1. The maxim
mobilia sequuntur personam applies to
negotiable bonds and certificates of indebtedness issued by a state
or her municipality, as to ordinary choses in action, and they have
situs for taxation -- in this case, a testamentary transfer tax at
the domicile of their owner. P.
280 U. S.
209.
2. When negotiable bonds and certificates of indebtedness issued
by a state or her municipality and not used in business in that
state are owned at the time of his death by a person domiciled in
another state in which they are kept, an attempt of the state in
which they were issued to tax their transfer by inheritance is
repugnant to the Fourteenth Amendment.
Blackstone v.
Miller, 188 U. S. 189,
overruled. P.
280 U. S.
209.
3. Existing conditions imperatively demand protection of choses
in action against multiplied taxation, whether following
misapplication of some legal fiction or conflicting theories
concerning the sovereign's right to exact contributions. P.
280 U. S.
212.
4. Taxation is an intensely practical matter, and laws in
respect of it should be construed and applied with a view of
avoiding, so far as possible, unjust and oppressive consequences.
Id.
Page 280 U. S. 205
5. The Court can find no sufficient reason for saying that
intangible property is not entitled to enjoy an immunity from being
taxed at more than one place similar to that accorded to tangible
property. P.
280 U. S.
212.
6. This case does not present the question whether choses in
action that have acquired a situs for taxation other than at the
domicile of their owner through having become integral parts of
some local business may be taxed a second time at his domicile. P.
280 U. S.
213.
176 Minn. 634 reversed.
Appeal from a judgment of the Supreme Court of Minnesota
upholding an inheritance tax.
See also 175 Minn. 310;
id. 314.
Page 280 U. S. 208
MR. JUSTICE McREYNOLDS delivered the opinion of the Court.
Henry R. Taylor, while domiciled and residing in New York, died
testate, December 4, 1925. He had long owned and kept within that
state negotiable bonds and certificates of indebtedness issued by
the State of Minnesota and the Cities of Minneapolis and St. Paul
worth above $300,000. Some of these were registered, others were
payable to bearer. None had any connection with business carried on
by or for the decedent in Minnesota. All passed under his will,
which was probated in New York. There also, his estate was
administered and a tax exacted upon the testamentary transfer.
Minnesota assessed an inheritance tax upon the same transfer.
Her Supreme Court approved this and upheld the validity of the
authorizing statute. The executor -- appellant -- claims that, so
construed and applied, that enactment conflicts with the Fourteenth
Amendment.
When this cause first came before the Supreme Court of
Minnesota, it held negotiable public obligations were something
more than mere evidences of debt, and, like tangibles, taxable only
at the place where found, regardless of the owner's domicile. It
accordingly denied the power of that state to tax the testamentary
transfer. After
Blodgett v. Silberman, 277 U. S.
1, upon a rehearing, considering that cause along with
Blackstone v. Miller, 188 U. S. 189, it
felt obliged to treat the bonds and certificates like ordinary
choses in action and to uphold the assessment.
Registration of certain of the bonds we regard as an immaterial
circumstance. So did the court below. Counsel do not maintain
otherwise.
Page 280 U. S. 209
Under
Blodgett v. Silberman, the obligations here
involved were rightly regarded as if ordinary choses in action. The
maxim
mobilia sequuntur personam applied, and gave them
situs for taxation in New York -- the owner's domicile. The
testamentary transfer was properly taxed there. This is not
controverted.
But it is said the obligations were debts of Minnesota and her
corporations, subject to her control; that her laws gave them
validity, protected them, and provided means for enforcing payment.
Accordingly, counsel argue that they had situs for taxation
purposes in that state, and maintain the validity of the challenged
assessment.
Blackstone v. Miller, supra, and certain approving
opinions, lend support to the doctrine that, ordinarily, choses in
action are subject to taxation both at the debtor's domicile and at
the domicile of the creditor; that two states may tax on different
and more or less inconsistent principles the same testamentary
transfer of such property without conflict with the Fourteenth
Amendment. The inevitable tendency of that view is to disturb good
relations among the states and produce the kind of discontent
expected to subside after establishment of the Union. The
Federalist, No. VII. The practical effect of it has been bad;
perhaps two-thirds of the states have endeavored to avoid the evil
by resort to reciprocal exemption laws. It has been stoutly
assailed on principle. Having reconsidered the supporting arguments
in the light of our more recent opinions, we are compelled to
declare it untenable.
