Credits involved were for cash deposited with several Missouri banks, and there were coupon bonds issued by the United States and numerous promissory notes, most of which were executed by citizens of Missouri and secured by liens upon lands located within that state. The state of Missouri sought to tax this property lying physically within its limits, but the decedent resided in Illinois, and the transfer was taxed in that state.
Messrs. Harry Carstarphen, of Hannibal, Mo., and John F. Garner, of Quincy, Ill., for plaintiffs in error and appellants. [281 U.S. 586, 587] Messrs, Stratton Shartel and A. M. Meyer, both of Jefferson City, Mo., for State of Missouri. Missouri.
Mr. Justice McREYNOLDS delivered the opinion of the Court.
The validity of section 558, R. S. of Missouri. 1919, was duly challenged in the court below; by the judgment there the rights of the parties were finally determined; the cause is properly here on appeal.
While a resident of Quincy, Adams county, Ill., Carrie Pool Baldwin died October 4, 1926. By will she left all her property to Thomas A. Baldwin, her son, a resident of the same place, and appointed him sole executor. The will was duly probated at her residence, and under the statute of Illinois an inheritance tax was there laid upon the value of all her intangible personalty, wherever situated.
Ancillary letters of administration with the will annexed issued out of the probate court of Lewis county, Mo., to Harry Carstarphen, October 22, 1926. A report to that court revealed that at the time of her death Mrs. Baldwin owned real estate in Missouri; credits for cash deposited with two or more banks located there; also certain coupon bonds issued by the United [281 U.S. 586, 589] States and sundry promissory notes which were then physically within that state. Most of these notes were executed by citizens of Missouri, and the larger part were secured by liens upon lands lying therein.
Under section 558, R. S. 19191 (copied in margin) the state of Missouri demanded transfer or inheritance taxes reckoned upon the value of all the above described property. No denial of this claim was made in respect of the real estate; but as to the personalty it was resisted upon the ground that the property was not within the jurisdiction of the state for taxation purposes and to enforce the demand would violate the due process clause of the Fourteenth Amendment. [281 U.S. 586, 590] The Lewis county circuit court declared the transfer of the personal property not subject to taxation; the Supreme Court reached a different conclusion and directed payment.
It does not appear and is not claimed that either the decedent or her son ever resided in Missouri. The record discloses nothing tending to show that the personal property had been given a business situs in that state.
Among other things, the Supreme Court (19 S.W.(2d) 732, 734) said:
The challenged judgment rests upon the broad theory that a state may lay succession or inheritance taxes measured by the value of any deposits in local banks passing from a nonresident decedent; also upon the value of bonds issued by the United States and promissory notes executed by individual citizens of the state when devised by such nonresident if these bonds or notes happen to be found within the confines of the state when death occurs. The cause was decided below prior to our determination of Farmers' Loan & Trust Co. v. Minnesota, 280 U.S. 204 , 50 S. Ct. 98, 74 L . Ed. 371. Blackstone v. Miller, 188 U.S. 189 , 23 S. Ct. 277, was cited in support of the conclusion reached. Considering Farmers' Loan & Trust Co. v. Minnesota and previous opinions there referred to, the theory upon which the court below proceeded is untenable, and its judgment must be reversed.
Ordinarily, bank deposits are mere credits, and for purposes of ad valorem taxation have situs at the domicile of the creditor only. The same general rule applies to negotiable bonds and notes whether secured by liens on real estate or otherwise.
In Kirtland v. Hotchkiss, 100 U.S. 491, 498 , 499 S., this Court declared:
And in Blodgett v Silberman, 277 U.S. 1, 14 , 48 S. Ct. 410, 415:
We find nothing to exempt the effort to tax the transfer of the deposits in Missouri banks from the principle applied in Farmers' Loan & Trust Co. v. Minnesota, supr a. So far as disclosed by the record, the situs of the credit was in Illinois where the depositor had her domicile. There the property interest in the credit passed under her will; and there the transfer was actually taxed. This passing was properly taxable at that place, and not otherwhere.
The bonds and notes, although physically within Missouri, under our former opinions were choses in action with situs at the domicile of the creditor. At that point they, too, passed from the dead to the living, and there this transfer was actually taxed . As they were not within Missouri for taxation purposes, the transfer was not subject to her power. Rhode Island Trust Co. v. Doughton, 270 U.S. 69 , 46 S. Ct. 256, 43 A. L. R . 1374
It has been suggested that, should the state of the domicile be unable to enforce collection of the tax laid by it upon the transfer, then in practice all taxation thereon might be evaded. The inference seems to be that [281 U.S. 586, 594] double taxation-by two states on the same transfer-should be sustained in order to prevent escape from liability in exceptional cases. We cannot assent. In Schlesinger v. Wisconsin, 270 U.S. 230, 240 , 46 S. Ct. 260, 261, 43 A. L. R. 1224 Y, a similar notion was rejected.
