January 13, 1925. The opinion of the Court was delivered by The question raised is whether, for the purpose of assessing the South Carolina inheritance tax, the value of real estate situated in Pennsylvania could properly be included as a portion of a legacy bequeathed by the testatrix, a resident of South Carolina, to the Presbyterian Hospital of Philadelphia, under the provisions of a will duly admitted to probate in this State directing that the real estate in question should be sold and converted into money and the proceeds of sale paid in fixed proportions to said hospital and another beneficiary named in the will. Let the statement of facts set out in the record be incorporated in the report of the case.
Appellants' exceptions advance three propositions: (1) That "the South Carolina tax commission were without power and authority to tax the transfer of any part of the real estate in Philadelphia"; (2) that the "commission erred in including any portion of the real estate in Philadelphia as a part of the residuary share of the Presbyterian Hospital subject to the inheritance tax"; and (3) that the "commission should have excluded the value of the whole of the real estate in Philadelphia from the total value of the entire estate in determining the taxable value of the residuary estate, and the share of the Presbyterian Hospital subject to such tax should have been fixed after making such deduction." *Page 199
The validity of the first of the foregoing propositions, in so far as it declares and asserts the elementary principle that one state has no power directly to tax real estate situated in another state, is not open to question. 26 R.C.L., 211, § 180; note Ann. Cas., 1915A, 169. But it does not follow, respondents say, that appellants' remaining contentions are valid, and that the tax here under review was improperly levied. The position of the tax commission is that, under the terms of this will, by virtue of the doctrine of equitable conversion, the real estate in Pennsylvania was converted into personalty, and as such personalty is subject to the inheritance tax in South Carolina, the State of the testatrix's domicile. Broadly, the case turns upon whether that position may be soundly maintained.
In the construction of wills the doctrine of equitable conversion has been fully accepted and repeatedly applied in this jurisdiction. In Perry v. Logan, 5 Rich. Eq., 202, this Court (Dargan, Ch.) said:
"Wherever it is apparent from the words of the will, that the testator meant, that his real estate" in that form "should not pass into the possession of the objects of his testamentary bounty, but * * * should be converted into money, and as money * * * come to those for whom he designs the benefaction," this will be considered in equity as a bequest of personalty. "Under such circumstances, it will be treated in all respects, as if the conversion had been made by the testator in his lifetime."
In Farmer v. Spell, 11 Rich. Eq., 547; 548 it is said (Wardlaw, J.):
"Equitable conversion of realty into personalty is effected in strictness only where a sale of the land is ordered, and disposition of the proceeds is made; but if the intention to dispose of the subject as personalty can be ascertained from the face of the will, it may not be indispensable that a sale should be explicitly directed as a means of conversion." *Page 200
In the case of Clarke v. Clarke, 46 S.C. 230;24 S.E., 202; 57 Am. St. Rep., 675, the testatrix, Mrs. Clarke, a resident of South Carolina, by her will bequeathed and devised "the rest, residue, and remainder" of her estate, real and personal, one-half to one beneficiary and one-half to other beneficiaries. The testatrix owned considerable real estate situated in Connecticut and other states. This Court held (syllabus) that "when the testator uses such words as convey the idea that the whole estate, both real and personal, shall be commingled and distributed as personalty, and in such connection uses such words as `invest' and `pay over,' the will will be construed to authorize the executor to convert the realty into personalty, although no direct authority to sell and convey real estate is given," and accordingly construed the will of Mrs. Clarke to work an equitable conversion of realty, wherever situated, into personalty.
