Brief for the Appellee — Greenough v. Tax Assessors of Newport

Supreme Court brief1947

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~~ IN THE SUPREME COURT OF THE UNITED-STATES*--——

: OCTOBER TERM 1946. ae

WILLIAM. GREENOUGH np

GEORGE HENRY WARREN. JR.

Trustees,

oar Appellants,

TAX ASSESSORS of ‘The City of Newport; and.

EDWARD L. LEAHY. Tax Administrator of the

* State of Rhode Island,

. +, Appellees

BRIEF FOR APPELLEES

;

_ JOHN C. BURKE

Special Counsel

. ee

ALEXANDER’ G. TEITZ

City Solicitor

_ Attorneys for Tax Assessors of the

City of Newpérr,

JOHN H. NOLAN ;

Attorney General of thé State of

Rhod Island

Attorney for Edward | Leahy. *

Tax Administrator of: the Staté of

Rhode Island

j ppellee Ss.

INDEX

_ SUBJECT INDEX

Co fh RWW NH N'N —

PAGE

Opinions Below

Jurisdiction

Questions Presented

Statute InvB®lved

Statement

Summary of Argument

Argument: oan

‘I. Constitutionality —

IT. Conclusion ]

TABLE OF CASES

Ailman and Honey, 17 R. I. 362 19, 20

Anthony v. Caswell,.15 R. I. 159 | 11, 18

Beman v. Feitner, 168 N. Y. 360 14

Bl: dgett-v. Silberman. 277 U.S. 1 4

Curty v. McCanless, 307 U. S. 357 13, 22

Dorrance’s Will, 333.Pa. 162, 3 Atl 2nd 682,

127. ALR 366 .-:. . | 8, 9

- International Harvester Co. v. Wiscohsin 322

US. 433... >

Kirtland y. Hotchkiss, 100 U. S. 491 17

Magnano Co. v. Hamilton, 292 U. S. 40 S$

Newcomb v. Paige, 224 Mass. 516... 19

/ ~ oe

ae | 7 PAGE f

Price v. Hunter, 34 a ae: Rese eae CMa tet hes 12

Safe Deposit % T. Co. v. Virginia, 280 U. S. : £y

83, 67 ALR 402 ............ me 17” f

St. Louis v. Ferry Co:, 11 Wallace cs ESET. |

State Tax on Foreign Held Bonds, 15 Wallace 300. ae 18

Utah v. Aldrich, 316 U.S. 174 0 es A 23

Welch. v. Boston, 221 Mass. 155 2.0: .cteccwcwes . 14

_ Wisconsin v. d. C. Penney Co., 311 U.S. 435 ...... 4, 6

rome ¥. Cees, 20 Fi: B.A is once ceo ancg 8

STATUTES CITTD ) a

General Laws of Rhode Island 1938, Chapter 36,°. NF

SRC. F, SUDAIVMION FE ie lect > 21, 22

General Laws of Rhode Island 193%, i bs 431,

We Eo ee ~~ oe |

U.S. Gonstjestion. Article IV, Sec, - erat ee

U. S.- Constitution, Fourteenth Ainidienas . 3, 4

TEXT Booxs ’ ‘

51 Am. Jur, Sec. 92 . RSG, nee ee

51 Am. Jur. Sec..484 ice ae me | Bay

Perry on Trusts © Trustees, 7th Ed, ‘Vol l, Sec.

331, . om Rae , 2). <8

abe |

: IN THE SUPREME COURT OF THE UNITED STATES

OCTOBER TERM 1946

“No. 461°

—

WILL IAM GREENOUGH aAnpb aes

- GEORGE HENRY WARREN, dR... ‘Tease:

T . Appellants

Vv ?

TAX ASSESSORS of the City - Newport; and

EDWARD L. LEAHY, Tax pe ea of the

State of Rhode Island,‘ ~

: Appellees.

BRIEF FOR APPELLEES

| OPINIONS BELOW

The opinion of ‘the Superior Court of the State of

Rhode Island, from which the appeal to the Supreme

Court of the State of Rhode Island was taken, pears -

in ‘the Record at pages 34 to 37. This opinion has not .

‘been reported. The opinion of the Supreme Court of

Rhode Isiand’ (R. 39) is reported: in 71 R. I. 477, 47.

\ddntie Reporter, 2d, 625.

ee”

. e co

, 2 if . ee =

\ * *

|, JURISDICTION:

- ‘Phis case is ‘upon appeal’ from the Superior Court of

Rhode. Island utider Section. 344 of Title 28 of the

- United States Cade, which is Section 237 of the Judi-

. cial Code, on the ground that there was drawn into

question the validity of a statute of the State.

The case below is reported in 47 A. 2nd, 625.

