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 CASES 
 ON TAXATION 
 
 BY 
 JOSEPH HENRY BEALE 
 
 RoTALL Professor of Law in Harvard University 
 
 CAMBRIDGE 
 
 HARVARD UNIVERSITY PRESS 
 
 1922
 
 Copyright, 1922, 
 By Joseph Henry Beale 
 
 
 THE UNIVEBSITT PBE98, CAMBBIDGE, V. 3. A.
 
 ^ 
 
 u. 
 h 
 
 CASES ON TAXATION. 
 
 CHAPTER I. 
 TAX ON PERSON. 
 
 STATE V. EOSS. 
 Supreme Court of New Jersey. 1852. 
 
 [Reported 23 N. J. L. 517.] 
 
 This was an assessment made by the assessor of the township of 
 Princeton upon James Potter, the prosecutor, in the year 1851, for 
 taxes, and removed into this court by certiorari. 
 
 James Potter owned and cultivated a rice plantation in Georgia, 
 -which he considered his place of residence or permanent domicil ; he 
 voted, performed jury duty, and exercised the other rights of a 
 citizen in Georgia, and did not in New Jersey. He owned a house 
 and establishment in Princeton, in which he resided with his family 
 and servants for five or six months in each year during the sickly 
 season in Georgia. 
 
 He was assessed in Princeton — first, for his lands and personal 
 chattels situate there; secondly, for a poll tax of fifty cents; and, 
 thirdly, for $200,000 of Camden and Amboy Railroad bonds owned 
 by him. 
 
 Green, C. J. The assessment of a poll tax against the prosecutor 
 is clearly illegal. The statute enacts that a poll tax of fifty cents shall 
 be assessed upon every white male inhabitant of this state of the age 
 of twenty-one years and upwards. The term " inhabitant," as used 
 in the act and in the popular acceptation of the phrase, means some- 
 thing more than a person having a mere temporary residence. It 
 imports citizenship and municipal relations ; and if the term were less 
 unequivocal than it is, it could never be presumed, in the absence of 
 the most explicit enactment, that the legislature designed to impose a 
 poll tax upon the citizens of another state. The idea is repugnant 
 to every principle of sound policy, of Just legislation, and of in- 
 ternational comitv. " In imposing a tax," says Chief Justice :Mar- 
 shall, "the legislature acts upon its constituents." McCulloch v. 
 The State of Maryland, 4 ^Yheat. 316. 
 
 687506
 
 2 KUNTZ V. DAVIDSON COUNTY. [cHAP. I. 
 
 A personal tax is the burthen imposed by government upon its 
 own citizens for the benefits which that government affords by its 
 protection and its laws; and any government which should attempt 
 to impose such tax upon the citizens of other states would justly 
 incur the rebuke of the enlightened sentiment of the civilized world. 
 No such intention can be imputed to our legislature; they have in 
 express terms excluded the idea, by confining the poll tax to in- 
 habitants of this state. 
 
 A temporary residence, for the purpose of business or pleasure, 
 continued for days, weeks, or even months, while the party's domicil 
 is elsewhere, and while he has no intention of becoming a citizen 
 of this state, does not, as has been already said, constitute an in- 
 habitant. It is perfectly immaterial, for this purpose, whether he 
 makes his temporary residence in his own dwelling, with his domestic 
 establishment and retinue about him, or as a mere lodger in the 
 house of another. 
 
 Let the assessment be corrected.^ 
 
 KUNTZ V. DAVIDSON COUNTY. 
 Supreme Court of Tennessee. 1880. 
 
 [Reported 6 Lea, 65.] 
 
 Cooper, J. The circuit judge, who tried this case without a jury, 
 gave judgment in favor of Davidson county against Peter Kuntz 
 for the poll taxes assessed against him for several years, and he 
 appealed. 
 
 By the act of the 17th of June, 1870, ch. 26, "every male inhabit- 
 ant of the State between the ages of twenty-one and fifty years," with 
 certain exceptions not material to be noticed, is required to pay a poll 
 tax. The plaintiff in error was born in Prussia in 1845, emigrated 
 to the United States in 1870, and came to Davidson county, Ten^ 
 nessee, in 1873, and has since resided in that county, having a wife 
 and two children. He claims to be a subject of the King of Prussia, 
 having never withdrawn or intended to withdraw his allegiance. He 
 has never applied for naturalization papers, nor exercised the elective 
 franchise, and considers himself a temporary resident of the State. 
 
 By the statute, " every male inhabitant of the State," with certain 
 exceptions, which do not apply to the plaintiff in error, is liable to 
 pay a poll tax. An inhabitant is one who has an actual residence 
 in a place; or, as it has been otherwise expressed, "one that resides 
 in a place": Ptoosevelt v. Kellogg, 20 Johns. 211. The intention of 
 such person to quit his residence will not, until consummated, de- 
 prive him of his right as an inhabitant : 1 Dall. 480 ; Foster v. Hall, 
 4 Hum. 346. 
 
 * Ace. Boston Investment Co. v. Boston, 158 Mass. 461, 83 N. E. 580 
 (1893) ; Pendleton v. Com., 110 Va. 229, 65 S. E. 536 (1909; On Yuen Hai 
 Co. V. Ross, 8 SaAvy. 384, 14 Fed. 338 (1882).
 
 ALASKA packers' ASSOCIATION V. HEDENSKOY. 3 
 
 No such intention appears in this case, except by way of inference 
 from the statement that appellant considers himself a temporary 
 resident. His own statements clearly show that he is an inhabitant 
 within the meaning of tiie law : Stratton v. Brigham, 2 Sneed, 420. 
 That the legislature would have the right to levy a poll tax upon all 
 of its inhabitants, unless restrained by some provision of the Con- 
 stitution, is clear. The power of taxation is an incident of sov- 
 ereignty, and extends to persons and property within the limits of 
 its sovereignty. Tlie right to tax an individual results from the 
 general protection afforded to himself and property, and depends 
 on residence, not citizenship. These are elementary principles, 
 which have not been disputed: Cooley on Tax., 1-4, 269.^ 
 
 There is no error in the record, and the judgment must be 
 affirmed.2 
 
 ALASKA PACKERS' ASSOCIATION v. HEDENSKOY. 
 Circuit Court of Appeals, Ninth Circuit. 1920. 
 
 [Reported 267 Fed. 154.] 
 
 Appeal from the District Court of the United States for the First 
 Division of the Northern District of California. 
 
 Libel by John Hedenskoy against the Alaska Packers' Association. 
 Decree for libelant, and respondent appeals. Reversed and re- 
 manded, with directions to render a decree for respondent. 
 
 In April, 1919, libelant and certain assignors, residents of Cali- 
 fornia, were hired by the defendant, a California corporation, salmon 
 fisher and packer, and shipped for a fishing venture to Alaska and 
 return to San Francisco, agreeing to work as seamen and fishermen, 
 beachmen and trapmen. After they had unloaded cargo at a point 
 in Alaska, they worked as salmon fishermen during the salmon run, 
 or about thirty-five days, and then loaded canned salmon on ships 
 bound for San Francisco, there to be distributed to other places. 
 Except for a small sum, the earnings of libelant and his assignors 
 were payable in San Francisco. 
 
 On May 1, 1919, the Legislature of Alaska passed an act to impose 
 a tax upon male persons in Alaska for school purposes (Laws 1919, 
 c. 29), "providing means for its collection." Section 1 is as fol- 
 lows : " There is hereby made, imposed and levied upon each male 
 person, except soldiers, sailors in the United States Navy or Revenue 
 Cutter Service, volunteer firemen, paupers, insane persons or ter- 
 ritorial charges, within the territory of Alaska or the waters thereof, 
 over the age of twent3^-one years and under the age of fifty years, 
 an annual tax in the sum of five dollars, to be paid and collected in 
 the manner provided in the following sections of this act, and to be 
 deposited by the treasurer of the territory of Alaska in a separate 
 
 * The court then found tV.e tax not unconstitutional. — Ed. 
 
 * Ace. Frantz'3 Appeal, 52 !'a. 367 (1866).
 
 4 ALASKA PACKEKS' ASSOCIATION I". HEDENSKOY. [CHAP. I. 
 
 fund called the 'school fund' and used for no other than school 
 purposes/' Section 2 provides for the method of appointment of the 
 school tax collector. Section 3 provides for advertisement by the 
 school tax collector by notice, setting forth that the tax is due and 
 payable and warning persons of the need of payment. Section 4 
 makes the tax payable between the first Monday in the month of 
 April and the first Monday in tJie month of August of each year: 
 " Provided, that all persons subject to the tax who are in the terri- 
 tory of Alaska on the first Monday in the month of April shall pay 
 said tax on or before the first day of May in the same year, and all 
 persons arriving in the territory of Alaska after the first Monday 
 in the month of April shall pay said tax within thirty days after 
 such arrival: Provided, further, that all persons subject to said tax 
 shall pay the same within ten days after a written or oral demand 
 by the said school tax collector made within the period between the 
 first Monday in April and the first Monday in August in each year." 
 Section 8 provides that the school tax collector shall demand, and it 
 shall be the duty of every person or corporation emplo}dng labor 
 in Alaska to furnish such collector upon demand, a list of employees 
 subject to the tax imposed, "and for this purpose the territorial 
 treasurer shall furnish to each school tax collector suitable blank 
 forms for the making of such lists, which blank forms shall be de- 
 livered by the school tax collector to the employers of labor afore- 
 said." The employer is required to deduct from the wages of each 
 of its employees subject to the tax the amount thereof. By section 10 
 the treasurer of the territory shall, before the first Monday in the 
 month of April in each year, deliver to each school tax collector 
 blank tax receipts in book form with stubs numbered. Section 13 
 provides that the tax imposed by the act shall be due and payable 
 "as to all persons within the territory subject to said tax at the 
 time of the passage of this act, immediately upon its passage and 
 approval, and, as to all persons arriving in the territory after the 
 passage of the act, as elsewhere in this act provided." 
 
 On August 12, 1919, the school tax collector for the Bristol Bay 
 school district, where the libelant was during the time he was in 
 Alaska in 1919, by telegram demanded that the corporation pay the 
 tax of all of its employees, and the bookkeeper of the corporation 
 presented a statement to the libelant and his assignors showing the 
 deduction of $5 each for the tax, but libelant and his assignors re- 
 fused to agree to the payment with the deduction included. There- 
 after, in September, 191*9, the corporation, without the knowledge or 
 consent of the libelant or any of his assignors, paid the tax. 
 
 Hunt, Circ. J. (1) We agree with the District Court in its view 
 that the' libelant was subject to the tax involved, but we disagree 
 with the decision, which was that the necessary steps were not taken 
 whereby to fix liability. Libelant was not a mere sojourner, bound 
 through Alaska for another place. He agreed to perform work 
 within the territory during the fishing season of 1919. The hours, 
 compensation, and the nature of the work to be done are all set 
 forth in detail in the contract, which also requires that libelant
 
 ALASKA PACKERS ASSOCIATION V. HEDENSKOY. O 
 
 should be given a statement of the Alaska account before the vessel 
 sailed for her home port. The enterprise became one which called 
 for substantial employment within Alaska, and we think it is im- 
 material that the season for actual salmon fishing was only about 
 thirty-five days. It is to be noted, however, that the shipping articles 
 were signed in San Francisco in the beginning of April, I'JIO, and 
 that the men arrived in Alaska in May and June, and left Alaska, 
 bound for San Francisco, about the middle of August, reaching San 
 Francisco the latter part of August. The period of employment, 
 therefore, extended over some five months, three months of which 
 were in Alaska. 
 
 In Kelley v. Rhoads, 188 U. S. 1, 23 Sup. Ct. 259, 47 L. Ed. 359, 
 the officials of the territory of Wyoming endeavored to levy a tax 
 upon a band of sheep which were being driven across Wyoming and 
 into Nebraska. The question turned upon the purpose for which the 
 sheep were driven into Wyoming. The court recognized that, if the 
 purpose of bringing the sheep into the state was for grazing, then 
 they could be assessed; but, if the purpose was only to drive them 
 through the state to a market, they would be exempt as a subject of 
 interstate commerce, although they might incidentally have sup- 
 ported themselves in grazing while actually in transit. In Fennell v. 
 Pauley, 112 Iowa, 94, 83 N. W. 799, a resident of Missouri drove 
 a band of cattle for feeding purposes into Iowa, and kept them in 
 Iowa for six months, and then took them back to Missouri. The 
 Supreme Court of Iowa held that the cattle could be properly 
 assessed within Iowa because they were wnthin the state to be fed 
 therein, and not merely to remain there temporarily to be trans- 
 ported elsewhere. In Grigsby Construction Co. v. Freeman, 108 
 La. 435, 32 South. 399, 58 L. R. A. 349, a resident of Texas owned 
 certain personal property, which was taken to Louisiana to be used 
 in certain railroad grading. Upon the question whether the im- 
 position of a tax within Louisiana was valid, the Supreme Court 
 of the state cited Brown v. Houston, 114 U. S. 633, 5 Sup. Ct. 1091, 
 29 L. Ed. 257, and held that the determinative factor was whether 
 or not the property was within the state of Louisiana for use likely 
 to be of some duration as distinguished from transit, and that the 
 matter was not to be disposed of by the fact that the o^rner of the 
 property intended at a future time to remove the property. The doc- 
 trine recognized is that, if the main purpose of the presence of the 
 personal property is to devote it to a use within the state to which 
 it has been removed, then it has a taxable situs within the state. In 
 Eoff V. Kennefick, Hammond Co., 96 Ark., 138, 96 S. W. 986, 7 L. R. 
 A. (N. S.) 704, 117 Am. St. Rep. 79, 10 Ann. Cas. 63, a local 
 assessor assessed certain horses and implements which had been 
 brought into the state by a construction company in carrying out a 
 railroad contract. The owners of the propertv' lived in ^lissonri. 
 The Supreme Court of the state held that under the familiar rule 
 recognized bv the Supreme Court of the United States in Pullman 
 Car Co. r. Pennsylvania, etc., 141 U. S. 18. 11 Sup. Ct. 876. 35 L. 
 Ed. 613, and other cases, personal property could be separated from
 
 6 AT.ARTTA PACKEES' ASSOCIATION V. HEDENSKOY. [cHAP. I. 
 
 its owner for taxation purposes and that the property was not in 
 transit, but was in Arkansas chiefly for use and profit. 
 
 (2) It is well established that taxation of personal property which 
 may be temporarily witliin a state, but used therein for profit, is law- 
 ful, although the owner has his domicile in another state; and by 
 like reasoning we hold that one who is in a territory for the purpose 
 of carrying on a business during the season when such business is 
 properly and usually carried on, is subject to tax within the district 
 where the business is carried on, and the assessment is not invalid by 
 reason of the fact that the permanent residence of the person assessed 
 is not within the jurisdiction where such tax is levied. In the 
 Chinese Tax Cases (C. C.) 14 Fed. 338, it was held that some 
 Chinese laborers, who were taken into Oregon to engage in labor 
 upon a railroad, were not residents within the district wherein they 
 labored. 
 
 (3) There remains the question whether or not proper steps were 
 taken to enforce payment against the libelant for the year 1919, so 
 that the appellant corporation is legally bound. By section 4 of the 
 act, all persons subject to the tax shall pay it within ten days after 
 written or oral demand by the collector made between the first Mon- 
 day in April and the first Monday in August of each year. Inasmuch 
 as the liability to pay the tax was fixed by the act, we think the de- 
 mand by telegram on August 12 was a sufficient compliance with 
 the statute in order to establish delinquency, and that upon failure 
 to pay the delinquents became subject to the penalties provided by 
 section 5 of the act, which makes all taxes delinquent if not paid 
 within the time prescribed in section 4, or within ten days after de- 
 mand by the tax collector as prescribed in the act, and provides that 
 each person delinquent shall be subject to a penalty. It would be 
 most technical to hold that, because the collector failed to furnish the 
 blank forms and receipt books required by sections 8 and 10 of the act, 
 the libelant should escape liability. The blanks were not delivered 
 to the collector by the treasurer of the territory; but it appears that 
 before the statements were given to the men the collector looked 
 through the books of the corporation, which showed the names of 
 the employees, and that when the statements of account were given 
 to the men by the corporation, such statements disclosed a charge 
 of $5 for the tax in each instance. In this way the tax collector 
 gained the same information that would have been furnished to 
 him, if the blanks had been available and filled out. Nothing in 
 Callaghan v. Marshall, 210 Fed. 230, 127 C. C. A. 48, calls for a 
 different view. 
 
 Our judgment being that the libelant and his assignors became 
 liable to pay the tax, and that the proper steps to enforce payment 
 for 1919 were taken, the decree will be reversed, and the cause re- 
 manded, with directions to enter a decree in favor of the association. 
 
 Reversed.^ 
 
 * Certiorari denied bv the Supreme Court of the United States. 254 
 U. S. 652.
 
 THE DELAWARE EAILEOAD TAX. 
 
 THE DELAWARE RAILROAD TAX. 
 Supreme Court of the United States. 1874. 
 
 [Reported 18 Wall. 206.] 
 
 Appeal from the Circuit Court of the United States for the Dis- 
 trict of Delaware; in which court William Minot filed a bill against 
 the Philadelphia, Wilmington and Baltimore Railroad Company and 
 the State Treasurer and Collector of State Taxes of Delaware to en- 
 join the collection of certain taxes. 
 
 The railroad company was incorporated by Delaware, as well as by 
 Pennsylvania and Maryland, The State imposed a tax of three per 
 cent on its net earnings and of one-fourth of one per cent on the 
 actual cash value of its shares. The Circuit Court sustained the 
 legality of these taxes, and the plaintill appealed.^ ' 
 
 Field, J. We proceed, therefore, to the second objection to the act, 
 that it imposes taxes upon property beyond the jurisdiction of the 
 State. If such be the fact the tax to that extent is invalid, for the 
 power of taxation of every State is necessarily confined to subjects 
 within its jurisdiction. The objection of the appellant is directed 
 principally to the tax imposed by the fourth section of the act, and 
 assumes that the tax must be considered as laid upon the shares as 
 representing the separate property of the individual stockholders, or 
 as representing the property of the corporation. And the argument 
 is that if the tax be laid upon the shares of the stockholders it falls 
 upon property out of the State, because nearly all the stockholders, 
 at least a much greater number than the ratio of the mileage of the 
 road in Delaware to its entire length, are citizens and residents of 
 other States; and if the tax be laid upon the shares as representing 
 the property of the corporation, it falls upon property out of the 
 State, because the ratio of the mileage of the road in Delaware to its 
 entire length is not that which the capital invested by the company 
 in that State bears to the entire capital of the company, or that which 
 the value of the property of the company there situated bears to the 
 value of its entire property. 
 
 If the assumption of the appellant were correct, there would be 
 difficulty in sustaining the validity of the tax. 
 
 In the first place, the share of a stockholder is, in one aspect, some- 
 thing different from the capital stock of the company; the latter 
 only is the property of the corporation ; the former is the individual 
 interest of the stockholder, constituting his right to a proportional 
 part of the dividends when declared, and to a proportional part of the 
 effects of the corporation when dissolved, after payment of its debts. 
 Regarded in that aspect it is an interest or right which accompanies 
 the person of the owner, having no locality independent of his dom- 
 icil. But whether, when thus regarded, it can be treated as so far 
 
 * This short statement is substituted for that of the reporter. Onlr so 
 much of the cases as involves the jurisdiction to tax is given. — Ed.
 
 8 THE DELAWARE KAILEOAD TAX. [ciIAP. I. 
 
 severable from the property to which it relates as to be taxable inde- 
 pendent of the locality of the latter is a question not necessary now to 
 decide. The arg:ument of the appellant assumes that it is thus 
 severable. 
 
 In anv aspect, if provision for the taxation of the shares at the local- 
 ity of the company be made in its charter, their taxability at such 
 locality is annexed as an incident to the shares, and it does not matter 
 where the domicil of the owner may be. The tax may then be en- 
 forced through the corporation by requiring it to withhold the amount 
 from the dividends payable thereon. The shares in the national 
 banks created under the act of Congress of June 3d, 1864, are made 
 taxable at the place where the bank is located, and not elsewhere; 
 and in the case of The National Bank v. Commonwealth, reported in 
 the 9th of Wallace, a law of Kentucky requiring the banks in that 
 State to pay the tax laid on tlieir shares was sustained by this court. 
 But in the act of Delaware under wliich the corporation defendant 
 was formed, there is no such provision for the taxation of the shares 
 of the individual stockholders. 
 
 In the second place, assuming that the tax is upon the property of 
 the corporation, if the ratio of the value of the property in Delaware 
 to the value of the whole property of the company be less than that 
 which the length of the road in Delaware bears to its entire length, 
 and such is admitted to be the fact, a tax imposed upon the property 
 in Delaware according to the ratio of the length of its road to the 
 length of the whole road must necessarily fall upon property out of 
 the State. The length of the whole road is in round numbers one 
 hundred miles ; the length in Delaware is twenty-four miles. The tax 
 upon the property estimated according to this ratio would be in Dela- 
 ■^eare -^ or 3^ of the amount of the tax upon the whole property. 
 But the value of the property in Delaware is not ^ of the value of 
 the whole property, but much less than this proportion would require. 
 
 We repeat, therefore, that upon the assumption made by the apel- 
 lant there would be difficulty in sustaining the tax. 
 
 We do not think, however, the assumption is correct. As we con- 
 Btrue the language of the fourth section, the tax is neither imposed 
 upon the shares of the individual stockholders nor upon the property 
 of the corporation, but is a tax upon the corporation itself, measured 
 by a percentage upon the cash value of a certain proportional part of 
 the shares of its capital stock ; a rule which, though an arbitrary one, 
 is approximately just, at any rate is one which the legislature of Del- 
 aware was at liberty to adopt. 
 
 The State may impose taxes upon the corporation as an entity exist- 
 ing under its laws, as well as upon the capital stock of the corporation 
 or its separate corporate property. And the manner in which its value 
 shall be assessed and the rate of taxation, however arbitrary or capri- 
 cious, are mere matters of legislative discretion. It is not for us to 
 suggest in any case that a more equitable mode of assessment or rate 
 of taxation might be adopted than the one prescribed by the legisla- 
 ture of the State; our only concern is vnth the validity of the tax; 
 all else lies beyond the domain of our jurisdiction.
 
 THE DELAWARE RAILEOAD TAX. 9 
 
 Nothing was urged in the argument specially against the tax upon 
 the corporation under the first section of the act, which is determined 
 by the net earningsr or income of the company. Whatever objections 
 could be presented are answered by the observations already made 
 upon tlie tax under the other section. A tax upon a corporation may 
 be proportioned to the income received as well as to the value of the 
 franchise granted or the property possessed. 
 
 From the views expressed, it follows that the judgment of the 
 Circuit Court must be 
 
 Affirmed, 4Nd it is so ordered.
 
 10 MCKEEN V. COU^TTY OF NOKTHAMPTON. [CHAP. I. 
 
 9 McKEEN V. COUNTY OF NORTHAMPTON. 
 
 Supreme Court of Pennsylvania. 1865. 
 [Reported 49 Pennsylvania, 519.] 
 
 Agnew. J. James McKeen is the owner of four hundred and sev- 
 entv-two shares of the capital stock of a manufacturing company, 
 incorporated under the laws of New Jersey, doing business and hold- 
 ing its property in AVarren county in that State. McKeen himself is 
 a resident of Easton, Pennsylvania, and the question is, whether his 
 stock is taxable here for Slate and county purposes. 
 
 The taxing power rests upon the reciprocal duties of protection and 
 support between the State and the citizen, and the exclusive sover- 
 eigntv and jurisdiction of the State over the persons and property 
 wUhin its territory. In McCullough v. The State of Maryland, 4 
 Wheat. 487, Marshall, C. J., remarks of the taxing power: "It is 
 obvious that it is an incident of sovereignty, and is co-extensive 
 with that to which it is incident. All subjects over which the 
 sovereign power of a State extends are objects of taxation ; but those 
 over which it does not extend are, upon the soundest principles, exempt 
 from taxation." Story, in his Conflict of Laws, § 19, says: "The 
 sovereign has power and authority over his subjects, and over the 
 property which they possess within his dominions." See Id. §§ 18 
 and 20!^ 
 
 The defendant below being a citizen of this State, it is clear he is 
 subject personally to its power to tax, and that all liis property accom- 
 panying his person, or falling legitimately within the territorial juris- 
 diction of the State, is equally within this authority. The interest 
 which an owner of shares has in the stock of a corporation is personal. 
 Whithersoever he goes it accompanies him, and when he dies his domi- 
 cile governs its succession. It goes to his executor or administrator, 
 and not to the heirs, and is carried into the inventory of his personal 
 effects. When it is argued, therefore, that the foundry, machine-shop, 
 and other estate of the corporation, being within the State of New 
 Jerse}', are subject wholly to the same exclusive State jurisdiction there 
 wliich we claim for this State over property within its territory, another 
 ownership is stated and a new issue introduced. But to that property 
 the defendant below has no title ; his title being in the shares he holds, 
 and not in the property of the corporation. No execution against him 
 there would sell a spark of right to it, nor would his heirs at law suc- 
 ceed to any estate in it. Unquestionably it may be taxed as the prop, 
 erty of the corporation in New Jersey ; but the ownersliip there is that 
 of the corporation, the legal entity, and not of the natural persons who 
 own the shares of its stock. 
 
 The stock of individuals may be controlled, to a certain extent, in 
 New Jersey to make it liable to the claims of their domestic creditors, 
 or legatees and next of kin. Even ancillary administration may be 
 granted there to preserve the estate for resident claimants. But even 
 then the residue of McKeen's stock would be remitted to the executors
 
 MCKEE^f r. COUNTY OF NOETIIAMPTON. 11 
 
 or administrators of the domicile in Penn83'lvania, and the right of 
 succession would be governed by our laws ; thus proving that though 
 local authority may attach to the stock for special purposes, its owner- 
 ship has its legal situs at the domicile of the owner. There is abun- 
 dant authority for this : Mothland /'. Wireman, administrator of 
 Thornburg, 3 Penn. 185; Miller's Estate, 3 Rawle, 312; Stokely's Es- 
 tate, 7 Harris, 47G ; Dent's Appeal, 10 Id. 514. 
 
 Another feature is noticeable. In the exercise of the authority to 
 tax, the proceeding is personal only. Though different kinds of prop- 
 erty are specified as the subjects of taxation, it is not as a proceeding 
 ifi rem, but only as affording the means and measure of taxation. The 
 tax is assessed personally, and the means of enforcement is a warrant 
 against the person of the owner, and any property he has whether taxed 
 or not: Act 15th April, 1834, §§ 20, 21 ; Purd. ^801, pp. 938-939. 
 
 We have authorities directly upon this question deciding the prin- 
 ciple, though upon a different species of tax — the collateral inheritance 
 tax : Ifi re .Short's Estate, 11 Harris, 63. The decedent, a resident of 
 Philadelphia, owned half a million of dollars in stocks and corporations 
 of other States, and bonds of the State of Kentucky, and a bank de- 
 posit in New York ; all were held to be subject to the collateral inher- 
 itance tax here. Gibson, C. J., opens his opinion by stating: " That 
 Mr. Short's property out of tlie State suV)jected him to personal liability 
 for taxes assessed* on it here in his lifetime, is not to be doubted. The 
 general rule is, that the situs of personal property follows the domicile 
 of the owner of it, insomuch that even a creditor cannot reach it in a 
 foreign country, except by attachment or some otlier process provided 
 by the local law; certainly not by a personal action, without appear- 
 ance or something equivalent to it." To the same effect is the case of 
 Hood's Estate, 9 Harris, 106 ; the difference of domicile merely lead- 
 ing to an opposite result. 
 
 The court below was right in entering judgment for the whole amount 
 of the taxes, State and county. The question of liability for county 
 taxes is disposed of in the opinion just read in the case of Whitesell v. 
 Northampton County. Judgment affirmed.^ 
 
 1 Ace. Seward v. Rising Sun, 79 Ind. 351 ; Dwight v. Boston, 12 All. 316 : Hall 
 V. Fayetteville, 115 N. C. 281, 20 S. E. 373; Bradley v. Bander, 36 Oh. S. 23; 
 Dyer r. Osburn, 11 R. I. 321. 
 
 " In the absence of constitutiooal restrictions, the citizen may be taxed in the dis- 
 cretion of the legislature, either personally, by way of poll-ta.x, or upon the value of 
 his property, wherever situate or however elsewhere taxed, to such extent as the public 
 exigencies may require. . . . The very nature of choses in action is that they have no 
 locality, but follow the person of the owner. As they sometimes virtually represent 
 property that is situated elsewhere, and it maybe taxed elsewhere, there is in some cases 
 a double taxation ; but this results from our peculiar situation, and although undoubt- 
 edly to be avoided, and not to be assumed as intended without plain enactments ad- 
 mitting of no other reasonable interpretation, yet so far as it is produced by that 
 contlict of laws which arises from a variety of sovereignties so intimately connected as 
 ours, it frequently cannot be avoided, and at all events has not been attempted to be 
 prevented, by either the national or the State constitutions." Elmek, J., in State v. 
 Bentley, 23 N. J. L. 532 (1S52). — Ed.
 
 12 UNIOX TRANSIT CO. V. KENTUCKY. [CKAP. I. 
 
 UNION TRANSIT CO. v. KENTUCKY. 
 
 Supreme Court of the United States. 1905. 
 
 [Reported 199 U. S. 194.] 
 
 Bro"vvn, J. In this case the question is directly presented whether 
 a corporation organized under the laws of Kentucky is subject to taxa- 
 tion upon its tangible personal propert\', permanently located in other 
 States, and employed there in the prosecution of its business. Such 
 taxation is charged to be a violation of the due process of law clause of 
 the Fourteenth Amendment. 
 
 Section 4020 of the Kentucky statutes, under which this assessment 
 was made, provides that ''All real and peisonal estate within this 
 State, and all personal estate of persons residing in this State, and of all 
 corporations organized under the laws of this State, whether the prop- 
 erty be in or out of this State, . . . shall be subject to taxation, unless 
 the same be exempt from taxation b}- the Constitution, and shall be 
 assessed at its fair cash value, estimated at the price it would bring at 
 a fair voluntary sale." 
 
 That the property taxed is within this description is beyond contro- 
 versy. The constitutionality of the section was attacked not only upon 
 the ground that it denied to the Transit Corapan}- due process of law, 
 but also the equal protection of the laws, in the fact that railroad com- 
 panies were only taxed upon the value of their rolling stock used within 
 the State which was determined by the proportion which the number of 
 miles of the railroad in the State bears to the whole number of miles 
 operated by the company. 
 
 The power of taxation, indispensable to the existence of ever^- civil- 
 ized government, is exercised upon the assumption of an equivalent 
 rendered to the taxpayer in the protection of his person and propert}', in 
 adding to the value of such property, or in the creation and maintenance 
 of public conveniences in which he shares, such, for instance, as roads, 
 bridges, sidewalks, pavements, and schools for the education of his chil- 
 dren. If the taxing power be in no position to render these services, or 
 otherwise to benefit the person or property taxed, and such property be 
 wholly within the taxing power of another State, to which it may be said 
 to owe an allegiance and to which it looks for protection, the taxation 
 of such property within the domicil of the owner partakes rather of the 
 nature of an extortion than a tax, and has been repeatedly held by this 
 court to be beyond the power of the legislature and a taking of property 
 without due process of law. Railroad Company v. Jackson, 7 Wall. 
 262 ; State Tax on Foreign-held Bonds, 15 Wall. 300 ; Tappan v. 
 Merchants' National Bank, 19 Wall. 490, 499; Delaware &c. R. R. 
 Co. V. Pennsylvania, 198 U. S. 341, 358. In Chicago &c. R. R. Co. v. 
 Chicago, 166 U. S. 226, it was held, after full consideration, that the 
 taking of private property without compensation was a denial of due
 
 CHAP. I.] UNION TltANSlT CO. (. KENTUCKY. 13 
 
 process within the Fourteenth Amendment. See also Davidson 7\ New 
 Orleans, 9G U. S. 1)7, 102; Missouri Pacific Railway /•. Nebraska, 164 
 U. S. 4U3, 417 ; Mount Hope Cemetery n. Boston, lo8 Mass. r>09, .019. 
 
 Most modern legislation upon this subject has been directed (1) to 
 the requirement that every citizen shall disclose the amount of his prop- 
 erty subject to taxation and shall contril)ute in proportion to such 
 amount ; and (2) to the voidance of doul)k' taxation. As said by Adam 
 Smith in his ^' Weaitli of Nations," Book V., Ch. 2, Pt. 2, " the sub- 
 jects of ever}- State ought to contribute towards the support of the gov- 
 ernment as nearly as possible in proportion to their respective abilities ; 
 that is, in proportion to the revenue which they respectively enjoy 
 under the protection of the State. The expense of government to the 
 individuals of a great nation is like the expense of management to the 
 joint tenants of a great estate, who arc all obliged to contribute in pro- 
 portion to their respective interest in the estate. In the observation 
 or neglect of this maxim consists what is called equality or inequalit}- 
 of taxation." 
 
 But notwithstanding the rule of uniformit}' lying at the basis of 
 every just system of taxatioTi, there are doubtless many individual 
 cases where the weight of a tax falls unequall}- upon the owners of 
 the property taxed. This is almost unavoidable under every system 
 of direct taxation. But the tax is not rendered illegal by such discrim- 
 ination. Thus ever}- citizen is bound to pay his proportion of a 
 school tax, though he have no children; of a police tax, though he have 
 no buildings or personal property to be guarded ; or of a road tax, 
 though he never use the road. In other words a general tax cannot be 
 dissected to show that, as to certain constituent parts, tlie taxpayer re- 
 ceives no benefit. Even in case of special assessments imposed for the 
 impiovement of property within certain limits, the fact that it is ex- 
 tremely doubtful whether a particular lot can receive an}' benefit from 
 the improvement does not invalidate the tax with respect to such lot. 
 Kelly V. Pittsburgh 104 U. S. 78 ; Amesbury Nail Factory Co. v. 
 Weed, 17 Mass. 53; Thomas r. Gay, 169 U. 8. 264; Louisville &c. 
 R. R. Co. V. Barber Asphalt Co. 197 U. S. 430. Subject to these in- 
 dividual exceptions, the rule is that in classifying property for taxation 
 some benefit to the property taxed is a controlling consideration, and a 
 plain abuse of this power will sometimes justify a judicial interference. 
 Norwood I'. Baker, 172 U. S. 269. It is often said protection and 
 payment of taxes are correlative obligations. 
 
 It is also essential to the validity of a tax that the property shall be 
 within the territorial jurisdiction of the taxing power. Not only is 
 the operation of State laws limited to persons and pro[)erty within the 
 boundaries of the State, but property which is wholly and exclusively 
 within the jurisdiction of another State, receives none of the protec- 
 tion for whicli the tax is snjjposed to be the compensation. This rule 
 receives its most familiar illustration in the cases of land which, to 
 be taxable, must be within the limits of the State. Indeed, we know
 
 1-4 UNION TRANSIT CO. V. KENTUCKY. [CHAP. I. 
 
 of no case where a legislature has assumed to impose a tax upon land 
 within the jurisdiction of another State, much less where such action 
 has been defended by any court. It is said by this court in the 
 Foreign-held Bond Case, 15 Wall. 300, 319, that no adjudication 
 should be necessary- to establish so obvious a proposition as that 
 property lying beyond the jurisdiction of a State is not a subject 
 upon which her taxing power can be legitimately exercised. 
 
 The argument against the taxability of land within the jurisdiction 
 of another State applies with equal cogency to tangible personal prop- 
 erty beyond the jurisdiction. It is not only beyond the sovereignty of 
 the taxing State, but does not and cannot receive protection under its 
 laws. True, a resident owner ma}' receive an income from such 
 property, but the same ma}- be said of real estate within a foreign 
 jurisdiction. Whatever be the rights of the State with respect 
 to the taxation of such income, it is clearlj' beyond its power to tax 
 the land from which the income is derived. As we said in Louisville 
 &c. Ferry Co. y. Kentucky, 188 U.S., 385, 396: "While the mode, 
 form, and extent of taxation are, speaking generall}', limited only by 
 the wisdom of the legislature, that power is limited by principle in- 
 hering in the very nature of constitutional government, namely, that 
 the taxation imposed must have relation to a subject within the jurisdic- 
 tion of the taxing government." See also McCulloch v. Maryland, 4 
 Wheat. 316, 429; Hays v. Pacific Mail S. S. Co., 17 How. 596, 599 ; 
 St. Louis r. Ferry Co., 11 Wall. 423, 429, 431 ; Morgan v. Parham, 
 16 Wall. 471, 476. 
 
 Kespecting this, there is an obvious distinction between the tangible 
 and intangible propert}', in the fact that the latter is held secretl}- ; 
 that there is no method by which its existence or ownership can be 
 ascertained in the State of its situs, except perhaps in the case of 
 mortjiaiies or shares of stock. So if the owner be discovered, there is 
 no way by which lie can be reached by process in a State other than 
 that of his domicil, or the collection of the tax otherwise enforced. 
 In this class of cases the tendency of modern authorities is to apply the 
 maxim mobilia sequiintur personam, and to hold that the property ma}' 
 be taxed at the domicil of the owner as the real situs of the debt, and 
 also, more particularly in the case of mortgages, in the State where 
 the property is retained. Such has been the repeated rulings of this 
 court. Tappan v. Merchants' National Bank, 19 Wall. 490; Kirtland 
 V. Hotchkiss, 100 U. S. 491 ; Bonaparte v. Tax Court, 104 U. S. 592; 
 Sturgis V. Carter, 114 U. S. 511; Kidd u Alabama, 188 U. S. 730; 
 Blackstone r. Miller, 188 U. S. 189. 
 
 If this occasionally results in double taxation, it muchoftener happens 
 that this class of property escapes altogether. In the case of intangible 
 property, the law does not look for absolute equalit}', but to the much 
 more practical consideration of collecting the tax upon such property, 
 either in the State of the domicil or the situs. Of course, we do not 
 enter into a consideration of the question, so much discussed bj- polit-
 
 CHAP, l] union transit CO. V. KENTUCKY. 1^ 
 
 ical economists, of the double taxation involved in taxing the propert}' 
 from wliich these securities arise, and also the burdens upon such prop- 
 erty, sucii as mortgages, sliares of stock and the liiic — the securities 
 themselves. 
 
 The arguments in favor of the taxation of intangible property at the 
 domicil of the owner have no application to tangibli.' pr(;perty. The 
 fact that siicii property is visible, easily found and didicult to conceal, 
 and the tax loadily collectil)le, is so cogent an argument for its taxa- 
 tion at its siti/s, that of late there is a general consensus of opinion 
 that it is taxable in the State where it is permanently located and em- 
 ployed, and where it receives its entire protection, irrespective of the 
 domicil of the owner. We have, ourselves, held in a number of cases 
 that such property [)ermanently located in a State other than that of 
 Its owner is taxable there. Brown r. Houston, 114 U. S. G22 ; Coe v. 
 Errol, IIG U. S. ol7 ; Pullman's Car Co. y. Pennsylvania, 141 U.S. 18; 
 Western Union Telegraph Co. v. Massachusetts, 125 U. S. 530 ; Rail- 
 road Company /•. Peniston, 18 Wall. 5 ; American Refrigerator Transit 
 Company c. Hall, 174 U. S. 70; Pittsburgh Coal Company /". Bates, 
 156 U. S. 577 ; Old Dominion Steamship Comi)any c Virginia, 198 
 U. S. 299. We have also held that, if a corporation be engaged in 
 running railroad cars into, through, and out of the State, and having at 
 all times a large number of cars within tiie State, it ma}' be taxed by 
 taking as the basis of assessment such proportion of its capital stock as 
 the number of miles of railroad over which its cars are run within the 
 State bears to the whole number of miles in all the States over which 
 its cars are run. Pullman's Car Co. ?^ Pennsylvania, 141 U. S. 18. 
 
 There are doubtless cases in the State reports announcing the prin- 
 ci[)le that the an(;ient maxim of rnobilld se'juuntnr persoiKiyn still 
 applies to personal property, and that it may be taxed at the domicil 
 of the owner, but upon examination they all or nearly all relate to 
 intangible property, such as stocks, bonds, notes, and other choses in 
 action. We are cited to none applying this rule to tangible pro[)erty, 
 and after a careful examination have not been able to find any wherein 
 the question is s{]uarely presented, unless it be that of Wheaton v. 
 Mickel, 63 N. J. Law, 525, where a resident of New Jersey* was taxed 
 for certain coastwise and seagoing vessels located in Pennsylvania. It 
 did not appear, however, that they were permanently located there. 
 The case turned upon the construction of a Slate statute, and the ques- 
 tion of constitutionality was not raised. If there are any other cases 
 holding that the maxim applies to tangible personal property, they are 
 wholly exceptional, and were decided at a time when personal propert}' 
 was comparatively of small amount, and consisted principally of stocks 
 in trade, horses, cattle, vehicles, and vessels engaged in navigation. 
 But in view of the enormous increase of such property since the in- 
 troduction of railways and the growth of manufactures, the tendency 
 has been in recent years to treat it as having a situs of its own for 
 the purpose of taxation, and correlatively to exempt at the domicil of
 
 16 TNION TKjiXSIT CO. /■. KENTUCKY. [ciIAl*. I. 
 
 its owner. The cases in the State reports upon this subject usually 
 turn upon the construction of local statutes granting or withliolding the 
 riglit to tax extra-territorial property-, and do not involve the constitu- 
 tional principle here invoked. Many of them, such, for instance, as 
 Blood r. Sayre, 17 Vt. 609; Preston r. Boston, 12 Pickering, 7; 
 Pease r. Whitney, 8 iSIass. 93; Gray /•. Kettel, 12 Mass. 161, turn 
 upon the taxaliility of propertj* where the owner is located in one, 
 and tiie property in another, of two jurisdictions within the same State, 
 sometimes even involving double taxation, and are not in point here. 
 
 One of the most valuable of the State cases is that of Ho3-t v. 
 Commissioners of Taxes, 23 N. Y. 224, where, under the New York 
 statute, it was hekl that the tangible property of a resident actually 
 situated in another State or country was not to be included in the as- 
 sessment against him. The statute declared that "all lands and all 
 personal estate within this State" were liable for taxation, and it was 
 said in a most instructive opinion by Chief .Justice Comstock that the 
 language could not be obscured by the introduction of a legal fiction 
 about the situs of personal estate. It was said that this fiction involved 
 the necessar}' consequence that " goods and chattels actually within 
 this State are not here in any legal sense, or for any legal purpose, if 
 the owner resides abroad ; " and that the maxim mobilia sequnntur 
 personam ma^' only be resorted to when convenience and justice so re- 
 quire. The pro[)er use of legal fiction is to prevent injustice, accord- 
 ing to the maxim "in Jirtiont', juris semper mquilas existat." See 
 Eidman v. Martinez, 184 U. S. 578; Blackstone 7k Miller, 188 U. S. 
 189, 206. " No fiction," says Blackstone, "shall extend to work an 
 injury; its proper operation being to prevent a mischief or remedy an 
 inconvenience, which might result from a general rule of law." The 
 opinion argues with great force against the injustice of taxing extra- 
 territorial property, when it is also taxable in the State where it is lo- 
 cated. Similar cases to the same effect are People r. Smith, 88 N. Y. 
 .076 ; City of New Albany r. Meekin, 3 Indiana, 481 ; Wilkey r. Cit}' of 
 Pekin, 19 Illinois, 160; Johnson v. Lexington, 14 B. Monroe, 521; 
 Catlin V. Hull, 21 Vermont, 152 ; Nashua Bank /•. Nashua, 46 N. H. 
 389. 
 
 In Weaver's Estate r. State, 110 Iowa, 328, it was held b}' the Su- 
 preme Court of Iowa that a herd of cattle within the State of Mis- 
 souri belotiging to a resident of Iowa, was not subject to an 
 inheritance tax upon his decease. In Commonwealth v. American 
 Dredging Company, 122 Penna. St. 386, it was held that a Penn- 
 sylvania corporation was taxable in respect to certain dredges 
 and other similar vessels which were built, but not permanentl}' 
 retained outside of the state. It was said that the non-taxability of 
 tangible personal property located permanently outside of the State 
 was not "because of the technical principle that the situs of personal 
 property is where the domicil of the owner is found. This rule is 
 douI)tless true as to intangil)le property, sucti as bonds, mortgages, and
 
 CHAP. I.] rxio.x tkaxsit en. r. kknticky. 17 
 
 other evidences of debt. But the better opinion seems to be that it 
 does not iiold in the case of visible tungil)le personal property perma- 
 nently located in anotlier State. In such cases it is taxal)le within 
 the jurisdiction where found, and is exempt at the doraicil of the 
 owner." The property in that case, however, was held not to be per- 
 manently outsiile of the State, and therefore not exempt from taxation. 
 Tlie rule, however, seems to be well settled in Penns3lvania that so 
 much of the tangible property of a corporation as is situated in 
 another State, and there employed in its corporate business, is not 
 taxable in Pennsylvania. Commonwealth /•. Montgomery &c. Mining 
 Co., 5 Pa. County Courts Rep. .S!) ; Commonwealth r. Railroad Co., 
 145 Pa. St. 96; Coramonweallh /■. Westinghouse Mfg. Co., 151 Pa. St. 
 265 ; Commonwealth r. Standard Oil Co., 101 Pa. St. 119. The rule is 
 the same in New York. Pacific Steamship Company ?^ Commissioners, 
 46 How. Pr. 315. 
 
 Rut there are two recent cases in this court which we think com- 
 pletely cover the question under consideration and require the reversal 
 of the judgment of the State court. The first of these is that of tin; 
 Louisville &c. Ferry Co. o. Kentucky, 188 U. S. 385. That was an 
 action to recover certain taxes imposed upon the corporate franchise 
 of the defendant company, wliich was oiganized to estal)lish and main- 
 tain a ferry between Kentucky and Indiana. The defendant was also 
 licensed by the State of Indiana. We held that the fact that such 
 franchise had been granted by the Commonwealth of Kentucky did 
 not bring within the jurisdiction of Kentuck}' for the purpose of tax- 
 ation the franchise granted to the same company by Indiana, and 
 which we held to be an incorporeal hereditament derived from and 
 having its legal situs in that State. It was adjudged tiiat such taxa- 
 tion amounted to a deprivation of property without due process of law, 
 in violation of the Fourteenth Amendment, as much so as if the State 
 taxed the land owned b}' that company ; and that the officers of the 
 State had exceeded their power in taxing the whole franchise witiiout 
 making a deduction for that obtained from Indiana, the two being 
 distinct, "although the enjoyment of both are essential to a com[)lete 
 ferry right for the transportation of persons and propert}' across the 
 river both ways.'' 
 
 The other and more recent case is that of the Delaware &c. Rail- 
 road Co. r. Pennsylvania, 198 U. S. 341. That was an assessment 
 upon the capital stock of the railroad company, wherein it was eon- 
 tended that the assessor shouKl have deducted from the value of such 
 stock certain coal mined in Pennsylvania and owned l)v it, but stored 
 in New York, there awaiting sale, and beyond the jurisdiction of the 
 commonwealth at the time appraisement was made. This coal was 
 taxable, and in fact was taxed in the State where it rested for the pur- 
 poses of sale at the time when the appraisement in question was made. 
 Both this court and the Supreme Court of Pennsylvania had held that 
 a tax on the corporate stock is a tax on the assets of the corporation
 
 18 UNION TEANSIT CO. V. KENTUCKY. [CHAP. I. 
 
 issuing such stock. Tlie two courts agreed in the general proposition 
 that tangible property permanently outside of the State, and having no 
 situs within the State, coukl not be taxed. But the\- differed upon the 
 question whether the coal involved was permanently outside of the 
 State. In deUvering the opinion it was said: *•' However temporary 
 the stay of the coal might be in the particular foreign States where it 
 was resting at the time of the appraisement, it was definitely and for- 
 ever beyond the jurisdiction of Pennsylvania. And it was within the 
 jurisdiction of the foreign States for purposes of taxation, and in truth 
 it was there taxed. We regard this tax as in substance and in fact, 
 though not in form, a tax specifically levied upon the propert}' of the 
 corporation, and part of that property is outside and beyond the juris- 
 diction of the State which thus assumes to tax it." The decision in that 
 case was really broader than the exigencies of the case under consider- 
 ation required, as the tax was not upon the personal property itself, 
 but upon the capital stock of a Pennsylvania corporation, a part of 
 which stock was represented b}^ the coal, the value of which was held 
 should have been deducted. 
 
 The adoption of a general rule that tangible personal property in 
 other States may be taxed at the domicil of the owner involves possi- 
 bilities of an extremely serious character. Not only would it author- 
 ize the taxation of furniture and other property kept at country houses 
 in other States or even in foreign countries, of stocks of goods and mer- 
 chandise kept at branch establishments when already taxed at the State 
 of their situs, but of that enormous mass of personal property belong- 
 ing to railways and other corporations which might be taxed in the 
 state where the}' are incorporated, though their charters contemplated 
 the construction and operation of roads wholly outside the State, and 
 sometimes across the continent, and when in no other particular they 
 are subject to its laws and entitled to its protection. The propriety 
 of such incorporations, where no business is done within the State, is 
 open to a grave doubt, but it is possible that legislation alone cq,n 
 furnish a remed}'. 
 
 Our conclusion upon this branch of the case renders it unnecessary 
 to decide the second question, viz : Whether the Transit Company was 
 denied the equal protection of the laws. 
 
 It is unnecessary to say that this case does not involve the question 
 of the taxation of intangible personal property, or of inheritance or 
 succession taxes, or of questions arising between different municipali- 
 ties or taxing districts within the same State, which are controlled by 
 different considerations. 
 
 We are of opinion that the cars in question, so far as they were 
 located and employed in other States than Kentuck}', were not subject 
 to the taxing power of that commonwealth, and that the judgment of 
 the Court of Appeals must l)e reversed, and the case remanded to that 
 court for further proceedings not inconsistent with this opinion. 
 
 Mit. .Justicp: White concurred in tlws result.
 
 CHAP. I.] NEW YORK CKXTKAI, IJAILROAD T. MII.I.KR. 19 
 
 Mr. Justice Holmes : It seems to me that the result reached hy the 
 court probably is a desiral)le one, but I hardly understand bow it can 
 be deduced from tlie Fourteenth Amendment, and as the Chief Justice 
 feels the same dilllculty, 1 lliinU it proper to say that my doubt has 
 not been removed. 
 
 NEW YORK CENTRAL RAILROAD v. MILLER. 
 
 SUPRKMK COUKT OK THE UNITED StATES. 1906. 
 [Reported 202 U. S. 584.] 
 
 Holmes, J. These cases arise upon writs of certiorari, issued under 
 the State law and addressed to tlio State comptroller for the time being, 
 to revise taxes imposed upon the relator for the years lOUO, IDni, rj(»2, 
 1903 and 1904 resi)ectively. The tax was levied under New York Laws 
 of 1896, c. 908, § 182, which, so far as material, is as follows : " Francliise 
 Tax on Corporations. — Ever}^ corporation . . . incorporated . . . under 
 . . . law in this State, shall pay to the State treasurer annually, an annual 
 tax to be computed upon the basis of the amount of its capital .stock 
 employed within this State and upon each dollar of such amount," at 
 a certain rate, if the dividends amount to six per cent or more upon tiie 
 par value of such capital stock. " If such dividend or dividends amount 
 to less than six per centum on the par value of the capital stock [as was 
 the case with the relator], the tax shall be at the rate of one and one-half 
 mills upon such portion of the capital stock at par as the amount of cap- 
 ital employed within this State bears to the entire capital of the corpo- 
 ration." It is provided further by the same section that every foreign 
 corporation, etc., "shall pay a like tax for the privilege of exercising 
 its corporate franchises or carrying on its business in such corporate 
 or organized capacity in this State, to be computed upon the basis of 
 the capital employed by it within this State." 
 
 The relator is a New York corporation owning or hiring lines without 
 as well as within the State, having arrangements with other carriers for 
 through transportation, routing and rating, and sending its cars to points 
 without as well as within the State, and over other lines as well as its 
 own. The cars often are out of the relator's possession for some time, 
 and may be transferred to many roads successively', and even mav be 
 used by other roads for their own independent business, before they 
 return to the relator or the State. In short, by the familiar course of 
 railroad business a considerable proportion of the relator's cars con- 
 stantly is out of the State, and on this ground the relator contended 
 that that proportion should be deducted from its entire capital, in order 
 to find the capital stock employed within the State. This contention 
 the comptroller disallowed. 
 
 The writ of certiorari in the earliest case. No. 81, with the return set- 
 ting forth the proceedings of the comptroller, Knight, and the evidence
 
 20 NEW YORK CENTRAL RAILROAD V. MILLER. [CHAP. L 
 
 given before him. was heard by the AppeHate Division of the Supreme 
 Court, and a reduction of the amount of tlie lux was ordered. 7.") App. 
 Div. 169. On appeal the Court of Appeals ordered the proceedings to 
 be remitted to the comptroller, to the end that furllicr evidence might 
 be taken upon the question whether any of the relator's rolling stock 
 was used exclusively outside of the State, with directions that it' it should 
 bo found that such was the fact the amount of the rolling stock so used 
 should he deducted. 173 N. Y. 255. On rehearing of No. «1 and with 
 it No. ^2, before the comptroller, now Miller, no evidence was offered 
 to prove that any of the relator s cars or engines were used continuously 
 and exclusively outside of the State during the whole tax year. In the 
 later cases it was acbnitted that no substantial amount of the equipment 
 was so used during the similar periled. But in all of them evidence was 
 offered of the movements of particular cars, to illustrate the transfers 
 which they went through before they returned, as has been stated, evi- 
 dence of the relator's road mileage outside and inside of the State, and 
 also evidence of the car mileage outside and inside of the State, in order 
 to show, on one footing or the other, that a certain proportion of cars, 
 although not the same cars, was continuously without the State during 
 the whole tax year. The comptroller refused to make any reduction 
 of the tax, and the case being taken up again, his refusal was affirmed 
 by the A|)pellate Division of the Supreme Court and by the Court of 
 Appeals on the aiilhority of the former decision. 89 App. Div. 127 ; 
 177 N. Y. 584. The later cases took substantially the same course. 
 The relator saved the questions whether the statute as construed was 
 not contrary to Article 1, § 8, of the Constitution of the United States, 
 as to commerce among the States; Article 1, § 10, against impairing 
 the ol)ligation of contracts; Article 4, § 1, as to giving full faith and 
 credit to the public acts of other States ; and the Fourteenth Amend- 
 ment. It took out writs of error and brought the cases here. 
 
 The argument for the relator had woven through it suggestions which 
 only tended to show that the construction of the New York statute b^- 
 the Court of Appeals was wrong. Of course if the statute as construed 
 is valid under the Constitution, we are bound by the construction given 
 to it by the State court. In this case we are to assume that the statute 
 purports and intends to allow no deduction from the capital stock taken 
 as the basis of the tax, unless some specific portion of the corporate 
 property is outside of the State during the wliole tax year. We must 
 assume, further, tliat no part of the corporate property in question 
 was outside of the State during the whole tax year. The proposition 
 reall}' was conceded, as we have said, and the evidence that was 
 offered had no tendency to prove the contrary. If we are to suppose 
 that tlie reports offered in evidence were accepted as com|)etent to 
 establish the facts which they set forth, still it would be going a very 
 great way to infer from car mileage the average number or proportion 
 of cars absent from the State. For, as was said by a witness, the reports 
 show only that the cars made so many miles, but it might be ten or it
 
 (MIAP. I.] NEW YORK CK.N'IKAl- I;aI I.IIOA 1) /'. MILLER. 21 
 
 might be fifty cars that made tliiMU. Certainly no inference whatever 
 could be drawn that the same cars were ubseni from the State all the 
 time. 
 
 In view of what we have said it is qticslionalile whether the relator 
 has ollercd evidence enough to open the conslitutional olijections urgeil 
 acainst ihe tax. But as iL cannot be d(nil)ted, in view of the well-known 
 course of railroad business, that some consideral)le proportion of the 
 relator's cars always is absent from the State, it would be unsatisfactory 
 to turn the case off with a nierely technical answer, and we proceed- 
 The most salient points of llu; relator's argument are as follows: This 
 tax is not a tax on the franchise to be a corporation, but a tax on the 
 use and exercise of the franchise of transportation. The use of this or 
 an\' other franchise outside the State cannot be taxed by New York. 
 The car mileage within the State and that upon other lines without the 
 State afford a basis of apportionment of tne average total of cars contin- 
 uously employed by otlicr corporations without the State, and the relator's 
 road mileage within and without the State affords a basis of apportion- 
 ment of its average total equipment continuously employed by it re- 
 spectively within and without the State. To tax on the total value within 
 and without is beyond the jiuisdielion of tlie State, a Inking of property 
 without due process of law, and an unconstitutional interference with 
 commerce among the States. 
 
 A part of this argument we have answered alreadv. But we must go 
 further. We are not curious to inquire exactly what kind of a tax this 
 is to be called. If it can be sustained by the name given to it l)y the 
 local courts it mast be sustained by us. It is called a franchise tax in 
 the act, but it is a franchise tax measured by property. A tax very 
 like the present was treated as a tax on the property of the corporation 
 in Delaware, Lackawanna & Western R. R. v. Pennsylvania, 198 U. S. 
 341, 3')3. This seems to be regarded as such a tax by the Court of 
 Appeals in this case. See People v. Morgan, 178 N. Y. 433, 439. If 
 it is a tax on any franchise which the State of New York gave, and the 
 same State could take away, it stands at least no worse. The relator's 
 argument assumes that it must be regarded as a tax of a particular kind, 
 in order to invalidate it, although it might be valid if regarded as the 
 State court regards it. 
 
 Suppose, then, that the State of New York had taxed the property 
 directlv, there was nothing to hinder its taxing the whole of it. It is 
 true that it has been decided that property, even of a domestic corpora- 
 tion, cannot be taxed if it is permanently out of the State. Union Re- 
 frigerator Transit Co. v. Kentucky, 199 U. S. 194, 201, 211 ; Delaware, 
 Lackawanna & Western R. R. r. Pennsylvania. 198 U. S. 341 ; Louisville 
 & Jeffersonville Ferry Co. v. Kentucky, 188 U. S. 385. But it has not 
 been decided, and it could not be decided, that a State may not tax its 
 own corporations for all their property within the State during the tax 
 year, even if every item of that property should be taken successively 
 into another State for a day, a week, or six months, and then brought
 
 22 
 
 NEW YORK CENTRAL RAILROAD V. MILLER. [cHAP. I. 
 
 back. Using the language of doraicil, which now so frequently is ap- 
 plied to inanimate things, the State of origin remains the permanent 
 situs of the property, notwithstanding its occasional excursions to 
 foreign parts. Ayer & Lord Tie Co. v. Kentucky, May 21, 1906, 
 2<>2 U. S. 409. See also Union Refrigerator Transit Co. v. Kentucky 
 199 U. S. 194, 208, '209. 
 
 It was suggested that this case is but the complement of Pullman's 
 Palace Car Co. v. Pennsylvania, 141 U. S. 18, and tliat as there a tax 
 upon a foreign corporation was sustained, levied on such proportion of 
 its capital stock as the miles of track over which its cars were run witliin 
 the State bore to the wliole number of miles over which its cars were 
 run, so here in the domicil of such a corporation there should be an ex- 
 emption corresponding to the tax held to be lawfully levied elsewhere. 
 But in that case it was found that the " cars used in this State have, 
 during all the time for which tax is charged, been running into, through 
 and out of the State." The same cars were continuously receiving the 
 protection of the State and, therefore, it was just that the State should 
 tax a proportion of them. "Whether if the same amount of protection 
 had been received in respect of constantly changing cars the same prin- 
 ciple would have applied was not decided, and it is not necessary to 
 decide now. In the present case, however, it does not appear that any 
 specific cars or any average of cars was so continuousl}' in any other 
 state as to be taxable there. The absences relied on were not in the 
 coin'se of travel upon fixed routes, but random excursions of casually 
 chosen cars, determined by the varying orders of particular shippers 
 and the arbitrary convenience of other roads. Therefore we need not 
 consider either whether there is any necessary parallelism between 
 liability elsewhere and immunity at home. 
 
 Judgments affirmed
 
 CHAP. I.] FIDELITY & COLUMBIA TRUST CO. V. LOUISVILLE. 23 
 
 PIDFLITY & COLUMBIA TRUST CO. v. LOUISVILLE. 
 
 Supreme Court of the United States. 1917. 
 
 [Reported 254: V.8. 54.] 
 
 HOLXIES, J. This is a suit brought by the City of Louisville, 
 Kentucky, to recover annual taxes for the years 1907 and 1908 in 
 respect of personal property omitted from the original assessments to 
 the owner L. P. Ewald in his lifetime. The facts as simplified for 
 the purposes of argument here are that Ewald was domiciled in 
 Louisville but continued to carry on a business in St. Louis, ]\Iissouri, 
 where he formerly had lived. Deposits coming in part if not wholly 
 from this business were made and kept in St. Louis banks subject to 
 Ewald's order alone. They were not used in the business and be- 
 longed absolutely to him. The question is whether they could be 
 taken into account in determining the amount of his Louisville tax. 
 It would seem that some deposits were represented by certificates of 
 deposit but it was stated at the argument that no point was made of 
 that. See Wheeler v. Sohmer, 233 U. S. 434, 438. We are to take it 
 that all the sums are to be dealt with as ordinary bank accounts. 
 The decision of the state court uy)held the tax. 168 Kentucky, 71. 
 171 Kentucky, 509. 172 Kentucky, 451. 
 
 So far as the present decision is concerned we may concede without 
 going into argument that the Jklissouri deposits could have been taxed 
 in that State, under the decisions of this court. Liverpool & London 
 & Globe Ins. Co. v. Orleans Assessors, 221 U. S. 346, 354. Metro- 
 politan Life Ins. Co. v. New Orleans, 205 U. S. 395. But liability 
 to taxation in one^ State does not necessarily exclude liability in an- 
 other. Kidd V. Alabama, 188 U. S. 730, 732. Hawley v. Maiden, 
 232 U. S. 1, 13. The» present tax is a tax upon the person, as is 
 shown by the form of the suit, and is imposed, it may be presumed, 
 for the general advantages of living within the jurisdiction. These 
 advantages, if the State so chooses, may be measured more or less by 
 reference to the riches of the person taxed. Unless it is declared un- 
 lawful by authority we see nothing to hinder the State from taking 
 a man's credits into account. But so far from being declared un- 
 lawful, it has been decided by this court that whether a State shall 
 measure tlie contribution by tlie value of such credits and choses in 
 action, not exempted by superior authority, is the State's affair, not 
 to be interfered witli by the United States, and therefore that a 
 State may tax a man for a debt due from a resident of another State. 
 Kirtland v. Hotchkiss, 100 U. S. 491. See also Tappan i-. Mer- 
 chants' National Bank, 19 Wall. 190. 
 
 Judgment affirmed.^ 
 
 White, C. J., dissents. 
 
 * The court here considered other objections to the tax. — Ed.
 
 24: DEWEY r. DES MOINES. [cHAP. I. 
 
 DEWEY V. DES MOINES. 
 Supreme Cour^ of the United States. 1899. 
 
 [Reported 173 U. 8. 193.] 
 
 The petition in this case was filed by the plaintiff in error to 
 set aside certain assessments upon his lots in Des Moines, in the 
 State of Iowa> which had been imposed thereon for the purpose of 
 paying for the paving of the street upon which the lots abutted, and 
 to obtain a judgment enjoining proceedings towards their sale, and 
 adjudging that there was no personal liability to pay the excess of 
 the assessment above the amount realized upon the sale of the lots. 
 
 The petition alleged that the petitioner was at all times during 
 the proceedings mentioned a resident of Chicago, in the State of 
 Illinois, and that he had no actual notice of any of the proceedings 
 looking towards the paving of the street upon which his lots abutted ; 
 that the street was paved under the direction of the common council, 
 which decided upon its necessity, and the expense was, by the provi- 
 sions of the Iowa statute, assessed upon the abutting property, and 
 the lot owner made personally liable for its payment; that the ex- 
 pense of the improvement was greater than the value of the lots as- 
 sessed, and the common council knew it would be greater when the 
 paving was ordered. 
 
 Upon the trial the district court of Polk County gave judgment 
 dismissing the petition with costs, and in favor of the contractor 
 on his counterclaim, foreclosing the lien of the latter and ordering 
 the sale of the lots, and the judgment also provided for the issue of 
 a personal or general execution against the plaintiff in error to collect 
 any balance remaining unpaid after sale of the lots. 
 
 The Supreme Court affirmed the judgment of the District Court, 
 and the plaintiff brought the case here by writ of error. 
 
 Peckiiam, J.^ It is asserted in the petition that the defendant 
 Dillworth, the treasurer of Holt County, is attempting to enforce 
 the assessment levied by the common council, and that he claims 
 plaintiff in error is personally liable for the taxes and interest, 
 and will enforce payment thereof unless restrained, and that plain- 
 tiff's personal property is liable to be illegally seized for the pay- 
 ment of the tax. These allegations are substantially admitted by 
 the answers of the defendants, except as to the illegality of the 
 possible seizure of plaintiff's personal property. By filing the 
 counterclaim the contractor makes a direct attempt to enforce, 
 not only the lien upon the lots, but the personal liability of the 
 lot owner. Thus a non-resident, simply because he was the owner 
 of property on a street in a city in the State of Iowa, finds him- 
 self by the provisions of the state statute, and without the service 
 of any process upon him, laid under a personal obligation to pay 
 a tax assessed by the common council, or by the board of public 
 
 * Part of the opinion, involving no point of taxation, is omitted. — En.
 
 DEWEY r. DKS MOINES. 25 
 
 works and city engineer under tlu; statute, upon his property abut- 
 ting upon tlie street, for tlie ]Hirpose of paying tiie expenses incurred 
 in paving the street, which expenses are greater than the benefit the 
 lots have received by virtue of tlie improvement. Tlie plaintill, 
 prior to the imposition of that assessment, had never submitted liim- 
 self to the jurisdiction of the State of Iowa, and the only jurisdiction 
 that State had in the assessment proceedings was over the real prop- 
 erty belonging to him and abutting on the street to be improved. 
 An assessment upon lots, for a local improvement, is in the nature 
 of a judgment. 
 
 It is said that the statute (Code of Iowa, sec. 478) provides for 
 the personal liability of the owner of lots in a city in the State of 
 Iowa, to pay the whole tax or assessment levied to pay the cost of a 
 local improvement, and that the same statute provides that the as- 
 sessment shall also be a lien upon the respective lots from the time 
 of the assessment. It is also said tliat the statute has been held to be 
 valid by the Iowa Supreme Court. This seems to be true. Burling- 
 ton V. Quick, 47 Iowa, 223, 226 ; Farwell v. Des Moines Brick Manu- 
 facturing Co., 97 Iowa, 286. The same thing is also held in the 
 opinion of the state court delivered in the case now before us. 
 
 In this case no question arises with regard to the validity of a per- 
 sonal judgment like the one herein against a resident of the State of 
 Iowa, and we therefore express no opinion upon that subject. This 
 plaintiff was at all times a non-resident of that State, and we think 
 that a statute authorizing an assessment to be levied upon property 
 for a local improvement, and imposing upon the lot owner, who is a 
 non-resident of the State, a personal liability to pay such assessment, 
 is a statute which the State has no power to enact, and which cannot 
 therefore furnish any foundation for a personal claim against such 
 non-resident. There is no course of reasoning as to the character of 
 an assessment upon lots for a local improvement by which it can be 
 shown that any jurisdiction to collect the assessment personally from 
 a non-resident can exist. The State may provide for the sale of the 
 property upon which the assessment is laid, but it cannot under any 
 guise or pretence proceed farther and impose a personal liability upon 
 a non-resident to pay the assessment or any part of it. To enforce an 
 assessment of such a nature against a non-resident, so far as his per- 
 sonal liability is concerned, would amount to the taking of property 
 without due process of law, and would be a violation of the Federal 
 Constitution. 
 
 In this proceeding of the lot owner to have the assessment set aside 
 and the statutory liability of plaintiff adjudged invalid the court was 
 not justified in dismissing the petition and giving the contractor, 
 not only judgment on his counterclaim foreclosing his lien, but also 
 inserting in that judgment a provision for a personal liability against 
 the plaintiff and for a general execution against him. Such a provi- 
 sion against a non-resident, although a litigant in the courts of 
 the State, was not only erroneous but it was so far erroneous as to 
 constitute, if enforced, a violation of the Federal Constitution for 
 the reason already mentioned. By resorting to the state court to
 
 26 DEWEY V. DES MOINES. [CHAP. I. 
 
 obtain relief from the assessment and from an}^ personal liability 
 provided for by the statute, tlie plaintiff did not thereby in any 
 manner consent, or render himself liable, to a judgment against 
 him providing for any personal liability. Nor did the counterclaim 
 made by the defendant contractor give any such authority. 
 
 The principle which renders void a statute providing for the 
 personal liability of a non-resident to pay a tax of this nature is the 
 same which prevents a State from taking jurisdiction through its 
 courts, by virtue of any statute, over a non-resident not served with 
 process witliin the State, to enforce a mere personal liability, and 
 where no property of the non-resident has been seized or brought 
 under the control of the court. This principle has been frequently 
 decided in this court. One of the leading cases is Pennoyer v. ISTeff,, 
 95 U. S. 714, and many other cases therein cited. Mexican Central 
 Eailway v. Pinkney, 149 U. S. 194, 209. 
 
 The lot owner never voluntarily or otherwise appeared in any of 
 the proceedings leading up to the levying of the assessment. He gave 
 no consent which amounted to an acknowledgment of the jurisdiction 
 of the city or common council over his person. 
 
 A judgment without personal service against a non-resident is only 
 good so far as it affects the property which is taken or brought under 
 the control of the court or other tribunal in an ordinary action to 
 enforce a personal liability, and no jurisdiction is thereby acquired 
 over the person of a non-resident further than respects the property 
 so taken. This is as true in the case of an assessment against a non- 
 resident of such a nature as this one as in the case of a more formal 
 judgment. 
 
 The jurisdiction to tax exists only in regard to persons and prop- 
 erty or upon the business done within the State, and such jurisdiction 
 cannot be enlarged by reason of a statute which assumes to make a 
 non-resident personally liable to pay a tax of the nature of the one 
 in question. All subjects over which the sovereign power of the State 
 extends are objects of taxation. Cooley on Taxation, 1st ed. pp. 3, 4; 
 Burroughs on Taxation, sec. 6. The power of the State to tax extends 
 to all objects within the sovereignty of the State. (Per ]\Ir. Justice 
 Clifford, in Hamilton Company v. Massachusetts, 6 Wall. 632, at 
 638.) The power to tax is however limited to persons, property and 
 business within the State, and it cannot reach the person of a non- 
 resident. State Tax on Foreign-held Bonds, 15 Wall. 300, 319. In 
 Cooley on Taxation, 1st ed. p. 121, it is said that "a State can no 
 more suVjject to its power a single person or a single article of prop- 
 erty whose residence or legal situs is in another State, than it can 
 subject all the citizens or all the property of such other State to its 
 power." These are elementary propositions, but they are referred to 
 only for the purpose of pointing out that a statute imposing a per- 
 sonal liability upon a non-resident to pay such an assessment as this 
 oversteps the sovereign power of a State. 
 
 In this case the contractor, by filing his counterclaim herein, has 
 commenced the enforcement of an assessment and a personal liability 
 imposed by virtue of just such a statute, and the judgment under re-
 
 STATE V. WHEKLEE. 27 
 
 view gives him the right to do so. The lot owner ia called upon to 
 make such defence as he can to tlie claiui of personal liability or else 
 be forever barred from setting it up. lie does claim tliat as a non- 
 resident he did not have sucli notice, and tlic State or city did not 
 obtain such jurisdiction over him, with regard to the original assess- 
 ment as would authorize the establishment, of any personal liability 
 on his part to pay such assessment. 
 
 The contractor nevcrthelcsrf has ol)taincd a judgment, not alone 
 for a foreclosure of his lien, but also for the personal liability of the 
 lot owner, and unless he can in this proceeding have the provision in 
 the judgment, for a personal liability, stricken out, the lot owner 
 cannot thereafter resist it, even when the lots fail (if they should 
 fail) to bring enougli on their sale to satisfy the judgment. 
 
 The case of Davidson v. Xew Orleans, 96 U. S. 97, has been cited 
 as authority for the proposition that the rendering of a personal 
 judgment for the amount of an assessment for a local improvement 
 is a matter in which the state authorities cannot be controlled by the 
 Federal Constitution. It does not appear in that case that the com- 
 plaining party, in regard to the state statute, was a non-resident of 
 the State, but on the contrary it would seem, that she was a resident 
 thereof. That fact is a most material one, and renders the case so 
 unlike the one at bar as to make it unnecessary to further refer to it. 
 
 Tlie statute, upon wliich the right to enter this personal judgment 
 depends, being as to the non-resident lot owner an illegal enactment, 
 it follows that the judgment should and must be amended by striking 
 out the provision for such personal liability. For that purpose the 
 judgment is 
 
 Reversed and the cause remanded to the Supreme Court of 
 Iowa, for further proceedings therein not inconsistent with 
 this opinion. 
 
 STATE V. WHEELER. 
 SuPREiiE Court of Xohth Carolina. 1906. 
 
 [Reported Ul -Y. C. 773.] 
 
 Clarke, C. J. The defendant appeals from a conviction and 
 sentence for failing to work the public roads of Wake County, as 
 required by chapter 667, Laws 1905, amendatory of chapter 551, 
 Laws 1903. The appeal rests upon the alleged unconstitutionality 
 of the statute. The defendant contends : 
 
 1. Time is money. Labor is a man's property and therefore to 
 exact his labor and time to work the roads is to levy a tax on prop- 
 erty and such is unconstitutional unless ad valorem. 
 
 2. That if working the road is a poll tax, the act is unconstitu- 
 tional because it exacts this labor only of " able-bodied male persons 
 between the ages of 21 and 45." and excepts " residents in incorpo- 
 rated cities and towns and such as are by law exempted or excused," 
 whereas the poll tax (Const. Art. 5, § 1 ) is to be laid on ''every male 
 inhabitant between the ages of 21 and 50."
 
 28 STATE V. WHEELER. [cilAP. I. 
 
 3. That the requirement to work the roads is not placed upon 
 tho^ living in incorporated towns and cities, and therefore there 
 is a denial of the equal protection of the laws required by the four- 
 teenth amendment to the Constitution of the United States. 
 
 4. That inasmuch as the roads are now worked partly by taxation, 
 supplemented by labor exacted by the statute, and the latter is a 
 property tax (a man's labor being his property), therefore this is 
 double taxation. 
 
 These points have been repeatedly passed upon adversely to the 
 contentions of the defendant. State v. Sharp, 135 N". C. 628, which 
 has been cited and approved in State v. Covington, 125 N. C. 641; 
 State V. Carter, 129 N. C. 560; Brooks v. Tripp, 135 N. C. 161; 
 State r. Holloman, 139 N. C. 648. But counsel ask us to reconsider 
 them, and we have given the matter full deliberation. 
 
 For nearly two hundred and fifty years the roads of this State were 
 worked solely by the conscription of labor. It may have been in- 
 equitable, but it was never thought by any one to be unconstitutional, 
 nor has the idea been advanced heretofore that to work the roads by 
 labor was to work them by taxation. The validity of working the 
 roads by labor is sustained in State v. Halifax, 15 N. C. 345, and has 
 been recognized in countless trials for failure to work the roads. 
 Under this statute. Wake County works its roads partly by labor sup- 
 plemented by funds raised by taxation and other funds and the work 
 of its convicts. If the exaction of the labor of residents of the lo- 
 cality is, as counsel contend, a tax upon property, then we simply 
 have a higher tax, but not double taxation. The tax does not seem 
 to be more than enough to keep the roads in good order, but if it 
 should so prove, the people themselves, acting through their elected 
 representatives in the General Assembly, and the board of county 
 commissioners, will reduce it. The tendency of the times is to re- 
 quire better roads, wliich necessarily demands higher taxes for road 
 purposes, which is more than offset, it is claimed, by the benefits 
 derived from better roads. But that is a matter of legislation and 
 administration. The courts cannot meddle with it. Nor is there 
 any constitutional prohibition against double taxation. Com'rs 
 V. Tobacco Co., 116 N. C. 448; Cooley, Const. Lim. (7th Ed.) 
 738, and cases there cited. It exists in many instances that will 
 readily occur to any one, as the taxation of mortgages and indebted- 
 ness in the hands of a creditor, and taxation at the same time of 
 mortgaged property, and of the real and personal property of a 
 debtor, without reduction by reason of the mortgage or other in- 
 debtedness ; the taxation of the tangible property of a corporation and 
 also of its capital stock and of its franchises and also of the certificates 
 of shares in the hands of the shareholders. Sturges v. Carter, 114 
 U. S. 511; Com'rs v. Tobacco Co., supra. There are many other 
 instances, but this is a matter of legislation. Certainly this is not 
 double taxation any more than taxing the dweller in town to keep 
 up his streets (all of which falls upon him), and also laying a tax 
 on his property to aid in working the roads. 
 
 Nor does the fourteenth amendment require equality in levying
 
 STATE V. WIIEELEK. 29 
 
 taxation by the State, if this exaction of labor be taxation. How a 
 state shall levy its taxation is a matter solely for its Legislature, 
 subject ^to such restrictions as tlie state Constitution throws around 
 legislative action. If, on the other hand, working the roads by labor 
 IS a police regulation or a public duty, certainly it is not a matter 
 of federal supervision. Besides, as the dwellers in the towns keep up 
 their streets at a greater expense than the value of the statutory 
 labor put on the roads, there is no discrimination of which the de- 
 fendant can complain, especially as the tax money expended on the 
 roads to supplement the statutory labor is levied on town property 
 as well as upon that in the country. 
 
 The requirement to work the roads is not a poll or capitation tax, 
 which is a sum of money required to be paid by '' every male in- 
 habitant over 21 and under 50 years of age," which " shall be applied 
 to the purposes of education and the support of the poor." Const. 
 Art. 5, §§ 1, 2. Certainly " four days' work on the public roads " 
 in one's own township are not capable of being applied to education, 
 or the poor or anything else except to the roads. 
 
 This brings us to the first ground urged. To say that " time is 
 money" is a metaphor. It expresses merely the fact that time is 
 of value, and that the use of a man's muscle, or of his skill, or of 
 his mentality, will usually procure money in exchange. But time 
 is not money, nor is labor property, in any other sense than that it 
 is usually of some value and its proceeds belong to the individual or 
 to the parent or guardian if he is a minor, or to the state if he is a 
 convict. But it is not property in the sense that it can be liable to 
 a property tax. 
 
