Source: https://www.legalcrystal.com/case/95693/first-national-bank-boston-vs-maine
Timestamp: 2019-04-21 04:40:56+00:00

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1. Where a stockholder dies domiciled in a state other than that in which the corporation was created and has its property, the state of his domicile has power to tax the succession to the shares by will or inheritance, but the state of the corporation cannot do so.
2. A resident of Massachusetts died there owning shares in a Maine corporation, most of the property of which was in Maine. A Massachusetts tax was assessed and paid on legacies and distributive shares made up largely of the proceeds of the stock. A like tax was assessed in Maine, from which the amount of the Massachusetts tax was deducted. Held, that the tax by Maine was invalid under the due process clause of the Fourteenth Amendment. P. 284 U. S. 326 et seq.
3. A transfer from the dead to the living of any specific property is an event single in character, and is effected under the laws, and occurs within the limits, of a particular state, and it is unreasonable, and incompatible with a sound construction of the due process clause of the Fourteenth Amendment, to hold that jurisdiction to tax that event may be distributed among a number of states. P 284 U. S. 327 .
4. The considerations that justify application of the maxim mobilia sequuntur personam to death transfer taxes imposed in respect of bonds, certificates of indebtedness, notes, credits, and bank deposits apply, with substantially the same force, in respect of shares of corporate stock. Id.
5. Ownership of shares by the stockholder and ownership of the capital by the corporation are not identical. The former is an individual interest giving the stockholder a right to a proportional part of the dividends and the effects of the corporation when dissolved, after payment of its debts. And this interest is an incorporeal property right which attaches to the person of the owner in the his domicile. P. 284 U. S. 330 .
6. The fact that the property of the corporation is situated in another state affords no ground for the imposition by that a death tax upon the transfer of the stock; nor does the further fact of incorporation under the laws of that state. Id.
7. Power of state of incorporation to tax stock transfers and issue of new certificate distinguished. P. 284 U. S. 330 .
8. The question whether shares of stock, as well as other intangibles, may be so used in a state other than that of the owner's domicile as to give them a situs there for tax purposes analogous to the actual situs of tangible property is not here presented. P. 284 U. S. 331 .
130 Me. 123, 154 A. 103, reversed.
Appeal from a judgment sustaining a succession tax. An action in debt brought by the state to collect the tax was referred upon an agreed statement of facts to the Supreme Judicial Court.
The question presented for our determination by this appeal is whether the State of Maine has power, under the Fourteenth Amendment, to impose a tax upon a transfer by death of shares of stock in a Maine corporation forming part of the estate of a decedent who, at the time of his death, was domiciled in the Commonwealth of Massachusetts.
"within its jurisdiction, and there subject to an inheritance tax, even though the owner was a nonresident decedent, regardless of whether the certificates of stock were at the time of the death in the state of the domicile or in the taxing state,"
and that the Fourteenth Amendment thereby was not infringed. 130 Me. 123, 154 A. 103, 108.
to a transfer tax imposed by New York, notwithstanding the fact that the whole succession, including the deposit, had been similarly taxed in Illinois. That decision was overruled by the Farmers Loan Company case, and with it, of course, all intermediate decisions so far as they were based on Blackstone v. Miller.
A review of these decisions would serve no useful purpose. While, in some of them, a restatement of the doctrine of Blackstone v. Miller was unnecessary to a determination of the points presented for consideration, and in others the facts might be distinguished from those of the present case, nevertheless the authority of the Blackstone case was accepted by all. Frick v. Pennsylvania, 268 U. S. 473 , was one of the latest to approve that case and give countenance to the general doctrine that intangible property (unlike tangible property) might be subjected to a death transfer tax in more than one state, but this and all other instances of such approval, whether express or tacit, with the overthrow of the foundation upon which they rested, have ceased to have other than historic interest.
the power of the state to impose was a taking of property in violation of the due process clause; (2) that, while the tax laws of a state may reach every object which is under its jurisdiction, they cannot be given extraterritorial operation, and (3) that, as respects tangible personal property having an actual situs in a particular state, the power to subject it to state taxation rests exclusively in that state, regardless of the owner's domicile.
"But, to impose either tax, the state must have jurisdiction over the thing that is taxed, and to impose either without such jurisdiction is mere extortion, and in contravention of due process of law."
