Estate of Banerjee

• Decision Date: 16 June 1978
• Docket Number: S.F. 23760
• Court: California Supreme Court
• Parties: , 580 P.2d 657 ESTATE of Herbert N. BANERJEE, Deceased. Kenneth CORY, as State Controller, Petitioner and Appellant, v. BANK OF AMERICA, Objector and Respondent.

Page 157

147 Cal.Rptr. 157

21 Cal.3d 527, 580 P.2d 657

ESTATE of Herbert N. BANERJEE, Deceased.

Kenneth CORY, as State Controller, Petitioner and Appellant, v. BANK OF AMERICA, Objector and Respondent.

S.F. 23760.

Supreme Court of California,In Bank.

June 16, 1978.

Rehearing Denied July 13, 1978.

Myron Siedorf, Edwin Rosenthal, San Francisco and James R. Birnberg, Los Angeles, for petitioner and appellant.

Jordan, Walsh, Lawrence, Dawson & Carbone, Donald J. Lawrence and Michael P. Carbone, San Francisco, for objector and respondent.

Almon B. McCallum, San Francisco, Marc R. Isaacson, Los Angeles, as amici curiae on behalf of objector and respondent.

BY THE COURT:

We granted a hearing in this case to resolve a conflict between Court of Appeal opinions in this and an earlier case. After an independent study of the issue, we have concluded that the careful and scholarly opinion of Judge Lazarus (assigned) for the Court of Appeal, First Appellate District, in this case correctly treats the issues, and we adopt it as our opinion. That opinion, with appropriate deletions and additions, ^* is as follows:

The State Controller appeals from an order of the superior court sustaining objections filed by respondent Bank of America, N.T.&S.A., as ancillary administrator of the estate of Herbert N. Banerjee, a deceased nonresident alien, to the report of the inheritance tax appraiser. The tax would have amounted to $64,078 if the report had been approved. The effect of the order sustaining the objections was to reduce the estate's maximum tax liability to the sum of $2,741.

Which of these two figures is correct depends entirely on the question as to whether certain stock certificates for shares belonging to decedent in non-California corporations ¹ of an aggregate value of $931,279.13 should have been included as taxable items. These stock certificates together with other assets were held for decedent by the Bank of America at San Francisco in an investment management account. The administrator contends that the stock certificates representing shares in companies incorporated under the laws of other states are expressly excluded from taxation by the provisions of Revenue and Taxation Code section 13303, subdivision (b). The Controller insists, on the other hand, that the statute has been misread by both respondent and the court; hence, this appeal in which the only issue is as to the jurisdictional reach of section 13303.

A brief summary of the specific facts upon which this dispute is predicated follows.

Decedent was a resident and national of Japan at the time of his death, September 12, 1972. Starting in 1962, he established and maintained an investment management agency account with the Bank of America in San Francisco. When he died, his portfolio included the following assets, all of which were more specifically listed and described in the inventory and appraisement filed in the probate proceeding:

                Cash: (bank accounts, certificates of
                      deposit, etc.)                                 $ 512,626.89
                Stocks held in said agency account
                (a) "California stocks," that is, stocks of
                     corporations incorporated in California
                     or having their principal places of
                     business in California or doing the major
                     part of their business in California
                     Bankamerica Corporation            $62,040.50
                     Lockheed Aircraft Corp.              1,962.50
                     Safeway Stores, Inc.                30,150.00
                                                       -----------      94,153.00
                (b) Remaining stocks in agency account
                     consisting of stocks of corporations
                     incorporated in other states of the
                     United States or having principal places of
                     business other than California or not
                     doing the major part of their business
                     in California ("non-California stocks")           931,279.13
                                                                    -------------
                                       Total                        $1,538,058.02
                

Respondent concedes at the outset that the "California stocks" referred to in paragraph (a) above were subject to inheritance tax, and that the estate was further liable to pay any "pickup" tax equal to the state tax credit allowed decedent's estate in its federal estate tax return. The objections which were filed by the administrator were therefore only directed to the report insofar as it included in its calculations a tax on the "non-California stocks" mentioned in paragraph (b). The hearing thereon was held before the Honorable Paul E. Springer, court commissioner, sitting as judge pro tem., by stipulation of the parties. After considering evidence both oral and written, he rendered the decision from which this appeal has been taken.

