Bingham's Adm'r v. Commonwealth

• Decision Date: 11 May 1923
• Citation: 199 Ky. 402,251 S.W. 936
• Parties: BINGHAM'S ADM'R v. COMMONWEALTH.
• Court: Kentucky Court of Appeals

251 S.W. 936

199 Ky. 402

BINGHAM'S ADM'R v. COMMONWEALTH.

Court of Appeals of Kentucky.

May 11, 1923

Appeal from Circuit Court, Jefferson County.

Action by the Commonwealth against Mary Lily Bingham's Administrator, to have property assessed for taxation. From a judgment assessing the property, both parties appeal. Judgment affirmed on the original appeal by the administrator, and affirmed in part and reversed in part on the cross-appeal of the Commonwealth.

Bruce &amp Bullitt and Grover G. Sales, all of Louisville, for appellant.

Chas I. Dawson, Atty. Gen., J. Matt Chilton and B. F. Washer, both of Louisville, and M. M. Logan, of Bowling Green, for the Commonwealth.

CLARKE J.

Upon a former appeal of this case, reported in 188 Ky. 616, 223 S.W 999, it was held that property owned by Mrs. Bingham at her death was assessable in this action instituted by a revenue agent, as of September 1, 1917, and liable for 1918 ad valorem taxes in this state, although she died prior to and her administrator was not appointed until after September 1 and the cause was remanded in order that it might be assessed, as had not then been attempted, according to law.

Upon return of the case to the circuit court it was heard by agreement with another case between the same parties involving the amount of inheritance tax due the state on the same property, and upon the same evidence. The values as fixed by the judgment in this case are the same as by the judgment in the inheritance tax case, which upon the question of values was affirmed on the appeals by both parties in an opinion reported in 196 Ky. 318, 244 S.W. 781. We need not, therefore, restate our reasons here for affirming the judgment in this case upon both the original and the cross appeals as to the values fixed upon the properties involved; neither need we restate here in detail the properties constituting what are known in both records as the "Bingham property" and the "Flagler trust," as both are sufficiently described in the latter opinion, where we held that Mrs. Bingham was the sole owner of the trust properties, and the trustees were mere custodians for compensation to manage same for her benefit.

The questions involved upon the original appeal in this case by the administrator, in addition to those of values, are: (1) Whether or not that portion of Mrs. Bingham's estate known as the "Flagler trust" had a taxable situs within the state; and (2) whether or not any of the property owned by Mrs. Bingham could be assessed by the court at a value in excess of that named by the revenue agent in the statement he filed as a basis for the action.

1. In support of the contention that none of the Flagler trust property owned by Mrs. Bingham had a taxable situs within the state, reliance is had upon the cases from this court of Higgins v. Commonwealth, 126 Ky. 211, 103 S.W. 306; Commonwealth v. West India Oil Refining Co., 138 Ky. 828, 129 S.W. 301, 36 L.R.A. (N. S.) 295; Commonwealth v. Avery & Sons, 163 Ky. 828, 174 S.W. 518; and Hillman Land Co. v. Commonwealth, 148 Ky. 331, 146 S.W. 776, L.R.A. 1915C, 929.

The question involved in the Higgins Case was, as is therein stated:

"Is intangible personal property, such as notes, mortgages, and bonds, held by and in the possession of a trustee in this state, who manages and controls it, liable for taxation for state, city and county purposes, at the residence of the trustee, when the cestui que trust is a nonresident of the state?"

In the course of the opinion, answering this question in the affirmative, we said:

"There is, of course, a marked distinction between what is known as corporal personal property, such as live stock, lumber, or other material, and intangible personal property, like notes, bonds, and other securities. And it is generally recognized that tangible personal property has an actual situs at the place where it is located without respect to the domicile of the owner, whereas the situs of intangible personal property for purposes of taxation depends all together upon legislative enactment, or judicial construction. It does not always follow the beneficial owner, but may be taxed at the place where the person resided who has control or management of the securities, who lends out the money, collects the interest, and exercises other acts of ownership and control over it, and where it may be said to be permanently located, as much so as if the actual owner resided where it was. For many purposes the domicile of the owner is deemed the situs of his personal property, but this is only a fiction for motives of convenience, and is not of universal application but yields to the actual situs of the property when justice requires that it should, and is not allowed to be a controlling feature in matters of taxation."

