2. A statute of a state which undertakes to tax things wholly
beyond her jurisdiction or control conflicts with the Fourteenth
Amendment. P.
280 U. S.
92.
3.
Mobilia sequuntur personam is a fiction intended for
convenience, not controlling where justice does not demand it, and
not to be applied if the result would be a patent and inescapable
injustice through double taxation, or otherwise. Pp.
280 U. S.
92-93.
4. Intangibles, such as stocks and bonds, in the hands of the
holder of the legal title, with definite taxable situs at that
owner's residence not subject to be changed by the equitable owner,
may not be taxed at the latter's domicile in another state. P.
280 U.S. 93.
5. A citizen of Virginia transferred a fund of stocks and bonds
to a Maryland Trust Company in trust for his two minor sons. The
trustee was empowered to change the investments and was to
accumulate the income, first paying taxes and its own commissions,
and, as each son attained the age of twenty-five years, was to pay
him one-half of the principal with the income accumulated thereon.
If either son died before receiving his share, his share was to be
paid over to his children, if he left any; otherwise it was to be
added to that of the surviving son and held for his use and benefit
in the same manner as the original share of that son was held. The
deed made no provision for the event of death of both sons under
twenty-five without issue. The donor reserved to himself a power of
revocation, but died in Virginia without exercising it. The Trust
Company continued to hold the original securities in Baltimore,
Maryland, and paid the taxes regularly demanded by that City and
state on account of them. Administration of the
Page 280 U. S. 84
donor's estate was had in Virginia, where the two sons, still in
their minority, also were domiciled. The courts of Virginia
sustained a Virginia tax upon the whole corpus of the trust estate
by regarding the sons, in conjunction with the administrator, as
the real owners of it.
Held that the tax was on property
beyond the jurisdiction of the state, and invalid under the
Fourteenth Amendment. 151 Va. 883, reversed.
Appeal from a judgment of the Special Court of Appeals of
Virginia which affirmed a judgment denying relief to the trust
company from assessments of taxes.
Page 280 U. S. 89
MR. JUSTICE McREYNOLDS delivered the opinion of the Court.
This cause is properly here upon appeal. The petition for
certiorari is therefore denied. May 4, 1920, Lucius J. Kellam, then
domiciled and residing in Accomac County, Virginia, transferred and
delivered to the Safe Deposit & Trust Company of Baltimore,
Maryland, stocks and bonds of sundry corporations valued at
$50,000, with power to change the investments, upon the following
terms:
". . . To collect the income arising therefrom and after paying
such taxes as may be chargeable thereon and its 5% commissions on
the gross income, to accumulate the net income for the benefit of
the two sons of myself -- that is to say, Lucius J. Kellam, Jr.,
who attained the age of eight years on September 25, 1919, and
Emerson Polk Kellam, who attained the age of five years on February
5, 1920 -- and, when the said Lucius J. Kellam, Jr., arrives at
twenty-five years of age, to deliver to him one-half of the
principal of the estate hereby conveyed and one-half of the said
accumulations of income -- the other half of the
Page 280 U. S. 90
said principal and accumulations of income shall be retained by
said Trustee, and all income therefrom shall continue to be
accumulated until the said Emerson Polk Kellam arrives at
twenty-five years of age, when he shall become entitled to the said
one-half of the principal and accumulations so retained, together
with all further accumulations thereon. If either of said two sons
shall die before receiving his share of said principal and
accumulations, then the same shall be paid over and delivered to
his children living at his death, and if either shall die before
receiving his share without issue, then such share shall be added
to the share of the survivor and be held for his use and benefit in
the same manner precisely as his original share is held."
The deed made no provision for the event of death of both sons
under 25 without issue. The donor reserved to himself power of
revocation, but, without exercising it, died in 1920.
Administration on his estate was had in Accomac County, Virginia,
and his two sons are domiciled there.
Except as changed by reinvestment, the trust company has
continued to hold the original securities in Baltimore, Maryland,
and has paid the taxes regularly demanded by that city and state on
account of them.
An assessment for taxation in Accomac County, Virginia, for the
years 1921, 1922, 1923, 1924, and 1925 upon the whole corpus of the
trust estate was sustained by the court below -- the highest state
tribunal to which the matter could be submitted. It declared §
2307, Virginia Code (1919), as amended in 1920 (Laws 1920, c. 376)
1922 (Laws 1922, c. 520), and 1923 (Laws Ex.Sess.1923, c. 104),
*
Page 280 U. S. 91
applicable, adequate to support the demand, and not in conflict
with the Fourteenth Amendment.
Appellant maintains that, so interpreted and applied, the
statute lays a tax upon property wholly beyond the jurisdiction of
the state, and consequently offends the Fourteenth Amendment.
