Beneficial Ownership in U.S. Supreme Court Decisions

Reinhard-DeRoo, Matthias

doi:10.1007/978-3-319-01686-3_5

Matthias Reinhard-DeRoo²

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Abstract

The two previous chapters discussed the beneficial ownership concept in legal theory. This chapter shall discuss the concept in legal practice. For this purpose, a careful selection of twelve United States Supreme Court decisions from different fields of law shall be scrutinized. The way these cases deal with the beneficial ownership concept allows for representative conclusions which will be summarized at the end of this chapter.

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Notes

1.
46 U.S.C. § 688 (1920).
2.
Lauritzen v. Larsen, 345 U.S. 571 (1953) (defining seven criteria to determine whether an employer shall be held liable under the Jones Act: 1. Place of the wrongful act; 2. The law of the flag; 3. The allegiance or domicile of the injured seaman; 4. Allegiance of the defendant ship owner; 5. The place where the contract of employment was made; 6. the inaccessibility of the foreign forum; and 7. the law of the forum).
3.
Hellenic Lines, 398 U.S. at 308.
4.
Id. at 310; See also Belton v. Buesing, 240 Or 399, 402 P2d 98 (1965).
5.
See e.g.: Bollinger v. Commissioner, 807 F.2d 65 (6^th Cir.1986) Whittaker v. Whittaker Corp., 639 F.2d 516 (9^th Cir.1981); Lafkowitz v. Jackson, 13 F.2d 370 (8^th Cir.1926); Waddil v. Weaver, 53 Ala. 58; (1875); Haker v. McKissok, 12 N.J. 310 (1953); Gebhard v. West Allis, 89 Wis. 2d 557 (1974); State ex rel. Mitchell Aero, Inc. v Board of Review, 74 Wis. 2d 268 (1976).
6.
Burger (Chief Justice), Harlan (Associate), and Stewart (Associate).
7.
372 U.S. 10, 12 (1963).
8.
In United States v. Kun Yun Jho,, 534 F.3d 398, the Court of Appeal defines and recognizes the flag principle, but holds that the principle does not apply if the “[mis-] conduct occurred […] entirely within the ports of the United States”.
9.
Hellenic Lines, 398 U.S. 312.
10.
Id. at 313.
11.
For the significance of allotments in federal Indian policy, see infra chapter “The Beneficial Ownership Concept Applied in Federal Indian Law”, Sect. 2a).
12.
36 Stat. 856 Sec. 2 (1910) and 37 Stat. 678 (1913).
13.
Office of the Solicitor, Department of the Interior.
14.
Tooahnippah, 397 U.S. at 601.
15.
Id. at 605.
16.
Based on 25 U.S.C. § 373.
17.
25 U.S.C. § 408.
18.
Tooahnippah, 397 U.S. at 607.
19.
Tooahnippah, 397 U.S. at 610.
20.
Emphasis added.
21.
Tooahnippah, 397 U.S, at 609.
22.
Id. at 607, 612, (mentioning the Indian’s beneficial interest in connection with the trustee role of the government but without any further explanations).
23.
Replaced in 1982 with the U.S. Court of Federal Claims with newly established U.S. Court of Appeals for the Federal Circuit as appellate instance. It has the same responsibility as its preceding court (28 U.S.C. §1491).
24.
For the differences between the agency concepts of common law and civil law see Zweigert & Koetz, Comparative Law 431 ff. (3^rd ed. 1998).
25.
For the characterization of the U.S. as guardians and the Indians as wards, see Worcester v. Georgia, 31 U.S. 48 (1832); see also below 4.3 d).
26.
According to the Supreme Court this was agreed upon based on the Treaty of February 17^th, 44 Stat. 560 (1870) between the United States and the Klamath, Algoma, 305 U.S. at 420.
27.
Algoma, 305 U.S. at 421.
28.
Id.
29.
Id. (using the term substantial instead of beneficial twice on this page without further explanation).
30.
Id. at 422; see infra chapter “The Beneficial Ownership Concept Applied in Federal Indian Law”, Sect. 4b).
31.
Id. at 421.
32.
Id. at 420.
33.
See infra chapter “The Beneficial Ownership Concept Applied in Federal Indian Law”, Sect. 4b); Riley, The Apex of Congress’ Plenary Power over Indian Affairs: The Story of Lone Wolf v. Hitchcock 225.
34.
The original meaning of the term reservation changed its meaning the course of time. Originally the term was used in treaties of the 17th century to describe the part of land the Indians would reserve for themselves and not convey to the United States, Singer, Erasing Indian Country: The Story of Tee-Hit-Ton Indians v. United States 242.
35.
Shoshone, 304 U.S. at 113.
36.
See generally infra Chapter “The Beneficial Ownership Concept Applied in Federal Indian Law”, Sect. 2.
