Court Opinion

ID: 9419247
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:47:56.939291+00
Date Added: 2024-06-11T17:22:16.614501
License: Public Domain

Mr. Justice Douglas
delivered the opinion of the Court.
The sole question presented by this case is whether the State of Utah is precluded by the Fourteenth Amendment from imposing a tax upon a transfer by death of shares of stock in a Utah corporation, forming part of the estate of a decedent who, at the time of his death, was domiciled in the State of New York and held there the certificates representing those shares.
In 1940, Edward S. Harkness died testate, being at that time domiciled in New York. His estate was probated *175in New York, where respondents were appointed executors. Respondents were also appointed administrators with the will annexed, in Utah. At the time of his death, Harkness was the owner of 10,000 shares of common stock and 400 shares of preferred stock of the Union Pacific Railroad Co., a Utah corporation. The certificates representing those shares were never within Utah. They were in the possession of Harkness in New York at the time of his death, and are now held by respondents. For many years, the Union Pacific Railroad Co. has kept its stock books and records and transfer agents in New York, and has not maintained any in Utah. These shares are the only property owned by decedent which is claimed to be within the jurisdiction of Utah. At the date of decedent’s death, a New York statute allowed as a credit against the estate tax imposed by New York the amount of any constitutionally valid estate or inheritance tax paid to any other state within three years after the decedent’s death.1
Respondents sought a declaratory judgment in the Utah court holding that the transfer of the shares was not subject to tax by Utah under the provisions of its inheritance tax law.2 The trial court entered judgment for respond*176ents. The Supreme Court of Utah, under the compulsion of First National Bank v. Maine, 284 U. S. 312, affirmed. 116 P. 2d 923. We granted the petition for certiorari so that the constitutional basis of First National Bank v. Maine could be reexamined in the light of such recent decisions as Curry v. McCanless, 307 U. S. 357, and Graves v. Elliott, 307 U. S. 383. And see Commonwealth v. Stewart, 338 Pa. 9, 12 A. 2d 444, aff’d 312 U. S. 649.
There can be no doubt but that the judgment below should be affirmed if First National Bank v. Maine is to survive, as the judgment in that case prohibited the State of Maine from doing what the State of Utah is here attempting. But we do not think it should survive. And certainly it cannot if the principles which govern the Curry and Graves cases rest on firm constitutional grounds.
First National Bank v. Maine, like its forerunners Farmers Loan & Trust Co. v. Minnesota, 280 U. S. 204, and Baldwin v. Missouri, 281 U. S. 586, read into the Fourteenth Amendment a “rule of immunity from taxation by more than one state.” 284 U. S. p. 326. As we said in the Curry case, that doctrine is of recent origin. Prior to 1930, when Blackstone v. Miller, 188 U. S. 189, was overruled by Farmers Loan & Trust Co. v. Minnesota, the adjudications of this Court clearly demanded a result opposite from that which obtained in First National Bank v. Maine. That was recognized by the majority in the latter case (284 U. S. p. 321)—and properly so, because Blackstone v. Miller rejected the notion that there were constitutional objec*177tions to double taxation of intangibles by States which had command over them or their owner. And see Kidd v. Alabama, 188 U. S. 730, 732. Blackstone v. Miller permitted New York to tax the transfer of debts owed by New York citizens to a decedent who died domiciled in Illinois, although Illinois had taxed the entire succession. Mr. Justice Holmes, speaking for the Court, upheld the power of New York to collect the tax because the transfer of the debts “necessarily depends upon and involves the law of New York for its exercise.” 188 U. S. p. 205. It was that view which the minority in First National Bank v. Maine championed. They maintained that there was no constitutional barrier to taxation by Maine of the transfer of the shares of stock of the Maine corporation, since the nature and extent of the decedent’s interest in the shares were “defined by the laws of Maine, and his power to secure the complete transfer” was “dependent upon them.” 284 U. S. p. 332. That view had been repeatedly expressed in other earlier cases touching on the rights of a State to tax intangibles over which it had command though the owner was a non-resident. Tappan v. Merchants’ Nat. Bank, 19 Wall. 490, 503-504; Hawley v. Malden, 232 U. S. 1, 12; Baker v. Baker, Eccles & Co., 242 U. S. 394, 401; Frick v. Pennsylvania, 268 U. S. 473, 497; Rhode Island Hospital Trust Co. v. Doughton, 270 U. S. 69, 81. As stated by Chief Justice Marshall in McCulloch v. Maryland, 4 Wheat. 316, 429, the power to tax “is an incident of sovereignty, and is co-extensive with that to which it is an incident. All subjects over which the sovereign power of a state extends, are objects of taxation. . . .”
