NON-TESTAMENTARY CONVEYANCES TO TAKE EFFECT AFter Death. A. signs, seals, records, and delivers to B. an instrument drawn in the form of a warranty deed conveying Blackacre to B. and his heirs. Consideration is recited. In the habendum is inserted the clause: "this deed to take effect upon the death of the grantor." Courts of final appeal in this country entertain three widely divergent views as to the legal consequences of such a transaction. The Supreme Court of Iowa, in the case of Shaull v. Shaull,1 decided last November, held an instrument of this sort to be an attempted testamentary disposition, and void under the Wills Act because of the lack of attesting witnesses.2 A few courts have construed such a document as a valid conveyance of an estate in futuro with a resulting fee in A. subject to a conditional limitation in fee in favor of B.3 The great majority of the cases seem to take an intermediate position. They hold that the instrument is a valid deed, which apparently vests the fee at once in B., with the enjoyment thereof postponed until A.'s death, or with a more or less vaguely defined "life estate" reserved "by implication" or "operation of law" in A. It is submitted that the second view is the correct one, and that the result reached by the Iowa court is unsound and undesirable.

At the common law a deed purporting to convey an estate in futuro was void. Leake gives, as the reason for this rule, that the exigencies of tenure required that the seisin should never be in abeyance, but that there should at all times be a tenant invested with the seisin ready to meet the claims of the lord for the duties and services of the tenure.5 But since the Statute of Uses such a deed may operate as a bargain and sale to convey an estate in futuro. A social reason underlay the courts' 1 160 N. W. 36 (Iowa).

2 The following cases seem in accord: Sperber v. Balster, 66 Ga. 317 (“Said deed of gift to be of full effect at my death"); Ransom v. Pottawattamie County, 168 Iowa 570, 150 N. W. 657 ("This indenture to be effective after my death"); Turner v. Scott, 51 Pa. St. 126 ("In no way to take effect till after death of grantor"); Coulter v. Shelmadine, 204 Pa. St. 120, 53 Atl. 638 ("This assignment shall not be of any effect until after my death"); Pinkham v. Pinkham, 55 Neb. 729, 76 N. W. 411 ("This deed is to take effect from and after my death"); but see West v. Wright, 115 Ga. 277, 41 S. E. 602.

3 Shackleton v. Sebree, 86 Ill. 616 ("This deed not to take effect till after my decease"); Vinson v. Vinson, 4 Ill. App. 138 ("Do convey, at my death"); Wyman v. Brown, 50 Me. 139 (“This deed is not to take effect during my lifetime"); Abbott ↑. Holway, 72 Me. 298 ("This deed is not to operate as a conveyance until my decease"); Bunch v. Nicks, 50 Ark. 367, 7 S. W. 563 (“The deed shall go into full force and effect at my death.")

Abney v. Moore, 106 Ala. 131, 18 So. 60 ("This conveyance not to take effect till after my death"); Harshbarger v. Carroll, 163 Ill. 636, 45 N. E. 565 (“Only to take effect on death of grantor"); Latimer v. Latimer, 174 Ill. 418, 51 N. E. 548 (“To be in force from and after my decease and not before"); Spencer v. Robbins, 106 Ind. 580, 5 N. E. 726 ("To be equally divided between them at my decease and after paying my funeral expenses"); Wilson v. Carrico, 140 Ind. 533, 40 N. E. 50 (“The above obligation to be of none effect until after the death of the said B. C."); Kelley v. Shimer, 152 Ind. 290, 53 N. E. 233 ("This deed is to take effect on and after the death of the grantor"); McLain v. Garrison, 39 Tex. Civ. App. 431, 88 S. W. 484, and 89 S. W. 284 ("This deed is to take effect at my death and not before"); Gorham v. Daniels, 23 Vt. 600 ("Not to come into possession of it till after my decease"); Lauck v. Logan, 45 W. Va. 251, 31 S. E. 986 (“But this deed shall take effect when the said W. L. shall depart this life and not sooner ").

Roe v. Tranmer, 2 Wils. 75. LEAKE, LAW OF PROPERTY IN LAND, 2 ed., 33.

