Baldwin v. State of Missouri

• Decision Date: 26 May 1930
• Docket Number: No. 417,417
• Citation: 50 S.Ct. 436,72 A. L. R. 1303,74 L.Ed. 1056,281 U.S. 586
• Parties: BALDWIN et al. v. STATE OF MISSOURI
• Court: U.S. Supreme Court

281 U.S. 586

50 S.Ct. 436

74 L.Ed. 1056

BALDWIN et al.

v STATE OF MISSOURI.

No. 417.

Argued April 23, 1930.

Decided May 26, 1930.

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.

Messrs, Stratton Shartel and A. M. Meyer, both of Jefferson City, Mo., for State of Missouri. Missouri.

[Argument of Counsel from page 587 intentionally omitted] 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 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.

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:

'In recent cases we have held, for the purpose of property tax, that the situs of a credit is the domicile of the creditor * * *.

'If we could apply the same rule to an inheritance tax, we might have less difficulty in disposing of this case. The inheritance tax statute, article 21, c. 1, * * * R. S. 1919, provides an entirely independent method of ascertaining the property subject to inheritance tax from that applicable for general tax. The definition of the term 'property' in the last section, 589, of that article, makes inapplicable any definition relating to general property tax. An inheritance tax is not a property tax, but an excise tax, or a tax upon succession. In re Zook's Estate, 317 Mo. 986, 296 S. W. loc. cit. 780, and cases cited. * * *

'These notes, bonds, and cash were all in the possession of the administrator in Missouri. For what purpose they were in Missouri is not shown. We cannot assume that they were in the state of Missouri for the purpose of escaping taxation in the state of Illinois. 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, in which case it would be subject to a general tax, as well as the inheritance tax. * * *

'It (the personalty) possibly acquired a business situs in this state. Whether it did or not, it was within the jurisdiction of the state, and property subject to the transfer tax. It would have been a proper subject of inquiry by the trial court to determine how and why and under what conditions these evidences of debt were in this state, but, whatever the determination of that question, the property was leaglly within the jurisdiction of the probate court of Lewis county in this state, and subject to the tax.'

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, 47 L. Ed. 439, 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, 25 L. Ed. 558, this Court declared:

'Plainly, therefore, our only duty is to inquire whether the Constitution prohibits a State from taxing, in the hands of one of its resident citizens, a debt held by him upon a resident of another State, and evidenced by the bond of the debtor, secured by deed of trust or mortgage upon real estate situated in the State in which the debtor resides.

'The question does not seem to us to be very difficult of solution. The creditor, it is conceded, is a permanent resident within the jurisdiction of the State imposing the tax. The debt is property in his hands constituting a portion of his wealth, from which he is under the highest obligation, in common with his fellow-citizens of the same State, to contribute for the support of the government whose protection he enjoys.

'That debt, although a species of intangible property, may, for purposes of taxation, if not for all others, be regarded as situated at the domicile of the creditor. It is none the less property because its amount and maturity are set forth in a bond. That bond, wherever actually held or deposited, is only evidence of the debt, and if destroyed, the debt-the right to demand payment of the money loaned, with the stipulated interest-remains. Nor is the debt, for the purposes of taxation, affected by the fact that it is secured by mortgage upon real estate situated in Illinois. The mortgage is but a security for the debt, and, as held in State Tax on Foreign-held Bonds, supra (15 Wall. 300, 21 L. Ed. 179), the right of the creditor 'to proceed against the property mortgaged, upon a given contingency, to enforce by its sale the payment of his demand * * * has no locality independent of the party in whom it resides. It may undoubtedly be taxed by the State when held by a resident therein,' etc. Cooley on Taxation, 15, 63, 134, 270. The debt, then, having its situs at the creditor's residence, both he and it are, for the purposes of taxation, within the jurisdiction of the State.'

And in Blodgett v Silberman, 277 U. S. 1, 14, 48 S. Ct. 410, 415, 72 L. Ed. 749:

'The question here is whether bonds, unlike other choses in action, may have a situs different, from the owner's domicile such as will render their transfer taxable in the state of that situs and in only that state. We think bonds are not thus distinguishable from other choses in action. It is not enough to show that the written or printed evidence of ownership may, by the law of the state in which they are physically present, be permitted to be taken in execution or dealt with as reaching that of which they are evidence, even without the presence of the owner . While bonds often are so treated, they are nevertheless in their essence only evidences of debt. The Supreme Court of Errors expressly admits that they are choses in action. Whatever incidental qualities may be added by usage of business or by statutory provision, this characteristic remains, and shows itself by the fact that their destruction physically will not destroy the debt which they represent. They are representative, and not the thing itself.'

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...