See also Union Refrigerator Transit Co. v. Kentucky, 199 U. S. 194 , 199 U. S. 204 ; Rhode Island Hospital Trust Co. v. Doughton, 270 U. S. 69 , 270 U. S. 80 .
"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."
none was connected with business carried on by or for the decedent in Minnesota. His will was probated and his estate administered in New York, and a tax exacted by that state on the testamentary transfer. Minnesota assessed an inheritance tax upon the same transfer, which was upheld by her supreme court. This Court, applying the maxim mobilia sequuntur personam, held that the situs for taxation was in New York, and that the tax was there properly imposed. The contention on behalf of the state was that the obligations were debts of Minnesota and her municipal corporations, subject to her control, that her laws gave them validity, protected them, and provided means for enforcing payment, and that, accordingly, they had a situs for taxation also in that state.
taxable situs imposed by due application of the mobilia maxim.
"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 of their owner, and we can find no sufficient reason for saying that they 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."
Notwithstanding the registration of certain of the bonds, and notwithstanding the contention that Minnesota protects the debt, compels its payment, and permits its transfer, we concluded that the testamentary transfer was properly taxable in New York, but not also in Minnesota.
This case was followed by Baldwin v. Missouri, 281 U. S. 586 . There, the testator, domiciled in Illinois at the time of her death, had credits for cash deposited in banks located in Missouri, and certain bonds of the United States and promissory notes; all physically within that state. Some of the notes, executed by residents of Missouri, were secured on lands in that state. Applying the principles of the Farmers Loan Company case, we held that the situs of these credits, bonds, and notes was at the domicile of the testator, and there passed from the dead to the living; that they were not within Missouri for taxation purposes, and that the transfer was not subject to the power of that state.
Beidler v. South Carolina Tax Comm'n, 282 U. S. 1 , presented still another phase of the subject. There it appeared that a resident of Illinois died in that state. At the time of his death, a South Carolina corporation was indebted to him in a large sum upon an open unsecured account entered upon the books of the corporation kept in South Carolina. Again applying the principles of the Farmers Loan Company case, we held that the transfer by death of this debt was taxable only by the state of the domicile.
It long has been settled law that real property cannot be taxed, or made the basis of an inheritance tax, except by the state in which it is located. More recently, it became settled that the same rule applies with respect to tangible personal property. And it now is established by the three cases last cited that certain specific kinds of intangibles -- namely, bonds, notes, and credits -- are subject to the imposition of an inheritance tax only by the domiciliary state, and this notwithstanding the bonds are registered in another state, and the notes secured upon lands located in another state, resort to whose laws may be necessary to secure payment.
conclusion that a determination fixing the local situs of a thing for the purpose of transferring it in one state carries with it an implicit denial that there is a local situs in another state for the purpose of transferring the same thing there. The contrary conclusion as to intangible property has led to nothing but confusion and injustice by bringing about the anomalous and grossly unfair result that one kind of personal property cannot, for the purpose of imposing a transfer tax, be within the jurisdiction of more than one state at the same time, while another kind, quite as much within the protecting reach of the Fourteenth Amendment, may be at the same moment within the taxable jurisdiction of as many as four states, and by each subjected to a tax upon its transfer by death -- an event which takes place, and in the nature of things can take place, in one of the states only.
A transfer from the dead to the living of any specific property is an event single in character, and is effected under the laws, and occurs within the limits, of a particular state, and it is unreasonable and incompatible with a sound construction of the due process of law clause of the Fourteenth Amendment to hold that jurisdiction to tax that event may be distributed among a number of states.
"deposits in banks, mortgages, debts, receivables, shares of stock, bonds, notes, credits, evidences of an interest in property, evidences of debt and choses in action generally."
Gen.Laws N.Y.1930, c. 710, § 1. This impressive recognition of the substantial identity of the enumerated intangibles, for purposes of death taxation, is entitled to weight.
A distinction between bonds and stocks for the essentially practical purposes of taxation is more fanciful than real. Certainly, for such purposes, the differences are not greater than the differences between tangible and intangible property, or between bonds and credits. When things so dissimilar as bonds and household furniture may not be subjected to contrary rules in respect of the number of states which may tax them, there is a manifest incongruity in declaring that bonds and stocks, possessing, for the most part, the same or like characteristics, may be subjected to contrary rules in that regard.
