Ù. judgment (75 Pa. Super. Ct. 77); the S. 710-717, 58 L. ed. 448–451, 34 Sup. supreme court of the state refused an Ct. Rep. 244; Robertson v. Howard, 229 appeal, thereby making the judgment of U. S. 254, 57 L. ed. 1174, 33 Sup. Ct. the superior court final; and a writ of Rep. 854; Whitney v. Wenman, 198 U. certiorari brings the case here. S. 539-552, 49 L. ed. 1157-1160, 25 Sup. The facts in brief are as follows: Ct. Rep. 778; Mueller v. Nugent, 184 U. September 20, 1902, the insurance comS. 1-14, 46 L. ed. 405-411, 22 Sup. Ct. pany issued a policy of insurance upon Rep. 269; International Bank v. Sher- the life of John E. Schmidt in the sum man, 101 U. S. 403-406, 25 L. ed. 866, of $1,000, payable upon surrender of the 867.
policy, properly receipted, after acceptThe Pennsylvania Act of 1868 does ance of proof of death; payment to be not apply to a policy reserving the right made to his wife, Annie M. Schmidt, or, to change the beneficiary, and having a if he should survive her, then to his cash surrender or loan value.
administrators, executors, or assigns, Re Jamison Bros. & Co. 222 Fed. 92; subject to certain provisions, one of Re Shoemaker, 225 Fed. 329; Re Herr, which "The insured, with the 182 Fed. 717; Re Dolan, 182 Fed. 949; written approval of the president or Re Orear, 30 L.R.A. (N.S.) 990, 102 C. vice president, may, upon the surrender C. A. 78, 178 Fed. 635; Burlington v. of this policy, change the beneficiary, or Crouse, 228 U. S. 459, 57 L. ed. 920, 46 with such approval it may be assigned." L.R.A.(N.S.) 148, 33 Sup. Ct. Rep. 564; December 19, 1912, a petition in involunEverett v. Judson, 228 U. S. 474, 57 L. tary bankruptcy filed against ed. 927, 46 L.R.A.(N.S.) 154, 33 Sup. Ct. Schmidt; on January 8th following he Rep. 568; Andrews v. Partridge, 228 U. was duly adjudged a bankrupt; and one S. 479, 57 L. ed. 929, 33 Sup. Ct. Rep. month later petitioner was elected and 570; Cohen v. Samuels, 245 U. S. 50, duly qualified as his trustee. The policy 62 L. ed. 143, 38 Sup. Ct. Rep. 36; Cohn was not included in the schedula of asv. Malone, 248 U. S. 450, 63 L. ed. 352, sets, and petitioner had no knowledge of 39 Sup. Ct. Rep. 141.
it until after the proceeds had been paid The fact that the person making the by the insurance company to the widow. payment has the means of knowledge at Upon the date of the adjudication of hand, and overlooks the same by inad- bankruptcy the policy had a cash sur. vertence, is immaterial if the party re- render value of $322. April 4, 1913, the ceiving the money is not entitled to it. I bankrupt died, proof of the fact and
Girard Trust Co. v. Harrington, 23 Pa. cause of his death was duly made and
accepted by the company, and May 7,  beneficiary, must be regarded as 1913, it paid the face of the policy to assets to which the trustee in bankruptthe beneficiary named therein, and took cy was entitled. In each case the quesher receipt therefor. Neither (397] tion arose while the policy was in the then nor at any time before had the com- bankrupt's possession unmatured, and pany knowledge of the adjudication in the interest of the insurance company bankruptcy, or notice that the trustee was not affected. Here the question is would claim the whole or any part of whether, after the death of the insured the policy.
and payment of the stipulated amount The trustee's suit to recover the sur to the beneficiary named in the policy, render value is grounded upon $ 70a of in strict conformity to its terms, withthe Bankruptcy Act (July 1, 1898, chap. out notice of the bankruptcy or claim 541; 30 Stat. at L. 544, 565, Comp. Stat. made by the trustee, there is a liability SS 9585, 9654, 1 Fed. Stat. Anno. 2d ed. on the part of the insurance company to pp. 509, 1150), under which the trustee pay to the trustee the surrender value is vested by operation of law with the that, on complying with the terms of title of the bankrupt as of the date he the policy, he might have demanded. was adjudged a bankrupt, to rights and It is not enough to sustain the trusproperty not exempt, including “(3) tee's claim to say that the filing of the powers which he might have exercised petition in bankruptcy was a caveat to for his own benefit, but not those which all the world, and in effect an attachhe might have exercised for some other ment and injunction, and that, on person;
(5) property which, adjudication, title to the bankrupt's prior to the filing of the petition, he property became vested in the trustee. could by any means have transferred, or Mueller v. Nugent, 184 U. S. 1, 14, 46 L. which might have been levied upon and ed. 405, 411, 22 Sup. Ct. Rep. 269. The sold under judicial process against him: asserted right of property arose out of Provided, That when any bankrupt shall a contract under which the insurance have any insurance policy which has a company had rights as well as the incash surrender value payable to himself, sured. The company's contract was to his estate, or personal representatives, pay the stipulated amount to the benehe may, within thirty days after the ficiary first named on receiving proof of cash surrender value has been ascer- death of the insured, unless the latter tained and stated to the trustee by the should have surrendered the policy, and, company issuing the same, pay or secure with the written approval of the head to the trustee the sum so ascertained officer of the company, have changed the and stated, and continue to hold, own, beneficiary. The requirement of such and carry such policy free from the surrender and approval was for the proclaims of the creditors participating in tection of the company, so purposed that the distribution of his estate under the lat least it should have notice before its bankruptcy proceedings, otherwise the liability under the policy was modified. policy shall pass to the trustee as as- Section 70a of the Bankruptcy Act cansets;
not be construed to give to the trustee This provision shows it was the pur- in bankruptcy a right as against the pose of Congress to pass to the trustee company to demand that the surrender whatever sum was available to the bank- value be made assets of the estate, as rupt at the time of bankruptcy as cash by a change in beneficiary, without timeassets, to be realized on surrender of the ly notice to the company of a demand policy, but otherwise to leave to the in- for such a change; for the section in its sured the benefit of his life insurance. very words contemplates that the cash Burlingham v. Crouse, 228 U. S. 459, 473, surrender value shall have been “ascer57 L. ed. 920, 926, 46 L.R.A.(N.S.) 148, 1 tained and stated to the trustee by the 33 Sup. Ct. Rep. 564; Everett v. Judson,
company issuing the policy.” 228 U. S. 474, 57 L. ed. 927, 46 L.R.A.