Blackstone v. Miller no longer can
be regarded as a correct exposition of existing law, and, to
prevent misunderstanding, it is definitely overruled.
Four different views concerning the situs for taxation of
negotiable public obligations have been advanced. One fixes this at
the domicile of the owner; another at the debtor's domicile; a
third at the place where the instruments
Page 280 U. S. 210
are found physically present, and the fourth within the
jurisdiction where the owner has caused them to become integral
parts of a localized business. If each state can adopt any one of
these and tax accordingly, obviously the same bonds may be declared
present for taxation in two, or three, or four places at the same
moment. Such a startling possibility suggests a wrong premise.
In this Court, the presently approved doctrine is that no state
may tax anything not within her jurisdiction without violating the
Fourteenth Amendment.
State Tax on Foreign-Held
Bonds, 15 Wall. 300;
Union Refrig. Transit Co.
v. Kentucky, 199 U. S. 194;
Safe Deposit & Trust Co. v. Virginia, ante, p.
280 U. S. 83. Also,
no state can tax the testamentary transfer of property wholly
beyond her power,
Rhode Island Trust Co. v. Doughton,
270 U. S. 69, or
impose death duties reckoned upon the value of tangibles
permanently located outside her limits.
Frick v.
Pennsylvania, 268 U. S. 473.
These principles became definitely settled subsequent to
Blackstone v. Miller, and are out of harmony with the
reasoning advanced to support the conclusion there announced.
At this time, it cannot be assumed that tangible chattels
permanently located within another state may be treated as part of
the universal succession and taken into account when estimating the
succession tax laid at the decedent's domicile.
Frick v.
Pennsylvania is to the contrary.
Nor is it permissible broadly to say that, notwithstanding the
Fourteenth Amendment, two states have power to tax the same
personalty on different and inconsistent principles, or that a
state always may tax according to the fiction that, in successions
after death,
mobilia sequuntur personam and domicile
govern the whole.
Union Refrig. Transit Co. v. Kentucky, supra;
Rhode Island Trust Co. v. Doughton, supra, and
Safe
Deposit & Trust Co. v. Virginia, supra, stand in
opposition.
Page 280 U. S. 211
Southern Pacific Co. v. Kentucky, 222 U. S.
63, indicates plainly enough that the right of one state
to tax may depend somewhat upon the power of another so to do. And
Coe v. Errol, 116 U. S. 517,
116 U. S. 524,
though frequently cited to support the general affirmation that
nothing in the Fourteenth Amendment prohibits double taxation, does
not go so far. It affirmed the rather obvious proposition that the
mere fact of taxation of tangibles by one state is not enough to
exclude the right of another to tax them.
"If the owner of personal property within a state resides in
another state, which taxes him for that property as part of his
general estate attached to his person, this action of the latter
state does not in the least affect the right of the state in which
the property is situated to tax it also. . . . The fact, therefore,
that the owners of the logs in question were taxed for their value
in Maine as a part of their general stock in trade, if such fact
were proved, could have no influence in the decision of the case,
and may be laid out of view."
If Maine undertook to tax logs permanently located in another
state, she transcended her legitimate powers.
Union Refrig.
Transit Co. v. Kentucky, supra. Of course, such action could
not affect New Hampshire's rights in respect of property localized
within her limits.
While debts have no actual territorial situs, we have ruled that
a state may properly apply the rule
mobilia sequuntur
personam and treat them as localized at the creditor's
domicile for taxation purposes. Tangibles with permanent situs
therein, and their testamentary transfer, may be taxed only by the
state where they are found. And, we think, the general reasons
declared sufficient to inhibit taxation of them by two states apply
under present circumstances with no less force to intangibles with
taxable situs imposed by due application of the legal fiction.