 As already pointed out in State v. Sharp, 125 N. C. 63-i, the con- 
 scription of labor to work the public roads is not a tax at all (Cooley, 
 supra, 737; Pleasant v. Kost, 2i) 111. 494), but the exaction of a 
 public duty like service upon a jviT}', grand jury, coroner's inquest, 
 special venire, as a witness, military service and the like, which men 
 are required to render either wholly without compensation, or 
 (usually) with inadequate pav, as the sovereign may require. Guil- 
 ford V. Com'rs, 120 N. C. '26 ; State v. Hicks, 124 N. C. 837. 
 Originally none of these received any pay whatever (State v. Massey, 
 104 N. C. 878) ; the duration of military service only having a time 
 limit. And to this day, witnesses, above two, to each material fact, 
 receive no pay (Eevisal, § 1300), and witnesses for the losing party 
 receive none unless he is solvent, and talesmen summoned upon a 
 special venire unless chosen on the trial panel receive (except in a 
 few counties) no pay; which was true till recently of witnesses sum- 
 moned before the grand jury in all cases where " not a true bill " 
 is returned; and witnesses for the State in criminal cases where the 
 convicted are insolvent receive only half pay. Even when a witness 
 or a juror receives a prescribed per diem, in most cases it is less, 
 in many cases far less, than what his time was worth or he could 
 have earned. If the State can take his services for less tlian their 
 value, it is because it has a right to require them as a public duty 
 and lioncc it can, as of old, require them to be rendered without any
 
 30 STATE V. WilEELER. [ciIAP. I. 
 
 compensation at all. AVho will say that $10 per month is compensa- 
 tion for tlie time of a citizen sent to the front in time of war, or 
 to put down riots, and for the hardships, and the exposures to 
 weather, to disease, to danger and to death ? If the State can exact 
 such services it can exact labor to improve its public roads for the 
 public benefit. The worker on the roads gets back some benefit 
 therefrom. It was a crude and not ver}^ accurate calculation or 
 balancing of benefits, but was a necessity perhaps in former times 
 when currency was scarce and diificult to be obtained even by taxa- 
 tion. It is still a matter resting in the legislative discretion. Jus- 
 tices of the peace and some other officials formerly discharged the 
 public duties required of them without compensation. 
 
 In the progress of time we have gradually commenced payment, to 
 a limited extent, for most public services exacted as a public duty. 
 Justices of the peace receive fees. Some witnesses and jurors are 
 paid, usually less than the value of their time, but many witnesses, 
 and special veniremen usually still go unpaid, and compulsory mili- 
 tary service is paid only what the Legislature sees fit. Tlie public 
 duty of the residents of any locality to work upon its roads has been 
 reduced in Wake County by this statute to four days per annum, and 
 such service is supplemented by the work of the force of county con- 
 victs, by a tax of ISy^ cents upon the $100 worth of property in the 
 cities as well as in the country to hire labor and purchase labor- 
 saving machinery, by the appropriation of four-tenths of the net 
 proceeds of the dispensary in Ealeigh, and further by a special tax 
 which any township shall see fit to vote for the benefit of the roads 
 therein, and the four days' labor required can be commuted by the 
 payment of $2.50, with which the county will hire labor instead. 
 
 This is a very great advance upon the still recent custom, which 
 had been in force for more than two centuries, of working the roads 
 entirely and solely by labor called out in the discharge of the public 
 duty of the inhabitants of each locality to keep the highways in order. 
 TThenever in the judgment of the people of Wake County the four 
 days' labor, per annum, still exacted should be reduced, or entirely 
 abolished, they can send representatives to the General Assembly 
 wlio can doubtless procure such changes as the people may wish in 
 the manner of working the public roads. As we said at last term, in 
 State V. ITolloman, 139 N. C. at page 648, " It is for the legislative 
 department to prescribe by what methods the roads shall be worked 
 and kept in repair — whether by labor, by taxation on property, or 
 by funds raised from license taxes, or by a mixture of two or more 
 of those methods — and this may vary in different counties and 
 localities to meet the wishes of the people of each, and can be changed 
 by subsequent Ijcgislatures." 
 
 And there, after the fullest consideration, we again leave the 
 matter. If the system of working the public roads in any locality 
 is not satisfactory to the majority of its people, relief or change of 
 method must be sought from the lawmaking department. 
 
 No error. 
 
 Brown and Walker, JJ., concur in result.
 
 PROFFIT V. ANDEKSON. 31 
 
 PROFFIT V. ANDERSON. 
 
 Supreme Court of Appeals of Virginia. 1894. 
 [Reported 20 Southeastern Rep. 887.] 
 
 William F. Proffit was imprisoned bv order of the county court 
 for refusing to work the roads in Louisa County, as required by law. 
 He applied to the Supreme Court for a writ of habeas corpus, and 
 was ordered to be dischaiged from custody. 
 
 Per Curiam. The court is of opinion, for the reasons hereinafter 
 stated that the petitioner, William F. Proffit, a citizen of Louisa 
 County, Va., was on the third day of November unlawfully arrested 
 and imprisoned, in the county jail of said county by F. H. Anderson, 
 deputy sheriff for J. IT. Woolfork, sheriff of said county, under a 
 capias pro fine issued by the clerk of said county under and in pur- 
 suance of an order of the County Court of said county made and en- 
 tered on the 11th day of July, 1892, to recover of said petitioner the 
 road fine and costs mentioned in said order and capias, and imposed 
 upon him for failing to work on the public roads in Cuckoo Road 
 di=tnct, in said county, when warned thereto, as required by an act 
 of the general assembly of Virginia approved on the 29th day of 
 February, lh92, entitled ''An act to provide for working and keep- 
 ing in repair the public roads in the county of Louisa" (Acts 
 1891-92, c. 417, p. 686), and that said petitioner is illegally re- 
 strained of his liberty. 
 
 2. The court is of opinion that said act, so ... is void, because 
 repugnant to Section 5 of Article 10 of the Constitution of Virginia, 
 which declares: "The general assembly may levy a tax not exceed- 
 ing one dollar per annum on every male citizen who has attained the 
 age of twenty-one years, which shall be applied exclusively in aid of 
 public free schools : and counties and corporations shall have power 
 to impose a capitation tax, not exceeding fifty cents per annum, for 
 all purposes." This provision of the Constitution etfects two pur- 
 poses: (1) It authorizes the general assembly to assess a capitation 
 tax, not exceeding $1 per annum, on every male citizen who has 
 attained the age of 21 years, and expressly dedicates such tax to the 
 public free schools. (2) It confers directly upon the counties and 
 corporations the power to impose a capitation tax, not exceeding 
 fifty cents, for all purposes. The provision in respect to counties is 
 not subject to the will of the legislature in any respect, but confers 
 the power directly upon the counties, respectively. The question is, 
 does the act in question impose a capitation tax in the form of road 
 service? This question can only receive an affirmative ans\j-er. It is 
 undeniably true that taxes may be levied in money, in service, or in 
 kind, and, whether in the one form or other, it is none the less a tax. 
 "Taxation exacts money or services from individuals as and for 
 their respective shares of contribution to any public burthen." Mr.
 
 32 GORDON V. SANDERSOISr. [cHAP. I. 
 
 Justice Euggles in People v. Mayor, etc., of Brooklyn, 4 N. Y. 419. 
 In the present case the burden imposed is in form and substance a 
 per capita requisition for road service, and cannot, upon principle, 
 be distinguished from the ordinary capitation tax. In other words, 
 it is a requisition tax, and notliing else ; and, being in excess of the 
 capitation tax prescribed by the said fifth section of article 10 of 
 the Constitution of Virginia, the provisions of the aforesaid, im- 
 posing the same, are unconstitutional and void. But the court is, 
 at the same time, of opinion that the validity of the sixth, eighth, 
 and ninth sections only, of the act in question, are here involved, 
 and the judgment now to be rendered is confined to those sections, 
 and none others. ... It is therefore ordered that the petitioner, 
 William F. Proffit, be discharged from custody. 
 Lewis, P., and Lacy, J,, dissenting. 
 
 GORDON V. SANDERSON. 
 Supreme Judicial Court of Massachusetts. 1896. 
 
 [Reported 165 Mass. 375.] 
 
 Petition for a writ of mandamus to compel the collector of taxes 
 of the city of Waltham to receive payment of a poll tax assessed upon 
 the petitioner for the year 1893. Hearing before Allen, J,, who, at 
 the request of the parties, reported the case for the determination 
 of the full court. The facts appear in the opinion. 
 
 Field, C. J. It appears that a poll tax was duly assessed upon the 
 petitioner in the year 1893 ; that his name was placed upon the tax 
 list which was committed to the respondent as collector of taxes with 
 a warrant requiring him to collect the taxes upon the list, and that 
 the collector sent a tax bill by mail to the petitioner about the first 
 day of September in that year. On September 14 the collector re- 
 ceived the following certificate : " City of Waltham, Assessors Office, 
 Sept, 14, 1893. To Emory J. Sanderson, Treasurer and Col- 
 lector of Taxes. An abatement of two dollars is hereby allowed on 
 the tax assessed to Michael Gordon, of 7 John Street, in Ward 7, of 
 the tax list of 1893. E. P. Smith, J. F. Davis, a majority of the 
 Board of Assessors." 
 
 After this, on November 14, 1893, the petitioner tendered to the 
 respondent the sum of two dollars in pa^'ment of this poll tax, which 
 the respondent refused to receive. The petitioner did not make any 
 application to the assessors for an abatement of the tax, and has 
 always been ready to pay it. No cause of abatement appears on the 
 records of the assessors, and it is said that the only entry on the 
 records of the assessors is the word "Abated," placed against the 
 assessment of the tax. Apparently the object of the petitioner in 
 attempting to pay this tax is to obtain a settlement in the city of 
 Waltham. Pub. Sts. c. 83, § 1, cl. 5. 
 
 The counsel for the petitioner contends that the respondent can- 
 not justify his refusal to receive the amount of this tax by the cer-
 
 GORDON I'. SANDERSON. 33 
 
 tificate of the board of assessors, because; citlier the assessors hajd no 
 riglit to abate the tax, or, if they had, tlie record of the assessors is 
 defective, and does not show that the tax was lawfully abated. The 
 statutory provisions concerning the abatement of taxes are Pub. Sts. 
 c. 11, §§ 69-77, an% it is said that tlie present case is not witliin any 
 of the provisions of these sections. Section W of tiiis chapter was 
 first enacted in St. 1878, c. 77. See St. 1879, c. 43. But by § 5, 
 el. 12, of the same chapter, which wtis tiiken from the Gen. Sts. c. 11, 
 § 5, cl. 13, and from Kev. Sts. c. 7, § 5, cl. 8, "the polls and any 
 portion of the estates of persons who by reason of age, inlirmity, 
 and poverty are in the judgment of the assessors unable to contribute 
 fully towards the public charges," are exempt from taxation. If a 
 |)oll tax is assessed upon any such person, or upon a person not an 
 inhabitant of the city or town, we think it is within the power of 
 the assessors of their own motion to abate the tax, as a tax which 
 ought not to have been assessed. See Stetson v. Kempton, 13 Mass. 
 •.'72, 283. 
 
 As the abatement of this tax was within the power of the assessors, 
 the regularity of their action or the sufficiency of their record cannot 
 be tried in this proceeding against the collector. After the collector 
 received from the assessors a certificate that the tax had been abated 
 by them, he was no longer authorized to collect the tax. If the 
 matter was within the jurisdiction of the assessors, it was not for 
 him to inquire into the regularity of their action or the sufficiency 
 of their record. Hubbard v. Garfield, 102 Mass. 72. 
 
 AVe are of opinion that the right of the assessors to abate the tax 
 for the purpose of preventing the petitioner from gaining a settle- 
 ment in the city of Waltham cannot be tried in this proceeding. 
 
 Petition dismissed.
 
 3-i SAVI]!fGS <fe LOAN SOC. V. MULTXOJ^IAH COUNTY. [cHAP. H. 
 
 CHAPTER II. 
 
 TAX ON PROPERTY. 
 
 SECTION I. 
 
 REAL PllOrERTY. 
 
 SAVINGS AND LOAN SOCIETY v. MULTNOMAH COUNTY. 
 Supreme Court of the United States. 
 
 [Reported 169 U. -8.421.] 
 
 Gray, J. This was a bill in equity, filed in the Circuit Court of 
 the United States for the District of Oregon, by the Savings and 
 Loan Society, a corporation and citizen of the State of California, 
 against Multnomah County, a public corporation in the State of 
 Oregon, and one Kelly, the sheriff and ex officio the tax collector of 
 that county, and a citizen of that State, showing that in 1891 and 
 1892 various persons, all citizens of Oregon, severally made their 
 promissory notes to secure the payment of various sums of money, 
 with interest, to the plaintiff at its office in the city of San Francisco 
 and State of California, amounting in all to the sum of $531,000; 
 and, to further secure the same debts, executed to the plaintiff mort- 
 gages of divers parcels of land owned by them in Multnomah County ; 
 that the mortgages were duly recorded in the office of the recorder 
 of conveyances of that county; that the notes and mortgages were 
 immediately delivered to the plaintiff, and had ever since been 
 without the State of Oregon, and in the possession of the plaintiff 
 at San Francisco; that afterwards, in accordance with the statute 
 of Oregon of October 26, 1882, taxes were imposed upon all the 
 taxable property in Multnomah County, including the debts and 
 mortgages aforesaid ; that, the taxes upon these debts and mortgages 
 not having been paid, a list thereof was placed in the hands of the 
 sheriff, with a warrant directing him to collect the same as upon 
 execution, and he advertised for sale all the debts and mortgages 
 aforesaid; and that the statute was in violation of the Fourteenth 
 Amendment of the Constitution of the United States, as depriving 
 the plaintiff of its property without due process .of law, and denying 
 to it the equal protection of the laws. The bill prayed for an in- 
 junction against the sale ; and for a decree declaring that the statute 
 was contrary to the provisions of the Constitution of the United 
 
 i
 
 SECT. I.] SAVINGS & LOAN SOC. V. MULTNOMAH COUNTY. 35 
 
 States and therefore of no effect, and that all the proceedings jjefore 
 set out were null and void ; and for further relief. 
 
 The defendants demurred generally; and the court sustained the 
 demurrer, and dismissed the bill. GO Fed. Rep. lU. The plaintiff 
 appealed to this court. 
 
 Tlie ground upon which the plaintiff seeks to maintain this suit is 
 that the tax act of the State of Oregon of 1882, as applied to the 
 mortgages, owned and held by the plaintiff in California, of lands 
 in Oregon, is contrary to the Fourteenth Amendment of the Con- 
 stitution of the United States, as depriving the plaintiff of its prop- 
 erty without due process of law, and denying to it the equal protec- 
 tion of the laws. 
 
 The statute in question makes the following provisions for the 
 taxation of mortgages : By § 1, " a mortgage, deed of trust, contract 
 or other obligation whereby land or real property, situated in no 
 more than one county in this State, is made security for the pay- 
 ment of a debt, together with sucli debt, shall, for the purposes of 
 assessment and taxation, be deemed and treated as land or real 
 property.'' By § 2, the mortgage, " together with such debt, shall 
 be assessed and taxed to the owner of such security and debt in the 
 county, city or district in which the land or real property affected 
 by such security is situated " ; and may be sold, like other real prop- 
 erty, for the payment of taxes due thereon. By § 3, that person is 
 to be deemed the owner, who appears to be such on the record of 
 the mortgage, either as the original mortgagee, or as an assignee by 
 transfer made in writing upon the margin of the record. By § 4, 
 no payment on the debt so secured is to be taken into consideration 
 in assessing the tax, unless likewise stated upon the record ; and the 
 debt and mortgage are to be assessed for the full amount appearing 
 by the record to be owing, unless in the judgment of the assessor 
 the land is not worth so much, in which case they are to be assessed 
 at their real cash value. By §§ 5, 6, 7, it is made the duty of each 
 county clerk to record, in the margin of the record of any mortgage, 
 when requested so to do by the mortgagee or owner of the mortgage, 
 all assignments thereof and payments thereon ; and to deliver annu- 
 ally to the assessor abstracts containing the requisite information 
 as to unsatisfied mortgages reconlcd in his office. By § 8, a debt 
 secured by mortgage of land in a county of this State "shall, for 
 the purposes of taxation, be deemed and considered as indebtedness 
 within this State, and the person or persons owing such debt shall 
 be entitled to deduct the same from his or their assessments in the 
 same manner that other indebtedness within the State is deducted." 
 And by § 9, "no promissory note, or other instrument of writing, 
 which is the evidence of a debt that is wholly or partly secured by 
 land or real property situated in no more than one county in this 
 State, shall be taxed for any purpose in this State; but the debt 
 evidenced thereby, and the instrument by which it is secured shall, 
 for the purpose of assessment and taxation, be deemed and considered 
 as land or real property, and together be assessed and taxed as 
 hereinbefore provided." Oregon Laws of 1882, p. 64. All these
 
 36 sA\•l^(.;s & loan soc. v. multnomah county, [chap. ii. 
 
 sections are embodied in Hill's Annotated Code of Oregon, §§ 2730, 
 2735-2738, 2753-2756. 
 
 The statute applies onl}-^ to mortgages of land in not more than 
 one county. By the last clause of § 3, all mortgages, "hereafter 
 executed, whereby land situated in more than one county in this 
 State is made security for the payment of a debt, shall be void.'' 
 The mortgages now in question were all made since the statute, and 
 were of land in a single county; and it is not suggested in the bill 
 that there existed any untaxed mortgage of lands in more than one 
 county. 
 
 The statute, in terms, provides that " no promissory note or other 
 instrument in writing, which is the evidence of" the debt secured 
 by the mortgage, " shall be taxed for any purpose within this State ;" 
 but that the debt and mortgage "shall, for the purposes of assess- 
 ment and taxation, be deemed and treated as land or real property" 
 in the county in which the land is situated, and be there taxed, not 
 beyond their real cash value, to the person appearing of record to 
 be the owner of the mortgage. 
 
 The statute authorizes the amount of the mortgage debt to be 
 deducted from any assessment upon the mortgagor; and does not 
 provide for both taxing to the mortgagee the money secured by the 
 mortgage, and also taxing to the mortgagor the whole mortgaged 
 property, as did the statutes of other States, the validity of which 
 was affirmed in Augusta Bank v. Augusta, 36 Maine, 255, 259 ; 
 Alabama Ins. Co. v. Lott, 54 Alabama, 499 ; Appeal Tax Court v. 
 Eice, 50 Maryland, 302; and Goldgart v. People, 106 Illinois, 25. 
 
 The right to deduct from his assessment any debts due from 
 him within the State is secured as we!l to the mortgagee, as to 
 the mortgagor, by a provision of the statute of Oregon of October 
 25, 1880 (unrepealed by the statute of 1882, and evidently assumed 
 by § 8 of this statute to be in force), by which "it shall be the duty 
 of the assessor to deduct the amount of indebtedness, within the 
 State, of any person assessed, from the amount of his or her taxable 
 property." Oregon Laws of 1880, p. 52 ; Hill's Code, § 2752. 
 
 Taking all the provisions of the statute into consideration, its 
 clear intent and effect are as follows : The personal obligation of the 
 mortgagor to the mortgagee is not taxed at all. The mortgage and 
 the debt secured thereby are taxed, as real estate, to the mortgagee, 
 not beyond their real cash value, and only so far as they represent 
 an interest in the real estate mortgaged. The debt is not taxed 
 separately, but only together with the mortgage; and is considered 
 as indebtedness within the State for no other purpose than to en- 
 able the mortgagor to deduct the amount thereof from the assess- 
 ment upon him, in the same manner as other indebtedness within 
 the State is deducted. And the mortgagee, as well as the mortgagor, 
 is entitled to have deducted from his own assessment the amount 
 of his indebtedness within the State. 
 
 The result is that nothing is taxed but the real estate mortgaged, 
 the interest of the mortgagee therein being taxed to him, and the 
 rest to the mortgagor. There is no double taxation. Nor is any
 
 SECT. I,] SAVINGS & LOAN SOC. V. MULTNOMAH COUNTY. 37 
 
 such diseriioiuation made between mortgagors and mortgagees, or 
 between resident and non-resident mortgagees, as to deny to the 
 latter the equal protection of the laws. 
 
 No question between the mortgagee and the mortgagor, arising 
 out of the contract between them, in regard to the payment of taxes, 
 or otherwise, is presented or can be decided upon this record. 
 
 The case, then, reduces itself to the (juestion whether this tax 
 act, as applied to mortgages owned by citizens of other States and 
 in their possession outside of the State of Oregon, deprives them of 
 their property without due process of law. 
 
 By tiie law of Oregon, indeed, as of some other States of the 
 Union a mortgage of real property does not convey the legal title 
 to the mortgagee, but creates only a lien or incumbrance as security 
 for the mortgage debt; and the right of possession, as well as the 
 legal title, remains in the mortgagor, both before and after con- 
 dition broken, until foreclosure. Oregon General Laws of 1843- 
 1872, § 323; Hill's Code, § 326; Anderson v. Baxter, 4 Oregon, 105, 
 110; Semple v. Bank of British Columbia, 5 Sawyer, 88, 394; Teal 
 V. Walker, 111 U. S. 242; Sellwood v. Gray, 11 Oregon, 534; 
 Watson V. Dundee Mortgage Co., 12 Oregon, 474; Thompson v. 
 Marshall, 21 Oregon, 171 ; Adair v. Adair, 22 Oregon, 115. 
 
 Notwithstanding this, it has been held, both by the Supreme Court 
 of the State, and by the Circuit Court of the United States for the 
 District of Oregon,' that the State has the power to tax mortgages, 
 though owned and held by citizens and residents of other States, of 
 lands in Oregon. Mumford v. Sewell 11 Oregon, 67; Dundee 
 Mortgage Co. -o. School District, 10 Sawyer, 52; Crawford v. Linn 
 County, 11 Oregon, 482; Dundee Mortgage Co. v. Parrish, 11 
 Sawyer, 92; Poppleton v. Yamhill County, 18 Oregon, 377, 383; 
 Savings & Loan Society v. Multnomah County, 60 Fed. Eep. 31. 
 
 In Mumford v. Sewell, Judge Waldo, delivering the opinion of 
 the court, said : " All subjects, things as well as persons, over w^liich 
 the power of the State extends, may be taxed." "A mortgage, as 
 such, is incorporeal property. It may be the subject of taxation." 
 " Concede that tlie debt accompanies the respondent's person and 
 is without the jurisdiction of the State. But the security she holds 
 is Oregon security. It cannot be enforced in any other jurisdiction. 
 It is local in Oregon absolutely as the land which it binds." " Since 
 the power of the State over the mortgage is as exclusive and com- 
 plete as over the land mortgaged, the mortgage is subject to tnxa- 
 tion by the State, unless there is constitutional limitation to the 
 contrary." 11 Oregon, 68, 69. 
 
 " In Mumford v. Sewell," said Judge Deady, in Dundee Mortgage 
 Co. V. School District, "the court held that' a mortgage upon real 
 property in this State is taxable by the State, without reference to 
 the domicile of the owner, or the situs of the debt or note secured 
 thereby. And this conclusion is accepted by this court as the law of 
 this case. Nor do I wish to be understood as hanng any doubt about 
 the soundness of the decision. A mortgage upon real property in 
 this State, whether considered as a conveyance of the same, giving 
 the creditor an interest in or right to the same, or merely a contract
 
 38 SAVINGS & LOAN SOC. V. MULTNOMAH COUNTY. [CHAP. IL 
 
 giving him a lien thereon for his debt and the power to enforce the 
 payment thereof by the sale of the premises, is a contract affecting 
 real property in the State, and dependent for its existence, main- 
 tenance and enforcement upon the laws and tribunals thereof, and 
 may be taxed hete as any other interest in, right to, or power over 
 land. And the mere fact that the instrument has been sent out 
 of the State for the time being, for the purpose of avoiding taxation 
 thereon or otherwise, is immaterial." 10 Sawyer, 63, 64. 
 
 The authority of every State to tax all property, real and personal, 
 within its jurisdiction, is unquestionable. McCuUoch v. Maryland, 
 4 Wheat. 316, 429, Personal property, as this court has declared 
 again and again, may be taxed, either at the domicil of its owner, 
 or at the place where the property is situated, even if the owner 
 is neither a citizen nor a resident of the State which imposes the 
 tax. Tappan v. Merchants' Bank, 19 Wall. 490, 499; State Eail- 
 road Tax cases, 92 U. S. 575, 607; Coe v. Errol, 116 U. S. 517, 524; 
 Pullman's Car Co. v. Pennsylvania, 141 U. S. 18, 22, 27. The State 
 may tax real estate mortgaged, as it may all other property within 
 its jurisdiction, at its full value. It may do this, either by taxing 
 the whole to the mortgagor, or by taxing to the mortgagee the in- 
 terest therein represented by the mortgage, and to the mortgagor 
 the remaining interest in the land. And it may, for the purposes 
 of taxation, either treat the mortgage debt as personal property, to 
 be taxed, like other choses in action, to the creditor at his domicil; 
 or treat the mortgagee's interest in the land as real estate, to be 
 taxed to him, like other real property, at its situs. Firemen's Ins. 
 Co. V. Commonwealth, 137 Mass. 80, 81 ; State v. Eunyon, 12 Vroom 
 (41 N. J. Law), 98, 105; Darcy v. Darcy, 22 Vroom (51 N. J. 
 Law), 140, 145; People v. Smith, 88 N. Y. 576, 585; Common 
 Council V. Assessors, 91 Michigan, 78, 92. 
 
 The plaintiff much relied on the opinion delivered by Mr. Justice 
 Field in Cleveland, Painesville & Ashtabula Railroad v. Pennsyl- 
 vania, reported under the name of Case of the State Tax on Foreign- 
 held Bonds, 15 Wall. 300, 323. It becomes important therefore 
 to notice exactly what was there decided. In that case, a railroad 
 company, incorporated both in Ohio and in Pennsylvania, had issued 
 bonds secured by a mortgage of its entire road in both States ; and 
 the tax imposed by the State of Pennsylvania, which was held by 
 a majority of this court to be invalid, was a tax upon the interest 
 due to the bondholders upon the bonds, and was not a tax upon 
 the railroad, or upon the mortgage thereof, or upon the bondholders 
 solely by reason of their interest in that mortgage. The remarks 
 in the opinion, supported by quotations from opinions of the Su- 
 preme Court of Pennsylvania, that a mortgage, being a mere security 
 for the debt, confers upon the holder of the mortgage no interest 
 in the land, and when held by a non-resident is as much beyond 
 the jurisdiction of the State as the person of the owner, went be- 
 yond what was required for the decision of the case, and cannot be 
 reconciled with other decisions of this court and of the Supreme 
 Court of Pennsylvania.
 
 SECT. T.] SAVINGS & LOAN SOC. V. MULTXOJklAII COUNTY. 39 
 
 This court lias always held that a mortgage of real estate, made 
 in good faith by a debtor to secure a private debt, is a conveyance 
 of such an interest in the land, as will defeat the priority given 
 to the United States by act of Congress in the distribution of the 
 debtor's estate. United States v. liooe, 3 Crancli, 'i'.i; Tiielusson 
 V. Smith, 2 Wheat. 396, 42G; Conard v. Atlantic Ins. Co., 1 Pet. 
 38G, 441. 
 
 In Hutchins v. King, 1 Wail. 53, 58, Mr. Justice Field, delivering 
 the opinion of the court, said that " the interest of tiie mortgagee 
 is now generally treated by the courts of law as real estate, only so 
 far as it may be necessary for the protection of the mortgagee and 
 to give him the full benefit of his security." See also Waterman 
 V. Mackenzie, 138 U. S. 252, 258. If the law treats the mortgagee's 
 interest in the land as real estate for his protection, it is not easy to 
 see why the law should forbid it to be treated as real estate for the 
 purpose of taxation. 
 
 The leading quotation in 15 Wall. 323, from the Pennsylvania 
 Eeports, is this general statement of Mr. Justice Woodward : " The 
 mortgagee has no estate in the land, more than the judgment 
 creditor. Both have liens upon it, and no more than liens." Wit- 
 mer's Appeal, 45 Penn. St. 455, 463. Yet the same judge, three 
 years later, treated it as unquestionable that a mortgage of real 
 estate in Pennsylvania was taxable there, without regard to the domi- 
 cil of the mortgagee. Maltby v. Reading & Columbia Railroad, 
 52 Penn. St. 140, 147. 
 
 The effect of a mortgage as a conveyance of an interest in real 
 estate in Pennsylvania has been clearly brought out in two judg- 
 ments delivered by Mr. Justice Strong, the one in the Supreme 
 Court of Pennsylvania, and the other in this court. 
 
 Speaking for the same judges who decided Witmer's Appeal, 
 above cited, and in a case decided less than two months previously, 
 reported in the same volume, and directly presenting the question 
 for adjudication, Mr. Justice Strong said, of mortgages of real 
 estate : " They are in form defeasible sales, and in substance grants 
 of specific security, or interests in land for the purpose of security. 
 Ejectment may be maintained by a mortgagee, or he may hold pos- 
 session on the footing of ownership, and with all its incidents. And 
 though it is often decided to be a security or lien, yet, so far as it is 
 necessarv to render it effective as a security, there is always a recog- 
 nition of the fact that it is a transfer of the title." Britton's Ap- 
 peal, 45 Penn. St. 172, 177, 178. It should be remembered that in 
 the courts of the State of Pennsylvania, for want of a court of 
 chancery, an equitable title was always held sufficient to sustain an 
 action of ejectment. Simpson r. Ammons, 1 Binney, 175; Young- 
 man V. Elmira & Williamsport Railroad, 65 Penn. St. 278, 285, 
 and cases there cited. 
 
 Again, in an action of ejectment, commenced in the Circuit 
 Court of the United States for the District of Pennsylvania, Mr. 
 Justice Strong, delivering the imanimous opinion of this court, 
 said: "It is true that a mortgage is in substance but a security for
 
 40 SAVINGS A- LOAN SOC. V. ,MUL1 .NO.MAJi COUNTY. [cHAP. II. 
 
 a debt, or an obligation, to which it is collateral. As between the 
 mortgagor and all others than the mortgagee, it is a lien, a security, 
 and not an estate. But as between the parties to the instrument, or 
 their privies, it is a grant wliich operates to transmit the legal title 
 to the mortgagee, and leaves the mortgagor only a right to redeem." 
 " Courts of equity," he went on to say, " as fully as courts of law, 
 have always regarded the legal title to be in the mortgagee until 
 redemption, and bills to redeem are entertained upon the principle 
 that the mortgagee holds for the mortgagor when the debt secured 
 by the mortgage has been paid or tendered. And such is the law of 
 Pennsylvania. There, as elsewhere, the mortgagee, after breach 
 of the' condition, may enter or maintain ejectment for the land." 
 Applying these principles, it was held that one claiming under the 
 mortgagor, having only an equitable title, could not maintain an 
 action of ejectment against one in possession under the mortgagee, 
 while the mortgage remained in existence, or until there had been 
 a redemption ; because an equitable title would not sustain an action 
 of ejectment in the courts of the United States. Brobst v. Brock, 
 10 WaU. 519, 529, 530. 
 
 In a later case in Pennsylvania, Chief Justice Agnew, upon a 
 full review of the au!horities in that State, said : " Ownership of 
 the debt carries with it that of the mortgage; and its assignment, 
 or succession in the event of death, vests the right to the mortgage 
 in the assignee or the personal representative of the deceased owner. 
 But there is a manifest difference between the debt, which is a mere 
 chose in action, and the land which secures its payment. Of tlie 
 former there can be no possession, except that of the writing, which 
 evidences the obligation to pay ; but of the latter, the land or pledge, 
 there may be. The debt is intangible, the land tangible. The 
 mortgage passes to the mortgagee the title and right of possession 
 to hold till payment shall be made." Tryon v. Munson, 77 Penn. 
 St. 250, 262. 
 
 In Kirtland v. Hotchkiss, 42 Conn. 436, affirmed by this court 
 in 100 U. S. 491, the point adjudged was that debts to persons re- 
 siding m one State, secured by mortgage of land in another State, 
 might, for the purposes of taxation, be regarded as situated at the 
 domicil of the creditor. But the question, whether the mortgage 
 could be taxed there only, was not involved in the case, and was not 
 decided, either by the Supreme Court of Connecticut or by this court. 
 
 In many other cases cited by the appellant, there was no statute 
 expressly taxing mortgages at the situs of the land ; and, although 
 the opinions in some of them took a wider range, the only question 
 in juflCTnent in any of them was one of the construction, not of the 
 constitutionalit}', of a statute — of the intention, not of the power, 
 of the legislature. Such were : Davenport v. Mississippi & Missouri 
 Eailroad, 12 Iowa, 539; Latrobe v. Baltimore, 19 Maryland, 13; 
 People V. Eastman, 25 California, 601; State v. Earl, 1 Nevada, 
 394; Arapahoe v. Cutter, 3 Colorado, 349; People v. Smith, 88 
 N. Y. 576 ; Grant v. Jones, 39 Ohio St. 506 ; State v. Smith, 68
 
 SECT. I.] TADDELL V. NEW YORK. -il 
 
 Mississippi, 79; Holland v. Silver Bow Commissioners, 15 Mon- 
 tana, 460. 
 
 The statute of Oregon, the constitutionality of which is now 
 drawn in question, expressly forbids any taxation of the promisson- 
 note, or other instrument of writing, which is the evidence of the 
 debt secured by the mortgage; and, with equal distinctness, pro- 
 vides for the taxation, as real estate, of the mortgage interest in the 
 land. Although the right which the mortgage transfers in the 
 land covered thereby is not the legal title, but only an equitable 
 interest and by way of security for the debt, it appears to us to be 
 clear upon principle, and in accordance with the weight of authority, 
 tiiat this interest, like any other interest legal or equitable, may be 
 taxed to its owner (whether resident or non-resident) in the State 
 where the land is situated, without contravening any provision of 
 the Constitution of the United States. Decree affirmed. 
 
 Mr. Justice Harlax and Mr. Justice White dissented. 
 Mr. Justice McKenma, not having been a member of the court 
 when tliis case was argued, took no part in the decision. 
 
 PADDELL V. NEW YORK. 
 
 Supreme Court of the United States. 1908. 
 
 [Reported 2U f7. S. 446.] 
 
 Holmes, J. This is a bill to prevent the City of New York from 
 completing the levy of a tax and thereby creating a cloud upon the 
 plaintiff's title. The plaintiff owns lots numbered 592, 594 and 596 
 on Seventh Avenue, subject to mortgages for $70,000 and $45,000, 
 given by him. The premises have been valued, as the first step to- 
 ward taxation, at $160,000, and it is alleged upon information and 
 belief that this valuation makes no deduction for the mortgages. The 
 ground of the bill, so far as it is before us, is that the tax if completed 
 will be contrary to the Fourteenth Amendment. Some criticism 
 might be made and was made on the form of the allegations, but we 
 will take them as presenting what we believe they were intended to 
 present, the question whether, consistently with the Constitution of 
 the United States, a man owning land subject to a mortgage can 
 be taxed for the full value of the land, while at the same time the 
 mortgage debt is not deducted from his personal estate. A demurrer 
 to th.e bill was sustained by the courts below. 
 
 The plaintiff has many' difficulties in his way. In the first place 
 the mode of taxation is of long standing, and upon questions of 
 constitutional law the long settled habits of the community play a 
 part as well as grammar and logic. If we should assume that, eco- 
 nomically speaking, the present system really taxes two persons for 
 the same thing, tlie fact that the system has been in force for a very 
 long time is of itself a strong reason against the belief that it has 
 been overthrown by the Fourteenth Amendment, and for leaving any 
 improvement that may be desired to the legislature. 
 
 The weight of the plaintiff's argument is that ho is taxed for what
 
 42 PADDELL V. NEW YOEK. [CHAP. n. 
 
 he does not own. The bill seems to have been drawn on the dominant 
 notion of a right attached specifically to the mortgaged property, 
 that is to say, the notion that the property represents so many units 
 of vahie, from which the mortgage subtracts so many, leaving only 
 the remainder subject to be taxed; and this is the plaintiff's view. 
 But there is a subordinate averment that the plaintilf has not been 
 assessed for taxes in respect of personal property, s^nd the allegation 
 seems to convey, by indirection, that no deduction of the mortgage 
 debt has been made from personal property, and to admit that such 
 a deduction would have set the city right. As to the former notion, 
 it will be observed that the mortgages were given by the plaintiff, 
 and therefore charged him, as well as his land. If he should die, 
 by the law of New York his personal property would have to exon- 
 erate the realty, so far as it would go. If he lives, and remains sol- 
 vent, the chances are that he will pay the mortgages out of personalty. 
 Therefore, the true deduction is not the amount of the mortgages, 
 but the speculative chance that the land may have to be sold for the 
 (jebt — a chance that would be insured at different rates to different 
 persons. The other theory regards the mortgage debt as a deduc- 
 tion from total riches, to be compensated by an allowance to them 
 indifferently, either in the valuation of the land or by a deduction 
 from personal estate. And this logically leads to the conclusion that 
 no scheme of taxation is constitutional that does not make allowance 
 for all obligations and debts; a conclusion that the plaintiff seems 
 to accept, while he does not make it plain that he does not receive 
 both in law and in fact such an allowance by a deduction of debts 
 from personal estate. 
 
 It cannot matter to the plaintiff's argument whether the obliga- 
 tion is directed to a specific object or to the whole mass of objects 
 owTied by the party bound. In the one case, as much as in the other, 
 the obligation will take certain units of value from his riches, when 
 under the compulsion of the law it is performed. But it is an amaz- 
 ing proposition of constitutional law that the law cannot fix its eye 
 on tangibles alone and tax them by present ownership without regard 
 to obligations that, when performed, would make some of them change 
 hands ; for instance, that under the Fourteenth Amendment a man 
 having a thousand sheep as his only property could not be taxed for 
 their full value without allowance for an unsecured debt of five thou- 
 sand dollars, even if his creditors should be left untaxed, a matter 
 that hardly would concern him. Bell's Gap R. E. Co. v. Pennsyl- 
 vania, 134 U. S. 232, 237 ; Merchants' & Manufacturers' Nat. Bank 
 V. Pennsylvania, 167 U. S. 461, 464; People v. Barker, 155 N. Y. 
 330, 333. Undoubtedly he would be taxed for. more than he owned 
 if his total riches were computed on the footing that the law would 
 keep its promise and make him pay, and that what would be done 
 should be treated as done. If he owned other property, still there 
 would be the chance that the sheep might be seized on execution, and, 
 a.s we have said, the liability of the mortgaged land is no more, al- 
 though the chance may be greater. It is a sufficient answer to say 
 that you cannot carry a constitution out with mathematical nicety
 
 SECT. I.] PADDELL V. NEW YORK. 43 
 
 to logical extremes. If you could, we never should have heard of the 
 police power. And this is still more true of taxation, which in most 
 communities is a long way of! from a logical and coherent theory. 
 And it may perliaps be doubted whether tliere is even a logical objec- 
 tion to tlie sovereign puwur giving notice to all persons who may 
 acquire property witliin its domain that when it comes to tax it will 
 not look beyond tlie tangible thing, and that those who buy it must 
 buy it subject to that risk. 
 
 The plaintiff's contention that the mortgage must be deducted 
 from the land, whether the mortgage is taxed or not, stated a little 
 differently, is that he was entitled to an apportionment of the tax to 
 his interest, and that if the title to a lot is split up the government 
 cannot tax it as a whole. To this we cannot agree, although it should 
 be mentioned that the Greater New York Charter permits the o^-ner 
 of any interest to redeem it separately. Sec. 920. We have assumed 
 so far that the tax on tliis real estate is a debt that might be collected 
 by a personal suit against the plaintiff. As a matter of fact it is not 
 collected in that way and we gather from what was said and admitted 
 at the argument that it is doubtful at least whether such an action 
 would lie. See Durant v. Albany County, 26 Wend. 66; City of 
 Rochester v. Gleichauf, 82 N. Y. "Supp. 750. Suppose that the tax 
 law should operate only in rem, against a lot defined by the limits 
 of a separate title, and should simply give notice by sufficient means 
 to all the world that it would be sold unless within a certain time 
 some party in interest should see fit to pay a certain sum. Notwith- 
 standing the position of the plaintiff, it cannot be doubted that such 
 a proceeding would be as valid as the imposition of a personal liabil- 
 ity upon individuals according to their interest. See Witherspoon 
 V. Duncan, 4 Wall. 210, 217 ; Castillo v. McConnico, 168 U. S. 674, 
 681, 682. But the notion of a proceeding in rem is at the bottom 
 of the usual tax on land, even where, as in Massachusetts, there is a 
 personal liability superadded. This is shown by the doctrine that a 
 valid tax sale cuts off all titles and starts a new one. Hefner v. 
 Northwestern Life Ins. Co., 123 U. S. 747, 751 ; Emery v. Boston 
 Terminal Co., 178 Massachusetts, 172, 184. Of course there is no 
 question of allowances or deductions upon a proceeding in rem. All 
 interests are proceeded against at once. 
 
 If there is no personal liability in New York the levy of a tax is a 
 proceeding in rem,, whatever requirements may be made for notice 
 by naming parties in interest, and even if naming them is a condi- 
 tion to tiie validity of the tax. Indeed, it may be assumed that 
 primarily it is such a proceeding in any event, and as a proceeding 
 in rem might be sustained, even if the personal liability failed. A 
 tax on special interests is not unknown, Baltimore Shipbuilding & 
 Dry Dock Co. v. Baltimore, 195 U. S. 375, 381, but the usual course 
 is to tax the land as a whole, and that we understand to be the way 
 in New York. "In all cases the assessment shall be deemed as against 
 the real property itself, and the property itself shall be holdou and 
 liable to sale for anv tax levied upon it." Laws of 1902, c. 171, § 1. 
 See Greater New York Charter of 1901, §§ 1017, 1027.
 
 44 TIDE-WATER PIPE LINE CO. V. BEEEY. [CHAP. II. 
 
 More might be said, but we will add only that while in order to 
 meet the plaintiff^s arguments we have taken his bill as presenting 
 the question that we believe it was intended to present, the assump- 
 tion hardly could be made if our opinion othenvise was on his side. 
 It docs not appear that he has not received an allowance for his 
 mortgage debt except by a conjectural inference. Among the matters 
 that we do not consider is whether the plaintiff has any remedy ex- 
 cept proceedings for an abatement, wlion he admits that he was 
 liable to a tax and disputes only the amount. 
 
 Judgment affirmed. 
 
 TIDE-WATER PIPE LINE CO. v. BERRY. 
 
 COUET OF ErEOES AND APPEALS OF NeW JeESEY. 1891. 
 [Reported 53 N. J. L. 212.] 
 
 Depue, J. The prosecutor, a foreign corporation organized under 
 the laws of Pennsylvania, is the owner of an iron pipe line, used for 
 carrying crude petroleum from McKean County, Pennsylvania, to 
 the Kill von Kull, at Bayonne, in this State. Its principal office 
 is at Bayonne, in the county of Hudson, where the business of the 
 company is carried on. 
 
 The prosecutor was taxed for the year 1887 by the township of 
 Woodbridge for seven miles of pipe laid in that township, extending 
 across the township from Raritan township to the Rahway river. 
 
 The tax was assessed as a tax upon lands, under the second sec- 
 tion of the General Tax act of April 11, 1866. Rev., p. 1150. 
 
 The prosecutor was assessed and paid a tax under the act of April 
 18, 1884, entitled "An act to provide for the imposition of State 
 taxes upon certain corporations and for the collection thereof." 
 Rev. Sup., p. 1016. 
 
 Taxation under the act of 1884 was designed to provide revenue 
 for the state. The tax laid by that act is a franchise tax imposed 
 for the privilege of transacting business in this State. Evening 
 Journal Association v. State Board, 18 Vroom, 36 ; Trenton Savings 
 Fund V. Richards, 23 Id. 156; Standard Underground Cable Co. 
 V. The Attorney General, 1 Dick. Ch. Rep. 270. The taxes imposed 
 by the General Tax act of 1866 (Rep., p. 1150) are laid upon prop- 
 erty to provide revenue for local purposes. Both schemes of taxation 
 apply as well to foreign as to domestic corporations, and the act of 
 1866, taxing property, has not been superseded by the act of 1884, 
 imposing a tax upon franchises. 
 
 The principal contention is, that the property taxed is not real 
 estate within the meaning of the third section of the act of 1866. 
 If it be personalty, the prosecutor was taxable for it at Bayonne, 
 where its principal office is, pursuant to section 7 of the act of 1866. 
 If it be lands, within the meaning of the act of 1866, it was la^vfully 
 assessed under section 6 in the township where the property is 
 situated.
 
 SECT. I.] TIDE-WATER PIPE LINE CO. V. BEUUY. 45 
 
 The act of 1866 is a general law for the taxation of property. 
 In the yecond section it is enacted tliat all real and personal estate 
 within this State, whether owned by individuals or by corporations, 
 sliall be liable to taxation at the full and actual value thereof. 
 
 The I'ourtli section delines what property, rights and credits in 
 the nature of personalty shall be conij^rised under the term " per- 
 sonal estate." Section 3 declares tliat the term " real estate " in the 
 act "shall be construed to include all lands, all water power thereon 
 or appurtenant thereto, and all buildings or erections thereon or 
 atUxed to tiie same, trees and underwood growing thereon, and all 
 mines, quarries, peat and marl beds, and all fisheries." 
 
 The prosecutor acquired a riglit to lay and maintain its pipe upon 
 lands of private owners by a deed of grant under seal. The opera- 
 tive words of conveyance are, that the grantor "grants a right of 
 way over and through hinds in Middlesex County, for the purpose 
 of constructing from time to time one line of iron pipe for the 
 transportation of petroleum, in such manner as said grantee may 
 deem necessary, with free ingress and egress to construct, operate, 
 maintain, and from time to time repair and remove the same in 
 such manner as may be desired." Under these grants, which contain 
 apt words to create an estate in fee, the prosecutor acquired an 
 interest in the soil and a right of possession upon the terms and 
 subject to the conditions expressed in the grant, and the pipe line 
 is permanently affixed in the ground from two and a half to three 
 feet below the surface. The deeds provide "that the pipe shall be 
 so laid as not to interfere with the nsual cultivation of the premises, 
 nor with any buildings thereon, and that all actual damage done to 
 crops, timber or otherwise, by the construction or operation of said 
 pipe line, shall be paid for in full by the grantee." 
 
 The fact that the grantor retains the surface for cultivation does 
 not exclude the taxation of the prosecutor for its right and estate 
 therein. Under the statute of 43 Eliz., ch. 2, which laid a land tax 
 on the occupier, it was held that a water company laying its pipes 
 below the surface under a grant was ratable for the occupation of 
 lands below the surface of the soil by its pipes, though another per- 
 son was rated for the herbage. Eex v. Chelsea Water Works, 5 Barn. 
 & Ad. 1.55. Under a tax law identical with the third section of the 
 act of 1866, the Court of Appeals of New York held, that under the 
 definition of "land," as contained in the act, one person may be 
 taxed as owner of the fee and another for structures thereon or 
 minerals and quarries therein. Smith v. The Mayor of New York, 
 68 N. Y. 552. Nor does the reservation by the grantor of power 
 to revoke the grant for violation of the terms of the grant detract 
 from the grantee's estate. Tlie reservation is in the nature of a 
 right of rcycntry for condition broken. The estate granted sul)sists 
 until entry be made for condition broken. People, ex rel. MuUer 
 V. Board of Assessors, 93 N. Y. 308. 
 
 The particulars enumerated in section 3 as property taxable as 
 real estate and at the place and manner in whieli lands are taxable, 
 comprise no right or interest that by the common law would not be 
 embraced in the term "land." The act evidently contemplates that
 
 46 CENTKAL EAILEOAD CO. V. JERSEY CITY. [CHAP. II. 
 
 such rights and interests, when separated in ownership from the 
 fee, may be taxed to the owner thereof as distinguished from the 
 owner of the fee in the soil The courts of New York have so con- 
 strued their statute, and have held that the statute means that such 
 an interest in real estate as will protect the erection and possession 
 of buildings and permanent fixtures thereon shall be taxable as the 
 land of the person who has that interest in the real estate and owns 
 and possesses the buildings and fixtures, though unaccompanied by 
 the fee. People v. Cassitv, 46 N. Y. 46 ; Smith v. The Mayor of 
 New York, 68 Id. 553, 556; People, ex rel. N. Y. El. K. R. v. 
 Commissioners, 82 Id. 459, 462. Under tins construction the New 
 York courts have held that a pier constructed in New York harbor 
 (Smith V. The ]\Iayor of New York, supra), the track of a street 
 railroad (People v. Cassity, supra), the foundation columns and 
 superstructure- of an elevated railway (People, ex rel. N. Y. El. R. R. 
 V. Commissioners, supra) and an underground railway (People, 
 ex rel. N. Y. & li. R. R. Co. v. Commissioners, 101 N. Y. 322), 
 were taxable to the owners thereof as real estate, although the fee 
 in the land to which such structures were affixed was in another. 
 
 The counsel of the prosecutor relies mainly on People v. Board 
 of Assessors, 39 N. Y. 81. In that case it was held that the mains 
 of a gas company under the street's of a city could not be regarded 
 as real estate for the purpose of taxation. Laying gas and water 
 pipes in the streets, under legislative authority, is recognized as a 
 legitimate use of the streets. State v. Trenton, 7 Vroom 79, 85; 
 2 Dill. Mun. Corp. (4th ed.) 691, note 1, and cases cited. At all 
 events, it- does not appear in the case that the company had acquired 
 from any source an interest or right in the lands. The case was 
 decided on the autliority of Boreel v. The Mayor of New York, 
 2 Sandf. 552, which was disapproved in Smith v. The Mayor of 
 New York, 68 N. Y. 552, as applied to facts like those in this case. 
 
 We think the assessment was properly made against the prose- 
 cutor, and the judgment of the Supreme Court sustaining it should 
 be affirmed. 
 
 CENTRAL RAILROAD CO. v. JERSEY CITY. 
 Supreme Court of the United States. 1908. 
 
 [Reported 209 U. 8. 473.] 
 
 Holmes, J. This is a writ of error prosecuted to review a judg- 
 ment sustaining taxes levied by Jersey City upon lands of the plain- 
 tiff in error lying between the middle of New York Bay and its low 
 water line on the New Jersey shore. It is argued that this land, 
 although it belonged to New Jersey until conveyed, is not within 
 its jurisdiction, and cannot be taxed under the authority of that 
 State. The Supreme Court upheld the tax, 41 Vroom, 81, and 
 its judgment was affirmed by the Court of Errors and Appeals for 
 the reasons given by the Supreme Court. 43 Vroom, 311. The 
 plaintiff in error contended that, as New Jersey had not the right
 
 SECT. I.] CENTRAL EAILROAD CO. V. JERSEY CITY. 47 
 
 to tax, the attempt was to deprive the prosecutor of its property 
 contrary to the Fourteenth Amendment, and brought the case here. 
 
 The decision depends upon the construction of an agreement 
 made between New Jersey and New York for the purpose of settling 
 the territorial limits and jurisdiction of the two States, which previ- 
 ously had been the subject of dispute. This agreement was made by 
 commissioners aj)j)oint(.'d for the purpose, was confirmed by New York 
 on February 5, 1834, Laws of 1834, ch. 8, p. 8, and by New Jersey 
 on February 26, 1834, Ltiws of 1834, p. 118, and was approved by 
 Congress by act of June 28, 1834, c. 126. 4 Stat. 708. By Ar- 
 ticle I, the boundary line between the two States from a point above 
 the land in dispute is to be the middle of the Hudson River, of the 
 Bay of New York, of the water between Staten Island and New 
 Jersey, etc., "except as hereinafter otherwise particularly men- 
 tioned." By Article II, New York retains its present jurisdiction 
 over Bedlow's and Ellis Islands, and exclusive jurisdiction over 
 certain other islands in the waters mentioned. By Article III, New 
 York is to have "exclusive jurisdiction of and over all the waters of 
 the Bay of New York, and of and over all the waters of the Hudson 
 River lying west of Manhattan Island and to the south " of the above 
 mentioned point, "and of and over the land covered by the said 
 waters to the low water mark on the westerly or New Jersey side 
 thereof, subject to the following rights of property and jurisdiction 
 of the State of New Jersey, that is to say : 1. The State of New 
 Jersey shall have the exclusive right of property in and to the land 
 under water lying west of the middle of the Bay of New York and 
 west of the middle of that part of the Hudson River which lies 
 between IManhattan Island and New Jersey," 2. New Jersey is to 
 have exclusive jurisdiction over wharves, docks and improvements 
 made or to be nuide on its shore and over vessels aground or fast- 
 ened there, subject to the quarantine and passenger laws of New 
 York. 3. New Jersey is to have the exclusive right of regulating 
 the fisheries on the west of the middle of said waters, providing that 
 navigation be not obstructed or hindered. 
 
 Tlie other articles need but brief mention. Article IV gives New 
 York " exclusive jurisdiction " over the waters of the Kill van Kull 
 "in respect to such quarantine laws and laws relating to passengers, 
 etc., and for executing the same," and over certain other waters. 
 Article V gives New Jersey exclusive jurisdiction over certain other 
 waters subject to New Y^'ork's exclusive property and exclusive juris- 
 diction over wharves, docks and improvements within certain limits, 
 and exclusive right of regulating the fislicries on it5 side, as above 
 in the case of New Jersey. Articles VI and VII provide for the 
 service of criminal and civil process of each State on the waters 
 within the exclusive jurisdiction of the other. Article VIII and last 
 calls for the confirmation of the agreement by the two States and 
 approval by the Congress of the United States. 
 
 Thus the land which has been taxed is on the New Jersey pide 
 of the boundary lino but under the "exclusive jurisdiction" of 
 New York, subject to tlie exclusive right of property in New Jersey
 
 ■iS CENTRAL KAILEOAD CO. V. JEESEY CITY. [ciIAP. II. 
 
 and the limited jurisdiction and authority conferred by the para- 
 graplis summed up. The question is wliich of these provisions 
 governs tlie right to tax. It appears to us plain on the face of the 
 agreement that the dominant fact is the establishment of the boun- 
 dary line. The boundary line is the line of sovereignty, and the 
 establislmient of it is not satisfied but is contradicted by the sug- 
 gestion that the agreement simply gives the ownership of the land 
 under water on the New Jersey side to that State as a private owner 
 of land lying within the State of New York. On the contrary, the 
 provision as to exclusive right of property in the compact between 
 States is to be taken primarily to refer to ultimate sovereign rights, 
 in pursuance of the settlement of the territorial limits, which was 
 declared to be one purpose of the agreement, and is not to be con- 
 fined to the assertion and recognition of a private claim, which, for 
 all that appears, may have been inconsistent with titles already 
 accrued and which would lose significance the moment that New 
 Jersey sold the land. We repeat that boundary means sovereignty, 
 since in modern times sovereignty is mainly territorial, unless a 
 different meaning clearly appears. 
 
 It is said that a different meaning does appear in the Article 
 (III) that gives New York exclusive jurisdiction over this land 
 as well as the water above it. But we agree with the state courts 
 that have been called on to construe that part of the agreement that 
 the purpose was to promote the interests of commerce and naviga- 
 tion, not to take back the sovereignty that otherwise was the con- 
 sequence of Article I. This is the view of the New York as well 
 as of the New Jersey Court of Errors and Appeals, and it would be a 
 strange result if this court should be driven to a different conclusion 
 from that reached by both the parties concerned. Ferguson v. Eoss, 
 126 N. Y. 459, 463 ; People v. Central 11. K. Co., 43 N. Y. 383. 
 This opinion is confirmed by the judgment delivered by one of the 
 commissioners in State v. Babcock, 1 Vroom, 39. Again, as was 
 pointed out by the state court, the often expressed purpose of the 
 appointment of the commissioner and of the agreement to settle 
 the territorial limits and jurisdiction must mean . by territorial 
 limits sovereignty, and by jurisdiction something less. It is sug- 
 gested that jurisdiction is used in a broader sense in the second 
 article, and that may be true so far as concerns Bedlow's and Ellis 
 Islands. But the provision there is that New York shall retain its 
 " present " jurisdiction over them, and would seem on its face 
 simply to be intended to preserve the status quo ante, whatever it 
 may be. 
 
 Throughout nearly all the articles of the agreement, other than 
 those in controversy, the word jurisdiction obviously is used in a 
 more limited sense. The word has occurred in other cases where 
 a river was a boundary, and in the Virginia Compact was held to 
 mean, primarily at least, Juri^dictio, authority to applv the law to 
 the acts of men. Wedding v. Meyler, 3 93 TJ. S. 573, 584. Whether 
 in the case at bar some power of police regulation also was con- 
 ferred upon New York, as held in Ferguson v. Eoss, need not be
 
 SECT. I.] BOSTON MANUFACTURING CO. V. NEWTON. 49 
 
 decided now. That New Jersey retained the sovereignty, however, 
 seems to be assumed in Article III (2), giving her exclusive juris- 
 diction over wharves, docks and improvements, made and " to be 
 made," on the shore. This does not grant the right to make such 
 improvements, but assumes it to exist. But the right would need 
 the permission of New York, except on tiie hypothesis that New 
 Jersey had sovereign power over the place. 
 
 The conclusion reached has the very powerful sanction of the 
 conduct of the parties and of the existing condition of things. See 
 Moore v. McUuire, 2U5 U. S. 214, 220. The decisions of the courts 
 have been referred to. It was admitted at the bar that the record 
 of transfers of such lands was kept in New Jersey, not in New York. 
 New York never has attempted to tax the land, while New Jersey 
 has levied more or less similar taxes for many years without dis- 
 pute. See, c. g. State v. Collector of Jersey City, 4 Zabr. 108, 120 ; 
 State V. Jersey City, 1 Butcher, 530 ; State v. Jersey City, 6 Vroom, 
 178; S. C, 7 Vroom, 471. New Jersey, not New York, regulates 
 the improvements on the shore. x\ct of March 18, 1851, P, L. 1851, 
 p. 335; Rev. 1877, p. 1240; Act of April 11, 1864, V. L. 1864, 
 p. 681; March 31, 1869, P. L. 1869, p. 1017; 3 Gen. Stat. 2784, 
 2786 ; New York, Lake Erie & AVestem R. R. Co. v. Hughes, 46 N. 
 J. 67. Without going into all the details that have been mentioned 
 in the careful and satisfactory discussion of the question in the state 
 courts we are of opinion that the land in question is subject to the 
 sovereignty of the State of New Jersey, and that the exclusive 
 jurisdiction given to the Stats of New York does not exclude the 
 right of the sovereign power to tax. 
 
 Judgment affirmed. 
 
 BOSTON MANUFACTURING CO. v. NEWTON. 
 Supreme Judicial Court of Massachusetts. 1839. 
 
 [Reported 22 Pick. 22.] 
 
 By an agreed statement of facts, it appeared, that the plaintiffs 
 were owners of two mill dams extending across Charles River, where 
 it passes between the towns of Waltham and Newton, one half of the 
 dams being in Newton, and the other half in Waltham; that the 
 water-power created thereby was exclusively applied by the plaintiffs 
 to drive certain mills for the manufacture of cotton, situated in 
 Waltham; but that there was no natural obstacle to prevent this 
 water power from being applied and used to drive mills on the 
 Newton side of the river. 
 
 It further appeared, that the plaintiffs were taxed in Newton, for 
 one half of the dams, which was valued by the assessors, in assessing 
 the taxes for that year, at $3500; — for the land covered by the water 
 of the river in Newton, valued by the assessors at $1300, — and for 
 one half of the water power, valued at $16,500; and that the plain- 
 tiffs had alwavs been taxed by the town of Waltham for the value of 
 their mills, they beimr oslimated by the assessors as mills for the 
 manufacture of cotton cloth.
 
 50 QUIXEBAUG RESERVOIR CO. V. UNION. [ciIAP. II. 
 
 The plaintiffs, in order to avoid the seizure and sale of their prop- 
 erty by the collector of Ne^Nion, paid the tax assessed upon them in 
 that town, protesting against its legality ; and this action was brought 
 for the purpose of trying the riglit of the town of Newton to tax 
 the water power. 
 
 If the Court should be of opinion, that the town of Newton could 
 not la^A-fully tax this water power, judgment was to be rendered in 
 favor of the plaintiffs ; otherwise, for the defendants. 
 
 Shaav C. J., delivered the opinion of the Court. The only ques- 
 tion in this case is, whether the town of Newton have a right to tax 
 the plaintiff's, for the property, and under the circumstances, men- 
 tioned in tlie agreed statement of facts. 
 
 In the first place, the Court are of opinion, that water power for 
 mill purposes not used, is not a distinct subject of taxation. It is a 
 capacity of land for a certain mode of improvement, which cannot 
 be taxed independently of the land. 
 
 But the objection to this mode of taxation, is not the only or prin- 
 cipal objection to the tax in question. The Court are of opinion, that 
 the water power had been annexed to the mills, that it went to enhance 
 the value of the mills, and could only be taxed together with the mills, 
 as contributing to increase their value. As the mills were wholly 
 situated in Waltham, and were taxable there, they were not liable to 
 be taxed in Newton. 
 
 Defendants defaulted and judgment to he entered for the amount 
 agreed. * 
 
 QUINEBAUG RESERVOIR CO. v. UNION. 
 Supreme Court of Errors of Connecticut. 1900. 
 
 [Reported 73 Conn. 294.] 
 
 The Quinebaug Reservoir Company is a Massachusetts corpora- 
 tion. In 1846, being the owner of certain land surrounding Masha- 
 paug pond, with a dam and water privileges, in Union, in this State, 
 it sold and conveyed them to one Leland, reserving certain rights 
 to raise and use the pond, and to flow the surrounding land. 
 
 After this conveyance Mashapaug pond was divided into two ponds, 
 and the company has flowed the upper one to the height of four feet, 
 for the purpose of accumulating a water supply for use by mills in 
 Massachusetts owned by third parties. In 18!)!) it made a return to 
 the assessors of Union of its property taxable in that town, described 
 as : "Flowage over lands known as ^Lower Mashapaug Pond,' bounded 
 north by highway, ... .50 acres, at $5 per acre, $250; flowage 
 over lands known as ' Upper Mashapaug Pond,' bounded north by 
 lands of Martha Crawford, ... 50 acres, at $5, $250." The as- 
 sessors added to this list: "Ten acres of land (Mashapaug pond as it 
 was before 4 feet were added to the dam) at $5, $50; dams and water 
 privileges, $8,000." 2 
 
 » Sec Saco W. P. Co. v. Buxton, 98 Me. 295, 56 Atl. 914. 
 
 * The facts have been abridged, and part of the opinion omitted.
 
 SECT. I.] QUINEBAUG KESERVOIlt CO. I'. UNION. 51 
 
 Baldwin, J. General Statutes, § 3827, provide that all property, 
 not exempted, shall be liable to taxation, and that all real estate shall 
 be set in the list of the town where it is situated. Tiie conveyance by 
 the Quiuebaug Reservoir Company to Leland made him the owner in 
 fee . . . of certain lands, and reserved to it a right issuing out of 
 those lands, which was perpetually charged upon them in favor of 
 the company and its successors and assigns. This right was an in- 
 corporeal hereditament, and real estate. All real estate, whether 
 corporeal or incorporeal, has a fixed situs. This hereditament, in tiie 
 eye of the law, was situated in the town of Union, because the land 
 out of which it issued was situated there. The company made out a 
 tax list, embracing it, which was returned to the assessors of that town. 
 It was described in this list as " flowage over lands " which were 
 particularly bounded and identified. It is not disputed that the acre- 
 age of the lands subject to the easement was underestimated by 10 
 acres. The only question raised is as to the right of the assessors to 
 add, as they did, the item, " dams and water privileges." 
 
 The deed of 1846 shows that there was then a dam upon the lands, 
 and it is agreed that the company has always used its water privilege 
 by flowing them. For this real estate the plaintiff was taxable in 
 Union, unless it can claim some statutory exemption. . . . When 
 water is artificially stored upon land so as to create mechanical power 
 by its fall, the necessary result is to bring into existence a new ele- 
 ment of value. If the land thus used for storage purposes would be 
 more valuable for other purposes, the value gained is less than the 
 value lost. If, on the other hand, the power created has a value ex- 
 ceeding that of the land occupied, the taxable resources of the State 
 in which that land is situated are increased. Such a use of land may, 
 so long as it is continued, practically extinguish the value of the land 
 for any other purpose than that of sustaining the artificial burden to 
 which it has been thus subjected. In such case, under our system 
 which makes all real estate taxable by the towns in which it is sit- 
 uated, we should expect that either the value of the power or so much 
 of it as equals that of the land if left in its natural condition, would 
 be made taxable in the same way in wdiich this land had been before. 
 Such is the practical effect of the law, as we have construed it, and its 
 enactment was fully within the competence of the General Assembly. 
 The power, in whatever State it may be used, came into existence 
 and is now maintained under the protection of the laws of Con- 
 necticut, and its owner, wherever he mav belong, is taxable upon it 
 here, Winnipiseogee Lake Mfg. Co. v. Gilford, 64 X. II. 337, 10 Atl. 
 Rep. 849. Not to tax it would be to discriminate in favor of the 
 owners of water privileges, as against all other proprietors of real 
 estate. Cheshire v. County Commissioners, 118 Mass. 386. 
 
 We have no occasion to inquire whether it can be taxed at a valua- 
 tion estimated witli rpforenco to its use in ]\Iassachusetts. The appeal 
 is based, not upon the valuation given by the assessors to the item 
 which they added, but on their right to make the addition at all.
 
 52 ANDERSON V. DUEK. [cHAP. II. 
 
 AXDEKSON V. DUER. 
 
 SCPEEME CoUiiT OF THE UNITED STATES. 1921, 
 IReporied 42 Sup. Ct. 16.] 
 
 Pitney, J. The essential facts are as follows: Plaintiff holds a 
 nieniborship or seat in the Aew York Stock Exchange for which 
 he paid $GO,UUO, and which carries valuable privileges and has a 
 market value for the purposes of sale. The Exchange is not a cor- 
 poration or stock company, but a voluntary association consisting 
 of 1,100 members, governed by its own constitution, by-laws and 
 rules, and holding the beneficial ownership of the entire capital 
 stock of a Xew York corporation which owns the building in which 
 the business of the Exchange is transacted, with the land upon 
 which it stands, situated in the city of New York, and having a 
 value in excess of $5,000,000. A member has the privilege of 
 transacting a brokerage business in securities listed upon the Ex- 
 change, but may personally buy or sell only in the Exchange build- 
 ing. Membership is evidenced merely by a letter from the secretary 
 of the Exchange, notifying the recipient that he has been elected 
 to membership. Admissions to membership are made on the vote 
 of the committee on admissions. Membership may be transferred 
 only upon approval of the transfer by the committee, and the pro- 
 ceeds are applied first to pay charges and claims against the retiring 
 member, arising under the rules of the Exchange, any surplus being 
 paid to him. On the death of a member, his membership is subject 
 to be disposed of by the committee; but his widow and descendants 
 are entitled to certain payments out of a fund known as the " gratuity 
 fund." In the business of brokers in stocks and bonds a differentia- 
 tion is made between members of the Exchange and nonmembers, 
 in that business is transacted by members on account of other mem- 
 bers at a commission materially less than that charged to nonmem- 
 bers. A firm having as a general partner a meml)er of the Exchange 
 is entitled to have its business transacted at the rates prescribed 
 for members. 
 
 That a membership held by a resident of the state of Ohio in 
 the Exchange is a valuable property right, intangible in its nature, 
 but of so substantial a character as to be a proper subject of prop- 
 erty taxation, is too plain for discussion. That such a membership, 
 although partaking of the nature of a personal privilege, and assign- 
 able only with qualifications, is property within the meaning of the 
 Bankrupt Laws, has repeatedly been held bv this court. Hyde v. 
 Woods, 94 V. S. 523-5?5; Sparhawk v. Yerkes, 142 U. S. 1, 12; 
 Page V. Edmunds, 187 U. S. 500. fiOl. Whether it is subjected to 
 taxation by tlie taxing laws of Ohio is a question of state law, an- 
 swered in the affirmative by the court of last resort of that state, by 
 whose decision upon this court we are controlled. Clement Nat. 
 Bank r. Vermont, 2.31 U. S. 120. 
 
 The chief contention here is based upon the due process of law
 
 SECT. I.] ANDERSON T. DIUR. 53 
 
 provision of the 1-lth Amendment: it being insisted that the privilege 
 of membership iii the Exchange is so inseparably connected with 
 specific real estate in New York that its taxable .situs must be 
 regarded as not within the jurisdiction of the state of Ohio. Louis- 
 vifle & J. Ferry Co. v. Kentucky, 188 U. S. 385, is cited. It is 
 very clear, however, as the supreme court held, that the valuable 
 privilege of such membership is not confhied to the real estate of 
 the Stock Exchange; that a member has a contractual right t4» have 
 the association conducted in accordance with its rules and regula- 
 tions, and incidentally, has the right to deal through other members 
 on certain fixed percentages a^id methods of division of commissions; 
 that this right to secure the services of other members and to " sjilit 
 commissions" is a valuable right by which plaintiff in Cincinnati 
 may properly hold himself out as a member entitled to the privileges 
 of the Exchange, denied to nonmeiubcrs; and that thus he is 
 enabled to conduct from and in his Ciiuinnati ollice a lucrative busi- 
 ness through other members in New York. The court held, and 
 was warranted in holding, that the membership is personal property, 
 and, being without fixed situs, has a taxable situs at the doinicil 
 of the owTier. Mobilia sequuntur personam. See Union Eefrigera^ 
 tor Transit Co. v. Kentucky, 199 U. S. 194, 205. The asserted 
 analogy to Louisville & J. Ferry Co. v. Kentucky, supra, cannot 
 be accepted. That decision related to a public franchise arising 
 out of legislature grant, held to be an incorporeal hereditament in 
 the nature of real property, and to have no taxable situs outside 
 the granting state. It did not involve the taxation of intangible 
 personal property. See Ilawlev ('. Maiden, -232 U. S. 1, 11; Cream 
 of Wheat Co. r. Grand Forks County, U. S. 325, 328. 
 
 Nor is plaintiff's case stronger if we assume that the membership 
 privileges exercisable locally in New York enable that state to tax 
 them even as against a resident of Ohio. (See Rogers v. Hennepin 
 County, 240 U. S. 184, 191.) Exemption from double taxation by 
 one and the same state is not guaranteed by the 14th Amendment 
 (St. Louis Southwestern R. Co. v. Arkansas, 235 U. S. 350, 367, 
 368) ; much less is taxation by two states upon identical or closely 
 related property interests falling within the jurisdiction of both 
 forbidden (Kidd v. Alabama, 188 U. S. 730, 732 ; Hawley v. :Malden, 
 232 U. S. 1, 13; Fidelitv & C. Trust Co. t'. Louisville, 245 U. S. 
 54, 58). 
 
 That plaintiff is denied the equal protection of the laws, ^nthin 
 the meaning of the 14th Amendment, cannot be successfully main- 
 tained upon the record before us. The argument is that other 
 brokers in the same city are not taxed upon the value of their 
 iiieinbershii)s in the local stock exchange, nor upon the privilege 
 of doing business in New York Stock Exchange securities. As to 
 the local exchange memberships, it may be that the failure to tax 
 them is but accidental, or due to some negligence of subordinate 
 ofiBcers, and is not properly to be regarded as the act of the state. 
 If it be state action, there is a presumption that some fair reason 
 exists to support the exemption, not applicable to a membership in 
 the New York Exchange, and plaintiff ha< <bown nothing to over-
 
 54: ANDEKSOX V. DURR. [CIIAP. II. 
 
 come the presumption. As to the privilege referred to, it already 
 has been shown tliat the rights incident to plaintiff's property in- 
 terest give him pecuniary advantages over others in the same busi- 
 ness. Manifestly this furnishes a reasonable ground for taxing him 
 upon the property right, although others enjoying lesser privileges 
 because of not having it may remain untaxed. 
 
 The contention that the tax constitutes a direct burden upon 
 interstate commerce is groundless. Ordinary property taxation im- 
 posed upon property employed in interstate commerce does not 
 amount to an unconstitutional burden upon the commerce itself. 
 Pullman's Palace Car Co. v. Pcnn^vl¥ania, 141 U. S. 18, 23, 35; 
 Cleveland, C. C. & St. L. R. Co. v. Backus, 154 U. S. 439, 445; Postal 
 Teleg. Cable Co. v. Adams, 155 U. S. 688, 700. 
 
 Writ of error dismissed. 
 
 Writ of certiorari granted. 
 
 Judgment affirmed. 
 
 Holmes^ J. The question whether a seat in the New York Stock 
 Exchange is taxable in Ohio consistently with the principles estab- 
 lished by this court seems to me more difficult than it does to my 
 brethren. All rights are intangible personal relations between the 
 subject and the object of them created by law. But it is established 
 that it is not enough that the subject, the owner of the right, is 
 within the power of the taxing state. He cannot be taxed for land 
 situated eleswhere, and the same is true of personal property per- 
 manently out of the jurisdiction. It does not matter, I take it, 
 whether the interest is legal or equitable, or what the machinery 
 by which it is reached, but the question is whether the object of 
 the right is so local in its foundation and prime meaning that it 
 should stand like an interest in land. If left to myself I should 
 have thought that the foundation and substance of the plaintiff's 
 right was the right of himself and his associates personally to enter 
 the New York Stock Exchange building and to do business there. 
 T should have thought that all the rest was incidental to that, and 
 that that, on its face, was localized in New York. If so, it does not 
 matter whether it is real or personal property, or that it adds to the 
 owner's credit and facilities in Ohio. The same would be true of 
 a great estate in New York land. 
 
 As my Brothers Van Devantee and McEeynolds share the same 
 doubts, it has seemed to us proper that they should be expressed.
 
 SECT. II.] HOYT V. COMMISSIONERS OF TAXES. 
 
 f r" 
 
 HOYT V. COMMISSIONERS OF TAXES. 
 
 Court of Appeals of New Youk. 18G1. 
 
 [Keported 23 New York, 224.] 
 
 CoMSTocK, C. J. The legislature, in defining propert}' which is liable 
 to taxation, have used the following language: "All lands an<l all 
 personal estate vifhi/i (his State, whether owned \}y individuals or 
 cor[)orations, shall be liable to taxation siil)jeet to the exemptions here- 
 inafter speeified." (1 R. S., 387, § 1.) The title of the aet in whieh 
 this provision is contained, is, '■'■ of the property liable to taxation," 
 and it is in this title that we ought to look for eontroUing definitions 
 on the subject. Other enaetinents relate to the details of the s\"stera 
 of taxaticjn, to the mode of imposing and eolleeting the publie burdens, 
 and not to the property or subject upon whieh it is impused. In order, 
 therefore, to determine the question now before us, ihe primary requisite 
 is to interpret justly and fairly the language above quoted. 
 
 "All lands and all personal estate within this State shall be liable to 
 taxation." If we are willing to take this language, without attempt- 
 ing to obscure it by introducing a legal liction as to the situs of 
 personal estate, its meaning would seem to be plain. Lands and 
 personal property having an actual situation within the State are lax- 
 al)le, and by a necessary" im|)lication no other profjert}' can be taxed. 
 I know not in what language more appropriate or exact the idea could 
 have been cxi)ressed. Real and personal estate are included in pre- 
 cisely the same form of expression. Both are mentioned as being 
 within the State. It is conceded that lands lying in another State 
 or country, cannot be taxed against the owner resident here, and no 
 one ever supposed the contrary. Yet it is claimed that goods and 
 chattels situated in Louisiana, or in France, can be so taxed. The 
 legislature I su[)pose could make this distinction, but that they have 
 not made it, in the language of the statute is perfectly clear. Nor is 
 the reason apparent why such a distinction should be made. Lands 
 have an actual situs, which of course is immovable. Chattels also 
 have an actual situs, although tlu\v can be moved from one place to 
 another. Hoth are equally protected by the laws of the State or sov- 
 ereignty in which they are situated, and both are chargeable there with 
 public burdens, according to all just principles of taxation. A purely 
 poll tax has no respect to property. We linve no sueh tax. With us 
 taxation is upon property, anil so it is in all the States of the Union. 
 So also in general, it is in all countries. The logical result is, that the 
 tax is incurred within the jurisdiction and under the laws of the 
 country where it is situated. If we say that taxation is on the person
 
 ."G HOYT V. COMMISSIONERS OF TAXES. [CHAP. II. 
 
 in respect to the property, we are still without a reason for assessing 
 the owner resident here, in respect to one part of his estate situated 
 elsewhere, and not in respect to another part. Both, I repeat, are the 
 subjects of taxation in the foreign jurisdiction. If then the owner 
 ought to be subjected to a doul)le l)urdcn as to one, why not as to the 
 other also? 
 
 I liud then no room for interpretation, if we take the words of the 
 statute in their plain ordinarj- sense. The legislative definition of 
 taxable propert}- refers in that sense to the actual situs of personal 
 not less than real estate. If the intention had been different, it cannot 
 be doubted that different language would have been used. It would 
 have been so easy and so natmal to have declared that all lands within 
 this State, and all personal property wherever situated, owned by 
 residents of this State, shall be liable to taxation, that we should have 
 expected just such a declaration, if such had been the meaning of the 
 law-making power. To me, it is evident that the legislature were not 
 enunciating a legal fiction which, as we shall presently see, expresses a 
 rule of law in some circumstances and relations, but which in others is 
 not the law. They were speaking in plain words, and to the plain 
 understanding of men in general. When they said all real and all 
 personal estate within this State, I see no room for a serious doubt 
 that they intended property actually within the State wherever the 
 owner might reside. 
 