Qu ESTIONS PRESENTED | *

"Whether, under the provisions ‘of sub- division Fifth

of Section 9 of Chapter 30 of. the General Laws of

Rhode Island. of 1938, George Henry Warren, Jr... a

domiciled resident and inhabitant of the City and

County of Newport, State of Rhode Island, one of two -

trustees, can be taxed as trustee on one- -half of the

intangible trust property, a trust created under the will

of George Henry Warren’ who was a resident of: New

York, his co-trustee being a resident of New York and

_. the cestui que trust being 4 resident of New York.

as "STATUTE INVOLVED .

"The statute ‘aside (General Laws.of Rhode Island,

_ 1938, Chapter 30, Section 9, Subdivision Fifth) im-

poses an ad valorem Jax as follows:

“FIFTH. [Intangible personal property held in

trust by any executor, administrator, or trustee,

+ whether under an express or implied trust, the in-.

‘come of which is to be paid to. agy other person. —

shall be taxed to such executor... administrator or

trustee'in the town where such other person re-

sides; but if such other person resides out of the

‘state, then in the town where the executor, admin-

istrator, or trustee resides; and + _thgre be more

than one. such: executor, administrator. or trustee,

then in equal proportions to each of such execu-

_ tors, administrators, and trustees in the towns

Where they respectively reside.”’

The tax’ assessed is as follows:

“Warren, George’ H. Jr. Trustee u/w of George H.

Sym for Constance Whitney Warren. Intangible

sonal Property, $12,500. Tax $50.” (R. 3, 14).

{Whe uncontradicted evidence shows ‘that, according

to information given the: Tax Assessors of Newport,

prior to the above assessment, by William P. Sheffield,

‘Attorney as the representative of the. trustee, George

Henry Warren, Jr., $12,500 was one-half ‘of the sum.

held by the trustees on the date of the assessment as the -

then corpus. of the aforesaid trust created -under the

_ fifth and sixth clauses of the testator’s will. (R. 27),;:

Opinion of the Supreme Court (R. 40).

The trustees paid the tax under protest ‘alleging that

the assessment was in violation of Article IV, Section 2,

_ of the Constitution. of the’ United States (R. 32-33).

STATEMENT : } oe

The facts are undisputed. (R. 1- 3)

_ SUMMARY OF ARGUMENT |

Ssaathiey contentions may be briefly sunimarized - *

follows:

‘The application of the tax statute to the facts in’ this

case is not unconstitutional and is not in contravention’

of che provisions of the. Fourteenth . Aniéndment.

ARGUMENT

I CONSTITUTION ALItY

The application of the tax statute to -the facts’ in

this case is not unconstitutional and is not in contra-

vention ofthe provisions of the Fonrteenth Amend-

ment.

“The power to ta% is an incident of sovereignty,

and is coextensive with that to which it is an inci-

dent. All subjects over which the sovereign power

of a state extends, are objects of taxation

State Tése.Conmnisaioh of Utah v. Aldrich

316 U. S..174; 86 L. Ed. 1358

“Nothing can be less helpful than for courts to

go beyond the extremely limited restrictions that

the Constitution places upon the states and to in-

ject themselves in a merely negative way into

‘the delicate processes of fiscal policy- making. We

must be on guard against impisoning the taxing

power of the states within formulas that are not

- compelled by the Constitution but merely repre-

sent- judicial generalization exceeding the concrete

circumstances which they profess to summarize.”

Wisconsin v. J. C. Penney Co., 311 VU. S.

435 85 L. Ed. 267,130 ALR 1229

<P. 1233)

‘The Fourteenth Amendment does not, in terms

' "or in effect, prohibit unwise taxes, merely because

eS)

they ate unwise or unfair or burdensome taxes,

merely because they are unfair or burdensome.

-International Harvester Co. v. Wisco Dept. of

Taxation, 322, U. S. 435 (444) s os seal

1373 (1381)

In Wistisine Co. v. Hamilton, 292 U. S. 40, 78 L.Ed.

1109, 54S. Cr. 599, it is asserted that ““The due process’

clause of the Fourteenth Aniendment is not a limitation

upon the taxing power of the states except in‘rare and

special instances’’. ;

In°51 Am. Jur. Sec. 92, ander the heading of TAX-

ATION, various cases on this subject are digested as

- follows: a

“While-it is clear that the exaction by a state of a -

tax which it is without power to impose.is a taking

of property without due process of law in viola-

tion of the Fourteenth Amendment of the Federal

Constitution, a particular tax law or administrative

interpretation or application thereof will not be

struck down as a violation of*the Fourteenth.