Primitive conditions have passed; business is
Page 280 U. S. 212
now transacted on a national scale. A very large part of the
country's wealth is invested in negotiable securities whose
protection against discrimination, unjust and oppressive taxation,
is matter of the greatest moment. Twenty-four years ago,
Union
Refrig. Transit Co. v. Kentucky, supra, declared:
"In view of the enormous increase of such property [tangible
personalty] since the introduction of railways and the growth of
manufactures, the tendency has been in recent years to treat it as
having a situs of its own for the purpose of taxation, and
correlatively to exempt it at the domicile of the owner."
And certainly existing conditions no less imperatively demand
protection of choses in action against multiplied taxation, whether
following misapplication of some legal fiction or conflicting
theories concerning the sovereign's right to exact contributions.
For many years, the trend of decisions here has been in that
direction.
Taxation is an intensely practical matter, and laws in respect
of it should be construed and applied with a view of avoiding, so
far as possible, unjust and oppressive consequences. We have
determined that, in general, intangibles may be properly taxed at
the domicile, and we can find no sufficient reason for saying that
the are not entitled to enjoy an immunity against taxation at more
than one place similar to that accorded to tangibles. The
difference between the two things, although obvious enough, seems
insufficient to justify the harsh and oppressive discrimination
against intangibles contended for on behalf of Minnesota.
Railroad Company v.
Pennsylvania -- "State Tax on Foreign-Held Bonds
Case," 15 Wall. 300,
82 U. S. 320,
distinctly held that the state was without power to tax the owner
of bonds of a domestic railroad corporation made and payable
outside her limits when issued to and held by citizens and
residents of another state. Through Mr. Justice Field, the Court
there said:
Page 280 U. S. 213
"But debts owing by corporations, like debts owing by
individuals, are not property of the debtors in any sense; they are
obligations of the debtors, and only possess value in the hands of
the creditors. With them they are property, and in their hands they
may be taxed. To call debts property of the debtors is simply to
misuse terms. All the property there can be, in the nature of
things, in debts of corporations belongs to the creditors, to whom
they are payable, and follows their domicil, wherever that may be.
Their debts can have no locality separate from the parties to whom
they are due. This principle might be stated in many different
ways, and supported by citations in numerous adjudications, but no
number of authorities and no forms of expression could add anything
to its obvious truth, which is recognized upon its simple
statement."
If the situs of the bonds for taxation had been at the debtor's
domicile -- Pennsylvania -- the challenged effort to tax could not
have interfered unduly with the debtor's contract to pay
interest.
New Orleans v. Stemple, 175 U.
S. 309;
Bristol v. Washington County,
177 U. S. 133;
Liverpool & L. & G. Ins. Co. v. Orleans Assessors,
221 U. S. 346,
recognize the principle that choses in action may acquire a situs
for taxation other than at the domicile of their owner if they have
become integral parts of some local business. The present record
gives no occasion for us to inquire whether such securities can be
taxed a second time at the owner's domicile.
The bonds and certificates of the decedent had acquired
permanent situs for taxation in New York; their testamentary
transfer was properly taxable there, but not in Minnesota.
The judgment appealed from must be reversed. The cause will be
remanded for further proceedings not inconsistent with this
opinion.
Reversed.
Page 280 U. S. 214
MR. JUSTICE STONE, concurring.
I concur in the result. Whether or not control over a debt at
the domicile of the debtor gives jurisdiction to tax the debt,
Liverpool & L. & G. Ins. Co. v. Board of
Assessors, 221 U. S. 346,
221 U. S. 354,
we are not here concerned with a property tax, but with an excise
or privilege tax imposed on the transfer of an intangible,
see
Stebbins v. Riley, 268 U. S. 137;
Saltonstall v. Saltonstall, 276 U.
S. 260, and, to sustain a privilege tax, the privilege
must be enjoyed in the state imposing it,
Provident Savings
Society v. Kentucky, 239 U. S. 103. It
is enough, I think, to uphold the present decision that the
transfer was effected in New York by one domiciled there, and is
controlled by its law.
Even though the contract transferred was called into existence
by the laws of Minnesota, its obligation cannot be constitutionally
impaired or withdrawn from the protection which those laws gave it
at its inception.
See Provident Savings Society v.
Kentucky, 239 U. S. 103,
239 U. S. 113;
Bedford v. Eastern Building & Loan Association,
181 U. S. 227.
And, while the creditor may rely on Minnesota law to enforce the
debt, that may be equally true of the law of any other state where
the debtor or his property may be found. So far as the transfer, as
distinguished from the contract itself, is concerned, it is New
York law, and not that of Minnesota, which, by generally accepted
rules, it applied there and receives recognition elsewhere.
See
Bullen v. Wisconsin, 240 U. S. 625,
240 U. S. 631;
Russell v. Griggsby, 168 F. 577;
Lee v. Abdy, 17
Q.B.Div. 309;
Miller v. Campbell, 140 N.Y. 457, 460;
Spencer v. Myers, 150 N.Y. 269. Once the bonds had passed
beyond the state and were acquired by an owner domiciled elsewhere,
the law of Minnesota neither protected nor could it withhold the
power of transfer or prescribe its terms.
Page 280 U. S. 215
In the light of these considerations, granting that the
continued existence of the contract rested in part on the law of
Minnesota, the relation of that law to the transfer in New York,
both in point of theory and in every practical aspect, appears to
me to be too attenuated to constitute any reasonable basis for
deeming the transfer to be within the taxing jurisdiction of
Minnesota.
As the present is not a tax on the debt, but only on the
transfer of it, neither the analogies drawn from the law of
property taxes nor the attempt to solve the present problem by
ascribing to a legal relationship unconnected with any physical
thing, a fictitious situs, can, I think, carry us very far toward a
solution. Nor does it seem that the invocation of the Fourteenth
Amendment to relieve from the burdens of double taxation, as such,
promises more.
Hitherto, the fact that taxation is "double" has not been deemed
to affect its constitutionality, and there are, I think, too many
situations in which a single economic interest may have such legal
relationships with different taxing jurisdictions as to justify its
taxation in both to admit of our laying down any constitutional
principle broadly prohibiting taxation merely because it is double,
at least until that characterization is more precisely defined.
It seems to me to be unnecessary and undesirable to lay down any
doctrine whose extent and content are so dubious. Whether it is
far-reaching enough to overturn those cases which, in circumstances
differing somewhat from the present, have been regarded as
permitting taxation in more than one state, reaching the same
economic interest, is so uncertain as to suggest doubts as to its
trustworthiness and utility as a principle of judicial decision.
See Wheeler v. Sohmer, 233 U. S. 434, and
Blodgett v. Silberman, 277 U. S. 1;
Scottish Union &
National
Page 280 U. S. 216
Ins. Co. v. Bowland, 196 U. S. 611,
196 U.S. 620;
Rogers v.
Hennepin County, 240 U. S. 184,
240 U. S. 191;
New Orleans v. Stemple, 175 U. S. 309;
Metropolitan Life Ins. Co. v. New Orleans, 205 U.
S. 395;
Bristol v. Washington County,
177 U. S. 133;
Kirtland v. Hotchkiss, 100 U. S. 491, and
Savings Society v. Multnomah County, 169 U.
S. 421;
Union Transit Co. v. Kentucky,
199 U. S. 194,
199 U. S. 205;
Tappan v. Merchants' National
Bank, 19 Wall. 490,
86 U. S. 499;
Corry v. Baltimore, 196 U. S. 466, and
Hawley v. Malden, 232 U. S. 1,
232 U. S. 12;
Blackstone v. Miller, 188 U. S. 189 (so
far as it relates to the transfer tax on a bank account in the
state of the bank), and
Fidelity & Columbia Trust Co. v.
Louisville, 245 U. S. 54,
245 U. S. 58;
Bullen v. Wisconsin, 240 U. S. 625,
240 U. S.
631.
MR. JUSTICE HOLMES.