37.
Shoshone, 304 U.S. at 115.
38.
Worcester v. Georgia, 31 U.S. 48 (characterizing the U.S. as guardians and the Indians as wards); see also infra chapter “The Beneficial Ownership Concept Applied in Federal Indian Law”, Sect. 6e).
39.
Shoshone, 304 U.S. at 117.
40.
Cohen’s Handbook of Federal Indian Law 293 (1945 ed.)
41.
See infra chapter “The Beneficial Ownership Concept Applied in Federal Indian Law”, Sect. 3a).
42.
40 Stat. 1081 (1918).
43.
Handy & Harman, 284 U.S. at 141.
44.
Id. at 140.
45.
Id. at 136.
46.
Id.
47.
47 F.2d 184; see also Powerex Corp. v. Reliant Energy Services, Inc. 551 U.S. 224 (2007) (Breyer, J. dissenting) (explicitly mentioning beneficial ownership and control).
48.
See also: Bath Industries, Inc. v. Blot, 427 F 2d 112 (7^th Cir.1970); GAF Corp. v. Milstein, 453F 2d 712 (2^nd Cir.1971).
49.
47 F.2d 185.
50.
Id.
51.
15 U.S.C. § 78m(d).
52.
Posner, Economic Analysis Of Law, 181.
53.
GAF Corporation v. Paul Milstein et al. 543 F. 2d 709, 713 (1971); see also AMP Inc. v. Allied-Signal Corp, 168 F.3d 649 (3^rd Cir.1999) (providing a vivid example of such obfuscation by qualifying beneficial ownership as “outright ownership”).
54.
Dodge’s legal position is not different from the Hubbells. So whenever the Hubbells are mentioned below, this will also imply to include Dodge.
55.
Chicago, Milwaukee, 254 U.S. at 200.
56.
Id. at 212; see also National Bank v. Insurance Co. infra Sect. 12 of this chapter.
57.
Chicago, Milwaukee, 254 at 220, 222.
58.
Id. at 208; the use of the latter two may be best explained with the statement from Hudson that “the tendency of [not only] English lawyers, to have more than one name for the same concept – arguably because it helps to maintain the mystique of the law and to ensure that the clients are sufficiently impressed by their counsel’s knowledge of so much complicated terminology.” Hudson, Equity And Trusts 14.
59.
Hudson, Equity And Trusts 31.
60.
254 U.S. 196, 196, citing Colton v. Colton, 127 U.S. 310 (1888) (highlighting the psycho-economical motivation to provide for a beneficiary); Hudson, Equity And Trusts 47 f.; Uniform Trust Code Art. 4 § 402.
61.
Chicago, Milwaukee, 254 U.S. at 209.
62.
The Court mentioned the composition of the beneficiaries en passant without giving it any further attention.
63.
Id. at 216 (“It is plain enough, and is conceded that the corporation could not, by merely altering its own internal organization, affect the interest of the cestus que sent.”)
64.
For the change of beneficial ownership see also Jackson v. McIntosh, 12 F.2d 676, 1926; In re Estate of McKim, 111 N.M. 517, (1991).
65.
Id. at 210.
66.
Id.
67.
Montana Catholic Missions, 200 U.S. at 127.
68.
E.g. tax law (Portland General Electric, 237 Mont. 324; 773 P.2d, 1189 (1989)) or family and social security law (Christiansen v. Department of Social Security, Wn.2d 465, 131 P.2d 827 (1942); see generally Wardle & Nolan, Fundamental Principles Of Family Law 420 (2^nd ed. 2006); Harrison v. Missoula, 146 Mont. 420; 407 P. 2d 89 (1965) (discussing public annexation of community property).
69.
Montana Catholic Missions, 200 U.S. at 128; see Portland General Electric Company v. Montana Dep’t of Revenue, 237 Mont. 77; 773 P. 2d 1189 (1989) (containing an almost identical definition).
70.
Montana Catholic Missions, 200 U.S. at 127.
71.
Montana Catholic Missions, 200 U.S. at 129 with further references; see also infra chapter “The Beneficial Ownership Concept Applied in Federal Indian Law”, Sect. 4c).
72.
See supra chapter “Beneficial Ownership as a Concept”, Sect. 2.
73.
Stanford Encyclopedia, http://plato.stanford.edu/entries/rights, 1.
74.
Id. at 4.
75.
Wisconsin Central Railroad v. Price County, 133 U.S. 496, 504 (1889); see also the discussion of Bryan v. Itasca County, 426 U.S. 373 (1976), infra chapter “The Beneficial Ownership Concept Applied in Federal Indian Law”, Sect. 4c).
76.
For the role and nature of recognized Indian as opposed to (not recognized) aboriginal title see infra chapter “The Beneficial Ownership Concept Applied in Federal Indian Law”, Sect. 3a).
77.
The case law the attorney refers to is Railroad Company v. Citizens’ Company, 166 U.S. 557 (1897) (contract); Bridge Proprietors v. Hoboken, 68 U.S. 116 (1 Wall.) (1863) (contract); McCollough v. Commonwealth, 176 U.S. 102, 118 (1898) (Constitution, treaty, statute). He does not mention any case law regarding property in that context.
