G.R. No.

L-46720 June 28, 1940

WELLS FARGO BANK & UNON !RUS! "O#$AN%, petitioner-appellant,
vs.
!&E "OLLE"!OR OF N!ERNAL RE'ENUE, respondent-appellee.
De Witt, Perkins and Ponce Enrile for appellant.
Office of the Solicitor-General Ozaeta and Assistant Solicitor-General Concepcion for appellee.
Ross, Larence, Selph and Carrascoso, !a"es #adison Ross and $ederico A%ra&a as a"ici
c'ri(.
#ORAN, J.:
An appeal from a declaratory judgment rendered by the Court of First Instance of Manila.
Birdie illian !ye, "ife of Clyde Milton !ye, died on #eptember $%, $&'(, at os Angeles,
California, the place of her alleged last residence and domicile. Among the properties she left her
one-half conjugal share in )*,*** shares of stoc+ in the Benguet Consolidated Mining Company,
an anonymous partnership ,sociedad anoni"a-, organi.ed and e/isting under the la"s of the
0hilippines, "ith is principal office in the City of Manila. #he left a "ill "hich "as duly
admitted to probate in California "here her estate "as administered and settled. 0etitioner-
appellant, 1ells Fargo Ban+ 2 3nion 4rust Company, "as duly appointed trustee of the created
by the said "ill. 4he Federal and #tate of California5s inheritance ta/es due on said shares have
been duly paid. 6espondent Collector of Internal 6evenue sought to subject ane" the aforesaid
shares of stoc+ to the 0hilippine inheritance ta/, to "hich petitioner-appellant objected.
1herefore, a petition for a declaratory judgment "as filed in the lo"er court, "ith the statement
that, 7if it should be held by a final declaratory judgment that the transfer of the aforesaid shares
of stoc+ is legally subject to the 0hilippine inheritance ta/, the petitioner "ill pay such ta/,
interest and penalties ,saving error in computation- "ithout protest and "ill not file to recover
the same8 and the petitioner believes and t herefore alleges that it should be held that such
transfer is not subject to said ta/, the respondent "ill not proceed to assess and collect the same.7
4he Court of First Instance of Manila rendered judgment, holding that the transmission by "ill of
the said '9,*** shares of stoc+ is subject to 0hilippine inheritance ta/. :ence, this appeal by the
petitioner.
0etitioner concedes ,$- that the 0hilippine inheritance ta/ is not a ta/ property, but upon
transmission by inheritance ,oren.o &s. 0osadas, '9 ;ff. <a.., ('&', ('&9-, and ,(- that as to
real and tangible personal property of a non-resident decedent, located in the 0hilippines, the
0hilippine inheritance ta/ may be imposed upon their transmission by death, for the self-evident
reason that, being a property situated in this country, its transfer is, in some "ay, defendant, for
its effectiveness, upon 0hilippine la"s. It is contended, ho"ever, that, as to intangibles, li+e the
shares of stoc+ in =uestion, their situs is in the domicile of the o"ner thereof, and, therefore, their
transmission by death necessarily ta+es place under his domiciliary la"s.
#ection $9'% of the Administrative Code, as amended, provides that every transmission by virtue
of inheritance of any share issued by any corporation of sociedad anoni"a organi.ed or
constituted in the 0hilippines, is subject to the ta/ therein provided. 4his provision has already
been applied to shares of stoc+ in a domestic corporation "hich "ere o"ned by a British subject
residing and domiciled in <reat Britain. ,>no"les &s. ?atco, <. 6. @o. A(&%). See also <ibbs &s.
<overnment of 0. I., <. 6. @o. '9%&A.- 0etitioner, ho"ever, invo+es the rule laid do"n by the
3nited #tates #upreme Court in four cases ,Farmers oan 2 4rust Company &s. Minnesota, (B*
3.#. (*A8 )A a". ed., ')$8 Bald"in &s. Missouri, (B$ 3.#., 9B%8 )A a". ed., $*9%, Beidler &s.