If the possibility of evasion be considered from a practical standpoint, then the Federal Estate Tax Law, under which credit is only allowed where a tax is paid to the state, section 1093, Title 26, U. S. C. ( 26 USCA 1093) must be given due weight. Also the significance of the adoption of reciprocal exemption laws by most of the states, Farmers' Loan & Trust Co. v. Minnesota, supra, cannot be disregarded.
Normally, as in the present instance, the state of the domicile enforces its own tax, and we need not now consider the possibility of establishing a situs in another state by one who should undertake to arrange for succession there and thus defeat the collection of the death duties prescribed at his domicile.
This cause does not involve the right of a state to tax either the interest which a mortgagee as such may have in lands lying therein, or the transfer of that interest.
Reversed. The cause will be remanded to the Supreme Court of Missouri for further proceedings not inconsistent with this opinion. [281 U.S. 586, 595]
Mr. Justice HOLMES.
Although this decision hardly can be called a surprise after Farmers' Loan & Trust Co. v. Minnesota, 280 U.S. 204 , 50 S. Ct. 98, and Safe Deposit & Trust Co. v. Virginia, 280 U.S. 83 , 50 S. Ct. 59, and althought I stated my views in those cases, still as the term is not over I think it legitimate to add one or two reflections to what I have said before. I have not yet adequately expressed the more than anxiety that I feel at the ever increasing scope given to the Fourteenth Amendment in cutting down what I believe to be the constitutional rights of the States. As the decisions now stand I see hardly any limit but the sky to the invalidating of those rights if they happen to strike a majority of this Court as for any reason undesirable. I cannot believe that the Amendment was intended to give us carte blanche to embody our economic or moral beliefs in its prohibitions. Yet I can think of no narrower reason that seems to me to justify the present and the earlier decisions to which I have referred. Of course the words 'due process of law' if taken in their literal meaning have no application to this case; and while it is too late t deny that they have been given a much more extended and artificial signification, still we ought to remember the great caution shown by the Constitution in limiting the power of the States, and should be slow to construe the clause in the Fourteenth Amendment as committing to the Court, with no guide but the Court's own discretion, the validity of whatever laws the States may pass. In this case the bonds, notes and bank accounts were within the power and received the protection of the State of Missouri; the notes so far as appears were within the considerations that I offered in the earlier decisions mentioned, so that logically Missouri was justified in demanding a quid pro quo; the practice of taxation in such circumstances I think has been ancient and widespread, [281 U.S. 586, 596] and the tax was warranted by decisions of this Court. Liverpool & London & Globe Ins. Co. v. Assessors for the Parish of Orleans, 221 U.S. 346, 354 , 355 S., 31 S. Ct. 550, L. R. A. 1915C, 903; Wheeler v. Sohmer, 233 U.S. 434 , 34 S. Ct. 607. (I suppose that these cases and many others now join Blackstone v. Miller on the Index Expurgatorius- but we need an authoritative list.) It seems to me to be exceeding our powers to declare such a tax a denial of due process of law.
And what are the grounds? Simply so far as I can see that it is disagreeable to a bondowner to be taxed in two places. Very probably it might be good policy to restrict taxation to a single place, and perhaps the technical conception of domicil may be the best determinant. But it seems to me that if that result is to be reached it should be reached through understanding among the States, by uniform legislation or otherwise, not by evoking a constitutional prohibition from the void of 'due process of law' when logic, tradition and authority have united to declare the right of the State to lay the now prohibited tax.
Mr. Justice BRANDEIS and Mr. Justice STONE agree with this opinion.
Opinion of Mr. Justice STONE.
I agree with what Mr. Justice HOLMES has said, but as I concurred, on special grounds, with the result in Farmers' Loan & Trust Company v. Minnesota, 280 U.S. 204 , 50 S. Ct. 98, and Safe Deposit & Trust Company v. Virginia, 280 U.S. 83 , 50 S. Ct. 59, I would say a word of the application now given to those precedents. I do not think that the overturning of one conclusion in Blackstone v. Miller by those cases should be deemed to carry with it Scottish Union & National Insurance Co. v. Bowland, 196 U.S. 611 , 25 S. Ct. 345, 49 L. Ed . 619, Wheeler v. Sohmer, 233 U . S. 434, 34 S. Ct. 607, upholding a tax measured by a nonresident's bonds and notes, located within the taxing [281 U.S. 586, 597] state; Savings Society v. Multnomah County, 169 U.S. 421 , 18 S. Ct. 392, upholding a tax measured by a nonresident's notes, secured by mortgages on land within the taxing state; or Bristol v. Washington County, 177 U.S. 133 , 20 S. Ct. 585, and Metropolitan Life Insurance Co. v. New Orleans, 205 U.S. 395 , 27 S. Ct. 499, upholding a tax upon intangibles having a 'business situs' within the taxing state, but owned by a nonresident. These cases rest upon principles other than those applied in Blackstone v. Miller and are not dependent upon if for support.