• LEAKE, LAW OF PROPERTY IN LAND, 2 ed., 88. True, a series of Massachusetts

readiness to recognize this indirect effect of the statute. By the reign of Henry VIII the feudal structure of society was fast breaking down. An attempt to curtail the means already evolved for mitigating the burdens of tenure and the feudal system of conveyancing, was not to be tolerated. To-day the same result should be reached. That the instrument was intended primarily to operate under one of our modern statutes permitting the transfer of land by deed, will not preclude it from operating if necessary as a bargain and sale. And, moreover, such statutes would seem to offer a second ground upon which its validity may be rested. Since they dispensed with the feudal requirements of livery of seisin and the like, should not a conveyance under them be entitled to the same freedom in the creation of estates as when made by devise or by conveyance to uses? Indeed many jurisdictions have a separate statute specifically permitting the creation of estates in futuro by deed. Of these Iowa is one. If, then, in the instrument we set out to consider, the troublesome clause had read in so many words "the estate to vest," instead of "the deed to take effect" upon the death of the grantor, it would seem impossible to have questioned its validity.10

Yet it is to the feeling that somehow or other, even so, the deed would have been invalid that we owe the strained and unfortunate construction placed upon an instrument in the form originally supposed by those courts which follow the Iowa view. Their argument runs as follows: the inserted clause shows an intent on A.'s part not to convey anything in praesenti, but only after his death; therefore the instrument is "testamentary," and void for lack of proper attestation. Note there the confusion of two very different intents. That the grantor did not intend to convey an estate in praesenti is evident: that, as we have seen, has no bearing upon the validity of the instrument as a conveyance. But to argue that the clause establishes an effective intention that the instrument shall remain revocable is quite a different matter. The document is in form a deed; it has been recorded by the grantor; and its possession voluntarily surrendered to the grantee. Normally the strongest kind of evidence would hardly suffice to rebut the resulting presumption of "delivery" and show that a valid, irrevocable conveyance had

cases deny this proposition. Wallis v. Wallis, 4 Mass. 135; Brewer v. Hardy, 22 Pick. 376. But the accidental origin of the Massachusetts doctrine and the fallacy of the reasoning by which the later cases attempted to justify it has been repeatedly pointed out. Wyman v. Brown, 50 Me. 139; Abbott v. Holway, 72 Me. 298; Chandler v. Chandler, 55 Cal. 267. See GRAY, RULE AGAINST PERPETUITIES, § 57. Even in Massachusetts it has been substantially repudiated under cover of a second erroneous doctrine that a money consideration will support a covenant to stand seized. Trafton v. Hawes, 102 Mass. 533.

"This is fundamental. See Roe v. Tranmer, 2 Wils. 75; Thatcher v. Omans, 3 Pick. (Mass.) 521; Foster v. Dennison, 9 Ohio 121.

8 See KALES, FUTURE INTERESTS IN ILLINOIS, § 152. GRAY, RULE AGAINST PERPETUITIES, § 67. See also Kuuku v. Kawainui, 4 Hawaiian 515, holding a conveyance in futuro valid although the Statute of User was not in force.

IOWA, CODE OF 1897, § 2917. A good example of the spirit in which such a statute is, however, sometimes construed is found in Leaver v. Gauss, 62 Iowa 314, 17 N. W. 522.

10 Some courts, however, have done so. See, for example, Blackstock v. Mitchell, 67 Ga. 768 ("Bargain and sell . . . unto the said J. P. at our death"). And compare Leaver v. Gauss, 62 Iowa 314, 17 N. W. 522, referred to in note 9, supra.

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not in fact been made. Insistence to the extent necessary to accomplish that result, upon the literal meaning of the words, is surely unsound once the validity of estates in futuro is freely acknowledged. For they are then capable of another construction, consistent with, instead of squarely opposed to, the other evidence of the grantor's intent. Clearly the true intent, however inaptly expressed, was merely to postpone the vesting of the estate given. Many additional arguments support this view. It may well be urged that the grantor must have intended to accomplish something, and must in fact have known that without witnesses the instrument could not operate as a will." Then it is well recognized that "it is the duty of a court to seek by construction to maintain rather than to defeat the deed." 12 In short, to construe a clause, the intended meaning of which is scarcely even doubtful, so as to invalidate the entire document and thwart the other clearly expressed intentions of the maker is as undesirable as it is unnecessary. It offers an example worthy of three centuries ago of the technicality and injustice of which the law is sometimes capable. It can only be explained as the result of an extraordinary harking back to a feudal notion of the invalidity of estates in futuro which the courts that interpreted the Statute of Uses definitely repudiated.

