Cory v. White

Justice Powell,

with whom Justice Marshall and Justice Stevens join, dissenting.

The Court today decides two cases arising from the same set of facts, the instant case and California v. Texas, post, *93p. 164. Both cases involve the efforts of officials of California and Texas to tax the intangible property of the late Howard Hughes. Each State asserts its right to tax the Hughes estate on the basis of Hughes’ domicile. Yet both recognize that Hughes could have had only one domicile at the time of his death.

In order to avoid multiple taxation that all agree would be unfair, the administrator of the Hughes estate invoked the Federal Interpleader Act1 as a means of litigating Hughes’ domicile in one federal proceeding. The administrator alleged in his complaint, however, that Hughes was not a domiciliary of either California or Texas, but rather of the State of Nevada. App. 10.2

In the instant case, the Court holds today that this inter-pleader action is barred by the Eleventh Amendment. The Court does not dispute that multiple taxation based on domicile is unfair. Nor does it deny that the burden of multiple taxation ordinarily would fall, not on one of the claiming States, but solely on the heirs to an estate. But the Court opinion does not address these issues directly. Rigidly applying an aged and indefensible precedent, the Court denies the administrator and heirs of an estate any federal forum in which to resolve incompatible claims of domicile.

Having held in this case that there is no legal bar to both California and Texas taxing the Hughes estate on the basis of domicile, the Court surprisingly concludes in today’s decision in California v. Texas, post, p. 164, that there presently exists a justiciable controversy “between” those two States as to which actually was Hughes’ domicile.3 But these two cases — both decided today and both arising from the same set of facts — cannot be reconciled. Under the holding in the in*94stant case that there is no federal prohibition against two States taxing the Hughes estate on the basis of domicile, the mere assertion of claims by the two States cannot suffice to establish a controversy “between” them. In finding that there is a case ripe for decision, the Court must rely on a double contingency: first, that both States might win judgments in their own courts that Hughes was a domiciliary subject to estate taxation; and second, that in such a case the Hughes estate might not be large enough to satisfy both claims. This is too speculative a foundation to support the conclusion that there is a case or controversy appropriately within our. original jurisdiction.

In my view the Court’s decisions in these cases rest on a misconception of the rights and obligations created by our federal system, both in its constitutional and in its statutory aspects. Accordingly I dissent.

I

The issues before the Court today are substantially identical to those presented in California v. Texas, 437 U. S. 601 (1978). In that case the Court unanimously denied California’s motion for leave to file an original complaint. The Court’s one-sentence order did not explain our decision to decline to exercise our exclusive original jurisdiction over controversies “between” States. Justice Stewart, however, in an opinion that Justice Stevens and I joined, stated fully his reasons for agreeing that there existed no case or controversy between States.4 He argued cogently that California’s complaint “contain[ed] the seeds of two distinct lawsuits”:

“One is a dispute between two States as to the proper division of a finite sum of money. The other is a suit in the nature of interpleader to settle the question of a de*95cedent’s domicile for purposes of the taxes to be imposed upon his estate. But the suit in the nature of inter-pleader is not within the original and exclusive jurisdiction of this Court because it is not a dispute between States. And the dispute between the States, if indeed it is justiciable at all, is certainly not yet a case or controversy within the constitutional meaning of that term.” Id., at 610-611.

No material fact has changed since 1978. On the premises of the Court’s opinion, there still is no justiciable controversy between Texas and California. See California v. Texas, post, at 170 (Powell, J., dissenting).5 There is, however, a ripe dispute about the estate’s tax liability to the two States — a dispute of the kind for which federal interpleader jurisdiction ought to be available.

II

In our 1978 decision in California v. Texas, supra, four Justices of this Court suggested that the administrator of the Hughes estate might invoke the Federal Interpleader Act to protect the estate from taxation based on inconsistent claims of domicile. Contradicting the clear message conveyed by our decision in that case, the Court today finds interpleader unavailable on the ground that a suit against the state taxing officials is barred by the Eleventh Amendment.

*96The concurring opinions in California v. Texas, supra, all proposed that the administrator of the Hughes estate might invoke the “fiction” of Ex parte Young, 209 U. S. 123 (1908), as interpreted in Edelman v. Jordan, 415 U. S. 651 (1974), to bring an interpleader action naming as defendants the taxing officials of Texas and California. The Court today holds otherwise. According to the Court, it is the lawful function of the state officials to litigate Hughes’ domicile. There is accordingly no colorable claim that they are acting in excess of their authority under state law; no constitutional violation is alleged; and Edelman v. Jordan is read narrowly to retain the Eleventh Amendment bar to injunctive suits against state officials not acting unlawfully, even in this case in which no money damages are sought from the state treasury.

There can be no doubt that Edelman will admit of a broader construction. The plain language of that decision asserts that the Eleventh Amendment bars only suits “by private parties seeking to impose a liability which must be paid from public funds in the state treasury,” id., at 663, and not actions that may have “fiscal consequences to state treasuries . . . [that are] the necessary result of compliance with decrees which by their terms [are] prospective in nature,” id., at 667-668. Thus, at least in a case such as this, in which the very controversy is the result of our federal system, I continue to believe that resort to federal interpleader is not proscribed by the Eleventh Amendment as construed by Edelman v. Jordan.

In rejecting this interpretation of Edelman, the Court relies at the last on Worcester County Trust Co. v. Riley, 302 U. S. 292 (1937). If this broader view of Edelman “were to be the law,” the Court reasons, “Worcester must in major part be overruled.” Ante, at 91. In light of Edelman, however, it must be recognized that the law has changed since 1937, and that the legal assumptions on which Worcester County rested no longer are uniformly valid. See California v. Texas, 437 U. S., at 601 (Brennan, J., concurring). If Worcester County cannot be defended on the basis of its in-*97temal logic and adherence to constitutional principles, this Court should not be bound by it.

H — 1 hH I — i

The Court today contmues to reason from the premise, accepted by Worcester County, that multiple taxation on the basis of domicile does not offend the Constitution — even in a case in which both of the taxing States concede that a person may have but one domicile.6 In my view this premise is wrong. As an alternative to the approach that I embraced in California v. Texas, I now would be prepared to overrule Worcester County on this point and to hold that multiple taxation on the basis of domicile — at least insofar as “domicile” is treated as indivisible, so that a person can be the domiciliary of but one State — is incompatible with the structure of our federal system.

A

As Justice Stewart demonstrated in California v. Texas, the Court’s conclusion in Texas v. Florida, 306 U. S. 398 (1939) — that there was a controversy between States, identifiable by analogy to a suit in the nature of interpleader — can be explained only by its concern for “the plight of the estate, which was indeed confronted with a ‘substantial likelihood’ of *98multiple and inconsistent tax claims.” 437 U. S., at 606. Yet this focus of concern found no justification in the principles actually stated in Texas v. Florida, and it finds no justification in the principles on which the Court rests today. If the Constitution and laws provide no direct remedy to a decedent’s estate faced with multiple taxation on the basis of domicile, there is no principled reason to protect the estate, before the fact, against the bare possibility that multiple taxation may exhaust the estate completely. See 437 U. S., at 611.7 In my view, however, such taxation is not only unfair but offensive to the Due Process Clause of the Fourteenth Amendent.

B

Our decisions consistently have recognized that state taxation must be rationally related to “‘values connected with the taxing state.’” Moorman Mfg. Co. v. Bair, 437 U. S. 267, 273 (1978), quoting Norfolk & Western R. Co. v. Missouri State Tax Comm’n, 390 U. S. 317, 325 (1968). As framed by Justice Frankfurter in Wisconsin v. J. C. Penney Co., 311 U. S. 435, 444 (1940):

“Th[e] 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, opportunities and benefits given by the state. The simple but controlling question is whether the state has given anything for which it can ask return.”

Under these principles tangible property generally may be taxed only by the State where it is located. Curry v. McCanless, 307 U. S. 357, 364 (1939).8 Physical presence *99also is required to justify a state succession tax on the transfer of real property occasioned by the death of the owner. Treichler v. Wisconsin, 338 U. S. 251 (1949); Frick v. Pennsylvania, 268 U. S. 473, 492 (1925).

In contrast with real property, intangible personal property is not physically located in any particular place, at least in any simple sense.9 Moreover, there may be more than one State that has a significant connection with intangible property — for example, the State in which a trust’s assets are administered and the State in which the trustee is domiciled. See Curry v. McCanless, supra. Recognizing these differences, this Court has upheld the multiple taxation of intangible property. The decisions in which the Court has done so have not, however, undermined the fundamental principle that a State’s levy of a tax must be connected rationally with the values on which the tax is imposed or with protections that the State has afforded.

In this case both California and Texas — as most States— recognize that a person can have but one domicile. And it would appear settled that domicile provides the only adequate basis for taxation of intangible property in a decedent’s estate, not located in the State or otherwise dependent on the protection of its laws. See Curry v. McCanless, supra, at *100365-366; cf. Complete Auto Transit, Inc. v. Brady, 430 U. S. 274, 286-288 (1977) (defining Commerce Clause limits on state taxation in terms of connections to and benefits conferred by the taxing State). Here neither State alleges an entitlement to tax the Hughes estate on any other basis. From these premises it follows that multiple taxation based solely on conflicting determinations of domicile not only is unfair, but that taxation on this basis by at least one of the States must lack the only predicate asserted to justify its levy under the Due Process Clause.10

It is, of course, true that in 1937 Worcester County Trust Co. v. Riley, 302 U. S. 292, held that this admitted unfairness did not offend the Constitution. But Worcester County's holding on this point already has been undermined, not only by intervening decisions reiterating due process limits on state taxation of intangible property, see Norfolk & Western R. Co. v. Missouri State Tax Comm’n, supra, at 323-326, and of income, see, e. g., Mobil Oil Corp. v. Commissioner of Taxes, 445 U. S. 425, 436-442 (1980), but also by cases in which this Court has recognized a fundamental right to travel. See, e. g., Dunn v. Blumstein, 405 U. S. 330 *101(1972); Shapiro v. Thompson, 394 U. S. 618 (1969). It is only by moving from State to State that a taxpayer risks incurring multiple taxation based on conflicting determinations of domicile. While no single State can be charged with creating this risk, the fact of its existence cannot be defended. The threat of multiple taxation based solely on domicile simply is incompatible with the structural principles of a federal system recognizing as “fundamental” a constitutional right to travel.

C

By holding that multiple taxation based on domicile is prohibited by the Due Process Clause, the Court could lay the basis for resolution of disputes such as this one under the interpleader jurisdiction of the federal district courts. By alleging that state taxing officials threatened the estate with multiple liability, an administrator would state a colorable claim that the relevant state officers were acting outside of constitutional limits and thus that they were acting in their individual capacities under Ex parte Young, 209 U. S. 123 (1908). The Eleventh Amendment thus would not bar the suit under Ex parte Young and Edelman v. Jordan, and the interpleader requirement of competing claimants would be satisfied.

Professor Zechariah Chafee, the father of the federal inter-pleader statute, argued: “It is our federal system which creates the possibility of double taxation. Somewhere within that federal system we should be able to find remedies for the frictions which that system creates.” Federal Interpleader Since the Act of 1936, 49 Yale L. J. 377, 388 (1940).

In my view the Due Process Clause provides the right to be free of multiple taxation of intangibles based on domicile. The Federal Interpleader Act provides the remedy.

As the Court holds otherwise, I respectfully dissent.

28 U. S. C. §1335.

Nevada imposes no estate tax and therefore has not appeared as a party.

As a result of this decision, the Hughes heirs apparently will not suffer unfair double taxation. Other heirs of other estates presumably will not be so fortunate.

