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FARMERS LOAN & TRUST COMPANY v. MINNESOTA

decided: January 6, 1930.

THE FARMERS LOAN & TRUST COMPANY, EXECUTOR
v.
MINNESOTA



APPEAL FROM THE SUPREME COURT OF MINNESOTA.

Author: Mcreynolds

[ 280 U.S. Page 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.

[ 280 U.S. Page 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

[ 280 U.S. Page 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. 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 ...


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