California v. Texas

• Decision Date: 22 June 1978
• Docket Number: No. 76,76
• Citation: 98 S.Ct. 3107,57 L.Ed.2d 464,437 U.S. 601
• Parties: State of CALIFORNIA, Plaintiff, v. State of TEXAS
• Court: U.S. Supreme Court

437 U.S. 601

98 S.Ct. 3107

57 L.Ed.2d 464

State of CALIFORNIA, Plaintiff,

v State of TEXAS

No. 76

Supreme Court of the United States

June 22, 1978

On Motion for Leave to File Bill of Complaint.

June 22, 1978.

PER CURIAM.

The motion for leave to file a bill of complaint is denied.

Mr. Justice BRENNAN, concurring.

I agree with Mr. Justice STEWART and Mr. Justice POWELL that "in light of Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974), this Court's decision in Worcester County Trust Co. v. Riley, 302 U.S. 292, 58 S.Ct. 185, 82 L.Ed. 268 (1937), no longer can be regarded as a bar against the use of federal interpleader by estates threatened with double death taxation because of possible inconsistent adjudications of domicile." Post, at 615.

I am not so sure as they that Texas v. Florida, 306 U.S. 398, 59 S.Ct. 563, 83 L.Ed. 817 (1939), was wrongly decided. But, whatever the case, I would still deny California's motion to file a bill of complaint at this time. If we have jurisdiction at all, that jurisdiction certainly does not attach until it can be shown that two States may possibly be able to obtain conflicting adjudications of domicile. That showing has not been made at this time in this case, since it may well be possible for the Hughes estate to obtain a judgment under the Federal Interpleader Statute, 28 U.S.C. § 1335, from a United States district court, which would be binding on both California and Texas. In this event, the precondition for our original jurisdiction would be lacking. Accordingly, I would deny California's motion, at least until such time as it is shown that such a statutory interpleader action cannot or will not be brought.

Mr. Justice STEWART, with whom Mr. Justice POWELL and Mr. Justice STEVENS join, concurring.

California seeks to invoke the original and exclusive jurisdiction of this Court to settle a dispute with the State of Texas over the question of which State has the power to collect death taxes from the estate of the late Howard Robard Hughes. The Court today, without explanation of any kind, evidently concludes that California's complaint does not state a claim within our original and exclusive jurisdiction. This conclusion seems to me squarely contrary to a longstanding precedent of this Court, the case of Texas v. Florida, 306 U.S. 398, 59 S.Ct. 563, 83 L.Ed. 817. I have joined in the order denying California's motion for leave to file this complaint only because I think Texas v. Florida was wrongly decided and should be overruled.

I

According to the complaint, California imposes an inheritance tax on the real and tangible personal property located within its borders, and upon the intangible personalty wherever situated, of a person domiciled in the State at the time of his death, and Texas follows precisely the same policy.¹ The complaint alleges that the taxing authorities in each State are claiming in good faith that the decedent Hughes was domiciled in their State at the time of his death, and have instituted proceedings to tax all the assets of the estate within the jurisdiction, as well as the intangibles (consisting of shares of stock in a single holding company) that constitute the great bulk of the estate's assets.²

The common law in both States recognizes, as a theoretical matter, that a person has only one domicile for purposes of death taxes. Nevertheless, the complaint alleges, since neither Texas nor California is or will become a party to the proceedings in the other's courts, neither will be bound by an adverse determination of domicile in th other's forum. Finally, and at the crux of the dispute, the complaint alleges that if both California and Texas obtain judgments for estate taxes in their respective courts and impose their taxes on the basis of the valuation of assets set forth in the federal estate tax return, the estate's total liability for federal and state taxes will exceed its net value. Thus, the complaint alleges that if the United States and Texas were to collect the taxes claimed by them, and if the California courts should ultimately determine that Hughes was a domiciliary of California at the time of his death, then California would be left with an entirely valid tax judgment that would be uncollectible to the extent of about $21 million.

In sum, the complaint alleges that "because there is no other means by which the conflicting tax claims of Texas and California can be resolved, this Court is the only forum which can determine the question of decedent's domicile in a manner that will bind the interested parties and assure that the state of domicile, if California or Texas, will be able to collect the tax." California invokes the original and exclusive juris- diction of this Court on the authority of Texas v. Florida, supra.