It was that view which we followed in the Curry case. We held there that the Fourteenth Amendment did not prevent both Alabama and Tennessee from imposing death taxes upon the transfer of an interest in intangibles held in trust by an Alabama trustee but passing under the will of a beneficiary decedent domiciled in Tennessee. *178We stated that rights to intangibles “are but relationships between persons, natural or corporate, which the law recognizes by attaching to them certain sanctions enforceable in courts. The power of government over them and the protection which it gives them cannot be exerted through control of a physical thing. They can be made effective only through control over and protection afforded to those persons whose relationships are the origin of the ■rights. . . . Obviously, as sources of actual or potential wealth—which is an appropriate measure of any tax imposed on ownership or its exercise—they cannot be dissociated from the persons from whose relationships they are derived. These are not in any sense fictions. They are indisputable realities.” 307 U. S. p. 366. We held that the power to tax intangibles was not restricted to one State, whether “we regard the right of a state to tax as founded on power over the object taxed, as declared by Chief Justice Marshall in McCulloch v. Maryland, supra, through dominion over tangibles or over persons whose relationships are the source of intangible rights; or on the benefit and protection conferred by the taxing sovereignty, or both.” Id. pp. 367-368. And we added: “Shares of corporate stock may be taxed at the domicile of the shareholder and also at that of the corporation which the taxing state has created and controls; and income may be taxed both by the state where it is earned and by the state of the recipient's domicile. Protection, benefit, and power over the subject matter are not confined to either state.” Id., p. 368. In the recent case of Wisconsin v. J. C. Penney Co., 311 U. S. 435, 444, we gave renewed expression to the same view: “A state is free to pursue its own fiscal policies, unembarrassed by the Constitution, if by the practical operation of a tax the state has exerted its power in relation to opportunities which it has given, to protection which it has afforded, to benefits which it has *179conferred by the fact of being an orderly, civilized society.” And see Graves v. Schmidlapp, 315 U. S. 657.
Furthermore, the rule of immunity against double taxation espoused by First National Bank v. Maine, had long been rejected in other cases. Kidd v. Alabama, supra; Fort Smith Lumber Co. v. Arkansas, 251 U. S. 532; Cream of Wheat Co. v. Grand Forks, 253 U. S. 325. We rejected it again only recently. Illinois Central R. Co. v. Minnesota, 309 U. S. 157. And as we pointed out in the Curry case, the reasons why the Fifth Amendment “does not require us to fix a single exclusive place of taxation of intangibles for the benefit of their foreign owner” (Burnet v. Brooks, 288 U. S. 378) are no less cogent in case of the Fourteenth. 307 U. S. pp. 369, 370.
The recent caseg to which we have alluded are all distinguishable on their facts. But their guiding principles are irreconcilable with the views expressed in First National Bank v. Maine. If we raised a constitutional barrier in this case after having let it down in the Curry case, we would indeed be drawing neat legal distinctions and refinements which certainly cannot be divined from the language of the Constitution. Certainly any differences between the shares of stock in this case and the intangibles in the Curry case do not warrant differences in constitutional treatment so as to forbid taxation by two States in the one case and to permit it in the other. If we perpetuated any such differences, we would be doing violence to the words “due process” by drawing lines where the Fourteenth Amendment fails to draw them. Furthermore, the legal interests in the intangibles here involved are as diverse as they weré in the intangibles in the Curry case. And to say that these shares of stock were localized or had an exclusive situs in New York would be to indulge in the fiction which we rejected in the Curry case. Any such attempt to fix their *180whereabouts in New York would disregard the intimate relationship which Utah has to this corporation and its shares.