I

The outcome of this appeal therefore hinges upon how the language of Revenue and Taxation Code section 13303 is to be interpreted. In its present form, that section reads: " 'Estate' or 'property' means the real or personal property or interest therein of a decedent or transferor, and includes all of the following: (P) (a) All intangible personal property of a resident decedent within or without the State or subject to the jurisdiction thereof. (P) (b) All intangible personal property in California belonging to a deceased nonresident of the United States, including all stock of a corporation organized under the laws of California or which has its principal place of business or does the major part of its business in California or of a federal corporation or national bank which has its principal place of business or does the major part of its business in California, excluding, however, saving accounts in saving and loan associations operating under the authority of the Division of Savings and Loan or the Federal Home Loan Bank board and bank deposits, unless such deposits are held and used in connection with a business conducted or operated, in whole or in part, in California." (Italics added.)

The disagreement between the parties focuses on the meaning and effect to be given to the phraseology appearing in italics. Respondent argues that we must follow the Latin maxim, expressio unius est exclusio alterius ² in interpreting the statute. This being so, the contention goes, the section can only be read as imposing a tax on stock issued by the kind of corporations mentioned after the word "including," thereby excluding from state taxation stock certificates issued by other corporations, no matter where the certificates evidencing the ownership thereof may be physically located.

This, according to the Controller, is a misconception. He reasons that the first part of subdivision (b), providing that "(a)ll intangible personal property in California belonging to a deceased nonresident of the United States" is subject to tax, manifestly includes stock certificates, and that its import is in no way limited or otherwise diminished by anything said in the clause that follows.

We find no authority directly in point except what was said in the course of an opinion by a divided court ( ) (in) Estate of Hall (1977) 71 Cal.App.3d 219 ( ), 139 Cal.Rptr. 336. In order to reach its decision, the majority in that case saw fit to invoke another legal maxim, mobilia sequuntur personam (movables follow the person). We agree with respondent that if the rationale of Hall is to be followed it would appear to be dispositive here, since it was an adjudication based upon similar facts. ³ However, we are reluctantly obliged to differ with ( ) (Hall ). We firmly but deferentially take particular exception to the view expressed in the majority opinion that "the test to be applied in determining that situs (of certificates representing stock owned by a foreign resident) is the doctrine of mobilia sequuntur personam." ⁴ (Id., at p. 226, 139 Cal.Rptr. at p. 339.)

This appears to be clearly contrary to what has been said to be the law by higher authority. Estate of McCreery, supra, 220 Cal. 26, 29 P.2d 186, and Burnet v. Brooks (1933) 288 U.S. 378, 53 S.Ct. 222, 77 L.Ed. 518, both patently hold that where stock certificates are owned by persons not residing in the United States the reasons that might otherwise give resort to the maxim vanish. Each of these tribunals make it unequivocally clear that in such instances there is no occasion to apply the maxim and that consequently the stocks may have both an actual or constructive situs. Thus, a death tax may be imposed if certificates representing the shares owned by a decedent are physically located within the jurisdiction of the taxing authority. There has been no subsequent change in the law since these cases were decided.

McCreery was a resident and citizen of Great Britain who died testate in 1931. His estate was probated in England, but there were ancillary proceedings here as he owned stock in a corporation organized under the laws of this state. The certificates of stock for these shares were also physically located in California and were listed as assets of his estate in the inventory in the ancillary probate proceedings. The report of the inheritance tax appraiser included a tax on these shares. The report was at first confirmed by the court, but this order was thereafter reversed by the trial court on application of the respondents. The appeal by the Controller was from the latter order. (Estate of McCreery, supra, 220 Cal. at pp. 27-28, 29 P.2d 186.) One of the issues in that case was as to whether the due process clause of the Fourteenth Amendment to the federal Constitution prevented California from collecting an inheritance tax on stock of a California corporation in the estate of a nonresident of the United States, the certificates representing the stock also being physically located in California. ⁵ (Id., at p. 28, 29 P.2d 186.)

The court noted that "as to intangibles the courts still apply the legal fiction of mobilia sequuntur personam and have thus confined the place of taxation to the state of the domicile...