City Bank Farmers Trust Co. v. Schnader

Background

An executor for a New York resident sued Pennsylvania tax officials to stop an inheritance tax on seventy-nine portraits loaned to a Pennsylvania museum and on display there when the owner died. Pennsylvania law directed a state appraiser to value property located in the Commonwealth and allowed an appeal to the Dauphin County court. The executor sought a federal injunction, but the district court dismissed the bill for want of equity, reasoning the executor had an adequate state remedy by appealing the appraisement.

Reasoning

The Court addressed whether a federal equity court could hear a pre-enforcement suit to block the tax. It explained that the statutory appeal becomes a judicial proceeding, but found this case was not premature because state officials had refused to waive the tax and indicated they would assess the paintings. Given the imminent threat to estate administration and the practical injury alleged, the Court reversed the dismissal and instructed the lower court to reinstate the bill so the federal court may hear the request for injunctive relief and decide the merits.

Real world impact

The ruling allows executors and owners of property temporarily located in another state to seek federal equitable relief when state tax officers imminently threaten assessment and collection that would interfere with estate administration. The decision is procedural: it permits a federal hearing but does not resolve whether the tax is constitutional.