Manifestly, the securities are subject to taxation in Maryland
where they are in the actual possession of the trust company --
holder of the legal title. That they are property within Maryland
is not questioned.
De Ganay v. Lederer, 250 U.
S. 376,
250 U. S. 382.
Also, nobody within Virginia has present right to their control or
possession, or to receive income therefrom, or to cause them to be
brought physically within her borders. They have no legal situs for
taxation in Virginia unless the legal fiction
mobilia sequuntur
personam is applicable and controlling. The court below,
recognizing this, held the two sons, in conjunction with the
administrator of the father's estate -- all domiciled in Virginia
-- really owned the fund
Page 280 U. S. 92
and that, by reason of the fiction, its taxable situs followed
them.
We need not make any nice inquiry concerning the ultimate or
equitable ownership of the securities or the exact nature of the
interest held by the sons. In the disclosed circumstances, we think
that is not a matter of controlling importance.
Ordinarily, this Court recognizes that the fiction of
mobilia sequuntur personam may be applied in order to
determine the situs of intangible personal property for taxation.
Blodgett v. Silberman, 277 U. S. 1. But the
general rule must yield to established fact of legal ownership,
actual presence, and control elsewhere, and ought not to be applied
if so to do would result in inescapable and patent injustice,
whether through double taxation or otherwise.
State Board of
Assessors v. Comptoir National d'Escompte, 191 U.
S. 388,
191 U. S. 404;
Buck v. Beach, 206 U. S. 392,
206 U. S. 408;
Liverpool, etc., Ins. Co. v. Orleans Assessors,
221 U. S. 346,
221 U. S. 354;
Maguire v. Trefry, 253 U. S. 12,
253 U. S. 17. Here,
where the possessor of the legal title holds the securities in
Maryland, thus giving them a permanent situs for lawful taxation
there, and no person in Virginia has present right to their
enjoyment or power to remove them, the fiction must be disregarded.
It plainly conflicts with fact; the securities did not and could
not follow any person domiciled in Virginia. Their actual situs is
in Maryland, and cannot be changed by the
cestuis que
trust.
The power of Virginia to lay a tax upon the fair value of any
interest in the securities actually owned by one of her resident
citizens is not now presented for consideration.
See Maguire v.
Trefry, supra.
A statute of a state which undertakes to tax things wholly
beyond her jurisdiction or control conflicts with the Fourteenth
Amendment.
Union Refrigerator Transit Co. v. Kentucky,
199 U. S. 194,
199 U. S. 204;
Buck v.
Beach, 206
Page 280 U. S. 93
U.S. 392,
206 U. S. 402,
206 U. S.
408-409;
Frick v. Pennsylvania, 268 U.
S. 473;
Wachovia Bank & Trust Co. v.
Doughton, 272 U. S. 567,
272 U. S.
575.
Tangible personal property permanently located beyond the
owner's domicile may not be taxed at the latter place.
Union
Refrig. Transit Co. v. Kentucky, supra; Frick v. Pennsylvania,
supra. Intangible personal property may acquire a taxable
situs where permanently located, employed, and protected.
New
Orleans v. Stemple, 175 U. S. 309;
Bristol v. Washington County, 177 U.
S. 133;
State Board of Assessors v. Comptoir
National d'Escompte, 191 U. S. 388;
Metropolitan Life Ins. Co. v. New Orleans, 205 U.
S. 395;
Liverpool & L. & G. Ins. Co. v.
Orleans Assessors, 221 U. S. 346.
Here, we must decide whether intangibles -- stocks, bonds -- in
the hands of the holder of the legal title with definite taxable
situs at its residence, not subject to change by the equitable
owner, may be taxed at the latter's domicile in another state. We
think not. The reasons which led this Court in
Union Refrig.
Transit Co. v. Kentucky, 199 U. S. 194, and
Frick v. Pennsylvania, 268 U. S. 473, to
deny application of the maxim
mobilia sequuntur personam
to tangibles apply to the intangibles in appellant's possession.
They have acquired a situs separate from that of the beneficial
owners. The adoption of a contrary rule would "involve
possibilities of an extremely serious character" by permitting
double taxation, both unjust and oppressive. And the fiction of
mobilia sequuntur personam "was intended for convenience,
and not to be controlling where justice does not demand it."
No opinion of this Court seems definitely to rule the exact
point now presented.
Blackstone v. Miller, 188 U.
S. 189, sustained an assessment of tax by New York upon
the transfer of credits, declared to have taxable situs within her
borders, under the will of a citizen of Illinois.
Page 280 U. S. 94
In
Wheeler v. Sohmer, 233 U. S. 434, the
tax was not laid at the owner's domicile, but by the state wherein
the securities were deposited.