Amendment unless the state’s action is. palpably

arbitrary or grossly unequal in its application to

the persons concerned results in such flagrant and |

palpable: inequity between the burden imposed

and the benefit received as to amount to the arbi-. ©

_ trary taking of property without just compensa-

tion; or is so arbitrary as to compel the conclusion

that it does not involve an exertion of the taxing

power, but is in substance and eect a direct exer-

tion of different and forbidden power, such as the

confiscation of property. Where a state's :power |

of taxation is properly exercised, it seems clear that

any taking, of property thereunder does not con-

sre.

stitute a taking without due process of law. It’

has been said that the test of whether a tax law

violates the due process clause is, whether it bears. .

some fiscal relation to the protection, opportuni- -

ties, and. benefits given by the state, or in other

words, whether the State has. givén anything for

which it can ask a return. Due process of law does

not assure to a taxpayer the interpretation of state

legislation by the executive officers of a state as

against its interpretation by the courts of the state,

or relief from the consequences of a misi terpreta-

tion by either. A state tax is not violative of the

Fourteenth Amendment - merely because of the

oppressiveness of the exaction, where the method

of imposing the tax is not unconstitutional.

r.. (Namierons ¢ cases cited to support each statement. )

In Wisconsin Vv. e C Penney Co., Supra, the Court

states:

*” That (the) test is whether property was taken

without due process of law, or, if paraphrase we

‘must, .whether the taxing power exerted by the

state bears fiscal relation to protection, opportun-.

ities and benefits given by the state. The simple

but controlling question .s whether the state has |

given anything for whitch it can ask return. The

substantial privilege of carrying on business in

Wisconsin. which has here been given, clearly sup-

ports the tax, and the state has not given the less

merely because it nas conditioned the demand of.

the exaction upon happenings outside its own bor-

ders. The fact that a tax. is contingent upon events

brought to pass without a state does not destroy .

‘the nexus between such a tax and. transactions

within a state for which the tax is an exaction”’.

)

“This analysis is merely a reformulation of the

_ Classic approach of this court to the taxing power

of the states. (Lawrence v. State Tax Commission,

_ supra (786°U. S. 280, 76 L. Ed. 1105, 52S. Ct.

556, 87 ALR 374). Ambiguous intimations of

' general phrases in opgnions. torn from the signi-

aie of concrete circumstances, or eveg an ccca-

sional deviation over a long course of years, not

unnatural in view of the confusing complexities ¢ of

tax problems, do not alter the limited nature of the

_. function of this court when state taxes come before

it. At best, the responsibility for devising just and

productive sources of revenue challenges the wit

of legislators. Nothing can be: less helpful than .

for ceurts to go beyond the extremely limited re-

strictions that, the Constitution places upon the

states and to inject themselves, in a merely negative

way into the delicate processes of fiscal policy mak-:

ing. We must be on guard against imprisoning

the taxing power of the states within formulas

that; are not compelled *by the Peseirgpina but

merely represent judicial generalization exceeding

the concrete circumstances which they profess to

summarize’ .

In the annotation to the Penney case, at p. 1237 of

130 ALR, it is stated:

Tne court in sustaining the tax applied the simple

test of whether protection, opportunity, or benefit

was given by the state and received by theNaxpayer

in return fo: the tax, as the guiding criterion to °

sustain or defeat a tax under the due process clause,

' withont strict-adherence to the designation or des-

¢ription of the tax or other formulae as to taxable

event, “taxable situs, 1s, jurisd¥etion to tax or business

- situs ,etc.,”not in. terms found in the Constitution,

but merely. constituting judicial generalizations to.

fw? express mere results in applyinggthe true constitu-

tional test of a state’s right ta tax; and concluded

that the substantia] privilege of carrying ‘on’ busi-

* mess in Wisconsin which’ had ‘been given to the

foreign corporation clearly supportéd the tax, and

that the state had not given any the less merely

because it had conditioned the payment of the

tax upon-happenings ( Saree —-

outside its own borders”.

In the Dorrance case, 3 Atl. 2nd 682, 333 Pa. 162:

127 ALR 366, shown on pages 14, 20 and 21 of Appel-

Jants’ brief, the court also said:

(127 ALR, Page 370) | “The learned court below

recognizéd that the Trustees held by joint tenancy

but, apparently treating them as, tenanté in com-

mon concluded that ‘the undivided three-quarters,

. interest in the trust assets held by individual. res-

idents of the State of Pennsylvania is taxable under:

the . .... statute’. The legislature’ has not —

attempted to authorize a division of the joint ten-

ancy title. It is quite apparent from the amend- :

ment * (5) to the Act (if we may refer to it) .

