Robinson v. Dover , 59 N.H. 521 ( 1880 )

The despotic power of making an unequal division of public expense was upheld in The Salem Iron Factory Company v. Danvers, 10 Mass. 514. By statutory construction, authorizing double taxation, the plaintiff's real estate was held to be taxable once to the corporation as real estate, and once to the stockholders as corporate shares. By the New Hampshire act of Jan. 4, 1833, stock in any corporation, and real estate, including factory buildings and machinery, were put in the list of taxable property; and in Smith v. Burley, 9 N.H. 423, the Massachusetts decision was cited to sustain the taxation of a Peterborough factory once to the corporation as real estate in Peterborough, and once to the stockholders as corporate shares in the towns of their residence. There was no statute expressly forbidding double taxation. But the court said it could not for a moment be supposed that the legislature intended "a double taxation of the property, once to the corporation itself, and again to the corporators, which would be unjust, oppressive, and unconstitutional;" and that there was no doubt the clause "all other stock in any corporation" was intended "to include stocks in companies, if any, for taxing which no other provision had been made." There have been, and still are, various clauses of the statutes, which, if understood literally, would require an unequal division of public expense by what is called double taxation. But whatever their literal signification, they have been understood to require an equal division because an unequal division is not taxation. In Smith v. Burley, forty-two years ago, the defendants unsuccessfully contended for an exception that would take corporate property out of the otherwise universal rule.

The doctrine of inequality in the division of public expense has gained ground in other jurisdictions, but not in New Hampshire. The legislature, apparently fearing the doctrine might be introduced here by judicial construction against the legislative will, expressly declared, in 1853, that the laws of this state shall not be so construed as to cause any corporate stocks or other property to be twice taxed. The court had shown no tendency towards the construction thus prohibited. On the contrary, they had said it would be unjust, oppressive, and unconstitutional, and they could not for a moment suppose it was intended by the legislature. But overruled decisions were not unknown; the court might change their opinion: and the legislature undertook to render all misconstruction on this subject impossible. The Massachusetts precedent rejected in Smith v. Burley, could not be followed in any other case after it was enacted that the laws of this state shall not be so construed as to cause any corporate stocks or other property to be twice taxed. The fundamental principle, that taxation is an equal division of the public expense, — a collection from every member of the community of his share of that expense, — was protected by every possible guaranty of the state. The court could do no more than they did in Smith v. Burley to give that principle the security of judicial authority; and the legislature could do no more to prevent that security being withdrawn by a change of judicial opinion.

The laws shall not be so construed as to cause any property to be twice taxed. This declaration of legislative intention is conclusive; it controls all laws to which it is applicable; and it is applicable to all tax laws. Its meaning was not changed by its condensation in the revision of the statutes. It unmistakably shows that any statutory construction making any property liable to double taxation is erroneous. It shows that many clauses of the statutes, which, taken separately and literally, would make some property taxable twice or thrice, are not to be taken separately and literally, but are to be understood as subjecting the property they describe to single taxation only, and as designed, by their varied and comprehensive descriptions, to prevent property escaping single taxation. To say that property is taxable to each of two persons, corporate or incorporate, or in each of two states, is to say, in contradiction and defiance of this general statute of construction, that the law shall be so construed as to cause property to be twice taxed. The only question left open by this statute in this case is, In what state are savings-bank deposits taxable? The plaintiff's deposit in a savings-bank in Massachusetts is taxable either in Massachusetts or in New Hampshire. It is not taxable in both states.

The question is, not whether the plaintiff's deposit is taxed in Massachusetts, but whether it is taxable in Massachusetts or in New Hampshire. If it were taxable here, the tax could not be abated on the ground that the property was wrongfully taxed in Massachusetts. If the plaintiff owned New Hampshire land, its New Hampshire tax would not be abated by a taxation of it in Massachusetts. And if he owned Massachusetts land, the fact that it was not taxed in Massachusetts would be no cause for taxing it here.

If the plaintiff should transfer his deposit from the Massachusetts to a New Hampshire savings-bank, it would not be taxable twice, once to the bank, and again to him. The title of his money was divided, not multiplied, by depositing it in a savings-bank. One of its parts is called the legal, and the other the equitable, title. The legal passed to the bank as trustee: the equitable remained in the depositor as cestui que trust. When the money was deposited, the legal title held by the trustee, and the equitable title held by the plaintiff, were no more than they were before, when he held them both undivided. The parts are not greater than the whole, whether the trustee is incorporated or unincorporated. Morrison v. Manchester, 58 N.H. 538, 563. And the parts are not greater than the whole, whether the beneficiary and the trustee are, or are not, separated by a state line. The separation of the parts of the title by the state line raises the question, In which state is the property taxable?

This question cannot be avoided by any correct view of the case, since every such view is necessarily based upon the maxim of equal rights, that taxation is an equal division of public expense. A man's tax is his share of expense incurred by him and the other members of the community for a public purpose, and his and their common benefit. And as, upon this maxim, no government can honestly compel him to pay more than his share, either by holding his property taxable twice in one state, or by holding it taxable once in each of two or more states, it is necessary in this case to ascertain in which state the plaintiff's deposit is taxable. And this is not an open question. A fund held in trust by a Massachusetts savings-bank, or other corporation, is taxable in Massachusetts, as a fund held in trust by a New Hampshire savings-bank, or other corporation, is taxable in New Hampshire. Society v. Coite, 6 Wall. 594, 609, and authorities cited in Berry v. Windham, ante 288, 290. And as the amount of foreign capital invested in New Hampshire corporations far exceeds the amount of New Hampshire investments in foreign corporations, the rule is very advantageous to this state. The deposits of New Hampshire savings-banks have always been regarded as taxable here, whether the depositors resided in this state or elsewhere. This settled rule of this and all other jurisdictions is decisive of this case. If the plaintiff should transfer his residence to Massachusetts, and his deposit to a New Hampshire savings-bank, the deposit would be taxable here. Therefore, by the principle of our own law, the deposit is now taxable in Massachusetts.