Bullen v. Wisconsin,
240 U. S. 625,
involved an inheritance tax; the creator of the trust resided in
Wisconsin at his death, and an Illinois company with legal title
then held possession of the property in Chicago; but the creator
had retained full power to revoke the trust and regain control.
Fidelity & Columbian Trust Co. v. Louisville,
245 U. S. 54,
sustained a tax laid at the domicile of the legal owner. He had
full power to control the deposits in St. Louis banks, and might
have brought the entire fund within Kentucky's jurisdiction. In
Blodgett v. Silberman, 277 U. S. 1, the
decedent -- a resident of Connecticut -- had control and present
right to all benefits arising from the property. The legal title
was not held by another with the duty to retain possession, as in
the present cause. Moreover, this Court did not there determine
that the property had a taxable situs in New York.
Any general statement in the above opinions which may seem to
interfere with the conclusion here announced must be limited and
confined to the precise situation then under consideration.
It would be unfortunate, perhaps amazing, if a legal fiction
originally invented to prevent personalty from escaping just
taxation should compel us to accept the irrational view that the
same securities were within two states at the same instant, and,
because of this, to uphold a double and oppressive assessment.
The judgment of the court below must be reversed, and the cause
remanded for further proceedings not inconsistent with this
opinion.
Reversed.
Page 280 U. S. 95
* Sec. 2307, Va.Code 1919 (as amended).
"
By whom property is to be listed; to whom taxed. -- If
property be owned by a person
sui juris, it shall be
listed by and taxed to him. If property be owned by a minor, it
shall be listed by and taxed to his guardian or trustee, if any he
has; if he has no guardian or trustee, it shall be listed by and
taxed to his father, if any he has; if he has no father, then it
shall be listed by and taxed to his mother, if any he has, and if
he has no guardian, nor trustee, father nor mother, it shall be
listed by and taxed to the person in possession. If the property is
the separate property of a person over twenty-one years of age or a
married woman, it shall be listed by and taxed to the trustee, if
any they have in this state, and if they have no trustee in this
state, it shall be listed by and taxed to themselves. In either
case, it shall be listed and taxed in the county or city where they
reside; but if they be nonresidents of Virginia, the property shall
be listed and taxed in the county or city wherein such trustee
resides. If the property be the estate of a deceased person, it
shall be listed by the personal representative of person in
possession, and taxed to the estate of such deceased person. If the
property be owned by an idiot or lunatic, it shall be listed by and
taxed to his committee, if any; if none has been appointed, then
such property shall be listed by and taxed to the person in
possession. If the property is held in trust for the benefit of
another, it shall be listed by and taxed to the trustee in the
county or city of his residence (except as hereinbefore
provided)."
Concurring opinion of MR. JUSTICE STONE.
I concur in the result. It is enough to support it that, as
stipulated in the record, the Virginia assessment was levied
against a trustee domiciled in Maryland upon securities held by it
in trust in its exclusive possession and control there, and so is
forbidden as an attempt to tax property without the jurisdiction.
Brooke v. Norfolk, 277 U. S. 27. But
the question whether the Fourteenth Amendment forbids a tax on the
beneficiaries, in Virginia, where they are domiciled, measured by
their equitable interests, seems to me not to be presented by the
record, and so, under the settled rule of decision of this Court,
ought not now to be decided.
Burton v. United States,
196 U. S. 283,
196 U. S. 296;
Blair v. United States, 250 U. S. 273,
250 U. S. 279;
Flint v. Stone-Tracy Co., 220 U.
S. 107;
Light v. United States, 220 U.
S. 523,
220 U. S.
538.
No attempt was made by Virginia to tax the equitable interests
of the beneficiaries of the trust. That the thing taxed or the
measure of the tax is different from the equitable interests of the
beneficiaries, as affected by the specified contingencies,
sufficiently appears from the fact that the one may well have been
of different value than the other. In fact, the securities seem to
have been assessed at their full value, although the equitable
interests of the beneficiaries are less than the whole.
It may be that Virginia, following its own view of the nature of
vested and contingent interests, might tax the interests of these
beneficiaries as though they were the whole, but it is sufficient
for present purposes that it has not assumed to do so. In the face
of the present record, we are not required to speculate how far a
tax, forbidden because assessed upon property beyond the
jurisdiction, may be upheld because it may be passed on to the
beneficiaries
Page 280 U. S. 96
in Virginia and the equitable interests thus reached by
indirection.