#outh Carolina 4a/ Commission (B( 3. #., $8 )9 a". ed., $'$8 First @ational Ban+ of Boston
&s. Maine, (BA 3. #., '$(8 9( #. Ct., $)A, )% a". ed., '$'8 )) A. . 6., $A*$-, to the effect that
an inheritance ta/ can be imposed "ith respect to intangibles only by the #tate "here the
decedent "as domiciled at the time of his death, and that, under the due-process clause, the #tate
in "hich a corporation has been incorporated has no po"er to impose such ta/ if the shares of
stoc+ in such corporation are o"ned by a non-resident decedent. It is to be observed, ho"ever,
that in a later case ,Burnet &s. Broo+s, (BB 3. #., ')B8 )) a". ed., BAA-, the 3nited #tates
#upreme Court upheld the authority of the Federal <overnment to impose an inheritance ta/ on
the transmission, by death of a non-resident, of stoc+ in a domestic ,America- corporation,
irrespective of the situs of the corresponding certificates of stoc+. But it is contended that the
doctrine in the foregoing case is not applicable, because the due-process clause is directed at the
#tate and not at the Federal <overnment, and that the federal or national po"er of the 3nited
#tates is to be determined in relation to other countries and their subjects by applying the
principles of jurisdiction recogni.ed in international relations. Be that as it may, the truth is that
the due-process clause is 7directed at the protection of the individual and he is entitled to its
immunity as much against the state as against the national government.7 ,Curry &s. McCanless,
'*) 3. #., '9), ')*8 B' a". ed., $''&, $'A&.- Indeed, the rule laid do"n in the four cases relied
upon by the appellant "as predicated on a proper regard for the relation of the states of the
American 3nion, "hich re=uires that property should be ta/ed in only one state and that
jurisdiction to ta/ is restricted accordingly. In other "ords, the application to the states of the
due-process rule springs from a proper distribution of their po"ers and spheres of activity as
ordained by the 3nited #tates Constitution, and such distribution is enforced and protected by
not allo"ing one state to reach out and ta/ property in another. And these considerations do not
apply to the 0hilippines. ;ur status rests upon a "holly distinct basis and no analogy, ho"ever
remote, cam be suggested in the relation of one state of the 3nion "ith another or "ith the
3nited #tates. 4he status of the 0hilippines has been aptly defined as one "hich, though a part of
the 3nited #tates in the international sense, is, nevertheless, foreign thereto in a domestic sense.
,Co"nes &s. Bid"ell, $B( 3. #., (AA, 'A$.-
At any rate, "e see nothing of conse=uence in dra"ing any distinct bet"een the operation and
effect of the due-process clause as it applies to the individual states and to the national
government of the 3nited #tates. 4he =uestion here involved is essentially not one of due-
process, but of the po"er of the 0hilippine <overnment to ta/. If that po"er be conceded, the
guaranty of due process cannot certainly be invo+ed to frustrate it, unless the la" involved is
challenged, "hich is not, on considerations repugnant to such guaranty of due process of that of
the e=ual protection of the la"s, as, "hen the la" is alleged to be arbitrary, oppressive or
discriminatory.
;riginally, the settled la" in the 3nited #tates is that intangibles have only one situs for the
purpose of inheritance ta/, and that such situs is in the domicile of the decedent at the time of his
death. But this rule has, of late, been rela/ed. 4he ma/im "o)ilia se*''nt'r persona", upon
"hich the rule rests, has been described as a mere 7fiction of la" having its origin in
consideration of general convenience and public policy, and cannot be applied to limit or control
the right of the state to ta/ property "ithin its jurisdiction7 ,#tate Board of Assessors &s.
Comptoir @ational C5!scompte, $&$ 3. #., 'BB, A*', A*A-, and must 7yield to established fact of
legal o"nership, actual presence and control else"here, and cannot be applied if to do so result
in inescapable and patent injustice.7 ,#afe Ceposit 2 4rust Co. &s. Dirginia, (B* 3. #., B', &$-&(-
4here is thus a mar+ed shift from artificial postulates of la", formulated for reasons of
convenience, to the actualities of each case.
An e/amination of the adjudged cases "ill disclose that the rela/ation of the original rule rests
on either of t"o fundamental considerationsE ,$- upon the recognition of the inherent po"er of
each government to ta/ persons, properties and rights "ithin its jurisdiction and enjoying, thus,
the protection of its la"s8 and ,(- upon the principle that as o intangibles, a single location in
space is hardly possible, considering the multiple, distinct relationships "hich may be entered
into "ith respect thereto. It is on the basis of the first consideration that the case of Burnet &s.