Applying the doctrine of equitable conversion as announced in the foregoing cases to the construction of the will here involved, we have no doubt that under the terms of said will the real estate of the testatrix situated in the State of Pennsylvania or elsewhere became personalty; that is, that the will had the effect — certainly in so far as it operates upon the rights of any party entitled to invoke the doctrine of equitable conversion — of converting the realty of the testatrix, wherever situated, into personalty. The will expressly provides that "all the rest, residue and remainder" of the estate of the testatrix, real and personal, "in the City of Philadelphia or commonwealth of Pennsylvania, or elsewhere wheresoever situate," should be sold and the proceeds, after payment of all costs, charges, etc., divided and paid over in two equal half parts thereof; "one half part thereof to the Presbyterian Hospital in Philadelphia," etc., and "the other half part thereof" to the "trustee of the Roper Hospital of Charleston," etc. The clear intent of the testatrix that for the purpose of transferring to and vesting in the beneficiaries named the *Page 201 property described in the will, all her residuary real estate should be converted into money and distributed as personalty is, as we apprehend, in no wise changed or obscured by the provisions of the codicil which authorize the executors and trustees to make a partial distribution, before actual conversion, "in securities or real estate at a valuation and appraisement to be jointly approved" by the executors or trustees and "by both said beneficiaries." If under that authority these beneficiaries should take any part of the shares accruing to them in real estate it would seem clear that they take as purchasers and not as devisees. Any land so distributed would be merely a substitute for money, and would have to be taken at a price. Miller v. Commonwealth,111 Pa., 321; 2 A., 492; Laird's Appeal,85 Pa., 339. And see Clarke v. Clarke, supra. That the permission and authority thus conferred were not intended to alter the effect of the previous direction to sell, which clearly worked a conversion, is expressly confirmed by the additional language of the codicil to the effect that the provision, as to distributing a part of the property in securities or real estate. "is not intended to qualify the general direction in my will to convert as to any estate real or personal prior to any such agreement," etc. It being, therefore, the clearly disclosed intent of Mary Jane Ross that for the purpose of distribution under her will all the real estate here involved should be converted into money and should pass as personalty to the beneficiaries designated, under the well-settled rule in this State at the instant of the testatrix's death, this real estate, which she had directed to be converted into money, became by operation of law so converted, and passed under the will as personalty.
But whether under a will of this tenor there is such a conversion of real property into personalty as to justify the application of the rule that the situs of personal property follows the residence of the testator for the purposes of an inheritance or success on tax, is a question upon which the *Page 202 authorities are not uniform. Following the view announced by Vice Chancellor Wigram in Custance v. Bradshaw, 4 Hare (Eng.), 315 (a decision which would seem to have been modified by more recent English cases; see Forbes v.Stevens, L.R., 10 Eq., 178, and Stokes v. Ducroz, 62 L.T. N.S., 176; 38 W.R., 535), it appears to have been held in New York, North Carolina, Illinois, and Massachusetts that the doctrine of equitable conversion is not applicable to subject the transmission or devolution of real estate outside the state of the testator's domicile to an inheritance tax or succession duty in the state of the testator's residence. Swift's Estate, 137 N.Y., 77; 32 N.E., 1096; 18 L.R.A., 709. State v. Brevard, 62 N.C. 141. Connell v. Crosby,210 Ill., 380; 71 N.E., 350. McCurdy v. McCurdy,197 Mass. 248; 83 N.E., 881; 16 L.R.A. (N.S.), 329; 14 Ann. Cas., 859. On the other hand, it is the well-settled rule in Pennsylvania, where the real estate with which we are here concerned is situated, that the doctrine of equitable conversion is applicable to determine the situs and status of a testator's property for the purposes of inheritance taxation.Miller v. Com., 111 Pa., 321; 2 A., 492; Williamson's Estate, 153 Pa., 508; 26 A., 246; In re Dalrymple,215 Pa., 367; 64 A., 554; In re Marr's Estate,240 Pa., 38; 87 A., 621, Ann. Cas., 1915A, 167. That rule has been followed in Iowa. Sandford's Estate, 188 Iowa, 833;175 N.W., 506. In the case at bar the tax commission followed and applied the rule adopted by the Pennsylvania Courts, and the precise question presented is whether in so doing they committed error of law.
The decisions which deny the right to impose an inheritance tax, in the state of the testator's domicile under this doctrine of equitable conversion, proceed upon the theory that conversion is an equitable fiction which should not be carried beyond the extent necessary to accomplish the equitable result aimed at, and should not be held to "alter the nature of property for the purpose of subjecting *Page 203 it to fiscal claims to which at law it was not liable in its existing state" (Wigram, V.C., in Custance v. Bradshaw,supra), and that "it was never intended by the law to tax a theory having no real substance behind it" (Matter of Curtis, 142 N.Y., 219; 36 N.E., 887). The cases in which the contrary view is taken rest upon the basis that where a testator directs a sale of the land and the distribution of the proceeds, the doctrine of conversion applies for the reasons that what the testator intended was an actual conversion by sale, either to third parties or to beneficiaries under the will, and the blending of the proceeds with his other personalty for purposes of administration under the will; and that the actual situs of the land is immaterial in, that what passes under the will is not the land, but the proceeds, which is personalty, and liable to the tax. In re Handley, 181 Pa., 339; 37 A., 587. The action of the Courts in dating such conversion from the instant of death is but the application of the general rule that what is to be done must be treated in equity as done already.