II

In Texas v. Florida this Court accepted original jurisdiction of Texas' complaint "in the nature of a bill of interpleader, brought to determine the true domicile of [a] decedent as the basis of rival claims of four states for death taxes upon his estate . . .." 306 U.S., at 401, 59 S.Ct. 563. Texas and each of the three defendant States claimed that the decedent, Colonel Edward Green, son of the legendary Hetty Green,³ was its domiciliary and that it was entitled to collect death taxes upon his intangible property wherever located, as well as upon his tangible property within the State. None of the States had reduced its tax claim to judgment, but all conceded that the decedent's estate was insufficient to satisfy the total amount of taxes claimed: that is, if all four States were successful in their own courts and obtained judgments for taxes in the full amount claimed, the estate would be insufficient to cover all of the claims.⁴

Although none of the parties raised any question of this Court's jurisdiction, the Court considered the question sua sponte. It held that since the suit was between States, Art. III, § 2, of the Constitution conferred original jurisdiction to decide the case so long as "the issue framed by the pleadings constitutes a justiciable 'case' or 'controversy' within the meaning of the Constitutional provision, and . . . the facts alleged and found afford an adequate basis for relief according to accepted doctrines of the common law or equity systems of jurisprudence . . .." 306 U.S., at 405, 59 S.Ct. 563.

The Court found such a basis for relief by analogizing the suit to a bill in the nature of interpleader. This procedure had developed in equity to avert the "risk of loss ensuing from the demands in separate suits of rival claimants to the same debt or legal duty" by requiring the claimants to "l tigate in a single suit their ownership of the asserted claim." Id., at 405-406, 59 S.Ct. 563.⁵ Since the law of each of the claiming States provided that a decedent could be domiciled in only one State for purposes of death taxes, the Court held that the competing tax claims were in fact conflicting claims to the same single legal duty.

Thus viewing the suit as one in the nature of interpleader, the Court also found that the controversy was ripe for decision. Since each State's claim was sufficiently substantial to support a finding of domicile, there was a "fair probability" that each would be successful in its own courts and that the estate's assets would be insufficient to meet all of the claims. The Court therefore found a justiciable present controversy in the substantial "risk of loss [to] the state lawfully entitled to collect the tax." Id., at 410-411, 59 S.Ct. 563. The Court perceived no jurisdictional frailty in the fact that none of the claiming States had completed proceedings to collect its inheritance tax, since a plaintiff in an interpleader action was ordinarily not required to await actual institution of independent suits: "[I]t is enough if he shows that conflicting claims are asserted and that the consequent risk of loss is substantial." Id., at 406, 59 S.Ct. 563.⁶

The facts alleged in the complaint now before us are indistinguishable in all material respects from those on which jurisdiction was based in Texas v. Florida.⁷ This Court has original and exclusive jurisdiction of disputes between two or more States, 28 U.S.C. § 1251(a)(1), and it has a responsibility to exercise that jurisdiction when it is properly invoked. See Cohens v. Virginia, 6 Wheat. 264, 404, 5 L.Ed. 257; Massachusetts v. Missouri, 308 U.S. 1, 19-20, 60 S.Ct. 39, 84 L.Ed. 3. If Texas v. Florida was correctly decided, the Court, therefore, is under a duty in this case to grant California's motion to file its complaint.

I believe, however, that Texas v. Florida was wrongly decided. Its conclusion that there was a case or controversy among the claiming States depended entirely on the analogy to a suit in the nature of interpleader to settle the question of the decedent's domicile. Yet it seems to me that in resting upon that analogy the Court focused erroneously on the plight of the estate, which was indeed confronted with a "substantial likelihood" of multiple and inconsistent tax claims, and overlooked the fact that the dispute among the claiming States—stemming solely from the possibility that the estate might be insufficient to satisfy all of their claims—was not a case or controversy in the constitutional sense.

III

The Court's readiness in Texas v. Florida to accept the interpleader analogy is understandable in the context of the then state of the law governing multiple taxation of intangibles.

Before 1931 it had been taken as settled that, because the question of domicile was purely one of state law, it "must in many cases be impossible to have a single controlling decision upon the question," unless all interested parties could by chance or voluntary appearance be brought before a single forum. Baker v. Baker, Eccles & Co., 242 U.S. 394, 405, 37 S.Ct. 152, 61 L.Ed. 386. But when this Court held in 1931 that shares of stock and other intangible property could...