Welch v. Burrill

• Decision Date: 02 March 1916
• Citation: 111 N.E. 774,223 Mass. 87
• Parties: WELCH et al. v. BURRILL, Treasurer and Receiver General.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

223 Mass. 87

111 N.E. 774

WELCH et al.

v.BURRILL, Treasurer and Receiver General.

Supreme Judicial Court of Massachusetts, Essex.

March 2, 1916.

Case Reserved from Supreme Judicial Court, Essex County.

Proceedings by Francis C. Welch and another, administrators of the estate of Eleonora R. Sears, deceased, against Charles L. Burrill, the Treasurer and Receiver General. From a decree of the probate court for plaintiffs, defendant appeals. Case reserved, amended, and affirmed.

Tyler, Corneau & Eames, of Boston, for petitioner.

H. C. Attwill, Atty. Gen., Wm. H. Hitchcock, Asst. Atty. Gen., and Chas. W. Mulcahy, of Boston, for respondent.

RUGG, C. J.

This is a petition for the refunding of an inheritance tax. The petitioners are administrators of the estate of Eleonora R. Sears, late of Beverly in this commonwealth. The issue relates to the inheritance tax payable on account of two items of railroad stock, upon which a similar tax has been paid in Michigan. The deceased owned two hundred forty-five shares of stock of the Chicago & Northwestern Railway Company. That corporation was organized and exists under the laws of the states of Illinois, Wisconsin and Michigan. It has but one capital stock and conducts its business as a single corporation. Seven per cent. in value of its total property was located in the state of Michigan. The deceased also owned one hundred shares of the preferred stock of the Chicago, Milwaukee & St. Paul Railway Company. That corporation was organized and exists solely under the laws of the state of Wisconsin, although it has lines of railroad in that state, in Michigan and in other states. By judicial proceedings in Wisconsin, it was determined that a tax was due to that sovereignty from the estate of the deceased on account of her shares in the Chicago & Northwestern Railway Company, at the rate of one per cent upon 54.603 per cent of the value of her holdings of that stock, that being the percentage of the total value of the property of that corporation which is situated in Wisconsin. The state of Wisconsin also collected a tax at the rate of one per cent upon the entire value of her holdings of stock in the Chicago, Milwaukee & St. Paul Railway Company. By judicial proceedings in the state of Michigan, it was determined that a tax was due to that state from the estate of the deceased, on account of her ownership of shares of stock in these two corporations, at the rate of one per cent upon the full value of each of such holdings. These taxes have been paid. Other property of the deceased was subject to an excise succession tax in Michigan which has been paid and about which no question is made. Subsequently, the tax commissioner of this commonwealth, in determining the taxes due on account of the stock here in question, deducted from the taxes payable in this commonwealth the full amount of the taxes paid to the state of Wisconsin. He declined to deduct any part of the taxes paid to the state of Michigan on account of her ownership of stock in the Chicago, Milwaukee & St. Paul Railway Company, and deducted only a part of the taxes paid to Michigan on account of her ownership of shares of stock in the Chicago & Northwestern Railway Company.

The general question, whether the petitioners are entitled to recover in whole or in part, depends upon an interpretation of the controlling section of our tax law. St. 1909, c. 490, pt. 4, § 3, as amended by St. 1911, c. 502, § 1, and St. 1912, c. 678, § 2.¹ The crucial point is to determine the meaning of the words ‘legally subject in another state or country to a tax’ as applicable to property not within the commonwealth belonging to the estate of a deceased resident and actually taxed in another state. It has been decided by a court of competent jurisdiction, though not by the highest court, in the state of Michigan, that both these holdings of stock were subject to a succession tax in that state, and that the amount which has been paid is the correct amount. It is not contended by the defendant that the laws of Michigan did not authorize the imposition of these taxes. Therefore, it is not necessary to discuss or decide whether this court would be required in interpreting our statute to review at all and, if at all, to what extent it would review the interpretation of the tax statutes of another state given by the courts of that state. But it is urged by the defendant that Michigan had no jurisdiction to impose such taxes and that that question is one which must be determined by Massachusetts tax officers and courts.