As to the state of the authorities, it is to be noted that the majority of the cases are of the intermediate class already alluded to.13 These in so far as they hold the deed valid and irrevocable are in accord with the position contended for. In so far, however, as they shun the possibility of an estate in futuro, and rely upon an implied reservation of a life estate, they are, it is submitted, unsound. The law is strongly opposed, always, to the implication of life estates.14 The language used would seem to negative any intention that the grantee should acquire an estate in the land during the grantor's life. And as we have seen, it is unnecessary to resort to any such implication.15

FRANCHISE TAXES ON CORPORATIONS INCORPORATED IN MORE THAN ONE STATE. A recent case in the United States Supreme Court raises the question of the effect of incorporation of the same body under the laws of several states upon the taxing power of each of the incorporating states under the due process clause of the Constitution. Kansas City, M. & B. R. Co. v. Stiles, 37 Sup. Ct. Rep. 58.1 It is not due process to "That is the argument of the court in McLain v. Garrison, 39 Tex. Civ. App. 431, 88 S. W. 484.

12 Trafton v. Hawes, 102 Mass. 533.

13 See note 4, supra.

14 See KALES, FUTURE INTERESTS IN ILLINOIS, § 158 b.

15 Moreover, in a large proportion of these cases the only point in issue was the validity of the deed. Suit had not been brought until after the death of A., when under either view B. held in fee. The discussion of what A. had retained before his death was therefore mere dictum.

The case of In re Bybee, just reported in 160 N. W. 900 (Iowa), is interesting as possibly showing a tendency to stretch a point in upholding as a will an instrument of the sort here considered, which the same court had previously held invalid as a deed. See Ransom v. Pottawattamie County, 168 Iowa 570, 150 N. W. 657, cited in note 2, supra.

1 For a fuller statement of the facts, see RECENT CASES, p. 527.

tax property having a permanent situs outside of the territorial jurisdiction of the taxing state.2

4

In the first place, it is to be remembered that there is a vital, if elusive, difference between corporate franchise taxes and taxes on corporate property. The former may be levied arbitrarily by a state as excise taxes in return for the right to have corporate existence or to do business in that state; by hypothesis they are not taxes on property outside of the state.3 The latter, as the name implies, are taxes upon property and must respect the situs of that property. This difference being one of substance, the courts go behind the legislative form and name of a tax law in every case. Of course, if the legislature has called it a property tax, the problem is comparatively easy: to decide on what property the tax shall fall. But if the legislature has called it a franchise tax, the court is confronted with the difficult problem of deciding whether the legislature has not, after all, levied a property tax. This problem comes before the Supreme Court in every case, for, as in cases arising under the contracts clause,3 the state court's construction of the state law is not accepted, but is reviewed under the rule that "every case involving the validity of a tax must be decided on its own facts; and if the tax purports to be laid upon a subject within the taxing power of the states, it is not to be condemned by the application of any artificial rule but only when the conclusion is required that its necessary operation and effect is to make it a prohibited exaction." 10 The decided cases do not clearly show what facts will support the burden of proving that the necessary effect of what the state court has called a franchise tax is to lay a tax on property

2 Union Transit Co. v. Kentucky, 199 U. S. 194.

Throughout this note by "franchise tax" is meant an excise levied by a state upon a privilege to exist as a corporation of the state or a privilege given a foreign corporation to do business in the state, regardless of the value of the privilege. Franchises are often taxed as valuable property, but "franchise tax" is not used here to designate such a tax. See North Jersey St. Ry. Co. v. Jersey City, 73 N. J. L. 481, 483, 63 Atl. 833, affirmed in 74 N. J. L. 761, 67 Atl. 33; Phillipsburg R. Co. v. Assessors, 82 N. J. L. 49, 81 Atl. 1121.

See COOLEY, TAXATION, 3 ed., 153, 154.

5 See Home Ins. Co. v. New York, 134 U. S. 594, 601. "From the very nature of the tax being laid upon a franchise given by the State, and revocable at pleasure, it cannot be affected in any way by the character of the property in which its capital is invested."

Fargo v. Hart, 193 U. S. 490; Delaware, L. & W. R. Co. v. Pennsylvania, 198 U. S. 341..

Some of the confusion no doubt arises from the double meaning given to "franchise tax." See Louisville, etc. Ferry Co. v. Kentucky, 188 U. S. 385, in which a "franchise tax" was held invalid since "it was not competent for Kentucky to tax the franchise which its corporation lawfully acquired from Indiana and which franchise or incorporeal hereditament had its situs for purposes of taxation in Indiana." 8 McCullough v. Virginia, 172 U. S. 102.

This rule has not been reached without vigorous opposition. In Galveston, H. & S. A. Ry. Co. v. Texas, 210 U. S. 217, 228, Mr. Justice Harlan, in a dissenting opinion in which the Chief Justice, Mr. Justice White, and Mr. Justice McKenna concurred, said: "In my opinion the court ought to accept the interpretation which the Supreme Court of Texas places upon the statute in question. In other words, it should be assumed that... the State intended to impose only an occupation tax."