In so far as the question presented involves the right of the State of South Carolina to invoke the doctrine of equitable conversion of a resident testator's real property situated within the State, for the purposes of levying the tax imposed by our local inheritance tax laws, we can perceive no sound reason why the doctrine of conversion should not be applied. The inheritance tax is not a tax upon the property itself but upon the transfer, transaction, or right of succession, and is merely measured in amount by the value of the property transferred. Fuller v.Tax Commission (S.C.), 121 S.E., 478, 482. Magounv. Bank, 170 U.S. 298; 18 S.Ct., 594; 42 L.Ed., 1037.U.S. v. Perkins, 163 U.S. 625; 16 S.Ct., 1073;41 L.Ed., 287. Maxwell v. Bugbee, 250 U.S. 525; 40 S.Ct., 2;63 L.Ed., 1124. Rhode Island Hospital Trust Co. v.Doughton, 187 N.C. 263; 121 S.E., 741, 744. The will made by a resident of this State which provides for the *Page 204 transfer of real property in the State, in accordance with directions which work a conversion of such realty into personalty under the settled rule of equitable conversion, must be regarded as having been made in contemplation both of that rule and of the local inheritance tax laws. In enacting the inheritance tax law the lawmakers are presumed to have had in view the rule of equitable conversion as applied to wills in this jurisdiction, and, in the absence of express provision to the contrary, to have intended that inheritance taxes should be assessed upon the transfer of the property as thus converted. If, therefore, the trustees and beneficiaries under the will of a resident testator are entitled to invoke the doctrine of equitable conversion for any purpose, they would, it seems clear, be entitled to invoke that doctrine for the purposes of paying the inheritance taxes imposed by the State. If such right is available to the beneficiaries or trustees of the will, we see no sound reason why the same right may not also be invoked by the State whose laws confer the power to transfer property by will and sanction the rule of equitable conversion in giving effect to the terms of such will. We conclude, therefore, that the rule of equitable conversion is applicable for the purpose of imposing the inheritance tax in so far, certainly, as real estate situated within the State may be involved or affected.
If so, we think it may soundly be applied in the case at bar to the real estate of the resident testatrix situated in the State of Pennsylvania. The will of the testatrix, disposing of an estate of the net value of $1,788, 215.20, was duly admitted to probate in the Courts of this State, and the executors duly qualified and entered upon the discharge of their trust under the laws of this State. The value of the Pennsylvania realty was less than half of the value of the whole estate. If the rule of equitable conversion is applicable in the jurisdiction of the universal succession, the domiciliary State, the logical effect of *Page 205 the application of the rule is unquestionably to convert the real estate of the testatrix wherever situated into personalty for the purposes of this universal succession. That "the personal property of a decedent, whatever its character, and wherever located, is subject to an inheritance tax in the State of which the owner was a resident at the time of his death," is very generally conceded (Bullen v. Wisconsin, 240 U.S. 625;36 S.Ct., 473; 60 L.Ed., 830) under the well-settled principle that for purposes of taxation the situs of personal property is where the owner resides and has his domicile.Rhode Island Hospital Trust Co. v. Doughton, supra;Lamar v. Scott, 3 Strob., 563. That principle is based upon the maxim, mobilia sequuntur personam, which, in its application to tangible personal property physically located in a state other than that of the owner's domicile, has been aptly denominated a fiction of the law. But by virtue of that fiction the value of the personal property of a resident decedent physically situated in another state is properly taken into account in measuring the excise tax on the transfer, succession or devolution in the State of the decedent's domicile. That universally accorded right of the state of the domicile is in no wise impaired by the right of the state where the personal property may be physically located to subject the property to similar taxation. That is, it is the right of the domiciliary state to tax the universal succession, while according to the fact of power, the singular succession may be taxed in another. Knowlton v. Moore, 178 U.S. 53;20 S.Ct., 747; 44 L.Ed., 969. Coe v. Errol, 116 U.S. 517;6 S.Ct., 475; 29 L.Ed., 715. Hartman's Case,70 N.J. Eq., 667; 62 A., 562. Blackstone v. Miller,188 U.S. 189; 23 S.Ct., 277; 47 L.Ed., 439. And see Fullerv. S.C. Tax Com. (S.C.), 121 S.E., 479. Where, therefore, by the law of the domiciliary state, taxing the universal succession, the testator's real estate situated in other states is by the terms of the will converted into personalty, from the viewpoint of practical results there would seem to *Page 206 be no more substantial or valid reason for excluding the value of the converted real estate in measuring the excise tax upon the universal succession than for excluding the value of the tangible personal property of the testator physically situated in another state.