Broo+s, s'pra, "as decided by the Federal #upreme Court, sustaining the po"er of the
<overnment to impose an inheritance ta/ upon transmission, by death of a non-resident, of
shares of stoc+ in a domestic ,America- corporation, regardless of the situs of their
corresponding certificates8 and on the basis of the second consideration, the case of Cury &s.
McCanless, supra.
In Burnet &s. Broo+s, the court, in disposing of the argument that the imposition of the federal
estate ta/ is precluded by the due-process clause of the Fifth Amendment, heldE
4he point, )ein% solel+ one of ,'risdiction to ta/, involves none of the other consideration
raised by confiscatory or arbitrary legislation inconsistent "ith the fundamental
conceptions of justice "hich are embodied in the due-process clause for the protection of
life, liberty, and property of all persons F citi.ens and friendly aliens ali+e. 6ussian
Dolunteer Fleet &s. 3nited #tates, (B( 3. #., AB$, AB&8 )9 a" ed., A)', A)%8 A$ #. Ct.,
((&8 @icholas &s. Coolidge, ()A 3. #., 9'$8 9A(, )$ a" ed., $$BA, $$&(8 A) #. Ct., )$*8
9( A. . 6., $*B$8 :einer &s. Connon, (B9 3.#., '$(, '(%8 )% a" ed., ))(, ))&8 9( #.
Ct., '9B. -f in the instant case the $ederal Go&ern"ent had ,'risdiction to i"pose the ta.,
there is "anifestl+ no %ro'nd for assailin% it. >no"lton &s. Moore, $)B 3.#., A$, $*&8 AA
a". ed., &%&, &&%8 (* #. Ct., )A)8 Ma<ray &s. 3nited #tates, $&9 3.#., (), %$8 A& a".
ed., )B8 &)8 (A #. Ct., )%&8 $ Ann. Cas., 9%$8 Flint &s. #tone 4racy Co., ((* 3.#., $*),
$9', $9A8 99 a". ed., 'B&, A$A, A$98 '$ #. Ct., 'A(8 Ann. Cas., $&$(B, $'$(8 Brushaber
&s. 3nion p. 6. Co., (A* 3.#., $, (A8 %* a". ed., A&', 9*A8 '% #. Ct., ('%8 . 6. A., $&$)
C8 A$A, Ann. Cas, $&$)B, )$'8 3nited #tates &s. Coremus, (A& 3. #., B%, &'8 %' a". ed.,
A'&, A&%8 '& #. Ct., ($A. ,!mphasis ours.-
And, in sustaining the po"er of the Federal <overnment to ta/ properties "ithin its borders,
"herever its o"ner may have been domiciled at the time of his death, the court ruledE
. . . 4here does not appear, a priori, to be anything contrary to the principles of
international la", or hurtful to the polity of nations, in a #tate5s ta/ing property physically
situated "ithin its borders, "herever its o"ner may have been domiciled at the time of his
death. . . .