10 See Kansas City Ry. Co. v. Kansas, 240 Ù. S. 227, 233. The same idea that a valid tax may be measured as the legislature sees fit was used to support a federal excise tax on corporations measured by income in Flint v. Stone Tracy Co., 220 U. S. 107.

outside of the state." They vaguely indicate, however, that the measure of a tax should have some relation to the subject of the tax and that it is dangerous to base a franchise tax upon a valuation of property, without adding some clause, such as a maximum imposition or a pro-rating of assets to business in the state, to negative any inference that a tax based on property values must be a tax on property.12 The Alabama franchise tax attacked in Kansas City, M. & B. R. Co. v. Stiles 13 did not approach this danger limit; it levied a tax on domestic corporations based upon paid-up capital stock, regardless of values.11

It was argued, however, that the railroad, being incorporated in other states, was not a domestic corporation in Alabama. The argument is hard to support. At least for purposes of jurisdiction, a corporation incorporated in several states is domestic in each of them. The few cases which have said that the federal courts must consider it a corporation only of the state originally creating it 16 have been explained by the fact that in those cases the incorporation in other states was required as a condition precedent to doing business therein and in substance was not incorporation. Furthermore, in garnishment proceedings against a railroad incorporated in three states, a motion to dismiss the suit for want of jurisdiction was overruled, the court saying that the debt subject to garnishment had a situs wherever the corporation had its domicil, which was in any one or all of the three states.18 It has been held that a statute levying a tax on domestic corporations included those incorporated in other than the taxing state.19 Succession taxes of any one of the incor

17

11 Most of the cases go off on the point that state taxation puts a burden on interstate commerce; the question of due process is seldom raised. For a review of the decisions on state taxes affecting interstate commerce, see Western Union Tel. Co. v. Kansas, 216 U. S. 1, and note in 28 HARV. L. Rev. 93.

12 See Society for Savings v. Coite, 6 Wall. (U. S.) 594, affirming 32 Conn. 173 (tax on total deposits partly invested in federal securities); The Delaware Railroad Tax, 18 Wall. (U.S.) 206 (tax based on an unequal pro-rating of capital stock); Home Ins. Co. v. New York, 134 U. S. 594 (tax based on dividend partly derived from federal securities); Ashley v. Ryan, 153 U. S. 436 (tax based on total capitalization); Galveston, etc. Ry. Co. v. Texas, 210 U. S. 217 (tax based on gross receipts); Baltic Mining Co. v. Massachusetts, 231 U. S. 68, affirming 207 Mass. 381, 93 N. E. 831 (tax based on total authorized capital, with a maximum of $2000); Kansas City Ry. Co. v. Kansas, 240 U. S. 227, affirming 95 Kan. 261 (same); Crane Co. v. Looney, 218 Fed. 260 (tax based on capital, surplus, and undivided profits).

13 Ubi supra.

14 GENERAL ACTS OF ALABAMA, 1911, 170.

15 Memphis & C. R. Co. v. Alabama, 107 U. S. 581; Patch v. Wabash R. Co., 207 U. S. 277. In the latter case the court, at p. 283, said: "Therefore the question is raised how a corporation . . . thus organized shall be regarded for purposes of a suit like this. No nice speculation as to whether the corporation is one or many, and no details as to the particulars of the consolidation are needed for an answer. The defendant exists in Illinois by virtue of the laws of Illinois. . It cannot escape the jurisdiction by the fact that it is incorporated elsewhere." Goodwin v. New York, N. H. & H. R. Co., 124 Fed. 358; Goodwin v. Boston & Maine R. Co., 127 Fed. 986; Wasley v. Chicago, R. I. & P. Ry. Co., 147 Fed. 608; Case v. Atlanta & C. A. L. Ry. Co., 225 Fed. 862. See 19 HARV. L. REV. 134.

16 Nashua & L. R. Co. v. Boston & L. R. Co., 136 U. S. 356; St. Louis & S. F. Ry. Co. v. James, 161 U. S. 545; Southern Ry. v. Allison, 190 U. S. 326.

17 See Goodwin v. New York, N. H. & H. R. Co., 124 Fed. 358, 359. The opinion of Lowell, J., in this case gives a complete review of the authorities.

18 Johnson v. Union Pac. Ry. Co., 145 Fed. 249.

19 Quincy Bridge Co. v. Adams County, 88 Ill. 615. Breese, J., said, at p. 619: "the