 It is said, however, that personal estate by a fiction of law has no 
 situs awa}- from the person or residence of the owner, and is alwa3's 
 deemed to be present with him at the place of his domicile. The right 
 to tax the relator's property situated in New Orleans and New Jerse}% 
 rests upon the universal application of this legal fiction ; and it is 
 accordingh' insisted upon as an absolute rule or principle of law which, 
 to all intents and purposes, transfers the propert}' from the foreign to 
 the domestic jurisdiction, and thus subjects it to taxation under our 
 laws. Let us observe to what results such a theory will lead us. The 
 necessary consequence is, that goods and chattels actually within this 
 State are not here in any legal sense, or for any legal purpose, if the 
 owner resides abroad. They cannot be taxed here, because they are 
 with the owner who is a citizen or subject of some foreign State. On 
 the same ground, if we are to have harmonious rules of law, we ought 
 to relinquish the administration of the effects of a person resident and 
 dying abroad, although the claims of domestic creditors may require 
 such administration. So, in the case of the bankruptcy of such a 
 person, we should at once send abroad his effects, and cannot consist- 
 enth' retain them to satisfy the claims of our own citizens. Again, we 
 ought not to have laws for attaching the personal estate of non-residents, 
 because such laws necessarily assume that it has a sihis entirely distinct 
 from the owner's domicile. Yet we do in certain cases administer upon 
 goods and chattels of a foreign decedent ; we refuse to give up the 
 effects of a bankrupt until creditors here are paid ; and we have laws
 
 SECT. II.] ilOYT V. COMMISSIONEKS OF TAXKS. 57 
 
 of attacliinont against the effects of noii-iesideiit cielitors. These, and 
 other ilhistratioiis which might he inentionetl, clemonstratc that the 
 fiction or max i in moOilia personam sequuntur is \)y no means of 
 universal application. Like other fictions, it has its special uses. It 
 may be resorted to wiien convenience and justice so require. In other 
 circumstances the trutli and not the fiction affords, as it plainly ou<'ht 
 to afford, the rule of action. The proper use of legal fictions is to 
 prevent injustice, according to th(! maxim, hi Jictione juris semper 
 Oiquitas exUtat. '' No fiction," says lilackstone, " shall extend to 
 work an injury ; its proper oj^eration being to prevent a mischief or 
 remedy an inconvenience, which might result from the general rule of 
 law." So Judge Story, referring to the situs of goods and chattels, 
 observes: "The general doctrine is not controverted, that although 
 movables are for man\' purposes to be deemed to have no situs, except 
 that of the domicile of the owner, >et this being but a legal fiction it 
 yields whenever it is necessar\-, for the pur[)ose of justice, that the 
 actual situs of the thing should be examined." He adds quite perti- 
 nently, I think, to the present question, " A nation within whose territory 
 any personal proi)erty is actually situated, has an entire dominion over 
 it while therein, in [)oint of sovereignt\' and jurisdiction, as it has over 
 innnovable property situated there." (Confl. of Laws, § 550.) I can 
 think of no more just and appro[)riate exercise of the sovereignty of a 
 State or nation over property, situated within it and protected by its 
 laws, tiian to compel it to contribute toward the maintenance of govern- 
 ment and law. 
 
 Accordingly there seems to be no place for the fiction of which we 
 are speaking, in a well-adjusted system of taxation. In such a system 
 a fundamental requisite is that it be harmonious. But harmony does 
 not exist unless the taxing power is exerted witii reference exclusively 
 eitlier to tiic situs of the property, or to the residence of the owner. 
 Both rules cannot ol)tain unless we im[)ute inconsistency to the law, 
 and oppression to the taxing power. Wliichever of these rules is the 
 true one, whichever we find to be founded in justice and in the reason 
 of the thing, it necessarily excludes the other ; because we ought to 
 suppose, indeed we are boimd to assume, that other States and Govern- 
 ments have adopted the same rule. If then proceeding on the true 
 principles of taxation, we snl)ject to its burdens all goods and chattels 
 actually within our jurisdiction, without regard to the owner's domicile, 
 it must be understood that the same rule prevails everywhere. If we 
 also proceed on the opposite rule, and impose the tax on account of the 
 domicile, witliout regard to the actual situs, while the same property is 
 taxed in another sovereignty by reason of its situs there, wo necessarily 
 subject the citizen to a doul»le burden of taxation. For this no sound 
 reason can be given. To put a strong case. The owner of a sou-lhern 
 plantation with his thousand slaves upon it, may porfiT to reside and 
 spend his income in New York. Our laws protect him in his person as 
 a citizen of the State, and for this the State receives a sullicient i-on-
 
 58 HOYT V. COMMISSIONERS OF TAXES. [CHAP. II. 
 
 sideration without taxing the capital which it does not protect. Under 
 our laws can we lax the wealth tluis invested in slave property ? They 
 Ignore, on the contrary, the very existence of such property, and 
 therefore there is no room for the fiction according to which, and only 
 according to which, the situs is supposed to be here. But if we could 
 make room for that fiction, still it remains to be shown that some rule 
 of reason or principle of equity can be urged in favor of such taxation. 
 This cannot be shown, and the attempt has not been made. 
 
 We may reverse the illustration. A citizen and resident of Massa- 
 chusetts may own a farm in one of the counties of this State, and large 
 wealth belonging to him may be invested in cattle, in sheep or horses 
 which graze the fields, and are visible to the e3es of the taxing power. 
 Now tliese goods and chattels have an actual situs, as distinct!}' so as 
 the farm itself. Putting the inquiry then with reference to both, are 
 the}' " real estate and personal estate icithin this State " so as to be 
 subject to taxation under that definition? It seems to me but one 
 answer can be given this question, and that answer must be according 
 to the actual truth of tlie case. If we take the fiction instead of the 
 truth, then the situs of these chattels is in Massachusetts, and they are 
 not within this State. The statute means one thing or the other. It 
 cannot have double and inconsistent interpretations. And as this is 
 impossible so we cannot, under and according to the statute, tax the 
 citizen of Massachusetts in respect to his chattels here, and at the 
 same time tax the citizen of New York in respect to his chattels 
 having an actual situs there. In both cases the property must be 
 '• within this State," or there is no right to tax it at all. It cannot be 
 true in fact, if a Massachusetts man owns two spans of horses, one of 
 which draws his carriage at home and the other is kept on his farm 
 here, that both are within the State. It cannot be true by any legal 
 intendment, because the same intendment which locates one of them 
 here, must locate the other abroad and beyond the taxing power. It 
 seems to follow then inevitably that before we can uphold the tax 
 which has been imposed upon the relator's property situated in New 
 Orleans and New Jersey, we must first determine, that if he resided 
 there, and the same goods and chattels were located here, they could 
 not be taxed as being within the State. Such a determination I am 
 satisfied would contravene the plain letter of the statute as well as all 
 sound principles underlying the subject.^ 
 
 ^ The remainder of the opinion is omitted. 
 
 Ace. Dunleith v. Rogers, .53 III. 45 ; Leonard v. New Bedford, 16 Gray, 292; S. v. 
 Ross, 23 N. J. L. .517 ; Hardesty v. Fleming, 57 Tex. 395. 
 
 " We have no difficulty in disposing of the last condition of the question, namely : 
 the fact, if it he a fact, that the property was owned by persons residing in another 
 State.; for, if not exempt from taxation for other reasons, it cannot be exempt by 
 reason of l>eing owned by non-residents of the State. We take it to be a point settled 
 beyond all contradiction or question, that a State has jurisdiction of all persons and 
 things within its territory which do not belong to some other jurisdiction, such as the 
 representatives of foreign governments, with their houses and effects, and property
 
 SECT. II.] SCOLLAKD V. AMEKICAN FKLT CO. 59 
 
 SCOLLARD V. AMERICAN FELT CO. 
 SuPBEME Judicial Court of Massachusetts. 1907. 
 
 [Reported 194 Mass. 127.] 
 
 KInowlton, C. J. This petition in equity is brought against 
 the defendant, a foreign corporation, under the St. 19U2, c. ."549, 
 which is as follows: "When any foreign corporation or non-resident 
 person doing business in the Commonwealth shall for sixty days 
 neglect, refuse or omit to pay a tax lawfully assessed and payable, 
 any court having jurisdiction in equity may upon petition of the 
 collector of taxes of the city or town where the tax is assessed re- 
 strain said corporation or person from doing business in the Com- 
 monwealth until said tax, with all incidental costs and charges, 
 shall have been paid. Service of ])rocess upon any#uch petition may 
 be made by an officer duly qualified to serve process, by leaving a 
 duly attested copy thereof at the place where the business is carried 
 on." It appears by the agreed facts that the defendant had goods, 
 wares and merchandise, and stock in trade in Boston on May 1, 
 l!)Uo, which the assessors undertook to tax. It is also agreed that 
 the corporation filed no return of its taxable property with the 
 assessors for that year. One of the assessors therefore estimated 
 the value of its property subject to taxation. Plainly this property 
 was rightly taxed under the St. 1903, c. 437, § 71, unless the pro- 
 vision in the last part of tliis section, that the taxes "shall be 
 assessed, collected and paid in accordance with the provisions of 
 chapters twelve and thirteen of the Revised Laws," is invalid. 
 
 The defendant contends that this tax could not lawfully be 
 assessed to the defendant, but that it should have been assessed 
 in rem against the particular articles of personal property to which 
 it refers. We are of opinion that this contention is unfounded. In 
 the first place the defendant concedes, and there is no doubt, that 
 personal property may be separated from the domicil of the owner 
 for purposes of taxation, and may be taxed wherever it is kept for 
 use. Tappan v. Merchants' National Bank, 19 Wall. 490, 499. 
 Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18, 22, and 
 cases cited. Bristol v. Washington County, 177 U. S. 133. Nor is 
 there any good reason why the tax should not be assessed to the 
 owner in such cases. It should be paid by him, as it is founded 
 upon his o\\Tiership of tlie property taxed, and it undoubtedly can be 
 collected out of the property, if that can be found within the juris- 
 diction. Taxes so assessed liave been held valid in this Common- 
 wealth. Blackstone Manufacturing Co. r. Blackstone, 13 Gray, 488. 
 
 belonging to or in the use of the Government of the Fnited States. If the owner of 
 personal property within a State resides in another State which taxes him for that 
 property as part of his general estate attached to his person, this action of the latter 
 State docs not in the least affect the right of the State in which the property is 
 situated to tax it also. It is hardly necessary to cite authorities on a point so eleinen- 
 tarv." — Bradley, J., in Coe v. Errol, 116 t'. S. 517 (1886). Ace. Wiukley v. ^'ew. 
 toD, 67 N. H. 80; 36 Ail 610. — Eu.
 
 60 CAESTAIRS V. COCHRAN. [cHAr. II. 
 
 Boston Loan Co. v. Boston, 137 Mass. 332. Lamson Consolidated 
 IStore Service Co. v. Boston, 170 Mass. 354. If the question were 
 whether such a tax could be made the foundation of a personal 
 judgment in an action at law against the owner, other considerations 
 would be pertinent. See Bristol v. AVashiugton County, 177 U. S. 
 133; Dewey v. Des Moines, 173 U. S. 204; New York v. McLean, 
 170 N. Y. 374. Whether collection could be made by such an action 
 brought by the collector against the owner, it is unnecessary to de- 
 cide ; for if one part of the statute in regard to collection is invalid, 
 we tliink it separable from the rest, on the ground that the Legis- 
 lature probably would have enacted the rest without it, if the ques- 
 tion of its validity had been considered. See Edwards v. Bruorton, 
 184 Mass. 529; Commonwealth v. Petranich, 183 Mass. 217; Com- 
 monwealth V. Anselvich, 186 Mass. 376, 379. Upon the facts agreed, 
 the tax appears to have been assessed properly. 
 
 CARSTAIKS V. COCHRAK 
 SuPEEME Court of the United States. 1904. 
 
 [Reported 193 U. S. 10.] 
 
 By chap. 704 of the Laws of Maryland, 1892, as amended by 
 chap. 320, Laws 1900, the general assembly of that State provided 
 for the assessment and collection of taxes on liquors in bonded ware- 
 houses within the State. The proprietors of such warehouses were 
 required to pay the taxes and given a lien on the property therefor. 
 This legislation was sustained by the Court of Appeals of the State, 
 95 Md. 488, to review whose judgment this writ of error was sued 
 out. 
 
 Brewer, J, That the statutes in question do not conflict with 
 the Constitution of Maryland is settled by the decision of its highest 
 court. Merchants' Bank v. Pennsylvania, 167 U. S. 461, and cases 
 cited; Backus v. Ft. Street Union Depot Co., 169 U. S. 557, 566; 
 Easmussen v. Idaho, 181 U. S. 198, 200. 
 
 A state has the undoubted power to tax private property having 
 a situs within its territorial limits, and may require the party in 
 possession of the property to pay the taxes thereon. "Unless re- 
 strained by provisions of the Federal Constitution, the power of the 
 State as to the mode, form, and extent of taxation is unlimited, 
 where the subjects to which it applies are within her jurisdiction." 
 State Tax on Foreign-held Bonds, 15 Wall. 300, 319. "Statutes 
 sometimes provide that tangible personal property shall be assessed 
 wherever in the State it may be, either to the owner himself or to 
 the agent or other person having it in charge; and there is no doubt 
 of the right to do this, whether the owner is resident in the State or 
 not." 1 Cooley on Taxation. 3d ed. p. 653. See also Coe v. Errol, 
 116 U. S. 517; Marye v. Baltimore & Ohio Ptailroad, 127 U. S. 117, 
 123 ; Pullman's Car Co. v. Pennsylvania, 141 U. S. 18 ; Ficklen v. 
 Shelby County, 145 U. S. 1, 22; Savings Society v. Multnomah
 
 SECT. II.] SELLIGEB V. KENTUCKY. CI 
 
 County, 169 TI. S. 421, 427; New Orleans v. Stempel, 175 U. S. 
 309 ; Board of Assessors v. Comptoir National, 191 U. S. 388 ; Na- 
 tional Bank v. Coinraonwealth, 9 Wall. 353 ; Merchants' Bank v. 
 Pennsylvania, 167 U. S. 461. 
 
 That under Federal legislation distilled spirits may be left in a 
 warehouse for several years, that there is no specific provision in the 
 statutes in question giving to the proprietor who pays the taxes a 
 right to recover interest thereon, and tliat for spirits so in bond 
 negotiable warehouse receipts have been issued, do not affect tlie 
 question of the power of the State. The State is under no obliga- 
 tion to make its legislation conformable to the contracts which the 
 proprietors of bonded warehouses may make with tho?e who store 
 spirits therein, but it is their business, if they wish further protec- 
 tion than the lien given by the statute, to make their contracts 
 accordingly. 
 
 We see no error in the judgment of the Court of Appeals, and it is 
 
 Affirmed. 
 
 SELLIGER V. KENTUCKY. 
 Supreme Couet of the United States. 1909. 
 
 [Reported 213 U. 8. 200.] 
 
 Holmes, J. This is a proceeding to recover back-taxes on personal 
 property of the plaintitf in error, hereafter called the defendant. He 
 pleaded that he did own certain barrels of whiskey which he did not 
 list for the years in question, but that he had exported them to Bre- 
 men and llaiuburg, in Germany, for sale abroad, and that the State 
 was forbidden to tax them, both because they were exports, U. S. 
 Const., Art. I. § 10, and because their permanent situs was outside 
 the State. Fourteenth Amendment. Delaware, Lackawanna & AYest- 
 ern R. E. Co. v. Pennsylvania, 198 U. S. 341. Union Refrigerator 
 Transit Co. v. Kentucky, 199 U. S. 194. The plaintifl" replied, deny- 
 ing that the export was for sale and that the situs of the whiskey was 
 abroad. It alleged that the defendant was a citizen and resident of 
 Kentucky, engaged there in the wholesale whiskey business, and that 
 he shipped the whiskey to Germany merely to evade revenue and ad 
 valorem taxes on the same. It alleged further that the defendant re- 
 mained the owner and in possession of the whiskey, except such 
 portion as he reshippcd to himself or to purchasers in the United 
 States, that while the whiskey remained in the German warehouses 
 he held the warehouse receipts, used them as collaterals and traded 
 in them, and that the barrels of whiskey sold by him were mostly 
 returned to the State of Kontuck7% and all to the United States. The 
 court of first instance held that the whiskey was exempt on both the 
 groirnds taken by the defendnnt. On appeal to the State circuit 
 court for the countv, the judgment was affirmed on the ground that 
 the situs of the whisker was outside the State. A further appeal was 
 taken to the Court of Appeals, and that court, accepting the fact that
 
 62 SELLIGER V. KENTUCKY. [CHAP. n. 
 
 the whiskey was beyond the taxing power of Kentucky, nevertheless 
 sustained the tax as a tax on the warehouse receipts. The case then 
 was brought by writ of error to this court. 
 
 We think that we liave stated the elt'ect of the pleadings fairly, 
 and it will be observed that the plaiutiif's claim was of a right to tax 
 the whiskey, the warehouse receipts being mentioned only to corrobo- 
 rate the plaintitf's contention as to the true domicil of the goods. 
 After the decision, the amount of whiskey for which the defend- 
 ant held German warehouse receipts at the material times and 
 the value of the whiskey were agreed, and thereupon the court, recit- 
 ing tlie agreement, directed a judgment for taxes due upon the ware- 
 house receipts, valuing them at the agreed value " per barrel of 
 whiskey embraced in them," So that it will be seen that the effect 
 is the same as if the whiskey itself had been taxed, and the question 
 is whether, by such a dislocation of the documents from the things 
 they represent, a second property of equal value is created for taxing 
 purposes, which can be reached although the first could not. Pos- 
 sibilities similar in economic principle sometimes have to be, or at 
 least have been, recognized, but of course, economically speaking, 
 they are absurd. 
 
 We are dealing with German receipts, and therefore we are not 
 called upon to consider the effect of statutes purporting to make such 
 instruments negotiable. Bonds can be taxed where they are per- 
 manently kept, because by a notion going back to very early law the 
 obligation is, or originally was, inseparable from the paper or parch- 
 ment which expressed it. Buck v. Beach, 206 U. S. 392, 403, 413. 
 That case and the authorities cited by it, show how far a similar no- 
 tion has been applied to negotiable bills and notes. But a warehouse 
 receipt does not depend upon any peculiar doctrine for its effect. A 
 simple receipt merely imports that goods are in the hands of a 
 certain kind of bailee. But if a bailee assents to becoming bailee for 
 another to whom the owner has sold or pledged the goods, the change 
 satisfies the requirement of a change of possession so far as to vali- 
 date the sale or pledge. Therefore it is common for certain classes 
 of bailees to give receipts to the order of the bailor, and so to assent 
 in advance to becoming bailee for any one who is brought within the 
 terms of the receipt by an endorsement of the same. But this does not 
 give the instrument the character of a symbol, it simply makes it the 
 means of bringing about what is somewhat inaccurately termed a 
 change of possession, upon ordinary legal principles, just as if the 
 goods had been transported to another warehouse. Union Trust Co. 
 V. Wilson^ 198 TJ. S. 530, 536. If the receipt contains no clause of 
 assent to a tranfer, it has been held that an endorsement goes no 
 further than a transfer and unaccepted order on any other piece of 
 paper. Hallgarten v. Olrlham, 135 Massachusetts 1. 
 
 The form of the receipts given in Germany does not appear. It 
 does not appear that they contained any assent to transfer, unless 
 by conjecture from the defendant's testimony that he pledged them 
 for loans. Even that conjecture is made more doubtful, if not ex- 
 cluded, by the findings of the lower courts. It does not appear that
 
 SECT. II. J SELLIGEK V. KENTUCKY. 63 
 
 the Court of Appeals made a difTerent finding if it had the power to 
 do so. This court can make none. Tliero is no presumption that we 
 know of that the transaetions took one form or liad one elfect rather 
 than another. 
 
 We can think of hut two ways in which the receipts could amount 
 to more than a mere convenience for getting quasi-possession of the 
 goods. In the first place, tliey might express or imply a promise to be 
 answerable, or c arrv a statutory liability, for a corresponding amount 
 in case the property referred to was delivered to another without a 
 surrender of the receipts. See Mechanics' & Traders' Ins. Co. v. 
 Kiger, 103 U. !S. do2. Such a promise might have a distinct value if 
 the promiser had credit. But it cannot be assumed on this record 
 that the receipts contained it, and if they did, even then the value of 
 the instrument would be due rather to the assumption that the bailee 
 would not give up the goods without a return of it than to the prom- 
 ise. The value of the promise would vary with the promisor. As a 
 key to the goods a receipt no more can be called a second propertv of 
 equal value than could a key to an adamantine safe that could not be 
 opened without it be called a second property of a value distinct from 
 but equal to that of Iho money that safe contained. The receipt, like 
 the key, would be property of some small value distinct from that to 
 which it gave access. But it would not be a counterpart, doubling 
 the riches of the owner of the goods. 
 
 In the second place, the receipt might be made the representative 
 of the goods in a practical sense. A statute might ordain that a sale 
 and delivery of the goods to a purchaser without notice should be 
 invalid as against a subsequent bona fide purchaser of the receipt. 
 We need not speculate as to how the law would deal with it in that 
 event, as we have no warrant for assuming that the German law gives 
 it such effect. On the facts before us, and on any facts that the 
 Court of Appeals can have had before it, the receipts cannot be taken 
 to have been more than one of several keys to the goods. It cannot 
 be assumed that a good title to the whiskey could not have been given 
 while the receipts were outstanding. We assume that tliey made it 
 very unlikely that it would be, but the practical probability does not 
 make the instrument the legal equivalent of the goods. We take it to 
 be almost undisputed that if the warehouses were in Kentuckv the 
 State would not and could not tax both the whiskey and the receipts, 
 even when issued in Kentucky form, and that it would recognize that 
 the only taxable object was the whiskey. The relation of the paper to 
 the goods is not changed by their being abroad, and the only question 
 in the case is whether the paper can be treated as property equivalent 
 in value to the goods, because in some way it represents them. 
 
 We state the question as we have stated it because that is the one 
 that is raised by the derision under review. It would be a mere 
 quibble to say that the receipts, as paper, had an infinitesimal value, 
 that they acquired a substantial one, although much less than that 
 of the whiskey, because of their practical use, and that this court 
 is not concerned with a mere overvaluation. The tax is imposed on 
 the theory that the receipts are the equivalents of the goods and are
 
 64: HOPKINS V. BAKEK. [CHAP. II. 
 
 taxable on that footing, although the goods cannot be taxed. Assum- 
 ing, as tlie Court of Appeals assumed, that the whiskey is exempt 
 under the Constitution of the United States, we are of opinion that 
 the protection of the Constitution extends to warehouse receipts lo- 
 cally present within the State. What was said by Chief Justice 
 Tauoy about bills of lading applies to them, mutatis mutandis: "A 
 duty upon that is, in substance and effect, a duty on the article ex- 
 ported." Almy V. California, 24 How. 169 ; Fairbank v. United 
 States, 181 U. S. 283, 294. We discuss the case on the facts assumed 
 by the Court of Appeals. Whether a finding would have been war- 
 ranted that the whiskey still was domiciled in Kentucky, or for any 
 other reason was not exempt, is a matter upon which we do not pass. 
 See New York Central & Hudson Eiver R. R. Co. v. Miller, 202 U. 
 S. 584, 597. 
 
 Judgment reversed. 
 
 HOPKINS V. BAKER. 
 
 CouET OF Appeals of Makyland. 1894. 
 [Reported 78 Md. 363.] 
 
 Boyd, J. This case was tried in the Baltimore City Court on an 
 agreed statement of facts. The agreement shows that Charles J. 
 Baker, William Baker, Jr., and Charles E. Baker, compose the firm 
 of Baker Bros, and Company ; that Charles E. Baker is a resident of 
 Baltimore City, and the other two members of the firm are residents 
 of Baltimore County; that Charles J. Baker has a four-tenths interest, 
 and the other two have each a three-tenths interest, in the firm. It 
 is admitted that the place of business of the finn is on Charles street, 
 in Baltimore City, at which place is kept the stock of the partnership, 
 of an average value of $80,000.00; that the firm has been assessed by 
 the Appeal Tax Court of Baltimore City for $80,000.00 on their 
 stock, and $750.00 on their horses used in their business, and taxed 
 $1,393.95 for State and City taxes for 1893. 
 
 The appellees declined to pay those taxes, but were willing to pay 
 on the horses, which they keep permanently in the city, and on the 
 three-tenths interest of Charles E. Baker. The question raised by 
 the agreed statement of facts and the prayers was whether taxes could 
 be levied and collected from the whole stock of the firm, or whether 
 only the three-tenths interest of Charles E. Baker therein was liable. 
 
 The Court below decided that the plaintiff was only entitled to 
 recover the amount of taxes due for the horses and for the interest 
 of Charles E. Baker in the whole stock of the partnership. A judsr- 
 ment was entered accordimrlv for $432.38 with interest and costs, and 
 the plaintiff appealed to this Court. 
 
 As the situs of personal property is ordinarilv tho place of residence 
 of the owner, tho Constitution provides that personal propertv should 
 be taxed where the owner hon/i fide resides for the greater part of the 
 year; but, as that provision alone might work great hardship on the
 
 SECT. II.] HOPKINS V. BAKKR. 65 
 
 county or city where goods and chattels of the owner are permanently 
 located, the exception was made. (Joods and cliattels permanently 
 located at the residence of the owner are to be taxed there, so what 
 might be called his "floating" goods and chattels are taxed at the 
 ])lace of his residence, because they have no actual siliLs of their own, 
 and hence tliat of their owner is adopted, but such goods and cliattels 
 as compose the stock in trade of the appellees are not carried back- 
 wards and forwards between Baltimore County, or some other county 
 and the City of Baltimore, As long as tliey are the property of the 
 appellees they are located in Baltimore City, and they are as " per- 
 manently located" there as such goods and chattels can be anywhere. 
 They are not manufactured or purchased to be kept as long as they 
 remain in existence. The separate articles constituting the stock may 
 continue the property of the appellees for a day, a week, a month, a 
 year, or longer, but until they are sold they remain permanently in 
 Baltimore, and are not moved from place to place. That is clearly 
 what is meant by "permanently located" — not that the goods and 
 chattels must remain until tlicy are worn out, or indefinitely. The 
 agreed statement of facts shows that the average value of the stock 
 carried by the appellees is $80,000.00, and that they were assessed 
 for that amount. In other words, the appellees keep consttantly on 
 hand at their place of business in Baltimore City $80,000.00 worth 
 of goods and chattels in the shape of glass, etc. It may be true that 
 $5,000.00 worth of glass may be sold and shipped away today, and 
 another lot of glass worth $5,000.00 may be substituted for it today 
 or tomorrow, but the stock of goods and chattels of the value of 
 $80,000,00 is kept on hand — is permanently located at their place 
 of business. It is not necessary to itemize the stock in trade when it 
 is assessed. The assessors examine the stock, the goods and chattels, 
 and fix their value for taxation, just as they do the furniture or other 
 tangible personal property at the respective residences of the appel- 
 lees. If the contention of the appellees is to prevail then merchandise 
 cannot be taxed anywhere. No merchant expects to keep his stock 
 permanently on hand in the sense that term is used by the learned 
 counsel for the appellees. 
 
 He expects to sell as soon as he can receive his price, and as he 
 sells he replenishes his stock. The articles are changing from day to 
 da}', but the stock, which represents the aggregate of the goods and 
 chattels, remains about the same. Yet can it be claimed that a mer- 
 chant who resides and carries on his business in Baltimore is not to 
 be taxed for his stock in trade? A reasonable construction must be 
 given the constitutional provision, and we must bear in mind the 
 object in taxing goods and chattels permanently located in the city 
 or county whore thov are so located. 
 
 If the position of the appellees is correct, it is possible to have hun- 
 dreds of tliousands of dollars, probnbly millions, of tangilile personal 
 propertv. eronds and chattels, within the City of Baltimore, having 
 the benefit of its police nnd fire protection from year to year, and yet 
 not contribute one dollar to the support of the police or fire depart- 
 ments. Merchants transacting business in Cumberland, Hagerstown,
 
 66 COMilOX WEALTH V. UNIOiST SHirBUILDIJ^G CO. [ciiAl', II, 
 
 Frederick, Annapolis and other incorporated cities and towns in the 
 counties could escape all municipal taxes on their stock in trade by 
 living beyond the corporate limits of those cities and towns, whilst 
 those living within such cities and towns must pay the municipal as 
 well as the State and county taxes on their stock in trade. Such a 
 construction of the law would encourage fraud. A resident of a 
 remote county might carry a large stock in trade in Baltimore City, 
 or on the Eastern Shore, without the knowledge of the authorities 
 of the county where he resided. 
 
 We recognize fully the force of the argument of counsel for the 
 appellees that property cannot be taxed simply because it may seem 
 inequitable to permit it to escape taxation. But when we are called 
 upon to construe statutes or the Constitution on this subject, it is 
 our duty, in seeking the true interpretation of language used, to 
 place a reasonable construction upon it, and to bear in mind the fact 
 that our Constitution aimed to require all persons to bear their just 
 share of the burden of taxation. 
 
 Judgment reversed, and new trial awarded. 
 
 COMMONWEALTH v. UNION SHIPBUILDING CO. 
 Supreme Court of Pennsylvania. 1921. 
 
 [Reported 114 Atl. 257.] 
 
 Frazer, J. Defendant is a Pennsylvania corporation, with its 
 principal office in the city of Pittsburgh, but has considerable real 
 and personal property in the State of Maryland, where it owns and 
 operates a shipbuilding plant. During the tax year of 1918, it had 
 total assets amounting to $3,228,560.90, of which $1,369,837.35 
 represented the value of the shipbuilding plant, $5,000 was invested 
 in nontaxable liberty bonds, and the remainder, consisting of cash, 
 accounts receivable, and other tangible assets, amounted to $854,- 
 723.55. The capital stock of the company is $1,585,000 par value, 
 and represents its actual value. In assessing the capital stock tax 
 for the year 1918, the auditor general based his assessment pn such 
 portion of the valuation of the capital stock as the whole taxable 
 assets in Pennsylvania bore to the whole assets of the corporation. 
 The basis of assessment was thus found to be $607,897. Defendant's 
 contention is that this method of computation is erroneous, and that 
 the correct method is to deduct from the value of the entire stock 
 the value of its nontaxable property, to wit. the tangible propertv 
 located outside the State and the liberty bonds, the remainder, 
 $210,162.65, being the nortion taxable in Pennsvlvania. Under 
 this computation it will be observed the tax is much less than that 
 arrived at by the metborl adopted by the auflitoT ereneral. 
 
 The rule applied bv the auditor general and the court below i<? 
 similar to that employed in dptermining the amount of taxntinn 
 to be paid by foreien corporations having property invested in this 
 State; defendant, however, argues this results in taxing indirectly
 
 SECT. II. J COMMON WEALTH V. UNION SHIPBUILDING CO. 67 
 
 tangible property {(jcaled outside the State. It must be conceded 
 that a tax oa tliu capital of a corporation is a tax on the property 
 in which that capital is invested (Commissioners v. Standard Oil 
 Co., 101 Fa. liy;, and that a tax based on a valuation including 
 property situated outside the State is improper (D., L. & \V. K. K. 
 V. Pcnusyivania, VJ6 U. S. 3-11, 20 Sup. Ct. 06L», 4L> L. Ed. 1077). 
 The latter case relied upon by defendant is not controUin"- here. 
 The question there was whether coal mined and shipped beyond 
 the jurisdiction of the State was a proper subject of deduction in 
 assessing the value of the capital of a Tennsylvania corporation. 
 It was held the coal lost its situs in I'ennsylvania upon being trans- 
 ported to another State for the purpose of sale, and was therefore 
 beyond the taxing power of tlie State as specific property, and could 
 not be taxed indirectly by calling it a tax on capital stock represent- 
 ing that property. No question was there involved as to the proper 
 mode of computing the tax. 
 
 In the present case no direct levy is made on propertv held in a 
 foreign State, nor does such result necessarily follow indirectly. In 
 fixing the proportion of the tax to be paid, the full value of the 
 property located outside the State is deducted from the total assets. 
 This does not have the effect of taxing property in otlior jurisdic- 
 tions. It permits the stock of cnrpo-ntions created by the laws of 
 this State to be taxed on its full value, less deductions for such 
 propertv actually outside the State, and therefore subject to taxation 
 in the foreign jurisdiction, and prevents the possibilitv nf domestic 
 corporations escaping taxation altogether, as they might do under 
 the plan urged by defendant, where the value of the capital stock 
 is less than the value of total assets outside the State. "We are of 
 opinion the method of assessment adopted by the court below is 
 proper. 
 
 The judgment is affirmed.
 
 68 Pullman's palace-cab co. v. Pennsylvania. [chap. ii. 
 
 PULLMAN'S PALACE-CAR CO. v. PENNSYLVANIA. 
 
 Supreme Court of the United States. 1891. 
 [Reported 141 United States, 18.] 
 
 Gray, J.^ Upon this writ of error, whether this tax was in accord- 
 ance with the law of Pennsylvania, is a question on which the decision 
 of the highest court of the State is conclusive. The onl}' question of 
 which this court has jurisdiction is whether the tax was in violation of 
 the clause of the Constitution of the United States granting to Congress 
 the power to regulate commerce among the several States. The plain- 
 tiff in error contends that its cars could be taxed only in the State of 
 Illinois, in which it was incorporated and had its principal place of 
 business. 
 
 No general principles of law are better settled, or more fundamental, 
 than that the legislative power of ever)- State extends to all propert}' 
 within its borders, and that only so far as tlie comit}- of that State 
 allows can such property' be affected by the law of any other State. 
 The old rule, expressed in the maxim mobilia sequuntiir j^arsonarn, by 
 which personal property was regarded as subject to the law of the own- 
 er's domicile, grew up in the Middle Ages, when movable propert}- con- 
 sisted chiefly of gold and jewels, which could be easily carried b}' the 
 owner from place to place, or secreted in spots known only to himself. 
 In modern times, since the great increase in amount and variety of per- 
 sonal property not iraraediatel}' connected with the person of the owner, 
 that rule has yielded more and more to the lex situs, the law of the 
 place where the property is kept and used. Green v. Van Buskirk, 5 
 
 ^ Part of tlie opinion of the court and part of the dissenting opinion are omitted.— 
 Ed.
 
 SECT. IT.] Pullman's palace-car ro. r. pexnsylvaxta.' 00 
 
 Wall. 307, and 7 Wall. 139 ; Ilervey v. Rhode Island Locomotive Works, 
 93 U. S. 664 ; Ilarkuess v. Russell, 11« U. S. 663, G79 ; WalworUi v. 
 Harris, 129 U. S. 355 ; Story on Conflict of Laws, § 55U ; Wharton on 
 Conflict of Laws, §§ 297-311. As observed by Mr. Justice Story, in 
 hi» coininentaries just cited, •• Although movables are for many purposes 
 to be deemctl tu have no situs, except that of the domicile of the owner, 
 yet this being l)ut a legal fiction, it yields, whenever it is necessary for 
 the purpose of justice that the actual ■'iitus of the thing should be ex- 
 amined. A nation within whose territory any personal property is 
 actually situate has an entire dominion over it while therein, in point 
 of sovereignty and jurisdiction, as it has over immovable i)roperty 
 situate there." 
 
 For the purposes of taxation, as has been repeatedly aflirmed by this 
 court, personal property may be separated from its owner ; and he may 
 be taxed, on its account, at the place where it is, although not the 
 place of his own domicile, and even if he is not a citizen or a resident 
 of the State which imposes the tax. Lane County v. Oregon, 7 Wall. 
 71, 77; Railroad Co. v. Pennsylvania, 15 Wall. 300, 323, 324, 328; 
 Railroad Co. v. Peniston, 18 Wall. 5, 29 ; Tappau t-. Merchants' Bank, 
 19 Wall. 490, 499 ; State Railroad Tax Cases, 92 U. S. 575, 607, 608 ; 
 Brown v. Houston, 114 U. S. 622; Coe v. Errol, 116 U. S. 517, 524; 
 Marye v. Baltimore & Ohio Railroad, 127 U. S. 117, 123. 
 
 It is equally well settled that there is nothing in the Constitution or 
 laws of the United States which prevents a State from taxing personal 
 property, employed in interstate or foreign commerce, like other per- 
 sonal property within its jurisdiction. . . . 
 
 The cars of this company within the State of Pennsylvania are 
 employed in interstate commerce ; but their being so employed does 
 not exempt them from taxation by the State ; and the State has not 
 taxed them because of their being so employed, but because of their 
 being within its territory and jurisdiction. The cars were continuously 
 and permanently employed in going to and fro upon certain routes of 
 travel. If they had never passed beyond the limits of Pennsylvania, it 
 could not be doubted that the State could tax them, like other property, 
 within its borders, notwithstanding they were employed in interstate 
 commerce. The fact that, instead of stopping at the State boundary, 
 they cross tliat boundary in going out and coming back, cannot allect 
 the power of the State to levy a tax upon them. The State, having 
 the right, for the purposes of taxation, to tax any personal property 
 found within its jurisdiction, without regard to the place of the owner's 
 domicile, could tax the specific cars which at a given moment were 
 within its borders. The route over wliicli the cars travel extending 
 beyond the limits of the State, particular cars may not remain within 
 the State ; but the company has at all times substantially the same 
 number of cars within the State, and continuously and constantly uses 
 there a portion of its property ; and it is distinctly found, as matter of 
 fact, that the company continuously, throughout the periods for which
 
 TO Pullman's v.\i.Acr-c\Ti ccs. v. pt.xxstt.vaxta. J chap. IT. 
 
 these taxes were levied, carried on business in Pennsylvania, and had 
 about one luinclred cars within the State. 
 
 The mode which the State of Pennsylvania adopted, to ascertain the 
 proportion of the company's property upon wliich it should be taxed in 
 that State, was by taking as a basis of assessment such proportion of 
 the capital stock of the compauy as the number of miles over wliich it 
 run curs witliiu the State bore to the whole luuuber of miles, in that 
 and other States, over which its cars were run. This was a just and 
 equitable method of assessment; and, if it were adopted by all the 
 States through which these cars ran, the company would be assessed 
 upon the whole value of its capital stock, and no more. 
 
 The validity of this mode of apportioning such a tax is sustained by 
 several decisions of this court, in cases which came up from the Circuit 
 Courts of the United States, and in which, therefore, the jurisdiction 
 of this court extended to the determination of the whole case, and was 
 not limited, as upon writs of error to the State courts, to questions 
 under the Constitution and laws of the United States. 
 
 In the State Railroad Tax Cases, 92 U. S. 575, it was adjudged that 
 a statute of Illinois, by which a tax on the entire taxable propert}' of a 
 railroad corporation, including its rolling stock, capital, and franchise, 
 was assessed by the State Board of Equalization, and was collected in 
 each municipality in proportion to the length of the road within it, was 
 lawful, and not in conflict with the Constitution of the State ; and Mr. 
 Justice Miller, delivering judgment, said : — 
 
 "Another ol)jection to the system of taxation by the State is, that 
 the rolling stock, capital stock, and franchise are personal property, 
 and that this, with all other personal property, has a local situs at the 
 principal place of business of the corporation, and can be taxed by 
 no other county, cit}', or town, but the one where it is so situated. 
 This objection is based upon the general rule of law that personal 
 propert}', as to its situs, follows the domicile of its owner. It may be 
 doubted ver}' reasonably whether such a rule can be applied to a rail- 
 road corporation as between the different localities embraced by its 
 line of road. But, after all, the rule is merely the law of the State 
 which recognizes it ; and when it is called into operation as to prop- 
 erty located in one State, and owned by a resident of another, it is 
 a rule of comity in the former State rather than an absolute principle 
 in all cases. Green ?;. Van Buskirk, 5 Wall. 312. Like all other laws 
 of a State, it is, therefore, subject to legislative repeal, modification, or 
 limitation ; and wlien the legislature of Illinois declared that it should 
 not prevail in assessing personal property of railroad companies for 
 taxation, it simply exercised an ordinary function of legislation." 92 
 U. S. 607, 608. 
 
 "It is further objected that the railroad track, capital stock, and 
 franchise is not assessed in each county where it lies, according to its 
 vfilue there, but according to an aggregate value of the whole, on 
 which each county, city, and town collects taxes according to the length
 
 SECT. II.] PULT.MAX'S PALACE-CAR CO, V. PEXXSYLVANIA. 7l 
 
 of the track within its limits." " It may well be donhtr-d whether 
 any better mode of determining tiie value of that portion of the 
 track within any one county has been devised, th:in tr^ ascertain the 
 value of the whole road, and apportion the value within the county liv 
 its relative length to the whole." "This court has expresslv held in 
 tvvo cases, where the road of a corporation ran through dilfcrent States, 
 that a tax upon the income or franchise of the road was properly a|)- 
 portioned by taking the whole income or value of the franchise, and 
 the length of the road within each State, as the basis of taxation. 
 Delaware Railroad Tax, 18 Wall. 20G; Krie Railroad r. Pennsyl- 
 vania, 21 Wall. 4'J2." 1)2 U. S. 60«, Gil. 
 
 So in Western Union Telegraph (lo. v. Attorney-General of Massa- 
 chusetts, 125 U. S. oJiO, this court uphekl the validity of a tax im- 
 posed by the State of Massachusetts upon the capital stock of a 
 telegraph company, on account of property owned and used by it 
 witliin the State, taking as the basis of assessment such proportion 
 of the value of its capital stock as the length of its lines within the 
 State boi-e to their entire length throughout the country. 
 
 Even more in point is the case of IMarye v. Baltimore & Ohio 
 Railroad, 127 U. S. 117, in which the question was whether a rail- 
 road company incorporated by the State of Maryland, and no part of 
 whose own railroad was within the State of Virginia, was taxal)le 
 under general laws of Virginia upon rolling stock owned by the 
 company, and employed upon connecting railroads leased by it in 
 thai State, yet not assigned permanently to tkose roads, but used 
 in'ierchangeably upon them and upon roads in other States, as the 
 company's necessities required. It was held not to be so taxable, 
 solely because the tax laws of Virginia appeared upon their face to 
 be limited to railroad corporations of that State; and Mr. Justice 
 Matthews, delivering the unanimous judgm'ent of the court, said: — 
 
 "It is not denied, as it cannot be, tliat the State of Virginia has 
 rightful power to levy and collect a tax ui)on such property used and 
 found within its territorial limits, as this property was used and 
 found, if and whenever it may choose, by apt legislation, to exert its 
 authority over the subject. It is quite true, as the sites of the Balti- 
 more and Ohio Railroad Compa!iy is in the State of Maryland, that 
 also, upon general principles, is the situs of all its personal property; 
 but for purposes of taxation, ae well as for other purposes, that situs 
 may be fixed in whatever locality the property may be brought and 
 used by its owner by the law of the place where it is found. If the 
 Baltimore and Ohio Railroad Company is permitted by the State of 
 Virginia to bring into its territory, and there habitually to use and 
 employ a portion of its movable personal property, and the raiiioad 
 company chooses so to do, it would certainly be competent and Itgiti- 
 mate for the State to impose upon such property, thus used and 
 employed, its fair share of the burdens of taxation imposed upon 
 similar property used in the like way by its own citizens. Ami such
 
 72 Pullman's palace-car co. v. penxsylvania. [chap. ti. 
 
 a tax might be properly assessed and collected in cases like the 
 present, where the specific and individual items of property so used 
 and employed were not continuously the same, but were constantly 
 changing, according to the exigencies of the business. In such 
 cases, the tax might be fixed by an appraisement and valuation of 
 the average amount of the property thus habitually used, and col' 
 lected by distraint upon any pwtion that might at any time be 
 found. Of course, the lawlessness of a tax upon vehicles of trans- 
 portation used by common carriers might have to be considered in 
 particular instances with reference to its operation as a regulation 
 of commerce among the States, but the mere fact that they were 
 employed as vehicles of transportation in the interchange of inter- 
 state commerce would not render their taxation invalid." 127 U. S. 
 123, 124. 
 
 For these reasons, and upon these authorities, the court is of opiu* 
 ion that the tax in question is constitutional and valid. The result 
 of holding otherwise would be that, if all the States should concur in 
 abandoning the legal fiction that personal property has its situs at 
 the owner's domicile, and in adopting the system of taxing it at the 
 place at which it is used and by whose laws it is protected, property 
 emploj'ed in any business requiring continuous and constant move- 
 ment from one State to another would escape taxation altogether. 
 
 Judgment affirmed. 
 
 Mr. Justice Bradley, with whom concurred Mr. Justice Field and 
 Mr. Justice Harlan, dissenting. 
 
 I dissent from the judgment of the court in this case, and will state 
 brief!}' my reasons. I concede that all property, personal as well as 
 real, within a State, and belonging there, may be taxed by the State. 
 Of that there can be no doubt. But where property does not belong in 
 the State another question arises. It is the question of the jurisdiction 
 of the State over the property. It is stated in the opinion of the court 
 as a fundamental proposition on which the opinion reall}' turns that all 
 personal as well as real property within a State is subject to the laws 
 thereof. I conceive that that proposition is not maintainable as a gen- 
 eral and absolute proposition. Amongst independent nations, it is 
 true, persons and property within the territory' of a nation are subject 
 to its laws, and it is responsible to other nations for any injustice it 
 may do to the persons or property of such other nations. This is a 
 rule of international law. But the States of this government are not 
 independent nations. There is such a thing as a Constitution of the 
 United States, and there is sucli a thing as a government of the United 
 States, and there are many things, and many persons, and many articles 
 of property that a State cannot lay the weight of its finger upon, because 
 it would be contrary to the Constitution of the United States. Cer- 
 tainly, property merely carried through a State cannot be taxed by the 
 State. Such a tax would be a duty — which a State cannot impose.
 
 SECT, ir.] Pullman's palace-car co. v. Pennsylvania. T.'i 
 
 If a drove of cattle is driven tliroiigh Pennsylvania from Illinois to 
 New York, for tlie purpose of being sold in New York, whilst in 
 Penns} Iviinia it may be subject to the police regulations of the State, 
 but it is not subject to taxation there. It is not generally subject to the 
 laws of the State as other property is. So if a train of cars starts at Cin- 
 cinnati for New York and passes through J'ennsylvania, it may be subject 
 to the police regulations of that Slate wliilst within it, but it would l;e 
 repugnant to the Constitution of the United Stales to tax it. We have 
 decided this very question in the case of State Freight Tax, lo Wall. 
 232. Tlie point was directly raised and decided that property on its 
 passage through a State in the course of interstate commerce cannot be 
 taxed by the State, because taxation is incidentally regulation, and a 
 Stale cannot regulate interstate commerce. The same doctrine was 
 recognized in Coe r. Errol, 116 U. S. 517. 
 
 And surely a Stale cannot interfere with the officers of the United 
 States, in the performance of their duties, whether acting under the 
 Judicial, JNIilitary, Postal, or Revenue Departments. They are entirely 
 free from State control. So a citizen of the United States, or any other 
 person, in the performance of any duty, or in the exercise of any privi- 
 lege, under the Constitution or laws of the United States, is absolutely 
 free from State control in relation to such matters. So that the general 
 proposition, that all persons and personal property within a State is 
 subject to the laws of the State, unless materially modified, cannot 
 be true. 
 
 But, when personal property is permanently located within a State 
 for the purpose of ordinary use or sale, then, indeed, it is subject to the 
 laws of the State and to the burdens of taxation ; as well when owned 
 by persons residing out of the State, as when owned by persons resid- 
 ing in the State. It has then acquired a situs in the State where it is 
 found. 
 
 A man residing in New York may own a store, a factory, or a mine 
 in Alabama, stocked with goods, utensils, or materials for sale or use 
 in that State. There is no question that the situs of personal property 
 so situated is in the State where it is found, and that it may bo sub- 
 jected to double taxation, — in the State of the owner's residence, as a 
 part of the general mass of his estate; and in the State of its situs. 
 Although this is a consequent-e which often bears hardly on the owner, 
 yet it is too firmly sanctioned by the law to be disturbed, and no remedy 
 seems to exist but a sense of equity and justice in the legislatures of the 
 several States. The rule would undoubtedly be more just if it made the 
 property taxable, like lands and real estate, only in the place where it 
 is permanently situated. 
 
 Personal as well as real pro[)erty may have a situs of its own, inde- 
 pendent of the owner's residence, even when employed iu interstate or 
 foreign commerce. An office or warehouse, connected with a steamship 
 line, or with a continental railway, may be provided with furniture and 
 all the apparatus and api)liances usual in such establishments. Such
 
 74 puli^man's palace-car co. v. pennsylvaistta. [chap. tt. 
 
 property would be subject to the lex rei sitae and to local taxation, 
 though sole]}' devoted to the purposes of the business of those lines. 
 Hut tlie ships that traverse the sea, and the cars that traverse the land, 
 in those lines, being the veliicles of commerce, interstate or foreign, and 
 intended for its movement from one State or country- to another, and 
 having no fixed or permanent situs or home, except at the residence of 
 the owner, cannot, without an invasion of the powers and duties of the 
 federal government, be subjected to the burdens of taxation in the 
 places wliere they only go or come in tiie transaction of their business, 
 except where they belong. Hays v. Pacific Mail Steamship Co., 17 
 IIow. 590 ; Morgan r. Parham, IG Wall. 471 ; Transportation Co. v. 
 Wheeling, 99 U. S. 273. To contend that there is any difference be- 
 tween cars or trains of cars and ocean steamships in this regard, is to 
 lose sight of the essential qualities of things. This is a matter that 
 does not depend upon the aflirmative action of Congress. The regula- 
 tion of ships and vessels, by act of Congress, does not make them the 
 instruments of commerce. They would be equally so if no such affirma- 
 tive resulations existed. For the States to interfere with them in either 
 case would be to interfere with, and to assume the exercise of, that 
 power which, by the Constitution, has been surrendered by the States 
 to the government of the United States, namely, the power to regulate 
 commerce. 
 
 Reference is made in the opinion of the court to the case of Railroad 
 Company v. Maryland, 21 Wall. 456, in which it was said that commerce 
 on land between the different States is strikingly dissimilar in many re- 
 spects from commerce on water ; but that was said in reference to the 
 highways of transportation in the two cases, and the diff'erence of control 
 which the State has in one case from that which it can possibly have in 
 the other. A railroad is laid on the soil of the State, by virtue of au- 
 thority granted by the State, and is constantly subject to the police juris- 
 diction of the State ; whilst the sea and navigable rivers are high- 
 ways created by nature, and are not subject to State control. The 
 question in that case related to the power of the State over its own 
 corporation, in reference to its rate of fares and the remuneration it 
 was required to pay to the State for its franchises, — an entirely differ- 
 ent question from that which arises in the present case. 
 
 Reference is also made to expressions used in the opinion in Glouces- 
 ter Ferry Co. v. Pennsylvania, 114 U. S. 196, which, standing alone, 
 would seem to concede the right of a State to tax foreign corporations 
 engaged in foreign or interstate commerce, if such property is within 
 the jurisdiction of the State. But the whole scope of that opinion is to 
 show that neither the vehicles of commerce coming within the State, 
 nor the capital of such corporations, is taxable there ; but only the 
 property having a situs there, as the wharf used for landing passengers 
 and freight. The entire series of decisions to that effect are cited and 
 relied on. 
 
 Of course I do not mean to sa}' that either railroad cars or ships are
 
 SECT. II.] Pullman's palace-car co. v. Pennsylvania. 75 
 
 to be free from taxation, Imt I do s:iy linit tla-y are not taxable by those 
 States in which they arc onl} Uansiently present in the transaction of 
 their comniercial operations. A British ship coming to the harbor of 
 New Yorii from Liverpool ever so rcgiihirly and spentUng iialf its time 
 (when not on the ocean; in that iiail)or, cannot be taxed by tlie Slate 
 of jS'ew Yorli (liarbor, [)ilotage, and quarantine dues not being taxes). 
 So New Yoiic sliips plying regularly to the port of New Orleans, so 
 that one of the line may be always lying at the latter port, cannot be 
 taxed by the State of Louisiana. (See cases above cited). No more 
 can a train of cars belonging in Pennsylvania, and running regularly 
 from l'liila(lei[)hia to New York, or to ('liicago, be taxed by the State 
 of New York, in the one case, or by Illinois, in the other. If it may 
 lawfully be taxed by these States, it may lawfully be taxed by all the 
 intermeiliate States, New Jersey, Ohio, and Indiana. And then we 
 should have back again all the confusion and competition and State 
 jealousies which existed before the adoption of the Constitution, and 
 for putting an end to which the Constitution was adopted. 
 
 In the opinion of the court it is suggested that if all the States should 
 adopt as equitable a rule of proportioning the taxes ou the Pullman 
 Company as that adopted by Pennsylvania, a just S3steni of taxation 
 of the wiiole capital stock of the comi>any would be the result. Yes, 
 if — ! But Illinois may tax the company on its whole capital stock. 
 Where would be the equity then ? This, however, is a consideration 
 that cannot be compared with the question as to the power to tax at 
 all, — as to the relative power of tlie State and general governments 
 over the regulation of internal commerce, — as to the right of theStates 
 to resume those powers which have been vested in the government of 
 the United States. 
 
 It seems to me that the real question in the present case is as to the 
 situs of the cars in question. They are used in interstate commerce, 
 between Pennsylvania, New York, and the Western States. Their legal 
 situs no more depends on the States or places where they are carried in 
 the course of their operations than would that of any steamboats em- 
 ployed by the Pennsylvania Railroad Company to carry passengers on 
 the Ohio or Mississippi. If such steamboats belonged to a company 
 located at Chicago, and were changed from time to time as their condi- 
 tion as to repairs and the convenience of the owners might render 
 necessary, is it possible that the States in which the}' were running and 
 landing in the exercise of interstate commerce could subject them to 
 taxation? No one, I think, would contend this. It seems to me that 
 the cars in question belonging to the Pullman Car Company are in pre- 
 cisely the same category.
 
 Y6 STATE TAX 0?r FOREIGT^-HELD BONDS. [CHAP. IT. 
 
 STATE TAX ON FOREIGN-HELD BONDS. 
 
 SuPKEME Court of the United States. 1873. 
 [Reported 15 Wallace, 300.] 
 
 Field, J.^ The question presented in this ease for our determination 
 is whether the eleventii section of the Act of Pennsylvania of Ma}', 1868, 
 so fur as it applies to the interest on bonds of the railroad company, 
 made and payable out of the State, issued to and held by non-residents 
 of the State, citizens of other States, is a valid and constitutional exer- 
 cise of the taxing power of the State, or whether it is an interference, 
 under the name of a tax, with the obligation of the contracts between 
 the non-resident bondholders and the corporation. If it be the former, 
 this court cannot arrest the judgment of the State court; if it be the 
 latter, tlie alleged tax is illegal, and its enforcement can be restrained. 
 
 The case before us is similar in its essential particulars to that of The 
 Railroad Company v. Jackson, reported in 7 Wallace. There, as here, 
 the company was incorporated by the legislatures of two States, Penn- 
 sylvania and Marjdand, under the same name, and its road extended in 
 a continuous line from Baltimore in one State to Sunbur\' in the other. 
 And the company had issued bonds for a large amount, drawing inter- 
 est, and executed a mortgage for their security upon its entire road, its 
 franchises and fixtures, including the portion lying in both States. 
 Coupons for the different instalments of interest were attached to each 
 bond. There was no apportionment of the bonds to any part of the 
 road lying in either State. The whole road was bound for each bond. 
 The law of Pennsylvania, as it then existed, imposed a tax on money 
 owing b}- solvent del)tors of three mills on the dollar of the principal, 
 payable out of the interest. An alien resident in Ireland was the holder 
 of some of the bonds of the railroad compan\-, and when he presented 
 his coupons for the interest due thereon, the company claimed the right 
 to deduct the tax imposed by the law of Pennsylvania, and also an al- 
 leged tax to the United States. The non-resident refused to accept the 
 interest with these deductions, and brought suit for the whole amount 
 in the Circuit Court of the United States for the District of Maryland. 
 That court, the chief justice presiding, instructed the jury that if the 
 
 1 The opinion only is given. — Ed.
 
 SKCT. II. J ^TATE TAX (J\ FORKKiX-11 KLD BONDS. 77 
 
 plaintifT, when he purchased the bonds, was a British subject, resident 
 in Ireland, and still resided there, he was entitled to recover the amount 
 of the coupons without deduction. Tlie verdict and judgment were in 
 accordance with this instruction, and the case was brought here for 
 review. 
 
 This court held that the tax under the law of Pennsylvania could not 
 he sustained, as to permit its deduction from the cou|)ons held by the 
 plaintiff would be giving effect to the acts of her legislature upon prop- 
 erty and effects lying beyond her jurisdiction. The reasoning by which 
 the learned justice, who delivered the opinion of the court, reached this 
 conclusion, may be open, perhaps, to some criticism. It is not per- 
 ceived how the fact that the mortgage given for the security of the bonds 
 in that case covered that portion of the road which extended into Mary- 
 land could affect the liability of the bonds to taxation. If the entire 
 road upon which the mortgage was given had been in another State, and 
 the bonds had been held by a resident of Pennsylvania, they would have 
 been taxable under her laws in that State. It was the fact that the bonds 
 were held b}- a non-resident which justified the language used, that to 
 permit a deduction of the tax from the interest would be giving effect 
 to the laws of Pennsylvania upon property beyond her jurisdiction, and 
 not the fact assigned by the learned justice. The decision is, neverthe- 
 less, authority for the doctrine that property l3ing beyond the jurisdic- 
 tion of the State is not a subject upon which her taxing power can be 
 legitimately exercised. Indeed, it would seem that no adjudication 
 should be necessar}' to establish so obvious a proposition. 
 
 The power of taxation, however vast in its character and searching in 
 its extent, is necessarily limited to subjects within the jurisdiction of the 
 State. These subjects are persons, pro[)erty, and business. Whatever 
 form taxation may assume, whether as duties, imposts, excises, or li- 
 censes, it must relate to one of these subjects. It is not possible to 
 conceive of any other, though as applied to them, the taxation may be 
 exercised in a great variety of ways. It may touch property in every 
 shape, in its natural condition, in its manufactured form, and in its va- 
 rious transmutations. And the amount of the taxation may be deter- 
 mined by the value of the property, or its use, or its capacity, or its 
 productiveness. It may touch business in the almost infinite forms in 
 which it is conducted, in professions, in commerce, in manufactures, 
 and in transportation. Unless restrained by provisions of the Federal 
 Constitution, the power of the State as to the mode, form, and extent 
 of taxation is unlimited, where the subjects to which it applies are within 
 her jurisdiction. 
 
 Corporations may be taxed, like natural persons, upon their property 
 and business. But debts owing by corporations, like debts owing by 
 individuals, are not property of the debtors, in any sense ; they are 
 obligations of the debtors, and only possess value in the hands of the 
 creditors. With them they are property, and in their hands they may 
 be taxed. To call debts property of the debtors is simply to misuse
 
 78 STATE TAX ON FOREIGN-HELD BONDS. [cHAP. II. 
 
 terms. All the property there can be in the nature of things in debts 
 of corporations, belongs to the creditors, to whom they are payable, and 
 follows their domicile, wherever that may be. Their debts can have no 
 locality separate from the parties to whom they are due. This principle 
 might be stated in many ditferent ways, and supported by citations from 
 numerous adjudications, but no number of authorities, and no forms of 
 expression could add anything to its obvious truth, which is recognized 
 upon its simple statement. 
 
 The bonds issued b}' the railroad company in this case are undoubt- 
 edly property, but property in the hands of the holders, not property of 
 the obligors. So far as they are held by non-residents of the State, 
 they are property beyond the jurisdiction of the State. The law which 
 requires the treasurer of the company to retain five per cent of the inter- 
 est due to the non-resident bondholder is not, therefore, a legitimate 
 exercise of the taxing power. It is a law uiiich interferes between the 
 compan}' and the bondholder, and under the pretence of levying a tax 
 commands the company to withhold a porti(ji) of the stipulated interest 
 and pay it over to the State. It is a law which thus impaii's the obli- 
 gation of the contract between the parties. The ol (ligation of a contract 
 depends upon its terms and the means which the law in existence at the 
 time affords for its enforcement. A law which alters the terms of a con- 
 tract b}' imposing new conditions, or dispensing with those expressed, 
 is a law which imi)airs its obligation, for, as stated on another occasion, 
 such a law relieves the parties from the moral duty of performing the 
 original stipulations of tlie contract, and it prevents their legal enforce- 
 ment. The Act of Pennsylvania of May 1, 1868, falls within this de- 
 scription. It directs the treasurer of every incorporated company to 
 retain from the interest stipulated to its bondholders five per cent 
 upon every dollar, and pay it mto the treasury of the Commonwealth. 
 It thus sanctions and commands a disregard of the express provisions 
 of the contracts between the company and its creditors. It is only 
 one of many cases where, under the name of taxation, an oppressive 
 exaction is made without constitutional warrant, amounting to little 
 less than an arbitrary seizure of private property. It is, in fact, a 
 forced contribution levied upon propert}' held in other States, where it 
 is subjected, or may be subjected, to taxation upon an estimate of its 
 full value. 
 
 The case of Maltby v. The Reading and Columbia Railroad Com- 
 pany, decided by the Supreme Court of Pennsylvania in 1866, was 
 referred to by the Common Pleas in support of its ruling, and is 
 relied upon by counsel in support of the tax in question. The decision 
 in that case does go to the full extent claimed, and holds that bonds ot 
 corporations held by non-residents arc taxable in that State. But it is 
 evident from a perusal of the opinion of the court that the decision 
 proceeded upon tlie idea that the bond of the non-resident was itsell 
 property in the State because secured by a mortgage on property there, 
 "It is undoubtedly true," said the court, "that the Legislature ol
 
 SECT. II.] STATE TAX ON FOREIGN-HELD BONDS. 70 
 
 Pennsylvania cannot impose a personal tax upon the citizen of another 
 .State, but the c(jii.stant practice is to lax property wiliiin our juiisdic- 
 tion which belongs to non-resideiils." And again: "There uiiisl be 
 jurisdiction over eitiier the property or ihe person of the owner, else 
 the power cannot be exercised; l)uL wiicn ilw. property is wiiliin our 
 jurisdiction, and enjoys the protection of our Slate government, it is 
 juslly taxable, and it is of no moment that the owner, who is required 
 to pay the tax, resides elsewhere." There is no douljt of the correct- 
 ness of these views. Jnit the court then |)roceeds to state that the 
 principle of taxation as the correlative of protection is as apphcable 
 to a non-resident as to a resident ; that the loan to the non-resident is 
 made valuable by the franchises which the company derived from the 
 Commonwealth, and as an investment rests upon Suite authoritv, and, 
 therefore, ought to contribute to the support of the State government. 
 It also adds that, thougli the hjan is for some purjwses subject to the 
 law of the domicile of the holder, " yet, in a very high sense," it is 
 also property in Pennsylvania, observing, in support of ihis position, 
 that the holder of a bonil of tlie company could not enforce it except 
 in that State, and that the mortgage given for its security was upon 
 property and franchises within her jurisdiction. The amount of all 
 which is this : that the State which creates and protects a corporation 
 ought to have the right to tax the loans negotiated l)y it, though taken 
 an(.l held by non-residents, a (jroposition which it is unnecessai-y to con- 
 trovert. The legality of a tax of that kind would not be questioned if 
 in the charter of the company the imposition of the tax were author- 
 ized, and in tlie bonds of the company, or its certificates of loan, the 
 liability of the loan to taxation were stated, Tiie tax in that case 
 would be in the nature of a license tax for negotiating the loan, for in 
 whatever manner made payable it would ultimately fall on the com[)any 
 as a condition of effecting the loan, and parties contracting with the 
 company would provide for it by proper stipulations. But there is 
 nothing in the observations of the court, nor is there anything in the 
 opinion, which shows that the bond of the non-resident was propert}' 
 in the State, or tliat the non-resident had any proi)erty in the Slate 
 which was subject to taxation within the principles laid down by the 
 court itself, which we have cited. 
 
 The property mortgaged belonged entirel}' to the company, and so 
 far as it was situated in Pennsylvania was taxable there. If taxation 
 is the correlative of protection, the taxes which it there paid were the 
 correlative for the protection which it there received. And neither the 
 taxation of the property, nor its protection, was augmented or dimin- 
 ished by the fact that the corporation was in debt or free from debt. 
 The i)roperty in no sense belonged to the non-resident bondholder or 
 to the mortgagee of the company. The mortgage transferred no title ; 
 it created only a lien npon the property. Though in form a convev- 
 ance, it was both at law and in equity a mere security for the debt 
 That such is the nature of a mortgage in IViiiisvIvania has been fre-
 
 so STATE TAX OX FOREIGN-HELD BOXDS. [ciIAP. 11. 
 
 cjuently ruled by her highest court. In Witmer's Appeal, 45 Penn. S. 
 403, the court said: '' The mortgagee has no estate in the land, any 
 more than the judgment creditor. Both have liens upon it, and no 
 more than liens." And in that State all possible interests in lands, 
 whether vested or contingent, arc subject to lev}' and sale on execution, 
 yet It has been held, on the ground that a mortgagee has no estate in the 
 lands, that the mortgaged premises cannot be taken in execution for 
 his debt. In Rickert v. Madeira, 1 Rawle, 329, the court said: "A 
 mortgage must be considered either as a chose in action or as giving 
 title to the land and vesting a real interest in the mortgagee. In the 
 latter case it would be liable to execution ; in the former it would not, 
 as it would fall within the same reason as a judgment bond or simple 
 contract. If we should consider the interest of the mortgagee as a 
 veal interest, we must carr}' the principle out and subject it to a dower 
 and to the lien of a judgment; and that it is but a chose in action, a 
 mere evidence of debt, is apparent from the whole current of decisions." 
 Wilson r. Shoenberger's Executors, 31 Penn. S. 295. 
 
 Such being tiie character of a mortgage in Pennsylvania, it cannot 
 be said, as was justly observed b}- counsel, that the non-resident holder 
 and owner of a bond secured by a mortgage in tiiat State owns any 
 real estate there. A mortgage being there a mere chose in action, it 
 only confers upon the holder, or the party for whose benefit the mort- 
 gage is given, a right to proceed against the property mortgaged, upon 
 a given contingency, to enforce, by its sale, the payment of his de- 
 mand. This right has no locality independent of the party in whom it 
 resides. It ma}' undoubtedly be taxed by the State when held by a 
 resident therein, but when held by a non-resident it is as much beyond 
 the jurisdiction of the State as the person of the owner. 
 
 It is undoubtedl}' true that the actual situs of personal property 
 which has a visible and tangible existence, and not the domicile of its 
 owner, will, m many cases, determine the State in which it may be 
 taxed. Tiie same thing is true of public securities consisting of State 
 bonds and bonds of municipal bodies, and circulating notes of bank- 
 ing institutions ; the former, by general usage, iiave acquired the char- 
 acter of, and are treated as, propert}- in the place where they are found, 
 though removed from the domicile of the owner ; the latter are treated 
 and pass as money wherever the}' are. But other personal propert}^ 
 consisting of bonds, mortgages, and del)ts generally, has no situs 
 independent of the domicile of the owner, and certainly can have none 
 where the instruments, as in tlie present case, constituting the evi- 
 dences of debt, are not separated from the possession of the owners. 
 
 Cases were cited by counsel on the argument from the decisions of 
 the highest courts of several States, which accord with the views we 
 have expressed. In Davenport r. The Mississippi and Missouri Rail- 
 road Company, 12 Iowa, 539, the question arose before the Supreme 
 Court of Iowa whether mortgages on property in that State held by 
 non-residents could be taxed under a law which provided that all prop-
 
 SECT. II.] STATE TAX ON FOREIfi.\-II i;i.I> HOXDS. 81 
 
 ert\', loaf and personal, within the State, with certain exceptions not 
 material to tlic present case, should be subject to taxation, and the; 
 court said : — ■ 
 
 " Both in law and equity the mortgagee has only a chattel interest. 
 It is true that the situs of the property mortgaged is within the juris- 
 diction of the State, but. the mortgage itself being i)ersonal property, 
 a chose in action attaches to the person of the owner. It is agreed by 
 the parties that the owners and holders of the mortgages are non- 
 residents of the State. If so, and the property of the mortgage 
 attaches to the person of the owner, it follows that these mortgages 
 are not propcrt}' within the State, and if not they are not- the subject 
 of taxation," 
 
 In People v. Eastman, 25 Cal, G03, the question arose before the Su- 
 preme Court of Caiifornia wliether a judgment of record in Mariposa 
 County upon the foreclosure of a mortgage upon property situated in 
 that county could be taxed there, the owner of the judgment being a 
 resident of San Francisco, and the law of California requiring all prop- 
 erty to be taxed in the county where situated ; and it was held that it 
 was not taxable there. ''The mortgage," said the court, "has no 
 existence independent of the thing secured b}' it ; a payment of the 
 debt discharges the mortgage. The thing secured is intangible, and 
 has no situs distinct and a[)art from the residence of the holder. It 
 pertains to and follows the person. The same debt ma}', at tlie same 
 time, be secured by a mortgage upon land in every county in the State ; 
 and it the mere fact that the mortgage exists in a particular county gives 
 the propert}' in the mortgage a sitits subjecting it to taxation in that 
 county, a party, without further legislation, might be called upon to 
 pa}' the tax several times, for the lien for taxes attaches at the 
 same time in ever}' count}' in the State, and the mortgage in one 
 county may be a different one from that in another although the debt 
 secured is the same." 
 
 Some adjudications in the Supreme Court of Pennsylvania were also 
 cited on the argument, which appear to recognize doctrines inconsistent 
 with that announced in JMaltby v. Reading and Columbia Railroail 
 Company, particularly the case of Mclveen r. The County of North- 
 ampton, 49 Penn. S. 519, and the case of Short's Estate, 16 Id. 03, 
 but we do not deem it necessary to pinsuc the matter further. We 
 are clear tliat the tax cannot be sustained ; that the lionds, being held 
 by non-residents of the State, are only property in their hands, and 
 that they are thus beyond the jurisdiction of the taxing power of the 
 State, Even where the bonds are held by residents of the State, the 
 retention by the company of a portion of the stipulated interest can 
 only be sustained as a mode of collecting a tax upon that species of 
 property in the State. When the propei'ty is out of the State there 
 can then be no tax upon it for which the interest can be retained. 
 The tax laws of Pennsylvania can have no extraterritorial operation : 
 flor can any law of that State, inconsistent with the terms of a con-
 
 82 STATE TAX ON FOREIGN-HELD BONDS. [ciIAT. TT. 
 
 tract, made with or paj'able to parties out of the State, have any effect 
 upon the contract whilst it is in the hands of such parties or other non- 
 residents. The extraterritorial invalidity of State laws discharging a 
 debtor from his contracts with citizens of other States, even though 
 made and payable in the State after the passage of such laws, has been 
 judicially determined by this court. Ogden r. Saunders, 12 Wheaton, 
 214 ; Baldwin r. Hale, 1 Wallace, 223. A like invalidit}' must, on 
 similar grounds, attend State legislation which seeks to change the 
 obligation of such contracts in any particular, and on stronger grounds 
 where the contracts are made and payable out of the State. 
 
 Judgment reversed, and the cause re)7ia tided /or further proceed' 
 in(js, 1)1 conformity with this opinion. 
 Davis, Cliffokd, Miller, and Hunt, JJ., dissenting. 
 
 1
 
 SECT. II.] BLACKSTONK V. MII.LEU. 83 
 
 BLACKSTONE v. MILLER. 
 
 SUPUEME COUUT OF THE UnITED StATES. 1903. 
 [Reported 188 U. S. 189.] 
 
 Holmes, J. This is a writ of error to the Surrogate's Court of the 
 county of New York. It is l)rought to review a decree of the court, 
 sustained by the Appellate Divisicjii of the Supreme Court, G'J A[jp. 
 Div. 127, and by the C(KMt of Appeals, 171 N. Y. G82, levying a tax 
 on the transfer by will of certain property of Timothy B. Blackstone, 
 the testator, who dietl domicile<l in Illinois. The property consisted of 
 a dei)t of $10. 092. 21, due to the deceased by a firm, and of the net sum 
 of $4,843,456.72, held on a deposit account by the United States Trust 
 Comi)any of New York. The objection was taken seasonably upon the 
 record that the transfer of this i^roperty could not lie taxed in New York 
 consistently with the Constitution of the United States. 
 
 The deposit in question represented the proceeds of railroad stock 
 sold to a syndicate and handed to the Trust Company, which, by arrange- 
 ment with the testator, held the proceeds subject to his order, paying 
 interest in the meantime. Five days' notice of withdrawal was required, 
 and if a draft was made ui)on the company, it gave its check upon one 
 of its banks of deposit. The fund had been held in this way from 
 March ."il, 18;i'.), until the testator's death on May 26, 1900. It is 
 pro!)al)le, of course, that he did not intend to leave the fund there 
 forever and that he was looking out for investments, but he had not 
 found them when he died. The tax is levied under a statute impos- 
 ing a tax "upon the transfer of any property, real or personal. . . . 
 2. When the transfer is by will or intestate law, of property within the 
 State, and the decedent was a non-resident of the State at the time of 
 his death." Laws of 1896, c. 908, § 220, amended, Laws of 1897, 
 c. 284 ; 3 Birdseye's Stat. 3d ed. 1901, p. 3592. The whole succession 
 has been taxed in Illinois, the New York deposit being included in the 
 appraisal of the estate. It is objected to the New York tax that the 
 propert}' was not within the State, and that the courts of New York 
 had no jurisdiction ; that if the proi)erty was within the State it was 
 only transitorily there, Hays /'. Pacilic Mail Steamship Co., 17 How. 
 596, 599, 600, that the tax impairs the obligation of contracts, that it 
 denies full faith and credit to the judgment taxing the inheritance in 
 Illinois, that it deprives the executrix and legatees of privileges and 
 immunities of citizens of the State of New York, and that it is contrary 
 to the Fourteenth Amendment. 
 
 In view of the State decisions it must be assumed that the New York 
 statute is intended to reach the transfer of this property if it can be 
 reached. New Orleans v. Stempel, 175 U.S. 309, 316; Morley r. 
 Lake Shore & Michigan Southern Railway Co., 146 U. S. 162. 166. 
 ■\Ve also must take it to have been found that the property was not in
 
 ,84 BLACKSTONE V. MILLER. [CHAP. IT. 
 
 traiisitu in such a sense as to withdraw it from the power of the State, 
 if otherwise the right to tax the transfer belonged to the State. The 
 propert}- was delayed within the jurisdiction of New York an indefinite 
 time, which had lasted for more than a year, so that this finding at least 
 was justified. Kelley v. Rhoads, 188 U. S. 1, and Diamond Match Co. 
 ('. Villaue of Ontonagon, 188 U. S. 84, present term. Both parties agree 
 with the plain words of the law that the tax is a tax upon the transfer, 
 not upon the deposit, and we need spend no time upon that. Therefore 
 the naked question is whether the State has a riglit to tax the transfer 
 by will of such deposit. 
 
 The answer is somewhat obscured by the superficial fact that New 
 York, like most other States, recognizes the law of the domicil as the 
 law determining the right of universal succession. The domicil, natu- 
 rall}', must control a succession of that kind. Universal succession is 
 the artificial continuance of the person of a deceased b}- an executor, 
 heir, or the like, so far as succession to rights and obligations is con- 
 cerned. It is a fiction, the historical origin of which is familiar to 
 scholars, and it is this fiction that gives whatever meaning it has to the 
 saying mobilia seqiamtur personam. But being a fiction it is not al- 
 lowed to obscure the facts, when the facts become important. To a 
 consideral)le, although more or less varying, extent, the succession de- 
 termined by the law of the domicil is recognized in other jurisdictions. 
 But it hardly needs illustration to show tliat the recognition is limited 
 by the policy of the local law. Ancillary administrators pay the local 
 debts before turning over the residue to be distributed, or distributing 
 it themselves, according to tlie rules of the domicil. The title of the 
 principal administrator, or of a foreign assignee in bankruptcy, another 
 tj'pe of universal succession, is admitted in but a limited wa}' or not at 
 all. See Crapo v. Kelly, 16 Wall. 610; Chipman v. Manufacturers' 
 National Bank, lo6 Mass. 147, 148, 149. 
 
 To come closer to the point, no one doubts that succession to a tan- 
 gible chattel may be taxed wherever the propert3' is found, and none 
 the less that the law of the situs accepts its rules of succession from the 
 law of the domicil, or that by the law of the domicil the chattel is part 
 of a universitas and is taken into account again in the succession tax 
 there. Eidman v. Martinez, 184 U. S. 578, 586, 587, 592. See Mager 
 V. Griraa. 8 How. 490, 493 ; Coe v. Errol, 116 U. S. 51 7, 524 ; Pullman's 
 Palace Car Co. v. Pennsylvania, 141 U. S. 18, 22; Magoun v. Illinois 
 Trust & Savings Bank, 170 U. S. 283; New Orleans v. Stempel, 175 
 U. S. 309 ; Bristol V.Washington County, 177 U. S. 133; and for state 
 decisions Matter of Estate of Romaine, 127 N. Y. 80 ; Callahan v. 
 Woodbridge, 171 Mass. 593; Greves i\ Shaw, 173 Mass. 205; Allen 
 V. National State Bank, 92 Md 509. 
 
 No doubt this power on the part of two States to tax on diflferent and 
 more or less inconsistent principles, leads to some hardship. It may 
 be regretted, also, that one and the same State should be seen taxing 
 on the one hand according to the fact of power, and on the other, at
 
 SECT. II. J BLACKSTONE V. MII.LKU. 8') 
 
 the same time, according to the fiction that, in succession? after death, 
 mohilid sequuntur personam and domicil governs tho whole. But 
 these inconsistencies infringe no rule of constitutional law. Coe /•. 
 Errol, 110 U. S. 517, 524; Knowlton v. Moore, 178 U. S. 11. 
 
 The question, then, is narrowed to whether a distinction is to be taken 
 between tangible chattels and the deposit in this case. There is no 
 doul)t that eourts in New York and elsewhere have been loath to recog- 
 nize a distinction for taxing [jurposes l)etvveen what commonly is called 
 mone\- in the bunk and actual coin in the pocket. The practical simi- 
 larity more or less has ol)literated the legal difference. Matter of 
 Houdayer, 150 N. Y. 37 ; New Orleans v. Siempel, 175 U. S. 309, 316 ; 
 City National Bank v. Charles Baker Co., 180 Mass. 40, 42. In view 
 of these cases, and the decision in the present case, which followed 
 them, a not very successful attempt was made to show that by reason 
 of the facts which we have mentioned, and others, the deposit here was 
 unUke an ordinary deposit in a bank. We shall not stop to discuss 
 this aspect of the case, because we prefer to decide it upon a broader 
 view. 
 
 If the transfer of the deposit necessarily depends upon and involves 
 the law of New York for its exercise, or, in other words, if the transfer 
 is subject to the power of the State of New York, then New York may 
 subject the transfer to a tax. United States i\ Perkins, 1G3 U. S. G25, 
 628, G2!) ; McCulloch v. Maryland, 4 Wheat. 316, 429. But it is plain 
 that the transfer does de|)end upon the law of New York, not because 
 of any theoretical speculation concerning the whereabouts of the debt, 
 but because of the practical fact of its power over the person of the 
 debtor. The principle has been recognized by this court with regard 
 to garnishments of a domestic debtor of an absent defendant. Chicago, 
 Rock Island & Pacific Ry. Co. v. Sturm, 174 U. S. 710. See Wyman /•. 
 Halstead, 109 U. S. 654. What gives the debt validity? Nothing but 
 the fact that the law of the place whore the debtor is will make him pay. 
 It does not matter that the law would not need to be invoked in the 
 particular case. Most of us do not commit crimes, yet we nevertheless 
 are sul)ject to the criminal law, and it affords one of the motives for our 
 conduct. So again, what enables any other than the very creditor in 
 proper person to collect the debt? The law of the same place. To test 
 it, suppose that New Y''ork should turn back the current of legislation 
 and extend to debts the rule still applied to slander that actio personalis 
 moritin- cum persona, and should provide that all debts hereafter con- 
 tracted in New York and payable there should be extinguished by the 
 death of either party. Leaving constitutional considerations on one 
 side, it is plain that the right of the foreign creditor would be gone. 
 