ede by the same legislature at the special session

f 1936, that it had no intention, when it passed

the Act in 1935, to tax to resident trus *. of for- ©

eign heldtrust property,, because the endment

provide for the taxiny to resident beneficiaries of

equitableNnterests tn foreign trusts. Without iow

considering the power of the’ legislature as exer-,

__cised, the amendment taxing beneficial interests

would seem to indicate that the degislature thought _

ee Gate

itfiad not already taxed. the same property in the

trustee’ s hands”. |

* (5) “The amendment passed at the first extra

session of 1936, P.L. 51, 72 P.S. Sec. 3244, amends |

Sec. 3 by adding. in the first paragraph as taxable

property’ . . . the equitable interest jn any

such personal property of the classes hereinafter

enumerated, owned, held or possesse¢yby any res-

‘ .- ident, where the legal title to such personal prop-

erty is vested in a trustee, agent, or attorney if fact

domiciled in another state, and where such resident .

is entitled to receive all or any part of the income

thertfromm™ .. . °°. ”’

Be “To the last paragraph of Section 3, the following

was added: ‘“The value of the equitable interest

in any personal property, made subject to tax by

this section, shall be measured by ascertaining the -

value @f the personal property in which such res-

. ident has the sole equitable interest, or in ¢ase of

divided equitable interests in the same personal

property, then by ascertaining such part of the

value of the whole of such personal property as

represents the equitable interest of such resident

therein’’.

\ The prorat case cannot be considered as an author-

ity because . ‘ gh

(a) The Pennsylvania statute did not provide,

as does the Rhode Island Statute, for appor-

. tionment of the tax between the trustees.

arr x SAE,

-(b) The reasoning of the Pennsylvania Court's

_ decision is clearly that an amendment y the

eure

— 10'S

° Pennsylvania statute (shown above) pro-

viding for taxyhg of the cestuis indicated the .

legislative intent ‘not to tax the trustee.’ It is

fair to state that if were not for the amend-

ment’to the statute, the-court would not have

arrived at the decision rendered.

v ae ao .

Furthermore, it must not be overlooked in the Dor-.

rance case that a dissenting opinion was rendered by Mr.

Justice Maxey! and a careful reading of this opinion, it

is believed, will convince the Court’ that the reasoning

in the: dissenting opinion is more sound: and reasonable,.

_ and in the Dorrance case, the syllabus (4) plainly states

(127 ALR 366): —

«4. That a state statute providing for the taxation

of any resident of the state on personal prop-

erty held as trustee was not’intended to apply

in the case of resident trustees of foreign trusts

is indicated by an amendment made by the.

same legislature at a subsequent session, pro-

viding: for the taxation to resident benefici-

. aries of equitable interests in foreign trusts’’.

In67 ALR, at Page 492, in a note to the annotdtion

in the case of Safe Deposit and T. Co., v. Virginia, 280

U.S. 83, it is stated: Be

“So, an assessment jointly against two trustees,

one a resident, and one’a: non-resident of the State, |

is void as to the non- -resident, and the resident is.

assessable only to the extent of one half of the value

'« .. of the assets of the trust. People ex rel. Kellog v.

‘Wells (1905) 182 N. Y. 314, 74.N.'E. 878

. (reversing the same case in the Appellate Division

| (1905) 101 App. Div. 600,.92 N. Y. Supp. 5).

From the report: of the case below it would appear

that the trust was created by a will of a resident

ee of‘N. Y., hut that the trust. securities were in. New - ©

_ Jester: at’ the time of the assessment, and not in

“* New Kort” oe hives \ ©

» . In 51 Am. Jur.» Sec. 484, it isatated that:

: “In the case of several trustees who are residents

'-- of different states, the tax inf each state is ordinarily

, apportioned to the -number of trustees therein res-

: , — Anno. 67. ALR 400; 127 ALR 379”,

®& .

| The trustee is the owner, for the. purposes of taxation,

> of the property held in trust by him. ‘Green v. Mumford,

aS ¢ 313 (319); Anthony v. Caswelt, 15 R.1., 159

(1 1).

q : Whether or I t the person’ taxed’ receives any direct

| benefit from the tax is not the test by which the consti-

tutionality of a taxihg act.can be determined: instances

__ are. numerous in which the individual taxpayer receives

-\/( and can receive no direct benefit. ©. -. from: th. ‘tax.

Wood v. Quimby, 20 R¥I., 482 (490)

In Blodgett v. Siiecnsa. 277 ww. 5. °4;..72 1. Ba.

_ 749 (757) it was stated:

“At common law the maxim. mebilia-sequuntur

' personam applied. There has been discussion and

criticism of the application and enforcement of

that maxim, but it isso fixed in the common law

of this country and of England, insofar as‘it relates

to intangible property, including choses. i in action 7

_ without regard to whether they are evidenced in,

writing .or otherwise and whether the papers evi-

dencing the same are found in the state of the dom-

‘icile or elsewhere, and ‘is so fully sustained by cases

in this and other courts, that it must be treated as

settled in this jurisdiction whether it approve itself —

_ to legal philosophic test or not.