The validity of any such reason, it would seem clear, must rest in the last analysis upon the consideration that, while the succession to the personalty wherever situated under the principle of mobilia sequuntur personam is governed by the law of the decedent's domicile, title to real property can be transferred only in accordance with the lexloci rei sita. Thus it was held in Clarke v. Clarke,178 U.S. 186; 20 S.Ct., 873; 44 L.Ed., 1028, that a judgment of the Courts of South Carolina, (Clarke v. Clarke, 46 S.C. 230;24 S.E., 202; 57 Am. St. Rep., 675), construing the will of a resident testatrix, which had been probated in the State, to work an equitable conversion of real property into personalty, was not binding, under the full faith and credit clause of the Federal Constitution, upon the Courts of Connecticut, where certain of the decedent's land was situated, the Court saying:
"It is a doctrine firmly established that the law of a State in which land is situated controls and governs its transmission by will or its passage in case of intestacy. * * * `It is a principle firmly established that to the law of the State in which the land is situated we must look for the rules which govern its descent, alienation and transfer, and for the effect and construction of wills and other conveyances.'"
Conceding, therefore, for the purposes of the present discussion, that it is to the law of Pennsylvania that we must look for the rules which govern the "effect and construction" of the will of this testatrix, in so far as the realty situated in Pennsylvania is concerned, if under the law of that jurisdiction the will may soundly be construed to work an equitable conversion of the real estate there situated into personalty, the position that such converted realty should not be *Page 207 taken into account in this, the domiciliary state, for the purpose of taxing the universal succession would seem, in any view, to be no longer tenable. If, as has been suggested by our own Court (Lamar v. Scott, supra), the principle that personal estate "is regulated as to its mode of transmission from one person to another by the law of the country where the owner had his domicile at the time," derives its force, not from "the law of other countries, but because it is the municipal law of the country in which the chattels are situated," the proposition that the Pennsylvania realty passing under this will becomes personalty for the purposes of inheritance taxation in this State derives a like force from the law of the State where the land is situated. Our examination of the Pennsylvania decisions leaves no room for doubt that under the law of that jurisdiction the effect of the will here under consideration was to work an equitable conversion of the real estate situated in that State, into personalty. See Pennsylvania cases, supra, and note Ann. Cas., 1915A, 172-174. That the doctrine of equitable conversion is applicable for the purpose of inheritance taxation has, apparently, been followed by the Courts of Pennsylvania to its logical conclusion. Thus the right of the State to tax realty there situated as realty, when under the will of a nonresident testator the land had been equitably converted into personalty, was denied in the case of Coleman's Estate,159 Pa., 231; 28 A., 137. In that State of the law of the place where this real estate is situated, we perceive no valid ground for denying the right of this, the domiciliary state, to take into account the value of the Pennsylvania real estate as personalty, in measuring the amount of the inheritance tax here.
The record does not disclose that the assessment of the South Carolina inheritance tax under the foregoing view will entail any such double taxation as would justify the application of the principle that where there is substantial doubt as to the intent of the Legislature in enacting a tax *Page 208 law, the doubt is to be resolved against a construction, which would result in double taxation on the same property rights. It is stated in the argument of appellants' counsel that since the decision of the Pennsylvania cases herein referred to, that state has enacted an inheritance law very similar to that in force in this State, and that under that law the Pennsylvania realty is subject to inheritance taxation in that State. But it does not appear that under that statute the real estate in question would not be treated as personalty under the well-settled law of that jurisdiction. And, as hereinabove pointed out, the right to impose such a tax in the State of the domicile of the testatrix, which has acquired jurisdiction of the universal succession, is not affected by the statute of a foreign State which subjects to similar taxation the personal estate of a decedent in that State. Hartman'sCase, 70 N.J. Eq., 667; 62 A., 560. Blackstone v.Miller, supra.
It is accordingly adjudged that the ruling appealed from be affirmed.
MESSRS. JUSTICES WATTS, FRASER and COTHRAN concur.
MR. CHIEF JUSTICE GARY did not participate.