More specifically, if the question is “whether the state has given anything for which it can ask return” (Wisconsin v. J. C. Penney Co., supra, p. 444), or whether the transfer depends upon and involves the law of Utah for its exercise (Blackstone v. Miller), there can be no doubt that Utah is not restrained by the Fourteenth Amendment from taxing this transfer. The corporation owes its existence to Utah. Utah law defines the nature and extent of the interest of the shareholders in the corporation. Utah law affords protection for those rights. Utah has power over the transfer by the corporation of its shares of stock. Certainly that protection, benefit, and power over the shares would have satisfied the test of Blackstone v. Miller and Curry v. McCanless. But it is said that we are here interested only in the factum of the transfer, and that the stockholder in the case at bar had no need to invoke the law of Utah to effect a complete transfer of his interest. The argument is based on the fact that the transfer office is located outside Utah, and that, under the Uniform Stock Transfer Act which Utah has adopted (Rev. Stat. 1933 § § 18-3-1 et seq.), the trend is to treat the shares as merged into the certificates in situations involving the ownership and transfer of the shares. We do not stop to analyze the many cases which have been cited, nor to speculate as to how Utah would interpret its law in this regard. Suffice it to say, that if that freedom of transfer exists as respondents claim, it stems from Utah law. It finds its ultimate source in the authority which Utah has granted. It is indeed a benefit which Utah has bestowed. For it alone Utah may constitutionally ask a return. In view of these realities, we cannot say with the majority in First National Bank v. Maine, p. 327, that a “transfer from the dead to the living of any specific property is an event *181single in character and is effected under the laws, and occurs within the limits, of a particular state,” so as to preclude Utah from imposing a tax on this transfer.
We are of course not unmindful of the notions expressed in Farmers Loan & Trust Co. v. Minnesota, and repeated in First National Bank v. Maine, that the view chana-, pioned by Blackstone v. Miller disturbed the “good reía-’ tions among the States” and had a “bad” practical effect which led many States “to avoid the evil by resort to reciprocal exemption laws.” 280 U. S. p. 209. Bpt, as stated by the minority in First National Bank v. Maine, “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.” 284 U. S. p. 334. More basically, even though we believed that a different system should be designed to protect against multiple taxation, it is not our province to provide it. See Curry v. McCanless, supra, pp. 373-374. To do so would be to indulge in the dangerous assumption that the Fourteenth Amendment “was intended to give us carte blanche to embody our economic or moral beliefs in its prohibitions.” Mr. Justice Holmes, dissenting, Baldwin v. Missouri, supra, p. 595. It would violate the first principles of constitutional adjudication to strike down state legislation on the basis of our individual views or preferences as to policy, whether the state laws deal with taxes or other subjects of social or economic legislation.
For the reasons stated, we do not think that First National Bank v. Maine should survive. We overrule it. In line with our recent decisions in Curry v. McCanless, Graves v. Elliott and Graves v. Schmidlapp, we repeat that there is no constitutional rule of immunity from taxation of intangibles by more than one State. In case of shares of stock, “jurisdiction to tax” is not restricted to the domiciliary State. Another State which has extended benefits *182or protection, or which can demonstrate “the practical fact of its power” or sovereignty as respects the shares (Blackstone v. Miller, p. 205), may likewise constitutionally make its exaction. In other words, we restore these intangibles to the constitutional status which they occupied up to a few years ago. See Greves v. Shaw, 173 Mass. 205, 53 N. E. 372; Larson v. MacMiller, 56 Utah 84, 189 P. 579, and cases collected in 42 A. L. R. pp. 365 et seq.
We reverse the judgment below and remand the cause to the Supreme Court of Utah for proceedings not inconsistent with this opinion.

Reversed.

N. Y. L. 1930, c. 710, § 1, amended L. 1934, c. 639, § 1; McKinney’s Cons. L., Bk. 59, Tax Law, § 249-0. This section was repealed by L. 1940, c. 138. For the present provision, see McKinney, op. cit., Cum. Ann. Pt. (1941) § 249-o.

Rev. Stat. Utah, 1933, § 80-12-2 provides:
“A tax equal to the sum of the following percentages of the market value of the net estate shall be imposed upon the transfer of the net estate of every decedent, whether a resident or nonresident of this state:
“Three per cent of the amount by which the net estate exceeds $10,000 and does not exceed $25,000;
“Five per cent of the amount by which the net estate exceeds $25,000.” , "
' Sec. 80-12-3 provides:
*176“The value of the gross estate of a decedent shall be determined by including the value at the time of his death of all property, real or personal, within the jurisdiction of this state, and any interest therein, whether tangible or intangible, which shall pass to any person, in trust or otherwise, by testamentary disposition or by law of inheritance or succession of this or any other state or country, or by deed, grant, bargain, sale or gift made in contemplation' of- the death of the grantor, vendor or donor, or intended to take effeot in possession or enjoyment at or after his death.”