This is a proceeding for the determination of a tax alleged to
be due to the Minnesota but objected to by the appellant as
contrary to the Fourteenth Amendment of the Constitution of the
United States. The tax is imposed in respect of the transfer by
will of bonds and certificates of indebtedness of the State of
Minnesota and bonds of two cities of that state. The testator died
domiciled in New York, and the bonds were there at the time of his
death. The supreme court of the state upheld the tax, 176 Minn.
634, and the executor appeals.
It is not disputed that the transfer was taxable in New York,
but there is no constitutional objection to the same transaction's
being taxed by two states if the laws of both have to be invoked in
order to give it effect. It may be assumed that the transfer,
considered by itself alone, depends on the law of New York, but if
he law of Minnesota is necessary to the existence of anything
beyond a piece of paper to be transferred, then Minnesota may
demand payment for a privilege that could not exist without its
help. It seems to me that the law of Minnesota is a
Page 280 U. S. 217
present force necessary to the existence of the obligation, and
that therefore, however contrary it may be to enlightened policy,
the tax is good.
No one would doubt that the law of Minnesota was necessary to
call the obligation into existence. Other states do not attempt to
determine the legal consequences of acts done outside of their
jurisdiction, and therefore whether certain acts done in Minnesota
constitute a contract or not depends on the law of Minnesota alone.
I think the same thing is true of the continuance of the obligation
to the present time. It seems to me that it is the law of Minnesota
alone that keeps the debt alive. Obviously, at the beginning, that
law could have provided that the debt should be extinguished by the
death of the creditor or by such other event as that law might
point out. It gave the debt its duration. The continued operation
of that law keeps the debt alive. Not to go too far into the field
of speculation, but confining the discussion to cities of the state
and the state itself, the continued existence of the cities and the
readiness of the state to keep its promises depend upon the will of
the state. If there were no Constitution, the state might abolish
the debt by its fiat. The only effect of the Constitution is that
the law that originally gave the bonds continuance remains in force
unchanged. But it is still the law of that state, and no other.
When such obligation are enforced by suit in another state, it is
on the footing of recognition, not of creation,
Deutsche Bank
Filiale Nurnberg v. Humphrey, 272 U.
S. 517,
272 U. S. 519.
Another state, if it is civilized, does not undertake to say to the
debtor, "now that we have caught you, we will force an obligation
upon you whether you still are bound by the law of your own state
or not." I believe this to be the vital point. Unless I am wrong,
the debt, wherever enforced, is enforced only because it is
recognized as such by the law that created it and keeps it still a
debt. No doubt, sometimes obligations are enforced elsewhere
when
Page 280 U. S. 218
the statute of limitations has run at home. But such decisions,
when defensible, stand on the ground that the limitation is only
procedural, and does not extinguish the duty. If the statute
extinguishes the debt by lapse of time, no foreign jurisdiction
that intelligently understood its function would attempt to make
the debtor pay.
I will not repeat what I said the other day in
Safe Deposit
& Trust Co. of Baltimore v. Virginia, ante, p.
280 U. S. 83,
concerning the attempt to draw conclusions from the supposed situs
of a debt. The right to tax exists in this case because the party
needs the help of Minnesota to acquire a right, and that state can
demand a
quid pro quo in return.
Southern Pacific Co.
v. Kentucky, 222 U. S. 63,
222 U. S. 68;
Union Refrigerator Transit Co. v. Kentucky, 199 U.
S. 194,
199 U. S.
206.
I do not dwell on the practical necessity of resorting to the
state in order to secure payment of state or municipal bonds. Even
if the creditor had a complete and adequate remedy elsewhere, I
still should think that a correct decision of the case must rest on
whether I am right or not about the theoretical dependence of the
continued existence of the bonds upon Minnesota law.
Blackstone v. Miller, 188 U. S. 189,
supports my conclusions, and I do not think that it should be
overruled. A good deal has to be read into the Fourteenth Amendment
to give it any bearing upon this case. The Amendment does not
condemn everything that we may think undesirable on economic or
social grounds.
MR. JUSTICE BRANDEIS agrees with this opinion.