By the rule of inequality, Massachusetts can compel her citizens to pay a Massachusetts tax upon all New Hampshire land owned by them, as well as a double tax upon their Massachusetts land, because, by that rule, taxation is, not an equal division of public expense, but such an arbitrary exaction as pleases a lawless government. Under that rule, the question, in what state property is taxable, is immaterial; for the citizen has no right of property against a government vested with a discriminating and unlimited power of confiscation, exercised by a process erroneously called taxation.

The doctrine of inequality, so prevalent and oppressive in other ages and countries, is defended on various grounds. It is said that a double taxation of corporate property is justified, in some incomprehensible manner, by the franchise. A corporate franchise is property of a certain kind; and if it is worth anything, it is taxable, like other property, at its full value. Bartlett v. Carter ante 105, 106. It is a part of the corporate property; and the taxation of all the corporate property at its value, either to the corporation or the stockholders, includes a taxation of the franchise

It is said the property of a corporation, real or personal, is taxable to its owner, the corporation, and its stock is personal property, taxable to its owners, the stockholders. This argument makes the parts of a thing twice as much as the whole of it. The shares of the stockholders are their shares of the equitable title of the property, the legal title of which is in the corporation. The property is not doubled by merely separating its equitable from its legal title. A tax paid by the corporation is paid out of the estate of the stockholders by their corporate agent and trustee. By making the corporate investment, they do not double their share of the public expense unless the value of the invested property is doubled if the investment is doubled in value, it bears its share of the public expense when it is taxed at its value to the corporation as corporate property. If it is again taxed at its value to the stockholders as their shares of the corporate property, it bears twice its share of the public expense.

It is said that one tax may be laid upon property, and another tax upon its income. Belo v. Commissioners, 82 N.C. 415; Worth v. Commissioners,82 N.C. 420. An equal division of the public expense may be made by a property tax and an income tax. The modes of division may be numerous and various. If the result is an equal division, it is taxation. But an equal tax of all property, accompanied by a so-called tax laid upon the income of farms and not upon the income of any other property, would not be accepted by the community as an equal or honest division of their common burden.

It is said that the relation of trustee and beneficiary is analogous to that of debtor and creditor. Belo v. Commissioners, supra. This view makes it immaterial whether the trustee is incorporated or not. In either case, all taxes of the trust property whether paid by the trustee or the beneficiary, or by both, are, in practical effect, paid out of the estate of the person or persons having the exclusive beneficial interest. A tax paid out of the trust fund by the trustee, is paid by the trustee as agent of the beneficiary. And the result is the same, and the inequality in the division of public expense is the same, whether one tax of the trust fund is assessed to the trustee and another to the beneficiary, or whether the fund is taxed twice to the trustee, or twice to the beneficiary.

If a savings-bank deposit were taxable to the bank as holder of the legal title without any beneficial interest, and also to the depositor as holder of the equitable title and the entire beneficial interest producing an income, all property held by guardians, executors, administrators, or other incorporated or unincorporated trustees, would in like manner be twice taxable. And if, on account of the separation of the legal from the equitable title, or on account of the analogy of debtor and creditor, an additional tax were put upon property whenever it was put in trust, it would follow that when a guardian or other trustee, incorporated or unincorporated, deposits a trust fund in a savings-bank, it is taxable once to the bank, a second time to the fiduciary depositor, and a third time to the only person who derives any income from it, or has any beneficial interest in it.

When a testator, having a son capable and a daughter incapable of managing property, leaves half of his estate to the son and the other half in trust for the daughter, the tax of the whole estate is not thereby increased one half. The mere trust does not make the daughter's share of the public expense twice as much as her brother's; and the double taxation of her property would be the imposition of a penalty for a misfortune. If she lived in this state, and her trustee, living in Maine, deposited the trust fund in a Massachusetts savings-bank, it would not be taxable in each of the three states. A just government would inquire, In which state is the fund taxable? It would not inquire by what false analogy of debtor and creditor, or by what verbal quibble disregarding the substance of things, and rejecting the legal sense and the common-sense of the case, the beneficiary could be despoiled by an unequal and dishonest division of public expense, taxing her brother's property once, and taxing hers more than once. The legality of such a wrong can be maintained only by a failure to understand what taxation is, and by understanding that, instead of being an equal division among the members of the community of an expense incurred by them for their common benefit, taxation is a seizure of such property of his subjects as an absolute ruler capriciously chooses to appropriate to his own use.

A system of substantially unequal taxation, like any other system of injustice and oppression, is calculated to encourage the emigration of persons and their property, and to discourage their immigration: and every state is entitled to such prosperity as naturally arises from its just methods of administration. This state has not adopted the policy of repulsion and expulsion, but has adopted the contrary policy of inviting people to remain in, and to come into, a territory where the principle prevails that every one is bound to bear his share, and no more than his share, of the common burden. Upon this principle, property is not taxable twice in one state, nor once in each of two states.

Tax abated.

CLARK, J., did not sit: the others concurred.