Further, this principle is not ceube:.shaken by the °

‘ inquiry into the question whether the transfer of

such intangibles, like. specialties, bonds, or prom-

issory notes, is subject to taxation in another juris-

diction. As ta that we need not inquire. It is not

‘ the issue in this-case. For present purposes it suf-

fices that intangible personality has:such a situs at

the domicil of its owner that its transfer on his

death. may be taxed there’.

In Price v. Hunter, 34 Fed. 355. (Pa 1888) the Court

said:

“Property held by a trustee in the state, for the

- benefit of another ‘is subject to tax, irrespective of . .

the domicile of the beneficiary.

The title to, he the possession W the corpus of a

_fund being in the trustee. in the absence: of statutory

provisions to the contrary, its situs, for the purpose of

taxation, is at the domicil of the trustee, and the fact

that the beneficiaries of the trust are non-residents. does

not prevent the application’ of the, general rule. (Citing

numerous cases in annotation 67 ALR 393-403; also

127 ALR 379).

- 8

: : In Curry t v. McCanless, 307 U. 397: 83 L. Ed.

bo +1339, the Court said:

. “Intangibles, consisting of ‘rights not related to-

' physical things, are merely "relationships between ©

persons, natural of corporate, «which the law rec-

ognizes by attaching to them certain sanctions en-

forceable in the courts. . _ c y

- ¢

An adequate constitutional basis for imposing on

a citizen ofa state a tax on the use and ¢njoyment

of rights in intangibles measured by their. value is _

found in the state’s control over the citizen at the

place of his domicil,-and his duty there, common

tq all citizens, to contribute to the support of the

‘government of the state.

' The state in which an owner of latinniites has his -

domicil cannot be deprived, by reason of the owner's.

. activities, elsewhere, of its constitutional jurisdic-

tion ‘to tax such intangibles.

The Fourteenth Amendment. does not require the

fixing of a single exclusive place for the taxation

of intangibies.

‘The due process clauses of both the Fifth and Four-

teenth Amendments are directed at the protection

: ef the individual, and he is entitled to their immaun-

ity as much against the state as against, the nagional

government. m e:

. Legal ownership of ecsnpitites in a state by a trus-

_ .. tee located in that state affords adequate constitu-

tional basis for imposing on the trustee ‘a tax meas-

ured by the value of such intangibles, and the Four-

teenth Amendment does not relieve the trustee from

the obligation to” pay ‘suth a tax.”

cans a y

“al a

a* was held ii in People ex rel iioin v. Feitnee (1901) —

168 N. Y. 360, 61 N. E. 280:

“that where two othe three trustees ‘tide the will

of”a New Jersey testator were domiciled in New .

York, the third being a non-resident, each of the

resident: trustees was assessable in the taxing dis-

trict in which he resided, upon one third of: the °

trust fund, consisting of securities sv deposit with

a safe-deposit company in New Jersey, the bene-

ficiaries being nongesidents of New York. This

decision reversed the judgment of the appellate

division in (1901) 63 App. Div. 174, 71N. Y.

155,

. express. statute, have never

Supp. 261”. ae a

was held'in Welch v. Boston (1915) 221 Mass.

109 N. E. 174:

“the exclusive legal title to trust property is vested

in the trustee Certificates gf stock, apart from:

*' regarded as capa-

ble of acquiring a situs independent of the domicile

. of the owner and Of the corporation whose frac-

tional.ownership they represent. The maxim that

they follow the person of their owner as to situs

has its foundation not only :n convenience bu

the practical necessities of business.

Generally speaking intangible. property

. may be regarded for the’ purposes of taxation as

~ situated at the domicile of the owner and within

the jurisdiction of the state where he has such dom-

itile. A tax upon such property to the owner at

‘his domicile, in accordance with the state statute

‘violates no provision of the Federal, Constitu- ~

, tion’”’. Buck'v. Beach, 206 U. S.. 392.°401, 27

| Sup. Ct. 712, oT L. Ed. 1106, 11 Ann Cas 732. +

< 15.

“Even in. the light of the most recent’ decisions dom-

icile of the owner Asually fixes the situs of personal

property, for purposes of taxation, even as to class:

es described as tangible, unless it has become. per-

manently. located in some other jurisdiction and, so

far as adjudiciations go, is also employed in the

“prosecution of business there. Southern Pacific Co. v

Kentucky, 222 U .S. 63, 74; 32 Sup Ct. 13, 56

LL. Ed. 96,.See 15 Columbia Law, Review, 377.

“Upon this aspect of ‘the case the contention is ‘

that the owners of stocks and bonds may establish

_an_ independent. situs for the purpose of their tax-

ation, different from the domicile of the owner, the

debtor or the corporation issuing the stock, by a

simple deposit of them in a foreign state, and there-

by divest the jurisdiction of their domicile of the

right to tax. Without undertaking to say, what effect

such deposit. may have on the taxing ‘power of the

state of deposit, see Wheeler v. New York, 233

U. S- 434, 439, 446, 34 Sup. Ct. 607.-58°L. Ed.

10349, it seems to us: that the power of a state of

their domicile to tax them is not affected.