 In the present case, the com(N.S.) 154, 33 Sup. Ct. Rep. 568. In two recent cases, Cohen v. Samuels, 245 pany, having in good faith performed U. S. 50, 53, 62 L. ed. 143, 145, 38 Sup. the contract according to its terms, withCt. Rep. 36; Cohn v. Malone, 248 U. out the notice that the contract called S. 450, 63 L. ed. 352, 39 Sup. Ct. Rep. for as a condition of changing the terms, 141, we have held that the surrender cannot be called upon to make the furvalue of a policy not in terms payable ther payment demanded by the trustee. to the bankrupt, but which could be Frederick v. Metropolitan L. Ins. Co. 152 made so payable at the bankrupt's will C. C. A. 167, 239 Fed. 125. by a simple declaration changing the Judgment affirmed.
YEE WON, Petitioner,
Francisco from China, were being held V.
for return. 170 C. C. A. 86, 258 Fed. 792. EDWARD WHITE, as Commissioner of He must be regarded here as a Chinese Immigration, Port of San Francisco.
person, first permitted to enter the
United States in 1901 as a resident mer(See S. C. Reporter's ed. 399-402.)
chant's minor son, but who subsequently Aliens Chinese exclusion wife and acquired the status of laborer, and as
such entitled to remain. minor child.
1. A Chinese person, first permitted to In respect of the parties specially enter the United States in 1901 as a resi- concerned, the circuit court of appeals dent merchant's minor son, but who subse- said: “The father of Yee Won died in quently acquired the status of laborer, and San Francisco in 1908. In the latter as such is entitled to remain in the United part of 1910 Yee Won applied to the States, may not properly demand that his wife and minor children, who were born immigration officers at the port of San in China, and have never resided elsewhere, Francisco for an identification of his be permitted to come into this country and status. He was about to depart for reside with him. The Federal statutes ex. China, and it was his purpose to secure clude all Chinese persons belonging to the such an identification as would secure class defined laborers except those his admission upon his return. He made specifically and definitely exempted, and no claim that he was a merchant. His there is no such exemption of a resident claim was that he was a capitalist and laborer's wife and minor children. [For other cases, see Aliens, vi. b, in Digest property owner. He was granted such Sup. Ct. 1903.)
a certificate, and departed for China in Aliens Chinese exclusion expira- January, 1911. He returned on May 29, tion of treaty.
1914. He was then thirty-three years 2. Federal legislation undertaking to of age. He claims to have married Chin limit immigration and residence of Chinese Shee in China, March 2, 1911, and that laborers was re-enacted, extended, and continued without modification, limitation, or
a daughter, Yee Tuk Oy, was born to condition by the Act of April 29, 1902, as
them November 28, 1912, and a son, Yee amended by the Act of April 27, 1904, § 5, Yuk Hing, was born to them on Novemand is now in force, notwithstanding the ber 2, 1913. These three are the present Treaty of December 8, 1894, expired in 1904. applicants to enter the United States. [For other cases, see Aliens, Ví. b, in Digest They were all born in China, and this Sup. Ct. 1908.]
is their first application to enter the [No. 209.)
The writ was properly denied unless, Submitted April 20, 1921. Decided May 16, as matter of law, such a laborer may 1921.
properly demand that his wife and
minor children be permitted to come inN WRIT of Certiorari to the United to this country and reside with him,
States Circuit Court of Appeals for notwithstanding they were born in the Ninth Circuit to review a judgment China, and have never resided elsewhere. which affirmed a judgment of the Dis- In support of such right United States trict Court for the Northern District of v. Gue Lim, 176 U. S. 459, 44 L. ed. 544, California, denying an application for a 20 Sup. Ct. Rep. 415, is cited, and it is writ of habeas corpus.
said that the reasoning therein which See same case below, 170 C. C. A. 86, permitted her to enter, because a mer258 Fed. 792.
chant's wife, applies to the family of a The facts are stated in the opinion.
Chinese laborer, who lawfully resides Messrs. M. Walton Hendry and John
here. But that case turned upon the L. McNab submitted the cause for peti- true meaning of $ 6, Act of July 5, 1884 tioner. Mr. Joseph P. Fallon was on the (chap. 220, 23 Stat. at L. 115, Comp. brief.
Stat. § 4290, 2 Fed. Stat. Anno. 2d ed.
p. 72), which required  every Solicitor General Frierson submitted Chinese person other than laborers, as the cause for respondent.
condition of admission, to present a
specified certificate. The conclusion was Mr. Justice McReynolds delivered the that the section should not be construed opinion of the court:
to exclude their wives, since this would The courts below denied petitioner's obstruct the plain purpose of the Treaty application for a writ of habeas corpus of 1880 [22 Stat. at L. 826], to permit to secure release of his wife and minor merchants freely to come and go. children, who, having been denied ad- The Treaty of 1894, 28 Stat, at L. mission upon their  arrival at San | 1210, provided that “the coming, ercept