It is true that the bonds and notes located in Missouri are choses in action, rights in which may be transferred at the domicile of the owner as well as in any other state in which he may chance to be. But the transfer made there is not completely effected without their delivery, which ordinarily can be compelled only in Missouri and in accordance with its laws. If negotiable, which so far as appears some of them were, their transfer by delivery within Missouri could defeat the transfer made in Illinois. When secured by mortgage on real estate, the transfer of the security, which is an inseparable incident of the chose in action, Carpenter v. Longan, 16 Wall. 271; Lipscomb v. Talbott, 243 Mo. 1, 31, 147 S. W. 798, may be affected by the recording laws, availed of only through the recording facilities where the land is located. See Pickett v. Barron, 29 Barb. 505; Curtis v. Moore, 152 N. Y. 159, 163, 46 N. E. 168, 57 Am. St. Rep. 506.
These circumstances, I think, are sufficient to give the jurisdiction which I thought lacking in Farmers' Loan & Trust Company v. Minnesota, to tax the transfer in Missouri, see Hatch v . Reardon, 204 U.S. 152 , 27 S. Ct. 188, 9 Ann. Cas. 736, and Rogers v. Hennepin County, 240 U.S. 184 , 36 S. Ct. 265; to say nothing of the further fact that Missouri laws alone protect the physical notes and bonds and the security located there. Apart from the question of jurisdiction, that one must pay a tax in two places, reaching the same economic interest, with respect to which he has sought and secured the bene- [281 U.S. 586, 598] fit of the laws of both, does not seem to me so oppressive or arbitrary as to infringe constitutional limitations.
Taxation is a practical matter, and if, in the choice of the rule we adopt, we may, as the Court has said in Farmers' Loan & Trust Company v. Minnesota, give some consideration to its practical effect, we ought not, I think, to overturn long-established rules governing the constitutional power to tax, without some consideration of the necessity and of all consequences of the change. Under the law as it has been, no one need subject himself to double taxation by keeping his securities in a state different from his domicile or by seeking the protection of its laws for his mortgage investments. But it is a practical consideration of some moment that taxation becomes increasingly difficult if the securities of a non-resident may not be taxed where located, and where alone they may be reached, but where the courts are not open to the tax gatherers of the domicile . See Moore v. Mitchell, No. 79, decided February 24, 1930, 281 U.S. 18 , 50 S. Ct, 175, 74 L. Ed. -; Id. (C. C. A.) 30 F.(2d) 600; Colorado v. Harbeck, 232 N. Y. 71, 133 N. E. 357.
It is said that the present record discloses nothing tending to show that the decedent's personal property had been given a business situs in Missouri. The Supreme Court of Missouri (19 .W.(2d) 732, 734) said: 'It is a reasonable inference that the cash and notes in such large quantities in Missouri, when none of it was held in Illinois, was retained in this state for the purpose of investment. They may have established a business situs in this state. ...'
The burden is not on the state to establish the constitutionality of its laws, nor are we limited in supporting their constitutionality to the reasons assigned by the state court . I do not assume, from anything that has been said in this or the earlier cases, that constitutional power to tax the transfer of notes and bonds at their business situs, no longer exists. As this Court has often held, the burden rests upon him who assails a statute to [281 U.S. 586, 599] establish its unconstitutionality. Upon this ambiguous record it is for the appellant to show that the stock and bonds subjected to the tax had no business situs within the taxing jurisdiction. See No. 454, Corporation Commission of Oklahoma v. Lowe, 281 U.S. 431 , 50 S. Ct. 397, 74 L. Ed. -, decided May 19, 1930, No. 485, Toombs v. Citizens Bank of Waynesboro, 281 U.S. 643 , 50 S. Ct. 434, 74 L. Ed. -, decided this day.
Mr. Justice HOLMES and Mr. Justice BRANDEIS join in this opinion .
[ Footnote 1 ] Section 558, Revised Statutes of Missouri, 1919, Chapter 1, Article XXI: