Wachovia Bank & Trust Co. v. Doughton, 272 U.S. 567 (1926)
Wachovia Bank & Trust Co. v. Doughton, 272 U.S. 567 (1926)
567
47 S.Ct. 202
71 L.Ed. 413
Stanford L. Haynes, of Springfield, Mass., died May 21, 1920, leaving a will
which was duly probated at that place. The fifth clause gave to the Springfield
Safe Deposit & Trust Company, Massachusetts corporation, the residue of the
estate in trust, one-half to be set aside and the net income paid to his daughter,
Theodosia, so long as she should live, and at her death to be transferred to 'such
person or persons and in such proportions as said Theodosia shall by will
appoint, or in the event that said Theodosia shall fail to exercise the power of
appointment hereby conferred upon her and shall leave issue surviving her,
such payment and transfer shall be made to such issue by right of
representation.' The corporation accepted the trust and received a large fund.
After her father's death Theodosia intermarried with Taylor and resided at
Morgantown, N. C. She died there June 23, 1921, leaving an infant child. By
will dated March 18, 1921, executed in North Carolina and adequate under the
laws of the state and of Massachusetts, she directed that the property described
by the fifth clause of her father's will should be divided between her husband
and child. She also disposed of some land and personal property in North
Carilina. The will was duly probated in the latter state and plaintiff in error
became administrator of the estate. The fund held by the trust company and
subject to appointment was made up of stocks and bonds valued at
$395,279.93.
3
Section 6, c. 34, Public Laws N. C. 1921, ratified March 8, 1921, directs that
all real and personal property passing by will or the intestate laws of the state
shall be subject to a tax, and
Acting under this statute, the proper officer demanded payment of a tax
computed upon the value of the property which passed under the appointment
by Mrs. Taylor. The Supreme Court of North Carolina approved the demand
and specifically held that enforcement would not offend the Fourteenth
Amendment by depriving the interested parties of property without due process
of law. It declared that the statute taxed the exercise of the power of
appointment made by permission and under direct protection of local laws. 189
N. C. 50, 126 S. E. 176.
In Orr v. Gilman, 183 U. S. 278, 22 S. Ct. 213, 46 L. Ed. 196, and Chanler v.
Kelsey, 205 U. S. 466, 27 S. Ct. 550, 51 L. Ed. 882, this court held that by an
act passed subsequent to the instrument which created a power of appointment
New York might tax its execution without violating the Fourteenth
Amendment. But in each of these causes the first testator, or creator of the trust,
and the trustees thereunder were residents of New York and the fund was there
held. Here the original testator resided in Massachusetts, his will was probated
there, and the trustee holds the funds there for disposition under the local laws.
The power of appointment was exercised by a resident of North Carolina by a
will there executed and that state has attempted to impose the tax. These
circumstances differentiate the causes.
7
Mrs. Delano, acting under the power granted by her father, appointed by her
will those who should take the full beneficial interest in property held by
trustees in New York and actually located there. The New York court held that
the tax was upon the exercise of the power by will as an effective transfer
within the purposes of the act, and this court said:
10
'The Court of Appeals of New York had the exclusive right to construe
instruments of title in that state, and determine for itself the creation and vesting
of estates through wills under the laws of the state.' 'That power was exercised
under the will of Laura Delano, a right which was conferred upon her under the
laws of the state of New York and for the exercise of which the statute was
competent to impose the tax in the exercise of the sovereign power of the
Legislature over the right to make a disposition of property by will.'
11
Except perhaps where the instrument which created the power provides that the
appointment must be by will executed according to the law of the donee's
domicile, to be proved and allowed there, the following propositions are
established in Massachusetts:
12
'Personal property over which one has the power of appointment is not the
property of the donee, but of the donor of the power.' The appointee takes, not
as the legatee of him who appoints, but of the original donor. 'Property in the
hands of domestic trustees appointed under the will of a domestic testator, who
conferred a power of appointment upon a non-resident, must be distributed
according to the law of this Commonwealth and * * * the execution of the
power must be interpreted according to our law and in conformity to the power
conferred.' Walker v. Treasurer & Receiver General, 221 Mass. 600, 602, 603,
109 N. E. 647, 648, and cases there cited; Shattuck v. Burrage, 229 Mass. 449,
118 N. E. 889.
13
14
We think the assets of the trust estate established by the will of Haynes had no
situs, actual or constructive, in North Carolina. The exercise of the power of
appointment was subject to the laws of Massachusetts and nothing relative
thereto was done by permission of the state where Mrs. Taylor happened to
have her domicile. No right exercised by the donee was conferred on her by
North Carolina. A state may not subject to taxation things wholly beyond her
jurisdiction or control Frick v. Pennsylvania, 268 U. S. 473, 45 S. Ct. 603, 69
L. Ed. 1058, 42 A. L. R. 316.
15
16
17
be executed only by will; but the command over the fund was substantially the
same. Mrs. Taylor, the donee, had the life interest and the power to dispose of
the remainder by a will which she could bind herself to make. I dare say that it
may be desirable to limit the universitas as was done in Frick v. Pennsylvania,
268 U. S. 473, 45 S. Ct. 603, 69 L. Ed. 1058, 42 A. L. R. 316, but I cannot help
doubting whether the present decision can be reconciled with Bullen's Case.
18
Mr. Justice BRANDEIS and Mr. Justice STONE concur in this view.