/ ‘If it be said that Levieditaiiansi protection is the

‘consideration for taxation (Diamond Match Co.

v. Ontonagon, 188 U.S. 82, 90; 23 Sup.Ct. 266,

47 L.Ed. 394; Union Transit Co. v.Kentucky, 199,

| U. S. 194, 202, 26 Sup. Ct. 36, 50 L. Ed. 150,

4 Ann. Cas. 493), there. is still support for the tax.

The plaintiffs would be given whatever ‘protection

they as owners might require from our government,

and they doubtiess. could be held by our courts to

the performance of their trusts at the suit of their a

cestuj ™ trustent’or other interested parties.

ab” s

» ‘ é . R . e

f é . : . “

16°. g

The natural netting of dealing with the taxation |

of invisible and intangible property is to treat with:

‘the owner where he lives, where he can be reached .

(and where it is comparatively easy to administer —

with justice the law. Any other course seems to

open wide the door to evasion of. ail taxation

“For these reasons no right secured to the plain-

tiffs by the Fourteenth Amendment ta the Con-

stitutiort of the United States or by our own Con-

stitution is violated by the statute as thus inter-

pretated. This conclusion is‘supported in principle

by Kirtland v. Hotchkiss, 100 U. S#491, 25 L. Ed.

558 has numerous mae cases cited.)’’.

The biere 3 in the Welch case wets substantially as fol-

lows: Plaintiffs’ ‘sought to recover from ‘the City of

Boston amount. of. taxes paid under protest. The plain-

tiffs were trustees appointed by the Probate Court of

York County in the State of Maine, under the will of'a’

testatrix who was domiciled: in that County and State.

_ All the beneficiaries under the trust. were-domiciled in

the State of California. The corpus of the trust fund,

so far as concerned the tax in question, consisted of

stocks and bonds of corporations foreign to the Com-

monwealth of Massachusetts. These bonds and certi-

* ficates Gf stocks always were deposited and kept in the

Stute of Maine. The question was whether such prop-

‘erty was legally assessable to the plaintiffs who. were

domiciled in Massachustts. It -was held fhat the assess-

ment; under the statute was valid-and that no right se-

cured-to the plaintiffs by the Fourteenth Amendment to

the Const®ution of the United States or by the’Consti-

ution of Massachusetts was violated by the Statute.

17°

‘In Safe Deposit & Trust Co. of Baltimore v. Com-

monwealth of Virginia, 280 U. S. 83;.74 L. Ed. 180;

67 ALR 386 (annotation 390), it was stated that:

“Ordinarily this court recognizes that the fiction

of mobilia sequuntur personam may he applied in

order to determine the situs of intangible perspnal

property for taxation.” Blodgett uv. Silberman,

277 U.S. 1, 72 L. Ed. 749, 48 Sup. Ct. Rep: 410.

; In Kirtland v. Hotchkiss, 100 U. S.. 491, 25 L. Ed.

558, the Court rani

“So long ‘as a ners by its laws prescribing the

mode and subject of taxation, does not intrench-

upon the legitimate: authority®of the Union,’ or

“violate any. right recognized or secured by the Con-.

stitution of the United States, this Court, as be-

tween the State and its citizen, can afford him no

relief against state taxation, however . unjust,

oppressive or onerous’’.

+ &

‘This vital power,” said thi§ court in BR. v. ‘Bil- '

lings, 4 Pet., 563, ‘‘may be abused; but the Con-

stitution of the United States was not intended

to furnish the corrective for every abuse of power

which. may be committed by the State Govern-

“ments. The ‘interest, wisdom and -justice of the

representative body, and its felations with its con-

-Stituents, furnish the only security, when there

— iS NO express con. rdct, against unjust and) excessive.

taxation, as well as against unwise legislation.”

Sa,

In st. Louts v. Ferry Co., 11 Wall., 423, 20 L. Ed.,

192, and in State Tax on Foreign Held Bonds, 15 Wall.,

300, 21 L. Ed., 179; the language of the court was

equally emphatic, viz: — ,

“unless restrained ‘by provisions of the Federal

Constitution, the power of the State as to the mode,

form and extent df taxation is unlimited, where

the subjects to which it-applies are within her jur-

isdiction’’. :

II. CONCLUSION -

The Rhode Island statute follows the common rule

in taxing the trust property to the trustee. In Anthony —

v. Caswell (1885) 15 R. 1, 159, the court in construing |

. substantially the.same statute with which this court is

now concerned had before it a set of facts which is

almost exactly opposed to the present case. In the cited

case the trustee rsided in New York and the cestui re-

sided in Rhode Island. Residence in Rhode Island of the

cestut was held not to confer authority to tax the trust

‘fund to an out-of-state trustee. And the court stated:

“The statute, following the common <itle clearly

recognizes executors, administrators and trustees

as the owners, for the purpose of taxation of the

‘ property held in trust by them’’.

af ‘1 ) Only one-half of = fund was taxed to the res-

; ident trustee.