 Power over the person of the debtor confers jurisdiction, we repeat. 
 And this being so we perceive no better reason for denying the right of 
 New York to impose a succession tax on debts owed by its citizens than 
 upon tangible chattels found within the State at the time of the death. 
 The maxim viobilia se/juimtiir personam has no more truth in the one
 
 86 BLACKSTOXE V. MILLER. [ciIAP. U. 
 
 case tlian in the other. When logic and the polic}' of a State conflict 
 with a fiction due to liistorical tradition, the liction must give way. 
 
 There is no conflict between our views and the point decided in the 
 case reported under the name of State Tax on Foreign Held Bonds, 
 15 Wall. 300. The taxation in that case was on the interest on bonds 
 held out of the State. Bonds and negotiable instruments are more than 
 merely evidences of debt. The debt is inseparable from the paper which 
 declares and constitutes it, by a tradition which comes down from more 
 archaic conditions. Bacon y. Hooker, 177 Mass. 335,337. Therefore, 
 considering only the place of the property, it was held that bonds held 
 out of the State could not be reached. The decision has l)een cut down 
 to its precise point by later cases. Savings & Loan Society v. Multno- 
 mah County, 1G9 U. S. 421, 428; New Orleans v. Stempel, 175 U. S. 
 309, 319, 320. 
 
 In the case at bar the law imposing the tax was in force before the 
 deposit was made, and did not impair the obligation of the contract, if 
 a tax otherwise lawful ever can be said to have that effect. Pinney /;. 
 Nelson, 183 LI. S. 144, 147. The fact that two States, dealing each with 
 its own law of succession, both of which the plaintiff in error has to in- 
 voke for her rights, have taxed the right which the}' respectively confer, 
 gives no cause for complaint on constitutional grounds. Coe o. Errol, 
 llG U. S. 517, 524; Knowlton v. Moore, 178 U. S. 53. The universal 
 succession is taxed in one State, the singular succession is taxed in 
 another. The plaintiff" has to make out her right under both in order 
 to get the money. See Adams /•. Batchelder, 1 73 Mass. 258. The 
 same considerations answer the argument tliat due faith and credit 
 are not given to the judgment in Illinois. The tax docs not deprive 
 the plaintiff in error of any of the privileges and immunities of the 
 citizens of New York. It is no such deprivation that if she had 
 lived in New York the tax on the transfer of the deposit would have 
 been part of the tax on the inheritance as a wliole. See Mager v. Grima, 
 8 How. 490 ; Brown r. Houston, 114 U. S. 622, 635 ; Wallace v. Myers, 
 38 Fed. Rep. 184. It does not violate the Fourteenth Amendment. 
 See Magoun v. Illinois Trust & Savings Bank, 170 U. S. 283. Matters 
 of state procedure and the correctness of the New York decree or judg- 
 ment, apart from specific constitutional objections, are not open here. 
 As we have said, the question whether the property was to be regarded 
 as in trd/isifii, if material, must be regarded as found against the plain- 
 tiflT in error. 
 
 Decree affirmed. 
 
 Mr. Justice White dissents.
 
 SECT. II.] BUCK V. BEACH. 87 
 
 BUCK V. BEACH. 
 SuPBEME Court ot' the United States. 1907. 
 
 [Reported 20G U. S. 392.] 
 
 Judgment against the plaintiff in error (who was defendant 
 below) was recovered in a State Circuit Court in Indiana, which 
 was affirmed by the Supreme Court of the State (IGi Indiana, 37), 
 and the plaintiff in error brings the case here to review that judg- 
 ment. The predecessor of the defendant in error, being at the time 
 treasurer of Tippecanoe County, in the State of Indiana, brought 
 this action in 1897 against the plaintiff in error to subject funds in 
 his hands to the payment of taxes alleged to be due from the estate 
 of one Job M. Nash, deceased, which taxes liad been assessed in 
 above county and State in 189-4, after the death of Nash, on personal 
 property of the deceased that had been omitted from the tax list in 
 his lifetime, during the years 1881 to 1893, both inclusive. 
 
 The point in dispute between the parties relates to the assessment 
 for omitted property on what are called the " Ohio notes," the plain- 
 tiff in error insisting that such assessment was illegal as beyond 
 the jurisdiction of the State to impose. 
 
 The material facts are not really in dispute. It appears that 
 Nash died in 1893, at that time, and for more than twenty years 
 prior thereto, a resident of the city and State of New York. He 
 left a will which was admitted to probate in Hamilton County, 
 Ohio, and his executors qualified tliere. They thereafter refused 
 to pay the tax imposed upon the Ohio notes in Indiana. By the 
 terms of the will a trust was created, and part of the personal prop- 
 erty constituting such trust (more than enough to pay the taxes 
 in dispute) was turned over to James Buck, plaintiff in error and 
 one of the two trustees named in the will. He resided in Lafayette, 
 in the State of Indiana, and the other trustee resided in Cincinnati, 
 in the State of Ohio. From this fund, in the hands of Buck, tlie 
 defendant in cn-or asked to have the taxes paid which had been 
 assessed, as abov^e stated, and which he claimed were due the State. 
 This was refused, and this action was thereupon commenced. 
 
 A former action had been brought by the trustees for relief by 
 injunction against the predecessor of the defendant in error to en- 
 join him from seizing upon or interfering with the trust fund for 
 the payment of the taxes in dispute, and in that action the trustees 
 had been unsuccessful. Buck v. Miller, 147 Indiana, 586, decided 
 in 1896. 
 
 The amount assessed on the estate of decedent upon the "Ohio 
 notes" from 1884 to 1893, on account of omitted assessments dur- 
 ing those years, aside from the penalties for nonpa}Tnent, was 
 $36,357.71. 
 
 During the above-mentioned years, while the decedent was, as 
 Btated, a resident of the State of Now York, he had a large sum of 
 money invested in the States of Oliio and Indiana, approximating
 
 88 BUCK V. BEACH. [CHAP. II. 
 
 $750,000. The money loaned by him iu Ohio was evidenced by 
 Ohio notes, made by tiie borrowers, who were residents of Ohio, the 
 payment of the money borrowed being secured by mortgages on 
 lands situated iu Ohio. The moneys loaned in- Ohio were loaned 
 through an agent of Mr. Nash, residing iu Cincinnati. The notes 
 were dated and payable in Cincinnati, to the order of Mr. Nash, but 
 were not endorsed by him, and all renewals and payments on ac- 
 count of them were made to his agent in Cincinnati. All moneys 
 paid upon or by reason of these notes were deposited in a bank in 
 Cincinnati to the credit of Mr. Nash, and no part thereof was sent 
 to Indiana. The Cincinnati agent commenced loaning decedent's 
 money about 1860, and, upon the removal of decedent to New York 
 in 1870, and until his death, in 1893, the agent made investments 
 on decedent's behalf in Ohio, collected the principal and interest 
 upon his mortgage loans and had general charge of his financial 
 interests in that State. 
 
 James Buck was the agent of decedent at Lafayette, in the State 
 of Indiana, for many years preceding the death of Mr. Nash. The 
 Ohio notes were sent to him from Cincinnati by the agent there, 
 during the years in question, together with the mortgages securing 
 the payment of the notes, and they were kept in a safe at Lafayette, 
 Indiana, by Mr. Buck, but no business was transacted in regard to 
 them nor any use made of them in Indiana, otherwise than that a 
 short time before the interest on or principal of the notes became 
 due they were sent to the Ohio agent to have the interest payments 
 made to him endorsed upon them, or to be delivered up if the 
 principal were paid. 
 
 Notliing else was done in Indiana in regard to the notes, except 
 that a few days prior to the first day of April in each year (which 
 is the day upon which assessments for taxes are, by law, made in the 
 State of Indiana) Mr. Buck sent the notes and mortgages to the 
 Ohio agent, and a few days subsequent to that day in each year the 
 same were returned by the Ohio agent to Mr. Buck, who retained 
 them in his possession. 
 
 When the Ohio notes and mortgages were sent from Cincinnati 
 to Mr. Buck by the Ohio agent, Mr. Buck made a record of their 
 receipt in a book kept by him for that purpose, showing the dates 
 and amounts of the notes and when due, and whenever payment or 
 renewal of said notes was reported by the Ohio agent to the Indiana 
 agent, he made entries of the facts in the register kept by him. 
 
 Mr. Buck also had possession of the notes and mortgages given 
 to Mr. Nash for moneys loaned in the s State of Indiana, and such 
 moneys were invested and reinvested in that State during these 
 years, and the taxes thereon were duly paid. 
 
 Mr. Buck transacted no business directly with the makers of the 
 Ohio notes or mortgages but, as stated, sent the notes to the Ohio 
 agent for any business to be done in regard to them. 
 
 During Mr. Buck's agency money was sometimes sent to him at 
 Lafayette from Cincinnati to be invested, which money was placed 
 on deposit in the bank in Indiana and loaned for Mr. Nash. Such
 
 SECT. II.] BUCK V. BEACH. 
 
 89 
 
 moneys have nothing to do with the " Ohio notes " in issue in this 
 action. 
 
 During these years, at least from 1886, Mr. Buck was authorized 
 by virtue of a' power of attorney from Mr. Nash to satisfy when due 
 and wlicn the money was paid all notes and mortgages, but so far 
 as the Ohio notes and mortgages were concerned he never assumed 
 to satisfy any of them or receive payment for the same. Tiiat was 
 all done by the Ohio agent at Cincinnati. 
 
 Peckham, J. The only question involved here is in regard to 
 the taxability of the Ohio notes in the .State of Indiana. 
 
 The plaintiff in error asserts that the simple physical presence 
 of the Ohio notes in Indiana payable to and not endorsed by the 
 decedent, did not constitute taxable proi)erty there, becau-e such 
 notes were given and were payable and were paid in Ohio by resi- 
 dents of Ohio, and to a non-resident of Indiana, and for loans 
 made in Ohio, the capital represented by such notes never having 
 been used in business in Indiana, and he insists that a tax upon such 
 capital or upon the notes themselves as representing that capital 
 is an illegal tax, and that to take property in payment of such an 
 illegal tax is to take it without due process of law and constitutes 
 a violation of the Fourteenth Amendment. 
 
 If the facts in this case constituted the debts evidenced by the 
 Ohio notes property in the jurisdiction of the State of Indiana at 
 the time when such taxes were imposed, then the tax was valid, 
 if there were statutory authority of that State for the same. The 
 State Court has held that there was such authority, Buck v. Miller, 
 147 Indiana, 586; Buck v. Beach, 164 Indiana, 37, being the case 
 at bar, and that construction of the statute concludes this court. 
 Delaware &c. Co. v. Pennsylvania, 198 U. S. 341, 352. 
 
 The sole question then for this court is whether the mere presence 
 of the notes in Indiana constituted the debts of which the note? 
 were the written evidence, property within the jurisdiction of that 
 State, so that such debts could be therein taxed. 
 
 Generally, property in order to be the subject of taxation must 
 be within the jurisdiction of the power assuming to tax. State 
 Tax on Foreign-held Bonds, 15 Wall. 300; Erie Pailroad v. Penn- 
 sylvania, 153 U. S. 628, 646 ; Savings Societv v. IMultnomah County, 
 169 U. S. 421, 427; Louisville &c. v. Kentuclry, 188 IJ. S. 385; 
 Delaware &c. v. Pennsylvania, 198 IT. S. 431; Union Transit Co. 
 V. Kentucky, 199 U. S. 194; Metropolitan Ins. Co. v. New Orleans, 
 205 U. S. 395. 
 
 In regard to tangible property the old rule was mohxlm seqminter 
 personam, by which personal property was supposed to follow the 
 person of its owner, and to be subject to the law of the owner's 
 domicil. For the purpose of taxation, however, it has long been 
 held that personal property may be separated from its owner, and 
 he may be taxed on its account at the place where the property is, 
 although it is not the place of his own domicil, and even if he is 
 not a citizen or resident of the State which imposes the tax. Pull- 
 man Palace Car Co. v. Pennsylvania, 141 U. S. 18, 22; Tappau
 
 90 BUCK V. BEACH. [CHAP. II. 
 
 V. Merchants' National Bank, 19 Wall. 490; People ex rel. Hoyt 
 V. The Commissioner of Taxes, 23 N. Y. 224. The same rule applies 
 to intangible property. Generally speaking, intangible property in 
 the nature of a debt may be regarded, for the purposes of taxation, 
 as situated at the domicil of the creditor and within the jurisdiction 
 of the State where he has such domicil. It is property within that 
 State. Thus it has been held that a debt owned by a citizen of one 
 State against a citizen of another State and evidenced by the bond 
 of the debtor, secured by a deed of trust or mortgage upon real estate 
 situated in the State where the debtor resides, is properly taxed by 
 the State of the residence of the creditor, if the statute of that State 
 so pro\-ides, and such tax violates no provision of the Federal Con- 
 Btitution. Kirtland v. Hotchkiss, 100 U. S. 491, 498. 
 
 Eejecting the fiction of law in regard to the situs of personal 
 property, including therein choses in action, the courts of Indiana 
 have asserted jurisdiction by reason of the statute of that State 
 over these Ohio notes for the purpose of taxation in Indiana, founded 
 upon the simple fact that such notes were placed in the latter State 
 by the Ohio agent of the decedent under the circumstances above 
 set forth. The Supreme Court of Indiana refused to accept the 
 testimony of the agents that the Ohio notes were sent to Lafayette 
 merely for safe keeping, and for clerical convenience, and said that 
 "the court below was authorized to make the opposite deduction 
 from the uniform course of the business in respect to the keeping 
 of said notes and mortgages and from the evidence that decedent 
 gave the direction which established the practice that was pursued 
 in that particular. More than that, the evidence clearly warranted 
 the conclusion that Buck was vested with a control of said notes 
 and securities for the purposes of enabling decedent to escape taxa- 
 tion in Ohio. We must, therefore, conclude, in support of the gen- 
 eral finding, that the court below found that in the conducting of 
 the business of the Ohio agency the decedent separated from said 
 business the possession of said notes and mortgages and vested the 
 right to such possession in said Buck. There was no return for taxa- 
 tion of said notes, or of the investments represented by them, either 
 in Ohio or in New York during the lifetime of the decedent." 
 
 Taking this to be a finding of fact by the Supreme Court of the 
 State, it is plain that the action of the decedent in sending the Ohio 
 notes into the State of Indiana for the purpose stated (whether 
 successful or not), was improper and unjustifiable. The record 
 does show, however, that the executors subsequently paid the Ohio 
 authorities over $40,000 for taxes on the moneys invested in Ohio. 
 
 But an attempt to escape proper taxation in Ohio does not confer 
 jurisdiction to tax property asserted to be in Indiana, which really 
 lies outside and bevond the jurisdiction of that State. Jurisdiction 
 of the State of Indiana to tax is not conferred or strengthened by 
 reason of the motive which may have prompted the decedent to send 
 into the State of ludiaua. these evidences of debts owing him by 
 residents of Ohio. The question still remains, was there any prop- 
 erty within the jurisdiction of the State of Indiana, so as to permit
 
 JsECT. 11.] BUCK V. liEACII. 91 
 
 that state to tax it, simply because of the presence of the Ohio notes 
 in that State? It was not the value of tlie paper as a tangible thing, 
 on which these promises to pay the debts existing in Ohio were 
 written, that was taxed by that State. The property really taxed 
 was the debt itself, as each separate note was taxed at the full 
 amount of the debt named therein or due thereon. And jurisdiction 
 over these debts for the purpose of taxation was asserted and exer- 
 cised solely by reason of the physical presence in Indiana ui tlu3 
 notes themselves, although tliey were written evidence of the ex- 
 istence of tile debts which were in fact thereby taxed. 
 
 A distinction has been sometimes taken between bonds and other 
 specialty debts belonging to the deceased, on the one hand, and 
 simple contract debts on the other, for the purpose of probate juris- 
 diction, and the probate court, where the bonds are found, has been 
 held to have jurisdiction to grant probate, while in the other class 
 of debts (including promissory notes) jurisdiction has attached to 
 the probate Court where the debtor resided at the death of the 
 creditor. 1 Williams on Executors, 6th Am. from 7th English ed., 
 bottom paging 288, 290, note [/i] ; Wvman v. Halstead Adm'r, 109 
 U. S. G54. See also Beers v. Shannon, 73 N. Y. 292, 299 ; Owen 
 V. Miller, 10 Ohio St. 136. 
 
 Under such rule, the debts here in question were not property 
 within the State of Indiana, nor were the promissory notes them- 
 selves, whicli w^ere only evidence of such debts. The rule giving 
 jurisdiction where the specialty may be found, has no application 
 to a promissory note. Assuming such a rule, the case here is not 
 covered by it. 
 
 There are no cases in this court where an assessment such as the 
 one before us has been involved. We have not had a case where 
 neither the party assessed nor the debtor was a resident of or present 
 in the State where the tax was imposed, and where no business was 
 done therein by the owner of the notes or his agent relating in any 
 way to the capital evidenced by the notes assessed for taxation. We 
 cannot assent to the doctrine that the mere presence of evidences 
 of debt, such as these notes, under the circumstances already stated, 
 amounts to the presence of property within the State for taxation. 
 That promissory notes may be the subject of larceny, as stated in 
 48 N. Y. cited "below, does not make the debts evidenced by them, 
 property liable to taxation within the State where there is no other 
 fact than the presence of the notes upon which to base the claim. 
 
 In People v. The Board of Trustees, &c., 48 N. Y. 390, it was 
 held that money due upon a contract for the sale of land was per- 
 sonal propertv, and that where such contract belonging to a non- 
 resident was in the hands of a resident aeont. it might, for the pur- 
 poses ,of municipal taxation, be assessed to the agent and taxed. 
 In the opinion Judcre Earl said: "The debts due upon these 
 contracts are personal estate, the same as if they were due upon notes 
 or bonds; and such personal estate may be said to exist where the 
 oblisiations for pavments are held." The contracts spoken of in that 
 case" were contracts for the sale of land by a non-resident owner to
 
 92 BUCK V. BEACH. [cHAP. n. 
 
 persons witliin the count}- where the lands were situated. The 
 debtors resided within the State, and the agent of the non-resident 
 for the sale of the land resided in the State and had possession of 
 the contracts. A different case as to its facts from the one before us. 
 
 In People v. Smith, 88 N. Y. 576, jurisdiction to tax in New 
 York was denied under the statute of that State, because the personal 
 estate was not witliin the State, althougli the same principle, page 
 581 as cont-ained in 48 N. Y. supra, was asserted. 
 
 If payment of these notes had to be enforced it would not be to 
 the courts of Indiana that the owner would resort. He would have 
 to go to Ohio to find the debtor as well as the lands mortgaged as 
 security for the payment of the notes. It is true that if the notes 
 were stolen while in Indiana, and they were therein a subject of 
 larceny, the Indiana courts would have to be resorted to for the 
 punishment of the thieves. That would be in vindication of the 
 general criminar justice of the State. This consideration, however, 
 is not near enough to the question involved to cause us to change 
 our views of the law in regard to the taxation of property, and make 
 that property within the State, which we think is clearly outside it. 
 
 Although public securities, consisting of state bonds and bonds 
 of municipal bodies, and circulating notes of banking institutions 
 have sometimes been treated as property in the place where they 
 were found, though removed from the domicil of the owner. State 
 Tax on Foreign-held Bonds, 15 Wall. 300, 324, it has not been held 
 in this court that simple contract debts, though evidenced by pro- 
 missory notes, can under the facts herein stated be treated as prop- 
 erty and taxed in the State where the notes may be found. 
 
 As is said in the above cited case at page 320 : " All the property 
 there can be in the nature of things in debts of corporations, be- 
 longs to the creditors, to whom they are payable, and follows their 
 domicil, wherever that may be. Their debts can have no locality 
 separate from the parties to whom they are due. This principle 
 might be stated in many different ways, and supported by citations 
 from numerous adjudications, but no number of authorities, and no 
 forms of expressions could add anything to its obvious truth, which 
 is recognized upon its simple statement.'' 
 
 The cases cited in Metropolitan Life Insurance Company v. The 
 City of New Orleans, 205 IJ. S. 395, show that this rule is enlarged 
 to the extent of holding that capital, evidenced by written instru- 
 ments, invested in a State may be taxed by the authorities of the 
 State, although their owner is a non-resident and such evidences of 
 debt are temporarily outside of the State when the assessment is 
 made. Although the language of the opinion in the case of State 
 Tax on Foreign-held Bonds, supra, has been somewhat restricted 
 so far as regards the character of the interest of the mortgagee in 
 the land mortgaged, Savings, &c. Society v. Multnomah County, 
 169 U. S. 421, 428, the principle upon which the case itself was 
 decided has not been otherwise shaken by the later cases. New 
 Orleans v. Stempel, 175 TJ. S. 309, 319, 320; Blackstone v. Miller, 
 188 TJ. S. 189, 206. In the Stempel case, supra, the notes, as we
 
 SECT. II.] BUCK r. BEACH. Oo 
 
 have said, represented the capital of the owner invested in the State, 
 and tlie capital was taxed, although the owner was a non-resident. 
 
 Cases arising under collateral inheritance tax or succession tax 
 acts have been cited as ahordiug foundation for the right to tax as 
 herein asserted. The fuundation upon which such acts rest is 
 dilfereut from tliat which exists where the assessment is levied upon 
 property. The succession or inheritance tax is not a tax on prop- 
 erty, as has been frequently held by this court, Knowlton v. Moore, 
 178 U. S. 41, and Blackstone v. Miller, 188 U. S. ISU, and therefore 
 the decisions arising under such inheritance tax cases are not in 
 point. 
 
 Our decision in this case has no tendency to aid the owner of 
 taxable property in any effort to avoid or evade proper and legiti- 
 mate taxation. The presence of the notes in Indiana formed no 
 bar to the right, if it otherwise existed, of taxing the debts, evidenced 
 by the notes, in Ohio. It does, however, tend to prevent the taxa- 
 tion in one State of property in the shape of debts not existing there 
 and which if so taxed would make double taxation almost sure, 
 which is certainly not to be desired and ought, wherever possible, to 
 be prevented. 
 
 For the reason that as the assessment in this case was made upon 
 property which was never within the jurisdiction of the State of 
 Indiana the State had no power to tax it, and the enforcement of 
 such a tax would be the taking of property without due process of 
 law. 
 
 The judgment of the Supreme Court of Indiana is reversed and 
 the case remanded for further proceedings not inconsistent with the 
 opinion of this court. 
 
 Reversed. 
 
 Brewer and Day, JJ., dissenting.^ 
 
 ' " It has been asserted or implied, again and again, that the States had the 
 power to deal with negotiable paper on tho footing of situs. It is well 
 settled that bank bills and municipal bonds are in such a concrete, tangible 
 form that they are subject to taxation where found, irrespective of the dom- 
 icil of the owner; . . . notes and mortgages are of the same nature. . . we 
 see no reason why a State may not declare that if found within its limits 
 they shall be subject to taxation. New Orleans i\ Stempel, 175 U. S. 309, 
 322, 323. Bristol v. Washington County, 177 U. S. 133, 141. State Board 
 of Assessors v. Comptoir National d'Escompte, 1!)1 U. S. 388, 403, 404. 
 Metropolitan Life Insurance Co. v. New Orleans, 205 U. S. 395, 400, 402. 
 This is the established law unless it has been overthrown by the decision in 
 Buck V. Beach, 200 U. S. 302. 
 
 " No such effect should l)e attributed to that case. The Ohio notes in Buck's 
 hands that were held not to be ta.xable in Indiana were moved backward and 
 forward between Ohio and Indiana with the intent to avoid taxation in 
 either State. 206 U. S. 402. They really were in Ohio hands for business 
 purposes, ihid., 305, and sending them to Indiana was spoken of by Mr. 
 Justice Pcckliam as improper and unjustifiable. Ibid. 402. Their absence 
 from Ohio evidently was regarded as a temporary absence from home. 
 Ihiil. 404. And the conclus*ion is carefully limited to a refusal to hold the 
 presence of the notes " under the circumstances already stated " to amount 
 to the presence of property within the State. A distinction was taken be-
 
 94 TAI'PAN V. merchants' NATIONAL BANK. [cHAP. IL 
 
 TAPPAN V. MERCHANTS' NATIONAL BANK. 
 
 SUPEEME COUKT OF THE UNITED STATES. 1873. 
 [Reported 19 Wall. 490.] 
 
 Bill to enjoin the collection of taxes in Cook County on the 
 shares of the Merchants' Bank. The Circuit Court of the Northern 
 District of Illinois granted the injunction, and Tappan, the col- 
 lector, appealed.^ 
 
 Waite^ C. J. We are called upon in this case to determine whether 
 the General Assembl}' of the State of Illinois could, in 1867, provide 
 for the taxation of the owners of shares of the capital stock of a 
 National bank in that State, at the place, within the State, where 
 the bank was located, without regard to their places of residence. The 
 statute of Illinois, under the authority of which the taxes complained 
 of were assessed, was passed before the act of Congress, approved 
 February 10th, 1868, which gave a legislative construction to the 
 words, " place where the bank is located, and not eleswhere," as use(} 
 in rection forty-one of the National Banking Act, and permitted 
 the State to determine and direct the manner and place of taxing 
 resident shareholders, hut provided that non-residents should be taxed 
 only in the city or town where the bank was located. 
 
 The power of taxation by any State is limited to persons, property, 
 or business within its jurisdiction. Pergonal propertv, in the ab- 
 sence of any law to the contrary, follows the person of the o-woier, and 
 has its situs at his domicile. But, for the purposes of taxation, it 
 may be separated from him, and he may he taxed on its account at 
 the place where it is actually located. These are familiar principles, 
 and have been often acted upoii in this court and in the courts 
 of Illinois. If the State has actual jurisdiction of the person of 
 the owner, it operates directly upon him. If he is absent, and it 
 has jurisdiction of his property, it operates upon him through his 
 property. 
 
 Shares of stock in National banks are personal property. They 
 are made so in express terms by the act of Congress under which 
 such banks are organized. They are a species of personal property 
 which is, in one sense, intanirihle and incorporeal, but the law w^hir-h 
 creates them may separate them from the person of their owner for 
 
 tween thp presence sufficient for a succession tax like that in this case, and 
 that reouired for a property tax such as then was before the court, and the 
 only point decided was that the notes had no such presence in Indiana as 
 to warrant a propertv tax. See New York Central & Hudson River R. R. 
 Co. V. Miller, 202 U. S. 584, .597. If Buck i\ Beach is not to he distinfruished 
 on one of the forecroinw jrrounds, as some of us think that it can he, we are 
 of opinion that it must yield to the current of authorities to which we have 
 referred." — HoT.ME!^. .J.' in Wheeler v. Sohmer, 2.33 U. S. 434. 439. 
 * This Bhort statement is substituted for that of the Reporter.
 
 SECT. II.] BELLOWS FALLS POWER CO. V. COMMON WEALTH. 95 
 
 the purposes of taxation, and give them a situs of their own. This has 
 been dune. By section forty-one of the National Banking Aet, it is 
 in effect provided that all sliares in sucli banks, held by any person 
 or body corporate, may be included in the valuation of the personal 
 property of such person or corporation in the .assessment of taxes 
 imposed under Slate aulhorit}', at the place where the bank is 
 located, and not elsewhere. This is a law of the property. Every 
 owner takes the property subject to this power of taxation under 
 State authority, and every non-resident, by becoming an own(T, 
 voluntarily submits himself to the jurisdiction of the State in which 
 the bank is established for all the purposes of taxation on account of 
 bis ownership. His money invested in the shares is withdrawn 
 from taxation under the authority of the State in which he resides 
 and submitted to the taxing power of the State where, in contempla- 
 tion of the law, his investment is located. The State, therefore, 
 within which a National bank is situated has jurisdiction, for the 
 purposes of taxation, of all the shareholders of the bank, both resident 
 and non-resident, and of all its shares, and may legislate accordingly. 
 
 Decree reversed and the cause remanded. ^ 
 
 BELLOWS FALLS POWEE CO. v. COMMONWEALTH. 
 Supreme Judicial Court of Massachusetts. 1915. 
 
 [Reported 222 Mass. 51.] 
 
 RuGG, C. J. This is a petition under St. 1909, c. 490, Part 111, 
 § 70, for the recovery of the amount of an excise alleged to have been 
 excessive, which was levied upon a domestic business corporation 
 under §§ 41 and 43 of Part III of the tax act, St. 1909, c. 490, as 
 amended by St. 1904, c. 198, § 6. The questions presented are 
 whether certain stocks and bonds of Vermont corporations are " secu- 
 rities which if owned by a natural person resident in this Common- 
 wealth," by § 41 " would not be liable to taxation," or by § 43 " would 
 be liable to taxation," and also whether such stock is "property 
 situated in another State or country and subject to taxation therein" 
 by§4L ... 
 
 The petitioner owned a large number of shares of stock in a Ver- 
 mont corporation, the value of which the tax commissioner refused 
 to deduct from the true market value of the corporate franchise of 
 the petitioner, for the purpose of determining its excise tax. Tt is 
 contended by the petitioner that the tax commissioner was in error 
 for two reasons, (1) because the stock of the Vermont corporation 
 would not be subject to taxation in this Commonwealth if owned by 
 a natural person, and (2) because such stock is property situated in 
 another State and subject to taxation therein. These two conten- 
 tions rest on statutes of the State of Vermont. . . . 
 
 ' Arc. f=y:ate v. Travelers Ins. Co., 70 Conn. 500. See Matter of Bronson, 
 150 N. Y. 1.
 
 96 BELLOWS FALLS POWER CO. V. COMMONWEALTH. [cHAP. II. 
 
 Plainly these contentions would have no merit in law were it not 
 for the special provisions of the Vermont statute. It was early de- 
 cided in this Commonwealth that shares of stock in a. foreign corpora- 
 tion were taxable as property to the owner resident here, although 
 tlie place of business and the entire property of the corporation 
 were in another jurisdiction. Great Barriugton v. County Commis- 
 sioners, 16 Pick. 572. This principle of taxation has been repeatedly 
 upheld, the latest instance being Hawley v. Maiden, 204 Mass. 138. 
 That decision was ailirmed in 232 U. S. 1, where, at pages 12 and 
 13, it was said by Mr. Justice Hughes in 'delivering the opinion: 
 "Whether, in the case of corporations organized under State laws, 
 a provision by the State of incorporation fixing the situs of shares 
 for the purpose of taxation, by whomever owned, would exclude the 
 taxation of the shares by other States in which their owners reside 
 is a question which does not arise upon this record and need not be 
 decided.'* We are not aware that this question ever has been 
 determined by this court or by the Supreme Court of the United 
 States. It now is presented. It must be taken as the settled purpose 
 of our tax law to assess to the owners resident in this Commonwealth 
 a tax upon all shares of foreign corporations. It is provided in the 
 tax act (St. 1909, c. 490) in Part I, § 2, that " All property real and 
 personal situated within the Commonwealth, and all personal prop- 
 erty of the inhabitants of the Commonwealth wherever situated, 
 unless expressly exempted by law, shall he subject to taxation." 
 Part I, § 23, provides that *'A11 personal estate, within or with- 
 out the Commonwealth, shall be assessed to the owner in the city or 
 town in which he is an inhabitant on the first day" of April, with 
 exceptions not here material, save that by St. 1909> c. 516, § 1, 
 "Merchandise, machinery and animals owned by inhabitants of this 
 Commonwealth, but situated in another State shall be exempt from 
 taxation." Part I. § 4, provides that "Personal estate for the pur- 
 pose of taxation shall include . . . Third, Public stocks and securi- 
 ties, . . . bonds of railroads and street railways, stocks in turnpikes, 
 bridges and moneyed corporations within or without this Common- 
 wealth . . ." with exceptions not now of consequence. In sub- 
 stance, the only question is whether these provisions of the law, which 
 plainly include in their scope stock such as is owned by this petitioner 
 in the Vermont corporation, conflict as applied to such shares with 
 any provision of the State or federal constitution. 
 
 Vermont has the power to tax all the shares of corporations or- 
 ganized under its laws, whethpr owned by its residents or by those 
 of other States or countries. This expressly was decided in Corry 
 V. Mayor & City Council of Baltimore, 196 U. S. 466, and m St. 
 Albans v. National Car Co. 57 Vt. 68. The nrincmle was applied 
 in Tannan v. Merchants' National Bank, 19 Wall. 490. It was rec- 
 offnizpd in Crevp^ v. Shaw, 173 Mass. 205, 208, Kingsbury v. Chapm, 
 196 Mass. 533, 535, anrl Kennerlv v. Hodees. 215 Mass 112, 114. 
 
 Tt may be urtred on the one pi<1e that the nature and the incidents 
 of the share, of stock are fixed bv the law by which the corporation is 
 created- that the provisions of that law are limitations upon the
 
 SECT. II.] BELLOWS I' ALLS POWEE CO. V. COMMONWEALTH. 97 
 
 essential characteristics of shares and follow them wherever they 
 may go; and that if the situs of the shares for purpose of taxation 
 is declared by that law to be in the State of its domicil, that is an 
 inherent restriction which everywhere must be recognized as an inci- 
 dent of the property represented by the shares ; that tliis provision as to 
 situs for tax purposes is contractual in substance and may be invoked 
 by the owner in exoneration of liability as much as others whicli are 
 obligatory are resorted to by creditors to establish a liability. Con- 
 verse V. Ayer, 197 Mass. 443, 453, Whitman v. Oxford National 
 Bank, 176 U. S. 559; that by virtue of the Vermont statute this 
 stock is divested of its taxable character as intangible property and 
 clothed with an immovable garment of tangibility located in Vermont 
 alone, and hence, that these shares stand on the same footing as mer- 
 chandise and other tactile personal effects which cannot be taxed to 
 their owner in a jurisdiction other than that in which they perma- 
 nently are placed. Delaware, Lackawanna & Western Railroad v. 
 Pennsylvania, 198 U. S. 341. Old Dominion Steamship Co, v. Vir- 
 ginia, 198 U. S. 299. Expressions by eminent judges are laid hold 
 of as countenancing the soundness of these contentions. It was said 
 by Chief Justice Waite in Tappan v. Merchants' National Bank, 19 
 Wall. 490, at page 499, " shares of stock in national banks are per- 
 sonal property. . . . They are a species of personal property which is, 
 in one sense, intangible and incorporeal, but the law which creates them 
 may separate them from the person of their owner for the purposes 
 of taxation, and give them a situs of their own. This has been done. 
 [Here is quoted the section of the national banking act to that effect.] 
 This is a law of the property. Every o^\Tier takes the property sub- 
 ject to this power of taxation under State authority, and every non- 
 resident, by becoming an owner, voluntarily submits himself to the 
 jurisdiction of the State in which tlie bank is established for all the 
 purposes of t;ixation on account of his ownership." In Covington v. 
 First National Bank of Covington, 198 IT. S. 100, at page 111, it 
 was said by Mr. Justice Day, "The sitits of shares of foreign-held 
 stock in an incorporated company, in the absence of legislation im- 
 posing a duty upon the company to return the stock %vithin the State 
 as the agent of the owner, is at the domicil of the owner." It is to 
 be noted, however, that both these cases relate to shares in national 
 banks. The subject of national banking is within the exclusive con- 
 trol of Congress and its mandate respecting any subject within ite 
 sphere is supreme and binding upon all the States. The national 
 bank act is explicit as to the situs of shares of stock in national bank? 
 for taxation. These expressions, therefore, were directed to a dif- 
 ferent subject and are of slight value in considering the present ques- 
 tion, which expresslv was left open in Hawley v. Maiden, 232 IT. S. 
 1, 13. See Orether v. Wright, 23 C. C. A. 498, 512. 
 
 Weighty as are. the sugsrestions which have been noted above, we 
 are of opinion that the constitutionalitv of the statute requiring the 
 taxation of shares like these in question must be sustained. The 
 fudnmental ground is that the power to tax all property within its 
 jurisdiction is a necessary attribute of sovereignty, and that there
 
 98 BELLOWS FALLS POWER CO. V. COMMON WEALTH. [cKAP. II. 
 
 is a certain quality of property in these shares attaching to the person 
 of the owner and hence taxable at his domicil. 
 
 It is too well settled to require the citation of authorities that 
 the several States of the Union are foreign to each other except so 
 far as the United States is paramount as the dominating gov- 
 ernment, and except so far as they are bound to recognize the frater- 
 nity among sovereignties established by the Constitution of the United 
 States. No State taxation laws can have extraterritorial elfect. Each 
 State, so far as relates to the power of taxation, is an independent 
 sovereignty. It is not concerned with what other States may do as 
 to property within its jurisdiction, which may be made the subject 
 of taxation bv itself. Dwight v. Boston, 12 Allen, 316. Sturges v. 
 Carter, 114 U. S. 511. Seward v. Rising Sun, 79 Ind. 351. BacOT^ 
 V. State Tax Commissioners, 126 Mich. 22. Judy v. Beckwith, 137 
 Iowa, 24. McKeen v. County of Northampton, 49 Penn. St. 519. 
 State V. Branin, 3 Zabr. 484, 496. Bradley v. Bander, 36 Ohio St. 
 28, Ogden v. St. Joseph, 90 Mo. 522, 529. Commonwealth v. Lovell, 
 125 Ivy. 491. Stanford v. San Francisco, 131 Cal. 34, All property 
 within the jurisdiction of a State, which is capable of being taxed, 
 may be made subject to taxation unless exempted imder federal or 
 State law. No State can assess to the residents a tax upon their real 
 estate or tangible personal property situated in a foreign jurisdiction. 
 Union Refrigerator Transit Co. v. Kentucky, 199 U. S. 194. Neither 
 can any State give extraterritorial effect to its laws exempting prop- 
 erty of its subjects from taxation in other jurisdictions. But, except 
 as restrained by federal or State constitutional provisions, " the power 
 of the State as to the mode, form, and extent of taxation is unlimited, 
 where the subjects to which it applies are within her jurisdiction." 
 Kirtland v. Hotchkiss, 100 U. S. 491, 497. 
 
 There is a necessary element of property in shares in corporations 
 which, although intangible, attaches to and follows the person of the 
 ovmer, and is inseparable from it. Such shares are personal property 
 and not real estate. They are subject to succession according to the 
 law of the domicil of the owner. As was said in Hawley v. Maiden, 
 232 U. S. 1, at page 9, " It is well settled that the property of the 
 shareholders in their respective shares is distinct from the corporate 
 property, franchises and capital stock." and further at page 12, that 
 shares of stock are " in the nature of contract rights or choses in ac- 
 tion. Morawetz on Corporations, § 225." It was held in Stanwood 
 V. Stanwood, 17 Mass. 57, in an opinion written by Chief Justice 
 Parker, that shares of stock in a bank were choses in action. The 
 principle of that decision applies to vshares of stock in all corpora- 
 tions. It is an incident of such shares that the owner is entitled to 
 participate in the net profits earned, to enforce the use of its capital 
 for its corporate purposes, to restrain abuses of corporate powers, 
 and to receive his proportion of the property of the corporation re- 
 maining after the payment of its debts upon its dissolution. Van 
 Allen V. The Assessors, 3 "W^all. 573, 584. Pnrrinsrton ik Tennessee, 
 95 U. S. 679, 687, In mo=t norpomf ions he hn= the further ri?ht in 
 proportion to his ownership to participate in the election of officers
 
 SECT. II.] BELLOWS FALLS POWER CO. V. COMMONWEALTH. 99 
 
 and such direction of the corporate allairs as may be vested in stock- 
 holders. Certificates of stock may be the subject of contracts for 
 sale or exchange under our laws. Opinion of tlie Justice-s, lt)(J Mass. 
 603, 619, 621. Uur laws may be invoked i-o enforce such contracts 
 and other property rights, Herbert t'. .Simson, 220 Mass. 480, as well 
 as to protect the owner and his property interest therein against theft 
 or fraud. His property right as such owner may be attached and 
 secured by his creditors by resort to our courts, and in many instances 
 doubtless this is the only way of reaching such right in any juris- 
 diction. This property right follows the person of the owner, has its 
 situs at his domicil and is there taxable regardless of any law of a 
 sister State by w liose authority the corporation itself may have been 
 created. 
 
 Certificates of stock in a corporation have other of the charac- 
 teristics of property. They may be converted like corporeal personal 
 property. Jarvis v. Rogers, 15 ]\Iass. 389. Hagar v. Norton, 188 
 Ma.-s. 47, 50. MczVllister v. Kulm, 9G U. S. 87. They are the sub- 
 ject of larceny and embezzlement. O'llerron v. Gray, 168 Mass. 573, 
 575. They may be hypothecated, pledged and replevied. Kennedy 
 V. Hodges, 215 Mass. 112, 115. They may be made by statute subject 
 to attacinnent and garnishment. Puget Sound National Bank of 
 Everett v. Mather, 60 Minn. 362. Title pasfses by their delivery and 
 assignment or endorsement. Sargent v. Essex Marine Railway, 9 
 Pick. 201. Sargent v. Franklin Ins. Co. 8 Pick. 90, 95. Boston 
 Music Hall Association v. Cory, 129 Mass. 435. Certificates of stock 
 are not in every respect the equivalent of the shares in the corporation 
 which they represent. Often they are spoken of as evidence of title, 
 Kennedy v. Hodges, iibi .supra, Richardson v. Shaw, 209 U. S. 365, 
 378; but they may be regarded as something more. Indeed, it was 
 said in Hatch v. Reardon, 204 U. S. 152, 161, respecting a certificate 
 of stock, " That document was more than evidence, it was a constit- 
 uent of title. No doubt, in a more remote sense, tlie object Avas the 
 membership or share which the certificate conferred or made attain- 
 able. More remotely still it w^as an interest in the property of the 
 corporation, which might be in other States than either the corpora- 
 tion or the certificate of stock." In Merritt v. American Steel-Barge 
 Co. 24 C. C. A. 530, at page 537, is found this lansruage : " Speaking 
 technically, it is true that a stock certificate is written evidence of a 
 certain interest in corporate property. . . . But in the business world 
 such obligations or securities are treated as something more than movp 
 muniments of title. They are dailv houfrht and sold like ordinary 
 chattels, . . . they have an inherent market value, and, while differ- 
 ing in some respects from chattels, they are Erenerally clas^ifipd n^ 
 personal property." Said Cooley, C. J., in Daggett v. Davis. ^^ 
 Mich. 35, respecting the characteristics of stock in a corporation, 
 "the certificnte itself is also -property; standing as it does as th^^ 
 representative of tlie shares." In Simpson v. Jersey Cit^' Contrnctincr 
 Co. 165 N. Y. 103, 197, 198, occur these words: "Certificates of 
 stock are treated bv business men as propertv for all practical pur- 
 poses. They are sold in the market and they are transferred as collat-
 
 100 BELLOWS FALLS POWEK CO. V. COMMONWEALTH. [cHAP. II. 
 
 eral security for loans, and they are used in various ways as property. 
 They pass by delivery from hand to hand." In Cook on Corporations, 
 (7th ed.) § -±85, it is said, '" eertilicates of stock have gradually grown 
 to be more than mere receipts or evidence of stock, and have come to 
 be the stock itself, practically, in business transactions . . . and, 
 like a promissory note, a certilicate of stock is property in itself." 
 While some of these expressions go rather far, enough has been said 
 to show a generally prevailing tendency to treat a certilicate of stock 
 as possessing incidents of property. These are a sufficient basis for 
 taxation to the owner at his residence. The validity of a commercial 
 usage whereby possession of a certilicate of stock duly indorsed en- 
 ables the holder to pass title good against the world has been recog- 
 nized in numerous cases. Eussell v. American Bell Telephone Co. 
 180 Mass. 467. Andrews v. Worcester, Nashua & Eochester Eailroad, 
 159 Mass. 64, 66. Scollans v. Eollins, 173 Mass. 275; S. C. 179 
 Mass. 346. Clews v. Friedman, 182 Mass. 555. Baker v. Davie, 211 
 Mass. 429, 438. 
 
 If the domiciliary State of the corporation has the right to estab- 
 lish the situs of its shares of stock for purposes of taxation, on prin- 
 ciple it would seem that that power may be exercised to declare an 
 entire exemption from taxation and to collect revenue in some other 
 way from the corporation. If the power exists in the State creating 
 the corporation to establish the situs of its shares of stock for the 
 purpose of taxation, and is exercised, it must be absolute and no other 
 State can inquire into the character or extent of that taxation in an 
 effort to tax its own citizen who is a stockholder in such corporation. 
 It hardly seems possible that the Fourteenth Amendment to the 
 federal constitution can have such an effect. 
 
 The theory of taxation is that it is money exacted from the subject 
 in return for the protection afforded by established government. It is 
 the duty of governments to protect persons and property. These rights 
 of the Massachusetts owner of shares of stock in the Vermont corpora- 
 tion pertain to his residence here and receive the protection of our 
 laws. To that extent the shareholder resident here receives for the 
 taxation imposed a return in governmental protection for the prop- 
 erty rights incident to his ownership. 
 
 These are incidents of property which necessarily follow the person 
 of the owner of shares in foreign corporations, even though the shares 
 may be taxed at the foreign domicil of the corporation. For these pur- 
 poses the situs of corporate shares follows the domicil of the owner. 
 This is the general rule. There appears to us to be no ground for the 
 pcfnblishmont of an exception to that general rule in the instant case. 
 Bristol V. Washington County, 177 U. S. 133. Ayer & Lord Tie Co. 
 V. Kentucky, 202 U. S. 409. Southern Pacific Co. v. Kentucky, 222 
 F. S. 63. 69. Darnell v. Indiana. 226 TJ. S. 390. Frothingham v. 
 Shaw, 175 Mass. 59. Welch v. Boston. 221 Mass. 155. On this 
 gronnd. if not on others also, Selliger v. Kentucky, 213 U. S. 200, is 
 distingnishable. 
 
 The rase at bar closely resembles Bonaparte v. Tax Court, 104 
 TJ. S. 592. where municipal and State bonds, soine entirely exempted
 
 SECT. II.] BELLOWS FALLS I'OWEK CO. V. COMMONWEALTH. 101 
 
 from taxation and others subject to taxation in the State of issue by 
 the State laws under which they were authorized, nevertheless were 
 held to be taxable at the domicil of the owner, in principle that case 
 seems indistinguisiiable from the case at bar. An express legislative 
 declaration by the debtor State that its bonds either shall be exempt 
 from taxation or shall be subject to taxation in its own jurisdiction, 
 although not categorically an attempt to separate the situs of tlie 
 debt from the person of the owner, yet is in substance the equivalent 
 of a declaration to that end. It is a legislative elfort to incorporate 
 into the property as one of its essential qualities an exemption from 
 taxation or a liability to taxation in the State of issue alone. It is 
 hard to conceive of a purpose on the part of that State not to attach 
 by strong inference and fair implication a separation of situs for taxa- 
 tion from the domicil of the owner to bonds so issued, if the effective 
 exercise of such a function were within the scope of legislative power. 
 Indeed, the Vermont statute is not a precise assertion of separation of 
 sittis of shares from the person of the non-resident owner. It is a 
 simple exercise of the power of the sovereign to tax. That was the 
 effect of one of the statutes under consideration in Bonaparte v. Tax 
 Court, 104 U. S. 592. The barrier against accomplishing that pur- 
 pose in such way as to compel recognition by the taxing power of a 
 sister State was no greater in substance in that case than it is in the 
 present case. 
 
 It has been held that the State having jurisdiction over the debtor 
 has the constitutional power to assert and maintain for itself a situs of 
 the debt for purposes of taxation and levy a tax thereon against the 
 creditor domiciled in another State. This was decided as to debts 
 secured by mortgage upon real estate in Savings & Jjoan Society t'. 
 Multnomah County, 169 U. S. 421. It was decided as to unsecured 
 credits, whether expressed by notes or existing as bald accounts cur- 
 rent, in Liverpool & London & Globe Ins. Co. v. Assessors for the 
 Parish of Orleans, 221 U. S. 346. Bonaparte v. Tax Court upheld 
 the power of the State having jurisdiction of the creditor owning 
 the debt to tax him at his domicil upon the maxim mohilia sequuntur 
 personam, despite the express tax or exemption from taxation hy the 
 State having jurisdiction w^here the debt was created and the debtor 
 domiciled, while the Multnomah County and Orleans cases sustained 
 an exercise of the power to tax by the State having jurisdiction of the 
 debtor regardless of what might happen in the State having jurisdic- 
 tion of the creditor. The more comprehensive power of Congrro's 
 as to taxation and exemption from taxation of suhjects within its 
 jurisdiction as compared with that of a State lecrislature is pointed 
 out by Taft, J., in an opinion concurred in bv Lurton, J., in Crether 
 V. Wright, 23 C. C. A. 498, 512. 
 
 It is manifest from the adjudicntions by the Fnitod Stntes Su- 
 preme Court mentioned above that under some circumstances the 
 same property may be taxed to the same person in differont jurisdic- 
 tions without violating anv riffht secured bv the federal constitution. 
 Put in other words, these decisions appear to menu that property mav 
 have a situs in two different jurisdictions for taxation purposo-5 when
 
 102 BELLOWS FALLS TOWER CO. V. COMMONWEALTH. [ciIAP. II. 
 
 the nature of the property seems to require or permit it. There may 
 be a dill'erence bet^veeu bonds and shares of stock as to capacity for 
 independent situs. Blackstoue v. Miller, 188 U. S. 189, 206. Selliger 
 V. Kentucky, 213 U. !S. 200, 201. But there appears to be no ground 
 for distinction between shares of stock and accounts current so far 
 as concerns the issues here involved. This principle governs the case 
 at bar. It shows that Corry v. Mayor & City Council of Baltimore, 
 1!JG U. S. 46G, is not inconsistent with this result, but that it bears 
 the same relation to the present case as does Liverpool & London & 
 Globe Ins. Co. v. Assessors for the Parish of Orleans to Bonaparte v. 
 Tax Court. As was said in Kidd v. Alabama, 188 U. S. ?30, at page 
 732, by Mr, Justice Holmes, as to taxation between sister States, " it 
 would be a great advantage to the country and to the individual States 
 if principles of taxation could be agreed upon which did not conflict 
 with each other, and a common scheme could be adopted by which 
 taxation of substantially the same property in two jurisdictions could 
 be avoided. But the Constitution of the United States does not go 
 so far." 
 
 There is an analogy so far as concerns situs between the case at 
 bar and the numerous cases holding that residence of the owner is 
 sufficient ground for the imposition of a succession or inheritance tax 
 upon various lands of intangible property. Frothingham v. Shaw, 
 175 Mass. 59. Buck v. Beach, 206 U. S. 392. Wheeler v. New York, 
 233 U. S. 434. 
 
 The principle against double taxation of the same property has no 
 application, because that is confined in operation to such taxation 
 in the same jurisdiction. 
 
 Whether it would be wise to make exemptions in cases like the 
 present is not a judicial but a legislative question. Knight v. Boston, 
 159 Mass. 551. 
 
 It follows from what has been said that the shares of stock are not 
 " property situated in another State and subject to taxation therein." 
 The context in which these words occur in our tax law and its other 
 general provisions demonstrate that these words refer to the kind of 
 property which, if owned by an individual and situated and taxed in 
 another State, would be exempt from taxation here, such as real 
 estate, and " merchandise, machinery and animals." St. 1909, c. 516, 
 ^ 1. Union Eefrigerator Transit Co. v. Kentucky, 199 U. S. 194. 
 There are substantial, although intangible, elements of property in 
 shares of stock in a corporation which attach to the owner resident in 
 this Commonwealth. 
 
 The general statement in the decisions of manv courts and of text 
 writers is to the effect that shares of stock in foreign corporations 
 mav be asse=sed to the o^mer at the place of his domicil irrespective 
 of taxes which may have been imposed on the corporation itself, even 
 in respect of its capital stock. Creenleaf v. Board of Eeview, 184 111. 
 226. 228. State v. Nelson, 10? Minn. 319, 322. Appeal Tax Court 
 V. Gill, 50 Md. 377. 396. Allon v. Commonwealth, 98 Va. 80, 84. 
 State 7;. Bontlev. 3 Zabr. 532. 542. 27 Am. & Eng. Encyc. of Law, 
 {2d ed.) 928, 929. 37 Cyc. 821, 864, 865.
 
 SECT. I J. J BELLOWS FALLS POWEK CO. V. COMMONWEALTH. 103 
 
 Our decision upon this hiancli of the case is supported by direct 
 adjudications upon the .same point in Dyer v. Osborne, 11 K. I. '6l\, 
 Worth V. Commissioners of Ashe County, 90 N. C. 409, Appeal Tax 
 Court V. Patterson, 50 Md. 35-1, 373, Judy v. Beckwith, 137 Iowa, k!-l, 
 33, Seward v. Kising Sun, 79 Ind. 351, 353, 35-1, Bacon v. State Tax 
 Commissioners, 12G Mich. 22, 2!), 30, Central of Georgia iiaihvay i'. 
 Wright, 166 Fed. Rep. 153, 159, appeal dismissed, 215 U. S. 617. 
 See 1 Cooley on Taxation, (3d ed.) 389. Although in some of these 
 opinions the question of the power of the domiciliary State of the 
 corporation to appropriate to itself an exclusive taxation silus of the 
 shares of stock was not much discussed, the decisions are clear to the 
 effect that it cannot do so. The result seems to be supported by Kidd 
 V. Alabama, 188 U. S. 730, where at page 731 some of these cases are 
 cited with approval. It conforins to the policy of our law touching a 
 kindred point in Dwight v. Boston, 12 Allen, 316, where it was said 
 at page 322, " our whole system of taxation, as established and prac- 
 ticed, is to disregard the liability of shares in foreign corporations to 
 taxation in the States where they are situated." We are aware of no 
 authorities to the contrary. Oliver v. Washington Mills, 11 Allen, 
 268, involved quite different considerations. 
 
 The conclusion is, in the opinion of a majority of the court, that as 
 matter of constitutional power the Legislature can impose a property 
 tax upon the shares of stock in a Vermont corporation owned by a 
 natural person resident in this Commonwealth. The exercise of such 
 power does not conflict with constitutional guarantees for equal pro- 
 tection of the laws, full faith and credit to the public acts of other 
 States, nor is it a deprivation of property without due process of law. 
 Of course it does not impair the obligation of any contract, because 
 it is to be inferred that our tax law was in effect long before the ac- 
 quisition of the stock by the petitioner. 
 
 The petitioner contends that its bond of a A^ermont corporation is 
 not comprehended within "securities which if owned by a natural 
 person resident in this Commonwealth would be liable to taxation," 
 as these words are used in § 43, cl. 2. Its argument is that such a 
 bond is a debt due to it and that if owned by a natural person resident 
 here who owed money in excess of the value of the bond, as the peti- 
 tioner does, then such natural person would not be taxed for it. Hale 
 V. County Commissioners, 137 Mass. 111. This argument is falla- 
 cious. These words in the statute were not intended to establish the 
 same standard of taxation for a corporation as for an individual. The 
 reference to securities which would be taxable if owned by a natural 
 person is merely for the purpose of determining the taxable character 
 of the securities. Farr Alpaca Co. v. Commonwealth, 212 Mass. 156, 
 162. If the securities possess that taxable character, then they are to 
 be taken into account. The debts owed by the petitioner are all 
 considered in determining the fair market value of its shares, pro- 
 vided it makes proper return of them. It is not entitled under the 
 excise tax law to have them deducted a second time. 
 
 "Securities" is a word of suflRcientlv broad import to include a 
 bond like that in question. It was said in Boston Railroad Holding
 
 104 BELLOWS FALLS POWER CO. V. COMMONWEALTH, [ciIAP. II. 
 
 Co. V. Commonwealth, 215 Mass. 493, that "'in its ordinary accepta- 
 tion the words ' securities ' includes bonds . . . and other evidences 
 of indebtedness." There is nothing in any part of the tax law to show 
 tliat it was used in this section in a narrow or constricted sense. 
 
 In this respect also no error is shown in the action of the tax com- 
 missioner in the determination of the excise tax upon the petitioner. 
 
 Petition dismissed with costs.
 
 SECT. 
 
 U,l ADAMS EXI'KESS CO. f . OHIO. 10." 
 
 ADAMS EXPRESS COMPANY /•. OHIO. 
 
 SUPKKMK CoiRT OK THE UnITED StATES. 1697. 
 [Reported 166 U. 5. 194 ; 166 U. S. 185.] 
 
 These are oases involving the constitutionality of certain laws of the 
 State of Ohio providing for the taxation of telegraph, telephone, and 
 express conipanios, and the validity of assessments of express com- 
 panies thereunder. 
 
 The general assembly of Ohio passed, April 27, 1893, 90 Ohio Laws, 
 330, an act to amend and supplement §§ 2777, 2778, 2779, and 2780 of 
 the Revised Statutes of that State (commonly styled " The Nichols 
 Law "), which was amended May 10, 1894. The law created a state 
 board of ai)praisers and assessors, consisting of the auditor of State, 
 treasurer of State, and attorney general, which was charged with the 
 duty of assessing the property in Ohio of telegraph, telephone, and 
 express companies. By the act as amended, between the first and thirty- 
 first days of May annually each telcgrapli, telephone, and express com- 
 pany doing business in Ohio, was required to file a return with tlie 
 auditor of State, setting forth among other things the number of shares 
 of its capital stock ; the par value and market value (or, if there be no 
 market value, then the actual value) of its shares at the date of the 
 return ; a statement in detail of the entire real and personal property 
 of said companies and where located, and the value thereof as assessed 
 for taxation. Telegraph and telephone companies were required to 
 return, also, the whole length of their lines, and the length of so much 
 of their lines as is without and is within the State of Ohio, including 
 the lines controlled and used, under lease or otherwise. Express com- 
 panies were required to include in the return a statement of their entire 
 gross receipts, from whatever source derived, for the year ending the 
 first day of May, of business wherever done ; and of the business done 
 in the State of Ohio, giving the receipts of each oflSce in the State ; 
 also the whole length of the lines of rail and water routes over which 
 the companies did business, within and without the State. Provision 
 was made in the law for the organization of the board, for the appoint- 
 ing of one of its members as secretar\' and the keeping of full minutes 
 of its proceedings. The board was required to meet in the month of 
 .lune and assess the value of the property of these companies in Ohio. 
 The rule to bo followed b}' the board in making the assessment was 
 that "in determining the value of the property of said companies in 
 this State, to be taxed within the State and assessed as herein pro- 
 vided, said board shall be guided by the value of said propert}' as de- 
 termined b}' the value of the entire capital stock of said companies, 
 and such other evidence and rules as will enable said board to arrive at 
 the true value in money of the entire property of said companies within 
 the State of Ohio, in the proportion which the same bears to the entire
 
 106 ADAMS EXPRESS CO. V. OHIO. [CHAP. II. 
 
 property of said companies, as determined b}- the value of the capital 
 stock thereof, and tlie other evidence and rules as aforesaid." 
 
 As to telegraph and telephone companies, the board was required to 
 apportion the vahiation among the sevei'al counties through which the 
 lines ran. in the proportion that the lengtii of the lines in tlie respective 
 counties bore to the entire length in the State; in the case of express 
 companies, the apportionment was to be made among the several coun- 
 ties in which they did business, in the proportion that the gross receipts 
 in each county bore to the gross receipts in tlie Slate. 
 
 The amount thus apportioned was to he certified to the county audi- 
 tor, and placed by him on the duplicate "to be assessed, and the taxes 
 thereon collected the same as taxes assessed and collected on other 
 personal property," the rate of taxation to be the same as that on other 
 property in the local taxing district. 
 
 The valuation of all the real estate of the companies, situated in 
 Ohio, was required to be deducted from the total valuation, as fixed by 
 the board. 
 
 The original suits were brought in the Circuit Court to enjoin the 
 certification of the apportioned valuations to the county auditors, as to 
 1893, against the state board ; as to 1894 and 1895, against the auditor 
 of State. ^ 
 
 The appellants filed a petition for a rehearing. 
 
 Brewer, J. We have had before us at the present term several 
 cases involving the taxation of the property of expi'ess ciompanies, 
 some coming from Ohio, some from Indiana, and one from Kentuck}' ; 
 also a case from the latter State involving the taxation of the property' 
 of the Henderson Bridge Company. The Ohio and Indiana cases were 
 decided on the 1st of February. (165 U. S. 194.) Petitions for re- 
 hearing of those cases have been presented and are now before us for 
 consideration. 
 
 The importance of the questions involved, the close division in this 
 court upon them, and the earnestness of counsel for the expi-ess com- 
 panies in their original arguments, as well as in tlieir briefs on this 
 application, lead those of us who concurred in the judgments to add a 
 few observations to what has hitherto been said. 
 
 Again and again has this court affirmed the pro^josition that no State 
 can interfere with interstate cotnmerce through the imposition of a tax, 
 by whatever name called, which is in effect a tax for the privilege of 
 transacting such commerce. And it has as often aflfiinied that such 
 restriction upon the power of a State to interfere with interstate com- 
 merce does not in the least degree aln-idge the right of a State to tax 
 at their full value all the instrumentalities used for such commerce. 
 
 Now the taxes imposed upon exi)ress com[)anies by the statutes of 
 the three States of Ohio, Indiana, and Kentucky are certainly not in 
 terms "privilege taxes." The}- purport to be ui)on the property of the 
 
 ^ Part of the statninent of facts, arijnmonts of counsel, aud tlie opinion of the 
 Court upon the first argument, are omitted. — Eu.
 
 SECT. II.] ADAMS EXPRESS CO. V. OHIO. 107 
 
 companies. They arc, therefore, not, in form at least, subject to any 
 of the (icmiiu'iatioiis at^ainst privilci^c taxes wliich have ho often come 
 from this coiiit. Tlic slaliiles giant no privilege of doing an expres? 
 business, charge notiiing for doing sucii a business, and contempUite only 
 the assessment and levy of taxes upon the property of the express com- 
 panies situated witliin the respective States. And the only really sub- 
 stantial (piistion is whethei', prf)peily understood and administered, they 
 subject to the taxing power of tlie State pro|)ert3' not within its territorial 
 limits. The l)urden of tlie contention of the express companies is that 
 they have within the limits of the State certain tangil)le property, such 
 as horses, wagons, etc. ; that that tangible property is their only prop- 
 erty within tlie Slate; that it must be valued as other like property, 
 and upon sueh valuation alone can taxes be assessed and levied against 
 them. 
 
 But this contention practically ignores the existence of intangible 
 property, or at least denies its lialiility for taxation. In the complex 
 civilization of to-day a large portion of the wealth of a OMnmunity con- 
 sists ill iiitai)gii)le property, and there is nothing in the iiatuie of things 
 or in the limitations of the Federal Constitution which restrains a State 
 from taxing at its real value such intangible property. Take the sim- 
 plest illustration : B, a solvent man, purchases from A certain prop- 
 erty, and gives to A his promise to pay, say, SI 00.000 therefor. Such 
 promise may or may not be evidenced by a note or other written instru- 
 ment. The property conveyed to B may or may not be of the value of 
 SlOO.OOO. If tliere be nothing in the way of fraud or misrepresenta- 
 tion to invalidate that transaction, there exists a legal promise on the 
 part of B to pay to A Si 00.000. That promise is a part of A's prop- 
 erty. It is something of value, something on which he will receive 
 cash, and which he can sell in the markets of the community for cash. 
 It is as certainly property, and property of value, as if it were a build- 
 ing or a steamboat, and is as justly siil)Ject to taxation. It matters 
 not in what this intangible property consists — whether privileges, cor- 
 porate franchises, contracts, or obligations. It is enough that it is 
 property which though intangible exists, which has value, produces 
 income, and passes current in the markets of the world. To ignore 
 this intangible property, or to hold that it is not subject to taxatit)n at 
 its accepted value, is to eliminate from the reach of the taxing power a 
 large portion of the wealth of the country. Tsow, whenever separate 
 articles of tangible pro})erty are joined together, not simply by a unit}' 
 of ownership, but in a unity of use, there is not infrequently developed 
 a property, intangible though it may be, wliich in value exceeds the 
 aggregate of the value of the separate pieces of tangible iitoperty. 
 Upon what theory of substantial I'iglit can it be adjudged that the value 
 of this intangil)le propertv must be excluded frcmi the tax lists, and 
 the only property placed thereon be the separate [jieces of tangible 
 property ? 
 
 The first question to be considered therefore is whether there is
 
 108 ADAMS EXPRESS CO. V. OHIO. [CHAP. H. 
 
 belonging to these express companies intangible propert}' — property 
 differing fvom the tangible propert}- — a property created by either the 
 combined use or the manner of use of the separate articles of tangible 
 propert}-, or ihe grant or acquisition of franciiises or privileges, or all 
 together. To say that there can be no such intangible property, that 
 it is something of no value, is to insult the common intelligence of 
 every man. Take the Henderson Bridge Company's property, the 
 validity of the taxation of which is before us in another case. The 
 facts disclosed in that record show that the bridge company owns a 
 bridge over the Ohio, between the city of Henderson in Kentucky and 
 the Indiana shore, and also ten miles of railroad in Indiana; that 
 that tangil)le i)ropcrty — that is, the bridge and railroad track — was 
 assessed in the States of Indiana and Kentucky at $1,277,695.54, such, 
 therefore, being the adjudged value of the tangible property. Thus the 
 physical property could piesumably be reproduced b}- an expenditure 
 of that sum, and if placed elsewhere on the Ohio River, and without 
 its connections or the business passing over it or the franchises con- 
 nected with it, might not of itself be worth any more. As mere bridge 
 and tracks, that was its value. If the State's power of taxation is lim- 
 ited to the tangible property, the company should only be taxed in the 
 two States for that sum, but it also appears that it, as a corijoration, 
 had issued bonds to the amount of $2,000,000, upon which it was 
 paying interest; that it had a capital stock of §1,000,000, and that 
 the shares of that stock were worth not less than §90 per share in 
 • the market. The owners, therefore, of that stock had property which 
 for purposes of income and purposes of sale was worth $2,900,000. 
 What gives this excess of value? Obviously the franchises, the privi- 
 leges the company possesses — its intangible property. 
 
 Now, it is a cardinal rule which should never be forgotten that what- 
 ever propert}' is worth for the purposes of income and sale it is also 
 w^orth for purposes of taxation. Suppose such a bridge were entirely 
 within the territorial limits of a State, and it appeared that the bridge 
 itself cost only §1,277,000, could be reproduced for that sum, and yet 
 it was so situated with reference to railroad or other connections, so 
 used by the travelling i)ublic, that it was worth to the holders of it in 
 the matter of income $2,900,000, could be sold in the markets for that 
 sum, was therefore in the eyes of practical business men of the value 
 of $2,900,000, can there be any doubt of the State's power to assess it 
 at that sum, and to collect taxes from it upon that basis of value? 
 Substance of right demands that whatever be the real value of any 
 propert}-, that value may be accepted by the State for purpose of taxa- 
 tion, and this ought not to be evaded b}' any mere confusion of words. 
 Suppose an express company is incorporated to transact business within 
 the limits of a State, and does business only within such limits, and for 
 the purpose of transacting that business purchases and holds a few 
 thousands of dollars' worth of horses and wagons, and yet it so meets 
 the wants of the people dwelling in that State, so uses the tangible
 
 SECT. II.] ADAMS EXPRESS CO. V. OHIO. 100 
 
 property which it possesses, so transacts business therein that its stock 
 becomes in tiic n:urlvcts of the Stiiic of tliu actual cash value of hun- 
 dreds of ihou-sands of dollars. To the owners thereof, for the purposes 
 of income and sale, the corporate property is worth hundreds of thou- 
 sands of dollars. Does substance of right require that it shall pay 
 taxes only upon the thousands of dollars of tangible property which it 
 possesses? Accumulated wealtli will laugh at the crudity of taxing 
 laws which reach only the one and ignore the otiier, while they who 
 own tangible property, not organized into a single producing plant, 
 will feel the injustice of a system which so misplaces the burden of 
 taxation. 
 
 A distinction must be noticed between the construction of a State 
 law and the power of a State. If a statute, properly construed, con- 
 templates only the taxation of horses and wagons, then those belonging 
 to an express company can l)e taxed at no higher value than those 
 belonging to a farmer. But if the State compr'^hends all property in 
 its s<^heme of taxation, then the good will of an organized and estab- 
 lished industry must be recognized as a thing of value. The capital 
 stock of a corporation and the shares in a joint stock company repre- 
 sent not only the tangil)le property, but also the intangible, including 
 therein all corporate franchises and all contracts, privileges, and good 
 will of the concern. 
 
 Now, the same reality- of the value of its intangible propert}' exists 
 when a company does not confine its work to the limits of a single 
 State. Take, for instance, the Adams Express Company. According 
 to the return filed by it with the auditor of the State of Ohio, as shown 
 in the records of these cases, its number of shares was 120.000, the 
 market value of each §140 to 6150. Taking the smaller sum, gives the 
 value of the company's property taken as an entirety as $10,800,000. 
 In other words, it is worth that for the fnirposes of income to the 
 holders of the stock and for purposes of sale in the markets of the 
 land. But in the same return it shows that the value of its real estate 
 in Ohio was only $25,170; of real estate owned outside of Ohio, 
 $3,005,157.52; or a total of $3,0;50,327.52 ; the value of its personal 
 property in Ohio, $42,065; of personal property outside of Ohio, 
 $1,117,426.05; or a total of $1,159,491.05, making a total valuation 
 of its tangible property $4,189,818.57, and upon that basis it insists 
 that taxes shall be levied. But what a mockery of substantial justice 
 it would be for a corporatism, whose property is worth to its stock- 
 holders for the purposes of income and sale $16,800,000, to be ad- 
 judged liable for taxation only upon one fourth of that amount. The 
 value which property bears in the market, the amount for which its 
 stock can be bought and sold, is the real value. Business men do not 
 [>ay cash for property in moonshine or dreamland. They buy and pay 
 for that which is of value in its power to produce income, or for pur- 
 poses of sale. 
 
 It is suggested that the comi)any may have bonds, stocks, or other
 
 110 ADAMS EXPRESS CO. V. OHIO. [cHAP. II. 
 
 investments which produce a part of the value of its capital stock, and 
 which have a special situs in other States or are exempt from taxation. 
 If it has, let it show the fact. Courts deal with things as they are, and 
 do not determine rights upon mere possibilities. It' hull of the property 
 of tlie Adams Exi)ress Company, which by its own showing is worth 
 61G,(J0U,000 and over, is invested in Uniti'd IStates bonds, and there- 
 fore exempt from taxation, or invested in any way outside the business 
 of the company and so as to be subject to purely local taxation, h t 
 that fact be disclosed, and then if the .State of Ohio attempts to include 
 ■within its taxing power such exempted property, or property of a dif- 
 ferent situs, it will be time enough to consider and determine the rights 
 of the company. That if such facts exist they must be taken into con- 
 sideration by a State in its proceedings under such tax laws as are here 
 presented has been heretofore recognized and distinctly affirmed by 
 this court. Pittsburgh, Cincinnati, etc. Railway Co. v. Backus, 154 
 U. S. 421, 443 ; Western Union Telegraph Co. v. Taggart, 163 U. S. 1, 
 23 ; Adams Express Co. v. Ohio, 165 U. S. 194, 227. Presumably all 
 that a corporation has is used in the transaction of its business, and if 
 it has accumulated assets which for any reason affect the question of 
 taxation, it should disclose them. It is called upon to make return 
 of its property, and if its return admits that it is possessed of property 
 of a certain value, and does not disclose anything to show that any 
 portion thereof is not subject to taxation, it cannot complain if the 
 State treats its property as all taxable. 
 
 But where is the situs of this intangible property? The Adams 
 Express Company has, according to its showing, in round numbers 
 $4,000,000 of tangible property scattered through different States, and 
 with that tangible property' thus scattered transacts its business. By 
 the business which it transacts, by c()ml)ining into a single use all these 
 separate pieces and articles of tangible property-, by the contracts, 
 franchises, and privileges which it has acquired and possesses, it has 
 created a corporate property of the actual value of $16,000,000, Thus, 
 according to its figures, this intangible property, its franchises, privi- 
 leges, etc., is of the value of $12,000,000, and its tangil)le property of 
 only $4,000,000. Where is the situs of this intangible property? Is 
 it sim[)ly where its home office is, where is found the central directing 
 thought which controls the workings of the great machine, or in the 
 State which gave it its corporate franchise; or is that intangible prop- 
 erty distributed wherever its tangible property is located and its work 
 is done? Clearly, as we think, the latter. Every State within which 
 it is transacting business and where it has its property, more or less, 
 may rightfully say that the $16,000,000 of value which it possesses 
 springs not merely from the original grant of cor])orate power by the 
 State which incorporated it, or from tlie mere ownership of the tangil)le 
 property, but it springs from the fact thnt that langilile property it has 
 comlijned witli contracts, franchises, and privileges into a single unit of 
 property, and this State contributes to that aggregate value not merely
 
 SECT. II.] ADAMS. EXP:EESS CO. V. OHIO. Ill 
 
 the separate value of such tangible property as is within its limits, but 
 Its proportionate sluire of the value of the entire property. That this 
 is true is obvious fioin the result that would follow if all the States 
 other than the one wliich created the corporation could and should 
 withhold from it the right to transact express business within their 
 limits. It might continue to own all its tangible property within each 
 of those States, but unable to transact the express business within ilieir 
 limits, that SI 2, 000. 000 of value attributable to its intangible propert}' 
 would shrivel to a niere trifle. 
 
 It may be true that the principal office of the corporation is in New 
 York, and that for certain purposes the maxim of the common law was 
 " mob'dia personam sequuntur" but that maxim was never of universal 
 application, and seldom interfered with the right of taxation. Pull- 
 man's Palace Car Co. /'. Pennsylvania, 141 U. S. 18, 22. It would 
 certainh' seem a misapplication of the doctrine expressed in that maxim 
 to hold that b}- merely transferring its principal office across the river 
 to Jersey Cit}' the situs of $12,000,000 of intangible property for pur- 
 poses of taxation was changed from the State of New York to that of 
 New Jersey. 
 
 It is also true that a corporation is, for purposes of juiisdiction in 
 the Federal courts, conclusively presumed to be a citizen of the State 
 which created it, but it does not follow therefrom that its franchise to 
 be is for all purposes to be regarded as confined to that State. For 
 the transaction of its business it goes into various States, and wherever 
 it goes as a corporation it carries with it that franchise to l)e. . But the 
 franchise to be is only one of the franchises of a corporation. The 
 franchise to do is an independent franchise, or rather a combina- 
 tion of franchises, embracing all things which the corporation is given 
 power to do, and this power to do is as much a thing of value and a 
 part of the intangible property of tliie corporation as the franchise to 
 be. Francliises to do go wherever the work is done. The Southern 
 Pacific Railway Company is a corporation chartered by the State of 
 Kentucky, yet within the limits of that State it is said to have no tan- 
 gil)le property and no office for the transaction of business. The vast 
 amount of tangilile property which l)y lease or otherwise it holds and 
 operates, and all the franchises to do which it exercises, exist and are 
 exercised in the States and Territories on the Pacific Slope. Do not 
 these intangible properties — these franchises to do — exercised in con- 
 nection with the tangible property which it holds, create a substantive 
 matter of taxation to be asserted by every State in which that tangil)le 
 property is found? 
 
 It is said that the views thus expressed open the door to possibilities 
 of gross injustice to these corporations, through the conflicting action 
 of the different States in matters of taxation. That may be so, and 
 the courts may be called npon to lelieve against such abnses. But 
 such possil)ilities do not equal the wrong whii-h sustaining the conten- 
 tion of the api)elhiut would at once do. In the city of New York are
 
 112 ADAMS EXPRESS CO. V. OHIO. [CJIAI*. 11. 
 
 located the headqiuirters of a corporation, whose corporate property is 
 confessedly of tlie value of Si 6, 000,000 — a value which can be realized 
 by its stockholders at any moment they see tit. Its tangible property 
 and its business is scattered through man\' States, all whose powers 
 are invoked to protect its property from trespass and secure it in the 
 peaceful transaction of its wideh- dispersed business. Yet because that 
 tangilile projjerty is only 64,000,000 we are told that that is the limit 
 of the taxing power of these States. In other words, it asks these 
 States to protect property which to it is of the value of $16,000,000, 
 but is willing to pay taxes only on the basis of a valuation of $4,000,000. 
 The injustice of this speaks for itself. 
 
 In conclusion, let us sa}' that this is eminently a practical age ; that 
 courts must recognize things as they are and as possessing a value 
 which is accorded to them in the markets of the world, and that no 
 finespun theories about situs should interfere to enable these large cor- 
 porations, whose business is carried on through many States, to escape 
 from bearing in each State such burden of taxation as a fair distribu- 
 tion of the actual value of their property among those States requires. 
 
 The petition for a rehearing is 
 
 J)e?iied. 
 
 White, J. (with whom were Field, Harlan, and Bkown, JJ.), 
 dissenting.^ 
 
 It is elementary that the taxing power of one government cannot be 
 lawfully exerted over property not within its jurisdiction or territory 
 and within the territory and jurisdiction of another. The attempted 
 exercise of such power would be a clear usurpation of authority, and 
 involve a denial of the most obvious conceptions of government. This 
 rule, common to all jurisdictions, is peculiarly applicable to the several 
 States of the Union, as the}' are by the Constitution confined within 
 the orbit of their lawful authority, which they cannot transcend with- 
 out destroying the legitimate powers of each other, and, therefore, with- 
 out violating the Constitution of the United States. 
 
 In assessing the actual intrinsic value of tangible property of ex- 
 press companies in the State of Ohio it was the duty of the assessing 
 board to add to such value a proportionate estimate of the capital 
 stock, so as thereby to assess not only the tangil)le property within the 
 State, ])ut also along with such property a i)art of the entire capital 
 stock of the corporation, without reference to its domicil, and equally 
 without reference to the situation of the propert}' and assets owned by 
 the company from which alone its capital stock derives value. In other 
 words, although actual property situated in States other than Ohio may 
 not be assessed in that State, yet that it may take all the value of the 
 property in other States and add sucli portion thereof, as it sees fit, to 
 the assessment in Ohio, and that this process of taxation of propert}- 
 
 1 This opinion was delivered upon the first argument. Part of it onlv is given. 
 —Ed.
 
 SECT. IT.] ADAMS EXPRESS CO. V. OJIIO. ll'.j 
 
 in other States, in violation of the Constitution, becomes legal providi-d 
 only it is called taxation of proi>t'itv witiiiu tin; iStato. 
 
