383 HUGHES, C. J., dissenting. sequuntur personam might have seemed to justify such a tax on personal property by the State of the owner's domicile. But as said in Pullman's Car Co. v. Pennsylvania, 141 U. S. 18, 22: "The old rule, expressed in the maxim mobilia sequuntur personam, by which personal property was regarded as subject to the law of the owner's domicile, grew up in the Middle Ages, when movable property consisted chiefly of gold and jewels, which could be easily carried by the owner from place to place, or secreted in spots known only to himself. In modern times, since the great increase in amount and variety of personal property, not immediately connected with the person of the owner, that rule has yielded more and more to the lex situs, the law of the place where the property is kept and used." The rule thus established that the State of the owner's domicile cannot tax tangible personal property which has an actual situs in another State was applied by this Court to an inheritance or transfer tax in the case of Frick v. Pennsylvania, 268 U. S. 473. There the Court held, without division, that to tax the transfer of tangible personal property having an actual situs in another State "contravenes the due process clause of the Fourteenth Amendment." The importance of this limitation of state power is obvious in view of the interrelation of the States under the bond of the Constitution, and of the opportunities for oppressive taxation if States attempt to tax property or transfers of property not properly attributable to their own domain. "The limits of State power are defined in view of the relation of the States to each other in the Federal Union." Burnet v. Brooks, 288 U. S. 378, 401. But while the question was thus settled as to tangible personal property, the fiction of mobilia sequuntur personam still persists in a general sense as to intangibles, embracing securities, thus permitting taxation by the State of the owner's domicile although the owner may HUGHES, C. J., dissenting. 307 U.S. keep the securities in another State. Blodgett v. Silberman, 277 U. S. 1, 9, 14, 16. This general rule proceeds in the view that intangibles, as such, are incapable of an actual physical location and that to attribute to them a "situs" is to indulge in a metaphor. Still, in certain circumstances the use of the metaphor is appropriate. New York ex rel. Whitney v. Graves, 299 U. S. 366, 372. The fact that this rule of convenience may generally be applied does not justify the conclusion that intangibles can never be so effectively localized in another State as to withdraw them from the taxing power of the domiciliary State. The proper use of a legal fiction is to prevent injustice and it should not be unnecessarily extended so as to work an injury. Union Transit Co. v. Kentucky, supra, p. 208. As we said in Safe Deposit & Trust Co. v. Virginia, 280 U. S. 83, 92, the fiction of mobilia sequuntur personam "must yield to established fact of legal ownership, actual presence and control elsewhere, and ought not to be applied if so to do would result in inescapable and patent injustice, whether through double taxation or otherwise." In that case, a resident of Virginia had transferred certain securities to the Safe Deposit & Trust Company of Baltimore in trust for his minor sons. The donor reserved to himself a power of revocation. He died without having exercised it. Virginia undertook to impose an ad valorem tax upon the entire corpus of the trust estate and this Court held that as the securities were subject to taxation in Maryland, where they were in the actual possession of the trustee, the holder of the legal title, they had no legal situs for taxation in Virginia "unless the legal fiction mobilia sequuntur personam was [is] applicable and controlling." The Virginia court had held that the two beneficiaries in conjunction with the administrator of the father's estate really owned the trust fund and that by reason of the fiction its taxable situs followed them. 383 HUGHES, C. J., dissenting. This Court refused to accept that view and denied the right of taxation to Virginia, saying: "It would be unfortunate, perhaps amazing, if a legal fiction originally invented to prevent personalty from escaping just taxation, should compel us to accept the irrational view that the same securities were within two States at the same instant and because of this to uphold a double and oppressive assessment." That was a case of an ad valorem property tax. But the power to impose an inheritance or transfer tax, as well as the power to impose an ad valorem property tax, depends upon the property being attributable to the domain of the taxing State. Frick v. Pennsylvania, supra, p. 492. In the instant case, the legal title to the property in question is in the Colorado trustee, the trust was created under the Colorado law and its administration is subject to the control of Colorado. To say that these securities are not as effectively localized in Colorado, as were the furniture, pictures and other art treasures of Mr. Frick in New York and Massachusetts, where alone their transfer could be taxed, would be to ignore realities and to make important rights turn upon a verbal distinction. Upon what ground then is it maintained that these securities are within the taxing power of New York? Solely, it appears, upon the ground that the indenture creating the trust in Colorado reserved to the settlor a power of revocation. This unexercised power is treated as carried by the settlor into New York and hence as bringing in its train the entire corpus of the trust property. That results, as already noted, in giving the fiction an oppressive operation. But, aside from that practical aspect, if through the trust in Colorado the securities have been effectively localized in that State, why should an unexercised power of revocation alter their status? Mr. Frick did not even need to revoke an instrument, for at HUGHES, C. J., dissenting. 307 U.S. any time he could have removed his furniture and art treasures from New York and Massachusetts to his domicile in Pennsylvania. But that obvious control, while unexercised, did not detract from the taxing power of the States where the property was, or permit taxation by the domiciliary State. It is said that the power of disposition is equivalent to ownership, and that its relinquishment at death is an appropriate subject of taxation. The case of federal taxation is not analogous as there are no state boundaries to be considered when the federal tax is laid. Nor are state cases relevant when there is no attempted extraterritorial application of a state statute, and it is not necessary again to review the authorities cited in the dissenting opinion in Curry v. McCanless, ante, p. 357. For the present purpose it is sufficient to note that under the principle established in Frick v. Pennsylvania, it is not enough to say that a power of disposition is equivalent to ownership, for ownership by a resident of a State gives that State no authority to tax property not attributable to its domain. Mr. Frick owned his property in New York and Massachusetts but still his own State of Pennsylvania could not tax its transfer. The fundamental question is thus not one of a reserved but unexercised power of revocation or of an ultimate control in an owner, but whether securities, classed as intangibles, are necessarily and in all circumstances subject to a different rule from that obtaining in the case of tangible personal property. It is not perceived that there is a sound basis for such an invariable distinction, which is foreign to common thought and practical needs. When confronted with the question as to tangible personal property, we did not hesitate to limit the application of the fiction, and it is regrettable that we can not deal with the fiction in a similar fashion in such a case as this, where we have an effective localization of securities through a trust created in a State other than that of the settlor's domicile at the time of death, and where in that other State the trustee holds title and possession and has been and is administering the trust subject to its laws. I think that the judgment of the Court of Appeals of New York should be affirmed. MR. JUSTICE MCREYNOLDS, MR. JUSTICE BUTLER and MR. JUSTICE ROBERTS concur in this opinion. SOUTHERN PACIFIC CO. v. UNITED STATES. CERTIORARI TO THE COURT OF CLAIMS. No. 613. Argued March 29, 1939-Decided May 29, 1939. 1. Where a land grant railroad, having an established route partly land-grant aided between two terminal points, developed an alternative route which in part was identical with the original route and to that extent land-grant aided, held that the Government was entitled, under its land-grant Act contract, to compensate the railroad for terminal-to-terminal service on the basis of the lower tariff available on the alternative route less the higher land grant percentage deduction applicable on the original route, irrespective of what route was actually used in shipment. Pp. 394, 401. 2. This conclusion is consistent with the long continued administrative construction given land grant contracts. P. 401. 3. Doubts in respect of the interpretation of public grants are to be resolved in favor of the Government. P. 401. 87 Ct. Cls. 442, affirmed. CERTIORARI, 306 U. S. 625, to review a judgment dismissing the petition in a suit brought by the railroad company against the United States to recover sums claimed to be due on account of transportation charges. Mr. James R. Bell for petitioner. |