The governing words occur in a Massachusetts tax statute, which is the guide for the tax officers of this commonwealth in the performance of their duties. Whether property is legally subject to a tax in another state is not a question in its essence dependent upon the sole determination of the taxing state. That question often is settled by the Supreme Court of the United States in passing upon contentions arising under the fourteenth amendment. The amount of the tax due to this commonwealth depends upon a correct decision whether the property is subject to taxation in another state or country. The amount of a tax due to any state is one naturally to be decided by the courts of the taxing state. Whether such property legally can be made subject to taxation in another state depends upon general principles of law as to which an authoritative interpretation as between the several states is made by the Supreme Court of the United States.

We are of opinion that the courts of this commonwealth must decide whether the property of a deceased resident is ‘legally subject’ to taxation in another state or country, in order to decide what tax is due to this commonwealth. If the Legislature had intended to leave that question to the decision of the courts of other states and countries, it hardly would have used these words. ‘Legally’ well might have been omitted and the word ‘subjected’ substituted for ‘subject.’ At all events, these words are not apt to express the thought that our tax officers and courts must stop short with the information that some other state or country has exacted a tax, and make no further inquiry. The statute puts upon them the further duty of ascertaining whether the property which has been thus taxed was in law subject to taxation. Whether property is legally subject to taxation in another state or country depends fundamentally upon the jurisdiction of that other state or country over the property. Jurisdiction as between the several states and as between sovereign nations always is a question which can be inquired into and adjudicated whenever it is pertinent. The declaration in this respect by the authorities of one state, or nation, legislative or judicial, is not binding upon another state or nation. The commonest illustration is when the validity of a judgment rendered by a court of another state is challenged. See Old Dominion Copper Mining & Smelting Co. v. Bigelow, 203 Mass. 159, 205 to 212, 89 N. E. 193,40 L. R. A. (N. S.) 314; affirmed in 225 U. S. 111, 32 Sup. Ct. 641, 56 L. Ed. 1009, Ann. Cas. 1913E, 875, where the cases are collected. There is no inherent difficulty in determining such jurisdiction.

The words used in the instant statute by the Legislature indicate a purpose to surrender the power of this commonwealth to tax only when a tax within the jurisdictional power of the foreign state or country has been levied, and not when one has been extorted without legal authority. This imposes no hardship on the taxpayer beyond that which always exists when one has to defend himself against a wrong. It is always within the power of a taxpayer to obtain an authoritative determination binding upon everybody whether he is subject to the jurisdiction of another state of the Union asserting power to tax. Otherwise, in order to avoid double taxation, this commonwealth might be at the mercy of every other state which asserted a right to tax and possessed the power to compel the payment of the tax. If the taxpayer has not interest enough in securing a final and binding decision as to his liability to a tax in the other state, he ought not to complain if that matter is decided by the courts of his own state. Of course there is no such common arbiter as the United States Supreme Court to settle the question of jurisdiction to tax between a single state and a foreign country. Whether in that case the state with respect to its citizen acts as a complete and unrestrained sovereign need not be inquired now. See U. S. v. Bennett, 232 U. S. 299, 34 Sup. Ct. 433, 58 L. Ed. 612;Bemis v. City of Boston, 14 Allen, 366. But that question seems likely to arise infrequently.

So far as jurisdiction to tax is concerned, the question whether the property was legally subject to a similar tax in another state is one to be decided by the courts of this commonwealth if it has not been decided by the Supreme Court of the United States.

[4][5][6] Jurisdiction for the purpose of imposing a succession tax exists only when the exercise of some essential incident in the transfer of the title depends for its legality upon the law of the state levying the tax. Walker v. Treas. and Receiver General, 221 Mass. 600, 109 N. E. 647;People v. Griffith, 245 Ill. 532, 537, 92 N. E. 313;Hull's Estate, In re, 111 App. Div. 322,97 N. Y. Supp. 701. Situs of the shares of stock within the taxing state is the foundation of jurisdiction to tax. That situs ordinarily can be only at the domicile of the owner or at the domicile of the corporation. In re Enston, 113 N. Y. 174, 181,21 N. E. 87,3 L. R. A. 464;In re James, 144 N. Y. 6, 10,38 N. E. 961. Doubtless shares of stock have a situs sufficient to justify the imposition of a succession tax both at the domicile of the owner of the stock and at the domicile of the corporation. Moody v. Shaw, 173 Mass. 375, 53 N. E. 891. It commonly has been supposed that the certificate of stock in a...