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(60) LAW || COL || BAD (original digest by LFFA

Wells Fargo Bank & Union Trust Philippines, the Philippine inheritance tax may
be imposed upon their transmission by death
Company v. CIR It is argued, however, that, as to intangibles, like the
GR No. 46720 | June 28, 1940 | Moran, J. shares of stock in question, their situs is in the
PROPERTY domicile of the owner thereof, and, therefore, their
Tax 1 case; intangible property; shares of stock in Ph transmission by death necessarily takes place
corporation under his domiciliary laws.
Birdie Lillian Eye dies in LA, California, leaving her
shares of stock in the Benguet Consolidated Mining
Company. HELD
Birdie Lillian Eye, wife of Clyde Milton Eye, died on The Administrative Code provides that inheritance
September 16, 1932, at Los Angeles, California, the of shares of stock is subject to inheritance tax.
place of her alleged last residence and domicile.
Among the properties she left was her one-half conjugal Section 1536 of the Administrative Code, as amended,
share in 70,000 shares of stock in the Benguet provides that every transmission by virtue of
Consolidated Mining Company, an anonymous inheritance of any share issued by any corporation or
partnership (sociedad anonima), organized and existing sociedad anonima organized or constituted in the
under the laws of the Philippines, with its principal Philippines, is subject to the tax therein provided. This
office in the City of Manila. provision has already been applied to shares of
stock in a domestic corporation which were owned
Wells Fargo Bank is appointed trustee of her will. by a British subject residing and domiciled in Great
She left a will which was duly admitted to probate in
California where her estate was administered and Wells Fargo: only State where decedent was
settled. Wells Fargo Bank & Union Trust Company, was domiciled at time of his death can impose
duly appointed trustee of the trust created by the said inheritance tax on intangibles
will. Wells Fargo, however,
1. invokes the rule laid down by the United States
Inheritance tax was already paid in the US Supreme Court in four cases to the effect that
The Federal and State of California's inheritance taxes an inheritance tax can be imposed with respect
due on said shares have been duly paid. to intangibles only by the State where the
decedent was domiciled at the time of his
The CIR seeks to subject the shares of stock to death,
Philippine inheritance tax; Wells Fargo objects. 2. and that, under the due-process clause, the
State in which a corporation has been
The CIR sought to subject anew the aforesaid shares of incorporated has no power to impose such tax
stock to the Philippine inheritance tax, to which Wells if the shares of stock in such corporation are
Fargo objected. owned by a non-resident decedent.
3. due-process clause is directed at the State and
A petition for declaratory judgment was filed with not at the Federal Government, and that the
the lower court, which ruled in favor of CIR. federal or national power of the United States
is to be determined in relation to other
The Court of First Instance of Manila rendered countries and their subjects by applying the
judgment, holding that the transmission by will of the principles of jurisdiction recognized in
said 35,000 shares of stock is subject to Philippine international relations.
inheritance tax. Hence, this appeal by Wells Fargo.
The question here is not of due process, but of the
Wells Fargo argues that the situs of tax as to power of the Philippine government to tax.
intangibles, like shares of stock, is the domicile of The question here involved is essentially not one of due
the owner thereof. process, but of the power of the Philippine Government
to tax. If that power be conceded, the guaranty of due
Wells Fargo concedes: process cannot certainly be invoked to frustrate it,
1. that the Philippine inheritance tax is not a tax unless the law involved is challenged, which it is not.
on property, but upon transmission by
inheritance; The rule that inheritance tax on intangibles has
2. that as to real and tangible personal property only one situs has been relaxed in favor of the
of a non-resident decedent, located in the taxing power of the State.
Originally, the settled law in the US is that intangibles
(60) LAW || COL || BAD (original digest by LFFA)
have only one situs for the purpose of inheritance extends his activities with respect to his
tax, and that such situs is in the domicile of the intangibles, so as to avail himself of the protection
decedent at the time of his death. But this rule has, of and benefit of the laws of another state
late, been relaxed. The maxim mobilia sequantur "In cases where the owner of intangibles confines his activity