78.
Montana Catholic Missions, 200 U.S. at 132.
79.
Id. at 135.
80.
Id. at 136.
81.
Montana Catholic Missions, 200 U.S. at 128.
82.
104 U.S. 54 (1881); see infra Sect. 12.
83.
Montana Catholic Missions, 200 U.S. 138.
84.
Wolfchild v. United States, 559 F. 3^rd 1228, n.5 (Fed. Cir.2009).
85.
Leff, The Leff Dictionary of Law: A Fragment, 94 Yale L.J., 2149 (1985).
86.
231 U.S. 28 (1913) (recognizing fee simple title of the Pueblos because such title had been previously recognized by the Mexican Government); see also United States v. Candelaria, 271 U.S. 432 (1926) (upholding recognition yet restricting the right to alienate fee land, arguing that identical restrictions had already been applied under Mexican government).
87.
544 U.S. 197 (2005); see also County of Yakima v. Confederated Tribes and Bands of Yakima Nation, (502 U.S. 251 (1992) (discussing taxability of repurchased land); Cass County Joint Waters Resource District v. 1.43 Acres of Land, 643 N.W. 2d 685 (ND 2002) (discussing state jurisdiction over land purchased by an Indian tribe in fee).
88.
See generally for the (state) taxability Bryan v. Itasca County, 426 U.S. 373 (1976), discussed infra in chapter “The Beneficial Ownership Concept Applied in Federal Indian Law”, Sect. 4b).
89.
Montana Catholic Missions, 200 U.S. at 124.
90.
162 U.S. 512 (1896).
91.
Montana Catholic Missions, 200 U.S. at 128.
92.
In Wolfchild v. United States, 559 F. 3rd 1228 (Fed. Cir.2009), (mentioning temporary occupancy pending future legislation without further elaborating or even differentiating between occupancy and beneficial ownership).
93.
133 U.S. 496 (1889).
94.
162 U.S. 512 (1886).
95.
Id. at. 508 (citing Winona & St. Peter Railroad Co. v. Barney, 113 U.S. 618, 625 (1885)).
96.
Id. at 509.
97.
237 U.S. 642.
98.
“Entryman” is the technical term for a person who seeks to acquire public land.
99.
237 U.S. 642, 642; see also Leff, The Leff Dictionary of Law, 94 Yale L. Rev. 2149 (1985).
100.
Id. at 647; for naked title see infra Sect. 8.
101.
See Witherspoon v. Duncan, 71 U.S. 210 (discussing original taxability of public lands once registered with (“entered at”) the land office and a “certificate of entry” has been obtained); In Carroll v. Safford, 44 U.S. (3 How.) 441, 441 (1845) (holding that payment for the land accompanied with the necessary certification constitutes taxability, “although a patent has not yet been issued”); In Hussman v. Durham, 165 U.S. 144 f. (1897) (holding that legal and beneficial (“equitable”) ownership remained with the government with the result that there was no passing of “tax title”); Bothwell v. Bingham, see supra Sect. 7c).
102.
Wells, id.
103.
Id. at 539 f.
104.
Id.
105.
Wells, 181 U.S. 531, 546 with further references.
106.
See also Wright v. Central Georgia Railway Company, 236 U.S. 674 (1915), in which Justice Holmes uses parts of the same quote.
107.
Wells, 181 U.S. at 545.
108.
It originates in the Latin ad opus; Hudson, Equity And Trusts 14.
109.
Wells, id. at 545.
110.
Wells, id.; this holding was revised in Montana Catholic Missions v. Missoula County only four years later.
111.
Id. at 546.
112.
Id.
113.
First State Bank v. United States, 92 F.2d 132 (9^th Cir.1937); Guaranty Trust Co. v. Atlantic C.E.R. Co, 138 F. 517 (9^th Cir.1905); Aurbach v. Gallina, 753 So. 2d 60, 62 (Fla. 2000) (stating that “mere naked title could repose in one entity but ‘beneficial ownership’ on another”); Farmers’ & Mechanics National Bank v. King, 57 Pa. 202, (1868) (“naked legal right with the beneficial ownership in another”); In re Estate of Massouras, 16 Wis. 2d 304, 312, 114 N.W.2d 449 (1962).
114.
Compare with Handy & Harman, see supra Sect. 5, in which the reason, similar to here was that the property was used merely as a security.
115.
104 U.S. 54.
116.
137 U.S. 414.
117.
200 U.S. 118.
118.
In the case itself, the Supreme Court Justice Brewer quickly added that this dictum did “not represent the questions involved in this case, [and] a more detailed statement of the facts is requisite.” Quid hoc? One almost gets the impression that the Judge himself was so impressed by the ingenious sentence he had just created that he worried to lose the focus on the case at hand. Whatever the motivation behind this statement and its immediately following play down was, the brilliancy remains.