 If the rule contended lor by the State of Ohio l)e true, why would it 
 not appl}' to a corporation, partnership, or iiulividual engaged in liie 
 dry goods business or any other business having branches in various 
 States? Would it not be as proper to say of such agencies, as it is of 
 the agencies of express companies, that there is an intellectual unity 
 of earnings between the main establishment and all such agencies, and 
 therefore a right to assess goods found in an agency with relation lo 
 the capital and wealth of the original house and all the other branches 
 situated in other Stales? Take the case of a merchant carrying on a 
 general commercial business in one State and having connections of 
 confidence and credit with another merchant of great capital in anotiicr 
 State. If this rule be true, can it nyt also be said that such merchant 
 derives advantages in his business from the sum of the capital in other 
 States which may be availed of to extend his credit and his capacity 
 to do business, and that therefore his tangible property nuist be valued 
 accordingly? Suppose bankers in Hoslon, Philadelphia, and New 
 York of great wealth, owning stocks and bonds of various kinds, send 
 representatives to New Orleans with a limiteil sum of money there to 
 commence business. These representatives rent oftices and buy ollice 
 furniture. Is it not absolutely certain that the business of those indi- 
 viduals would be largely out of proportion to the actual capital pos- 
 sessed by them, because of the fact that reflexly and indirectly their 
 business and credit is supported by the home offices? In this situation, 
 the assessor comes for their tax return. lie finds noted thereon only a 
 limited sura of money and the value of the office furniture. What is 
 to prevent that official under the rule of supposed metaphysical or intel- 
 lectual unity between property from saying: "It is true you have but 
 a small tangible capital, and jour office furniture is only worth 82J(), 
 but the value of property is in its use, and as yon have various elements 
 of wealth situated in the cities named, I will assess your |)ropertv be- 
 cause of its use at a million dollars"'? Such conduct would be ex- 
 actly in accord with the power of taxation which it is here claimed tlie 
 State of Ohio possesses, and which, as I understand it, the cotnt now 
 upholds. To give the illustrations, I submit, is to point to the con- 
 fusion, injustice, and impossibility of such a rule.
 
 114 NEW OIILEAXS V. STEMPEL, [cHAP. II. 
 
 NEW ORLEANS v. STEMPEL. 
 Supreme Court of the United States. 1899. 
 
 [Reported 175 United States, 309.] 
 
 Hkewer, J.^ This case came on appeal from the Circuit Court of 
 iiie United States for the Eastern District of Louisiana. It is a suit 
 brought b}- the appellee to restrain the collection of taxes levied upon 
 certain personal property which she claims was exempt from taxation. 
 . . . The assessment . . . was of $15,0U0 '' uione}- in possession, on 
 donnsit. or in hand," and of S800.000 " nionev loaned on interest, all 
 credits and all l)ills receivable, for money loaned or advanced, or for 
 goods sold ; and all credits of an}- and every description." . . . 
 
 Under the circumstances disclosed by the testimon}-, were the money 
 and credits subject to taxation ? It appears that these credits were 
 evidenced by notes largely secured by mortgages on real estate in New 
 Orleans ; that these notes and mortgages were in the city of New 
 Orleans, in possession of an agent of the plaintiff, who collected the 
 interest and principal as it became due, and deposited the same in a 
 bank in New Orleans to the credit of tlie plaintiff. The question, there- 
 fore, is distinctly presented whether, because the owners were domi- 
 ciled in the State of New York, the moneys so deposited in a bank 
 within the limits of the State of Louisiana, and the notes secured by 
 mortgages situated and held as above described, were free from taxa- 
 tion in the latter State. Of course there must be statutory warrant for 
 such taxation ; for if the legislature omits any property from the list of 
 taxables, the courts are not authorized to correct the omission and 
 adjudge the omitted propert}' to be subject to taxation.^ 
 
 From tills review of the decisions of the Supreme Court of the State, 
 it is obvious that moneys, such as those referred to, collected as in- 
 terest and principal of notes, mortgages, and other securities kept 
 within the State, and deposited in one of the banks of the State for 
 use or reinvestment, are taxable under the act of 1890. The}' are 
 property arising from business done in the State ; they were tangible 
 property when received by the agent of the plaintiffs, and as such sub- 
 ject to taxation, and their taxability was not, as the court holds, lost 
 by their mere deposit in a bank. It is true that wlien deposited the 
 mone3S became the property of the bank, and for most purposes the 
 relation of debtor and creditor arose between the bank and the de- 
 positor ; 3'et, as evidentl}' the moneys were to be kept in the State for 
 
 1 I'art of the opinion is otnitted. — En. 
 
 2 The court here cited Acts La. 1890, c. 121 ; Liverpool, etc. Ins. Co. v. Board of 
 Assessors, 44 La. Ann. 760; Railey v. Boai'd of Assessors, 44 La. Ann. 765; Clason v. 
 New Orleans, 46 La. Ann. 1 ; Bluelield Banana Co. v. Board of Assessors, 49 La. Ann. 
 43 ; Parker v. Straus.?, 49 La. Ann. 1173 ; London & Liverpool lus. Co. v. Board of 
 Assessors, 51 La. Ann. 1028. — Ei> 
 
 I
 
 \ 
 
 SECT. II.] NEW ORLEANS V. STEMPEL. 11 f) 
 
 reinvestment or other use, they remained still subject to taxation, ac- 
 cording to the decision in 49 La Ann. 43. With regard to tlie notes 
 and mortgages, it may be conceded that there is no express decision of 
 the Supreme Court to the effect that they were taxable under the law 
 of 1890 ; yet the reasoning of that court in several cases and its decla- f 
 
 rations, although perhaps only dicta, show that clearly in its judgment 
 they had a local situs within the State, and were by the statute of 1890 
 subject to taxation. 
 
 When the question is whether property is exempt from taxation, and 
 that exemption depends alone on a true construction of a statute of the 
 State, the Federal courts should be slow to declare an exemption in 
 advance of any decision by the courts of the State. The rule in such 
 a case is that the Federal courts follow the construction placed upon 
 the statute by the State courts, and in advance of such construction 
 the}' should not declare property beyond the scope of the statute and 
 exempt from taxation unless it is clear that such is the fact. In other 
 words, they should not release any property within the State from its 
 liability to State taxation unless it is obvious that the statutes of the 
 State warrant such exemption, or unless the mandates of the Federal 
 Constitution compel it. 
 
 If we look to the decisions of other States, we find the frequent ruling 
 that when an indebtedness has taken a concrete form and become evi- 
 denced b}- note, bill, mortgage, or other written instrument, and that 
 written instrument evidencing the indebtedness is left within the State 
 in the hands of an agent of the non-resident owner, to be by him used 
 for the purposes of collection and deposit or reinvestment within the 
 State, its taxable situs is in the State. See Catlin /'. Hull, 21 Vt. 152, 
 in which the rule was thus announced (pages 159, 161) : — 
 
 "It is undoubtedly true that, by the generally acknowledged prin- 
 ciples of public law, personal chattels follow the person of the owner, 
 and that upon his death they are to be distributed according to the 
 law of his domicile; and, in general, any conveyance of chattels good 
 b}- the law of his own domicile will be good elsewhere. But this rule 
 is merely a legal fiction, adopted from considerations of general con- 
 venience and policy for the benefit of commerce, and to enable persons 
 to dispose of their property at their decease agreeably to their wishes, 
 without being embarrassed by their want of knowledge in relation to 
 the laws of the country where the same is situated. But even this 
 doctrine is to be received and understood with this limitation, that 
 there is no positive law of the country where the property is in fact 
 which contravenes the law of his domicile ; for if there is, the law of the 
 owner's domicile must yield to the law of the State where the property 
 IS in fact situate." 
 
 "We are not only satisfied that this method of taxation is well 
 founded in principle and upon authority, but we think it entirely just 
 and equitable that, if pcisoiis residing abroad bring their property and
 
 1 
 
 116 NEW ORI.EANS V. STEMPEL. [cnAP. IT. 
 
 invest it in this State, for the purpose of deriving profit from its use 
 and employment here, and thus avail themselves of the benefits and 
 advantages of our laws for the protection of tlieir property, their prop- 
 ertj- should yield its due proportion towards the support of the govern- 
 ment which thus protects it." 
 
 In Goldgart r. People, 106 111. 25, 28, the court said: — 
 
 "If the owner is absent, but the credits are in fact here, in the 
 liands of an agent, for renewal or collection, witli the view of reloaiiing 
 the mone}' by the agent as a permanent business, they have a situs here 
 for the purpose of taxation, and there is jurisdiction over the thing." 
 
 In Wilcox V. PZllis, 14 Kan. 588, the power of the State to tax a 
 citizen and resident of Kansas, on money due iiim in Illinois, evidenced 
 by a note which was left in Illinois for collection, was denied, the 
 court saying (p. 603), after referring to the maxim, tnobiUa sequuntur 
 2^erso>iam .- — 
 
 " This maxim is at most only a legal fiction ; and Blackstone, speak- 
 ing of legal fictions, says : ' This maxim is invariably observed, that no 
 fiction shall extend to work an injury, its proper operation being to 
 prevent a mischief, or remedy an inconvenience, that might result from 
 the general rule of law' 3 Blackstone Com. 43. Now, as the State of 
 Illinois, anil not Kansas, must furnish the plaintiflT with all the remedies 
 that he may have for the enforcement of all his rights connected with 
 said notes, debts, etc., it would seem more just, if said debt is to be 
 taxed at all, that the State of Illinois, and not Kansas, should tax it, 
 and that we should not resort to legal fictions to give the State of 
 Kansas the right to tax it." 
 
 The same doctrine was affirmed m Fisher v. Commissioners of Rush 
 County, 19 Kan. 414, and again in Blain v. Irby, 25 Kan. 499, 501, in 
 which the court said, referring to promissory notes : " They have such 
 an iMde|)endent situs that they may be taxed where they are situated." 
 
 The decisions of the highest courts of New York, in which State 
 these plaintiffs reside, are to the same effect. In People v. Trustees, 
 48 N. Y. 390, 397, the court said : — 
 
 " That the furniture in the mansion and the mone}' in the bank were, 
 under these provisions, properly assessable to the relators is not seri- 
 ously disputed. And I am unable to see why the money due upon the 
 land contracts must not be assessed in the same wa}'. The debts due 
 upon these contracts are personal estate, the same as if the}' were due 
 upon notes or bonds ; and such personal estate may be said to exist 
 where the obligations for payment are held. Notes, bonds, and other 
 contracts for the payment of money have always been regarded and 
 treated in the law as personal propert}'. The}' represent the debts 
 secured by them. They are the subject of larceu}', and a transfer of 
 them transfers the debt. If this kind of property does not exist where 
 the obligation is held, where does i* exist ? It certainly does not exist 
 where the debtor ma}' be and follow his person. And while, for some 
 purposes in the law, by legal fiction, it follows the person of the cred-
 
 SECT. 
 
 n.] NEW oni.EANs r. stempel. 11 T 
 
 itor and exists where he may be, yet it has been settled that, for the 
 purpose of taxation, this legal fiction does not, to the full extent, apply, 
 and that such property belonging to a non-resident creditor may be 
 taxed in the place where the obligations are held by his agent, lloyt 
 V. Commissioners of Taxes, 23 N. Y. 238 ; The People v. Gardner, 51 
 Barb. 352; Catlin v. Hull, 21 Vt. 152." 
 
 This proposition was reaflirnied in People ex rcl. v. Smith, 88 N. Y. 
 576, in which the Court of Ap[)eals of that State held that a resident of 
 New York was not liable to taxation on moneys loaned in the States of 
 Wisconsin and Minnesota on notes and mortgages, which notes and 
 mort<Ta<res were held in those States for collection of principal and in- 
 terest and reinvestment of the funds, it appearing that property so 
 situated within the limits of tliose States was there subject to taxa- 
 tion. See also Missouri v. St. Louis County Court, 47 Mo. 594, 600; 
 People V. Home Insurance Company, 28 Cal. 533 ; Billinghurst v. Spink 
 County, 5 S. Dak. 84, 98 ; /n re Jefferson, 35 Minn. 215 ; Poppleton 
 V. Yamhill County. 18 Ore. 377 ; Redmond v. Commissioners, 87 N. C. 
 122 ; Finch v. York County, 19 Neb. 50. 
 
 With reference to the decisions of this court, it may be said that 
 there has never been any denial of the power of a State to tax securi- 
 ties situated as these are, while there have been frequent recognitions 
 of its power to separate for purposes of taxation the situs of personal 
 property from the domicile of the owner. In State Tax on Foreign- 
 held Bonds, 15 Wall. 300, it was held that while tiie taxing power of 
 the Slate may extend to pro[)erty within its territorial limits, it cannot 
 to that which is outside those limits ; and, therefore, that bonds issued 
 by a railroad company, allhough secuied by a mortgage on property 
 within the State, were not subject to taxation while in the possession 
 of their owners who were non-residents, the court saying: "We are 
 clear that the tax cannot be sustained ; that the bonds, being held by 
 non-residents of the State, are only property in their hands, and that 
 they are thus beyond the jurisdiction of the taxing power of the State." 
 But in the same case, on page 323, the court declared : " It is un- 
 doubtedly true that the actual situs of personal property which has a 
 visible and tangible existence, and not the domicile of its owner, will, 
 in many cases, determine the State in which it may be taxed. The 
 same thing is true of public securities consisting of State bonds and 
 bonds of municipal bodies, and circulating notes of l)anking institu- 
 tions. The former, by general usage, have aecpiired the character of, 
 and are treated as, proiierty in the place where they are found, though 
 removed from the domicile of the owner ; the latter are treated and 
 pass as money wherever they are. But other personal proi)erty, con- 
 sisting of bonds, mortgages, and debts generally, has no situs indepen- 
 dent of the domicile of the owner, and certainly can have none where 
 the instruments, as in the present case, constituting the evidences ot 
 debt, are not separated from the possession of the owners." 
 
 This last sentence, properly construed, is not to be taken as a denial
 
 118 JTEW OKLEANS V. STEMPEL. [cHAP. IT. 
 
 of the power of the legislature to establish an independent situs for 
 bonds and mortgages when those properties are not in the possession 
 of the owner, but simply that the fiction of law, so often referred to, 
 declares their situs to be that of the domicile of the owner, a declara- 
 tion which the legislature has no power to disturb when in fact they 
 are in his possession. It was held in that case that a statute requiring 
 the railroad company, the obligor in such bonds, to pay the State tax, 
 and authorizing it to deduct the amount of such taxation from the 
 interest due bj' the terms of the bond, was, as to non-residents, a 
 law impairing the obligation of contracts. The same proposition was 
 affirmed in Murray v. Charleston, 96 U. S. 432, where the city of 
 Charleston attempted to tax its obligations held by non-residents of 
 the State. In Tappan v. Merchants' National Bank, 19 Wall. 490, the 
 ruling was, that although shares of stock in national banks were in a 
 certain sense intangible and incorporeal personal propert}', the law 
 might separate them from the persons of their owners for purposes of 
 taxation, and give them a situs of their own. See also Pullman's Car 
 Company ?'. Pennsylvania, 141 U. S. 18, 22, where the question of the 
 separation of personal property from the person of the owner for pur- 
 poses of taxation was discussed at length ; as also the case of Savings 
 Society' V. Multnomah County, 169 U. S. 421, 427, in which a statute 
 of Oregon taxing the interest of a mortgagee in real estate was ad- 
 judged valid, although the owner of the mortgage was a non-resident. 
 Nor is there anything in the case of Kirtland v. Hotchkiss, 100 U. S. 
 491, conflicting with these decisions. It was there held that a State 
 might tax one of its citizens on bonds belonging to him, although such 
 bonds were secured by mortgage on real estate situated in another 
 State. It was assumed that the situs of such intangible property as a 
 debt evidenced b}- bond was at the domicile of the owner. There was 
 no legislation attempting to set aside that ordinary rule in respect to 
 the matter of situs. On the contrary, the legislature of the State of 
 Connecticut, from which the case came, plainl}' reaffirmed the rule, and 
 the court in its opinion summed up the case in these words (p. 499) : 
 "Whether the State of Connecticut shall measure the contribution 
 which persons resident within its jurisdiction shall make by way of 
 taxes, in return for the protection it affords them, by the value of the 
 credits, choses in action, bonds or stocks which they may own (other 
 than such as are exempted or protected from taxation under the Con- 
 stitution and laws of tlie United States) is a matter which concerns 
 only the people of that State, with which the Federal government can- 
 not rightfully interfere." 
 
 This matter of situs may be regarded in another aspect. In the 
 absence of statute, bills and notes are treated as choses in action, and 
 are not subject to levN' and sale on execution ; but by the statutes of 
 many States the}' are made so subject to seizure and sale as any tan- 
 gible personal property. 1 Freeman on Executions, s. 112; 4 Am. & 
 Kng. i:. of L., 2d ed.. 282; 11 Am. & Eng. E. of L., 2d ed., 623.
 
 SECT. II.] NEW ORLEANS V. STEMPEL. 11 f) 
 
 Among the States referred to in these authorities as ha\nng statutes 
 wammtiiiij^ such levy and sale are California, Indiana, Kentucky, New 
 York, Tcinu'ssce, Iowa, antl Louisiana, lirown r. Andcison, 1 Mailin 
 (N. 8.), 410, atlirnied the rightfulness of such a levy and sale. In 
 Fluker v. IJnllard, 2 La. Ann. 338, it was held that if a ihUc was not 
 taken into the actual possession of the sheriff, a sale by him on an 
 execution conveyed no title on the purchaser, the court saying: "In 
 the case of Sinii)son r. AUain, it was held that, in order to make a 
 valid seizure of tangible property, it is necessary that the sheriff should 
 take the property levied upon into actual possession. 7 Rob. 504. In 
 the case of Gobeau r. The New Orleans & Nashville Railroad Com- 
 pany, the same doctrine is still more distinctly announced. The court 
 there says : ' From all the dilTerent provisions of our laws above re- 
 ferred to, can it be controverted that, in order to have them carried 
 into effect, the sheriff must necessanl}' take the property seized into 
 his possession ? This is the essence of the seizure. It cannot exist 
 without such possession.' 6 Rob. 348. It is clear, under these au- 
 thorities, that the sheriff effected no seizure of the note in controversy, 
 and consequently his subsequent adjudication of it conferred no title 
 on Bailey." 
 
 The same doctrine was reaffirmed m Stockton v. Stanbrough, 3 La. 
 Ann. 390. Now, if pro()erty can have such a situs within the State as 
 to be subject to seizure and sale on execution, it would seem to follow 
 that the State has power to establish a like situs within the State for 
 purposes of taxation. 
 
 It has also been held that a note may be made the subject of seizure 
 and delivery in a replevin suit. Graff ik Shannon, 7 Iowa, 508 ; Smith 
 V. Eals, 81 Iowa, 235 ; Pritchard v. Norwood, 155 ^Nlass. 539. 
 
 It is well settled that bank bills and municipal bonds are in such a 
 concrete tangible form that they are subject to taxation where found, 
 irrespective of the domicile of the owner ; are subject to levy and sale 
 on execution, and to syizure and delivery under replevin ; and yet they 
 are but i)roniises to pay. — evidences of existing indebtedness. Notes 
 and mortgages are of the same nature ; and while they may not have 
 become so generall}* recognized as tangilile personal propert}', yet they 
 have sucii a concrete form that we see no reason why a State may not 
 declare that if found within its limits they shall be subject to taxation. 
 
 It follows from these considerations that 
 
 The decree of (he Circuit Court must be reversed afid the case 
 remanded for further proceedings.^ 
 
 Harlan and White, JJ., dissenting. 
 
 1 Ace. Bristol v. Washington County, 177 U. S. 133; Walker v. Jack, 88 Fed. 576 ; 
 P. V. Home Ins. Co., 29 Cal. 533 ; In re Jefferson, 35 Minn. 217; S. v. Beniley, 23 
 N. J. L. 532. See Herron v. Keeran, 59 Ind. 472. — Ed.
 
 120 BRISTOL v. WASHINGTON COUNTY. [CHAP. II. 
 
 BRISTOL V. WASHINGTON COUNTY. 
 SuPEEME Court of the United States. 1900. 
 
 [Reported 177 U. S. 133.] 
 Fuller, C. J. In the course of the administrution of the estate 
 of Cyrus Jefrerson, deceased, in the probate court of the County 
 of Washington, Minnesota, a claim was presented in March, 1881, 
 against the estate for unpaid taxes for the years 1883 and 1883, on 
 credits secured by mortgages, amounting to about $122,000, and the 
 claim was allowed. The executors appealed to the district court 
 where the order of the probate court was affirmed. The case was 
 then carried by the executors to the Supreme Court of Minnesota, 
 which, on May 26, 1886, affirmed the judgment. In re Jefferson, 
 35 ]\Iinnesota, 215. It was objected " that taxes are not debts which 
 can be proved against the estate of deceased persons ; " but the court 
 overniled the objection, saying : " It is not material whether a per- 
 sonal tax is a debt, in the sense that an action against the person 
 may be maintained to recover it. It is at least a claim against 
 the property which survives the death of the person against whom 
 it is levied, and remains a claim against his estate. The statute re- 
 gards it as a debt to be paid out of the estate. In prescribing the order 
 of preference in which debts shall be paid, where the estate is not 
 sufficient to pay all, it provides (Gen. St., 1878, c. 53, § 38) that, 
 after paying the necessary expenses of the funeral, last sickness and 
 administration, the executor or administrator shall '^pay the debts 
 against the estate in the following order. . . . Second, public rates 
 and taxes.' This, we think, is conclusive that, for the purpose of 
 proof and payment out of the estate, a personal tax is a debt," The 
 court further held that a tax list or tax duplicate, duly certified 
 by the county auditor, as required by statute, was prima facie evi- 
 dence of the due levy of the taxes in it. The main question in the 
 case was whether credits due to a resident of another State, from 
 residents within Minnesota, for moneys loaded and invested by, 
 and which credits were managed and controlled by, an agent of the 
 creditor, resident within Minnesota, could be taxed in Minnesota 
 under existing statutes, and the court held that they could. The 
 court, after referring to the provisions of the statute that all personal 
 property in the State was subject to taxation, and that all moneys and 
 credits should be listed by the owner or his agent, where one or the 
 other resided, said : " It is to be taken, therefore, as the intent of 
 the statute, that credits, to whomsoever owing, are taxable here if 
 they can be regarded as personal property in this State; that is 
 situated in this State. To justify the imposition of tax by any 
 State, it must have jurisdiction over the person taxed, or over the 
 property taxed. As Jefferson was not a resident of this State, there 
 was no jurisdiction over him. But if the property on account of 
 which these taxes were unpaid was within this State, the State had 
 jurisdiction to impose them as it might impose a tax upon tangible
 
 SECT. 11. J BIUSTUL V. WASKINGTON COUNTY. 121 
 
 personal proj)erly permanently situated here, and to enforce the 
 taxes against the property. The authorities wliich we cite in support 
 of the proposition tliat tlie credits taxed had a situs here, fully sus- 
 tain this. 
 
 "For many purposes the doinicil of the owner is deemed the sittis 
 of his personal property. This, however, is only a fiction, from 
 motives of convenience, and is not of universal application, but 
 yields to the actual situs of the property when justice requires that 
 it should. It is not allowed to be controlling in matters of taxation. 
 Thus, corporeal personal property is conceded to be taxable at the 
 place where it is actually situated. A credit, which cannot be re- 
 garded as situated in a place merely because the debtor resides there, 
 must usually be considered as having its situs where it is owned, 
 — at the doinicil of the creditor. The creditor, however, may give 
 it a business situs elsewhere; as where he places it in the hands of 
 an agent for collection or renewal, with a view to reloaning the 
 money and keeping it invested as a permanent business." After 
 citing Catlin v. Hall, 21 Vermont, 152; People v. Smith, 88 N. Y. 
 576; Wilcox v. Ellis, 14 Kansas, 588; Board of Supervisors v. Dav- 
 enport, 40 Illinois, 197, and many other cases, the opinion con- 
 tinued thus: "The obligation to pay taxes on property for the 
 support of the government arises from the fact that it is under the 
 protection of the government. Now, here was property within this 
 State, not for a mere temporary purpose, but as permanently as 
 though the owner resided here. It was employed here as a business 
 by one who exercised over it the same control and management as 
 over his own property, except that he did it in the name of an ab- 
 sent principal. It was exclusively under the protection of the laws 
 of tliis State. It had to rely on those laws for the force and validity 
 of the contracts on the loans, and the preservation and enforcement 
 of the securities. The laws of New York never operated on it. If 
 credits can ever have an actual situs other than the domioil of the 
 owner, can ever be regarded as property within any other State, 
 and as under obligation to contribute to its support in consideration 
 of being under its protection, it must be so in this case." 
 
 It was thus ruled that the tax list of personal property was prima 
 facie evidence of the due levy of the taxes; that such taxes could 
 be proven against decedents' estates; and that credits secured by 
 mortgages, the result of the business of investing and reinvesting 
 moneys in tlie State, were subject to taxation as having their situs 
 there. 
 
 Admonished as to the law of the State in these particulars, Mrs. 
 Bristol, Mr. Jefferson's daughter, continued the business of invest- 
 ing and reinvesting in the same way and through the same agency 
 imtil her own death in Au.gust, 1804. The State statute required 
 every person being a resident of the State to list his personal prop- 
 erty, including moneys, credits, etc., for taxation and " monevs and 
 other personal property invested, loaned or otherwise controlled by 
 him as the agent or attorney or on account of any other person or 
 persons;" and in cases of failure to obtain a statement of personal
 
 122 BRISTOL V. WASHINGTON COUNTY. [cHAP. II. 
 
 property from any cause, it was made the duty of the assessor to 
 ascertain its amount and value and assess the same at such amount 
 as he believed to be the true value thereof. Stat. 1894, c. 11, 
 §§ 1515, 15-16; Stat. 18T8, c. 11, §§ 7, 38. No question arises here 
 in respect of the re<jular listing of these investments for taxation 
 from 1883 until and including 189-1, nor in respect of the valuation 
 thereof. 
 
 Mrs. Bristol had invested some $18,000 of her own mone}', belonging 
 to her prior to her father's death, in the same way and by the same 
 agency, and invested and reinvested in the same manner that money 
 and moneys derived from notes and mortgages held by the agent 
 for Mr. Jefferson, which passed to her on his death. And these in- 
 vestments were taxable and were taxed year by year during all this 
 period according to the statutes of the State and the decision of the 
 Supreme Court from which we have quoted. 
 
 it is insisted, however, that this is not so, because in 1885, which 
 was after the presentation of the claim against the father's estate 
 in the probate court, though before the decision by the Supreme 
 Court, the notes then in the hands of the agents were delivered to Mrs. 
 Bristol, and thereafter all new notes taken in the business were sent 
 to her and kept by her in her home in New York. But these notes 
 were payable as before at the office of the agents in Minnesota; the 
 mortgages securing the notes were retained by the agents, and the 
 notes were returned to the agents from time to time, whenever re- 
 quired by them, for the purpose of renewal, collection or foreclosure 
 of securities; the agents continued to collect the money due on the 
 notes, and to make loans in the name of Mrs. Bristol, sometimes 
 under her husbands's direction, but generally on their own judg- 
 ment; and they remitted money to Mrs. Bristol whenever she called 
 for the same, while what was not received by her M'as invested in 
 new loans. It also appeared that Mrs. Bristol had given the agents 
 a power of attorney empowering them to satisfy or discharge, or 
 to sell and assign, any and all mortgages in her name in the States 
 of Minnesota and Wisconsin, but that she revoked this instrument 
 after the death of one of the agents, and about November, 1890, 
 thereafter executing satisfaction of mortgages herself. 
 
 Nevertheless the business of loaning money through the agency 
 in Minnesota was continued during all these years just as it had 
 been carried on before, and we agree with the Circuit Court that the 
 fact that the note: were sent to Mrs. Bristol in New York, and the 
 fact of the revocation of the power of attorney, did not exempt these 
 investments from taxation under the statutes as expounded in the 
 decision to which we have referred. And we are unable to perceive 
 that any rights secured by the Federal Constitution were infringed 
 by the statutes as thus interpreted so far as the situs of these loans 
 and mortgages was concerned. 
 
 In New Orleans v. Stempel, 175 U. S. 309, certain taxes were 
 levied on money on deposit, and also on money loaned on interest, 
 credits and bills receivable, and it was held by this court that the 
 statutes of Louisiana, as interpreted by the courts of that State, in 
 
 i
 
 SECT. II.] METliOPOLITAN LIFE INS. CO. V. NEW ORLEANS. 123 
 
 authorizing such assessment, did not violate the Constitution of 
 the United States. There the money, notes and evidences of credits 
 were in fact in Louisiana, though their owners resided elsewhere. 
 Still under the circumstances of the case before us, we think, as we 
 have said, tliat the mere sending of the notes to New York and the 
 revocation of the power of attorney did not take these investments 
 out of the rule. 
 
 Persons are not permitted to avail themselves for their own bene- 
 fit of the laws of a State in the conduct of business witliin its limits, 
 and then to escape their due contribution to the public needs through 
 action of this sort, whether taken for convenience or by design.^ 
 
 Reversed and remanded. 
 
 METROPOLITAN LIFE INSURANCE COMPANY v. 
 
 NEW ORLEANS. 
 
 SuPUEME Court of the United States. 1907. 
 
 [Reported 205 U. S. 395.] 
 
 Moody, J. This is a writ of error to review the judgment of the 
 Supreme Court of Louisiana, which sustained a tax on the " credits, 
 money loaned, bills receivable," etc., of the plaiutilT in error, a life 
 insurance company incorporated under the laws of New York, where 
 it had its home ofllce and principal place of business. It issued poli- 
 cies of life insurance in the State of Louisiana and, for the purpose of 
 doing that and other business, had a resident agent, called a superin- 
 tendent, whose duty it was to superintend the company's business gen- 
 erally in the State. The agent had a local otiice in New Orleans. The 
 company was engaged in the business of lending money to the holders 
 
 * The court found that the recovery of a portion of the taxes had been 
 barred by the operation of the statute of limitations.
 
 124 METROPOLITAN I-IFE INS. CO. V. NEW ORLEANS. [CIIAP. II. 
 
 of its policies, which, when the}' had reached a certain point of maturity, 
 were regarded as furnishing adequate security for loans. The money 
 lending was conducted in the following manner : The policy holders 
 desiring; to obtain loans on their policies applied to the compan3"'s agent 
 in New Orleans. If the agent thought a loan a desirable one ho ad- 
 vised the company of the ap[)lication by communicating with the home 
 office in New York, and requested that the loan be granted. If the 
 home office approved the loan the company forwarded to the agent a 
 check for the amount, witli a note to be signed by the borrower. The 
 agent procured the note to be signeti, attached the policy to it, and for- 
 warded both note and policy to the home office in New York. He then 
 delivered to the borrower the amount of the loan. When interest was 
 due upon the notes it was paid to the agent and b}' him transmitted to 
 the home office. It does not appear whether or not the notes were re- 
 turned to New Orleans fSr the endorsement of the payments of interest. 
 When the notes were paid it was to the agent, to whom they were sent 
 to be delivered back to the makers. At all other times the notes and 
 policies securing them were kept at the home office in New York. The 
 disputed tax was not eo nomine on these notes, but was expressed to 
 be on ''credits, money loaned, bills receivable," etc., and its amount 
 was ascertained b}- computing the sum of the face value of all the notes 
 held by the compan}^ at the time of the assessment. The tax was 
 assessed under a law, Act 170 of 1898, which provided for a levy of 
 annual taxes on the assessed value of all property situated within the 
 State of Louisiana, and in Section 7 provided as follows : 
 
 "That it is the duty of the tax assessors throughout the State to place 
 upon the assessment list all property subject to taxation, including mer- 
 chandise or stock in trade on hand at the date of listing within their 
 respective districts or parishes. . . . And provided further^ In assess- 
 ing mercantile firms the true intent and purpose of this act shall be held 
 to mean the placing of such value upon stock in trade, all cash, whether 
 borrowed or not, money at interest, open accounts, credits, &c., as will 
 represent in their aggregate a fair average on the capital, both cash and 
 credits, emplo3'ed in the business of the part}' or parties to be assessed. 
 And this shall apply with equal force to any person or persons repre- 
 senting in this State business interests that ma}' claim domicile else- 
 where, the intent and purpose being that no non-resident, either by 
 him.self or through any agent, shall transact business here without 
 paying to the State a corresponding tax with that exacted of its own 
 citizens ; and all bills receivable, obligations or credits arising from the 
 business done in this State are hereby declared as assessable within 
 this State and at the business domicile of said non-resident, his agent 
 or representative." 
 
 The evident purpose of this law is to lay the burden of taxation 
 equally upon those who do business within the State. It requires that 
 in the valuation for the purposes of taxation of the property of mercan- 
 tile firms the stock, goods, and credits shall be taken into account, to
 
 SECT. II,] MKTIIOPOI.ITAN LIFE INS. CO. V. NEW ORLEANS. 12^> 
 
 the end that the average capital employed in tlie business shall be taxed. 
 This meUiod of assessment is applied impartially to the citizens of the 
 State and to tlie citizens of other Slates or countries doiiif; business, 
 personall}' or through agents, witliin the State of Louisiana. To accom- 
 plish this result, the law expressly provides that '■ all bills receivable, 
 obligations or credits arising from the business done in tliis State shall 
 be assessable at the lousiness domicile of the resident." Thus it is clear 
 that the measure of the taxation designed by the law is the fair average 
 of the capital employed in the business. Cash and credits and bills 
 receivable are to be taken into account merely i)ecause they represent 
 the capital and arc not to be omitted because their owner happens to 
 have a domicile in another State. The law was so construed b^' the 
 Supreme Court of Louisiana, where, in sustaining the assessment, it 
 was said : 
 
 "There can be no doubt that the seventh section of the act of 1898, 
 quoted in the judgment of the District Court, announced the policy of 
 the State touching the taxation of credits and bills of exchange repre- 
 senting an amount of the property of non-residents equivalent or corre- 
 sponding to said bills or credits which was utilized by them in the 
 prosecution of their business in the State of Louisiana. The evident 
 oliject of the statute was to do away with discrimination theretofore ex- 
 isting in favor of non-residents as against residents, and place them on 
 an equal footing. The statute was not arbitrary, but a legitimate exer- 
 cise of legislative power and discretion." 
 
 The tax was levied in obedience to the law of the State, and the only 
 question here is whether there is anything in the Constitution of the 
 United States which forbids it. The answer to that question depends 
 upon whether the property taxed was within the territorial jurisdiction 
 of the State. Property situated without that jurisdiction is beyond the 
 State's taxing power, and the exaction of a tax upon it is in violation 
 of the Fourteenth Amendment to the Constitution. Louisville Ferry 
 Co. V. Kentucky, 188 U. S. 38') ; Delaware, &c., Railroad Co. v. Penn- 
 sylvania, 198 U. S. 341 ; Union Refrigerator Transit Co. /•. Kentucky, 
 199 U. S. 194. But personal property ma}' be taxed in its permanent 
 abiding place, although the domicile of the owner is elsewhere. It is 
 usually easy to determine the taxable situs of tangible personal propertv. 
 But where personal property is intangible, and consists, as in this case, 
 of credits reduced to the concrete form of promissory notes, the inquiry 
 is comi)licated, not only by the fiction that the domicile of personal 
 property- follows that of its owner, but also by the doctrine, based upon 
 historical reasons, that where debts have assumed the form of bonds or 
 other specialties, they are regarded for some purposes as being the 
 property itself, and not the mere representative of it, and may have a 
 taxable situs of their own. IIow far promissory notes are assimilated 
 to specialties in respect of this doctrine, need not now be considered. 
 
 The question in this case is controlled bv the authority of the pre- 
 vious decisions of this court. Taxes under this law of Louisiana have
 
 126 METROPOUtAN LIFE INS. CO. V. NEW OE.I.EANS. [cHAP. IT. . 
 
 been twice considered here, and assessments npon credits arising out of 
 investments in the State have been sustained. A lax on credits evi- 
 denced In' notes secured bv mortgages w.is sustained where the owner, 
 a non-resident who had inherited them, left them in Louisiana in the 
 possession of an agent, who collected the principal and interest as they 
 became due. New Orleans r. Stempel, 175 U. S. 309. Again, it was 
 held that where a foreign banking company did business in New Orleans, 
 and through an agent lent mone}' which was evidenced b}' checks drawn 
 upon the agent, treated as overdrafts and secured by collateral, the 
 checks and collateral remaining in the hands of the agent until the trans- 
 actions were closed, the credits tiius evidenced were taxable in Loui- 
 siana. Board of Assessors v. Comptoir National, 191 U. S. 388. In 
 both of these cases the written evidences of the credits were continuously 
 present in the State, and their presence was clearly the dominant factor 
 in the decisions. Here the notes, though present in the State at all 
 times when they were needed, were not continuously present, and during 
 the greater part of their lifetime were absent and at their owner's dom- 
 icile. Between these two decisions came the case of Bristol v. Wash- 
 ington County, 177 U. S. 133. It appeared in that case that a resident 
 of New York was engaged through an agent in the business of lending 
 money in Minnesota, secured by mortgages on real property. The 
 notes were made to the order of the non-resident, though payable in 
 Minnesota, and the mortgages ran to her. The agent made the loans, 
 took and kept the notes and securities, collected the interest and re- 
 ceived payment. The property tiius invested continued to be taxed 
 without protest in Minnesota, until linally the course of business was 
 changed by sending the notes to the domicile of the owner in New York, 
 where the}- were kept by lier. The mortgages were, however, retained 
 b}' the agent in Minnesota, though his power to discharge them was 
 revoked. The interest was paid to the agent and the notes forwarded 
 to him for collection when due. Taxes levied after this change in the 
 business were in dis{)ute in the case. In delivering the opinion of the 
 court, Mr. Chief Justice Fuller said: "Nevertheless, the business of 
 loaning money through the agenc}' in Minnesota was continued during 
 all these years, just as it had been carried on before, and we agree with 
 the Circuit Court that the fact that the notes were sent to Mrs. Bristol 
 in New York, and the fact of the revocation of the power of attorney, 
 did not exempt these investments from taxation under the statutes as 
 expounded in the decisions to which we have referred. ..." 
 
 Referring to the case of New Orleans v. Stempel, the Chief Justice 
 said : 
 
 "There the moneys, notes, and other evidences of credits were in fact 
 in Louisiana, though their owners resided elsewhere. Still, under the 
 circumstances of the case before us, we think, as we have said, that the 
 mere sending of the notes to New York and the revocation of the power 
 of attorney did not take these investments out of the rule. 
 
 "Persons are not permitted to avail themselves, for their own benefit.
 
 SECT. IT.] METROPOLITAN LIFE INS. CO. V. NEW ORLEANS. 127 
 
 of the laws of a State in the conduct of business within its Hrnits, and 
 then to eseape their (hie eontril)iition to the [)ul>he need, through action 
 of this sort, whether taken for convenience or by design." 
 
 Accordingly it was held that the tax was not forbidden by the Fed- 
 eral Constitution. 
 
 In this case, the controlling consideration was the presence in the 
 State of the capital employed in the business of lending nuMicy, and 
 the fact tliat the notes were not continuously present was regarded as 
 immaterial. It is impossible to distinguish the case now before us from 
 the Bristol (;ase. Here the loans were negotiated, the notes signed, the 
 security taken, the interest collected, and the debts |)aid williin the State. 
 The notes and securities were in Louisiana whenever the business exi- 
 gencies required them to be there. Their removal with the intent that 
 they shall return whenever needed, their long continued though not per- 
 manent absence, cannot have the effect of releasing tliem as the repre- 
 sentatives of investments in business in the State from its taxing power. 
 The law may well regard the place of their origin, to which they intend 
 to return, as their true home, and leave out of account temporary ab- 
 sences, however long continued. Moreover, neither the fiction that 
 personal property follows the domicile of its owner, nor the doctrine 
 that credits evidenced by bonds or notes may have the situs of the lat- 
 ter, can be allowed to obscure the truth. Blackstone o. Miller, IJSM 
 U. S. 189. We are not dealing here merely with a single credit or a 
 series of separate credits, but with a business. The insurance comi)an3' 
 chose to enter into the business of lending money within the State of 
 Louisiana, and employed a local agent to conduct that business. It 
 was conducted tinder the laws of the State. The State undertook to tax 
 the capital employed in the business precisel}' as it taxed the capital of 
 its own citizens in like situation. For the purpose of arriving at the 
 amount of capital actually employed, it caused the credits arising out of 
 the business to be assessed. We think the State had the power to do 
 this, and that the foreigner doing business cannot escape taxation upon 
 his capital by removing temporaril}- from the State evidences of credits 
 in the form of notes. Under such circumstances, they have a taxable 
 situs in the State of their origin. 
 
 The judgment of the Supreme Court of Louisiana is 
 
 Affirmed.
 
 128 KEAT V. PEOPLE. [CHAP. II. 
 
 BEAT V. PEOPLE. 
 Supreme Court of Illinois. 1903. 
 
 [Reported 201 III. 469.] 
 
 Magruder, C. J. The general rule is, that personal property is 
 taxable, or has its taxable situs, at the domicile of the creditor. 
 The principle, applicable in such cases, is that which is embodied 
 in the maxim, mobilia personam sequuntur. But this principle does 
 not always apply for the purposes of taxation. On the contrary, 
 tangible personal property may be taxed where it is situated irre- 
 spective of ownership, if the statute shall so provide. (Cooley 
 on Taxation, pp. 269, 270; Hayward v. Board of Eeview, 189 111. 
 234.) Speaking of the rule or maxim thus referred to, we said in 
 Hayward's case, supra : " An exception to this rule may exist when 
 the credits are kept in the limits of the State, and employed per- 
 manently in business by the owner though a non-resident, or by an 
 agent of the owoier, residing in the State, and having the physical 
 control of the papers and writings evidencing the credits." 
 
 In Goldgart v. People, 106 111. 25, we said (p. 28) : "The stat- 
 ute requires the 'credit,' as well as other personal property, to be 
 listed by the owner, if a resident of the State, or if it be controlled 
 by an agent, then by the agent. ... If the owner be resident in 
 the State there is jurisdiction over his person, and over his credits 
 also, which, in legal contemplation, in the absence of anything show- 
 ing they have a situs elsewhere, accompany him. If the owner is 
 absent, but the credits are in fact here in the hands of an agent for 
 renewal or collection with the view of re-loaning the money by the 
 agent as a permanent business, they have a situs here for the pur- 
 pose of taxation, and there is jurisdiction over the thing." The 
 words, thus used in the Goldgart case, were quoted with approval 
 in Hayward v. Board of Eeview, supra; and the substance of the 
 holding in the Goldgart case, supra, was also stated and referred 
 to with approval in Matzenbaugh v. People, 194 111. 108. In Mat- 
 zenbaugh's case, supra, we said (p. 116) : The general rule is, the 
 taxable situs of credits is the domicile of the owner. But an 
 exception to the rule arises when the instruments, which evidence 
 the right of the owner to receive the indebtedness which constitutes 
 the ' credits,' are in the hands of an agent of the owner for the pur- 
 pose of enabling such agent to transact the business of the owner, 
 in which business the credits constitute, as it were, the subject 
 matter or stock in trade of such business." In Matzenbaugh's case, 
 also, it was held that the notes and securities there referred to were 
 subject to taxation under the laws of Illinois, because the owner 
 thereof allowed them to remain in the hands of his asrent in Illinois 
 for the purpose of enabling such agent to successfully and conve- 
 niently continue the prosecution of the business of loaning money, 
 in which such OMTier had lonsr been engaged. 
 
 The holding of the cases decided by this court would thus seem to be
 
 SECT. II.] BEAT V. I'EOPLE. 129 
 
 that, where tlie owner of such credits or Pecurities is a non-resident 
 of Illinois and is absent from that .State, his securities, remaining 
 in this State in the hands of an agent, are only subject to taxation 
 in this State when they are so left in the hands of the agent for 
 the purpose of having them renewed or collected, in order that the 
 money, realized from such renewal or collection, may be re-loaned 
 by the agent as a permanent business. The credits of the non-res- 
 ident owner, so remaining in Illinois, must constitute the subject 
 matter or stock in trade of the business of the owner as conducted 
 by the agent. 
 
 In the case at bar, there is no evidence that the notes and mort- 
 gage here under consideration were left by Mrs. Reat in Illinois 
 for the purpose of being collected and re-loaned as a permanent 
 business by any agent. The testimony is quite clear that, after 
 she left Illinois and went to California, she sold a farm in Illinois, on 
 which she had lived, and took from the purchaser notes and a mort- 
 gage for the purchase money. These notes, together with the mort- 
 gage, were left in the the hands of Jeffries, not as agent for the 
 re-investment of the money to be collected upon the notes and mort- 
 gage, but merely for the convenience of the maker of the notes. 
 Jeffries collected the interest from tlie maker of the notes, and re- 
 mitted such interest to Mrs. Heat in California, and charged noth- 
 ing for his services in collecting the interest and remitting it. There 
 is no evidence, tending to show that, when the principal of the notes 
 should be paid, it was not also to be remitted. The securities, how- 
 ever, were not left with any idea that the money collected should 
 be re-invested, or re-loaned, or permanently used in any business 
 in Illinois. It would, therefore, seem to follow that, although the 
 securities thus taxed were in the State of Illinois, yet they were 
 subject to the rule, which makes the domicile of the owner the tax- 
 able sitiis of the personalty. We are, therefore, of the opinion that 
 the notes and mortgage in question were not properly taxed in this 
 State. 
 
 In view of the conclusion thus reached, it is not necessary to 
 consider the objection, that at the time the county collector selected 
 lots 13 and 16 above mentioned as the real estate to be charged 
 with the personal property tax already mentioned, the lots in ques- 
 tion were not owned by Emeline Reat. Inasmuch as the notes and 
 mortgage in question were not properly subject to taxation as per- 
 sonal property in Illinois, it is immaterial whether, after the death 
 of ^Irs, Reat, and after the title had descended to her heirs, the 
 county collector properly charged the tax against the lots, or not. 
 
 The judgment of the county court is reversed, and the cause is 
 remanded to that court for further proceedings in accordance with 
 the views herein expressed. 
 
 Reversed and remanded, with directions.
 
 1^0 'HAYS V. PACIFIC MAIL STEAMSHIP CO. [ciIAP. IT. 
 
 HAYS V. PACIFIC MAIL STEAMSHIP CO. 
 
 Supreme Court of the United States. 1855. 
 
 [Reported 17 Howard, 596.] 
 
 Nelson, J. This is a writ of error to tlie District Court for the 
 Northern District of California. 
 
 Tlie suit was brought in the District Court by the company, to 
 recover back a sum of money wliich the}' were com[)elIed to pay to the 
 defendant, as taxes assessed in the State of California, upon twelve 
 steamships belonging to them, which were temporarily within the juris- 
 diction of the State. 
 
 The complaint sets forth that the plaintiffs are an incorporated com- 
 pan}' by the laws of New York ; that all the stockholders are residents 
 and citizens of that State ; that the principal office for transacting the 
 business of the company is located in the cit}' of New York, but, for 
 the better transaction of their business, they have agencies in the city 
 of Panama, New Grenada, and in the city of San Francisco, Califor- 
 nia ; that they have, also, a naval dock and shipyard at the port of 
 Benicia, of that State, for furnishing and repairing their steamers ; 
 that, on the arrival at the port of San Francisco, they remain no longer 
 than is necessary to land their passengers, mails, and freight, usually 
 done in a da}' ; they then proceed to Benicia, and remain for repairs 
 and refitting until the commencement of the next voyage, usually some 
 ten or twelve days ; that the business in which they are engaged is in 
 the transportation of passengers, merchandise, treasure, and the 
 United States mails, between the city of New York and the city 
 of San Francisco, b}' wa}' of Panama, and between San Francisco 
 and different ports in the Territory of Oregon ; that the company are 
 sole owners of the several vessels, and no portion of tJie interest is 
 owned by citizens of the State of California ; that the vessels are all 
 ocean steamships, employed exclusively in navigating the waters of the 
 ocean ; that all of them are duly registered at the custom-house in New 
 York, where the owners reside ; that taxes have been assessed upon all 
 the capital of the plaintiffs represented by the steamers in the State of 
 New York, under the laws of that State, ever since they have been 
 employed in the navigation, down to the present time; that the said 
 steamships have been assessed in the State of California and county of 
 San Francisco, for the year beginning 1st July, 1851, and ending 30th 
 June, 1852, claiming the assessment as annually due, under an act of
 
 SIOCT. TI.] HAYS V. TAOIFrC ^rA^^> RTEAMSIFTI* CO. 131 
 
 the legislature of the State; that the taxes assessed amount to 
 $11,962.50, and were paid under protest, after one of the vessels was 
 advertised for sale b}- the defendant, in order to prevent a sale of it. 
 
 To this coinplaint the defendant demurred, and the court below gave 
 judgment for the plaintiffs. 
 
 By the 3d section of the Act of Congress of 31st December, 1792, it 
 is provided that ever}' ship or vessel, except as thereafter provided, 
 shall be registered by the collector of the district, in which shall be 
 comprehended the i)ort to which the ship or vessel shall belong at the 
 time of her registry, and which port shall be deemed to be tliat at or 
 nearest to wliich the owner, if tliere be but one, or, if more tlian one, 
 nearest to the place where the husband, or acting and managing owner, 
 usually resides ; and the name of the ship, and of the port to which 
 she shall so belong, shall be painted on her stern, on a black ground, 
 in white letters of not less than three inches in length ; and if any ship 
 or vessel of the United States shall be found without haviufr her name, 
 and the name of the port to which she belongs, painted in the manner 
 mentioned, the owner or owners shall forfeit fifty dollars. 
 
 And by the Act of 29th July, 1850 (9 Stats, at Large, 440), it is 
 provided that no bill of sale, mortgage, or conveyance of any vessel 
 shall be valid against any person otlier than the grantor, etc., and per- 
 sons having actual notice, unless such bill of sale, mortgage, or convey- 
 ance be recorded in the office of the collector of the customs where 
 such vessel is registered or enrolled. 
 
 These provisions, and others that might be referred to, very clearly 
 indicate that the domicile of a vessel that requires to be registered, if 
 we may so speak, or home port, is the port at which she is registered, 
 and which must be the nearest to the place where the owner or owners 
 reside. In this case, therefore, the home port of the vessels of the 
 plaintiflTs was the port of New York, where they were duly registered, 
 and where all the individual owners are resident, and where is also the 
 principal place of business of the company ; and where, it is admitted, 
 the capital invested is subject to State, county, and other local taxes. 
 
 These ^ips are engaged in the transportation of passengers, mer-. 
 chandise, etc., between the cit}- of New York and San Francisco, by 
 the way of Panama, and between San Francisco and ditTercnt ports in 
 the territory of Oregon. They are thus engaged in the business and 
 commerce of the country, upon the highway of nations, touching at 
 such ports and places as these great interests demand, and which hold 
 out to the owners sufficient inducements by the profits realized or ex- 
 pected to be realized. And so far as resi)ects the ports and harbors 
 witiiin the United States, they are entered and cargoes discharged or 
 iaden on board, independently of any control over them, except as it 
 res|i<(is such municipal and sanitary regulations of the local authorities 
 a^ aif not inconsistent with the constitution and laws of the general 
 govern. nent, to which belongs the regulation of commerce with foreign 
 J' 'tions and l)etween the States.
 
 132 HAYS V. PACIFIC MALL STEAMSHIP CO. [CHAP. II. 
 
 Now, it is quite apparent that if the State of California possessed 
 the authority to impose the tax in question, any other State in the 
 Union, into the ports of which the vessels entered in the prosecution of 
 their trade and business, might also impose a like tax. It may be 
 that the course of trade or other circumstances might not occasion as 
 great a delay in other ports on the Pacific as at the port of San Francisco. 
 But tills is a matter accidental, depending upon the amount of business 
 to be transacted at the particular port, the nature of it, necessary 
 repairs, etc., which in no respect can allect the question as to the situs 
 of the property, in view of the right of taxation by the State. 
 
 Besides, whether the vessel, leaving her home port for trade and 
 commerce, visits, in the course of her voyage or business, several ports, 
 or confines her operations in the carrying trade to one, are questions 
 that will depend upon the profitable returns of the business, and will 
 furnish no more evidence that she has become a part of the personal 
 property within the State, and liable to taxation at one port than at the 
 others. She is within the jurisdiction of all or any one of them tempo- 
 rarily, and for a purpose wholly excluding the idea of permanently abid- 
 ing in tiie State, or changing her home port. Our merchant vessels 
 are not unfrequontly absent for years, in the foreign carrying trade, 
 seeking cargo, carrying and unlading it from port to port, during all 
 the time absent ; but the}' neither lose their national character nor their 
 home port, as inscribed upon their stern. 
 
 The distinction between a vessel in her home port and when lying 
 at a foreign one, or in the port of another State, is familiar in the 
 admiralty law. and she is subjected, in many cases, to the application 
 of a different set of principles. 7 Pet. 324 ; 4 Wheat. 438. 
 
 We are satisfied that the State of California had no jurisdiction over 
 these vessels for the purpose of taxation ; they were not, properly, 
 abiding within its limits, so as to become incorporated with the other 
 personal property of the State ; they were there but temporarily, en- 
 gaged in lawful trade and commerce, with their situs at the home port, 
 where the vessels belonged, and where the owners were liable to be 
 taxed for the capital invested, and where the taxes had been paid. 
 
 An objection is taken to tlie recovery against the collector, on the 
 ground, mainly, that the assessment under the law of California, by 
 the assessors, was a judicial act, and that the part}' should have pur- 
 sued his remedy to set it aside according to the provisions of that law. 
 
 We do not think so. The assessment was not a judicial, but a 
 ministerial act, and as the assessors exceeded their powers in making 
 it, the oflScer is not protected. 
 
 The payment of the tax was not voluntary, but compulsory, to pre- 
 vent the sale of one of the ships. 
 
 Our conclusion is, that the judgment of the court below is right, 
 and should be affirmed.^ 
 
 1 Jrc. Johnson v. Debary-r>aya Merchants' Line, 37 Fla. 499, 19 So. 640; Roberts 
 V. Ckirlevoix, 60 Mich. 197 ; S. v. Haight, 30 N. J. L, 428.
 
 SKCT. II. J OJLD DOMINION STEAMSllli' CO- V. VIKCilNIxV. 133 
 
 OLD DOMINION STEAMSHIP CO. v. VIRGINIA. 
 Supreme Court of the United States. I'JOS. 
 
 [Reported l'J8 U. 8. 299.] 
 
 On March 17, 1904, the Supreme Court ol" AppeaKs of tlie State 
 of Virginia, in a matter appealed from a finding ol' tiie Stale Cor- 
 poration Commission, entered the following lindiugs and order: 
 
 " That the Old Dominion Steamship Company was a non-res- 
 ident corporation, having been incorporated by the .senate and house 
 of representatives of the State of Delaware; tliat it was then and 
 had been for many years theretofore engaged in the transportation 
 of passengers and freight on the Atlantic Ocean and communica- 
 ting navigable waters, between the city of New York, in the State 
 of New York, and Norfolk, and certain other ports within the State 
 of Virginia. That said steamship company in the prosecution of 
 its said transportation business owned and operated the vessel prop- 
 erty above named ; that these vessels, with the exception of the tug 
 Germania, whose movements and use will be hereinafter stated, 
 visited various ports or points within the State of Virginia, for the 
 purpose of receiving freight and passengers, for which they issued 
 bills of lading and tickets to points outside the State of Virginia: 
 that owing to the shallow waters where these vessels plied it was im- 
 possible in most instances for the larger ocean-going steamers of 
 the company to be used; that in consequence the vessels above enu- 
 merated were used to receive the freight and passengers as aforesaid, 
 giving the shipper of freight a bill of lading for the same, destined 
 to New York and other points outside of Virginia, and the passen- 
 ger a ticket to his destination, and thus transported such freight and 
 passengers to deeper \vater at Norfolk and Old Point Comfort where, 
 upon such bills of lading and tickets, the passengers and freight 
 were transferred to one of the larger ocean-going vessels of the steam- 
 ship company, and so the ultimate destination, namely. New York, 
 and elsewhere outside of Virginia, was reached ; that any other busi- 
 ness transacted by the above-named vessels -was incidental in char- 
 acter and comparatively insignificant in amount; that the said 
 vessels were built and designed for interstate traffic especially and 
 were adjuncts to or branches of the main line of the Old Dominion 
 Steamship Company between New York and Norfolk : that each and 
 all of the said vessels were regularly enrolled, under the United 
 States laws, outside of the State of Virginia, with the name and port 
 of such enrollment painted on the stern of each of them ; thnt the 
 said vessels, though regularly enrolled and licensed for oonstwise 
 trade, were then used on old established routes upon navigable waters 
 within Virginia, as follows, to wit: 
 
 " First. The steamer Hampton Roads, between Fort Monroe and 
 Hampton and Norfolk. 
 
 " Second. The steamer Mobiaek, between points in Mathews and 
 Gloucester Counties and Norfolk.
 
 13-i OLD DOMINION STEAMSHIP CO. V. VIRGINIA. [cilAl', II. 
 
 "Tliird. The steamers Luray and Accomac, between Smithfield 
 and Norfolk. 
 
 " Fourth. The steamer Virginia Dare, between Suffolk and Nor- 
 folk. 
 
 " Fifth. The steamers Berkeley and Brandon, between Richmond 
 and Norfolk; and 
 
 " The steamers Berkeley and Brandon ply between Richmond and 
 Norfolk. These two steamers were completed in the year 1901, or 
 early in 1902, one of them having been constructed at the William 
 R. Trigg shipyard in the city of Richmond, and the other outside 
 of the State of Virginia. Early in the year 1902 they were placed 
 upon the line between Norfolk and Richmond, one steamer leaving 
 Richmond each evening and arriving in Norfolk each morning, thus 
 giving a night trip every night each way between Richmond and 
 Norfolk. At the time these steamers were placed upon this route 
 and since that time, the Old Dominion Steamship Company has by 
 public advertisement called attention to the fact that these two 
 steamers were especiall}- fitted in the matter of stateroom accom- 
 modations for carrying passengers between Richmond and Norfolk, 
 and the said two steamers have since that time been advertising for 
 the carriage of passengers and freight on their route between Rich- 
 mond and Norfolk, and have been regularly carrying freight and 
 passengers between the said two points in Virginia as well as taking 
 on freight and passengers for further transportation on their ocean 
 steamers at Norfolk. The Old Dominion Steamship Company ap- 
 plied under the revenue laws of the State of Virginia for a license to 
 sell liquor at retail on each of these steamers, and on July 1, 1902, 
 there was granted through the commissioner of the revenue of the 
 cit}' of Richmond a license to the Old Dominion Steamship Com- 
 pany for tlie sale of liquor at retail on each of these steamers, said 
 licenses to expire on April 30, 1903. On or about the same time, 
 the said steamship company complied with the revenue laws of the 
 United States, and paid the necessary revenue tax through the cus- 
 tom house at the city of Richmond for the purpose of selling liquor 
 at retail on each of these steamers. In the spring of 1903, the said 
 steamship company, in order to obtain licenses to sell liquor at retail 
 on each of these steamers, applied for the same in the city of Rich- 
 mond and complied with the requirements of section 143 of the new 
 revenue law, approved April 16, 1903, and so obtained licenses for 
 the years 1903-1904 to sell liquor at retail on each of these steamers 
 on their route between the cities of Richmond and Norfolk, and 
 likewise, on or about the same time, complied with the revenue laws 
 of the United States in the matter of selling liquor at retail on each 
 of the said steamers on said route. 
 
 " Sixth. The steam tug Germania, which was used in the harbor 
 of Norfolk and Hampton Roads for the purpose of docking the 
 large ocean-going steamers of the Old Dominion Steamship Com- 
 pany, and the transferring from different points in those waters 
 freight from connecting lines destined to points outside of Virginia. 
 
 "And the court, having maturely considered said transcript of 
 
 ■U
 
 SECT, II. J OLD DOMINION STEAMSHIP CO. V. VIRGINIA. lu'j 
 
 the record of the finding aforesaid and the arguments of counsel, is 
 of opinion that the legal situs of the vessels and barges assessed for 
 taxation by the finding of the State corporation conuiiission is, for 
 that purpose, within the jurisdiction of the State of Virginia, and that 
 said property is amenable to the tax imposed thereon — notwith- 
 standing the fact that said vessels and barges are owned by a non- 
 resident corporation, that they may have been enrolled under tlie act 
 of Congress at some port outside the State of Virginia, and that 
 tiiey are engaged, in part, in interstate commerce — and doth so 
 decide and declare. Therefore it seems to the court here that the 
 finding of the State corporation commission appealed from is with- 
 out error, and said finding is approved and alUrmed. It is further 
 considered by the court that the appellee recover against the appel- 
 lant thirty dollars damages and its costs by it about its defense ex- 
 pended upon this appeal." 
 
 To review this order the Old Dominion Steamship Company sued 
 out this writ of error. 
 
 Bkewer, J. The facts being settled, the only question is one of 
 law. Can Virginia legally subject these vessels to State taxation? 
 The general rule is that tangible personal property is subject to taxa- 
 tion by the State in which it is, no matter where the domicil of the 
 owner may be. This rule is not affected by the fact that the prop- 
 erty is employed in interstate transportation. Pullman's Palace Car 
 Company v. Pennsylvania, 141 U. S. 18, in which Mr. Justice Gray, 
 speaking for the court, said (p. 23) : 
 
 " It is equally well settled that there is nothing in the Constitu- 
 tion or laws of the United States wdiich prevents a State from taxing 
 personal property, employed in interstate or foreign commerce, like 
 other personal property wdthin its jurisdiction." 
 
 See also Cleveland, &c. Pailway Co. v. Backus, 154 U. S. 439, 445; 
 Western Union Telegraph Co. v. Taggart, 163 U. S. 1, 14. 
 
 This is true as to water as well as to land transportation. In 
 Gloucester Ferry Company v. Pennsylvania, 114 U. S. 196, 217, Mr. 
 Justice Field, in delivering the opinion of the court, after referring 
 to certain impositions upon interstate commerce, added : 
 
 " Freedom from such impositions does not, of course, imply ex- 
 emption from reasonable charges, as compensation for the carriage 
 of persons, in the way of tolls or fares, or from the ordinary taxa- 
 tion to which other property is subjected, any more than like free- 
 dom of transportation on land implies such exemption." 
 
 See also Passenger Cases, 7 How. 283, in which Mr. Justice McLean 
 said (p. 402) : 
 
 "A State cannot regulate foreign commerce, but it may do mnny 
 things which more or less affect it. It may tax a ship or other 
 vessel used in commerce the same as other property owned by its 
 citizens." 
 
 The same doctrine is laid down in the snme case bv "Mr. Chief .Tu=!- 
 tice Taney (p. 479). See also Transportation Company v. Wheel- 
 ing, 99 tr. S. 273. That the service in which these vessels were 
 engaged formed one link in a line of continuous interstate commerce
 
 136 OLD DOMINION STEAMSHIP CO. V. VIRGINIA. [CHAP. II. 
 
 may affect the State's power of regulation but not its power of taxa- 
 tion. True, they are not engaged in an independent service, as the 
 cabs in Pennsylvania Railway Company v. Knight, 192 TJ. S. 21, 
 but, being wholly within the State, that was their actual situs. And, 
 as appears from the authorities referred to, the fact that they were 
 engaged in interstate commerce does not impair the State's author- 
 ity to impose taxes upon them as property. Indeed, it is not con- 
 tended that these vessels, although engaged in interstate commerce, 
 are not subject to State taxation, the contention being that they are 
 taxable only at the port at which they are enrolled. In support of 
 this contention the two principal cases relied upon are Hays v. The 
 Pacific Mail Steamship Company, 17 How. 596, and Morgan v. Par- 
 ham, 16 Wall. 471. Registry and enrollment are prescribed by sec- 
 tions 4141 and 4311, Rev. Stat., for vessels of the United States 
 engaged in foreign and domestic commerce. Section 4141 reads : 
 
 " Sec. 4141. Every vessel, except as is hereinafter provided, shall 
 be registered by the collector of that collection district which in- 
 cludes the port to which such vessel shall belong at the time of her 
 registry ; which port shall be deemed to be that at or nearest to which 
 the owner, if there be but one, or, if more than one, the husband or 
 acting and managing owner of such vessel, usually resides." 
 
 By sections 4131 and 4311 vessels registered or enrolled are de- 
 clared to be deemed vessels of the United States. As stated by 
 Chancellor Kent, in his Commentaries, vol. 3, p. *139 : 
 
 "The object of the registry acts is to encourage our own trade, 
 navigation, and ship-building, by granting peculiar or exclusive 
 privileges of trade to the flag of the United States, and by prohibit- 
 ing the communication of those immunities to the shipping and 
 mariners of other countries. These provisions are well calculated 
 to prevent the commission of fraud upon individuals, as well as to 
 advance the national policy. The registry of all vessels at the cus- 
 tom house, and the memorandums of the transfers, add great secu- 
 rity to title, and bring the existing state of our navigation and 
 marine under the view of the General Government. By these regu- 
 lations the title can be effectually traced back to its origin." 
 
 This object does not require and there is no suggestion in the 
 statutes that vessels registered or enrolled are exempt from the 
 ordinary rules respecting taxation of personal property. It is true 
 by sec. 4141 there is created what may be called the home port of 
 the vessel, an artificial situs, which may control the place of taxation 
 in the absence of an actual situs elsewhere, and to that extent only 
 do the two cases referred to go. 
 
 Our conclusion is that where vessels, though ensraged in interstate 
 commerce, are employed in such commerce wholly within the limits 
 of a State, they are subject to taxation in that State, although they 
 may have been registered or enrolled at a port outside its limits. 
 The conclusion, therefore, reached by the Court of Appeals of Vir- 
 ginia was right, and its judgment is 
 
 Affirmed.
 
 SECT. II.] TEiXN'AXT V. STATK liOAJJD Ol' TAXES. 137 
 
 TENNANT v. STA'IM-: HOARD OF TAXES. 
 Court of Ekuoks and Appeals of New Jersey. 1921. 
 
 [Reported 113 Atl. 254.] 
 
 Parker, J. This is a dispute over the right of Jersey City to tax 
 certain personal proi)erty oT tlie hankruj)! lirm of Daily r. Jvins, for 
 taxes of the year 1918. . . . By the various appeals from tlie local 
 assessors to the county board and thence to the State board, and the 
 certiorari from the Supreme Court, all disputed matters seem to have 
 been eliminated except a fund in hank and a tugboat %yhich on May 
 20 was moored (as we were informed on the argument) in the South 
 Cove of Jersey City. . . . 
 
 On this phase of the case the argument seems to be that the fund 
 and the tugboat, being held by the trustee in bankruptcy, were in the 
 custody of the law, and that property in such custody is not taxable. 
 On the broad question whether property of a bankrupt in the hands 
 of a trustee in bankruptcy is exempted from State taxation, the an- 
 swer of the United States Supreme Court is decidedly in the negative. 
 Swarts V. Hammer, 194 U. S. 441, 34 Sup. Ct. 695, 48 L. Ed. 
 1060. This is dispositive of the taxability of the bank deposit in 
 this aspect. . . . 
 
 It is next argued that the tug was further in the " custody of the 
 law" because of the possession by the marshal, so as to be exempt. 
 The facts are that the tug was registered at the New York custom 
 house and had been ordinarily employed in and about the waters of 
 New York Harbor. About the time of the bankruptcy (appellant was 
 appointed trustee May 2, 1918) the tug was brought into tidewaters 
 on the New Jersey side adjacent to Jersey City, and moored there 
 apparently unused, and so remained until after it was sold, June 17, 
 1918. During this period, as we imdorstand the evidence, several 
 libels in admiralty were filed, and served by the United States mar- 
 shal for the district of New Jersey. Sale was made jointly by the 
 appellant as trustee and by the marshal, and from the proceeds 
 the libels were paid off and the balance was paid to or retained by the 
 trustee. The sale price was $30,000, and this was adopted by the 
 State Board as the fair value of the tug, which was subjected to tax 
 at that valuation together with the fund already in bank. 
 
 As a preliminary to ascertaining whether this tug was exempt 
 because in the custody of the marshal, it is necessary to determine 
 the other question raised, whether apart from such claim of exemp- 
 tion it was taxable on May 20, 1918, in the taxing district of Jersey 
 City. In our opinion it was so taxable. As an active tug plying in 
 the waters of New York Harbor it was taxable at the residence of 
 the owners or the permanent situs of the property, it is immaterial 
 which. American Mail Steamship Co. v. Crowell, 76 N. J. Law, 54, 
 68 Atl. 75? ; Shrewsbury v. Merchants' Steamboat Co.. 76 N. J. Law, 
 407, 69 Atl. 958: West Shore E. Co. r. State Board, 83 N. J. Law,
 
 138 TENNANT V. STATE BOAED OF TAXES. [CHAP. II. 
 
 Sr, 81 Atl. 351; Id., 81 N. J. Law, 768, 85 Atl. 826. But with the 
 bankruptcy its condition became one of passivity; it was a mere 
 chattel secured from drifting and awaiting a sale. Had it been 
 drawn out on a ship railway or even tied up to a wharf on the Jersey 
 City water front, its taxable situs would be indubitable. While the 
 point does not seem to be definitel}^ argued, we gather from the asser- 
 tion that the tug was in the " tidewaters of New York Bay " that it 
 is claimed to have been out of the taxing jurisdiction of New Jersey 
 because of the interstate treaty limiting the "jurisdiction" of New 
 Jersey on the waters of New York Bay and the Hudson river. C. S. p. 
 5358. But this jurisdiction has been held by the courts of both 
 New York and New Jersey to be a jurisdiction simply for the ex- 
 ercise of the police power. People v. Central E. E. of N. J., 13 N. Y. 
 283; Central R. R. Co. v. Jersey Citv, 70 N. J. Law, 81, 56 Atl. 
 239; S. C, 309 U. S. 173, 28 Sup. Ct. 592, 52 L. Ed. 896. In the 
 opinion of Mr. Justice Garrison in 70 N. J. Law at page 97, 56 Atl. 
 at page 215, it is declared that " the sovereign power of taxation 
 over all the territory thus defined (i. e., to the middle of the Hudson 
 river) resides in the State of New Jersey." See Cook v. Weigley,. 
 72 N. J. Eq. 221, 65 Atl. 196. A vessel more or less permanently 
 moored within the territory is, in our opinion, personal property 
 "found" within the taxing district, in the same manner as, e. g., 
 coal on storage pending a sale and removal. Lehigh & Wilkes-Barre 
 Coal Co. V. Junction, 75 N. J. Law, 922, 68 Atl. 806, 15 L. E. A. 
 (N. S.) 511. It is pertinent to note, wliile on this subject, that the 
 libels against this tug were filed in the United States District Court 
 for the District of New Jersey, and the seizure was made by the 
 marshal of that court, in conformity, as it seems to us, with the stat- 
 utory provision that "the State of New Jersey shall constitute 
 one judicial district" (Eev. Stat. U. S. § 531; Comp Stats. U. S. 
 § 1082) treated as meaning that the district extends to the middle 
 of the river for all purposes of executing civil process out of that 
 court. 
 
 The tug, then, being legally "found" in the taxing district of 
 Jersey City, it only remains to inquire whether because under seizure 
 by the marshal it was exempted by any rule of law from taxation as 
 against its general owners, Dailey v. Ivins, or the trustee in bank- 
 ruptcy, either by provision in the statute or rule laid down by decision 
 of the courts. It is not exempted by statute ; . . . and we think cur 
 reports will be searched in vain for a case wherein it was held, or 
 even claimerl, that real or personal property otherwise liable to taxa- 
 tion is exempt because of having been levied on or attached by court 
 process. The court officer himself (as in this case the marshal) is 
 ordinarily not liable for the tax (37 Cyc. 797; In re Kellinger, 9 
 Paige N. Y. Ch. 62) ; but that does not exempt the property nor, 
 as we view it, the general owner. 
 
 These considerations lead to an affirmance of the judgment.
 
 SKCT. IJ.] MCCUTCJIEN V. BOAED OF EQUALIZATION OF TAXES. 139 
 
 McCUTCHEN v. BOARD OF EQUALIZATION OF TAXES. 
 Supreme Court of New Jersey. 1915. 
 
 [Reported 87 N. J. L. 370.] 
 
 Swayze, J. The question is the same decided recently in a case 
 involving the tax of anotlier year. The opinion in tliat case is said 
 not to have been reported. It may serve as our opinion in the 
 present case. 
 
 The question is tlie right of Jersey City to tax flour held on a pier 
 in Jersey City for tiie purpose of repacking and blending. The Hour 
 is shipped from the northwest to A'ew York City, on through bills of 
 lading; freight is paid through. Instead of transporting the flour 
 immediately upon its arrival across the river by lighters, it is un- 
 loaded and held at the pier for the purposes mentioned. Tlie lia- 
 bility of the railroad company for local taxes on this pier was before 
 the Court of Errors and Appeals in Lehigh A^alley Railroad Co. 
 V. Jersey City, 80 N. J. L. 298. Tlie test of the right to tax goods 
 shipped from one State to another and detained in course of trans- 
 portation is settled by the case of Lehigh and Wilkes-Barre Coal Co. 
 V. Junction, 75 N. J. L. 922. If the goods are actually in the course 
 of a continuous journey, they are not subject to taxation. The diffi- 
 culty is to decide what breaks the continuity of the journey. In 
 this case it was broken by repacking and blending the flour upon 
 the pier. Whether mere repacking would suffice may perhaps be 
 arguable, although the packages that go on to destination are not 
 the same packages that are landed on the pier; but surely the flour 
 after blending is a different commodity. It is blended for the very 
 purpose of making something different, a quality that is or is sup- 
 posed to be more salable. The process of blending is no doubt differ- 
 ent from the process of grinding grain into flour, but in each case 
 a different commodity is produced. 
 
 This view is sustained by the decisions of the United States 
 Supreme Court. In General Oil Co. v. Crain, 209 U. S. 211, the 
 oil was held at Memphis for the purpose of putting it in barrels 
 for further transport. It was held that it was subject to the juris- 
 diction of Tennessee. 
 
 The taxes are affirmed, with costs. 
 
 COE V. ERROL. 
 Supreme Court of the United States. 1886. 
 
 [Reported 116 V. S. 517.] 
 
 In September 1881, Edward S. Coe filed a petition in the Su- 
 preme Court of New Hampshire for the county of Coos, against the 
 town of Errol, for an abatement of taxes, and therein, amongst
 
 140 COE V. EREOL. [CHAP. II. 
 
 other things, alleged that on the 1st of April, 1880, he and others, 
 residents of Maine and Massachusetts, owned a large number of 
 spruce logs that had been drawn down the winter before from Went- 
 worth's location, in New Hampshire, and placed in Clear Stream 
 and on the banks thereof, in the town of Errol, county of Coos, 
 New Hampshire, to be from thence floated down the Androscoggin 
 river to the State of Maine to be manufactured and sold; and that 
 the selectmen of said Errol for that year appraised said logs for 
 taxation at the price $G,000, and assessed thereon State, county, 
 town, and school taxes, in the whole to the amount of $120, and 
 highway taxes to the amount of $60. A further allegation made the 
 same complaint with regard to a lot of spruce logs belonging to Coe 
 and another person, which had been cut in the State of Maine, and 
 were on their way of being floated to Lewiston, Maine, to be manu- 
 factured, but were detained in the town of Errol by low water. 
 Similar allegations were made Avith regard to logs cut the following 
 year, 1880, and drawn from Wentworth's location, and part of them 
 deposited on lands of John Akers, and part on land of George C. 
 Demeritt, in said town of Errol, to be from thence taken to the State 
 of Maine; and, also, with regard to other logs cut in Maine and 
 floated down to Errol on their passage to Lewiston, in the State 
 of Maine, and both which classes of logs were taxed by the select- 
 men of Errol in the year 1881. The petition also contained the 
 following allegations, to wit : 
 
 "Said Coe further says that said logs of both years, so in the 
 Androscoggin river, have each year been taxed as stock in trade in 
 said Lewiston to said Coe and Pingree, and said Coe claims and 
 represents that none of said logs were subject to taxation in said 
 Errol for the reason that they were in transit to market from one 
 State to another, and also because they had all been in other ways 
 taxed. 
 
 " That said Androscoggin river, from its source to the outlet of 
 the Umbagog Lake in the State of New Hampshire, through said 
 State and through the State of Maine to said Lewiston, is now, and 
 for a long time has been, to wit, for more than twenty years last 
 past, a public highway for the floatage of timber from said lakes 
 and rivers in Maine, and from the upper waters of said Androscog- 
 gin river and its tributaries in New Hampshire down said river to 
 said Lewiston, and has been thus used by the petitioner and his 
 associates in the lumber business for more than twenty years last 
 past.'' 
 
 Without further pleading, the parties made an agreed case, the 
 important part of which was as follows, to wit : 
 
 " It is agreed that the facts set forth in the petition arc all true 
 except what is stated as to the taxation of the logs as stock in trade 
 in Lewiston, Maine; and if that is regarded by the court as material, 
 the case is to be discharged and stand for trial on that point. It is 
 agreed that upon this petition the legality of the taxation is in- 
 tended to be brought before the court for adjudication, and all formal 
 objections to the proceedings in the town meeting, &c., and all other
 
 SECT. II.] COE V. ERROL. 141 
 
 matters of form, are waived, and we submit the matter to the court 
 for a legal adjudication as to whether or not any or all of the taxes 
 shall be abated. 
 
 "And it is agreed that for many years the petitioner and his 
 associates in the lumber business have cut large quantities of timber 
 on their lands in Maine and floated them down the said lakes and 
 rivers in Maine and down the Androscoggin river to the mills at 
 said Lewiston; and timber thus cut has always lain over one season, 
 being about a year, in the Androscoggin river, in this State, either 
 in Errol, Dummer, or Milan; and the timber referred to in this 
 petition as having been cut in Maine had lain over in Errol since 
 the spring or summer before the taxation, according to the above 
 custom." 
 
 Upon this case the Supreme Court of New Hampshire, in Sep- 
 tember term, 1882, adjudged as follows, to wit: "Xow, at this term, 
 the said questions of law having been fully determined in said law 
 term, and an order made that that portion of said tax assessed upon 
 the logs cut as aforesaid in said State of Maine be abated, and that 
 the tax assessed upon all of said logs cut in the State of New Hamp- 
 shire be sustained, and said order hanng been fully made known to 
 the parties of this case and become a part of the record thereof, it is 
 therefore ordered and decreed by the court that there be judgment 
 in accordance with said order made at said law term, without costs 
 to either party." 
 