We conclude that shares of stock, like the other intangibles, constitutionally can be subjected to a death transfer tax by one state only.
The question remains: in which state, among two or more claiming the power to impose the tax, does the taxable event occur? In the case of tangible personalty, the solution is simple: the transfer -- that is, the taxable event -- occurs in that state where the property has an actual situs, and it is taxable there and not elsewhere. In the case of intangibles, the problem is not so readily solved, since intangibles ordinarily have no actual situs. But it must be solved unless gross discrimination between the two classes of property is to be sanctioned, and this Court has solved it in respect of the intangibles heretofore dealt with by applying the maxim mobilia sequuntur personam.
Farmers Loan Co. v. Minnesota, supra, at pp. 280 U. S. 211 -212; Baldwin v. Missouri, supra; Beidler v. South Carolina Tax Commission, supra.
This ancient maxim had its origin when personal property consisted in the main of articles appertaining to the person of the owner, such as gold, silver, jewels, and apparel, and, less immediately, animals and products of the farm and shop. Such property was usually under the direct supervision of the owner, and was often carried about by him on his journeys. Under these circumstances, the maxim furnished the natural and reasonable rule. In modern times, due to the vast increase in the extent and variety of tangible personal property not immediately connected with the person of the owner, the rule has gradually yielded to the law of the place where the property is kept and used. Pullman's Palace-Car Co. v. Pennsylvania, 141 U. S. 18 , 141 U. S. 22 ; Eidman v. Martinez, 184 U. S. 578 , 184 U. S. 581 ; Union Refrigerator Transit Co. v. Kentucky, supra, 199 U. S. 206 . But in respect of intangible property, the rule is still convenient and useful, if not always necessary, and it has been adhered to as peculiarly applicable to that class of property. Blodgett v. Silberman, supra, 277 U. S. 9 -10; Farmers Loan Co. v. Minnesota, supra, 280 U. S. 211 ; Union Refrigerator Transit Co. v. Kentucky, supra, 1 199 U. S. 206 .
the stockholder and ownership of the capital by the corporation are not identical. The former is an individual interest giving the stockholder a right to a proportional part of the dividends, and the effects of the corporation when dissolved, after payment of its debts. Delaware Railroad Tax, 18 Wall. 206, 85 U. S. 229 -230; Rhode Island Trust Co. v. Doughton, 270 U. S. 69 , 270 U. S. 81 ; Eisner v. Macomber, 252 U. S. 189 , 252 U. S. 213 -214. And this interest is an incorporeal property right which attaches to the person of the owner in the state of his domicile. The fact that the property of the corporation is situated in another state affords no ground for the imposition by that state of a death tax upon the transfer of the stock. Rhode Island Trust Co. v. Doughton, supra. And we are unable to find in the further fact of incorporation under the laws of such state adequate reason for a different conclusion.
to the state of the domicile, and these considerations are greatly fortified by the fact that a large majority of the states have adopted that rule by their reciprocal inheritance tax statutes. In some states, indeed, the rule has been declared independently of such reciprocal statutes. The requirements of due process of law accord with this view.
We do not overlook the possibility that shares of stock, as well as other intangibles, may be so used in a state other than that of the owner's domicile as to give them a situs analogous to the actual situs of tangible personal property. See Farmers Loan Company case, supra, at p. 280 U. S. 213 . That question heretofore has been reserved, and it still is reserved to be disposed of when, if ever, it properly shall be presented for our consideration.
We hold that the exaction of the tax here assailed was not within the power of the state under the Fourteenth Amendment, and, accordingly, the judgment below must be reversed and the cause remanded for further proceedings not inconsistent with this opinion.
"All property within the jurisdiction of this state, and any interest therein, whether belonging to inhabitants of this state or not, and whether tangible or intangible, which shall pass by will, by the intestate laws of this state, . . . shall be subject to an inheritance tax for the use of the state as hereinafter provided. . . ."
Section 25 of the same chapter in substance provides that, in case of transfers of stock owned by a nonresident decedent in a Maine corporation, the tax shall be paid to the Attorney General at the time of the transfer.