As jurisdiction may e/ist in more than one government, that is, jurisdiction based on
distinct grounds F the citi.enship of the o"ner, his domicile, the source of income, the
situs of the property F efforts have been made to preclude multiple ta/ation through the
negotiation of appropriate international conventions. 4hese endeavors, ho"ever, have
proceeded upon e/press or implied recognition, and not in denial, of the sovereign ta/ing
po"er as e/erted by governments in the e/ercise of jurisdiction upon any one of these
grounds. . . . ,See pages '&%-'&)8 '&&.-
In Curry &s. McCanless, s'pra, the court, in deciding the =uestion of "hether the #tates of
Alabama and 4ennessee may each constitutionally impose death ta/es upon the transfer of an
interest in intangibles held in trust by an Alabama trustee but passing under the "ill of a
beneficiary decedent domiciles in 4ennessee, sustained the po"er of each #tate to impose the
ta/. In arriving at this conclusion, the court made the follo"ing observationsE
In cases "here the o"ner of intangibles confines his activity to the place of his domicile
it has been found convenient to substitute a rule for a reason, cf. @e" ?or+ e/ rel., Cohn
&s. <raves, '** 3.#., '*B, '$'8 B$ a". ed., %%%, %)*8 9) #. Ct., A%%8 $*B A. . 6., )($8
First Ban+ #toc+ Corp. &s. Minnesota, '*$ 3. #., ('A, (A$8 B$ a". ed., $*%$, $*%98 9)
#. Ct., %))8 $$' A. . 6., ((B, by saying that his intangibles are ta/ed at their situs and
not else"here, or perhaps less artificially, by invo+ing the ma/im "o)ilia se*''nt'r
persona". Blodgett &s. #ilberman, ()) 3.#., $8 )( a". ed., )A&8 #. Ct., A$*, supra8
Bald"in &s. Missouri, (B$ 3. #., 9%B8 )A a". ed., $*9%8 9* #. Ct., A'%8 )( A. . 6.,
$'*', s'pra, "hich means only that it is the identify o"ner at his domicile "hich gives
jurisdiction to ta/. But "hen the ta/payer e/tends his activities "ith respect to his
intangibles, so as to avail himself of the protection and benefit of the la"s of another
state, in such a "ay as to bring his person or properly "ithin the reach of the ta/ gatherer
there, the reason for a single place of ta/ation no longer obtains, and the rule even
"or+able substitute for the reasons may e/ist in any particular case to support the
constitutional po"er of each state concerned to ta/. 1hether "e regard the right of a state
to ta/ as founded on po"er over the object ta/ed, as declared by Chief Gustice Marshall in
McCulloch &s. Maryland, A 1heat., '$%8 A a". ed., 9)&, supra, through dominion over
tangibles or over persons "hose relationships are source of intangibles rights, or on the
benefit and protection conferred by the ta/ing sovereignty, or both, it is undeniable that
the state of domicile is not deprived, by the ta/payer5s activities else"here, of its
constitutional jurisdiction to ta/, and conse=uently that there are many circumstances in
"hich more than one state may have jurisdiction to impose a ta/ and measure it by some
or all of the ta/payer5s intangibles. #hares or corporate stoc+ be ta/ed at the domicile of
the shareholder and also at that of the corporation "hich the ta/ing state has created and
controls8 and income may be ta/ed both by the state "here it is earned and by the state of
the recipient5s domicile. protection, benefit, and po"er over the subject matter are not
confined to either state. . . .,p. $'A)-$'A&.-
. . . 1e find it impossible to say that ta/ation of intangibles can be reduced in every case
to the mere mechanical operation of locating at a single place, and there ta/ing, every
legal interest gro"ing out of all the comple/ legal relationships "hich may be entered
into bet"een persons. 4his is the case because in point of actuality those interests may be
too diverse in their relationships to various ta/ing jurisdictions to admit of unitary
treatment "ithout discarding modes of ta/ation long accepted and applied before the
Fourteen Amendment "as adopted, and still recogni.ed by this Court as valid. ,0. $'9$.-
1e need not belabor the doctrines of the foregoing cases. 1e believe, and so hold, that the issue
here involved is controlled by those doctrines. In the instant case, the actual situs of the shares of
stoc+ is in the 0hilippines, the corporation being domiciled therein. And besides, the certificates
of stoc+ have remained in this country up to the time "hen the deceased died in California, and
they "ere in possession of one #yrena Mc>ee, secretary of the Benguet Consolidated Mining
Company, to "hom they have been delivered and indorsed in blan+. 4his indorsement gave
#yrena Mc>ee the right to vote the certificates at the general meetings of the stoc+holders, to
collect dividends, and dispose of the shares in the manner she may deem fit, "ithout prejudice to
her liability to the o"ner for violation of instructions. For all practical purposes, then, #yrena
Mc>ee had the legal title to the certificates of stoc+ held in trust for the true o"ner thereof. In
other "ords, the o"ner residing in California has e/tended here her activities "ith respect to her
intangibles so as to avail herself of the protection and benefit of the 0hilippine la"s.
Accordingly, the jurisdiction of the 0hilippine <overnment to ta/ must be upheld.