The facts of that case, as in the Hillman Land Co. Case, are just the reverse of those now under a consideration. There a local agent or trustee of a nonresident owner was loaning, managing, and investing funds for the letter in this state. Here nonresident trustees were loaning, managing, and investing funds of a resident owner in the state of the trustees' residence. In holding that cash, notes, and bonds while so held by a local trustee for the benefit of the nonresident owner had a taxable situs here, we acted in the Higgins Case upon the theory that intangible property did not necessarily have its taxable situs at the owner's domicile, but was a matter of legislative control, and, under our statutes then in effect, attached rather to the managing agent or fiduciary at his residence, provided such control was of a permanent rather than a transitory or temporary character.

Manifestly, then, if we were right in the Higgins Case, and our statutes were still the same, the Flagler trust property, at least in so far as it consisted of cash, notes, and bonds, had a taxable situs in Florida, where the managing trustees resided and employed the funds, since their control was of a permanent rather than a temporary character, being for 10 years under Flagler's will, and extended for a further period of 25 years by Mrs. Bingham's will; but in that case the question was not presented or discussed as to whether or not such intangible property could be taxed both here and at the residence in another state of the beneficial owner. That case was decided in April, 1907, and in March, 1908, at the next succeeding session of the Legislature, section 4020, upon the construction of which that decision was rested, was amended by adding thereto the following:

"Provided, however, that tangible personal property located and having a taxable situs without the state, of persons residing in this state, and of all corporations organized under the laws of this state, shall not be subject to taxation; and provided further, that the situs of intangible personal property for purposes of taxation shall be at the residence of the real or beneficial owner, and not at the residence of the fiduciary or agent having the custody or possession of same. Provided further, that nothing herein contained shall in any way affect the liability for franchise taxes now payable by corporations organized under the laws of this state." Acts 1908, c. 47, § 1.

It is manifest that in so doing at its next session the Legislature was exercising its authority as declared in the Higgins Case, and thereby fixed the situs of intangible personalty for the purposes of taxation by this state at the residence of the owner and not at the residence of the agent or fiduciary as decided in that case. Hence, if the Legislature had the power to fix the situs of such property as expressly held in the Higgins Case, the Flagler trust property, under the doctrine of that case and the statute as amended, is here rather than in Florida, and that case, instead of sustaining the contention of counsel for the estate, destroys it. But they argue, although relying upon that case, that the taxable situs of intangible personalty is not a question of legislative control, as was held not only in the Higgins opinion, but in many others from this court, such as Commonwealth v. Northwestern Mutual Life Ins. Co., 107 S.W. 233, 32 Ky. Law Rep. 796; Johnson, Sheriff, v. Bradley-Watkins Tie Co., 120 Ky. 136, 85 S.W. 726; Commonwealth v. Camden, 142 Ky. 365, 134 S.W. 914; and City of Henderson v. Barret's Ex'r, 152 Ky. 648, 153 S.W. 992.

This argument is based upon the ground that the Legislature cannot declare property here for taxation purposes when in fact it is located elsewhere, and that such an attempt is violative of the due process of law guaranty of the federal Constitution. The premises conceded the conclusions are indubitably correct, as was held in Louisville & Jefferson Ferry Co. v. Kentucky, 188 U.S. 385, 23 S.Ct. 463, 47 L.Ed. 513. But counsel assume the question at issue, which is whether or not the situs of intangible personalty owned by Mrs. Bingham, a resident of the state, but controlled by her nonresident trustees, is at the residence of the latter, when our Legislature had declared it here, and when, too, it is not claimed that the laws of Florida provide otherwise.

There is therefore no question presented involving a conflict of legislative authority, and we might assume that the common law, which does not differ materially from our statute on the question, prevails in Florida, from which it would result that no question of double taxation is presented, and that the sole question for decision on this branch of the case is whether or not, under such circumstances, the Legislature of this state can fix the situs of all intangible property beneficially owned by a resident of the state, despite the fact its management and the possession of the evidence of same have...