to the place of his domicile it has been found convenient to
perso-nam, upon which the rule rests, has been decried
substitute a rule for a reason by saying that his intangibles are
as a mere "fiction of law having its origin in taxed at their situs and not elsewhere, or, perhaps less
considerations of general convenience and public artificially, by invoking the maxim mobilia sequuntur
policy, and cannot be applied to limit or control the personam, which means only that it is the identity or
association of intangibles with the person of their owner at
right of the state to tax property within its
his domicile which gives jurisdiction to tax. But when the
jurisdiction" (State Board of Assessors vs. Comptoir taxpayer extends his activities with respect to his
National D'Escompte, 191 U. S., 388, 403, 404), and intangibles, so as to avail himself of the protection and
must "yield to established fact of legal ownership, benefit of the laws of another state, in such a way as to
bring his person or property within the reach of the tax
actual presence and control elsewhere, and cannot
gatherer there, the reason for a single place of taxation no
be applied if to do so would result in inescapable longer obtains, and the rule is not even workable substitute
and patent injustice." for the reasons which may exist in any particular case to
support the constitutional power of each state concerned to
An examination of the adjudged cases will disclose that
the relaxation of the original rule rests on either of two
fundamental considerations: In any case, the owner benefited from Philippine
1. upon the recognition of the inherent power of law because the secretary of the corporation had
each government to tax persons, properties legal, but not equitable, title to the shares.
and rights within its jurisdiction and enjoying, In the instant case, the actual situs of the shares of
thus, the protection of its laws; and stock is in the Philippines, the corporation being
2. upon the principle that as to intangibles, a domiciled therein. And besides, the certificates of
single location in space is hardly possible, stock have remained in this country up to the time
considering, the multiple, distinct when the deceased died in California, and they were
relationships which may be entered into in possession of one Syrena McKee, secretary of the
with respect thereto. Benguet Consolidated Mining Company, to whom they
have been delivered and indorsed in blank. This
It is on the basis of the first consideration that the case indorsement gave Syrena McKee the right to vote the
of Burnet vs. Brooks, was decided by the Federal certificates at the general meetings of the stockholders,
Supreme Court, sustaining the power of the to collect dividends thereon, and dispose of the shares
Government to impose an inheritance tax upon in the manner she may deem fit, without prejudice to
transmission, by death of a non-resident, of shares of her liablility to the owner for violation of instructions.
stock in a domestic (American) corporation, regardless For all practical purposes, then, Syrena McKee had the
of the situs of their corresponding certificates; and on legal title to the certificates of stock held in trust for the
the basis of the second consideration, the case of Cury true owner thereof. In other words, the owner
vs. McCanless, supra. residing in California has extended here her
activities with respect to her intangibles so as to
Burnet vs. Brooks: power to tax property within its avail herself of the protection and benefit of the
borders regardless of the domicile of the owner at Philippine laws. Accordingly, the jurisdiction of the
time of his death Philippine Government to tax must be upheld.
In sustaining the power of the Federal Government to
tax properties within its borders, wherever its owner DISPOSITIVE
may have been domiciled at the time of his death, the Judgment is affirmed, with costs against Wells Fargo.
court ruled:
". . . There does not appear, a priori, to be anything contrary to
the principles of international law, or hurtful to the polity of
nations, in a State's taxing property physically situated within
its borders, wherever its owner may have been domiciled at
the time of his death." . . .

"As jurisdiction may exist in more than one government, that
is, jurisdiction based on distinct grounds — the citizenship of
the owner, his domicile, the source of income, the situs of the
property — efforts have been made to preclude multiple
taxation through the negotiation of appropriate international
conventions. These endeavors, however, have proceeded
upon express or implied recognition, and not in denial, of the
sovereign taxing power as exerted by governments in the
exercise of jurisdiction upon any one of these grounds."

Curry vs. McCanless: The reason for single space
taxation is not applicable when the taxpayer