The provision of the Rhode Island eaaas providing

for apportionment where there is more than one trustee ~

was strictly followed by the appellees. Note also

_that the-information upon which one-half of the secur-

_ ities forming the trust. fund was taxed to the resident

trustee came from his own representative (R. 27) and

the assessment was made in accordance with the resident

trustee’s own feelings in the matteo (R. 27).

19 ;

The Massachusetts case (Newcomb v. Paige, 224

Mass. 516, Appellant's Brief, pp. 10, 12 and 19) is no

authority for appellants because the - Massachusetts

statute does not correspond to the Rhode Island Statute, .

and further that decision was based. upon ‘the final sen-

tence of Clause 5 of Séction 23 of the Tax Act, viz:

_ “The final sentence of the clause, to the effect that

when the trustee is not a resident of this Common-

wealth, the fund shall be ‘assessed to the person to

whom the income is payable, in the place where

he resides, if it is not: legally taxedto . . -trus-

tee under a testamentary trust in any other state’,

is some indication of a legislative purpose that a

trust fund lawfully within the taxing jurisdjction

of another state and there making a just contribu-°

“tion to the support of government,. should not be

made liable to another tax here’.

The Newport trustee because of his residence is entit- ~

led to all the protection the State of Rhode Island affords -

to the*legal owner of property. That such residence is

' an ample basis for the imposition of the tax was upheld

by the Supreme Court of Rhode Island as long ago as

1891 in Atlman and Honey, 17 R. 1., 362. ~

Even though “he Massachusetts tax statute’ in the

case (Newcomb v. Paige, supra},contained a provision

for apportionment, that statute differed from the Rhode

‘Island statute, and the Massachusetts Court in constru-

ing its statute based its decision upon the legislative —

intent <as found by the court, not to tax the trust fund,’ |

. tf it involved double taxation Nothing could. be clearer,

from the court's calling attention to the non-taxability .

yf 2 beneficiary under clause 5 of Section 23 of the Mass-

“achusetts Tax Act where the trust fund was legally

o ©

the provision of the Rhode Island. tax statute which is,

_ concerned in this case to apply to out-of- State trusts and

2 °

.lina resident decedent. The beneficiary was'a New York

_ resident. Honey invested some of the trust fund in mort-

: Per Dero eee - «20

taxable in another state, than that the court discovered

a legislative intention’ not to tax to a- Massachusetts -

co-trustee a postion of an out-of-state trust fund tax-

able elsewhere.’ In other words, the court found that

the Massachusetts legislature kad forbidden double tax-

ation.. This is the opposite of thé finding of the) Rhode

Island Court on the Rhode Island statute in pe fee of .

Ailman and Honey, supra, where the Court construed

said (p.- 364):

Oa oe if it (the trust fund) he thus liable

‘% double taxation, here and elsewhere, that has to

do with the policy of the law, over which we have

na control .@. wee

% © ne

The ‘well-settled construction of the statute is that

it applied to a resident trustee of an out-of-state trust. ~

The law of Petition of Ailman ®sHoney, supra, has

been the law of Rhode Island since 1891. Honey, a res-

ident of Newport, Rhode Islar 1, was appointed by the

South Carolina courts as trustee of a South Carolina

trust estate constituted under the will of a South Caro-

gages on Newport real estate. A tax was aSgessed to

Honey upon tlie intangible property so held{ and the

trustee’ raised the question that the statute should be——

construed as applying ‘‘only to property of decedent in-.

habitants: of the State’’ (p. 364). Tehe court decid od

that both the explicit language of the statzé.- and its

intent caused it to apply toa resident trustee of an out-

of-state trust fund, and upheld the tax. In so construing

the statute, the court stated unmistakably that the resi-

‘dence in this state of the legal owner of the intangibles | M

was sufficient, in-and of itself, to. give a taxable situs ‘

within Rhode Island to the intangibles:

oe ee fl before us, the legal owner

resides here, and he has invested a part of his trust

estate here; so that the situs of the property is

‘doubly fixed’ The fact that the authority of the

‘trustee comes from another state does not change

‘thé fact of -his residence and legal title within this

° state; nor the fact that the property, taxed is here,

by reason of its invgstment in loans. sécured by

mortgages within this state, se, run to the truis-

%”

tee’’.