"No transfer shall affect the right of the corporation to pay any dividend due upon the stock, or to treat the holder of record as the holder in fact until such transfer is recorded upon the books of the corporation or a new certificate is issued to the person to whom it has been so transferred."
Recognizing that responsibility must rest primarily on those who undertake to blaze a new path in the law, to say how far it shall go, and notwithstanding the decisions of this Court in Safe Deposit & Trust Co. v. Virginia, 280 U. S. 83 ; Farmers Loan & Trust Co. v. Minnesota, 280 U. S. 204 ; Baldwin v. Missouri, 281 U. S. 586 ; Beidler v. South Carolina Tax Comm'n, 282 U. S. 1 , I am not persuaded that either logic, expediency, or generalizations about the undesirability of double taxation justify our adding to the cases recently overruled the long list of those which, without a dissenting voice, have supported taxation like the present. No decision of this Court requires that result. See Baldwin v. Missouri, supra, p. 281 U. S. 596 .
Such want of logic as there may be in taxing the transfer of stock of a nonresident at the home of the corporation results from ascribing a situs to the shareholder's intangible interests which, because of their very want of physical characteristics, can have no situs, and again in saying that the rights, powers, and privileges incident to stock ownership and transfer which are actually enjoyed in two taxing jurisdictions, have situs in one and not in the other. Situs of an intangible, for taxing purposes, as the decisions of this Court, including the present one, abundantly demonstrate, is not a dominating reality, but a convenient fiction which may be judicially employed or discarded, according to the result desired.
of lienors in possession. As those states had created the corporations issuing the stocks, they had power to impose the tax and to enforce it by such means, irrespective of the decedent's domicile, and the actual situs of the stock certificates. Pennsylvania's jurisdiction over the stocks necessarily was subordinate to that power. Therefore. to bring them into the administration in that state, it was essential that the tax be paid. . . . We think it plain that such value as the stocks had in excess of the tax is all that could be regarded as within the range of Pennsylvania's taxing power."
The withdrawal from appellee of authority to impose the present tax, in terms which would sweep away all power to impose any form of tax with respect to the shares of a domestic corporation if owned by nonresidents, would seem to be a far greater departure from sound and accepted principles, and one having far more serious consequences, than would the disregard of wholly artificial notions of the situs of intangibles.
The present tax is not double in the sense that it is added to that imposed by Massachusetts, since the Maine statute directs that the latter be deducted from the former. But, as the stockholder could secure complete protection and effect a complete transfer of his interest only by invoking the laws of both states, I am aware of no principle of constitutional interpretation which would enable us to say that taxation by both states, reaching the same economic interest with respect to which he was sought and secured the benefits of the laws of both, is so arbitrary or oppressive as to merit condemnation as a denial of due process of law. Only by recourse to a form of words saying that there is no taxable subject within the state by reason of the fictitious attribution to the intangible interest of the stockholder of a location elsewhere is it possible to stigmatize the tax as arbitrary.
Affirmance of this judgment involves no declaration that the tax may be imposed by three or more states instead of two, and, under the decisions of this Court, there is no ground for supposing that it could be. See Rhode Island Trust Co. v. Doughton, 270 U. S. 69 . Even if it be assumed that some protection from multiple taxation, which the Constitution has failed to provide, is desirable, and that this Court is free to supply it, that result would seem more likely to be attained, without injustice to the states, by familiar types of reciprocal state legislation than by stretching the due process clause to cover this case. See 28 Columbia L.Rev. 806; 43 Harvard L.Rev. 641. We can have no assurance that resort to the Fourteenth Amendment, as the ill adapted instrument of such a reform, will not create more difficulties and injustices than it will remove. See 30 Columbia L.Rev. 405, 406.
The present denial to Maine of power to tax transfers of shares of a nonresident stockholder in its own corporation, in the face of the now accepted doctrine that a transfer of his chattels located there and equally under its control, Frick v. Pennsylvania, supra, and that his rights as cestui que trust in a trust of property within the state, Safe Deposit & Trust Co. v. Virginia, supra, may be taxed there and not elsewhere, makes no such harmonious addition to a logical pattern of state taxing power as would warrant overturning an established system of taxation. The capital objection to it is that the due process clause is made the basis for withholding from a state the power to tax interests subject to its control and benefited by its laws; such control and benefit are together the ultimate and indubitable justification of all taxation.

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