 The petitioner took a bill of exceptions, setting forth the agreed 
 case, and stating, amongst other things, the points raised on the 
 hearing before the Supreme Court of New Hampshire, and the de- 
 cision of that court thereon, as follows : 
 
 " On said hearing the petitioner claimed that said taxes named 
 in the petition and the statutes of this State, under the provisions 
 of which said taxes were assessed, were illegal and void, because 
 said taxes were assessed in violation of, and said statutes of this 
 State are in violation of and repugnant to, the general provisions 
 of the Constitution of the United States ; because said taxes were 
 assessed in violation of, and said statutes of this State are in viola- 
 tion of and repugnant to, that part of section 2, art. 4, of the Con- 
 stitution of the United States, which provides that * The citizens of 
 each State shall be entitled to all the privileges and immunities of 
 citizens of the several States ' ; because said taxes were assessed in 
 violation of, and said statutes of this State are in violation of and 
 repugnant to, those parts of sec. 8 of art. 1 of the Constitution of 
 the United States which provide that 'The Congress shall have 
 power ... to regulate commerce with foreign nations, and among 
 the several States,' and section 10 of said article 1, which provides 
 that ' No State shall, without the consent of Congress, lay anv im- 
 posts or duties on imports or exports except what may be absolutely 
 necessary for executing its inspection laws.' " 
 
 Mr. Justice Bradley delivered the opinion of the court. After 
 stating the facts in the language above reported he continued : 
 The case is now before us for consideration upon writ of error to
 
 142 COE V. ERROL. [CHAP. II. 
 
 the Supreme Court of New Hampshire, and the same points that were 
 urged before that court are set up here as grounds of error. 
 
 The question for us to consider, therefore, is, whether the products 
 of a State (in this case timber cut in its forests) are liable to be 
 taxed like other property within the State, though intended for ex- 
 portation to another State, and partially prepared for that purpose 
 by being deposited at a place of shipment, such products being owned 
 by persons residing in another State. 
 
 We have no ditticulty in disposing of the last condition of the 
 question, namely, the fact (if it be a fact) that the property was 
 owned by persons residing in another State; for, if not exempt from 
 taxation for other reasons, it cannot be exempt by reason of being 
 owned by non-residents of the State. We take it to be a point 
 settled beyond all contradiction or question, that a State has juris- 
 diction of all persons and things within its territory which do not 
 belong to some other jurisdiction, such as the representatives of 
 foreign governments, with their houses and effects, and property 
 belonging to or in the use of the government of the United States. 
 If the owner of personal property within a State resides in another 
 State which taxes him for that property as part of his general estate 
 attached to his person, this action of the latter State does not in 
 the least affect the right of the State in which the property is situ- 
 ated to tax it also. It is hardly necessary to cite authorities on a 
 point so elementary. The fact, therefore, that the owners of the 
 logs in question were taxed for their value in Maine as a part of 
 their general stock in trade, if such fact were proved, could have no 
 influence in the decision of the case, and may be laid out of view. 
 
 We recur, then, to a consideration of the question freed from this 
 limitation: Are the products of a State, though intended for ex- 
 portation to another State, and partially prepared for that purpose 
 by being deposited at a place or port of shipment within the State, 
 liable to be taxed like other property within the State? 
 
 Do the owner's state of mind in relation to the goods, that is, his 
 intent to export them, and his partial preparation to do so, exempt 
 them from taxation? This is the precise question for solution. 
 
 This question does not present the predicament of goods in course 
 of transportation through a State, though detained for a time within 
 the State by low water or other causes of delay, as was the case of 
 the logs cut in the State of Maine, the tax on which was abated 
 by the Supreme Court of New Hampshire. Such goods are already in 
 the course of commercial transportation, and are clearly under the 
 protection of the Constitution. And so, we think, would the goods 
 in question be when actually started in the course of transportation 
 to another State, or delivered to a carrier for such transportation. 
 There must be a point of time when they cease to be governed ex- 
 clusively by the domestic law and besrin to be governed and protected 
 by the national law of commercial regulation, and that moment 
 seems to us to be a legitimate one for this purpose, in which they 
 commence their final movement for transportation from the State of 
 their origin to that of their destination. When the products of the
 
 SECT. II.] COE V. EEEOL. 143 
 
 farm or tliu forest are collected and brought in from the surround- 
 ing country to a town or station serving as an entrepot for that par- 
 ticular region, whether on a river or a line of railroad, such products 
 arc not yet exports, nor are they in process of exportation, nor is ex- 
 purtation begun until they arc coiiiinittcd to the comuiou carrier 
 for transportation out of the State to tlie State of their destination, 
 or have started on their ultimate passage to that State. Until then 
 it is reasonable to regard tiicm as not only wiliiin tiie State of their 
 origin, but as a part of the general mass of property of that State, 
 subject to its jurisdiction, and liable to taxation there, if not taxed 
 by reason of their being intended for exportation, but taxed without 
 any discrimination, in the usual way and manner in which such 
 property is taxed in the State. 
 
 Of course they cannot be taxed as exports ; that is to say, they can- 
 not be taxed by reason or because of their exportation or intended 
 exportation ; for that would amount to laying a duty on exports, 
 and would be a plain infraction of the Constitution, which prohibits 
 any State, without the consent of Congress, from laying any imposts 
 or duties on imports or exports ; and, altliougli it has been decided, 
 Woodruff V. Parham, 8 Wall. 123, that this clause relates to imports 
 from, and exports to, foreign countries, yet when such imposts or 
 duties are laid on imports or exports from one State to another, it 
 cannot be doubted that such an imposition would be a regulation 
 of commerce among the States, and, therefore, void as an invasion 
 of the exclusive power of Congress. See Walling v. Michigan, ante, 
 446, decided at the present term, and cases cited in the opinion in 
 til at case. But if such goods are not taxed as exports, nor by reason 
 of their exportation, or intended exportation, but are taxed as part 
 of the general mass of property in the State, at the regular period 
 of assessment for such property and in the usual manner, they not 
 being in course of transportation at the time, is tliere any valid 
 reason why they should not be taxed? Though intended for ex- 
 portation, tliey may never be exported ; the owner has a perfect right 
 to change his mind ; and until actually put in motion, for some 
 place out of t'le State, or committed to the custody of a carrier for 
 transportation to such place, why may they not be regarded as still 
 remaining a part of the general mass of property in the State? 
 If assessed in an exceptional time or manner, because of their an- 
 ticipated departure, they miglit well be considered as taxed by reason 
 of their exportation or intended exportation ; but if assessed in the 
 usual way, when not under motion or shipment, we do not see why 
 the assessment may not be valid and binding. 
 
 The point of time when State jurisdiction over the commodities 
 of commerce begins and ends is not an easy matter to designate or 
 define, and vet it is hisrhlv important, both to the shipper and to 
 the State, that it should be clearly defined so as to avoid all am- 
 biguity or question. Tn regard to imports from foreign countries, 
 it was settled in the case of Brown 7". Maryland, 12 AAlieat. 419, 
 that the State cannot impose anv tax or duty on such goods so long 
 as they remain the property of the importer, and continue in the
 
 144 COE V. EEEOL. [ciIAP. U. 
 
 original form or packages in which they were imported; the right 
 to sell without any restriction imposed by the State being a neces- 
 sary incident of the right to import without such restriction. This 
 rule was deemed to be the necessary result of the prohibitory clause of 
 the Constitution, which declares that no State shall lay any im- 
 posts or duties on imports or exports. The law of Maryland, which 
 was held to be repugnant to this clause, required the payment of a 
 license tax by all importers before they were permitted to sell their 
 goods. This law was also considered to be an infringement of the 
 clause wliich gives to Congress the power to regulate commerce. 
 Tills court, as before stated, has since held that goods transported 
 from one State to another are not imports or exports within the 
 meaning of the prohibitory clauses before referred to; and it has 
 also held that such goods, having arrived at their place of destina- 
 tion, may be taxed in the State to which they are carried, if taxed 
 in the same manner as other goods are taxed, and not by reason of 
 their being brought into the State from another State, nor sub- 
 jected in any way to unfavorable discrimination. Woodruff v, 
 Parham, 8 Wall. 123; Brown v. Houston, 114 U. S. 623. 
 
 But no definite rule has been adopted with regard to the point of 
 time at which the taxing power of the State ceases as to goods ex- 
 ported to a foreign country or to another State. What we have al- 
 ready said, however, in relation to the products of a State intended 
 for exportation to another State will indicate the view which seems 
 to us the sound one on that subject, namely, that such goods do not 
 cease to be part of the general mass of property in the State, subject, 
 as such, to its jurisdiction, and to taxation in the usual way, until 
 they have been shipped, or entered with a common carrier for trans- 
 portation to another State, or have been started upon such transpor- 
 tation in a continuous route or journey. We think that this must be 
 the true rule on the subject. It seems to us untenable to hold that 
 a crop or a herd is exempt from taxation merely because it is, by 
 its owner, intended for exportation. If such were the rule in 
 many States there would be nothing but the lands and real 
 estate to bear the taxes. Some of the Western States produce very 
 little except wheat and corn, most of which is intended for export; 
 and so of cotton in the Southern States. Certainly, as long as these 
 products are on^-the lands which produce them, they are part of the 
 general property of the State. And so we think they continue to be 
 until they have entered upon their final journey for leaving the State 
 and going into another State. It is true, it was said in the case of 
 The Daniel Ball, 10 Wall. 557, 565: "Whenever a commodity has 
 begun to move as an article of trade from one State to another, com- 
 merce in that commodity between the States has commenced," But 
 this movement does not begin until the articles have been shipped 
 or started for transportation from the one State to the other. The 
 carrying of them in carts or other vehicles, or even floating them, 
 to the depot where the journey is to commence is no part of that 
 journey. That is all preliminary work, performed for the purpose 
 of putting the property in a state of preparation and readiness for
 
 SECT. II.] COE V. EREOL. 145 
 
 transportation. Until actually launched on its way to another State, 
 or committed to a common carrier for transportation to such State, 
 its destination is not fixed and certain. It may be sold or otherwise 
 disposed of within the State, and never put in course of transporta- 
 tion out of the State. Carrying it from the farm, or the forest, to 
 the depot, is only an interior movement of the property, entirely 
 within the State, for the purpose, it is true, but only for the pur- 
 pose, of putting it into a course of exportation; it is no part of the 
 exportation itself. Until shipped or started on its final journey out 
 of the State its exportation is a matter altogether in fieri, and not at 
 all a fixed and certain thing. 
 
 The application of these principles to the present case is ob\aous. 
 The logs which were taxed, and the tax on which was not abated by 
 the Supreme Court of New Hampshire, had not, when so taxed, 
 been shipped or started on their final voyage or journey to the State 
 of Elaine. They had only been drawn down from Wentworth's 
 location to Errol, the place from which they were to be transported 
 to Lewiston in the State of Maine. There they were to remain 
 until it should be convenient to send them to their destination. 
 They come precisely within the character of propert}^ which, accord- 
 ing to the principles herein laid down, is taxable. But granting all 
 this, it may still be pertinently asked, How can property thus situ- 
 ated, to wit, deposited or stored at the place of entrepot for future 
 exportation, be taxed in the regular way as part of the property of 
 the State ? The answer is plain. It can be taxed as all other prop- 
 erty is taxed, in the place where it is found, if taxed, or assessed for 
 taxation, in the usual manner in which such property is taxed; and 
 not singled out to be assessed by itself in an unusual and excep- 
 tional manner because of its destination. If thus taxed, in the usual 
 way that other similar property is taxed, and at the same rate, and 
 subject to like conditions and regulations, the tax is valid. In other 
 words, the right to tax the property being founded on the h}-pothesis 
 that it is still a part of the general mass of property in the State, it 
 must be treated in all respects as other property of the same kind 
 is treated. 
 
 These conditions we understand to have been complied with in 
 the present case. At all events there is no evidence to show that the 
 taxes were not imposed in the regular and ordinary way. As the 
 presumption, so far as mode and manner are concerned, is always 
 in favor of, and not against, official acts, the want of evidence to the 
 contrary must be regarded as e^^dence in favor of the regularity of 
 the assessment in this case. 
 
 The judgment of the Supreme Court of New Hampshire is 
 
 Affirmed.
 
 146 BUELIiSrGTON LUMBER CO. V. WILLETTS. [CHAP. II. 
 
 BURLINGTON LUMBER CO. v. WILLETTS. 
 Supreme Court of Illinois. 1886. 
 
 [Reported 118 III. 559.] 
 
 Craig, J. This was a bill in equity, brought by the Burlington 
 Lumber Company, to enjoin the collection of a tax, upon an assess- 
 ment made by the assessor of the town of New Boston, in Mercer 
 County, for the year 1885, on a certain quantity of logs which were 
 in the New Boston harbor, or bayou, on the 1st day of May, 1885. 
 
 There is no substantial dispute between the parties in regard to 
 the facts. The Burlington Lumber Company is a corporation or- 
 ganized under the laws of Iowa, with its place cf business at Bur- 
 lington. The corporation is engaged in the business of manufactur- 
 ing himber. It buys logs in ^^'isconsin and ^Minnesota, where they 
 are ratted, and towed down the Mississippi river to Burlington, and 
 there sawed into lumber at the mills of the company. In the Spring 
 and Summer of 1884, the company purchased logs, which were rafted 
 in Boef slough, near the mouth of the Chippewa river, in Wisconsin. 
 After the logs were rafted, they were towed down the river by a 
 steamer. The vice-president of the corporation, on cross-examina- 
 tion, testified : " Some of the logs were stopped on the way. We 
 could not stow all we bought, at or near Burlington, but it w-as more 
 convenient and safer to leave them in the harbor at New Boston. 
 After the boats were started with the rafts, the boat would be in- 
 structed to leave them at New Boston or other place, and there they 
 w^ould be left until wanted. The first raft was put in, October 3, 
 
 1884. That was there in May, 1885. There were 3,000,000 feet 
 there that winter. We had no logs at Burlington in winter of 
 
 1885. We have used the harbor for nine years. We could keep logs 
 there safer tlian at Burlington, and with less expense. Corporation 
 did not own the land. It leased shore privileges, — that is, we pay 
 something, rather than have bother or trouble, to those who own 
 the land, same as if we used a wharf. We have been renting shore 
 privileges several years. The right to tie rafts on his shore was 
 rented of Prentiss. The corporation had E. L. Willits employed to 
 look after logs, and see that none got away. When we wanted logs 
 we sent after them by steamer. Willits was the only man we had 
 employed or that had charge of them there." Edward L. AVillits 
 testified : " I was in the employ of the Burlington Lumber Company 
 in the fall, winter and spring of 1884 and 1885. Was employed 
 by the month to keep logs afloat and see that none got away. Got 
 $50 per month. I know the situation of the logs that winter and 
 spring. There were four rafts, and about 750,000 feet in each." 
 Cross-examined : " I have been employed five years to look after all 
 rafts. I give receipt to boat, deliver to boat and take receipt. I 
 have control while there. I had moved them across slough to keep 
 them afloat. The Burlington Lumber Company put a raft in 
 Sturgeon bay on the 1st of May. Part of it is there yet.''
 
 SECT. II.] BURLINGTON LUMBER CO. V. WILLETTS. 147 
 
 It is claimed that the property in question, under tlie evidence, 
 was in transitu, and, tlieiel'ore, not taxable in this .State. It is a 
 plain proposition, that property in course of transportation from 
 one State to another, over one of our navigable rivers, or over any of 
 the public highways of the country, is not liable to taxation as it 
 passes over sueii highway, by the State authorities abjng the line 
 of such highway, and we think it is equally clear, that if property, 
 while in the course of transportation over one of our navigable rivers, 
 should be detained by low water or ice, or other cause, it would not 
 be liable to be taxed by the authorities where the detenti(jn occurred. 
 Any otiier rule would have a direct tendency to obstruct commerce 
 between States, which, of course, could not be done under our system 
 of laws. But the question here presented is, whether the property, 
 when assessed, was in course of -transportation over a public high- 
 way. We have given the evidence bearing upon this point that con- 
 sideration which the importance of the question demands, and we 
 have reached the conclusion that the property was not in transitu. 
 For nine years the complainant liad used the harbor at New Boston 
 as a place of safety for dei)ositing logs during the winter. Land 
 along the shore had been leased, where the property was anchored, 
 and a man employed, who was placed in the possession of the prop- 
 erty. At the time the boats started from AVisconsin with the rafts, 
 to convey them down the river, the destination of the property had 
 not been determined by the company, but after departure, as stated 
 by the vice-president in his evidence, the boats were then instructed 
 to leave a part of the rafts at Xew Boston, and there they would 
 remain until wanted at the mill in Buslington, when a steamer 
 would be sent for them. New Boston harbor, or Sturgeon bay, as it 
 is usually called, is only about thirty miles up the river from Bur- 
 lington. It is very accessible, and it seems plain that the company 
 had selected the bay as a place of storage for its logs, — a place 
 where its property could be shipped, and kept in safety until such 
 time as it was needed at the mills in Burlington. Indeed, for all 
 practical purposes, it may be said that the transit of the property 
 ended at New Boston. When the logs reached that point, they were 
 located there for an indefinite time. New Boston harbor thus be- 
 came the destination of the property, and so remained until such 
 time as the corporation saw proper again to place the property in 
 transit. No other reasonable construction can be placed upon the 
 evidence. 
 
 The first section of our Revenue law provides, that all real and 
 personal property in this State shall be assessed and taxed, except 
 such as is by the act exempted. Here was a large quantity of per- 
 sonal property, located in this State on leased premises, in the hands 
 of an agent of the owner, and upon what principle it can escape taxa- 
 tion is not apparent, unless the plain language of our Revenue law 
 is disregarded. It is true, that the owners of the property were not 
 manufacturing the logs into lumber in this State, or engaged in 
 selling the lumber here, but the property was kept at New Boston 
 because it was more profitable for the owners to keep it in store
 
 14S COMMOXAVEALTH l'. AMEE. DKEDGI]S"G CO. [CHAP. II. 
 
 there than at Biirliugton, If kept at the mills in Burlington it 
 would be liable to loss upon the breaking up of the ice in the river, 
 in the spring, while at New Boston it was safe, at a trifling expense. 
 The property was therefore kept at New Boston on account of the 
 profit to the owners to keep it there. The company made money 
 by tlie transaction. Here the Burlington Lumber Company had 
 premises leased, large amounts of valuable property placed on the 
 leased premises, in the hands of hired agents, resulting in profit to 
 the company, and yet it is claimed it had no place of business in 
 this State. ' This claim is unreasonable. We think, when all the 
 circumstances are considered, it may be said that the company was 
 engaged in a business here, beneficial to itself. If, then, the com- 
 pany had this property located in our State, and it was here for 
 profit, and it was so located as to claim the protection of our laws, 
 the property, in our opinion, had a situs here, and was liable to 
 taxation. 
 
 We have been cited to the late case of Coe v. Town of Errol, de- 
 cided in the Supreme Court of the United States, as having an im- 
 portant bearing on the question involved. We have examined that 
 case, and, as we understand the decision, the question here involved 
 is not considered or decided in that case. The point there decided, 
 as we read the opinion of the court, is, in substance, this : In order 
 to exempt property from taxation on the ground that it is in course 
 of transportation, the property must be actually shipped, — that 
 placing it together for shipment is not sufiicient. 
 
 There is, hoAvever, one error in the record. The taxes which 
 complainant attempted to enjoin, were, in part, levied by the in- 
 corporated town of New Boston. The property, however, was never 
 within the incorporated limits of New Boston, and so far as it is 
 concerned, it acquired no jurisdiction over, and has no right what- 
 ever to impose a tax on, the property. The corporation tax was 
 void, because New Boston had no right to assess the property, and 
 being void, the complainants had a clear right to file a bill to enjoin 
 this part of the tax. 
 
 As to the corporation tax of New Boston the decree will be re- 
 ■ versed. In all other respects it will be affirmed, and the costs of 
 this court will be equally divided between the parties. 
 
 Decree reversed in part and in part affirmed. 
 
 COMMONWEALTH v. AMERICAN DREDGING CO. 
 Supreme Court of Pennsylvania. 1888. 
 
 [Reported 122 Pa. 386.] 
 
 In 1887, the American Dredging Company appealed to the court 
 below from the settlement by the auditor general and state treasurer, 
 on December 15, 1886, of taxes claimed to be due on its capital 
 stock, under the act of June 7, 1879, P. L. 112. The objections 
 filed averred that a tax of $1,485 was charged upon property of the
 
 SECT. II.] COMMONWEALTH V. AMEK. DREDGING CO. 149 
 
 company which had no situs within jurisdiction of the common- 
 wealth. 
 
 At tlie trial of the cause which was without a jury, under the 
 act of April 22, 187-i, P. L. lO'J, and was submitted without ar^- 
 ment and without points presented on either side, the court, Mc- 
 Pherson, J., found the following facts : 
 
 1. The defendant is a corporation of this commonwealth, char- 
 tered by the act of April 9, 18G7, P. L. 9oG, with power " to own, 
 construct, operate and dispose of dredging machines, steam tugs, 
 lighters, machinery and appliaiices for improvement of harbor, chan- 
 nels, docks and water-courses." Under this act and a supplement 
 of March 28, 18T3, P. L. 446, its capital stock for the tax year end- 
 ing the first ilonday of November, 1886, was $495,000. 
 
 2. During this year $232,803.22 of its capital stock was invested 
 in land and buildings situate in the state of Xew Jersey; $92,000 
 thereof was invested in four dredges, which were built outside of 
 the state of Pennsylvania, three of which have never been within the 
 limits of the state, and the fourth of which had never been within its 
 limits until after the end of the said year; $6,000 thereof was in- 
 vested in a tug which was built outside of Pennsylvania, and was 
 not within its limits during the said year ; and $38,500 thereof was 
 invested in eleven scows which were built outside of Pennsylvania, 
 and have never been within its limits. During the said year, the 
 said real estate and other property were all employed for corporate 
 purposes in the states of New Jersey, Maryland and Virginia. 
 
 3. During the year in question, the defendant declared two 
 dividends, each of three per cent, upon $495,000, and this settlement 
 taxes the Avhole capital stock under the act of 18T9, section 4, at the 
 rate of one half mill for each one per cent of dividend. 
 
 Upon these facts the conclusion of law was as follows: 
 It has been decided in Commonwealth r. Pennsylvania Coal Com- 
 pany, 5 Pa. C. C. E. 90, note, that so much of the tangible property 
 of a domestic corporation as is situate in other states, and there 
 employed in its corporate business, is not taxable by this common- 
 wealth. "We, therefore, hold that the commonwealth can only re- 
 cover tax upon $125,696.78 of the defendant's capital stock. The 
 amount due is as follows : 
 
 3 mills upon $125,696.78 $377 09 
 
 Interest from February 13, 1887, to May 10, 1888 . . 56 12 
 Attorney General's commission 18 85 
 
 $452 06 
 
 For which sum we direct judgment to be entered if exceptions 
 are not filed according to law. 
 
 To this decision, the commonwealth filed exceptions, which were 
 overruled; whereupon the commonwealth took this writ. 
 
 Paxsox, J. The court below correctly held that the defendant 
 company was not liable to taxation upon so much of its capital 
 stock as Avas reprefented by lands and buildings situate in the state 
 of New Jersey ; but we are of opinion that the learned judge erred
 
 150 NATIONAL DKEDGING CO. V. STATE. [ciiAF. 11. 
 
 iu his ruling that the $92,000 of said stock represented by the four 
 dredges, the tug-boat, and the eleven scows, conceding tliat they, 
 or at least a portion of them, were built outside of this state, and 
 have never been within it, were not Hable to taxation. This is not 
 because of the technical principle that t]ie situs of personal prop- 
 erty is where the domicil of tlie owner is found. This rule is doubt- 
 less true as to intangible property such as bonds, mortgages, and 
 other evidences of debt. But the better opinion seems to be that it 
 does not hold in the case of visible tangible personal property per- 
 manently located in another state. In such cases, it is taxable within 
 the jurisdiction where found and is exempt at the domicil of the 
 owner. Goods and chattels, horses, cattle, and other movable prop- 
 erty of a visible or tangible character are liable to taxation in the 
 jurisdiction of the state wherein the same are, and are ordinarily 
 kept, irrespective of the residence or domicil of the owner. Legal 
 protection and taxation are reciprocal, so that such personal prop- 
 erty and effects of a corporeal nature, or that may be handled and 
 removed, as receive the protection of the law are liable to be taxed 
 by the law where they are thus protected: Eorer on Interstate 
 Law, 204, and cases there cited; Potter on Corporations, §§ 189, 
 190 : Pierce on Eaiiroads, 472. No fault is found with this prin- 
 ciple, but does it apply to the facts of this case ? 
 
 It must be conceded that the property in question must be liable 
 to taxation in some jurisdiction. It it were permanently located in 
 another state, it would be liable to taxation there. But the facts 
 show that it is not permanently located out of the state. From the 
 nature of the business, it is in one place to-day and in another to-mor- 
 row, and, hence, not taxable in the jurisdiction where tempt»rarily 
 employed. It follow^s that if not taxable here, it escapes altogether. 
 The rule as to vessels engaged in foreign or interstate commerce is 
 that their siius for the purpose of taxation is their home port of 
 registry, or the residence of their owner, if unregistered : Pullman 
 Palace Car Co., 29 Fed. Eep. Q,(S; Hays v. Pacific ]\Iail Steamship 
 Co., 17 How. 596. These vessels, if they may be so called, were not 
 registered. Hence, their situs for taxation is the domicil of the 
 owners. This rule must prevail in the absence of anything to show 
 that they are so permanently located in another state as to be liable 
 to taxation under the laws of that state. 
 
 Judgment reversed, and a procedendo awarded. 
 
 NATIONAL DEEDGING CO. v. STATE. 
 Supreme Court of Alabama. 1893. 
 
 [Reported 99 Ala. 462.] 
 
 McClellan, J. The question presented on this record is whether 
 certain property of the National Dredging Company had a situs in 
 this State for the purposes of taxation when the assessment com- 
 plained of was made in the Spring of 1891. The property was 
 brought into the State after January 1st of that year and before the
 
 SECT, n.] NATIONAL DREDGING CO. V. STATE- 1.51 
 
 assessor had completed his assessment, and hence was properly as- 
 sessed if taxable at all in this State under the agreed facts. Cod3, 
 § 458. Tlujse facts are: The National Diedging C'onij)any is a Del- 
 aware corporation, domiciled at Wilmington in that Slate. As its 
 name indicates, its business or a part of its business, is the operation 
 "of machines, steam tugs, lighters, machinery and appliances for the 
 improvement of rivers, harbors, channels, docks, water courses, low 
 lands," &c. In the Fall or early Winter of 18D0 it entered into a 
 contract with the United States for continuing the work of dredg- 
 ing the channel of Mobile Bay, entered upon the execution thereof 
 early in 1891, and from that time on down to the time of the trial 
 of this cause in the City Court, July ;50, 18:)2, has been and was at 
 said last mentioned date still engaged therein. The property found 
 subject to taxation, to wit, one dredge boat, " Forbes," one tug boat, 
 "Curtis," and five mud scows, and brought into this State when the 
 performance of the contract was entered upon, that is, in January 
 or February, 18'Jl, and had remained here up to the trial, except 
 some portion thereof, not specified, which was removed to the State 
 of Maine in ]\Iarch or February, 1892. The contract with the Gov- 
 ernment had not been completed on July 30, 1892, but its comple- 
 tion would "occur shortly" thereafter, and after such completion 
 the company would have no further use for this property in Ala- 
 bama. The said tug boat, dredge and scows were floating property, 
 capable of being moved from port to port — the tug of its own 
 motive power, and the dredge and scows by being towed; and the 
 tug "Curtis" is registered in the custom house at Wilmington, 
 Delaware. It is clear from the foregoing epitome of the facts that 
 all of this property was at the time of the assessment being used 
 in the State of Alabama in the prosecution of works wholly within 
 ; the State, under a contract which involved its presence here in that 
 work for a time, the duration of which was indefinite, but which 
 extended beyond a year and a half, and the end of which, even from 
 the standpoint of the latter date, could not be more definitely fixed 
 than as "shortly to occur." During all this time and possibly to 
 the present moment the property has been wholly within Alabama; 
 engaged in a business or being used in a work which did not involve 
 its passing even temporarily beyond the limits of the State. More- 
 over, it has all along been used and possibly is even now being used 
 in the prosecution of this work precisely as property belonging to 
 citizens of this State would be used therein. Indeed, as appears 
 from this record, other property of the same kind, which had pre- 
 viously been used by residents of Alabama in the prosecution of 
 this work, was purchased by the appellant company, and, being in- 
 corporated with that involved here, has all along been used like it in 
 dredging the channel of Mobile Bay, and one scow so used was built 
 in the city of Mobile, and has never been, we assume, outside of the 
 State. Again, not only is the period of the contract in the execu- 
 tion of which this property is kept in the State indefinite, and hence 
 the duration of its presence here in the execution of that contract 
 uncertain, but it is manii'ost from the n"Teed facts that this contract
 
 152 ]SrATIO:N"AX, DEEDGIXG CO. v. state. [chap. II. 
 
 is only one of a series for the dredging of the channel in Mobile Bay, 
 covering years before and after the year 1891. This work was in 
 the line of the dredging corporation's business, it had secured this 
 contract under one annual congressional appropriation when it had 
 to bring its machinery and appliances — this property — to Mobile 
 for its execution. Having it there, and being thus in a more ad- 
 vantageous position for entering into another contract or other suc- 
 cessive contracts as appropriations are made by Congress, it is fair 
 to assume that the National Dredging Company will enter into 
 other contracts, or rather, at least, that its purpose and intention 
 is to do so if favorable terms can be made. These considerations 
 are proper in arriving at the situs of this property. They go to 
 show, by reference to the owner's intention as fairly inferable from 
 all the circumstances, an indefiniteness as to the period of the pres- 
 ence of these boats and scows wholly within Alabama beyond that 
 existing as to the duration of the first contract, and the use of the 
 property here in performance thereof. In other words, taking into 
 consideration the business of the corporation, the amount and con- 
 tinuing character of the work to be done in Mobile Bay, the prep- 
 arations made by the company for doing so much thereof as is 
 authorized under one annual appropriation, it may be that this 
 property will be for years engaged upon this work, as a part of that 
 now being used by the company of like kind with this had been used 
 thereon for a year or years prior to 1891. On this state of the case 
 
 — or even leaving out of view the considerations last adverted to 
 
 — it is clear, we think, that this property is not merely temporarily 
 within Alabama, but that, to the contrary, its presence here is for 
 such an indefinite period as involves the idea of permanency, in the 
 sense in which that term is used with respect to the situs of prop- 
 erty for the purposes of taxation. It is here as any other property 
 is or would be here in use upon the public works in Mobile Bay. 
 Its use in that work is the same as that of the other property orig- 
 inally embraced in this assessment and formerly owned by a citizen 
 of Alabama and by him devoted to this work during previous years, 
 the same as that of the scow which was built in Mobile for this work 
 and has never been beyond the State, and the same as that of an- 
 other scow built outside of the State for this work. All this other 
 property is property of the State or in the State for the purposes 
 of taxation, though it may at some uncertain future time cease to 
 be property taxable here in consequence of its removal to other juris- 
 dictions, as the property in controversy may sometimes be carried 
 out of the State. Until that happens, however, both classes of prop- 
 erty enjoy the same protection of our laws, both classes are devoted 
 to the same use, the continuation of each class within the State is 
 alike indefinite; the one class can not, in short, be distinguished 
 from the other in any characteristic which is of importance in deter- 
 mining the question of taxability vel non. And hence our conclu- 
 sion that the property in controversy had become so incorporated 
 with, and a part of, the tangible property of this State, for revenue 
 purposes, as that its taxable situs is here, notwithstanding the fact
 
 SECT. II.] NATIONAL DREDGING CO. V. STATE. 153 
 
 that the domicil of its owner is in another State. Mayor of ;Mo- 
 bile V. Baldwin, 57 Ala. 61; Boyd v. City of Selma, 96 Ala. 144; 
 11 So. IJep. 393; Burroughs on Taxation, pp. 40-1; Trammell v. 
 Connor, 91 Ala. 398. 
 
 There is nothing in the nature of this particular property to take 
 it out of the general principle. The fact that it is floating prop- 
 erty and may be moved from place to place and port to port by 
 water furnishes no more reason for exempting it from taxation here 
 than would exist for the exemption of property which did not float 
 and could be moved from place to place only overland. 
 
 With respect to the tug boat " Curtis," a special consideration is 
 advanced in support of its non-taxability. It is a sea-going vessel, 
 propelled by steam, and is entitled to registry under statutes of 
 the United States at tlie port of its owner's domicil. As matter of 
 fact, it is registered at the custom house in the City of "Wilmington, 
 Delaware. On this the contention is that that being home, it can 
 not be taxed elsewhere. There are many cases which hold that such 
 vessel, engaged in commerce between its home port and others, or 
 even wholly between other ports than that of its registry, can be 
 taxed only at tho port of registry. It is not our purpose to question 
 these decisions; it is not necessary that we should. They all pro- 
 ceed upon the theory that vessels thus engaged are never in foreign 
 jurisdiction except temporarily, and as an incident to the com- 
 merce to which they are devoted, and hence that they do not and 
 can not acquire a situs in foreign ports for the purpose of taxation : 
 they do not become incorporated with the property of other States 
 and countries which they touch intermittently, are never indefinitely 
 there, and their business, the work they perform, the uses to which 
 they are put, is not done and performed within, and are not local 
 to, the foreign State or countr}-. These considerations can have 
 no application here. The tug " Curtis " is not engaged in 
 c6mmerce, foreign or inter-state. Its business is wholly within Ala- 
 bama. It is not here temporarily, but indefinitely. It is as much 
 a part of the property of the State for taxation as if it had been 
 chartered for an indefinite period of time to carry freight and pas- 
 sengers, or tow ships over the waters of ]\Iobile Bay between the city 
 and Point Clear, or as if its owner had devoted it to the carrying 
 trade of the Alabama Eiver; and surely in these cases it could not 
 be successfully insisted that it was not as much Alabama property 
 for taxation as any other boat devoted exclusively to the na^-igation 
 of the water courses of the State. The question, indeed, is at last 
 one of situs in fact, and where this is sho\\Ti neither foreign registry 
 nor foreign ownership is of any consequence. 
 
 The judgment of the City Court is affirmed.
 
 154 PEAIEIE OIL AND GAS CO. V. EHRHAKIXr. [CHAP. II. 
 
 [PKAIEIE OIL AND GAS CO. v. EHRHARDT. 
 Supreme Court of Illinois. 1910. 
 
 [Reported 244 III. 634.] 
 
 ViCKERS, J. On March 17, 1908, the Prairie Oil and Gas Com- 
 pany, a corporation organized under the laws of Kansas, filed its bill 
 in equity in the Will county circuit court against August Ehrhardt, 
 county treasurer and collector, praying for an injunction to prevent 
 the collector from collecting certain taxes levied against the com- 
 plainant upon crude oil in certain tanks and pipe lines belonging 
 to the complainant and located in Will county. Upon a hearing 
 in the circuit court the temporary injunction was made perpetual, 
 and from a decree granting the relief prayed for, the collector has 
 appealed to this court. 
 
 The bill alleges, and the evidence sustains the allegations, that 
 appellee is an incorporated company under the laws of Kansas and 
 owns and operates a pipe line extending from Humboldt, Kansas, 
 through the States of Missouri, Iowa and Illinois, and extending 
 to Griffith, Indiana, through which crude petroleum is transported, 
 by means of a system of force pumps and tanks, from one end of 
 the pipe line to the other; that the company has a large number 
 of tanks in southeastern Kansas in which millions of barrels of 
 oil are stored; that some of this oil is produced by wells owned by 
 the company, but most of it is purchased from owners of other oil 
 wells in southeastern Kansas and in Oklahoma after it is collected 
 by such other owners in tanks at their wells and is conveyed through 
 collecting pipes to the storage tanks in Kansas. The oil is then 
 conveyed from the storage station in Kansas through pipe lines, 
 as above described, to Griffith, Indiana, where it is delivered to an- 
 other pipe line company, which transports the oil east through the 
 pipe lines of the latter company. The pipes through which the oil is 
 transported are made of metal, are from ten to twelve inches in dia- 
 meter and are two and somtimes three in number, laid parallel to 
 each other. The course of the oil across this State is slightly up- 
 grade, which makes it necessar}' to force the oil through the pipes 
 by a system of force pumps distributed along the line about forty- 
 five miles apart. There are two or three pumps installed at each 
 pumping station, which force the oil, by a pressure of about 650 
 pounds to the square inch, to the next station east, where, in turn, 
 another set of pumps forces it onward in its course across the State. 
 The oil travels in the pipes at the rate of about three miles per hour. 
 There is a pumping station at Wilmington, west of Griffith, Indiana, 
 and the next pumping station southwest of Wilmin.crton is at Ker- 
 nan, in LaSalle county. If the pumps at each station did exactly 
 the same amount of work they would keep the current of oil mov- 
 ing continuously in the pipe line. It is expected that the pumps 
 will work continnously, both dav and ninrht. In the practical opera- 
 tion of the pipe line it is found that it is impossible to so regulate the 
 several pumps along the line that each will do the same amount of
 
 SECT. II.] PEAIRIE OIL AND GAS CO. V. EllRUAKDT. 155 
 
 work as each of the others. Pumps will break down, get out of 
 repair and have to be stopped now and then, which would result 
 in an iutenuplion of the How of oil in the pipes. In order to over- 
 come ihc dilhcultics from the irregularities in the movements of 
 the pumps two tanks are established at each pumping station, which 
 are connected with the main pipes by connecting pipes and valves. 
 The object of these tanks is to equalize the work of the pumps. 
 They are so adjusted that an excess of oil coming to a station will 
 be forced into the tanks, and a shortage in the supply coming to a 
 station will be supplied by drawing on the surplus stored at such 
 station in the tanks. T.y maintaining these tanks at the pumping 
 stations an interruption of the work of any set of pumps will not 
 interfere with the work of any other pumps on the line. There is 
 usually enough oil stored in the tanks at each station to keep the 
 pumps going for twenty-four hours without receiving any oil from 
 the pipe lines. It sometimes Imppens, wlicn the pumps are all 
 working along the line, that the oil in the tanks will not be increased 
 or diminished for several days, but as a rule the oil is passing into 
 and out of the tanks, more or less, every day. There is thus an 
 almost constant flow of oil through the tanks as well as through the 
 pipes. The taxes which are sought to be enjoined are levied upon 
 the oil in the pipes and in the tanks thnt are located in Will county. 
 
 There is no question of fact in dispute between the parties. The 
 only question is the liability of appellee to pay taxes upon this oil 
 while it is being transported across Will county in the manner above 
 described. 
 
 The Revenue law of this State provides that all personal prop- 
 erty in this State shall be assessed and taxed, except such as is 
 specifically exempt from taxation by the statute. While there is no 
 express exemption of property in transit, yet it has been held by 
 this court and by the Supreme Courts of other States, and by the 
 Supreme Court of the United States, that property in transit which 
 is passing through a taxing district is not liable to local taxation. 
 Irvin V. New Orleans. St. Louis and Chicago "Railroad Co. 94 111. 
 105; Burlington Lumber Co. v. Willetts, 118 id. 559; People v. 
 Bacon, 243 id. 313; State v. Stevens, 146 Mo. 622: Coe v. Errol, 
 116 U S. 517; Kidd v. Pearson, 128 id. 1 ; Kelly v. Ehoades, 188 id. 
 1; Calvert on Regulations of Commerce, 291. 
 
 In the case of Kelly v. Rlmados, snpra. the United States Su- 
 preme Court held that a flock of sheep which were being driven 
 on foot through the State of Wyoming to a point in another State 
 were not subject to local taxation, notwithstanding the sheep were 
 permitted to graze as they went along, travelinGr at the rate of about 
 nine miles per dav. This case answers the appellant's argument that 
 property cannot be in transit as interstate commerce unless it is 
 in charge of some common carrier enga<TPd in that class of business. 
 The oil in question was not held in Will countv anv longer than 
 was necessary to its proper transportation hv the means provided 
 by appellee for that purpose. None of the oil was sold or offered for 
 sale while passing through this State, It is manifest that the only
 
 156 SEMPLE V. C0:MM0XWEALT1I. [chap. II. 
 
 purpose that appellee sought to accomplish Avas to transport the oil 
 I'rom the place where it was produced to other points in a foreign 
 State, where it would be refined and enter thereafter into the chan- 
 nels of trade. The oil never acquired a silus in this State so that 
 it can be said it became a part of the personal property of districts 
 through which it passed. To hold that this oil, either in the tanks 
 or in the pipes, was subject to taxation in Will county would au- 
 thorize its taxation through other taxing districts through which it 
 might pass, and if required to pay taxes in every State or county 
 through which the pipe lines extended, it would amount to such 
 a burden that transportation in this way would probably have to be 
 abandoned. 
 
 This oil, while on its way from one State to a point in another 
 State, is a subject of inter-state commerce and is therefore exempt 
 from local taxation. To so contrue our Eevenue law as to include 
 property while passing through the State as inter-state commerce 
 would render the Eevenue law unconstitutional under the commerce 
 clause of the Federal constitution. We agree with the learned judge 
 who tried this cause below, that "from the evidence this oil is an 
 article of commerce being transported from Kansas to Indiana 
 through the State of Illinois, and that under the inter-state com- 
 merce clause of the constitution it is not taxable in the State of 
 Illinois." 
 
 The decree of the circuit court of Will county will be affirmed. 
 
 Decree affirmed. 
 
 SEMPLE V. COMMONWEALTH. 
 CouET OF Appeals of Eextucky. 1918. 
 
 [Reported 181 Ey. 675.] 
 
 The appellant was not domiciled in Kentucky; but he made fre- 
 quent visits to Louisville on business, and leased an apartment 
 there, which he furnished. He kept an automobile there, and a 
 bank account, not used in his business, but for his personal expenses. 
 A revenue agent attempted, under provisions of section 4260 of the 
 Kentucky Statutes, in the county court of Jefferson county to have 
 this property assessed as as omitted property; and the court ordered 
 the assessment. On appeal to the Circuit Court the judgment was 
 affirmed; and from that judgment appellant prosecutes this appeal.^ 
 
 Thomas^ J. ... It is insisted, however, that appellant's small 
 amount of furniture, his automobile and bank account, under the 
 provisions of section 4020 of the Kentucky Statutes, are assessable in 
 Jefferson count}'. None of this property, however, was used by ap- 
 pellant in the prosecution or conduct of any business in which he 
 was locally engaged. All of it was for his personal convenience and 
 comfort while temporarily sojourning in the city of Louisville. His 
 
 * This short statement of facts is substituted for that of Thomas, J.
 
 SECT. II.] TEOI'LE, &C. V. COilMISSIOXEKS OF TAXES. 157 
 
 bank account is shown to have been exclusively for his personal ex- 
 penses. Under sucli circumstances personal property, even though 
 it be tangible, does not have a situs for taxation at the place where 
 it is thus temporarily located. 
 
 In the case of Commonwealth of Kentucky v. R. G. Dun & Co., 
 126 Ky. 108, in constming section 4020 of the Kentucky statutes, 
 this court said : 
 
 "This court, however, in construing this statute, has determined 
 that it does not apply to the property of non-residents when in this 
 State temporarily; that in such a case the situs for tiie purpose of 
 taxation is at the domicile of the owner." The court then cites the 
 cases of Board of Councilmen v. Fidelity Trust & Safety Vault Co., 
 Ill Ky. 667; Callahan v. Singer Manufacturing Co., 29 Ky. Law 
 Reporter, 123, and Commonwealth, by, &c. v. Haggin, 30 Kv. Law 
 Rep. 788. 
 
 In order that personal property may have a situs for taxation 
 in a locality different from the domicile of its owner, such personal 
 property must be permanently located at the place where it is sought 
 to be taxed. No temporary location will alter its situs for taxation 
 at a place other than the residence of its owner. Cases, supra, and 
 Union Refrigerator Transit Co. v. Kentucky, 199 U. S. 19-4. 
 
 We therefore conclude that the court was in error in assessing 
 any of the property for either of the years mentioned, and its Judg- 
 ment in doing so must be and it is reversed. 
 
 PEOPLE ex rel THE PARKER MILLS v. COMMISSIOXERS 
 
 OF TAXES. 
 
 Court of Appeals of New YoPtK. 1861. 
 
 [Reported 23 N. Y. 242.] 
 
 Appeal from the Supreme Court. Certiorari, under section 20 
 of the act of 1859 in relation to the assessment and taxation of 
 property in the city of New York, to review the proceedings of the 
 commissioners of taxes and assessments in imposing a personal tax 
 upon the relator. From the commissioners' return it appeared that 
 the relator is a foreign corporation, manufacturing nails in the 
 States of Massachusetts and Rhode Island. It had a depot and 
 agent in the city of New York, to whom it transmitted nails for sale. 
 Its only business Avithin this State consisted in making such sales, 
 the proceeds of which were remitted at once to the corporation in 
 Massachusetts ; and where sales were upon credit, the securities 
 received were sent to the corporation for collection. It appeared 
 by the testimony of the agent that the annual sales amounted to 
 about $300,000, 'and that the value of the nails which he then had 
 in store was $10,000. The commissioners, upon these facts, held 
 that the corporation "was conducting business in the city of New 
 York, and that the amount or sum invested in said business by it 
 was $10,000." They assessed the corporation at that amount, and
 
 158 PEOPLE^ <feC. V. COMMISSIONERS OF TAXES. [ciIAP. II. 
 
 imposed a tax of $179.21, The Supreme Court, at general term 
 in the first district, affirmed tlie proceedings, and an appeal was 
 thereupon brought to this court. 
 
 Seldex, J. This case depends upon the construction to be 
 given to the act of February 27, 1855, amendatory of the several acts 
 for the assessment and collection of taxes in this State. Section 1 
 of that act is as follows: "All persons and associations doing busi- 
 ness, in the State of jS'ew York, as merchants, bankers, or otherwise, 
 either as principals or partners, whether special or otherwise, and 
 not residents of this State, shall be assessed and taxed on all sums 
 invested in any manner in said business, the same as if they were 
 residents of this State; and said taxes shall be collected from the 
 property of the firms, persons, and associations, to which they sever- 
 ally belong." 
 
 I have no doubt, and shall therefore assume, that the words, 
 " persons and associations,'' used in this statute, should be construed 
 to include corporations. But the words descriptive of the property 
 in respect to which they are to be assessed, are among the most in- 
 definite in the language. The word " business " embraces every- 
 thing about which a person can be employed; and a sum is "in- 
 vested " whenever its amount is represented by anything but money. 
 No conclusion can be arrived at in this case, by following out the 
 precise lexicographical meaning of these terms. The statute is to 
 be interpreted, therefore, by the light to be obtained from its general 
 scope and tenor: from other statutes in pari materia: and from a 
 consideration of the evils and abuses at which it was aimed. 
 
 It was not uncommon, previous to the passage of the act, as the 
 history of our legislation shows, for foreign corporations, partic- 
 ularly insurance companies, to establish agencies in the city of New 
 York, and perhaps elsewhere in this State, for the transaction of 
 their corporate business. These agencies were protected by our 
 laws and carried on a profitable business within this State, and yet 
 contributed nothing towards the expenses of government. They 
 came in direct competition with domestic corporations, which were 
 heavily taxed. It was certainly just and right that they, or the 
 corporations by which they were established, should be made to con- 
 tribute, to some extent, to the public burdens. But there was also 
 another class of cases which called for special legislation, and which 
 the legislature probably had more directly in view in passing the 
 act of 1855. Many persons, engaged in business in the city of New 
 York as partners of commercial firms or otherwise, resided in New 
 Jersey, Connecticut, or elsewhere out of tins State. These persons 
 frequently had large amounts of property in this State, and enjoyed 
 the fruits of a profitable business carried on under the protection 
 of our laws ; and yet, by reason of the rule that personal property is 
 deemed to follow the person of the owner, they escaped taxation in 
 respect to this property, at least in this State, and probably in most 
 cases altogether. 
 
 There is no doubt that, to provide for these two classes of cases, 
 especially the last, was the main object of the act of 1855. That it
 
 SECT. II.] PEOPLE, etc. V. COMMISSIONEKS OF TAXLS. I.jO 
 
 was never intended to include a case like the present, seems to me 
 clear. In the two classes of cases referred to, the investment of 
 funds by the non-residents has more or less of permanency. It is 
 not the mere transit of property througji tiie State for the purposes 
 of a market, but the funds are used for tiie prosecuticni of continuous 
 business. Taxes are levied, for the most part, annually. Thev are 
 the consideration wliich ])ro{)erty holders pay for the protection 
 which the government and laws ail'ord to them and their property 
 for the year. But, if the commissioners in this case are right, if the 
 property is caught within this State for a single day while the 
 assessors are engaged in the performance of their duties, its owners 
 may bo as heavily taxed as if it had been here throughout the entire 
 year. 
 
 It is difficult to see any di /Terence in principle between the present 
 case and that of a drover who transports his herds of cattle bv rail- 
 road to the city of New York for sale; and yet, 1 apprehend, no one 
 ever supposed the owner of tlie cattle, if a non-resident, to be taxable 
 in such a case. It may be said tliat the Parker Mills had a store and 
 an agent in the city of New York. So the drover mav have his field 
 or his yard for keei)ing his cattle, and his herdsman "to take care of 
 them. The cases are, I think, parallel; and the reason why the 
 statute does not apply to either is, that there is no sum invested or 
 used for the purpose of carrying on a continuous business in this 
 State. 
 
 Tliat it never was the policy of the State to impose taxes upon 
 property sent into the State for the mere purpose of sale, is shown 
 by tiie course of legislation on this subject. The general tax law 
 provides (1 R. S. 389, § 5) that every person shall be assessed in 
 the town or ward w^here he resides, for all personal estate owned by 
 him, "including all such personal estate in his possession, or under 
 his control as trustee, guardian, executor," &c. By the amendatory 
 act of April 15, 1851 (Sess. Laws, 1851, ch. 176), agents are added 
 to the class of persons named in the previous statute; but lest the 
 clause, with this addition, should be construed more broadly than 
 the legislature intended, it was further provided that "the products 
 of any State of the United States, consigned to agents in any town 
 or ward in this State for sale on commission for the benefit of the 
 owner thereof, shall not he assessed to such agents." 
 
 The present case does not come strictly within tlie terms of this 
 exception. The word "products," ns here used, means, as I suppose, 
 the natural agricultural products of the country. But T can see no 
 distinction in principle between the presont case and the case ex- 
 cepted. In both, the commoditv is produced and owned in other 
 Stntes, and is brought tempornrily into this State for the mere pur- 
 poses of a market. Every reason which would lead to exemption 
 from taxation in one case, applies, as T conceive, equally to the other. 
 The exception is to he considered rnthor as indicative of the scope 
 intended to he given to the principal clause, than as founded upon 
 any reasons specially applicable to the natural products of the coun- 
 try as distinct from other property. It is a case to which the maxim.
 
 160 towjS^ of albektville v. hooper. [chap. ii. 
 
 expressio unius exclusxo est alterius, does not apply. The exception 
 was undoubtedly inserted, from abundant caution, to prevent a 
 misconstruction of the previous clause, authorizing the taxation of 
 trustees and agents for the property in their hands; and not be- 
 cause the legislature intended to discriminate between the products 
 of agricultural and other kinds of labor. It shows that it was no 
 part of the policy of the legislature, when that act was passed, to 
 compel the citizens of other States to contribute to the support of 
 our government simply because they send a portion of the products 
 of their industry to this State to be sold. It is clear, therefore, that 
 the property of the relators could not have been taxed to their agent 
 under the law of 1851 ; and I see no reason to suppose that it was in- 
 tended, by tlie law of 1855, to adopt a different policy in respect to 
 property so situated. My conclusion, therefore, is, that the Judg- 
 ment of the Supreme Court should be reversed, and that the pro- 
 ceedings should be remitted, with instructions to cause the names 
 of the relator to be erased from the assessment roll, and the corre- 
 sponding tax to be canceled. 
 All the judges concurring. 
 
 Ordered accordingly. 
 
 SECTION III. 
 
 ASSESSMENT. 
 
 TOWN" OF ALBEKTVILLE v. HOOPEE. 
 Supreme Couet of Alabama. 1916. 
 
 [Reported 196 Ala. 642.] 
 
 The action is by a citizen of the town of Albertville to recover a 
 sum of money paid by him through his agent as purchase money for 
 certain chattels sold by defendant municipality under a general ex- 
 ecution against plaintiff for the satisfaction of an alleged judgment 
 for municipal taxes on his jDersonal property subject to taxation in 
 said town. The execution was regular on its face, and was issued 
 under the authority of the town counsel regularly expressed. The 
 assessment upon which it was founded is shown to have been in the 
 following form : In the first column of the assessment book, against 
 plaintiff's name, items of real estate appear. In another column, 
 headed "Total Value of E. E.," appears in black ink the amount 
 $6,700, and in red ink the amount $66,678. There is no column 
 showing personal property assessed, nor is there any reference to 
 personal property'. In the final column, headed " Total Taxes," 
 appears the entry "33.50 E, est.," and under it the entry, "$333.29, 
 P. P." The compiler of the separate book explains that the figures 
 in red ink related to personal property. 
 
 SoMERViLLE, J. (1-3.) An execution issued by the town clerk 
 under section 1313 of the Code, for the collection of delinquent
 
 SECT. III.] TOWN OF ALBEKTVILLE l\ HOOPEK. 161 
 
 taxes, is manifestly a complete nullity unless there has been a writ- 
 ten assessment of the defendant's i^roperty. 
 
 " The term (assessment) commonly includes two distinct pro- 
 cesses: First, the preparation of a list by the proper officers, C(jm- 
 prising a description of all the persons or property found within tiie 
 jurisdiction, and liable to contribute to the particular tax; and, 
 second, an estimate by the assessors of the value of the property, 
 of whatever character it may be, which is to be called on to con- 
 tribute, thus forming the basis of an apportionment of the wliole tax 
 among the taxable persons within the district. The list, when thus 
 completed, is usually denominated the 'tax list' or 'assessment roll."* 
 Black on Tax Titles (2d Ed.) § 89. 
 
 "The assessment is an indispensable prerequisite to the validity 
 of a tax against any individual, for without a valid assessment 
 there can be no lawful attempt to collect the tax or to enforce it 
 against any specific property. Mere irregularities in the assessment 
 will not affect its validity, but only such omissions or defects as 
 go to the jurisdiction of the assessors, or deprive the taxpayer of 
 some substantial right.'* 37 Cyc. 98Tb. 
 
 (4.) In the instant case nothing had been done by the munici- 
 pality which can, even by the most liberal courtesy, be designated as 
 an assessment of the plaintiff's personal property. The required 
 assessment is not merely irregular or defective; it is simply non- 
 existent. For, certainly, the simple entry of the total amount com- 
 puted as a personal property tax is not an assessment, without some 
 sort of listing of the property itself. 
 
 Again, the assessment sale must be made by the city clerk or some 
 person authorized by the town council. This assessment roll was not 
 made by an authorized person, and apparently he merely copied the 
 total assessed value of personalty from the county assessment book 
 for the preceding year, without any reference to the items or the 
 mass of property to be taxed; in short, it does not appear from the 
 book that plaintiff owned any personal property whatever. Hence 
 jurisdiction of the personalty was never acquired by the municipality. 
 
 Our judgment is that the assessment was a legal nullity; that 
 there was nothing to support the execution under which plaintiff's 
 property was seized; and that the sale of it was a sheer conversion 
 by the municipality, without any authority of law. 
 
 (5.) In such cases it is well settled that the owner may waive 
 the tort, ratify the sale, and recover the purchase money received by 
 the tort-feasor. Lewis v. Dubose, 29 Ala. 219, 220; Blackshear 
 V. Burke, 71 Ala. 239; 4 Cyc. 332 (111). 
 
 There is no escape from the conclusion that plaintiff was entitled 
 to recover the amount awarded by the verdict, and the jury were 
 properly instructed to so find. . . . 
 
 Affirmed.
 
 162 STATE V. CUDAHY PACKING CO. [CHAP. II. 
 
 STATE V. CUDAHY PACKING CO. 
 
 Supreme Coukt of Minnesota. 1908. 
 
 [Reported 103 Minn. 419.] 
 
 Jaggaed, J. The trial court found that : The personal prop- 
 erty of the defendant was valued at $10,400 by the assessor of the city 
 of Minneapolis. Thereafter the city board of equalization increased 
 that assessment $10,000. Thereafter the State board of equaliza- 
 tion further increased the assessment by $G,630. The resulting tax 
 $810.90 was justly and properly levied. Judgment was accordingly 
 entered for the tax, together with the penalty. This appeal was 
 taken from the judgment. Defendant expressly admits: "In fact 
 [it] had personal property consisting of cash, book accounts, and 
 stock of all kinds, including the soap in storage, of the cash value 
 of $27,902.'77.'' The entire assessment was $27,030. 
 
 1. The defendant insists that the court will take judicial notice 
 that property in this State is not assessed for its actual cash value; 
 that the assessor assessed other personal property at fifty per cent, in 
 pursuance of the instructions contained in the circular issued by the 
 State auditor; and that, inasmuch as the defendant was assessed 
 for approximately the full value of its property, it had been dis- 
 criminated against. There is obviously no merit in this contention. 
 The statutes of this State distinctly provide that "all property shall 
 be assessed at its true and full value in money." Section 810, E. L. 
 1905. Neither the State auditor nor the courts have the power 
 to repeal or amend this clear and positive requirement. 
 
 2. Defendant also insists that the Minneapolis board of equaliza- 
 tion had no power to make an original assessment, as it undertook 
 to do in this case. The increase was in pursuance of the following 
 resolution of the city board: "On motion, ... a raise of $10,000 
 was ordered assessed against the Cudahy Packing Company for 
 goods in storage." The board of equalization by the charter (1) is 
 given power to revise, amend, and equalize the assessment on the 
 roll of the city assessor, and " (2) is vested with all the powers which 
 are or may be vested in the county boards of equalization under the 
 general laws of the State so far as applicable, but shall not be re- 
 stricted by any limitation as in respect to reducing the aggregate 
 sum of real or personal property as returned by the city assessor." 
 County boards of equalization have not the power to make an orig- 
 inal assessment. State v. Crookston Lumber Co., 85 Minn. 405, 
 89 N. W. 173. It is quite clear, however, that under the provision 
 granting the power to revise, amend, and equalize the assessment 
 the city board has power to amend by adding taxable property not 
 included in the assessor's list. 
 
 3. Defendant also argues that the action of the Minneapolis 
 board of equalization, and of the State board of equalization, also, 
 in increasing the assessment, was invalid, because in both cases notice 
 required by law to be given in such cases was not given. The argu-
 
 SECT. IJI.] STATE V. CUDAUY TACKING CO. 103 
 
 ment is not tenaljle. The proceedings to collect taxes in this State 
 are judicial. Uflicial machinery is provided for the creation of a 
 just demand on the part of the State to be paid by certain individuals 
 or out of certain property. Opportunity is given for an objecting 
 property owner to appear in court and to interpose any objection 
 he may have, including that of unfair or unequal valuation. \\ ith 
 respect to the collection of personal property taxes, one opportunity 
 is certainly given to appear and defend in court. Section 889, li. L. 
 1905. If this opportunity be not embraced, a further opportunity 
 may be aiforded. Section 893, Id. The statutory provisions which 
 are intended to guide the conduct of officers in the transaction of 
 public business, so as to insure the orderly and prompt performance 
 of public duties, and which pertain merely to the system and dis- 
 patch of proceedings, are construed as directory. The provisions 
 which affect the subsequent collection of the tax, and which are in- 
 tended for the protection of the citizen by preventing the sacrifice 
 of his property, and by the disregard of which his rights might be 
 affected, are construed as mandatory. Kipp v. Dawson, 31 Minn. 
 373, 17 N. W. 9G1, 18 N. W. 96^ Faribault Watenvorks Co. v. 
 County of Eice, 44 IMinn. 12, 46 ^t. ^-. 143. 
 
 Under the judicial system, the equalization proceedings are de- 
 signed merely to produce a just demand. Subsequent opportunity 
 to defend against that demand on the ground of unfair or unequal 
 valuation is allowed. Under the summary system, the means by 
 which the taxpayer secures his day in court is often by appeal or 
 resort to other remedy pending or following the action of the boards 
 of equalization. In this State, accordingly, provisions relating to 
 equalization are generally construed as directory, not mandatory. 
 Failure to give notice, under the judicial system, becomes clearly 
 material only when it is sought to bring the person or property 
 into court. The mere failure of the assessor to notify the property 
 owner and require him to list or return his taxable property (State 
 V. Wm. Deering & Co., 56 Minn. 24, 57 N. W. 313), or the failure 
 to give notice of hearing of boards of equalization (State v. Hynes, 
 82 Minn. 34, 84 N. AV. 636), does not invalidate the assessment, 
 in whole or in part. Indeed, the omission of equalization not re- 
 sulting in unfair or unequal assessment is not a basis of objection 
 in proceedings to collect. Scott Co. v. Hinds, 50 Minn. 204, 52 
 N. W. 523. 
 
 It was said in State v. District Court of TJed Lake Co., 83 ^Minn. 
 169, 85 N". W. 1135: "It was immaterial that the various boards of 
 review refused to reduce the amount of the assessment and that re- 
 lators had no notice thereof. There Avas essentially only one ques- 
 tion for the court to pass upon ; and that was, what was the assessable 
 value of the property at the time the tax was levied?" In State v. 
 Backus-Brooks Co., 102 Minn. 50, 112 N. W. 863, it was said: "The 
 defendant, having failed to show that any irregularity or omission 
 on the part of the State board of equalization or its secretary re- 
 sulted in any prejudice to it, or that the taxes as levied against it 
 were unequal or imfair, or based upon property it did not own, or
 
 16i STATE V. CUDAHY PACKIXG CO. [cHAP. II. 
 
 that its property was assessed proportionately higher than other 
 property of the same class, the defendant failed to establish any 
 defense/' 
 
 It follows that the failure of boards of equalization in this case 
 to give notice is a mere irregularity, of which defendant cannot 
 complain unless the tax sought to be collected was unfairly and un- 
 equally assessed. Section 919, 11. L. 1905. This defendant has 
 not shown. 
 
 Our attention has been called to Eavmond v. Chicago Union 
 Traction Co., 20? U. S. 20, 21, 28 Sup.' Ct. 7, 52 L. Ed. 15. In 
 that case the corporation had paid the full amount of its taxes, based 
 upon the same rate as that paid upon other property of the same 
 class. A federal court of equity restrained the collection of the 
 illegal excess resulting from the discrimination of a board of 
 equalization, whose decisions were conclusive, except as proceedings 
 for relief may be taken in courts. In the case at bar the action of 
 the officials did not result in an illegal discrimination. This de- 
 fendant is in no position to complain of the application of a tax 
 rate universal throughout the State to his tangible property only 
 at a valuation admittedly less than the law required. This, in an- 
 other se'nse, is, for aught that appears in this record, a smaller tax 
 than the defendant was legally subject to (State v. Western Union 
 Tel. Co., 96 Minn. 13, 104 N. W. 567), and less than was imposed 
 by law upon domestic corporations (section 838, E. L. 1905), because 
 the tax on their shares of stock includes, in effect, the valuation of 
 both tangible and intangible property as united in use. 
 
 Affirmed. 
 
 On April 10, 1908, the following opinion was filed. 
 
 Jaggaed, J. On petition for rehearing, defendant urges that the 
 decision previously rendered in this case violates article 4, § 2, of the 
 constitution of the United States, by denying to the defendant, a 
 citizen of Illinois, the privileges and immunities of a citizen of 
 Minnesota, and also violates article 14, § 1, of the amendments to 
 said constitution, by depriving the defendant of its property without 
 due process of law, and by denying the defendant the equal protec- 
 tion of the laws. The questions thus involved have been fully pre- 
 sented to and considered by this court. In so far as the petition 
 for reargument is addressed to the interpretation by this court of the 
 power of the Minneapolis board of equalization and its power to 
 assess property not on the assessment roll, there appears to be no 
 occasion for further discussion. The gist of the remaining argument 
 is (1) that the action of the board of equalization is illegal and 
 inequitable, for it discriminates against this defendant by making 
 him bear a greater burden of taxes proportionately than other tax- 
 payers in this State; (2) that it practically denies defendant a 
 hearing on the question of whether tliis assessment should be raised 
 or not, by failing to give him due notice of its action. 
 
 1. It does not appear in this record that this defendant has been 
 discriminated against. It is true that the State auditor directed 
 an original assessment of fifty per cent, of the value of real and
 
 SECT. III.] STATE V. CUDAIIY rACKI>'G CO. 165 
 
 personal property, and that the city assessor testified that the as- 
 sessment in Hennepin county was made on that basis as ordered. 
 It might also be a^Jsumed, altliough it was not proved, that the 
 assessors of other counties assessed in fact according to the same 
 rule. The conclusion that in consequence there had been a "sys- 
 tematic, intentional, and illegal undervaluation of other property 
 by the taxing officials" of the State does not at all follow. This 
 order of the State auditor might appear to be in contradiction to 
 the express statutory requirement tliat property should be assessed 
 at its full value in money. As a matter of fact, on the contrary, 
 however, it was designed and conduces to make possible literal 
 obedience to the statute. 
 
 The result of the assessors' labors is not the final listing or valua- 
 tion of property, real or personal. It is merely a step to that result. 
 After the assessor has made the survey, his list and valuation, the 
 county auditor corrects the verified result of his labors, as by addi- 
 tion of omitted property (section 853, R. L. 1905), and various 
 boards of equalization complete the work of creating a tax, con- 
 forming to statute, thereafter to be collected. More specifically, the 
 State board of equalization is charged with the duty of equalizing the 
 taxes between the various counties. A horizontal increase of a 
 given percentage, covering all property of a specified kind assessed 
 within a named county may be, and often has been, ordered. If 
 such an increase were made, then property which had been returned 
 by the assessor at its full valuation would ultimately bear a tax on 
 one hundred per cent, plus the percentage of increase imposed by 
 the State board. In consequence, either a grave practical injustice 
 would result in the collection of the excessive tax, or the courts of 
 the State would be overwhelmed with the hearings of alleged over- 
 valuations. There would be imposed on the overtaxed individual 
 the unnecessary and improper trouble and expense of appearing in 
 court and defending. Inter alia, to give opportunity to the stat- 
 utory boards of equalization to perform their functions, the instruc- 
 tion of the State auditor to assess at fifty per cent of the value of 
 the property w^as issued. The result of general obedience to the 
 State auditor's order is a presumptively unifonn valuation — an 
 even basis for an ultimately correct tax list. The essential question 
 to the taxpayer is whether, as a consequence of the work in the first 
 place of the assessor and in the second place of the county auditor 
 and of the boards of equalization, he is called upon to pay a tax on 
 a larger valuation than the law authorizes. The tax is not unequal, 
 and he has suffered no prejudice, as these terras are employed in 
 the law. The immediate case itself is a good illustration. Defend- 
 ant's original assessment was in fact less than fifty per cent of the 
 total valuation, which he admits; albeit accidentally. Two boards 
 of equalization added enough to make his final assessment conform 
 to the law. He has no cause for complaint. 
 
 It is urged that the court will take judicial notice of the fact that 
 "it is the practice of assessing officials to (ultimately) return as- 
 sessable property for taxation at one-half the cash value thereof."
 
 166 STATE V. CUDAIIY PACKING CO. [ciIAP. II. 
 
 Unfortunately courts must take judicial notice of the fact that the 
 ultimate assessment of real and personal property is extremely un- 
 even and erratic, and that no certain percentage of actual value is at- 
 tained. Large amounts of property, aggregating enormous values, 
 are assessed for more than their market value. Smaller amounts 
 are taxed for a fraction of their real value not susceptible of definite 
 estimate. The cases presented to the courts of this State tend to 
 show that, for example, personal property in the rural districts is 
 taxed on a higher average than personal property in large cities, and 
 that real estate in large cities is taxed at a much higher valuation than 
 in rural districts, and often for much more than its actual value. 
 To a large extent tliese inequalities are inevitable. To exactly what 
 extent, however, this condition exists, is a matter of controversy 
 and conjecture. No definite Imowledge on the subject exists, and 
 no proof has here been adduced. We think no adequate proof could 
 be practically produced. 
 
 It is elementary that, while a tax law must aim at equality, ap- 
 proximation to equality is all that can be had. Cooley, Taxn. (1st 
 Ed.) 127; Davis v. City, 55 Iowa, 549, 8 N. W. 423. Absolute 
 equality is not possible. " If equality were practicable," said Chief 
 Justice Gibson in Kirby v. Shaw, 19 Pa. St. 258, 261, "in what 
 branch of the government would power to enforce it reside? Not 
 in the judiciary, unless it were competent to set aside a law free 
 from collision with the constitution, because it seemed unjust. It 
 could interpose only by overstepping the limits of its sphere, by 
 arrogating to itself a power beyond its province, by producing intestine 
 discord, and by setting an example which other organs of the govern- 
 ment might not be slow to follow. It is its peculiar duty to keep 
 the first lines of the constitution clear, and to stretch its power in 
 order to correct legislative or executive abuses. Every branch of 
 the government, the judiciary included, does injustice for which 
 there is no remedy, because everything human is imperfect. The 
 sum of the matter is that the taxing power must be left to that 
 part of the government which is to exercise it." The courts will not 
 substitute their judgment as to valuation for that of the board of 
 equalization. State Kailroad Tax Cases, 92 U. S. 575, 23 L. Ed. 
 663. The local assessment cases recently decided by the supreme 
 court of the United States emphasize the extent to which the taxing 
 power is legislative and executive in character, and how limited is the 
 function of courts to interfere with its exercise, in a particular case. 
 See, for example, French v. Barber Asphalt Paving Co., 181 U. S. 
 324, 21 Sup. Ct. 625, 45 L. Ed, 879. And see Meriwether v. Garrett, 
 102 U. S. 472, 26 L. Ed. 197. 
 
 The certain purpose of the law of this State requiring a full 
 valuation to produce equality is evident in the intention of the very 
 instruction of the State auditor to which objection has been so stren- 
 uously urged here. The result of the operations of the official bodies 
 here was a tax at a rate applying uniformly throughout the State 
 on a valuation admittedly less than the taxable property defendant 
 owned. It is entirely clear that in this case no attempt whatever
 
 SECT. III.j PEOl'LE V. KEOKUK AND HAMILTON BRIDGE CO. 167 
 
 was made to discriminate between different classes of property 
 owners. The same rule applied indillereutly to residents and non- 
 residents. 
 
 2. Defendant was not denied a hearing, within tlie meaning 
 of the State and federal constitutions. It is the lawmaking power, 
 and not the judiciary, which is to determine all questions of discre- 
 tion or policy in ordering or imposing taxes, and which must make 
 all necessary rules and regulations and decide upon the agencies 
 by means of which a tax shall be created and collected. Mr. Justice 
 Shiras, in Thomas v. Oay, 169 IJ. S. 2G4:, 18 Sup. Ct. 340, 42 L. 
 Ed. 740. It was not necessary that the board of e(iualization should 
 have given notice of its increase. State llailroad Tax Cases, supra. 
 It is unnecessary, however, to discuss the extent to which such no- 
 tice is necessary, because tlie property owner liad the right to appear 
 before the boards of equalization at delinitely stated times, and was 
 given certain opportunity to appear in court and defend. Section 
 889, E. L. 1905. Indeed, it is natural to inquire, how did the defend- 
 ant raise the objections now under consideration? The answer is 
 clear: By embracing the opportunity aH'orded by statute to come 
 into court and interpose the very defense which the demonstrated in- 
 genuity of counsel has formulated. Moreover, the taxpayers' remedy 
 of paying under protest the tax claimed to be unjust or illegal, and 
 of bringing an action for the recovery of the sum, is preserved by 
 statute. Section 891. "What more [opportunity] ought to be 
 given?'' Mr. Justice Peckluim, in Security Trust & Safetv Vault 
 Co. V. City of Lexington, 203 U. S. 323, at page 333, 27 Sup. Ct. 
 87, at page 90, 51 L. Ed. 204. Cf. Central of Georgia Ry. Co. v. 
 Wright, 207 U. S. 127, 28 Sup. Ct. 47, 52 L. Ed. 47. 
 
 We conclude: No taxpayer can successfully base a defense to a 
 proper tax upon a charge of general official derelictions unproven 
 and conjectural. The courts will not require that assessments be 
 made in violation of law, will not impose the duty of committing 
 perjury on tax ofiBcers, and will not pervert their own functions 
 by repealing a just and valid statute, which requires an assessment 
 of all taxable property at its full value in money, by making the 
 enforcement of that statute impossible. 
 
 Petition for reargument denied. 
 
 PEOPLE V. KEOKUK AND HAMILTON BRIDGE CO. 
 Supreme Court of Illinois. 1919. 
 
 [Reported 287 III. 246.] 
 
 Caetwright, J. The county collector of Hancock County ap- 
 plied to the county court for a judgment against a strip of land 
 eight feet wide, described as commencing at a stated point and con- 
 tinuing along the center line of the bridge of the appellant, the 
 Keokuk and Hamilton Bridge Company, 1567 feet to the State 
 line between this State and Iowa, including the slopes, walls and
 
 168 PEOPLE V. KEOKUK AND HAMILTON BEIDGE CO. [CHAP. II. 
 
 embankments, for $3469.87 delinquent taxes of the year 1917 and 
 for an order of sale to satisfy the same. The appellant filed numer- 
 ous objections to the application, which in substance were : 
 
 (1) That the Keokuk and Hamilton Bondholders' Company, a 
 corporation, owned mortgage bonds of the appellant which were long 
 since in arrears and far exceeded the value of the property, and 
 therefore the bondholders' company was the real owner of the bridge 
 property. 
 
 (2) That the appellant was a railroad company and its property 
 was a railroad, which could only be assessed by the State Board of 
 Equalization. 
 
 (3) That the bridge formed a link in connection with various 
 railroads, making a complete line of railroad from points in this 
 State to points and connections with other railroads in the State of 
 Iowa and was used in inter-State commerce, and if sold for taxes 
 the means of inter-State commerce would be interfered with and 
 destroyed. 
 
 (4) That the United States, as a war measure, had taken charge 
 of the property and was operating it, and a proceeding to sell the 
 bridge would deprive the United States of such control and deprive 
 the United States and appellant of property without due process of 
 law. > 
 
 (5) That the property was arbitrarily, knowingly and fraudu- 
 lently assessed at its full market or cash value while all other 
 property was assessed by a rule and long custom at about forty per 
 cent of its cash value and the assessment was approved by the board 
 of review. 
 
 The court, on motion of the appellee, struck the objections from 
 the files and rendered judgment and order of sale for the taxes. 
 From that judgment and order this appeal was prosecuted. 
 
 A motion to strike objections from the files is in the nature of a 
 demurrer and necessarily admits every fact alleged in the objections 
 and the legal conclusions arising therefrom, and they can be stricken 
 from the files only in a case where no legal objection is stated and 
 where no proof of the facts alleged would constitute a defense to 
 the application nor justify a refusal of judgment. If any objection 
 states a legal ground of defense it is error for the court to strike it 
 from the files and refuse to the taxpayer a hearing and an oppor- 
 tunity to prove the fact alleged. Proof that the appellant was in- 
 debted and had issued mortgage bonds which were in arrears and 
 exceeded the value of the property and were held by a bondholders' 
 company did not make the bondholders owners of the property or 
 exempt the property from taxation in the name of the appellant. 
 
 The objections stated that the appellant was a corporation formed 
 by a consolidation of the Hancock County Bridge Company, a 
 corporation of this State, and an Iowa corporation, and that it con- 
 structed the bridge in 1869 under an act of Congress. The only 
 property it claimed to own was a bridge across the Mississippi river 
 between the cities of Hamilton and Keokuk, which was used by 
 various railroad companies operating railroads extending eastward 
 and westward from the bridge, and there was no allegation that the
 
 SECT. III.] PEOPLE V. KEOK.LK A.\i> liAMILTOX BUIDGE CO. ICO 
 
 bridge was a part of any railroad or railroad system owned by the 
 appellant. The bridge therefore was not a railroad and was law- 
 fully assessed by the local assessor as real estate and was not to be 
 assessed by the State Board of Equalization as railroad track. 
 
 The fact that property is used in inter-State commerce does not 
 exempt it from taxation. Inter-State commerce is not taxed by tax- 
 ing property devoted to such a use. Keokuk and Hamilton Bridge 
 Co. I'. Illinois, 175 U. S. 620. 
 
 The fact that by the act of Congress of March 21, 1918, and the 
 President's proclamation under the same, railroads have been taken 
 charge of by the United States and are being operated and con- 
 trolled by the government is not a defense against the payment of 
 local taxes on the property. Whether or not that act applies to the 
 appellant's bridge, which is not a railroad, any question of taxation 
 could only arise, in any event, between the Federal government and 
 the State. 
 
 There was a legal objection to the amount of the tax, which the 
 appellant had a right to prove, and the court erred in striking it 
 from the files. That objection was that the property was arbitrarily, 
 knowingly and fraudulently assessed at its full market or cash value 
 while all other property was arbitrarily and knowingly assessed at 
 about forty per cent of such value in accordance with an established 
 rule and long custom for assessing property. Section 1 of article 9 
 of the Constitution requires taxation of property in proportion to 
 value and authorizes the General Assembly to provide such revenue 
 as may be needful by levying a tax by valuation, so that every person 
 and corporation shall pay a tax in proportion to the value of his, her 
 or its property. Such value is to be ascertained by some person or per- 
 sons to be elected or appointed in such manner as the General Assem- 
 bly shall direct, and any error in the exercise of honest judgment will 
 not invalidate a tax, but an arbitrary, known and intentional viola- 
 tion of the rule of uniformity is an invasion of constitutional right 
 and will not be tolerated. It is sufficient for an objector to show 
 such willful and intentional violation of the constitutional pro^'i- 
 sion, and where an assessment shows a very great disparity and dis- 
 crimination, which could not reasonably have arisen from an error, 
 of judgment, the courts will give relief. (Eaymond v. Chicago 
 Union Traction Co. 207 U. ST 20.) The objection showed such 
 alleged disparity and discrimination between the full cash value 
 of appellant's property and the valuation of forty per cent of such 
 cash value of all other property, and the appellant had a right to 
 prove the objection. If the appellant had failed to avail itself of 
 any lawful opportunity to obtain relief against the assessment it 
 was a matter for defense and proof and did not justify striking the 
 objection from the files. If there was a defense of res judicata or 
 estoppel or any other alleged defense it was to be sho^\^l in answer 
 to the objection and afforded no reason for striking the objection 
 from the files. It seems to be assumed that the court, in striking 
 the objection from the files, took judicial notice of some alleged 
 facts, but the doctrine of judicial notice is a branch of the law of
 
 170 WEYEKHAEUSER TIMBER CO. V. PIERCE COUNTY. [cHAP. II. 
 
 evidence, and authorizes tlie court, whenever a fact is material, to 
 take judicial notice of the fact, but it must be presented to the court 
 in some way and not by demurrer or motion to strike. 
 