119.
Id. at 244.
120.
Id.
121.
Drexel, 122.U.S. at 247.
122.
“Because St. James has since died, and because of the laws and customs of France, complainants cannot ascertain the precise details of the transaction.” Id. at 246.
123.
Id. at 247.
124.
A demurrer is a formal refusal of a party in a litigation to reply to the statements of the counterparty.
125.
Drexel, 122 U.S. at 252.
126.
Delaware, New Jersey, South Carolina, and Tennessee. On the federal level, the courts of bankruptcy also operate as courts of Equity, see n.286.
127.
See supra chapter “Common Law, Equity, and Beneficial Ownership”.
128.
Drexel, 122 U.S. at 254.
129.
Hudson, Equity And Trusts 11.
130.
Leff, The Leff Dictionary of Law, 94 Yale L. Rev. 2149 (1985).
131.
Approx. 4.5 km².
132.
Laughlin, 121 U.S. at 415.
133.
A female complainant in an equity pleading.
134.
Laughlin, 121 U.S. at 417.
135.
Laughlin, 121 U.S. at 411; the differentiation between legal and equitable title and the right of property can be best explained with the most obvious interpretation: Right of property is used to denominate chattel.
136.
Id. at 417.
137.
Id. at 421.
138.
Laughlin, 121 U.S. at 411.
139.
Id. at 419.
140.
Id. (“[…] it not clearly appearing whether this (title to property) was to be in fee or for life.”).
141.
Id. at 412.
142.
Id.
143.
See Hohfeld, Fundamental Legal Conceptions, 26 Yale L.J., 746 (1917) (providing a good summary of privileges and powers emerging from real estate property).
144.
Hudson, Equity And Trusts 31; see also Chicago, Milwaukee & St. Paul R.C., supra Sect. 6 of this chapter.
145.
The Court considered sufficiently established that the father “[…] purchased the property with the purpose of letting the plaintiff and her husband remain on the plantation and control it, and the property upon it, intending to hold the legal title to all of and make himself personally responsible for the expenses of the plantation, the income to be applied to pay those expenses and the personal expenses of this daughter and her husband, and the remainder of it to the payment of the purchase money for which he was personally liable, and intending, when this was done, to convey, or secure by his will, to her a title to the property, it not very clearly appearing whether this was to be in fee or only for life”; Laughlin, 121 U.S. at 419 f.
146.
The list of content is virtually indefinite, Hohfeld, id., The elements listed serve only as vivid examples.
147.
Laughlin, 121 U.S. at 416.
148.
See infra chapter “The Beneficial Ownership Concept Applied in Federal Indian Law”, Sect. 4b).
149.
See also regarding family and ownership Aurbach v. Gallina, 753 So. 2d 60, 62 (Fla. 2000) (“To analyze the family dynamics to determine all the ‘beneficial’ owners of a car is to impose a fuzzy legal standard […]”).
150.
Holmes joined the Supreme Court in 1902.
151.
National Bank, 104 U.S. at 58.
152.
Id. at 60.
153.
Leadman v. Harris, 14 N.C. 144 (1831); see supra note 75.
154.
57 Pa. St. 202, 205, (1868).
155.
The Farmers’ decision was published in the same year Strong retired from the Pennsylvania Supreme Court (1868) and the Insurance Company decision was published one year after Strong retired from the U.S. Supreme Court (1881).
156.
National Bank, 104 U.S. at 69; underline added by author.
157.
Id. at 70.
158.
Id. at 71.
159.
National Bank, 104 U.S. at 68.
160.
See also Ohio Valley National Bank v. Hulitt 204 U.S. 162, 168 (1907) (“[…] the law looks through subterfuges and apparent ownerships and fastens the liability upon the shareholder to whom the shares really belong.”).
161.
Medieval French for cestui a que use le feoffment fuit fait: The person to whom the feoffment, (i.e. transfer of full title (fee simple) on property) was made.
162.
Scott, The Nature and Rights of the “Cestui Que Trust”, 16 Colum. L. Rev. 276 (1917).
163.
Id. at 290.

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Reinhard-DeRoo, M. (2014). Beneficial Ownership in U.S. Supreme Court Decisions. In: Beneficial Ownership. Springer, Cham. https://doi.org/10.1007/978-3-319-01686-3_5

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DOI: https://doi.org/10.1007/978-3-319-01686-3_5
Published: 20 August 2013
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