If the question were here, I would not be prepared to go so far
as to say that the equitable rights
in personam of the
beneficiaries of the trust might not have been taxed at the place
of their domicile quite as much as a debt secured by a mortgage on
land in another jurisdiction, notwithstanding the fact that the
land is also taxed at its situs. In neither case, if the threat of
double taxation were controlling, which, under the decisions, it is
not,
Fidelity & Columbia Tr. Co. v. Louisville,
245 U. S. 54,
245 U. S. 58;
Cream of Wheat Co. v. Grand Forks County, 253 U.
S. 325,
253 U. S. 330;
Citizens Nat'l Bank v. Durr, 257 U. S.
99,
257 U. S. 109;
cf. Swiss Oil Corp. v. Shanks, 273 U.
S. 407,
273 U. S. 413,
would it seem that in any real sense is there double taxation,
since the legal interests protected and taxed by the two taxing
jurisdictions are different.
MR. JUSTICE BRANDEIS, concurs in this opinion.
MR. JUSTICE HOLMES.
The Special court of appeals was plainly right in holding that
the deed of trust conferred an absolute gift upon the two
beneficiaries, perhaps, though I doubt it, subject to be divested
upon a condition subsequent. Gray, Perpetuities (1st ed.) § 108. If
the beneficiaries could be taxed at all, they could be taxed for
the whole value of the property, because the whole title was in
them, even if liable to be divested at some future time in a not
very probable event.
I am of opinion that, on principle, they can be taxed. In the
first place, I do not think that it matters that the owners,
residing in Virginia, have only an equitable title. To be sure, the
trustee having the legal title and possession
Page 280 U. S. 97
of the bonds in Maryland, may be taxed there. But that does not
affect the right of Virginia by reason of anything that I know of
in the Constitution of the United States.
Bonaparte v. Appeal
Tax Court, 104 U. S. 592;
Kidd v. Alabama, 188 U. S. 730,
188 U. S.
732-733;
Hawley v. Malden, 232 U. S.
1,
232 U. S. 13;
Cream of Wheat Co. v. Grand Forks, 253 U.
S. 325,
253 U. S. 330;
Citizens National Bank v. Durr, 257 U. S.
99,
257 U. S. 109;
Blodgett v. Silberman, 277 U. S. 1,
277 U. S. 10.
Compare with the last case Wheeler v. Sohmer, 233 U.
S. 434.
I see no other fact to cut down Virginia's power. It is true
that the conception of domicil has been applied to tangible
personal property, and it now is established that a state cannot
tax the owner of a such property if it is permanently situated in
another state. But hitherto the decisions have been confined to
tangibles that in a plain and obvious way owed their protection to
another power.
Union Refrigerator Transit Co. v. Kentucky,
199 U. S. 194,
199 U. S. 206.
It seemed to me going pretty far to discover even that limitation
in the Fourteenth Amendment. It opens vistas to extend the
restriction to stocks and bonds in a way that I cannot reconcile
with
Blodgett v. Silberman, 277 U. S.
1. Taxes generally are imposed upon persons, for the
general advantages of living within the jurisdiction, not upon
property, although generally measured more or less by reference to
the riches of the person taxed, on grounds not of fiction, but of
fact.
Fidelity & Columbia Trust Co. v. Louisville,
245 U. S. 54,
245 U. S. 58;
Kirtland v. Hotchkiss, 100 U. S. 491. The
notion that the property must be within the jurisdiction puts the
emphasis on the wrong thing. The owner may be taxed for it although
it never has been within the state.
Southern Pacific Co. v.
Kentucky, 222 U. S. 63. It
seems to me going still further astray to rely upon the situs of
the debt. A debt is a legal relation between two parties, and, if
we think of facts, is situated at least as much with the debtor
against whom the obligation must be enforced as it is with the
creditor. To say that a debt
Page 280 U. S. 98
has a situs with the creditor is merely to clothe a foregone
conclusion with a fiction. The place of the property is not
material except where inability to protect carries with it
inability to tax. But that is an exceptional consequence. One state
may tax the owner of bonds of another state, although it certainly
contributes nothing to their validity.
Bonaparte v. Appeal Tax
Court, 104 U. S. 592. It
is admitted that Maryland could tax the trustee in this case
although most, at least, of the securities handed over were beyond
the power of Maryland to affect in any substantial way. The
equitable owners of the fund were in Virginia, and I think they
could be taxed for it there. I do not understand that any merely
technical question is raised on the naming of the trustee instead
of the
cestui que trust as the party taxed. Nor is there
any question of the amount. Throughout the record, by the Court and
by the trustee, the single issue is stated to be whether the fund
can be reached. In the words of the trustee, it is:
"Has such corpus, so created and held, a taxable situs in
Virginia within the sanction section one of the 14th Amendment to
the Constitution of the United States?"
I think the judgment should be affirmed.