 The judgment of the county court is reversed and the cause 
 remanded. 
 
 Reversed and remanded. 
 
 WEYEEHAEUSEE TIl^IEER CO. v. PIEECE COUNTY. 
 
 Supreme Court of Washington. 1917. 
 [Reported 97 Wash. 534.] 
 
 Ellis^ C. J. The Weyerhaeuser Timber Company and the North- 
 western Improvement Company began separate actions against 
 Pierce county for the cancellation of a portion of the taxes assessed 
 against certain timber lands for the year 1914 on the ground of 
 overvaluation, and for recovery of excess payments made under 
 protest. By stipulation the two actions were consolidated for trial, 
 with an agreement that separate judgments be entered. Supple- 
 mental complaints were filed presenting the same issue as to the 
 assessed valuations for the year 1915, upon which taxes were not 
 then due. The Weyerhaeuser Timber Company sought a reduction 
 of $24,130.58 on its tax of $60,152.65, and the Northwestern im- 
 provement Company a reduction of $5,648.65 on its tax of $9,772.34. 
 The trial court found that plaintiffs were entitled to a 16 2-3 per 
 cent reduction in the amount of the valuations upon which they 
 had been assessed, gave judgment to the Weyerhaeuser company in 
 the sum of $11,314.17 for the excess taxes of 1914 paid imder pro- 
 test, and decreed an equivalent reduction of the taxes falling due 
 for the year 1915. In the case of the Northwestern Company, 
 
 the court gave judgment canceling its taxes in the sum of $1,628.72 
 for the year 1914, and in the sum of $1,642.52 for the year 1915, the 
 variation in amounts being due to tlie fact that the assessor had, 
 in certain instances, increased the valuation for the latter year over 
 that of the preceding year. From these judgments, the plaintiffs 
 and defendant both appeal, the former claiming they are entitled 
 to a further reduction in valuations, the latter that the court erred 
 in granting any reduction. To avoid confusion we shall refer to 
 the parties throughout as plaintiffs and defendant. 
 
 Plaintiffs have moved to strike the abstract of the record filed by 
 defendant in support of its appeal. It is urged that it has no place 
 in the record because defendant took no exceptions to the court's 
 findings of fact (ITarbican v. Chamberlin, 82 Wash. 556, 144 Pac. 
 717) ; and further, that it is useless, in that defendant's brief in- 
 sufficiently refers to the pages of the abstract for verification. Rule 
 VIII, 71 Wash. xlix. Regardless of defendant's cross-appeal, its 
 abstract may be treated as supplemental to that filed by plaintiffs 
 on their own appeal. Such an abstivact the statute permits a re- 
 spondent to supply. Though not referred to in defendant's brief
 
 SECT. Ill,] WEYEiaiAKUSEK T1.MBEU CO. V. PIERCE COUNTY. 171 
 
 as freely as could be desired for the convenience of the court, 
 this abstract has been useful, alike with that of pjlaintiffs', in mar- 
 shaling the contents of a voluminous record. The motion is denied. 
 
 I'laintilfs conleud that their properties were subjected to an arbi- 
 trary and excessive valuation, in that (1) they are now assessed 
 at values placed on them at the height of a boom in the lumber 
 industry, and that, at the time of assessment, suit and trial, lumber 
 values liad depreciated from thirty to lifty per cent; (2) that an 
 arbitrary zone system was employed resulting in a valuation of $1 
 per thousand being placed on their fir timber within one mile of a 
 logging road or other outlet, and a reduction of five cents per thou- 
 sand with each mile of recession from such road or outlet, regard- 
 less of logging conditions and the quality and accessibility of the 
 timber; (3) that all hemlock, regardless of quality and accessibility, 
 was assessed on an arbitrary valuation of 25 cents per thousand; 
 (4) that, in addition to the valuation of the timber for more than 
 it was worth, a land value averaging $1.75 per acre was included; 
 and (5) that, for the years 1914 and 1915, all of the property in 
 Pierce county, save timber lands and other unimproved lands, was 
 assessed on a basis not exceeding lifty per cent of the true value 
 in compliance with the act of 1913 (I\em. Code, § 9113), while 
 timber lands and unimproved lands were assessed as before on a 
 basis of sixty per cent, which course was arbitrary and unconstitu- 
 tional. 
 
 "We shall first take up the claim of plaintiffs as to the valuation 
 of tlie fir timber, including cedar and spruce, for the years 1914 
 and 1915. In order to obtain a clear understanding of the situation, 
 it is necessary to recur to the work of the assessor's office for prior 
 years. The evidence shows that, in the year 1908, all property in 
 Pierce county was valued by the assessor for assessment purposes 
 on a basis of sixty per cent of its full value. In fixing the values 
 of fir timber, he adopted a zone system, placing the assessment 
 $1 per thousand feet, and reducing the values five cents per 
 thousand for each additional mile until a minimum of 
 fifty cents was reached, which minimum was thereafter applied 
 regardless of added distances. In making these figures, it fairly 
 appears that the assessor failed to take into consideration the ele- 
 ments of quality and quantity of timber, its accessibility and the 
 logging conditions. The values fixed by the assessor in the year 
 1908 were adopted in each subsequent biennial valuation for assess- 
 ment without material change, and are the figures now in issue 
 as the assessment values for the vears 1914 and 1915. By the act 
 of 1913 (Rem. Code, § 9112), "it is provided that "all property 
 shall be assessed at not to exceed fifty per cent of its, true 
 and fair value in money." In making his assessment for tlie 
 years 1914 and 1915, the assessor reduced the value of all 
 property, excepting timber lands and unimproved propertv. to a 
 figure not exceeding fifty per cent of its full value, wliile continuing 
 in force the old 1908 assessment on a sixty per cent basis without 
 reduction as to timber lands and unimproved property; this, not-
 
 172 WEYEKHAEUSEE TIMBEE CO. V- PIERCE COUNTY. [CHAP. II. 
 
 withstanding the fact, as the evidence shows, that timber values had 
 depreciated fully 25 per cent at the time the assessment in dispute 
 was made. The valuation in 1908 was made at a time when the 
 lumber industry in this State had reached the highwater mark, from 
 which stage it had steadily subsided until the period covered jjy the 
 years 1914 and 1915. 
 
 The trial of this action was had in 1915, and the evidence of 
 values prevailing at that time and at the time of the assessment 
 is widely divergent, the witnesses for plaintiffs generally placing 
 the values lower than plaintiff's concede, while the witnesses for the 
 county in some cases exceed the assessor's values. But averaging 
 the figures of all the witnesses on both sides, we believe, invariably 
 results in a valuation lower than that fixed by the assessor. For 
 instances, in township 16 north, range 3 east, the average assessed 
 value is 70.8 cents per thousand, and the average value placed by 
 the witnesses is 48 cents, while the plaintiff concedes a value of 41.5 
 cents. In so far as the credibility of witnesses is concerned, those 
 for, plaintiffs are sustained in large part by the cruise of timber lands 
 made by the county in the year 1907 for use in the assessment of 
 timber lands for taxation. This cruise is in evidence, and the court 
 found " that said cruise was made and that it was a careful, accurate 
 and correct cruise, and has been admitted to be such by both of the 
 parties." A sample comparison of an assessment with the cruise 
 description will be of interest. The cruise describes the fir tim- 
 ber on the east one-half of section 13, township 16 north, range 
 3 east, as small and of inferior quality, while the west half has 
 "some good logs." On 1,837 feet, standing two-thirds on the east 
 side and the balance on the west, the high assessment valuation of 
 $1.15 is placed, which plaintiff asks to be reduced to 40 cents. The 
 highest valuation placed on land in that township by tlie county's 
 witness Flint was only $1.25, which on a fifty per cent basis for 
 assessment would be 62.5 cents. The inequality in the work of the 
 assessor finds further demonstration in his failure to place the 
 same ratings upon different tracts of timber practically equivalent 
 in quality, quantity and logging conditions. For instance, in town- 
 ship 18 north, range 6 east, the fir and cedar in section 23 is rated 
 at $1.20, while in section 15 it is rated 85 cents. In the former the 
 fir is " old growth, sound and smooth," the cedar " strictly shingle 
 timber, a great many trees will go to pieces in falling." In the latter 
 the fir is " large, smooth and sound, first-class timber," and the same 
 description applies to the cedar. Section 15 shows a somewhat higher 
 grade, and is one-half mile nearer railroad transportation, yet is 
 valued 35 cents lower than section 23. All the timber on which 
 reductions are sought is located in rough, broken, and in some cases 
 mountainous districts where logging conditions are unfavorable and 
 often practically prohibitive. The figures obtained from averaging 
 the testimony discloses an overvaluation by the assessor to the extent 
 of at least 25 per cent, and this is supported by the disclosures of 
 the cruises in evidence. The cruises, which are records in the as- 
 sessor's office, tend to show either arbitraiy action or marked inad-
 
 SECT. III.] WEYERHAEUSER TIMBER CO. r. PIERCE COUXTY. 173 
 
 vertence in making the valuations upon the lands here in controversy. 
 The apparent fact that the assessor merely adopted the figures of 
 an assessment made six years earlier certainly fails to show the ex- 
 ercise of an advised and mature judgment. And it is undisputed 
 that the value of timber had depreciated to a very considerable extent 
 at the time the assessment of 191-i was made. The assessor himself 
 testified before the State board of equalization as follows: 
 
 " Xow, in regard to timber land, you will find that we have gen- 
 erally kept the assessable values of timber lands in Pierce county 
 up to about what they Avere formerly. . . . Milling properties, as we 
 all know, have gone down greatly in the last year, especially in this 
 county. . . . Many of them have gone out of business, it is a hard 
 row for the milling interests. . . . We have kept those values too 
 high. They are too high now, and it is almost criminal with the 
 conditions of the timber interests to hold their values up the way 
 we have done for assessable purposes." 
 
 The evidence is extremely voluminous. We have examined it 
 carefully and it is obviously impracticable to discuss it more in detail. 
 It must suffice to st^ate our conclusions. We are satisfied that the 
 assessor did adopt the old valuations of 1908 without revision in the 
 light of the current market value of timber and timber lands, and 
 without applying the fifty per cent basis for assessment, and that 
 this course was arbitrary and discriminatory. We are further sat- 
 isfied that the original valuation of these timber lands in 1908 was 
 made upon a fundamentally wrong basis or theory, in that the zone 
 system employed had no relation to the quality or accessibility of 
 the timber on any given tract, and was essentially arbitrary and 
 prohibitive of the exercise of any 2:)ersonal judgment on the part 
 of the assessing officers as to actual value of these fir, cedar and 
 spruce timber lands. For a decision expressly so holding, see Her- 
 sey V. Board of Supervisors of Barron County, 37 Wis. 75. Finally, 
 we are satisfied from all of the evidence that these things have re- 
 sulted in making the fir, cedar and spruce timber valuations exces- 
 sive to the extent of at least twenty-five per cent. 
 
 Turning now to the hemlock timber, we find that it was assessed 
 for the years here in question at a flat rate of 25 cents per thousand 
 throughout the county. Plaintiffs claim that this valuation was 
 placed without regard to quality, accessibility or logging conditions, 
 and that, taking these elements into consideration, their hemlock 
 values should be reduced to values ranging from 2.5 cents to 20 cents 
 per thousand upon various sections. This would result in an average 
 valuation upon the Northwestern Improvement Company^s lands of 
 9.5 cents per thousand, and upon the Weyerhaeuser lands of 10.5 
 cents per thousand. The reduction made by the trial court, from 
 a sixty per cent to a fifty per cent basis of valuation, produced a 
 value for assessment of 20,8 cents instead of 25 cents per thousand. 
 The evidence shows tliat good hemlock undoulitedly has a full value 
 of fifty cents per thousand where it is in sufficient quantity and 
 easy of access for logging. "Wliile some of the hemlock in dispute 
 meets these requirements, it is clear that most of it does not. Much
 
 IT-i WEYERHAEUSER TIMBER CO. V. PIERCE COUNTY. [ciIAP. 11. 
 
 of it is described as small, rough, limby, knotty, scrubby, conky, and 
 poor, while some is described as medium and second class. On a 
 few of the sections it is of first class quality and abundant. It 
 appears from the evidence that it did not pay to log hemlock, since 
 it had very little commercial value at the time of trial. It has a 
 tendency to rot where e.^osed to the elements, but it is conceded 
 that it has a value for interior use in buildings. Undoubtedly hem- 
 lock has a value, but the quality and logging conditions of most of 
 that in controversy renders it practically unmarketable. It is lo- 
 cated upon steep and broken territory, in great part inaccessible 
 to logging roads and without streams capable of being utilized as an 
 outlet, owing to precipitous banks and rocky bottoms. This class 
 of timber is described by some of the witnesses as having only a 
 speculative future value, and as practically worthless at the present 
 time. 
 
 Carefully considering the testimony of all the witnesses, we find 
 that they place an average assessment value on the Northwestern 
 company's hemlock of 16 cents per thousand, and upon that of the 
 "Weyerhaeuser company of 21 cents. In the case of the latter com- 
 pany's hemlock, this valuation by the witnesses is substantially the 
 amount to which the trial court found they were entitled, and no 
 further reduction would be warranted. But in the case of the North- 
 western company, we think the evidence justifies a reduction to the 
 extent of 25 per cent of the assessed valuations, or a value of 18% 
 cents per thousand. The very fact of the imposition of a flat rate of 
 valuation by the assessor, in the light of the evidence, shows that he 
 did not exercise his judgment by taking into consideration the real 
 values of the different tracts of hemlock. This is further confirmed 
 by the fact that he adopted without change the work of a prior assessor, 
 made at a time when the market value of all timber was admittedly 
 higher and when the valuation then made and here adopted was 
 regarded as being sixty per cent of the higher actual values exist- 
 ing at that time. 
 
 In making this assessment the assessor included also a "land 
 value," not for the purpose of separately assessing the land, but 
 as an element of value to be considered in assessing the land with 
 the timber it bears as real estate. This land value for assessment 
 purposes was placed at from $1 to $3 per acre, resulting in an aver- 
 age valuation of $1.75 per acre on the lands here involved. The 
 Weyerliaeuser Timber Company contends that the lands have no 
 value except to carry the timber, and inasmuch as the timber was 
 assessed to the value allowed by law, that value absorbed the land 
 value and the further assessment of the lands was illegal. The evi- 
 dence shows that timber lands were usually valued only for the 
 timber upon them, and were bought and sold on that basis. But 
 it further appears that logged off lands are generally held by the 
 lumberer for sale, the evidence shown'ng prices in some instances 
 of $3 per acre. The evidence shows that some of the land in con- 
 troversy could be utilized for agriculture and some for grazing, 
 but a considerable part is fit only for reforestation. Such evidence
 
 SECT. III.] WEYEEUAEUSEK TIMliKli CO. t'. PIERCE COUNTY. 175 
 
 is sufficient to show that the hind carries some value in and of itself 
 aside troiii tlie timber. 
 
 Plaintiir does not specifically attack the valuations on any tract 
 as being excessive as a land valuation, but its position, in ell'ect, 
 amounts to a charge that an assessment both on the land and on 
 the timber conslituLes double taxation of the same property. It 
 seems a sufficient answer to say that the land was not separately 
 assessed nor separately taxed, it was merely considered as an element 
 of value which, with the value of the timber, goes to make up the 
 value of the wJiole as real estate, riaintili's' view does not seem 
 tenable under our system of taxation requiring all real property 
 to be assessed unless speciiically exempted. Our statutes (Kern. 
 Code, §§ 9095 and 'J2'22-l) ])eriiiit the .^cpar.ite taxation of standing 
 timber only in case the land and the timber are held in separate 
 ownership. This is a legislature recognition of the fact that the land 
 value is not absorhed in the timber value, but is an element of value 
 to be considered in the assessment of timber lands when both land 
 and timber are held in the same ownership. Eeal property for pur- 
 poses of taxation is defined by Rem. Code, § 9092, as including " the 
 land itself . . . and all rights and privileges thereto belonging, or 
 in anywise appertaining." We cannot escape the conclusion that 
 land has some intrinsic value aside from what it carries and, as such, 
 is subject to taxation, however great or small may be the value of the 
 appurtenant timber. While it would seem that lower land values 
 would be appropriate in this case, there is no evidence of ar])itrary 
 action on the part of the assessor so far as the land values are con- 
 cerned, beyond the fact of his adoption of a sixty per cent instead of 
 a fifty per cent basis of valuation for assessment purposes. That 
 inequitable factor permeates the whole as?es?mcnt. Plaintiff is en- 
 titled to the IG 2-3 per cent reduction made by the trial court in the 
 element of "land values," the same as in the element of the timber 
 values of its real estate. This ruling does not apply to the North- 
 western company, since in this action that company does not seek 
 a reduction in '" land values." 
 
 The law of this case is comparatively simple. It is well settled 
 that the assessor and board of equalization act in a quasi-judicial 
 capacity, that the law presumes that they have performed their duties 
 in a proper manner, that this presumption will be liberally indulged, 
 and that the evidence to overthrow it must be clear. Templeton v. 
 Pierce County, 25 Wash. 377, 65 Pac. 553 ; National Lumber & Mf i?. 
 Co. r. Cheha'^lis Countv. 80 Wash. 483, 150 Pac. 11(54; Hillman's 
 Snohomish Countv Land & R. Co. v. Snohomish Countv, 87 Wash. 
 58, 151 Pac. 96; Hueston v. King County, 90 Wash. 200, 155 Pac. 
 773; Northwestern Improvement Co. v. Pierce Countv, ante, p. 528, 
 167 Pac. 33. But it is equally well settled in this State that, where 
 the evidence shows arbitran- or capricious action on the part of the 
 assessing officer rather than th** exercise of an hone^Jt judgment, or 
 shows that he proceeded upon a fundamentally wrons^ basis or theo^-y 
 in makincT the as<5es«morit, the courts will frrant relief a^rain'^t an over- 
 Valuation of real property, and this regardless of the action of the
 
 176 WEYEEHAEUSER TniBEK CO. V. PIEKCE COUNTY. [CHAP. II. 
 
 board of equalization in the premises. First Thought Gold Mines, 
 Limited, r. Stevens County, 91 Wash. 437, 157 Pac. 1080; Northern 
 Pac. E. Co. V. Benton County, 87 Wash. 534, 151 Pac. 1123. It 
 is also well settled that there is neither that uniformity nor equality 
 which the law requires, where all kinds of property save one are 
 designedly and of fixed purpose assessed at less than a given per- 
 centage of their full and fair value, while that one class of property 
 is assessed at a greater percentage of such value. 
 
 "Such an arbitrary policy is vicious in principle, violative of 
 the constitution, and operates as a constructive fraud upon the rights 
 of the property holder discriminated against. In such cases equity 
 will grant relief." Spokane & Eastern Trust Co. v. Spokane County, 
 70 Wash. 48, 126 Pac. 54, Ann. Cas. 1914B 641. 
 
 See, also, Spokane & I. E. E. Co. v. Spokane County, 82 Wash. 
 24, 143 Pac. 307, and Greene v. Louisville & Interurban E. Co., 
 244 U. S. 499. 
 
 Though this court has held that it will not interfere with an 
 assessment upon the sole ground of excessive valuation, in the ab- 
 sence of some showing of actual fraud or arbitrary action, unless the 
 assessment be so great as to amount in itself to fraud in law (ISTorth- 
 em Pac. E. Co. v. State, 84 Wash. 510, 147 Pac. 45, Ann Cas. 1916E 
 1166; Hueston v. King County, supra), it is obvious that this rule 
 has no application to a case where the evidence shows such actual 
 arbitrary action. 
 
 Applying the evidence in the light of these well established prin- 
 ciples, we are constrained to direct the modification of the judgment 
 in the following particulars : On plaintiffs' appeal, the judgment 
 of the trial court will be modified to the extent of granting plain- 
 tiffs a 25 per cent reduction on the fir, cedar and spruce values for 
 the 3'ears 1914 and 1915 upon all that class of timber in controversy 
 in this action. As to the hemlock timber, the Weyerhaeuser Timber 
 Company will be granted a 16 2-3 per cent reduction on such timber 
 located in township 16 north, in ranges 5 and 6 east, township 18 
 north, range 6 east, and to-^mship 19 north, in ranges 7, 8 and 9 
 east. The ISTorthwestern Improvement Company will be granted 
 a 25 per cent reduction in the assessed value of its hemlock timber 
 in townships 15, 16, 17, 18 and 19 north, range 6 east. The "land 
 values" of all the lands of plaintiff Weverhaeuser Timber Company 
 here involved will stand as reduced by the trial court 16 2-3 per cent 
 to bring it to fifty per cent of full value corresponding with other 
 classes of property. These reductions are not to be considered as 
 additional to the ffeneral reduction made by the trial court, but as 
 including that reduction. 
 
 By its cross-appeal, defendant assigns as error the action of the 
 trial court in makinsr a 16 2-3 per cent reduction. What we have 
 said touching plaintiffs' appeal sufficiently disposes of this assign- 
 ment. 
 
 Some complaint is also made of the action of the trial court m 
 admitting in evidence assessments for years prior to those involved 
 in the present controversv. We think, however, that this evidence
 
 SECT. III.] AUDITOE GENERAL V. JENKIXSOX. 177 
 
 was admissible on two grounds — for the purpose of showing 
 that the assessor, in making the 1914 and 1915 assessments, merely 
 adopted the valuation of prior assessors without a proper exercise 
 of his own judgment, and for the further purpose of showing that 
 these adopted valuations were upon a sixty per cent basis when the 
 law in force in 1914 and 1915 required a fifty per cent basis. 
 
 The cause is remanded with instructions to the trial court to 
 modify the judgment in accordance with this opinion. 
 
 Chadwick, Maix, and Parker, JJ., concur. 
 
 AUDITOR GEXEEAL v. JEXKIXSON. 
 Supreme Court of Michigan. 1892. 
 
 [Reported 00 Mich. 523.] 
 
 Montgomery, J. The Auditor General having filed his petition 
 in the manner required by section 52 of the tax law of 1889, asking 
 that a decree be entered for the amount of taxes assessed for the vear 
 1888 upon delinquent lands in St. Clair county, the appellant jfiled 
 objections to the taxes assessed against her property, and a hearing 
 was had. 
 
 The evidence shows that the vessel property owned in the city 
 of Port Huron was assessed at 10 per cent of its actual cash value. 
 The same course had been pursued the previous 3'ear, and a bill in 
 equity had been filed by one Eobert Walsh to test the validity of 
 such assessments. 
 
 J. B. Hull, the present controller of the city, and one of the super- 
 visors in 1888, was called as a witness for the appellant, and, be- 
 ing asked to state what was said in regard to the arrangement as 
 to the assessment of vessel property for the year 1888, testified: 
 
 " I think when we were around, — that is, a little before the 
 vessel property was put on the assessment roll, we were around go- 
 ing on the property, making the assessment on real estate, — Dr. 
 Kibbee said something or other that the vessel property had to be 
 assessed pretty low to keep it here, — something of the kind. Says 
 I, ' What are you going to do ? ' He said he didn't know, but prob- 
 ably make it about the same as it was last year, — something of that 
 nature; T may not get the exact words. I do not know Avhat rate 
 of assessment was made, but understood that it was 10 or 15 per cent. 
 I do not recollect the exact amount." 
 
 Dr. Kibbee was a member of the board of review in 1888. 
 
 The learned circuit judge entered a decree requiring the appel- 
 lant to pay the full tax assessed against her property, and based 
 his decision upon the ground that the objection filed by her was 
 not sufficiently specific. The objection filed stated that — 
 
 "In the spring and winter of 1888, and prior to the assessment 
 of property for taxes in the city of Port Huron for that year, the 
 controller and supervisors of the several wards of said city, whose
 
 178 AUDITOE GENEEAL V. JENKINSON. [cHAP. II. 
 
 duty it was to assess and value the real and personal property assess- 
 able within said city, and on which assessed valuation said taxes were 
 apportioned, entered into a fraudulent and corrupt agreement with 
 the owners of vessel property subject to taxation within the said 
 city for the purpose of relieving them; . . . that in pursuance of 
 said agreement the assessment was made, and over $4:50,000 worth 
 of property subject to taxation in said city was assessed at less than 
 one-tenth of its true cash value." 
 
 The circuit judge, considering that there was no evidence tending 
 to show that any such agreement was made in the spring of the year 
 1888, although there was evidence tending to show such an agree- 
 ment made in the spring of 1887, was of the opinion that the objec- 
 tions were fatally defective. The petitioner asked to amend her 
 objections, but this was denied, and a decree entered as above stated. 
 
 We think the circuit judge was in error in not permitting an 
 amendment. The tax law of 1889 provides that proceedings where 
 the validity of any tax is in dispute shall, where there is no other 
 provision made therein, follow the ordinary chancery practice, and 
 the court may allow amendment as in ordinary cases. We see no 
 reason why such an amendment as asked should not liave been allowed. 
 
 But we also tliiuk that the petitioner was entitled to relief upon 
 the objections as they stood. The gist of the objection was the 
 intentional under-assessment of a large portion of the property. 
 This was clearly proven. It was wholly immaterial when the cor- 
 rupt agreement was made with reference to such assessment, or, 
 indeed, whether any such agreement was made at all. The hardship 
 to the appellant grew out of such under-assessment; and, if the 
 under-assessment was intentional on the part of the assessing officer, 
 it was equally invalid whether it was the result of an agreement with 
 the owners of the property or his own disregard of his official duty. 
 As was said in Walsh v. King, 74 Mich. 354 : 
 
 ""' It is settled in this State, as well as elsewhere, . . . that in 
 a case like the present, where the assessing officers have purposely, 
 in violation of law, exempted property from taxation, so that the 
 burden of taxation rests unequally, those wlio are wronged by this 
 action are entitled to remedv against snch wrong." 
 
 See, also, Merrill v. Humphrey, 24 Mich. 170, and cases cited. 
 
 It is claimed by the appellant that the entire tax assessed against 
 her should be declared invalid and set aside; l)nt we think otherwise. 
 There is no difficulty in ascertaining the extent to which she has 
 been affected by this unlawful omission of assessments, and it ap- 
 pears that her taxes were increased in consequence of the wrongful 
 assessment by the sum of $31.23. We think, therefore, that she is 
 entitled to have this sum deducted from the tax assessed against 
 her, and that this should be the extent of her relief. Merrill v. Hum- 
 phrey, 24 Mich. 170. 
 
 Appellant is entitled to costs in this Court. 
 
 The other Justices concurred.
 
 SECT. III.] UNION TANK LINE CO. V. WRIGHT. 179 
 
 UNION TANK LINE CO. v. WRIGHT. 
 
 SUPKEME CourLT OF THE UXITED STATES. 1919. 
 [Reported 249 V. 8. 275.] 
 
 McReynolds, J. This cause requires us to consider the power of 
 a State to lay and collect taxes upon instrumentalities of interstate 
 commerce which move both within and without its jurisdiction. 
 
 Union Tank Line — plaintiff in error — an equipment company 
 incorporated in New Jersey which has never carried on business 
 or had an ollice in (Jeorgia, owns twelve thousand tank cars suitable 
 for transporting oil over railroads and rents them to shippers at 
 agreed rates, based on size and capacity. The roads over which thej' 
 move also pay therefor stipulated compensation. Under definite 
 contract certain of these cars were furnished to the Standard Oil 
 Company of Kentucky and all of those which came into Georgia 
 were being operated by the Oil Company under such agreement. 
 They were not permanently within that State but passed "in and out." 
 
 March 16, ]i)14, the Tank Line made the following tax return 
 to the Comptroller General for 1913 — 
 
 Name of company Union Tank Line 
 
 Value of real estate owned by company in or 
 
 out of Georgia None 
 
 Number of miles of E. K. lines in Georgia over 
 
 which .... cars are run 6976.5 
 
 Total value of .... cars and .... other personal 
 
 [property in Ga. & elsewhere] $10,518,333.16 
 
 Value franchise [in Georgia] No franchise 
 
 Total number of miles E. R. lines over which 
 
 .... cars are run [in Ga. & elsewhere] .... 251,999 
 Total value of property taxable in Georgia .... $-47,310.00 
 Union Tank Line Company had an everage of 
 
 57 tank cars in Georgia during 1913 which 
 
 at a value of $830 per car equals $47,310.00 
 
 Defendant in error expressly admitted that the average number 
 of cars in Georgia during 1913 was fifty-seven, the value of each 
 being $830 — total $47,310; that the owner had paid into the State 
 treasury as taxes the full amount required on such valuation and 
 during that year had no other property in the Stnte. Acting upon 
 infurnuition contained in return above quoted, the comptroller gen- 
 eral assessed the Tank Line's property for 1913 at $291,196, its fran- 
 chise at $27,685; and demanded payment. In explanation of this 
 action he wrote to it as follows: 
 
 "^As to the return filed, you have furnished the data desired, but 
 have made an error in the application of same. After giving the 
 mileage for the Company everywhere and for Georgia, vou then go 
 nhead and assign 57 tank cars for this State and value them at $830 
 each, making the total for Georgia $47,310. This is an incorrect
 
 ISO UXION TA2fK LI^^E CO. V. WEIGHT. [CHAP. II. 
 
 method. If 3'ou were to be allowed to merely assign so many cars 
 to the State for taxation there would be no need for the mileage fig- 
 ures to be furnished. The valuation to be assigned to Georgia must 
 be in the same proportion to the A-aluation for the entire company, 
 as the mileage in Georgia bears to the entire mileage everywhere. . . . 
 Or to work it out by percentage instead of proportion: 6,976.5 the 
 G-eorgia mileage, is 3.76846 per cent of 251,999, the entire mileage. 
 Georgia is therefore entitled to 2.76846 per cent of the entire valua- 
 tion. This per cent of $10,518,333 is $291,195.84, or the same sum 
 arrived at by proportion, if we call the 84 cents an even dollar. . . . 
 A franchise value should also be returned. And whatever the valua- 
 tion you place on the franchise for the entire country, 2.76846 per 
 cent of same must be assigned to Georgia. Thus, if you should 
 value your franchise at $1,000,000, the franchise value to be assigned 
 to Georgia would be $27,685.''^ 
 
 "The valuation for Georgia was determined by taking 2.76846 
 per cent of the valuation you gave for the entire company, exclusive 
 of franchise. The 2.76846 per cent is the ratio the Georgia mileage 
 bears to the entire mileage, as explained in a previous letter. The 
 franchise value was obtained by placing your franchise for the entire 
 country at an even million dollars and giving Georgia 2.76846 per 
 cent thereof." 
 
 Thereupon, plaintiff in error instituted this proceeding in Fulton 
 County Superior Court alleging invalidity of the assessment, that 
 to enforce the tax would violate the Fourteenth Amendment, and 
 asked appropriate relief. The cause was tried upon pleadings and 
 agreed statement of facts. Among other things, the parties stip- 
 ulated : 
 
 "On April 7, 1914, when the defendant entered an assessment in 
 his office of property and franchise of the plaintiff as shown herein- 
 before, he had no other infoniiation for any of the years 1907 to 1914 
 inclusive than was contained in the said return filed b}'^ the plaintiff 
 on March 16, 1914, and embraced in this statement and which was 
 refused by the defendant, and did not know what cars defendant 
 had had in Georgia during any of said named years nor did he as- 
 certain the value of such ears, but his action was taken on such in- 
 formation hereinbefore shown; and that the assessment so entered 
 by the defendant in his office against the plaintiff's property during 
 said period for each of said years embraces the valuation of about 
 three hundred cars in excess of what the plaintiff actually had in 
 the State of Georgia, during said years of the approximate value of 
 $250,000.00 each year; and that the true value of a tank car is 
 about eight hundred and thirty ($830.00) dollars per car. 
 
 " That for the year 1914 the assessment entered against plaintiff 
 by defendant covered the value of at least three hundred and fifty 
 cars in excess of the number of cars plaintiff actually had in the 
 State of Georgia for the time said tax assessed. 
 
 "That defendant in entering said assessment never undertook to 
 ascertain the actual property of plaintiff's located in the State of 
 Georgia during the said years or to assess its property at its real
 
 ^,g-:§£C»r*H-.] ^^'^UNION TANK LiyiT CO . T : WaW I Mtw 
 
 value for taxation, otherwise than by simply ascertaining the per- 
 centage of its entire property shown by the ratic^ of the railroad 
 traversed by its eqiiii)inent in Georgia and the railroad mileage trav- 
 ersed by its equipment everywhere as shown bv ity said return filed 
 on March 16, 1914." ' \ 
 
 The trial court adjudged the assessment good as to both franchise 
 and physical property. The Supreme Court held no taxable fran- 
 chise existed, but that the physical property had been assessed as 
 required by statutes not in conflict with either State or Federal 
 Constitution. 143 Georgia, 765, 769, 771, 773; 146 Georgia, 489. 
 It said: '' The case relates to two matters, namely: a tax assessment 
 against tangible property of the company; and "second, a claim of 
 right to assess a franchise tax. . . . Theeffort was to tax property 
 in this State, and in doing so to apply the statute designed as a rule 
 to ascertain the property so coming into the Sttite and its ]^roper 
 valuation." After quoting §§ 989, 990 and 1031, Civil Code of 
 Georgia, copied in the margin,^ the opinion continues — "The sev- 
 eral code sections embody the statutory scheme for taxing cars of 
 equipment companies whose cars are handled over the railroads in 
 
 * Civil Code of Georgia. 
 
 Sec. 080. " Each non-resident person or company whose sleeping-cars 
 are run in this State shall be taxed as follows: Ascertain the whole number 
 of miles of railroad over which such sleeping-cars are run and ascertain 
 the entire value of all sleeping-cars of such person or company then tax 
 such sleeping-cars at the regular tax rate imposed upon the property of 
 this State in the same proportion to the entire value of such sleeping-cars 
 that the length of lines in this State over which such cars are run 'Ijears 
 to the length of lines of all railroads over which such sleeping-cars are 
 run. The returns shall be made to the comptroller-general by the president, 
 general agent, or person in control of such cars in this State. The comp- 
 troller-general shall frame such questions as will elicit the information 
 sought, and answers thereto shall be made under oath. If the officers above 
 referred to in the control of said sleeping-cars shall fail or refuse to answer 
 under oath, the questions so propounded, the comptroller-general shall 
 obtain the information from such sources as he may, and he shall assess 
 a double tax on such sleeping-cars. If the taxes herein provided for are 
 not paid, the comptroller-general shall issue executions against the owners 
 of such cars, which may Ijc levied l)y the sheriff of any county of this State 
 upon the sleeping-car or cars of the owner who has failed to pay taxes." 
 
 Sec. 990. " Any person or persons, copartnership, company or' corpora- 
 tion wherever organized or incorporated, whose principal business is fur- 
 nishing or leasing any kind of railroad cars except dining, buffet, chair, 
 parlor, palace, or sleeping-cars, or in whom the legal title in any such 
 cars is vested, but which are operated, or leased, or hired to be operated 
 on any railroads in this State, shall be deemed an equipment company. 
 Every such company shall be required to make returns to the comptrolleV- 
 general under the same laws of force in reference to the rolling stock o\\'ned 
 by the railroads making rctiirns in this State, and the assessment of taxes 
 thereon shall be levied and the taxes collected in the same manner as pro- 
 vided in the case of sleeping-cars in section 080."' 
 
 Sec. 1031. "Railroad companies operating railroads lying partly in this 
 State and partly in other States shall lie taxed as to the rolling stock 
 thereof and other personal property anpurtenant thereto, and which is not 
 permanently located in any of the States through which said railroads 
 pass, on so much of the wbole value of rollinsr stock and personal property 
 as is proportional to the length of the railroad in this Stat^, without 
 regard to the location of the head office of such railroad companies."
 
 1S2 UNION TANK LINE CO, V. WRIGHT. [cHAr. 11. 
 
 this State. Owing to the nature of the business, it is difficult to 
 ascertain the number of ears of equipment companies that come into 
 this State and designate the identity of each car or its value. The 
 purpose of the statute is to provide a reasonable method for deter- 
 mining the fact that cars come into this State and the values thereof, 
 to the end that the equipment companies allowing their cars to come 
 into this State may bear their just proportion of taxes leviable in 
 this State. The scheme of the statute is wliat is sometimes called 
 the track-mileage basis of apportionment, or what in a more general 
 way is termed the unit rule. The comptroller-general followed the 
 statute. The unit rule has been upheld by the Supreme Court of the 
 United States, in regard to railroads, telegraph companies, and 
 sleeping-car companies. Kentucky Eailroad Tax Cases, 115 U. S. 
 321 ; Western Union Telegraph Company v. Massachusetts, 125 U. S. 
 530 ; Pullman's Palace Car Co. v. Pennsjdvania, 141 U. S. 18. And 
 this principle of average has been approved in regard to refrig- 
 erator-cars. American Eefrigerator Transit Co. v. Hall, 174 U. S. 
 70; Union Eefrigerator Transit Co. v. Lynch, 177 U. S. 149. It 
 has even been held that the unit rule of valuation could properly 
 be applied to the valuation of property of express companies within 
 a certain State, though there was no ph3^sical connection with prop- 
 erty beyond the State. ... It seems to us, therefore, that the case falls 
 within the rule laid down by the Supreme Court of the United 
 States, as above mentioned, and that tliere are no siich circumstances as 
 to bring it within the ruling made in Fargo v. Hart, 193 U. S. 490." 
 A State may not tax property belonging to a foreign corporation 
 which has never come within its borders — to do so under any for- 
 mula would violate the due process clause of the Fourteenth Amend- 
 ment. In so far, however, as movables are regularly and habitually 
 used and employed therein, they may be taxed by the State according 
 to their fair value along with other property subject to its jurisdic- 
 tion, although devoted to interstate commerce. While the valuation 
 must be just it need not be limited to mere worth of the articles 
 considered separately but may include as well "the intangible value 
 due to what we have called the organic relation of the property ^ ^ 
 in the State to the whole system." How to appraise them fairly^ ^ 
 when the tangibles constitute part of a going concern operating in 
 many States often presents gi-ave difficulties; and absolute accuracy 
 is generally impossible. We have accordingly siistained methods 
 of appraisement producing results approximately correct — for ex- 
 ample, the mileage basis in case of a telegraph company (Western 
 Union Telegraph Co. v. Massachusetts), and the average amount of 
 property habitually brought in and carried out by a car company 
 (American Refrigerator Transit Co. v. Hall). But if the plan pur- 
 sued is arbitrary and the consequent valuation grossly excessive it 
 must be condemned because of conflict with the commerce clause or 
 the Fourteenth Amendment or both. Western Union Telegraph 
 Co. V. Massachusetts. 125 U. S. 530 ; Marye v. Baltimore & Ohio E. E. 
 Co., 127 U. S. 13 7; Pullman's Palace Car Co. v. Pennsylvania, 
 141 U. S. 18, 26; Adams Express Co. v. Ohio, 165 U. S. 194; S. C.
 
 SECT. III.] UNION TANK LINE CO. V. WRIGHT. 183 
 
 IGG U. S. 185; American Eefrigerator Transit Co. v. Hall, 174 U. S. 
 70; Union IJefrigerator Transit Co. v. Lynch, 177 U. S. 149, Fargo 
 V. JIait, 1U3 U. S. 41)0; Cudahy Packing Co. v. Minnesota, :.'46 
 U. S. 450, 4j;3. 
 
 In the present case the Comptroller General made no effort to 
 assess according to real value or otlierwise than upon the ratio which 
 miles of railroad in Georgia over which tlie cars moved bore to total 
 mileage so traversed in all States. Keal values — the essential aim 
 — of property within a State cannot be ascertained with even ap- 
 proximate accuracy by such process; the rule adopted has no nec- 
 essary relation thereto. During a year two or three cars might pass 
 over every mile of railroad in one State while hundreds constantly 
 employed in another moved over lines of less total length. Fifty- 
 seven was the average number of cars within Georgia during 1913 
 and each had a "true" value of $8;)0. Thus the total there subject 
 to taxation amounted to $47,310 — the challenged assessment spec- 
 ified $-.>91,196. 
 
 We think plaintiff in error's property was appraised according 
 to an arbitrary method which produced results wholly unreasonable 
 and that to permit enforcement of the proposed tax would deprive 
 it of property without due process of law and also unduly burden 
 interstate commerce. 
 
 Pullman's Palace Car Co. v. Pennsylvania, supra, relied on by 
 defendant in error, contains the following passage which seems to 
 uphold the Georgia rule — "The mode which the State of Penn- 
 sylvania adopted, to ascertain the proportion of the company's prop- 
 erty upon which it should be taxed in that State, was by taking as 
 a basis of assessment such proportion of the capital stock of the com- 
 pany as the number of miles over which it ran cars within the State 
 bore to the whole number of miles, in that and other States, over 
 which its cars were run. This was a just and equitable method of 
 assessment; and, if it were adopted by all tlie States through which 
 these cars ran, the company would be assessed upon the whole value 
 of its capital stock, and no more." But the point therein spoken of 
 was unnecessary to determination of the cause; and so far as the 
 quoted passage sanctions the specified rule for ascertaining values 
 as generally appropriate, just, unobjectionable and productive of 
 conclusive results, it must be regarded as obiter dictum, and we can- 
 not now approve or follow it. 
 
 Eeference to tlie original record upon which that case came here 
 will aid in understanding the exact issues presented. Pennsylvania 
 demanded taxes of the Pullman Company, an Illinois corporation, 
 for the years 1870 to 1880, upon such portion of its capital stock as 
 total miles of railroad in Pennsylvania over which its cars moved 
 bore to like total in all States. No statute prescribed the method 
 of valuation ; it had been adopted by executive officers. The Court 
 of Common Picas declared : " On the facts defendant claims that no 
 part of its capital stock is invested in this State. The argument 
 is that its cars are personal property, and, as they are not permanently 
 located in this State, but pass into, through, and out of it, this per-
 
 IS-i UXIOX TANK LINE CO. L'. AVEIGHT. [cHAP. II. 
 
 6onal property has no taxable situs in Pennsylvania, and could not be 
 taxed specifically in any given locality; and therefore, it is con- 
 tended, as the tax on capital stock is a tax on the property in which 
 the capital is invested, the latter cannot be taxed. . . . We hold, 
 therefore, that the proportion of the capital stock of the defendant 
 invested and used in Pennsylvania is taxable under these acts, and 
 that the amount of the tax may be properly ascertained by taking 
 as a basis the proportion wliich the number of miles operated by 
 defendant in this iState bears to the whole number of miles operated 
 by it, without regard to the question where any particular car or 
 cars were used; . . . The defendant is liable to tax on the pro- 
 portion of its capital stock invested in this State, as represented 
 by the coaches and cars owned and used by it here. . . . Determin- 
 ing the amount of the tax on the principle above stated, it is as 
 follows: Tax for years 1870 to 1880, inclusive, $16,321.89." The 
 Supreme Court affirmed this view, saying: "While the tax on the 
 capital stock of the company 'is a tax on its property and assets,' 
 yet the capital stock of a company and its property and assets are 
 not identical. The coaches of the company are its property. They 
 are operated within this State. They are daily passing from one 
 end of the State to the other. They are iised in performing the 
 functions for which the corporation was created. The fact that 
 they also are operated in other States cannot wholly exempt them 
 from taxation here. It reduces the value of property in this State 
 justly subject to taxation here. This was recognized in the court 
 below, and we think the [proportion] preference was fixed accord- 
 ing to a just and equitable rule." 
 
 In 1870 thePullman Company's capital stock amounted to three 
 million dollars, in 1880 it had gi'o\vn to six million; all cars actually 
 owned by the company (leased ones not included) during 1871, 
 numbered 241, and in 1880, 472, their total value being $4,334,000, 
 and $8,588,000 respectively; one hundred cars were operated witliin 
 Pennsylvania during each of the eleven years: total miles of track 
 everywhere passed over by the company cars during 1880 amounted 
 to 57,099, within Pennsylvania 5,127, and these figures adequately 
 represent the proportion for other years : total tax held due for the 
 eleven years amounted to $16,321.89. While the record does not 
 disclose the precise valuations upon which taxes were computed, 
 enough does appear to show that they were far below (perhaps not 
 one-third) the actual worth of a hundred cars. 
 
 The company demanded complete exemption upon the ground 
 that its cars were moving in interstate commerce and had no tax- 
 able situs in Pennsylvania. The appraisement was not challenged 
 as excessive; if the property was taxable in Pennsylvania the rule 
 adopted may have been decidedly favorable to the owner and the 
 assessment a moderate one. Ha^nng failed to challenge amount of 
 the assessment, the company could not well complain of the rule 
 under which this was fixed. In siich circumstances reasonableness 
 of the rule was not really in question and what was said of it can- 
 not control here where the very point is presented for decision.
 
 SECT. III.] -WEYEEHAUESEE V. MINXESOTxV. 185 
 
 Cohens v. Virginia, 6 ^Mieat. 264, 399; McCormick Machine Co. v. 
 Aultman, 16U U. S. GOG, Gil. See also Adams Express Co. i'. Ohio, 
 supra. 
 
 In other opinions of this court cited below to sup^jort the conclu- 
 sion there reached we upheld the power of a State to tax property 
 actuall}'' within its jurisdiction upon a fair valuation considered as 
 l)art of a going concern — they give no sanction to arbitrary and 
 inllatcd vahuitious. Taxes must follow realities, not mere deduc- 
 tions from inadequate or irrelevant data. 
 
 In Fargo v. Hart, supra, we condemned an assessment ostensibly 
 proportioned to mileage where property witliout the State and un- 
 necessary to the Express Company's actual business had been in- 
 cluded; and we pointed out that under no formula can a State tax 
 things wholly beyond its jurisdiction. 
 
 The same considerations which establish invalidity of the assess- 
 ment of plaintiff in error's property for 1913 apply to like ones 
 made b}'' the Comptroller General for all other years in question. 
 
 Judgment of the court below must be reversed and the cause re- 
 manded for further proceedings not inconsistent with this opinion. 
 
 Reversed and remanded. 
 
 'Mr. Justice Day, in view of the undisputed facts of this case, 
 concurs in the result. 
 
 PiTXEY, Braxdeis, and Clark, J J., dissenting. 
 
 WEYERHAUESER r. MINN"ESOTA. 
 
 SuPEEiiE Court of the Uxited States. 1900. 
 [Reported 176 U. 8. 550.] 
 
 McKexxa, J. The procedure under the statute is as follows: 
 A complaint to the Governor of the State that a considerable amount 
 of property has been grossly undervalued by the assessor or other 
 count}' officials. 
 
 The appointment by the Governor of a competent person to ex- 
 amine and report, and if he find undervalued property to prepare 
 a list in duplicate showing its character, location, ownership and 
 valuation, one of which lists shall be filed with the county auditor. 
 
 The entry of the list on the assessment books by the auditor. 
 
 The assessment of the property at its value corresponding to the 
 
 list. 
 
 Proceedings by the county auditor as under the general law. 
 
 This procedure was exactly followed, and it is stipulated that " the 
 taxes claimed in this proceeding are the proper amount of taxes due 
 against said lands on account of said increased valuation. . . ." 
 In other words, the lands have not been made to bear a greater 
 burden than they would and should have borne if they had been 
 orioinally assessed at their true valuation. It is, however, claimed 
 that the^ increased taxation is illegal because the law authorizing
 
 186 WEYEBIIAUESER V. MI^STNESOTA. [CHAP. II. 
 
 it offends the Fourteentli Amendment of the Constitution of the 
 United States. 
 
 The grounds of the contention are that the former assessments 
 constituted judicial judgments, and hence to commit to the executive 
 the power of setting them aside or to set them aside without notice 
 or opportunity to he heard is not due process of law. And further, 
 tliat the statute deprives the plaintiffs in error of the equal protec- 
 tion of the laws, in that it gives to owners of similar real estate an 
 opportunity to contest the absolute assessed valuation of their prop- 
 erty and to plaintiffs in error only the opportunity to contest the 
 gross overvaluation; and that if the State knew of fraud in the as- 
 sessments it is estopped to assert it against an innocent party, which 
 plaintilfs in error are claimed to be, and as the statute ignores this 
 doctrine of estoppel, it does not provide due process. 
 
 Conceding, arguendo, that the former assessments were judicial 
 judgments, the argument based on their immunity from executive 
 power or attack is not supported by the statute. It does not com- 
 mit to the Governor control over them, and it does give opportunity 
 to be heard. The Governor only starts the inquir}' upon which the 
 reassessment may be based, and the statute directs the proceedings 
 in an orderly course of inquiry, report, entry upon the assessment 
 books, assessment by the assessor and an action for the collection of 
 the taxes levied in the regular judicial tribunals. 
 
 Tlie complaint of plaintiffs in error seems to be that a hearing 
 before the Governor was not provided. If the basis of this is that 
 the owner of property must have notice of every step in taxation pro- 
 ceedings, we agree with the Supreme Court of the State tliat it is 
 untenable. Pittsburg, &c., Eailway v. Board of Public AVorks, 172 
 U. S. 32; Davidson v. Xew Orleans, 96 U. S. 97; Hagar v. Peclama- 
 tion District, 111 U. S. 701 : Winona & St. Peter Land Co. v. Min- 
 nesota, 159 U. S. 52G. If the basis of the complaint is that the 
 Governor acts judicially and plaintiffs in error were entitled to have 
 notice, and be heard before he rendered judgment, it is also un- 
 tenable. The Governor does not act judicially — he determines 
 nothing but that a complaint has been made in writing and under 
 oath, or that it has been found by a court, or the legislature or any 
 committee thereof, that a considerable amount of property in a 
 county of the State has been grossly undervalued. If the perception 
 of the fact of a complaint or a finding of a couri: or legislature is a 
 judgment in the sense urged, every act of government is a judgment, 
 and all of its exercises could be stopped, upon the reasoning of plain- 
 tiffs in error, by perpetual hearings. But supposing the Governor's 
 act is a judgment, it ends with the appointment of an examiner. 
 What is substantial comes afterwards, and if against what may be 
 detrimental in that the landowner can be heard, he is afforded due 
 process within the rule announced by the authorities, supra. 
 
 That the landowner is provided with an opportunitv to be heard 
 is decided by the Supreme Court of the State. In the opinion in 
 the case at bar the court said, quoting from Redwood v. Winona & 
 St. Peter Land Co., 40 Minnesota, 512, 518:
 
 SECT. III.] WEYEEHAUESER V. MINNESOTA. 187 
 
 " Within 20 days after the last publication of the delinquent list 
 any person may by answer interpose any defence or objection he 
 may have to tiie tax. lie may set up as a defence that the tax is void 
 for want of authority to levy it, or tliat it was partially, unfairly or 
 unequally assessed. Commissioners of St. Louis Co. v. Nettleton, 
 22 Minnesota, 356. He may set up as a defence pro tanto that 
 a part of a tax has not been remitted, as required by some statute. 
 Commissioners of Houston Co. v. Jessup, Id. 552. That tiie land is 
 exempt, or that the tax has been paid. County of Chicago v. St. 
 Paul & Duluth 1{. Co., 27 Minnesota, 109. That there was no 
 authority to levy the tax, or that the special facts authorizing the in- 
 sertion of taxes for past years in the list did not exist or any omis- 
 sions in the proceedings prior to filing the list, resulting to his 
 prejudice. County of Olmsted v. Barber, 31 Minnesota, 256. The 
 filing of the list is the institution of an action against each tract of 
 land described in it for the recovery of the taxes appearing in the 
 list against such tract and tenders an issue on every fact necessary 
 to the validity of such taxes. Chauncey v. Wass, 35 Minnesota, 1. 
 The only limitation or restriction upon the defences or objections 
 which may be interposed is that contained in section 79, to the effect 
 that if a party interposes as a defence an omission of any of the 
 things provided by law in relation to the assessment or levy of a 
 tax or of anything required by an ollicer to be done prior to filing 
 the list with the clerk, the burden is on him to show that such 
 omission has resulted in prejudice to him, and that the taxes have 
 been partially, unfairly, or unequally assessed. This relates not to 
 want of authority to levy tlie tax, but to some omission to do or 
 irregularity in doing the things required to be done in assessing or 
 levying a tax otherwise valid. Commissioners of St. Louis Co. v. 
 Nettleton, supra. And certain!}^, in justice or reason, a party can- 
 not complain that when he objects to a tax on the ground of some 
 omission or irregularity in matters of form, he is required to show 
 that he was prejudiced." 
 
 This court in "Winona & St. Peter Land Co. v. Minnesota, 159 
 "D. S. 52G, quoted the above extract as establishing that the property 
 owner was afforded a hearing by the laws of the State, and declared 
 the rule that the Constitution of the United States was satisfied if 
 an opportunity be given to question the validit}- or amount of the 
 tax "either before that amount is determined or in subsequent pro- 
 ceedings for its collection." And referring to the difference in the 
 manner of assessment and the successive opportunities for review 
 which were given to the property owner in one case and not in the 
 other, said : But there is othing in the difference to affect the con- 
 stitutional rights of a party. The legislature may authorize different 
 modes of assessment for different properties, providing the rule of 
 assessment is the smuo. Kentucky Enilrond Tax cases, 115 IT. S. 
 321, 337; Pittsburgh, Cincinnati, &c., Pailway v. Backus, 154 U. S, 
 421. The latter cases of State v. Lakeside Land Co., 71 Minnesota, 
 283, and State v. West Duluth Land Co., 78 N. W. Pep. 115, cited 
 by the plaintiffs in error, do not militate against the rule in any 
 way substantial to the pending controversy.
 
 188 LAMBKECHT V. "WILSOX. [CHAP. IT. 
 
 The special objections of plaintiffs in error therefore cannot be 
 sustained, nor the broader one that the first assessments are final 
 against any power of review or addition by the legislature. "We held 
 in the M'inona Case, siipj-a, that the legislature had power to provide 
 for the assessment of property which had escaped taxation in prior 
 years and, as we have seen, a special manner of assessment was sus- 
 tained. We agree with the Supreme Court of the State that a gross 
 undervaluation of property is within the principle applicable to an 
 entire omission of property. If it were othern'ise the power and 
 • duty of the legislature to impose taxes and to equalize their burdens 
 would be defeated by the fraud of public officers, perhaps induced 
 by the very property owners who afterwards claim its illegal ad- 
 vantage. # 
 
 If an officer omits to assess property or grossly undervalues it he 
 violates liis duty, and the property and its owners escape their just 
 share of the public burdens. In Stanley v. Supervisors of Albany, 
 121 U. S. 535, we held that against an excessive valuation of prop- 
 erty its owner had a remedy in equity to prevent the collection of 
 the illegal excess. It would be very strange if the State, against a 
 gross undervaluation of property, could not in the exercise of its 
 sovereignty give itself a remedy for the illegal deficiency. And this 
 is the effect of the statute. It "merely sets in motion new proceed- 
 incfs to collect the balance of the State's claim, and there is no con- 
 stitutional objection in the way of doing this,'' as the Supreme 
 Court of the State said in its opinion. 
 
 The other objections to the statute do not demand an extended 
 consideration. ThaVit deprives plaintiffs in error of the equal pro- 
 tection of the laws is based on the absence of a provision for notice 
 in the progress of the proceedings, and is answered by the Winona 
 case, supra. 
 
 The fourth contention, that the State is estopped to assert fraud 
 in the former assessment, if we should concede that it has any basis 
 in law, lacks an essential basis of fact. 
 
 The plaintiffs in error purchased after the enactment of the 
 statute, and the record affords no presumptions of ignorance or in- 
 nocence. If plaintiffs had been attentive to the assessment of the 
 land its gross undervaluation could not have escaped their notice. 
 Besides, whether a party in a case has been given or refused the 
 benefit of the law of estoppel involves no Federal question. 
 
 Judgment affirmed. 
 
 LAMBRECHT v. WILSON. 
 Supreme Court of Illinois. 1919. 
 
 [Reported 290 III. 547.] 
 
 Thompson, J. Appellants, executors of the last will and testa- 
 ment of Susan Wehrheim, deceased, filed a bill in the Circuit Court 
 of Marion County against appellee, praying an injunction to re- 
 strain appellee, as county collector, from collecting certain taxes on
 
 SECT. III.] LAMBIiECIIT V. WILSOX. 189 
 
 property of the estate of Susan Wehrheim assessed by the board of 
 review for omitted credits for ])reviou.s years. The bill alleged that 
 the board of review of Mariou County in 1U18 assessed against said 
 estate for back taxes, $6-1,890 for the year 191?, $04,905 for the year 
 1916 and $64,950 for the year 1915. These assessments were made 
 asrainst credits of Susan Wehrheim which the board of review de- 
 termined had not been assessed in said years. The bill further 
 alleged that said Susan Wehrheim, deceased, had been assessed for 
 those years on all of her personal property, including her credits, 
 and that taxes had been extended on said assessments and had been 
 paid by her, and that the back tax assessment made by the board of 
 review was without authority and illegal and void. Issue was joined 
 on this bill, and after a full hearing on the merits the court entered 
 a decree dismissing the bill for want of equity, and appellants prayed 
 for and have perfected this appeal. 
 
 It is agreed between the parties to this litigation that the board 
 of review properly assessed the estate of Susan Wehrheim for the 
 year 1918 at $67,320. The estate consisted largely of credits, set 
 forth in the inventory as "agreements for deeds securing loans." 
 Most of this property came to deceased by the death of her husband. 
 During the twenty years following his death there was a gradual 
 accumulation of property. It was lier practice in making loans to 
 require the owner of the real estate to deed her the land on which 
 the loan was made and in turn she gave to the land owner a con- 
 tract for deed. The total amount of money due on such agreements, 
 as set forth in the inventory of her estate, is $61,730.83. In addi- 
 tion to this there were two trust deeds aggregating $2,000, five notes 
 aggregating $2,194 and certificates of deposit aggregating $875. In 
 addition to this personal property the inventory shows she died 
 seized of eight different tracts of real estate on which no value was 
 placed. The schedule made by Susan Wehrheim for 1917 shows 
 the following items of property and the full value as determined by 
 the assessor: "Notes or mortgages, $1500; credits of other than 
 bank, banker, broker or stock jobber, $150; bonds and stocks, $450: 
 household or office furniture and propertv, $60 : all other personal 
 property required to be listed, $270," — making a total of $2430. 
 The schedule made in 1916 shows " credits of bank, banker, broker 
 or stock jobber, $90; moneys of other than bank, banker, bi-oker or 
 stock jobber, $450; bonds and stocks, $1500; household or office 
 furniture, $45; shares of stock of State and national banks, $270," 
 — making a total of $2355. The schedule for 1915 shows "moneys 
 of other than bank, banker, broker or stock jobber, $450 : bonds and 
 stocks, $1500; household and office furniture and property, $60: 
 shares of stock of State and national banks, $360," — making a 
 total of $2370. It is contended that a part of the values in these 
 schedules are extended after the -^Tong item, and that in the 
 schedules for 1915 and 1916 the $450 item should have been placed 
 on the schedule one line lower, and would have then been a valua- 
 tion of " credits of other than bank, banker, broker or stock jobber." 
 
 This court lias held that when credits have been assessed and taxes
 
 190 SU^'DAY LAKE IKOX CO. V. WAKEFIELD. [CUAP. II. 
 
 extended upon the assessments and paid by the taxpayer, the board 
 of review in subsequent years has no authority to increase such as- 
 sessments upon the theory that the assessment was too low or that 
 the board, in assessing, omitted credits. (Warner v. Campbell, 338 
 111. 630.) In deciding this question it was held that the assessor is 
 required, in determining value of property assessed, to exercise his 
 judgment, and that his acts are in the nature of judicial acts and not 
 subject to review by his successor or by the board of review for errors 
 of judgment. This is undoubtedly true where the values hxed by 
 the assessor are within the range of values which might be fixed by 
 any man exercising honest judgment. Values are necessarily a 
 matter of opinion, and dilferent men with the same honest intention 
 would arrive at different conclusions. Mere mistakes of the assessor 
 or errors of judgment will not invalidate an assessment, but valua- 
 tions must be the result of honest judgment and not of mere will. 
 Chicago, Burlington and Quincy Eailroad Co. v. Cole, 75 111. 591. 
 
 An over-valuation or an under-valuation of property will not, of 
 itself and alone, invalidate an assessment (Barkley v. Dale, 213 111. 
 614), but where the valuation is so grossly out of proportion to the 
 true value as to show that the assessor could not have been honest 
 in his valuation the assessment may be impeached for fraud, and by 
 reason of fraud in maldng the assessment the assessment amounts 
 to no assessment at all. (State Board of Equalization v. People, 
 
 191 111. 528; People's Gas Light Co. v. Stuckart, 286 id. 164; Weyer- 
 haueser v. Minnesota, 176 U. S. 550; 20 Sup. Ct. 485.) Where 
 valuations are so low as to amount to no valuation at all, an assess- 
 ment on such a valuation would amount to a fraud upon the State 
 and it will be regarded as no assessment. 
 
 "We hold, therefore, that Susan Wehrheim was not assessed on 
 credits for the years 1915, 1916 and 1917, and that the board of 
 review properly assessed the credits which she owned during these 
 years but which were omitted from the assessment for the respective 
 years. 
 
 The Circuit Court properly dismissed the bill for want of equity, 
 and its decree is afl&rmed. 
 
 Decree affirmed. 
 
 SUNDAY LAKE IROX CO. v. WAKEFIELD. 
 Supreme Court of Michigax. 1915. 
 
 [Reported 186 Mich. 626.] 
 
 KuHN^ J. This action is brought in assumpsit to recover from 
 the defendant $31,910.45 in taxes on its property for the year 1911, 
 paid by the plaintiff under protest. At the conclusion of the testi- 
 mony, the trial court directed a verdict for the defendant of no 
 cause of action, and, judgment being entered thereon, plaintiff brings 
 the case to this court for review by writ of error. 
 
 The property of the plaintiff was assessed in the years 1910 and
 
 SECT. III.] SUNDAY LAKE IKON CO. V. WAKEFIELD. 101 
 
 1911 by the township supervisor at $65,000. In 1911, the board 
 of State tax commissioners, acting under authority of legislative 
 enactment (Act No. 114, Fub. Acts 1911), employed an expert min- 
 ing engineer, Mr. James K. I'inlay, of New York City, to assist it 
 ia maJcing an appraisid of the value of the mining properties through- 
 out the State. Mr. Finlay, assisted by Dr. U. K. Leith, professor 
 of geology in the University of Wisconsin, and otliers, made an in- 
 vestigation of tliese properties extending over a period of three 
 months, and made a report to the board of State tax commissioners 
 with reference thereto on August 18, 1911, which report contained 
 a valuation of the plaintilf's property. The method pursued by Mr, 
 Finlay and his assistants in making this appraisal is set forth and 
 commented upon in the opinion of this court written by Mr. Justice. 
 Ostrander, in the case of Newport Mining Co. v. City of Ironwood, 
 185 Mich. G68 (152 N. W. 1088). Mr. Finlay's estimate of the 
 value of the property of the plaintiff company was $1,460,000. 
 
 At a Ixcaj^ing by the State board of tax commissioners in the vil- 
 lage of Bessemer in October, 1911, held for the purpose of reviewing 
 the assessments of mining properties in the township of "Wakefield, 
 the board raised the assessment of plaintiff's property from $65,000 
 to $1,071,000. At this hearing the plaintiff, by its representative, 
 objected to the assessment on the grounds that : 
 
 First, the valuation was grossly in excess of the true cash value; 
 second, the Finlay method of determining the value was contrary to 
 the manner in which other property was assessed throughout the 
 State ; and, third, it was not proportionate to the assessment of other 
 property generally in Wakefield township. 
 
 The claims that are now urged by counsel for appellant are stated 
 by them in their brief as follows : 
 
 " (1) That the said board committed a fraud upon the rights of 
 the plaintiff in wilfully raising the assessment of its property to. an 
 amount in excess of its true value, while at the same time with 
 full knowledge of the general underassessment of other property it 
 wrongfully refused to raise or increase at all the assessment of such 
 other property, with the purpose and effect of making the plaintiff 
 pay more than its just proportion of the taxes for the year 1913. 
 
 " (2) That the action of the State board here complained of re- 
 sulted in denying to the plaintiff the equal protection of the laws of 
 the State of IMichigan, and in substance and effect took the plain- 
 tiff's property without due process of law, in violation of the provi- 
 sions of the fourteenth amendment to the Constitution of the United 
 States. 
 
 " (3) That the board of State tax commissioners wilfully and 
 fraudulently imposed upon the property of the plaintiff an assessed 
 valuation grosslv in excess of its true cash value. 
 
 ** (4) That the plaintiff is entitled on this record to have judg- 
 ment entered in its favor." 
 
 In general, it is plaintiff's claim that Mr. Finlay obtained his 
 results without personal examination and acted largely on informa- 
 tion derived from maps and knowledge obtained from Mr. Leith,
 
 192 SUXDAY LAKE IROX CO. V. WAKEFIELD. [CHAP. II. 
 
 his assistant, who did visit the mine, and that acting upon this in- 
 formation he estimated that the ore deposit in the Sunday Lake 
 and Brotherton mines — the latter adjoins the former on the west — 
 contained 3,500,000 tons, 1,500,000 of which he judged were in the 
 Sunday Lake j^roperty. Witnesses were produced on the part of the 
 plaintiff who testified that the deposit in the plaintiff's mine could 
 not be expected to exceed 400,000 tons, and that its value was not 
 over $550,000, and on the trial a map was produced showing a dyke 
 which underhiid the Brotherton mine and dipped toward the east, 
 below which drilling had discovered no ore. There was evidence 
 that the approach to this dyke in the Brotherton mine had ])een 
 indicated bv an inereasin<y amount of non-Bessemer ore, and that 
 subsequent developments in 1912 showed that the Brotherton mine 
 did not bear out the expectations of 1911, one of the plaintiff's 
 witnesses saying it had run out ; and also that on the twentieth level 
 in the Brotherton mine (the lowest level in 1911) the d3-ke was 
 running in a downwardly direction, but, at the intersection of the 
 twenty-first level, reached in 1912, it had changed its course to a 
 more horizontal direction, the engineer who had prepared the map 
 saying that it was flattening rapidly toward the east. Coupling this 
 evidence with the fact that the amount of non-Bessemer ore was in- 
 creasing rapidly in the Sunday Lake mine, the plaintiff contends 
 that it is wellnigh certain that the dyke will soon be encountered 
 and the ore exhausted in the Sunday Lake mine. 
 
 It is defendant's claim that the record shows that these claims 
 on the part of the plaintiff are met by the testimony of Mr. Finlay, 
 who said that in making his valuation he had considered the pres- 
 ence of the dyke, and that the ore body had been showing an 
 enlargement in the Sunday Lake property which would make un- 
 necessary the depth assumed by the plaintiff to be required to de- 
 velop 1,500,000 tons ; also, the testimony of Dr. Leith, who said that 
 a subsequent examination of the mine in 1912 did not modify, in 
 his opinion, the value fixed by Mr. Finlay; also, the admission of 
 plaintiff's witness Crowell, a mining engineer, who stated that he 
 thought the dyke would eventually get to Sunday Lake mine, but 
 "just what angle it will assume when it comes there I cannot say." 
 
 In the opinion of this court in the Newport Mining Company 
 Case, supra, we have discussed and determined the propriety of the 
 Pinlay method of appraising mining property and of the use of 
 such an appraisal by the State board of tax commissioners in review- 
 ing the assessments. Indeed, in this case no serious criticism is made 
 of that method of appraisal, and it is said that it, " when based 
 upon correct factors and assumptions, might produce reasonably 
 satisfactory results." It is insisted, however, that, because it was 
 hastily and superficially applied in the instant case, it resulted in 
 a legal fraud, in that the property of the plaintiff company was as- 
 sessed grossly in excess of its true cash value. It is urged that, as 
 a matter of law, the proof of fraud does not require the establish- 
 ment of an evil or vicious intent on the part of the State board of 
 tax commissioners, and that aU that it is necessary to show is that
 
 SECT. III.] SUNDAY LAKE IROX CO. V. WAKEFIELD. 193 
 
 the act in question was wrongful and that it was intentionally done, 
 and that if its result was to produce injury it is fraudulent in tlie 
 eye of the law. 
 
 With reference to this claim, the learned trial judge in his charge 
 said: 
 
 '' We find that the State board of tax coimnissioners took these 
 figures of Mr. Finlay of $1,400,000 and considered them, and con- 
 sidered the method by which he placed the value upon the mine, 
 and then made a reduction of approximately $388,000 from those 
 figures, making the assessment as fixed by the State board of tax 
 commissioners at $1,072,000; the State board of tax commissioners 
 having raised the property from $65,000 to $1,072,000. The im- 
 mense difference between Mr. Finlay's figures and the State board 
 of tax commissioners, approximately $388,000, shows conclusively 
 that they did not accept all of his figures, but made an enormous 
 allowance from his figures; in fact, they cut them approximately 
 26 per cent., so that the State board of tax commissioners assessed 
 this property at 26 per cent below its cash value as fixed by Mr. 
 Finlay. 
 
 " I find no evidence in this case which would justify the court 
 in arriving at a conclusion that the State board of tax commissioners 
 acted fraudulently towards this plaintiff, or unjustly. The evidence 
 all indicates that they used their best judgment and their honest 
 endeavors, assisted by the State, in having this expert employed, 
 and, after an expenditure of many thousands of dollars in getting 
 this information, I think there is but one conclusion, and that is 
 that the St<at6 board of tax commissioners acted fairly, honestly, and 
 justly towards this plaintifi: in arriving at this valuation upon the 
 property in question, and there is nothing to justify the court in 
 setting aside their action and finding a verdict in favor of the plain- 
 tiff. I know of no way by which a more accurate or just method 
 could be found for getting at the value of these mines." 
 
 The law in this State with reference to fraudulent overvaluation 
 for taxation purposes has recently had the consideration of this 
 court, in the case of Island Mill Lumber Co. v. Citv of Alpena, 176 
 Mich. 575, 579 (142 X. W. 770), in which Mr. Justice Steere, in 
 speaking for the court, said : 
 
 " Counsel for plaintiff contend that the question of fraud is never 
 a question of law, but is always held by all courts to be a question 
 of fact for the jury, citing numerous cases. This is unquestionably 
 correct, when there is in the case legitimate evidence of fraud to 
 raise the issue, but whether or not there is any probative evidence 
 of fraud in the case is a question of law for the court. Fraud 
 is never presumed; there must be evidence tending to prove it. 
 The law upon the question of fraudulent overvaluation for taxation 
 purposes is well settled in this State, It must be something more 
 than an honest mistake in judgment to defeat a tax. In 2 Cooley 
 on Taxation (3d Ed.), p. 1459, it is said: 
 
 " ' An assessment is not fraudulent merely because of being exces- 
 sive, if the assessors have not acted from improper motive; but, if
 
 194 SUNDAY LAKE lEOX CO. I". WAKEPIUI-D- LciIAP. 11. 
 
 it is purposely made too high through prejudice or a reckless dis- 
 regard of duty in opposition to what must necessarily be the judg- 
 ment of all competent persons, . . . the case is a plain one for the 
 equitable remedy by injunction.' 
 
 " In such case the tax is necessarily invalid. 
 
 '' The above rule has been quoted by this court with approval and 
 consistently followed. The subject is exhaustively discussed, with 
 citation of numerous authorities, in Pioneer Iron Co. v. City of 
 Xegaunee, 116 Mich. 430 (74 N. W. 700), and City of Muskegon 
 V. Boyce, 123 Mich. 535 (82 N. W. 264)."' 
 
 See, also, City of Port Huron r. A\right, 150 Mich. 279 (114 
 N. W. 76). 
 
 After a careful consideration of this record and the plaintiff's 
 claims, and considering all the testimony produced in the light most 
 favorable to the phaintiff, without determining the relevancy of such 
 testimony as was admitted to show changes in conditions subsequent 
 to the assessment, we cannot agree that there is any evidence to 
 sustain the charge that the State board of tax commissioners, in 
 disregard of its duty, recklessly or intentionally or fraudulently 
 overvalued the plaintilf's property for taxation. Applying the rule 
 cited above in the Island Mill Lumber Co. Case from Cooley on 
 Taxation, it cannot be said that the State board of tax commissioners 
 acted in "reckless disregard of duty, in opposition to what must 
 necessarily be the judgment of all competent persons." In fixing 
 the value of this mine the State hoard did use the information 
 produced for itby disinterested experts of a- high standing, in accord- 
 ance with authority granted by an act of the legislature of this State. 
 The figure arrived at may possibly have been in fact too high or too 
 low, but Mr. Shields, one of the commissioners, who himself had 
 charge of the review, and was familiar with the development of iron 
 mines on the Gogebic range and its ore formation, we are convinced, 
 acted honestly, fairly, and in good faith upon all the informa- 
 tion he had at hand, and made a proper and legal assessment in fix- 
 ing the value of plaintiff's mine in the way that he did. 
 
 The claim is also made, as was made in the Newport Case, supra, 
 that the value of one class of property — mining property — was 
 raised and the values of other classes of property known to he under- 
 valued were not raised, and that such intentional inequality of as- 
 sessment constitutes fraud and invalidates the tax. This is based 
 largely upon claimed admissions of Mr. Shields of his knowledge 
 of the undervaluation of other property in the State and in that 
 locality, and the fact that great increases were made in the assess- 
 ment of other than mining property in the year 1912. 
 
 An examination of the evidence in this record is convincins: that 
 the business of the defendant township depended almost entirely 
 upon the mining business, and the mine of the plaintiff company, 
 which was one of the largest mines in the township, in 1911 was 
 assessed at the small sum of $65,000, although plaintiff now admits 
 that it is reasonably worth the sum of $450,000. People, generally, 
 ' at least, did not know the extent of the ore deposits, and it appears
 
 SECT. IV.] THE COLLECTOR V. DAY. 195 
 
 that business was dull. It further appears that after the report of 
 the Finlay appraisal was made public, disclosing the value and 
 the lonf^ life of the mines in the township, business conditions in 
 the village and township of Wakefield became better and the values 
 of property increased. These changed conditions, it may be said, 
 at least in part, accounted for the increased assessments in 1912, 
 and, as in tlie Xewport Case, we are in the instant case unable to 
 fmd any specified data in this record to sustain the conclusion that 
 the nonmining property in the defendant township was not assessed 
 relatively as high in 1911 as was the mining property. 
 
 Wo arc convinced that the trial judge arrived at the proper con- 
 clusion in directing a verdict for the defendant upon this record, 
 and the judgment is therefore affirmed.^ 
 
 » Affirmed by the Supreme Court of the United States, 247 U. S. 350. 
 
 SECTION IV. 
 EXEMPTIONS. 
 
 THE COLLECTOE v. DAY. 
 Supreme Court of the United States. 1870. 
 
 [Reported 11 Wall. 113.] 
 
 Error to the Circuit Court for the District of Massachusetts. 
 
 The collector of the internal revenue of the United States for the 
 district of Massachusetts assessed the sum of $61.50 upon the salary 
 of J. M. Day, judge of tlie Court of Probate and Insolvency, for the 
 county of Barnstable. Day paid the tax under protest, and brought 
 the action below to recover it. Judgment was rendered for the 
 plaintiff.^ 
 
 Nelsox, J. The case presents the question whether or not it is 
 competent for Congress, under the Constitution of the United States, 
 to impose a tax upon the salary of a judicial officer of a State? 
 
 In Dobbins v. The Commissioners of Erie Count}^ 16 Peters, 435, 
 it was decided that it was not competent for the legislature of a 
 State to levy a tax upon the salar\^ or emoluments of an officer of 
 the United States. The decision was placed mainly upon the ground 
 that the officer was a means or instrumentality employed for carry- 
 ing into effect some of the legitimate powers of the government, 
 which could not be interfered with by taxation or otherwise by the 
 States, and that the salary or compensation for the service of the 
 officer was inseparably connected with the office; that if the officer, 
 as such, was exempt, the salary assigned for his support or main- 
 tenance while holding the office was also, for like reasons, equally 
 exempt. 
 
 The cases of ^feCulloch v. ]\Ianland, 4 Wlieaton, 316, and "Weston 
 f . Charleston, 2 Peters, 449, were referred to as settling the principle 
 
 ^ This short statement of facta is substituted for that of the reporter.
 
 196 THE COLLECTOR V. DAY. [cHAP. II. 
 
 that goYenied tlie case, namely, '''that the State governments can- 
 not lay a tax upon the constitutional means employed by the gov- 
 ernment of the Union to execute its constitutional powers.^' 
 
 The soundness of this principle is happily illustrated by the Chief 
 Justice in McCulloch v. Maryland, 4 Wheaton, 433." "If the 
 States," he observes, "may tax one instrument employed by the 
 government in the execution of its powers, they may tax any and 
 every other instrument. They may tax the mail ; they may tax the 
 mint; they may tax patent-rights; they may tax judicial process; 
 they may^ tax all the means employed by the government to an excess 
 which would defeat all the ends of government.'" "This," he ob- 
 serves, "was not intended by the American people. They did not 
 design to make their government dependent on the States." Again, 
 lb. 427, " That the power of taxing it (the bank) by the States may 
 be exercised so far as to destroy it, is too obvious to be denied." 
 And, in "Weston v. The City of Charleston, he observes, 2 Peters, 
 466. " If the right to impose the tax exists, it is a right which, in 
 its nature, acknowledges no limits. It may be carried to any extent 
 within the jurisdiction of the State or corporation which imposes 
 it which the will of each State and corporation may prescribe." 
 
 It is conceded in the case of McCulloch v. Maryland, that the 
 power of taxation by the States was not abridged by the grant of a 
 similar power to the government of the Union ; that it was retained 
 by the States, and that the power is to be concurrently exercised by 
 the two governments; and also that there is no express constitutional 
 prohibition upon the States against taxing the means or instrumen- 
 talities of the general government. But, it was held, and, we agree 
 properly held, to be prohibited by necessary implication ; otherwise, 
 the States might impose taxation to an extent that would impair, 
 if not wholly defeat, the operations of the Federal authorities when 
 acting in their appropriate sphere. 
 