Justice Brennan also filed a concurring opinion tentatively accepting Justice Stewart’s conclusion and stating that he would “deny California’s motion, at least until such time as it is shown that... a statutory inter-pleader action cannot or will not be brought.” 437 U. S., at 601, 602. I too filed a concurring opinion. Id., at 615.

The Court’s main ground for distinguishing the situation in 1978 from the situation today seems to be that “it seemed to several Members of the Court [in 1978] that statutory interpleader might obviate the need to exercise our original jurisdiction.” California v. Texas, post, at 168. Yet this argument simply is unresponsive to the question whether there is an actual case or controversy for which our original jurisdiction properly can be invoked. The Court notes that “several other uncertainties” have disappeared. Post, at 169. But its arguments are makeweights. Until the States have obtained conflicting judgments in their own courts, there is no ripe “dispute between two States as to the proper division of [the] finite sum of money” comprising the Hughes estate. California v. Texas, 437 U. S. 601, 610 (1978) (Stewart, J., concurring). See post, at 170 (Powell, J., dissenting).

Worcester County must be viewed in the context of a constitutional history that is hardly one of settled consistency. Only seven years before the Court decided Worcester County, in Farmers Loan & Trust Co. v. Minnesota, 280 U. S. 204 (1930), this Court had overruled Blackstone v. Miller, 188 U. S. 189 (1903), and held that the Due Process Clause forbids the multiple taxation of intangibles. For a time Farmers Loan & Trust Co. appeared to have established that only the single State of a person’s domicile could tax intangible property in a decedent’s estate. See First National Bank v. Maine, 284 U. S. 312 (1932). But the Court then reached the contrary conclusion in Worcester County, finding that inconsistent state-court adjudications of domicile and consequent assessment of estate taxes did not violate the Due Process Clause. First National Bank v. Maine, supra, then squarely was overruled by State Tax Comm’n v. Aldrich, 316 U. S. 174, 181 (1942), which held that multiple taxation of intangibles did not per se offend the Constitution.

“If it is unfair to subject an estate to two domicile-based taxes when all agree that it is possible to have only one domicile, that unfairness is just as great, if not greater, when a decedent’s estate is able to pay the taxes to both States.” 437 U. S., at 611.

“When we speak of the jurisdiction to tax land or chattels as being exclusively in the state where they are physically located, we mean no more than that the benefit and protection of laws enabling the owner to enjoy the fruits of his ownership... are so narrowly restricted to the state in whose *99territory the property is physically located as to set practical limits to taxation by others. Other states have been said to be without jurisdiction and so without constitutional power to tax tangibles if, because of their location elsewhere, those states can afford no substantial protection to the rights taxed . . . .” 307 U. S., at 364.

See Curry v. McCanless, 307 U. S. 357, 365-366 (1939):

“Very different considerations, both theoretical and practical, apply to the taxation of intangibles, that is, rights which are not related to physical things. Such rights are but relationships between persons, natural or corporate, which the law recognizes by attaching'to them certain sanctions enforceable in courts. The power of government over them and the protection which it gives them cannot be exerted through control of a physical thing. They can be made effective only through control over and protection afforded to those persons whose relationships are the origin of the rights.”

See Chafee, Federal Interpleader Since the Act of 1936, 49 Yale L. J. 377, 383-384 (1940) (footnotes omitted):

“¡TJhere are two types of double taxation. In one kind, the same property or person is taxed in two states on two different theories. ... In the other kind of double taxation, a single theory is applied in both states to tax the same person or property, but the two state governments disagree on a vital issue of fact. The Worcester County Trust Co. case falls into this class. Both states had the same law, that a death tax is levied only at the decedent’s domicile and that a man has only one domicile. The only dispute was, where was that domicile?
“It is rather surprising that almost all the attacks on double taxation. . . have been directed at the first kind, because the second kind seems more unjust. . . . [I]t is highly unfair for both state governments to tell the taxpayer, ‘You have to pay only one tax,’ and then make him pay twice. The injustice of the situation is clearly brought out by the fact that the courts of each state regard the other state as acting unlawfully, and yet neither state gives the taxpayer any remedy.”