The go tern Statute construed in’the Ailman :

* case was prac ically the same as the statute under <6n- : - &§

sideration in the instant case.

(3) Subsection Fifth of: Secticn 9, Chapter 30, of

the General Laws’ of Rhode Island 1938 is constitu-

tional under both the Rhode Island and Federal Con- ”

stitutions.

(a) The statute follows the co mon rule in

. (sssessing:the tax to the trustee. :

‘In the absence of a statute, the law would look .

upon the trustee as the owner, and assess the prop-’. o I

_______erty at his domicile. If there are two dr more trus- ;

) tees residing in differen pike the tax is shlecree, Sa Y

the trustees being treated as equal owners. f

“Perry on Trusts and Trustees, Seventh Ed., Vol.. f

1, Sec. 334, p. 575, citing, among others, Green

v. Mumford, 4 R. I. 313”.

(b) The statute taxes to a resident trustee of an .

PARR ED RT MET:

= aeeaeeeer eS 22

out-of-state trust only his proportionate part of. the

_ trie fund.

Although the Rhode Island. statutes provide ‘that

trustees shall hold the trust property as- joint tenants

(Chapter 431, Section 1 of the 1938 General Laws),

a division of that joint tenancy title for purposes of* . |

taxation is authorized by the said Subsection Fifth of

Section 9, Chapter 30 of the 1938 General Laws. Con-

trary to the Pennsylvania statute construed in Dor-

rance’s Estate (cited supra), our statute does direct that

if there is more than one trustee, only his proportionate .

part of the trust: fund shall be taxed to each one. This

‘is a reasonable and equitable procedure, .It would be un-

fair to tax-to the resident trustee (or trustees’) all the

trust property where there is a non-resident trustee (or

trustees)... The statute here, too, follows the common .

rule. (See - ‘eaten. cited supra, from ‘“‘Perry on

Trusts’). :

gible property has been ‘enunciaged and reaffirmed by the

- latest decisions of this Court. ba :

~ Certain it is that if an owner of intangible property

extends his activities with respect to his intangibles so

that states other than his domicile give some measure of

- protection or benefits to his property, he is not thereby

relieved of taxation for it at his domicile. (See Curry

v. McCanless, supra, at p. 367):

whether we regard the right of a

state to tax as founded on power over the object

taxed .-. . through dominion over tangibles

of ‘intangible’ rights; or on the benefit and protec-

23° .

tion conferred by the taxing sovereignty, or both,

it is undeniable that the state of domicile ts nat

. deprived, by the taxpayer's activities elsewhere, of

its constitutional jurisdiction to tax, and conge-

‘ quently that there are many circumstances in whiche

more than one, state. may have jurisdiction to im-

pose a tax and measure it by some or all of the tax-.

eres intangibles”. =:

x y

(4) The State a Rhode Island extends to the res-

ident trustee in the instant case benefits and protection

accorded to any resident legal owner of —— prop-

erty.

The claim of appellants that the State of Rhode.

Island has no * ego a tax’’ because the resident

trustee and the trust propefty receive no benefits or pro-

tection from the Sgate of Rhode Island is. difficult to un-

derstand. In the concurrihg opinion in State Tax Com-.

mission of Utah v. Aldrich, supra: (p. 183), it was

said:

; _ that phrase ( jurisdiction to tax). ob-

_ Scures rather than enlightens, for it only states a

result and does not analyze the constitutional prgh.

lem’’. o

It isa legal conclusion only. The appellartts urport

to arrive at the decision that Rhode Island has nd “‘jur-

_- /isdiction to tax” by alleging that the resident trustee and

the trust fund receive no benefits or protection from the

state. But the/resident trustee* recerves benefits and pro-

tection accorde any resident, legal Owner of intangible.

roperty., i ; .

‘ -- yp. --°

e , e

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THE ASSESSMENT SHOULD BE SUSTAINED.

IT WAS NOT ILLEGAL NOR IN- VIOLATION

OF ARTICLE XIV OF THE AMENDMENTS OF

THE ° CONSTITUTION OF - THE UNITED, *

STATES. — ,- : .

‘ \

THE. “JUDGMENT OF THE SUPERIOR f

COURT OF THE STATE OF RHODE ISLAND E

_~ SHOULD BE AFFIRMED, ;

> a!

. PM ">

Respectfully submitted,

. JOHN C. BURKE

‘4 Special Counsel

ALEXANDER G- TEJTZ

City Solicitor

City of Newport*

JOHN H. NOLAN |

Attorney General of the State

pet Rhode Island

Attorney for Edward L. Leahy,

Tax Administrator of the State of

-Rhode Island

Appellees

Newport, R .I.

January, 21, 1947.

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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.