 These views, we think, abundantly establish the soundness of the 
 decision of the case of Dobbins v. The Commissioners of Erie, which 
 determined that the States were prohibited, upon a proper construc- 
 tion of the Constitution, from taxing the salary or emoluments of 
 an officer of the government of the United States. And we shall 
 now proceed to show that, upon the same construction of that in- 
 strument, and for like reasons, that government is prohibited from 
 taxing the salary of the judicial officer of a State. 
 
 It is a familiar rule of construction of the Constitution of the 
 Union, that the sovereign powers vested in the State governments 
 by their respective constitutions, remained unaltered and unim- 
 paired, except so far as they were granted to the government of the 
 United States. T]iat the intention of the framers of the Constitu- 
 tion in this respect might not be misunderstood, this rule of inter- 
 pretation is expressly declared in the tenth article of the amend- 
 ments, namely : " The powers not delegated to the United States are 
 reserved to the States respectively, or, to the people." The govern- 
 ment of the United States, therefore, can claim no powers which are 
 not granted to it by the Constitution, and the powers actually
 
 SECT. IV.] THE COLLECTOE V. DAY. 197 
 
 granted must be such as are expressly given, or given by necessary 
 implication. 
 
 The general government, and the States, although both exist 
 witliin the same territorial limits, are separate and distinct sover- 
 eignties, acting separately and independently of each other, within 
 their respective spheres. The former in its appropriate sphere is 
 supreme; but the States within the limits of tlieir powers not 
 granted, or, in the language of the Tenth Amendment, " reserved," 
 are as independent of the general government as that government 
 within its spliere is independent of the States. 
 
 The relation existing between the two governments are well stated 
 by the present Chief Justice in the case of Lane County v. Oregon, 
 7 "Wallace, 76. "Both the States and the United States," he ob- 
 served, " existed before the Constitution. The people, through that 
 instrument, established a more perfect union, but substituting a 
 National government, acting with ample powers directly upon the 
 citizens, instead of the Confederate government, which acted with 
 powers greatly restricted, only upon the States. But, in many of 
 the articles of the Constitution, the necessary existence of the States, 
 and within their proper spheres, the independent authority of the 
 States, are distinctly recognized. To them nearly the whole charge 
 of interior regulation is committed or left; to them, and to the peo- 
 ple, all powers, not expressly delegated to the National government, 
 are reserved.'' Upon looking into the Constitution it will be found 
 that but a few of the articles in that instrument could be carried 
 into practical effect without the existence of the States. 
 
 Two of the great departments of the government, the executive 
 and legislative, depend upon the exercise of the powers, or upon the 
 people of the States. The Constitution guarantees to the States a 
 republican form of government, and protects each against invasion 
 or domestic violence. Such being the separate and independent 
 condition of the States in our complex system, as recognized by the 
 Constitution, and the existence of which is so indispensable, that, 
 without them, the general government itself would disappear from 
 the family of nations, it would seem to follow, as a reasonable, if not 
 a necessary consequence, that the means and instrumentalities em- 
 ployed for carrying on the operations of their governments, for pre- 
 serving their existence, and fulfilling the high and responsible duties 
 assigned to them in the Constitution, should be left free and un- 
 impaired, should not be liable to be crippled, much less defeated by 
 the taxin<r power of another government, which power acknowledges 
 no limits but the will of the legislative body imposing the tax. And, 
 more especially, those means and instrumentalities which are the 
 creation of their soverei.sm and reserved rights, one of which is the 
 establishment of the judicial department, and the appointment of 
 oflfieers to administer their laws. "Without this power, and the ex- 
 ercise of it, we risk nothing in saying that no one of the States under 
 the form of government guaranteed by the Constitution could long 
 preserve its existence. A despotic government miffht. "We have said 
 that one of the reserved powers was that to establish a judicial de-
 
 198 THE COLLECTOK V. DAY. [CKAP. II. 
 
 partment ; it would have been more accurate, and in accordance with 
 the existing state of things at the time, to have said the power to 
 maintain a judicial department. All of the thirteen States were in 
 the possession of this power, and had exercised it at the adoption of 
 the Constitution ; and it is not pretended that any grant of it to the 
 general government is found in that instrument. It is, therefore, 
 one of tiie sovereign powers vested in the States by their constitu- 
 tions, which remamed unaltered and unimpaired, and in respect 
 to which the State is as independent of the general government as 
 that government is independent of the States. 
 
 Tlie supremacy of the general government, therefore, so much re- 
 lied on in the argument of the counsel for the plaintiff in error, in 
 respect to the question before us, cannot be maintained. The two 
 governments are upon an equality, and the question is whether the 
 power " to lay and collect taxes " enables the general government to 
 tax the salary of a judicial officer of the State, which officer is a 
 means or instrumentality employed to carry into execution one of its 
 most important functions, the administration of the laws, and which 
 concerns the exercise of a right reserved to the States ? 
 
 We do not say the mere circumstance of the establishment of the 
 judicial department, and the appointment of officers to administer 
 the laws, being among the reserved powers of the State, disables the 
 general government from levying the tax, as that depends upon the 
 express power " to lay and collect taxes," but it shows that it is an 
 original inherent power never parted with, and, in respect to which, 
 the supremacy of that government does not exist, and is of no im- 
 portance in determining the question; and further, that being an 
 original and reserved power, and the judicial officers appointed under 
 it being a means or instrumentality employed to carry it into effect, 
 the right and necessity of its unimpaired exercise, and the exemp- 
 tion of the officer from taxation by the general government stand 
 upon as solid a ground, and are maintained by principles and reasons 
 as cogent as those which led to the exemption of the Federal officer 
 in Dobbins v. The Commissioners of Erie from taxation by the 
 State ; for, in this respect, that is, in respect to the reserved powers, 
 the State is as sovereign and independent as the general government. 
 And if the means and instrumentalities employed by that govern- 
 ment to carry into operation the powers granted to it are, necessarily, 
 and, for the sake of self-preservation, exempt from taxation by the 
 States, why are not those of the States depending upon their re- 
 served powers, for like reasons, equally exempt from Federal taxa- 
 tion? Their unimpaired existence in the one case is as essential 
 as in the other. It is admitted that there is no express provision in 
 the Constitution that prohibits the general government from taxing 
 the means and instrumentalities of the States, nor is there any pro- 
 hibiting the States from taxing the means and instrumentalities 
 of that government. In both cases the exemption rests upon neces- 
 sary implication, and is upheld by the great law of self-preserva- 
 tion; as any government, whose means employed in conducting its 
 operations, if subject to the control of another and distinct govern-
 
 SECT. IV. J NOKTIIEEN PACIFIC ItAILKOAD V. MYEES. 199 
 
 ment, can exist only at the mercy of that government. Of what 
 avail are these means if another power may tax tliem at discretion? 
 
 But we are referred to the Veazie Bank v. Fenno, 8 Wallace, 533, 
 in support of this power of taxation. Tiiat case furnishes a strong 
 illustration of the position taken by the Cliief Justice in McCulloch 
 V. ^laryland, namely, " That tlie power to tax involves the power to 
 destroy." 
 
 The power involved was one which had been exercised by the 
 States since the foundation of the government, and had been, after 
 the lapse of three-quarters of a century, annihilated from excessive 
 taxation by the general government, just as the judicial office in the 
 present case might be, if subject, at all, to taxation by that govern- 
 ment. But, notwithstanding the sanction of this taxation by a 
 majority of the court, it is conceded, in the opinion, that " the re- 
 served rights of the States, such as the right to pass laws; to give 
 effect to laws through executive action; to administer justice 
 through the courts, and to employ all necessary agencies for legiti- 
 mate purposes of State government, are not proper subjects of the 
 taxing power of Congress." This concession covers the case before 
 us, and adds the authority of this court in support of the doctrine 
 which we have endeavored to maintain. 
 
 Judgment affirmed. 
 
 Bradley, J., dissented. 
 
 NOETHERN PACIFIC RAILWAY v. MYERS. 
 Supreme Court of the United States. 1899. 
 
 [Reported 172 U. S. 5S9.] 
 
 McKenna, J. The averments in the bill of complaint and the 
 stipulation of facts show a controversy between the railroad 
 company and the Interior Department as to the character of the 
 lands, whether mineral or non-mineral, taxed by the State of ^Ion- 
 tana, and the company avers "that at the time of said attempted 
 assessments and tax levies said lands . . . had not been and are not 
 now certified or patented to said railroad company, and the said 
 lands were not ascertained or determined to be a part of the lands 
 granted to said company, nor were they segregated from the public 
 lands of the United States, and the said railroad company had and 
 has but a potential interest therein." And part of the relief prayed 
 for w^as " that the lands be adjudged not subject to assessment and 
 taxation by said county of Jefferson or by the State of Montana for 
 the year 1894, and until the United States shall issue to said rail- 
 road company patents therefor." 
 
 A similar claim was denied by the Circuit Court of Appeals for 
 the Ninth Circuit in Northern Pacific Railroad r. Wright, 7 U. S. 
 App. 502, and by this court in Central Pacific Railroad v. Nevada, 
 162 U. S. 512. It is, however, now conceded that the railroad has 
 a taxable interest, counsel for appellant saying :
 
 200 ISrOETHEEX PACIFIC KAILEOAD V. MYEES. [cHAP. II. 
 
 "The question for decision is not whether the railway company 
 has any interest in its grant, or in the hinds in question, Avhich may 
 be subjected to some form of taxation; but whether the lands tliem- 
 selves are taxable; whether the present assessment which is on the 
 lands themselves can be sustained. We may well concede that the 
 taxing power is broad enough to reach in some form the interest of 
 the railway company in its grant ; that interest becomes confessedly 
 a vested interest upon construction of the road. It then becomes 
 property, and may well be held subject to some form of taxation. 
 
 "But here the legislature authorizes a tax upon, and the assessor 
 makes an assessment upon, the land itself by specific description; 
 the whole legal title to each parcel being specifically and separately 
 assessed. When the plain fact is, that neither the assessor or the 
 railway company can place its hand on a single specific parcel and 
 say whetlier it belongs to the company or to the IJnited States." 
 
 The question which was submitted therefore by the stipulation, 
 namel}', "whether the lands described in the bill were subject to 
 taxation under the laws of the United States and of the State of 
 Montana," if not evaded by the concession of appellant, has changed 
 its form; but even in the new form it seems to have the same foun- 
 dation as the contention rejected in the Nevada case, supra, that be- 
 cause title may not attach to some of the lands it does not attach, 
 as to any. Whether it has such foundation we will consider. 
 
 In Eailway Company v. Prescott, 16 Wall. 603; Eailway Com- 
 pany V. McShane, 22 Wall. 444, and Northern Pacific Eailroad 
 Company v. Traill County, 115 TJ. S. 600, it was decided that lands 
 sold by the United States might be taxed before they had parted 
 with the legal title by issuing a patient; but this principle, it was 
 said, must be understood to be applicable only to cases where the 
 right to the patent was complete, and the equitable title was fully 
 vested in the party without anything more to be paid or any act to 
 be done going to the foundation of his right. In the first case the 
 court said two acts remained to be done which might wholly defeat 
 the right to the patent: (1) the payment of the cost of surveying; 
 (2) a right of preemption which would accrue if the company did 
 not dispose of the lands within a certain time. The dependency 
 of the right of taxation on the first condition was affirmed with the 
 principle announced in Eailway Company v. McShane. The de- 
 pendency of the right of taxation on the second gi-ound was expressly 
 overruled. 
 
 Embarrassment to the title of the United States by a sale of the 
 land for taxes seems to have been the concern and basis of those 
 cases. This embarrassment was relieved, and Congress permitted 
 taxation by the act of July 10, 1886, e. 764, 24 Stat. 143. By that 
 act it is pro\'ided : " That no lands granted to any railroad corpora- 
 tion by any act of Congress shall be exempt from taxation by States, 
 Territories and municipal corporations on account of the lien of 
 the United States upon the same for the costs of surveying, selecting 
 and conve^ang the same, or because no patent has been issued there- 
 for; but this provision shall not apply to lands unsurveyed: Pro-
 
 SECT. IV.] NORTHERN PACIFIC RAILROAD V. MYERS. 201 
 
 vided, That any such land sold for taxes shall be taken by the pur- 
 chaser subject to the lien for costs of surveying, selecting and con- 
 veying, to be paid in such manner by the purchaser as the hjecretary 
 of the Interior may by rule provide, and to all liens of the United 
 States, all mortgages of the United States and all riglits of the 
 United States in respect to such lands: Provided further, That this 
 act shall apply only to lands situated opposite to and coterminous 
 with completed portions of said roads and in organized counties: 
 Provided further, That at any sale of lands under the provisions 
 of this act the United States may become the preferred purchaser, 
 and in such case the land sold shall be restored to the public domain 
 and disposed of as provided by the laws relating thereto.'* 
 
 This act was interpreted in Central Pacific Eailroad Co. v, Ne- 
 vada, supra. The lands involved were classified in the opinion as 
 follows: (1) those patented; (2) those unsurveyed; (3) those sur- 
 veyed but unpatented, upon which the cost of surveying had l)een 
 paid ; and (4) like lands upon which the cost of survey had not been 
 paid. Applying the statute, Mr. Justice Brown, speaking for the 
 court, said: "The principal dispute is with regard to the fourth 
 class. ... In view of the statute, it is difficult to see how these 
 lands, which are the very ones provided for by the statute, can escape 
 taxation if the State chooses to tax them." 
 
 This case establishes that the State may tax the surveyed lands, 
 mineral or agricultural, within the place limits of the grant, and 
 there is nothing in the case nor its principle which limits the assess- 
 ment to an interest less tlian the title; that distinguishes the lands 
 from a claim to them. The statute of Nevada defined the term 
 "real estate" to include "the ownership of, or claim to, or posses- 
 sion of, or right of possession to any lands ; " and the Supreme Court 
 of the State had decided that to constitute a possessory claim actual 
 possession was necessary, and, on this account, distinguished in some 
 way surveyed from unsurveyed lands. It was urged that the dis- 
 tinction was not justified, and that the necessity of actual possession' 
 applied alike to both kinds and exempted both kinds from taxation, 
 and hence it was insisted there was nothing to tax unless the title 
 was taxed, and that this could not be done under the decisions of this 
 court. To this contention the opinion replied that how the interest 
 of the railroad should be defined was not a Federal question, nor did 
 inaptitude of definition by the Supreme Court of the State or in the 
 application of the definition raise a Federal question. " Taxation 
 of the lands by the State," it -was said, " rested upon some theory 
 that the railroad had a taxable interest in them. "What that interest 
 was does not concern us so long as it appears that, so far as Con- 
 gress is concerned, express authority was given to tax the lands." 
 
 If this case leaves us any concern it is only to inquire what assess- 
 able interest passed by the grant. It is not necessary to detail the 
 cases in which this court has held that railroad land grants are in 
 prcpsenti of land to be afterwards located. Their principle reached 
 the fullest effect and application in Peseret Salt Co. v. Tarpey, 142 
 U. S. 24:1, 316. in which it was held that the legal title passed by
 
 202 NOKTHEBN PACIFIC RAILROAD V. MYERS. [CHAP. II» 
 
 such grants as distinguished from merely equitable interests, and an 
 action of ejectment was sustained by a lessee of the Central Pacific 
 Eailroad Company before patent Avas issued. But in Barden v. 
 N'orthern Pacific Eailroad, 15-i U. S. 288, in a similar action re- 
 covery was denied to the Northern Pacific Eailroad Company on 
 the ground that mineral lands were not conveyed by the grant to it, 
 but were "specifically reserved to the United States and excepted 
 from the operations of tlie grant/' 
 
 The accommodation of these cases is not difficult. In the Barden 
 case there was a concession that the land was mineral, and there was 
 an attempted recovery of valuable ores. In the Deseret case there was 
 no such concession, and the primary effect of the grant prevailed. 
 In the case at bar there is no such concession, and the primary effect 
 of the grant must prevail. There is no presumption of law of what 
 kind of lands the grant is composed. Upon its face, therefore, the 
 relation of the railroad to every part of it is the same, and on the 
 authority of Deseret Salt Co. v. Tarpey, ejectment may be brought 
 for every part of it. The action, of course, may be defeated, but 
 it may prevail, and a title which may prevail for the company in 
 ejectment surely may be attributed to it for taxation, to be defeated 
 in the latter upon the same proof or concession by which it would be 
 defeated in the former. An averment that there is a controversy 
 about the character of lands not yielded to, an expression of doubt 
 about it not acted on, is not sufficient. This view does not bring the 
 railroad company to an unjust dilemma. The company has the 
 title or nothing. In response to its obligations to the State, it must 
 say which. If it have the title to any of the lands, this title cannot be 
 diminished to a claim, or an interest because it has not or may not 
 have title to others. If there is uncertainty, it must be resolved by 
 the railroad. Suppose, to use the language of counsel, " Neither 
 the assessor or the railway company can place its hand on a single 
 specific parcel and say whether it belongs to the company or to the 
 United States." "We nevertheless say again, as we said by the Chief 
 Justice in Northern Pacific Eailroad v. Patterson, 154 U. S. 130, 
 132, " If the legal or equitable title to the lands or any of them was 
 in the plaintiff, then it was liable for the taxes on all or some of 
 them, and the mere fact that the title might be in controversy would 
 not appear in itself to furnish sufficient reason why the plaintiff 
 should not determine whether the lands or some of them were worth 
 paying taxes on or not." 
 
 That the Barden case does not preclude state taxation of the lands 
 is also manifest from its expression. Mr. Justice Field, who de- 
 livered the opinion of the court, in answer to the contention that its 
 doctrine would have that effect, said: "So also it is said that the 
 States and Territories through which the road passes would not be 
 able to tax the property of the company unless they could tax the 
 whole property, minerals as well as lands. We do not see why not. 
 The authority to tax the property granted to the company did not 
 give authority to tax the minerals Avhich were not granted. The 
 property could be appraised without including any consideration
 
 SECT. IV.] WOKCESTER COUNTY V. WOr.CIiSTER. 203 
 
 of the minerals. The value of the property, excluding the minerals, 
 could be as well estimated as its value including them. The prop- 
 erty could be taxed ior its value of the extent of the title which is of 
 the land." 
 
 The averment of the answer is that this was done; that the lands 
 were assessed and taxed for their value as agricultural lands witliout 
 including the minerals in them. Tiie replication put this in issue 
 but the stipulation of facts does not explicitly notice it, but prob- 
 ably was intended to cover it by the agreement that the assessment 
 was made in the manner and form required by the laws of Montana. 
 
 \Vg are referred to the act of Congress of February 20, 1895, 
 c. 131, entitled "An act to provide for the examination and classi- 
 fication of certain mineral lands in the States of Montana and 
 Idaho," 28 Stat. 683, as strengthening the contention of appellants. 
 We do not think it docs. It was passed after the time at which the 
 validity of the assessment complained of must be determined. Be- 
 sides, it does not purport to define the rights of the railway com- 
 pany in any particular with which we are now concerned. It fur- 
 nislies the Secretary of the Interior with another instrumentality — 
 not bringing the lands to a different judgment, but to an earlier 
 judgment. 
 
 Discovering no error in the decree of the Circuit Court of Ap- 
 peals, it is 
 
 Affirmed. 
 
 Brewee, Shieas, "White and PECKnAM, JJ., dissented. 
 
 WORCESTER COUNTY v. WORCESTER. 
 Supreme Judicial Court of ]\[assachusetts. 1874. 
 
 [Reported 116 Mass. 193.] 
 
 Devens, J. This is a petition for a -wTit of certiorari to quash 
 the proceedings of the respondents in laying an assessment, under 
 the St. of 18G7, c. 106, upon the property of the inhabitants of the 
 county of Worcester, consisting of the court-house estate used for 
 holdings of the courts in said county, and the offices of the clerks 
 thereof, the sheriff and other county officers, and of the jail estate, 
 used for a jail and house of correction. These estates are situated 
 upon the line of streets in which the city council of Worcester has 
 caused to be constructed sewers, by virtue of the statute; and if 
 they come within the class which can properly be subjected to as- 
 sessments of this character, the assessment thereon is valid. The 
 immunity of these estates from taxation depends, however, in our 
 opinion, upon other grounds than that of a statute exemption, and 
 extends to taxation not only for general public purposes, but for 
 local improvements of a public nature. Without regard to the stat- 
 ute exemption, property appropriated to public uses, as by the rail- 
 roads, has been repeatedly held not to be subject to taxation in this 
 Commonwealth. Worcester v. Western Railroad, 4 Met. 564, 567.
 
 204 WOECESTEK COUXTY V. WORCESTEK. [cHAP. II. 
 
 Boston & Maine Eailroad r. Cambridge, 8 Cush. 237. Wa3'land v. 
 County Commissioners, 4 Gray, 500. Charlestown r. County Com- 
 missioners, 1 Allen, 199. 
 
 Although taxation in the cases referred to was for general public 
 purposes, and we find no case where the exemption has been extended 
 to assessments like the present, yet the property treated in them 
 as appropriated to public use was not so essentially public in its 
 character, nor so strictly appropriated to public use, as the real estate 
 of these petitioners. The works constructed by a railroad corpora- 
 tion, for instance, and held under its charter, are to a certain extent 
 public works, intended for public use, and under the control of the 
 public, but their management, subject to such control, is in the 
 hands of a private corporation, the property is that of such corpora- 
 tion, and the private rights therein are of great importance. The 
 projierty held by the petitioners is strictly public, paid for from the 
 public funds, managed by the public authorities, devoted to public 
 purposes, and no private person has any rights or authority therein. 
 
 The property of the Commonwealth is exempt from taxation be- 
 cause, as the sovereign power, it receives the taxation through its of- 
 ficers or through the municipalities it creates, that it may from the 
 means thus furnished, discharge the duties and pay the expenses 
 of government. Its property constitutes one of the instrumentalities 
 by which it performs its functions. As every tax would to a 
 certain extent diminish its capacity and ability, we should be un- 
 willing to hold that such property was subject to taxation in any 
 form, unless it were made so by express enactment or by clear im- 
 plication. This property of the petitioners is not, indeed, in legal 
 form, the property of the Commonwealth, but the aitthority by which 
 the county holds it is derived from the statutes by which the 
 duty is imposed upon the various counties of providing suitable 
 court-houses, jails and houses of correction. Gen. St. c. 17, § 5; c. 
 178, § 6. When thus provided, such estates, although held by the 
 counties, are so held for the uses and purposes of the Commonwealth, 
 are essential to the administration of the executive and judicial 
 duties of its government, and are not to be deemed subject to taxa- 
 tion in any form, unless the intent of the legislature to render them 
 so clearly appears. 
 
 The mode provided for the enforcement of the assessment under 
 the St. of 1867, c. 106, certainly leads to the conclusion that it was 
 not contemplated that it could be applied to property like this of 
 the petitioners. "Where wholly new powers are given, they are to be 
 enforced as the statute giving them provides, and the remedy given 
 thereby is exclusive of every other. Eoxbury v. ISTickerson, 114 Mass. 
 West Roxbury v. Minot, 114 Mass. 
 
 The only remedy given for the collection of this assessment is 
 by means of the lien created upon the estates assessed which must 
 be enforced by a sale thereof. We do not think that it was the intent 
 of the legislature to subject estates like these of the petitioners to 
 such a remedy, when its enforcement might operate to deprive them 
 of the very instrumentalities by which they were able to perform
 
 SECT. IV.] nUXTSVILLE V. ilADISOX COUNTY. 205 
 
 the duties imposed upon them, and miglit be attended with serious 
 inconvenience or positive injury to the administration of justice in 
 the Commonwealth. 
 
 For these reasons, we are of opinion that the proceedings of the 
 respondents in making this assessment upon these estates of the peti- 
 tioners was erroneous, and that the writ of certiorari must issue, 
 but, under tlie Gen. Sts. c. 145, § 9, it will issue only to quash so 
 much of the assessment made by the respondents as relates thereto. 
 Haverhill Bridge v. County Commissioners, 103 Mass. 120. 
 
 Writ of certiorari to issue. 
 
 HUNTSVILLE v. MADISON COUXTY. 
 Supreme Court of Alabama. 1910. 
 
 [Reported 166 Ala. 389.] 
 
 Anderson, J. That there is a well-defined distinction between 
 general taxation and a local assessment for public improvements, 
 such as pavements, sewerage, etc., there can be no doubt. It is also 
 settled that constitutional or statutorj' exemption of public prop- 
 erty from general taxation does not necessarily exempt it from special 
 local assessment for public improvements ; but, while there is a con- 
 flict, the weight, and, we think, the sounder authorities, hold that 
 general language in a statute giving cities power to levy assessments 
 for street improvements is not sufficient to embrace the property 
 of the State or county which is devoted to strictly public uses, nor 
 authorize the enforcement of such special assessment against it under 
 a general judgment against the county. In other words, property 
 owned and held by the State and counties for public purposes is 
 generally exempt from taxation of any description, and is not 
 to be deemed subject to taxation in any form, unless the intent 
 of the Legislature to render it so clearly appears. Worcester 
 County V. Mayor of Worcester, 116 ]Mass. 193; Page & Jones 
 on Taxation,. § 580; Grav on Limitation of Taxing Powers 
 §§ 1906, 1174, 1175; Witter r. Mission School District, 121 Cal. 
 350, 53 Pac. 905, 66 Am. St. Rep. 33 : Edwards Co. v. Jasper Co., 
 117 Iowa, 365, 90 N. W. 1006, 94 Am. St. Eep. 301, and note; 
 City of Clinton v. Henry Co., 115 Mo. 557, 22 S. W. 494, 37 Am. 
 St. Rep. 415; Franklin Co. v. Ottowa, 49 Kan. 747, 31 Pac. 788, 
 33 Am. St. Rep. 396. For an able and complete discussion of the 
 subject, see note commencing on page 400. "\Miile there are many au- 
 thorities holding that this special tax is permissible unless prevented 
 by the statute, they are almost uniform in holding that it cannot be 
 enforced by fixing a lien on the public property, and those that 
 permit the levy merely authorize the collection by a personal judg- 
 ment rather than by an action in rem. It must also be borne in mind 
 that most of the statutes considered in this line of decisions did not 
 confine the right to collect the tax solely by subjecting the property, 
 but authorized a personal judgment. Therefore, in view of the fact
 
 206 HUNTSVILLE V. MADISON COUNTY. [cHAP. II. 
 
 that they all hold that the tax could not be enforced by an action 
 in rem, we are of opinion, that they would have held that the right 
 to levy against public property did not exist had tlie statutes pre- 
 scribed an action in rem as the exclusive remedy to enforce the collec- 
 tion of said tax. Article 26, p. 638, Code 1907, provides for the levy 
 and assessment by municipal corporations of this special tax for 
 public improvements and prescribes the remedy for the enforcement 
 of the collection of same, and which is, of course, subject to the lim- 
 itations fixed by section 223 of the Constitution of 1901. The au- 
 thority to levy this tax is general, and the statute makes no express 
 provision for the levy of same against State or county property held 
 for public purposes. Nor can the power to do so be necessarily im- 
 plied in view of the fact that the statute (section 1386) fixes a pro- 
 ceeding in rem as the sole method of enforcing the collection of said 
 special tax. It is true it authorizes the recovery of the amount of 
 the assessment with interest and cost, but it can only be enforced 
 against the property, and does not authorize a personal judgment 
 against the owner. True, also, section 1398 authorizes a judg- 
 ment, and section 1400 authorizes execution, but they apply 
 only in case of an appeal to the Supreme Court and in cases 
 where the appellant gave a supersedeas bond. " The general 
 rule seems to be that, where the Legislature has not authorized any 
 method for collecting a tax, an action at law will lie to collect it. 
 Where the Legislature, however, has authorized a method of collec- 
 tion, the method is exclusive, and generally in such case an action 
 will not lie unless the statute expressly authorizes it." Gray on 
 Limitations of Taxing Powers, §§ 1174, 1175; Worcester v. Worces- 
 ter, 116 Mass. 193. 
 
 There is another question which sl^ould be borne in mind in 
 arriving at the legislative intent, and which seems to have been 
 ignored in those cases holding that county property was liable to 
 said special tax. The Constitution expressly limits this tax so as 
 not to exceed the increased value of the property resulting from the 
 benefit to be derived from such improvements. It is a matter of 
 common knowledge that courthoiise lots and the buildings thereon 
 were procured and erected for public use, not to sell or rent, and it 
 would be difficult to ascertain how the county could be materially 
 or financially benefited because of the pavement or beautifying the 
 streets of Huntsville. There can be no material enhancement in 
 the value of the courthouse square that would prove of any substan- 
 tial benefit to the taxpayers of Madison county generally. They 
 own the square for certain purposes, not to rent or sell at a profit 
 and as a rule the investment is permanent, and for the use to which 
 the property is adapted it is just as valuable to the public whether 
 adjacent property is worth $100 or $1,000 per front foot. The fact 
 that county property is included in the exemptions from general taxa- 
 tion by the terms of section 2061 of the Code of 1907 is no indi- 
 cation that it was intended to be subject to this special tax. It was 
 exempt regardless of this statute, and was doubtless included in the 
 schedule with other property not necessarily exempt, independent of
 
 BECT. IV.] NOKTII HAVEN V. WALLINGFORD. 207 
 
 the statute, and for the purpose of setting fortli all exempt 
 property. 
 
 The bill, being without equity, was subject to the demurrers test- 
 ing its equity (section 3121 of the Code of 1907), and whidi were 
 properly sustained, and the decree of the chancery court is alTirmed. 
 
 Affirmed. 
 
 NORTH HAVEN v. WALLINGFORD. 
 
 Supreme Court of Erhors of Connecticut. 1920. 
 [Reported 111 Atl. 904] 
 
 Curtis, J. The plaintiff claims that the court erred in not 
 holding that all of the property of the defendant in North Haven 
 was taxable, and further claims that in any event the gristmill 
 on the property was taxable. 
 
 [1] Our statutes, Oeneral Statutes 1918, § 1160, provide that 
 "buildings with their appurtenances belonging to any county, town, 
 city or borough^' shall be exempt from taxation. This provision 
 in the light of the common law should be treated as if it exempted 
 from taxation all property held by municipalities for public use. 
 West Hartford v. Board of Water Commissioners, 44 Conn. 368; 
 Hamden v. New Haven, 91 Conn. 589, 101 Atl. 11. 
 
 [2] The plaintiff claims that as the borough was generating 
 electricity not only to light its own streets and public places but 
 also to sell it for light, heat, and power, to the inhabitants of Wall- 
 ingford, it was not using its North Haven plant for a public use, 
 but for a use that was essentially private. 
 
 It is the recognized law tliat the furnishing of electricity to the 
 public for light, heat, and power for pay is a public use for which 
 the power of eminent domain may be exercised. Lewis, Eminent 
 Domain (3d Ed.) vol. 1, § 268; Judson on Taxation (2d Ed.) 
 §§ 387, 388. 
 
 It is now the common law in Connecticut, and in substantially 
 all the states, that a municipality, which, acting imder legislative 
 authority, maintains and operates a public service plant and fur- 
 nishes water or gas or electricity for light, heat, and power to itself, 
 and to its inhabitants for pay, holds such plant for a public use. 
 
 [3] The great weight of authority holds that such a plant is 
 exempt from taxation wherever situated within the state of the 
 municipal itv. West Hartford v. Hartford, 44 Conn. 369. Traverse 
 Citv V. Blair County, 190 ilich. 313, 157 N. W. 81, Ann. Cas. 
 19i8E, 81; Hamden v. New Haven, 91 Conn. 589, 101 Atl. 11 ; 
 Id., 91 Conn. 589, 101 Atl. 11, 3 A. L. R. 1435 and note; New 
 London V. Perkins, 87 Conn. 229, 87 Atl. 724; Opinion of Justices, 
 150 Mass. 592, 24 N. E. 1084, 8 L. T?. A. 487; Judson on Taxation 
 (2d Ed.) § 388 ; Pond on Public Utilities, § 322. 
 
 The principles of law and public policy underlying this law have
 
 208 NORTH HAVE^^ V. WALLIXGFOED. [cHAP. II. 
 
 been so full}' set forth in the quoted cases and elsewhere that it is 
 no longer desirable to repeat them. 
 
 The electric light plant of the defendant located in North Haven 
 was therefore exempt from taxation by that town. 
 
 The plaintiff suggests that, under section 10 of chapter 231 of the 
 Public Acts of 1893 (Eevisiou 1918, § 506), relating to the price 
 that a municipality may charge for gas or electricity produced by 
 a municipal plant, it may be that the borough of Wallingford is 
 not now and never has been and never will be subjected to any 
 expense in conducting the electric plant in question; but, on the 
 contrar}^, the borough may always have been making a profit there- 
 from, and that consequently, if the judgment of the superior court 
 is sustained, the town of North Haven by its loss of the power to 
 tax a portion of its territory is the only municipality put to any 
 expense in maintaining the electric plant in question for the benefit 
 of the borough of Wallingford. 
 
 The town claims that therefore it is not just that its right to tax 
 the portion of the plant located in North Haven should be denied. 
 
 There is, however, nothing in the finding to show that this sug- 
 gested possibility is a fact, and hence no question in relation to the 
 matter is before us for decision. 
 
 Influenced, no doubt, by the possibility of such an unjust and 
 oppressive condition arising as is here suggested by the plaintiff, 
 the state of New York has provided by statute that the "property 
 of a municipal corporation of the state held for a public use," shall 
 be exempt from taxation " except the portion of municipal property 
 not within the corporation." Birdseye's Consol. Laws of N. Y. 
 vol. 5, p. 5806, § 4, par. 3. 
 
 In the years 1913 to 1916, inclusive, the gristmill on said acre 
 of land of the defendant in North Haven was assessed for taxation 
 as a distinct item by the town. 
 
 [4] The town claims that the use of the gristmill by the defend- 
 ant for pay makes it a lawful subject of taxation. 
 
 When the defendant purchased the water power and the essential 
 land in North Haven connected therewith under legislative authority, 
 if it had found thereon a gristmill which it deemed it could run 
 profitably as a commercial proposition, and then did so run it solely 
 for such purpose, a situation would be presented which would render 
 the plaintiff's claim seemingly valid. 
 
 The situation presented by the finding is far different. The water 
 power in question was granted to the defendant's predecessor in 
 title upon condition that the gristmill should be kept fit for service. 
 
 The plaintiff claimed that the defendant could not hold the land 
 and water power without operating the gristmill. The defendant 
 under such claim, and to protect itself from the possible impainnent 
 of its right to the stream by diversion or adverse flowage rights, 
 has continued to keep the gristmill in a condition for service, and 
 has received and ground the rare and occasional grists brought to 
 the mill. The mill is not run for money making, and the net income 
 from it is inconsequential.
 
 SECT. ]\'.] SAXITATiY DISTRICT OF CHICAGO V. GinnONS, 209 
 
 The receipts from the mill are merged with all the receipts from 
 the plant, and its expenses are paid from appropriations by the 
 defendant for the operation of its electric plant. 
 
 Under these conditions, the gi'istmill building is an inseparable 
 part of the electric plant of the defendant held for public use. Its 
 maintenance and operation* as a gristmill for the purposes stated 
 above are purely a subordinate incident in the maintenance by the 
 defendant unimpaired of the water power of its entire plant. It 
 is not an independent commercial enterprise. 
 
 As the gristmill is not run as a commercial enterprise, but as an 
 incident to the maintenauce of the water power of the electric plant, 
 the mere receipt of a trifling revenue, which went into the borough 
 treasury, does not render the mill subject to taxation. Hamden 
 V. N'ew Haven, 91 Conn. 589, 101 Atl. 11; West Hartford v. Conn. 
 Fair Ass'n, 88 Conn. 627, 92 Atl. 432; Perth Amboy v. Barker, 74 
 N. J. Law, 137, 65 Atl. 201. 
 
 "We hold, therefore, that the gristmill building is not a subject 
 of taxation, separable from the electric plant, under the conditions 
 now prevailing. 
 
 There is no error. 
 
 The other judges concurred. 
 
 SAXITARY DISTPJCT OF CHICAGO v. GIBBONS. 
 SuPKEME Court of Illinois. 1920. 
 
 [Reported 293 III. 519.] 
 
 Caetee, J. Appellant, the Sanitary District of Chicago, sought 
 by this bill, filed in the Superior Court of Cook County, to restrain 
 the collection of real estate taxes for the year 1918 on certain parcels 
 of land included in the right of way of the Calumet Sag channel, 
 the right of way of the main channel, the bed of the main channel 
 and certain Desplaines river lots, all of said real estate being in 
 Cook County but outside the territorial limits of the sanitar}- dis- 
 trict. Other taxes were involved in the bill not necessary to be here 
 considered. After a hearing the trial court entered a decree dismiss- 
 ing the bill as to said taxes, and from that decree an appeal has 
 been prayed to this court by the district. 
 
 In an elaborate brief counsel for the sanitarj' district have argued 
 that the real estate in question should be exempted because it is 
 *' public ground used exclusively for public purposes " ; that the san- 
 itary district is a municipal corporation (People v. Nelson, 133 111. 
 565; Wilson v. Board of Trustees, 133 111. 443), and was organized 
 primarily for the purpose of keeping the sewerage and waste of Chi- 
 cago out of Lake Michigan, and was therefore organized for a public 
 purpose of the greatest importance (Citv of Chicago v. Green, 238 
 111. 258; Judge v. Bergman, 258 111. 246). This court has held in 
 Sanitar}' District r. Martin, 173 111. 243, that the right of way of the 
 main drainage channel of the sanitary district outside of the terri-
 
 210 SAXITAEY DISTIllCT OF CHICAGO V. GIBBONS. [ciIAP. II. 
 
 to rial limits of said district is not " public grounds " as that phrase 
 is used in section 2 of the Kevenue Act of this State. This doe- 
 trine was approved by this court in Sanitary District v. llanberg, 
 22Q 111. 480, but it was further held in this last case that the 
 lands within the limits of the sanitary district, including the chan- 
 nel and right of way to be devoted exclusively to the purpose of 
 draining and carrying off the sewerage, was exempt from taxation. 
 The doctrine in these cases was approved again by this court in 
 Sanitary District v. Gifford, 257 111. 424, and in Sanitary District 
 V. Young, 285 111. 351. This is conceded by counsel for appellant 
 in this case but they argue that the conclusion heretofore reached 
 by this court on the question of taxing the right of way of tlie 
 main channel of the sanitary district outside of the territorial 
 limits of the district is so contrary to the general trend of author- 
 ities in other jurisdictions that they are again presenting this ques- 
 tion to this court with the suggestion that this court may in its 
 wisdom be disposed "to modify its former rulings as to the land in 
 the main channel outside of the confines of the sanitary district." 
 In view of these former holdings of this court, which practically 
 cover all the principal grounds urged by counsel for appellant, it 
 would be sufficient, in our judgment, simply to reaffirm the conclu- 
 sions reached in those cases without entering into any discussion of 
 the principles involved, but in view of the earnest and comprehensive 
 argument of counsel for appellant we have decided to refer again 
 briefly to the principles involved. 
 
 Counsel for appellant argue that the weight of authority in this 
 country is in favor of the proposition that all land owned by a muni- 
 cipal corporation and used in furtherance of its organic purposes is 
 exempt from taxation whether such land is within or without its 
 territorial limits, and they have cited numerous authorities in other 
 jurisdictions which tend to support their argument in this regard. 
 This court in the first case discussing this question (Sanitary District 
 V. Martin, supra) conceded that in other jurisdictions the rulings 
 might be different from the conclusion reached in that case as to 
 the property in question being subject to taxation, but held that it 
 has been the rule in this State from its earliest history that the as- 
 sessment of taxes upon public property of State, county or municipal 
 corporations was a mere question of policy and that the power existed 
 to make it bear its share. It is clear from the reasoning of Judge 
 Cooley in his authoritative work on Taxation (volume 1, 3d ed. p. 
 263) that the rule in most jurisdictions is that it is purely a question 
 of public policy whether the public property of municipalities shall be 
 exempt. It is also stated in Sanitary District v. Martin, supra, that, 
 wliatever may be the law in other States, the language of the con- 
 stitution of this State plainly implies that the property of muni- 
 cipal corporations is subject to taxation unless there is a law ex- 
 empting it; that statutes exempting property from taxation are 
 to be strictly construed, and that property claimed to be exempt 
 must clearly appear to be within the terms of the statute, other- 
 wise the courts will not hold it exempt from taxation. The court
 
 SECT. IV.] CONGKEGATIONAL S. S.^ <feC. V. BOAIiD OF BEVIEW. 211 
 
 in that case discussed at considerable length the very principles of 
 our Constitution and revenue laws now relied on in the extended 
 brief of counsel for appellant as showing tliat this property should 
 be exempt, and held said property not to be exempt, under our 
 constitution and statutes. These conclusions in that case have been 
 ailherud to in the later cases, particularly Sanitary District v. Han- 
 berg, supra, and Sanitary District v. Young, supra. In the case of 
 Sanitary District v. Ilanberg, supra, the court laid down the rule 
 (226 111. 483) that "the public outside of the district have no right 
 to use the drain or channel for sewerage, and that part of the channel 
 is a mere conduit for carrying oil' the sewerage from the drainage 
 district. The only beneficial use of th€ public in that part of the 
 channel is a mere easement of passage over the water for the pur))ose 
 of navigation. It was the.efore held that the authorities of Will 
 county could lawfully levy taxes upon said land." The same rule 
 was applied in Sanitary District v. Young, supra. . . . 
 
 Decree Affirmed. 
 
 CONGREGATIONAL SUNDAY SCHOOL AND 
 
 PUBLISHING SOCIETY v. BOAIID OF EEVIEW. 
 Supreme Court of Illinois. 1919. 
 
 [Reported 290 III. 108.] 
 
 Thompson, J. This is an appeal by the Congregational Sunday 
 School and Publishing Society from a decision of the board of re- 
 view of Cook county denying its personal property exemption 
 from taxation. This property consisted of religious and moral 
 books and Sunday school supplies kept in its store at 19 West 
 Jackson boulevard, Chicago. Its property was assessed at $20,000. 
 The Auditor of Public Accounts has certified the record to this 
 court for review. 
 
 Appellant was formed by the consolidation of two private cor- 
 porations and is organized under certain special acts of the State 
 of Massachusetts. Its main office is located in Boston, and the 
 Chicago office is a branch established for handling its business 
 in that territory west of the State of Ohio. The corporate purposes 
 of appellant, as authorized by the statutes of the State of ^Ias«a- 
 chusetts, are to establish and aid Sunday schools, supply Sunday 
 school libraries and othen\ase promote Sunday school education ; to 
 produce, publish, sell and circulate moral and religious tracts and 
 books ; and to publish, purcliase, sell, circulate and distribute, in 
 such manner as it deems advisable, any and all publications, books, 
 tracts, papers or periodicals calculated to promote good morals, pure 
 Christianity, the spread and extension of the gospel of Jesus Christ, 
 and to take, hold and disburse any and all charitable funds con- 
 tributed to it for the purposes aforesaid. The charter of the Con- 
 gregation Sabbn.tb School and Publishing Society, one of the
 
 212 COXGKEGATIONAL S. S.^ &C. V. BOAED OF EEVIEW. [ciIAP. II. 
 
 corporations merged in appellant, provided that nothing in the act 
 creating it was to be construed to authorize the corporation to traffic 
 in books for the purpose of profit. 
 
 Section 46 of our Corporation act (Kurd's Stat. 1917, p. 707,) 
 authorizes religious corporations to publish, print, circulate, sell 
 or give away such religious, Sabbath school and missionary tracts, 
 periodicals or books as they may deem necessary to the promotion 
 of religion and morality. We have held that a foreign corporation 
 legally doing business in tliis State has all the rights and privileges 
 that a similar domestic corporation has. Eaton v. Home Mission- 
 ary Society, 264 111. 88. 
 
 It is conceded that the business of appellant is four-fold : It 
 maintains a Sunday school missionary department, which organizes 
 Sunday schools and maintains missionaries who visit and assist in 
 the work of these schools; it publishes and circulates a religious 
 paper loiown as The CongregationaUst and Advance and four other 
 smaller religious periodicals; it publishes and sells religious and 
 moral books; and it composes and publishes Sunday school peri- 
 odicals, quarterlies and lesson-helps, and sells these supplies to Sun- 
 day schools of all denominations. Appellant employs authors of 
 note to write its books, and, so far as the record shows, it sells at 
 its Chicago office only such books as it writes and publishes. The 
 aim of the corporation is to publish and distribute these books 
 for the purpose of disseminating the views of its writers on religion 
 and moralit}'. A sufficient charge is made to cover the expenses of 
 this work. All the printing and publishing is done in Boston. 
 The Chicago branch is used as western headquarters for the work 
 of the society, and it maintains a store, where its religious and 
 moral books and Sunday school supplies are sold to whomsoever 
 desires to buy. The funds of appellant are raised by donations from 
 Congregational churches, Sunday schools. Christian Endeavor 
 societies, women's home missionary organizations and individuals, 
 and by incomes from certain legacies, trust funds and investments. 
 All of these funds are handled in Boston, and none of the property 
 of appellant, except the books and Sunday school supplies, is kept 
 in Chicago. All of the income of appellant is devoted to the cor- 
 porate purposes heretofore outlined. No stock is issued, no dividends 
 are declared and no profit accrues to any individual. Appellant 
 contends that these corporate purposes and acts are clearly religious, 
 beneficent and charitable, and that its property is therefore exempt 
 from taxation. 
 
 The onlv tabulated statement of receipts and disbursements and 
 of assets and liabilities that appears in the record is one for theyear 
 1908-1909. That vear its business showed a profit to the Chicago 
 office of $8440.28. ^ It appears that some years the business is op- 
 erated at a profit and some years it is operated at a loss. Appellant's 
 business at Chicago for the vear 1917 amoimted to approximately 
 $200,000. of which $140,000 was from the sale of Sunday school 
 supplies and $60,000 from the sale of religious and moral books. 
 It is, of course, impossible to determine just what the expenses will
 
 SECT. IV.] COXGEEGATIOXAL S. S., iC. I'. BOARD OF REVIEW. 213 
 
 be each year, but it appears that the prices charged are such that 
 in carrying tfie business over a period of years there will be practi- 
 cally no prolits. When a Sunday school is in such financial condition 
 that it is unable to purchase its supplies the society Avill furnish 
 the supplies gratis. If the missionaries find a Sunday school in 
 need of tliese supplies whicli is able to pay only a portion of the list 
 price, then it is furnished with these supplies at a cost of sevent}-- 
 five, fifty or twenty-five per cent of the price, in accordance with 
 its ability to pay. Such profits as do come from the business of 
 selling books and periodicals are devoted to the maintenance of the 
 missionary department. 
 
 In determining whether appellant is entitled to have its claim 
 for exemption granted it will be necessary to consider the revenue 
 laws of this State. All property in this State is subject to taxation 
 unless it is exempted. Section 3 of article 9 of the constitution 
 does not exempt from taxation such property as may be used ex- 
 clusively for school, religious or charitable purposes, but merely 
 provides that the General Assembly may by general law exempt 
 from taxation the property of such "^institutions. Section 2 of the 
 Eevenue act provides that "all property used exclusively for re- 
 ligious purposes, or used exclusively for school and religious pur- 
 poses, . . . and not leased or otherwise used with a view to profit," 
 and ''all property of institutions of public charity, all property of 
 beneficent and charitable ' organizations, whether^ incorporated in 
 this or in any other State of the United States, . . . when such 
 property is actually and exclusively used for such charitable or bene- 
 ficent purposes and not leased or otherwise used with a view to 
 profit," shall be exempt from taxation. This society claims ex- 
 emption under both of these clauses, and, so far as this particular 
 case is concerned, they are so closely associated that we will discuss 
 them together. 
 
 Before proceeding further it is well to determine what is meant 
 by the term "beneficent and charitable organizations." The de- 
 finition of a charity which we adopted in Crerar v. AVilliams, 145 111. 
 625, first laid down by Mr. Justice Gray in Jackson v. Phillips, 
 14 Allen, 539, is : "A charity, in a legal sense, may be more fully 
 defined as a gift, to be applied, consistently with existing laws, for 
 the benefit of an indefinite number of persons, either by bringing 
 their minds and hearts under the influence of education or religion, 
 ... by assisting them to establish themselves in life ... or by 
 otherwise lessening the burdens of government." This definition 
 was approved in Hoefl'er r. Clogan, 171 111. 462, In re Estate of 
 Graves, 242 id. 23, and Skinner v. Xorthem Trust Co. 288 id. 229. 
 The editors of the American and English Encvclopedia of Law 
 (5 Am. & Eng. Ency. of Law, — 2d ed. — 894,") and of Corpus 
 Juris (11 Corpus Juris, 399.) have accepted this definition as 
 comprehensive and satisfactorw 
 
 Charity, in the legal sense, is not confined to mere almsgiving 
 or the relief of poverty and distress, but has a wider signification, 
 which embraces the improvement and promotion of the happiness
 
 214 CONGEEGATIONAL. S. S.^ &C. V. BOAKD OF EEVIEW. [ciIAP. II. 
 
 of man. A charity is a gift to the general public use which extends 
 to the rich as well as to the poor. The test of a charity and tiie test 
 of a charitable organization are in law the same. The principal and 
 distinctive features of a charitable organization are, that it has no 
 capital stock and no provision for making dividends or profits but 
 derives its funds mainly from public and private charity and holds 
 them in trust for the objects and purposes expressed in its charter. 
 In other words, the test whether an enterprise is charitable is 
 whether it exists to carry out a purpose recognized in law as chari- 
 table, or whether it is maintained for gain, profit or private advan- 
 tage. An institution does not lose its charitable character, and 
 consequent exemption from taxation, by reason of the fact that those 
 recipients of its benefits who are able to pay are required to do so, 
 where no profit is made by the institution and the amounts so re- 
 ceived are applied in furthering its charitable purposes and those 
 benefits are refused to none on account of inability to pay therefor. 
 The fundamental ground upon which all exemptions in favor of 
 charitable institutions are based is the benefit conferred upon the 
 public by them, and a consequent relief, to some extent, of the bur- 
 den upon the State to care for and advance the interests of its 
 citizens. 
 
 The main case relied upon by appellee as tending to hold that 
 appellant is not a charity, and therefore not entitled to exemption 
 from taxation, is American Sunday School Union v. City of Phila- 
 delphia, 161 Pa. St. 307. The purpose of the union was the erection 
 and maintenance of Sunday schools and the publication and cir- 
 culation of moral and religious periodicals and books. It had no 
 capital stock and paid no dividends. It owned and occupied a build- 
 ing where books published not only by itself but also by other con- 
 cerns were sold. Standard works, such as Webster's Dictionary, 
 were included in the books sold by the union. The court held that 
 while the union was a benevolent and charitable institution, still the 
 building occupied by it was liable to taxation. The court said: 
 "Conceding the fact that the society is an 'institution of purely 
 public charity,' and, as such, exempt from taxation, it seems to us 
 such an institution may, as an aid to the accomplishment of its 
 primary object, carry on a business or use part of its property for 
 a business purpose which renders such business or such part of its 
 property taxable. The first floor of the society's Chestnut street 
 building was used for purely business purposes, and its business was 
 conducted in that location for the avowed purpose of profit. . . . 
 While they confine their trade to 'publications of a high moral 
 character and such standard works as Webster's Dictionary and 
 like works,' this in no way negatives the business character of the 
 enterprise. . . . Nor does the fact that the profits gr.thered on the 
 counter of the book store are devoted to the primary object of the 
 charity, which is purely public, in any de,gree affect the character 
 of the trading or commercial enterprise. Every dollar the society 
 expends is some charitable contributor's gains or profits from some 
 business not charitable. If such contributor devoted the whole of
 
 8ECT. IV.] CONGREGATIONAL S. S.^ <&C. V. BOAKD OF EEVIEW. 215 
 
 his profits from the sale of dry goods, groceries or books to promote 
 this particular charity, that fact would not make the source of such 
 prolit a purely public charity; and if, as the master has found, the 
 society was compelled to put a part of its operations on a basis that 
 was self-supporting by starting a book store to sell books only of a 
 high moral character and standard publications, that is trade. 
 That the entire prolits of this branch of the business are devoted 
 to the purposes of the charity no more changes its business nature 
 than if, instead of a book store, the society had established and 
 carried on a slioe store.'' 
 
 Jn Alton Bay Camp-Meeting Ass'n v. Town of Alton, 69 N. H. 
 311, the charter of tlie association provided that its real and personal 
 property, within certain limits, used for religious, moral, charitable 
 and benevolent purposes, should be exempt from taxation. Among 
 its affairs it conducted a grocery store, with a stock valued at about 
 $500, which it claimed to be exempt from taxation, but tlie court 
 there held that the purposes of a religious institution were not 
 advanced directly by operating the grocery store and therefore it 
 was subject to taxation. 
 
 In Sisters of Peace v. Westervelt, 64 iST. J. L. olO, exemption 
 from taxation was claimed on a tract of land upon which a cha[)el 
 and a three-story frame building used for a summer boarding house 
 had been erected. The annual income from the boarding house 
 amounted to over $5000, which money was afterwards used for 
 charitable purposes. The court there held that the chapel and 
 grounds upon which it stood were exempt but that the operation of 
 the boarding house did not directly further the purposes for which 
 the society was organized, and therefore the building and tract 
 were not exempt. The court said: "The fact that the profits of 
 a commercial enterprise are either in whole or in part devoted to 
 charity certainly does not operate to render the business itself a 
 charity; nor is the property in which it is carried on, by reason of 
 such appropriations of profits, used for charitable purposes." 
 
 In Fitterer v. Crawford, 157 Mo. 51, a Masonic lodge which 
 owned a building of which the first and second floors were rented 
 and the third floor was used as a lodge room, asked that the building 
 be exempt from taxation on the ground that the rents so received 
 were used for the benevolent purposes of the lodge and that these 
 floors were not rented for profit. Tlie court there held that the use 
 of the rents so received for the purposes of the lodge did not con- 
 stitute using the building exclusively for purely charitable pur- 
 poses, within the meanin<]: of the statute. To the same effect are 
 the holdings in the followins: cases cited by appellee: Stahl v. 
 Kansas Educational Ass'n. 54 Kan. 542; Citv of New Orleans v. 
 St. Patrick's ITall Ass'n, 28 La. Ann. 512: Pidsrelv Lodee v. Redus, 
 78 Miss. 352: Parker v. Quinn, 23 Utah, 332: Trustees of the 
 Academy of Richmond Countv r. Bolder, 80 Oa. 159; Young Men's 
 Christian Ass'n v. Doucflas County, 60 Neb. 642. 
 
 We are also referred by appellee to two decisions of this court. 
 Tn Monticello Seminary r. Board of Review, 249 111. 481, we held
 
 216 CONGKEGATIO^'AL S. S.^ &C. V. BOAKD OF EEVIEW. [ciIAP. 11. 
 
 that interest from bonds and notes owned b}' educational institu- 
 tions were not exempt, even should such interest be used for 
 the maintenance of the school. We there held that the property 
 itself must be directh' used for school purposes before it is entitled 
 to be exempted. In First Methodist Episcopal Church v. City of 
 Chicago, 26 111. 482, the church owned a building in Chicago, the 
 third floor of which it used for church purposes but the first and 
 second floors were rented for commercial purposes. The rents 
 so received were used for paying off the indebtedness of the church. 
 The purpose of the church to promote religion and morality was 
 not advanced directly by leasing a portion of its building for profit, 
 and so we held that the part of the building rented for commercial 
 purposes was liable to taxation. 
 
 The only case cited by appellee directly in point is American 
 Sunday School Union v. City of Philadelphia, supm. This is a 
 Pennsylvania case, and the constitution of Pennsylvania limits 
 exemption from taxation to "institutions of purely public charity." 
 Our constitution does not so limit the power of our legislature in 
 granting exemptions. In addition to selling its own publications 
 the union also sold such secular books as Webster's Dictionary. 
 These points sufficiently distinguish the Pennsylvania case, so that 
 it can not be said to be exactly in point with the case under con- 
 sideration. In all the other cases above referred to, money was 
 realized by the religious or charitable institutions from purely com- 
 mercial sources. In none of the cases was any object of the religious or 
 charitable institution promoted by the act done for which the money 
 was received. It must therefore be determined whether the primary 
 purpose of the retail book business of the appellant is charitable, or 
 whether the primary purpose is the making of a profit and the 
 secondary purpose is the devoting of these profits to charitable 
 purposes. First Congregational Church v. Board of Eeview, 251 
 111. 220. 
 
 It seems clear from the statement of facts certified to this court 
 that the dominant object of appellant is to spread the gospel of Jesus 
 Christ by the spoken and written word, and under this object this 
 is directly promoted by the distribution of its religious and moral 
 books and Sunday school supplies. It follows, therefore, that the 
 object of selling books and supplies is not to make money but is to 
 promote the religious, charitable and beneficent purposes of appel- 
 lant by disseminating the teachings of its books and periodicals. 
 The purpose of the society is accomplished by the effect on the minds 
 and lives of the children and adults who read and study its books 
 and periodicals. The work of appellant is to send its workers and 
 missionaries into those parts of our land where religious teaching 
 among the young has been neglected, and there to take the young 
 into Sunday schools for moral and religious instruction and pro- 
 vide for them wholesome literature. Many of these books are suit- 
 able for the use of adults, and the society seeks to supply needs of 
 individuals and families by gift where that is necessary, but by a 
 sale whenever a sale is practicable. The price received, whatever 
 
 ill
 
 SECT. TV.] CONGREGATIONAL S. S.^ &C. V. BOARD OF REVIEW. 217 
 
 it may be, makes a gift to needy persons possible to tbe amount so 
 received beyond what the society could otherwise give. It is not 
 the use to be made of the profits but the nature of the business done 
 that is to be considered iii duL-iding the question of liability to taxa- 
 tion. We have already pointed out the purposes for which this 
 society was organized and the four-fold nature of its business. Sales 
 of publications made by this society, whether at a profit, at actual 
 cost or half cost, are in aid of the gratuitous distribution of the 
 same publications among those who are unable to buy them. 
 
 In support of its claim for exemption appellant directs our at- 
 tention to a number of cases of this and other States. In Maine 
 Baptist Missionary Convention v. City of Portland, 65 Me. 9'3, 
 the corporate purposes of the convention were the promulgation and 
 diffusion of christian knowledge and intelligence through its agency 
 as an institution of domestic missions. It was held that since mis- 
 sionary societies have been repeatedly held to be charitable institu- 
 tions, the Baptist Missionary Convention came within that class 
 and its property was therefore exempt from taxation. 
 
 In Commonwealth v. Young Men's Christian Ass'n, 116 Ky. 711, 
 the corporate jDurpose of the association was to seek out young 
 men, endeavor to bring them under moral and religious influence, 
 secure their attendance at some place of worship, introduce them to 
 members and privileges of the association, secure them proper board- 
 ing places and employment and to surround them with christian 
 influences. The court, in holding that the association came within 
 the constitutional term of a purely public charity, said: "Aside 
 from that part of the religious work done by the appellees which 
 may be denominated devotional, they undertake to bring within 
 the religious, moral and intellectual influences of the institution 
 all young men, — and, for that matter, old men too, — for their 
 betterment, improvement and protection from evil influences and 
 consequences. It is not so much the giving of alms or in aid of the 
 mendicant ; the endeavor is to reach the boys and young men before 
 they need alms and before they are reduced to beggary, and by train- 
 ing their minds and teaching them how to use and preserve their 
 bodies and how to live useful and honest lives, to save them from 
 the lower grades of misfortune so familiar in the utter hel])lessness 
 of abject poverty and disease and want. Tliis is accomplished by 
 the institutions keeping open attractive quarters, wliere libraries 
 of useful books, current magazines and newspapers, innocent games 
 of amusement, a gjonnasium for the exercise and development of 
 the body, and night schools affording additional opportunities to 
 such as have not had sufficient advantages and education, are all 
 accessible to whomsoever will avail himself of them, without re- 
 gard to creed or nationality. Lists of decent boarding houses are 
 kept, to which strangers are directed. Proper acquaintances and 
 associations are formed and useful and moral instruction imparted. 
 In other words, they help tlie helpless, would keep the innocent 
 innocent, and endeavor by placing clean ideals and experiences be- 
 fore the youth to have them adopt them in their lives. They aid
 
 218 CONGBEGATIONAL S. S.^ <feC. V. BOARD OF REVIEW. [CHAP. n. 
 
 the uueducated to a limited but practical education. This is all 
 done 'for the love of God and for the love of our neighbor in the 
 catholic and universal sense, free from the stain of anything that 
 i3 personal, private or selfish/ " 
 
 in Davis v. Cincinnati Camp-Meeting Ass'n, 57 Ohio St. 257, 
 it was held that the association was an institution of purely public 
 charity, and that the lands used by it for the purpose of camp meet- 
 ings were not used with a view to profit, although charges were made 
 for the privileges of keeping public stables and of keeping boarding 
 and rooming houses on the grounds for the accommodation of 
 persons attending the meetings. 
 
 Jn j\Iethodi?t Episcopal Church v. Hinton, 93 Tenn, 188, it 
 was held that the publishing department of the Methodist Episcopal 
 Church South was an institution of purely religious and charitable 
 purposes and as such was exempt from taxation. The corporation 
 was organized for the manufacture and distribution of books, tracts, 
 periodicals and other publications, and the act provided that the 
 corporation should be under the discipline of the Methodist Episco- 
 pal Church South, according to its laws and usages. The discipline 
 of the church provided that the purpose of the institution was to 
 advance the cause of Christianity by disseminating religious knowl- 
 edge and useful literature and scientific information in the form 
 of books, tracts and periodicals. It further provided tliat any 
 surplus remaining after the sale of these publications was to be used 
 for the benefit of traveling, supernumerary, superannuated and 
 worn-out preachers, their wives, widows and children. Its annual 
 business amounted to $336,800, about 1/156 part of which was 
 derived from the printing of secular books. All the proceeds were 
 applied to the purposes named. The court held that the dissemina- 
 tion of the gospel and the advancement of Christianity were charitable 
 purposes. 
 
 In Commonwealtli v. Lynch, 115 Ya. 745, a young men's chris- 
 tian association was held to be exempt from taxation, regardless of 
 the fact that it charged for billiards, for bowling, for rooms and for 
 annual dues, the court saying: "If the dominant purpose and use 
 made of these rooms is to obtain revenue or profit, although it is 
 to be applied to. the general objects of the association, it would 
 render the property liable to taxation; but if the use made is that 
 for which the association was incorporated and tends immediately 
 and directly to promote its purposes, then its use is within the pro- 
 visions exempting the property from taxation, although revenue 
 or profit is derived therefrom as incident to such cases. . , . Mani- 
 festly, a member of the association who was a lodger or inmate of 
 the builrling Avould be in a better situation to take advantage of 
 the privileges offered by the association and more likely to take ad- 
 vantage of them, other things being equal, than a member who 
 lodged elsewhere. 
 
 In the Franklin Sffaare House v. Boston, 118 Mass. 409, the 
 court hold that the property of the corporation, which was organized 
 to provide a home for working girls at a moderate cost, was exempt
 
 BECT. IV.] CONGREGATIONAL S. S.^ <feC. V. BOAUD OF UEVIEW. 219 
 
 from taxation on the ground that it was a public charity, even 
 though tlie girls paid lor their keep, the corporation having no 
 capital stock and there being no proiits divided among its members. 
 
 In Contributors to Pennsylvania Hospital v. Delaware County, 
 169 Pa. St. c505, it was held that farms purchased and permanently 
 used by a hospital for hosj)ital purposes, as part of the hospital 
 plant and as an open air sanitarium, and incidentally for profit to 
 reduce expenses, are exempt from taxation. The court there dis- 
 tinguished American Sunday School Union v. City of Philadelphia, 
 supra, saying: "But property which is used directly for the pur- 
 poses and in the operation of the charity is exempt, though it may 
 also be used in a manner to yield some return and thereby reduce 
 the expenses." 
 
 In (}rand Lodge v. Board of Review, 281 111. 480, we held that 
 the Masonic Home for the care and support of dependent Masons 
 and their families was a charitable institution and that the land 
 used for its maintenance was devoted to a charity, and we further 
 held that the fact that the benefits are restricted to Master Masons, 
 their widows and orphans, does not deprive the institution of the 
 character of a public charity. We also held that a large farm 
 operated by the grand lodge to raise produce for the support of the 
 inmates of the home was exempt from taxation as the property of a 
 public charity, when the profits from the farm were used as a part 
 of the charity fund for the maintenance of the home. We there said : 
 " The primary use to which property is put is to be considered in 
 determining whether it falls within the terms of the exemption. 
 The primary purpose and use of the lands in question being the 
 maintenance of the home and the whole net income being devoted 
 to that use, they come within the statutory definition of lands ac- 
 tually and exclusively used for charitable or beneficent purposes and 
 not leased or otherwise used with a view to profit." 
 
 In City of Chicago v. University of Chicago, 228 111. 605, we held 
 that the dormitories and dining halls of the university were not used 
 with a view to profit, even though the students paid fees for lodging 
 and board, and that therefore the property was exempt from a water 
 tax. 
 
 In Monticello Female Seminary' v. People, 106 111. 398, a tract of 
 land used by the seminary for promenade grounds, gardens, or- 
 chards, pastures and crop lands, when all the returns from the lands 
 were used to supply the institution, was held exempt from taxation 
 under our statute. 
 
 In Sisters of St. Francis v. Board of Review, 231 Ul. 317, we 
 held that the St. Francis Hospital was an institution of public 
 charity where persons wlio are without money or property are cared 
 for without charge, and that it did not lose its right to exemption 
 from taxation by reason of the fact that the patients received by 
 it who are able to pny are required to do so, or by reason of the fact 
 that it receives contrilnitions from outside sources, so long as all 
 the money received by it is devoted to the general purposes of 
 charity and no portion of the money received by it is permitted to
 
 220 IN EE ALLERTOX. [cHAP. II. 
 
 inure to the benefit of an}^ private individual engaged in managing 
 the charity. We further held it was no objection because far the 
 greater number of patients paid for the care and attention they re- 
 ceived at the institution. So long as charity was dispensed to all 
 those who needed and who applied for it, and so long as no private 
 gain or profit came to any person connected with the institution, 
 and so long as it did not appear that an}^ obstacle of any character 
 was by the corporation placed in the way of those who might need 
 charity of the kind dispensed by the institution, the institution was 
 a charitable and beneficent organization. 
 
 We recognize the rule adopted by this court that statutes for the 
 exemption of property from taxation are to be strictly construed 
 against the exemption and in favor of the State and taxation. 
 (First Congregational Cliurch v. Board of Eeview, supra; ISTorth- 
 western University v. Hanberg, 237 111. 185; In re Walker, 200 id. 
 566.) On the other hand, charities have always been favored in 
 the law because they relieve the burdens of government, and if ap- 
 pellant fairly comes within the terms of the exemption clauses of 
 our Eevenue act we feel inclined to grant the exemption. It seems 
 clear that the predominant object of appellant in the use of its stock 
 of books and Sunday school supplies in Chicago is to spread the 
 gospel and to elevate humanity by means of written words embodied 
 in its religious and moral books and in its Sunday school lesson- 
 helps. The only means by which it can spread this gospel in printed 
 form is by distribution of its books and Sunday school supplies. 
 The purposes of appellant are directly carried out by the distribution 
 of its books and supplies, and the receipt of the money from sales 
 is incidental and secondar}\ It is not the profits from the sale of 
 the books that accomplish the purposes of appellant, but it is the 
 distribution of the books, periodicals and lesson-helps, — and there- 
 fore the use of the property sought to be taxed, — that directly 
 accomplishes appellant's religious, charitable and beneficent purposes. 
 
 The application of the appellant for exemption from taxation 
 of the property in question should have been granted, and there- 
 fore the decision of the board of review of Cook county is set aside. 
 
 Decision set aside. 
 
 Mr. Chief Justice Dunx, dissenting. 
 
 Ix EE ALLEETON". 
 Supreme Court of Illinois. 1921. 
 
 [Reported 296 III. 340.] 
 
 DuxcAX, J. This is an application by the tax commission of 
 IlHnois for an order setting aside and annulling a decision of the 
 board of review of Piatt County exempting about 1050 acres of land 
 in said county from taxation on the petition of Eobert Allerton, 
 William Dighton, W. F. Lodge, Elizabeth Phalen and A. E. Bur- 
 wash (the latter being farm adviser of the Piatt County farm
 
 SECT. IV.] IN EE ALLEETON. 221 
 
 bureau), trustees and grantees under a certain trust deed dated 
 November 21, 191'J, executed by liobert AUerion, conveying said 
 laud. The board of review filed a copy of the petition presented to 
 it, together with the transcript of the statement of facts considered 
 by it, and also of its order. The tax commission refused to confirm 
 the order of the board of review and has applied to this court for an 
 order setting the same aside. 
 
 The only evidence or facts before the board of review were those 
 contained in the petition, which was verified by affidavit, and the 
 trust deed, which Wiis made an exhibit and a part of the petition. 
 The petition avers the delivery of the trust deed to the trustees in 
 trust for the purposes and upon the terms and conditions therein 
 set forth ; that the trustees are in the possession of the land therein 
 described and have had such possession since November 21, 1919; 
 that the land is assessed in the name of Eobert Allerton and taxes 
 extended for the year 1920; that under the terms of the deed the 
 real estate is to be used for the purpose of creating and maintaining 
 in said county an old people's home, a county tuberculosis sanitarium 
 and a model and experimental farm; that the entire net income de- 
 rived from the use of the real estate is to be applied to the mainte- 
 nance of the old people's home ; that no private person will oljtain 
 any pecuniary gain or profit from the use of said premises, and that 
 the real estate and all income from the same will be used for chari- 
 table and public purposes. 
 
 In the preamble of the deed it is recited that it is the desire of 
 the grantor to create a memorial to his father, Samuel W. Allerton, 
 to be known as the Samuel "\V. Allerton Farm Memorial, and a me- 
 morial to his friend John Phalen, to be known as the John Phalen 
 Old People's Home Memorial. The deed declares that the grantor 
 and the four grantees named in the deed as trustees, and their suc- 
 cessors as trustees, do and shall own and hold the real estate in trust 
 for the purposes and upon the terms and conditions therein set forth, 
 and conveys an undivided four-fifths of the land, reserving to him- 
 self an undivided one-fifth. It provides for the selection of trustees 
 as successors upon the death, resignation, refusal or inability of any 
 of the trustees to act. It declares that it is the intention of the 
 grantor, as soon as in his judgment the same may be properly done, 
 to erect on a certain named site of the land a suitable building to be 
 used as an old people's home, and there shall be reserved and used 
 about such home, for necessary grounds and gardens, such quantity 
 of land as the trustees shall determine upon, and that all of the 
 remainder of said land, except so much as may be hereafter con- 
 veyed for a hospital as in the deed provided, shall be run as a model 
 and experimental farm in demonstration of the most approved 
 methods of farming, the same to be managed by the county agricul- 
 tural or farm adviser of the Piatt county farm bureau or such other 
 person as the trustees may name, subject to the direction and control 
 of the trustees. It further directs that the net income from the 
 land shall be deposited or invested by the trustees in such securities 
 as they may deem wise, and such fund be permitted to accumulate as
 
 222 IN HE A1.LERTON. [cKAP. II. 
 
 a fund for the proper working and managing of the farm, ar.d when 
 the trustees shall deem a suilieieut fund lias heen accumulated for 
 such purposes, then the net income, alter payment of all expenses 
 connected with the management and running of tlie farm, shall be 
 used for tlie upkeep and maintenance of the old people's home. The 
 fourth clause declares that after the completion of the buildings for 
 the Jionie and after the accumulation of sutiicient funds as aforesaid 
 and the opening of the home for use, there will be received and kept 
 at such home such old people of either sex, residents of said county, 
 as the board may decide to receive and accept as residents. The con- 
 ditions for admission of such persons as residents are, that those 
 admitted shall pay to said trustees, for such use as they may see fit 
 in connection with the running of the home, a sum of money, not to 
 exceed $500, to be determined upon by the trustees, and anyone 
 paying such sum may be admitted to the home and entitled to re- 
 main as a resident therein for his or her life. The trustees are 
 vested with the same power and authority as are commonly vested 
 in boards of directors of corporations of Illinois, and they may make 
 such rules, regulations and by-laws to govern and regulate the man- 
 agement and control of the farm and the home as they may deem 
 advisable, and alter the same from time to time as they see fit, and 
 elect officers, etc. The fifth clause declares that it has been the 
 grantor's desire to give to Piatt county the necessary land for a site 
 for the establishment and maintenance of a county tuberculosis sani- 
 tarium, and that the deed is subject to the provisions that there shall 
 be conveyed by the trustees to said county, or to such organization 
 or corporation, for hospital purposes, as they shall decide upon, 
 whenever the county or such organization or corporation is ready, 
 in the judgment of the trustees, to receive the same, and erect the 
 necessary buildings for such sanitarium or hospital thereon. The 
 deed specifies the land upon which the trustees may locate such sani- 
 tarium, and then provides that the income arising from said land so 
 to be conveyed is to be used by the trustees for the purposes first 
 mentioned in the deed until such conveyance is made. 
 
 There is no averment in the petition that any part of the real 
 estate in question is being actually and exclusively used as an old 
 people's home. The clear indications from the petition and from 
 the trust deed are that no part of the land was being actually and 
 exclusively used either for an old people's home or for agricultural 
 purposes, as a model and experimental farm in demonstration of the 
 most approved methods of farming, at the time it was assessed. 
 The most that can be said from the record is that the land is to be 
 or will be nsed at some time in the future for such purposes. The 
 deed is made subject to an expressed wish of the grantor at some 
 time to deed a part of the land described in the deed to the county 
 or some organization or corporation for the establishment and main- 
 tenance of a county tuberculosis sanitarium or for hospital purposes. 
 In case such deed is made, the land so deeded will not then be any 
 longer a part of the land to he managed by the trustees. The sani- 
 tarium or hospital is to be built and established by the county or
 
 BECT. IV.] IN HE ALLKULO^. 223 
 
 some organization or corporation, and not until, in the judgment of 
 tiie trubleeri, such county, organization or corporation is ready to 
 receive the gift and to erect the necessary buildings. There is no 
 showing in this record that there is even an intention on the part of 
 any of such organizations to accept the gilt upon the terms proposed 
 or to he proposed. So it is clear tliat there is not an old people's 
 home or sanitarium or liospital on the land in question, — or at 
 least there is no showing tliat any one of such institutions is in 
 actual existence on the land. 
 
 By section 3 of article 9 of the constitulion^t is provided that 
 such property as may he used exclusively for agricultural and horti- 
 cultural societies and for charitable purposes may be exempted from 
 taxation, but only by general law. Paragraph ? of section 2 of the 
 Eevenue act (Kurd's Stat. 1917, p. 2421), provides that "all prop- 
 erty of institutions of public charity, all property of beneficent and 
 charitable organizations, whether incorj)oratcd in this or any other 
 State of the United States and all property of old people's homes 
 when such property is actually and exclusively used for such chari- 
 table and beneficent purposes, and not leaj^cd or otherwise used witli 
 the view to profit," shall be exempt from taxation. The Constitu- 
 tion does not, of itself, exempt any property in this State from 
 taxation but simply provides what property may be exempted from 
 taxation by general law. It is, however, a limitation upon the 
 right of the legislature to legislate upon such question of exemption. 
 (People V. Deutsche Gemeinde, 249 111. 132.) The Constitution 
 contemplates, and the statute provides, that only property actually 
 and exclusively used for charitable purposes shall be exempt from 
 taxation. A law claimed to exempt property from taxation must be 
 strictly construed, and it devolves upon those claiming that specific 
 proj)erty is thus exempt to clearly show tliat it is within the con- 
 templation of the law. (People v. Wabash Railway Co. 138 111. 85.) 
 A trust fund possessed and held by trustees or real estate held for 
 charitable purposes, not then actually and exclusively used for 
 charitable purposes but only possessed and held for such use in the 
 future, is not exempt from taxation under the provision of the statute. 
 (Board of Directors r. Board of Eeview, 248 111. 590.) The find- 
 ing of the board of review in this case that the real estate "is to be 
 used" for the various purposes is not a sufficient finding of fact to 
 exempt such property from taxation, even if it be conceded that the 
 actual and exclusive use of the property for the various purposes 
 mentioned in the trust deed is sufficient to exempt it from taxation. 
 
 The tenth paragraph of section 2 of the Revenue act provides that 
 all property which mav be used exclusivelv hv societies for agri- 
 cultural purposes, and not for pecuniary profit, shall be exempt from 
 taxation. The record shows that the real estate in this case is to be 
 managed by the county agricultural or farm adviser of the Piatt 
 county farm bureau as a model and exporiinental farm in demon- 
 stration of the most approved methods of fanning, but it does not 
 show that it was held and used for such purpose at the time it was 
 assessed. The proof, therefore, does not show that the property is
 
 224 PRESIDEXT^ &C. OF lIAlJVAKD COL. V. ASSESSOES. [cHAP. II. 
 
 exempt from taxation, as found b}- the board of review, although it 
 does further show that it is not to be used for pecuniary profit by 
 any individual. It necessarily follows, then, that none of the real 
 estate in question was exempt from taxation at the time the order 
 of the board of review was entered. 
 
 Some question is raised by the Attorney General on behalf of the 
 tax commission as to whether or not the property, or any part of it, 
 ^\■ould be exempt from taxation if it were actually and exclusively 
 used for the purposes mentioned in the trust deed, — that is, for an 
 old peoples' home or for a model farm, — at the time the petitioners' 
 application for exemption was made. A solution of this question is 
 not necessary to the decision of the case, and we prefer not to pass 
 upon it until such time as the property may be actually and ex- 
 clusively used for such purposes, under a full showing of the facts 
 at such time and upon further briefs and arguments. 
 
 For the foregoing reasons the decision of the board of review is 
 set aside and annulled. 
 
 . Decision set aside. 
 
 PEESIDENT AND FELLOWS OF HAEVAED 
 
 COLLEGE V. ASSESSOES OF CAMBEIDGE. 
 Supreme Judicial Couet op Massachusetts. 1900. 
 
 [Reported 175 Mass. 145.] 
 
 "" MoRTOX, J. This is an action to recover back taxes that were as- 
 sessed by the respondents on certain parcels of real estate belonging 
 to the petitioner situated in Cambridge, which the petitioner con- 
 tends were exempt from taxation under Pub. Sts. c. 11, § 5, cl. 3, 
 as amended by St. 1889, c. 465. 
 
 The case was heard by a justice of the Superior Court, without 
 a Jury, on what are called agreed facts, but which we interpret as 
 authorizing him to draw such inferences as he thought warranted; 
 he held that the property was exempt, and found for the petitioner 
 for the entire amount, and reported the case to this court in such 
 a manner as to present the question of the assessibility of each of 
 the parcels. 
 
 We think that the ruling of the Superior Court was right, and 
 that all of the property was exempt from taxation. Many of the 
 principles and considerations and authorities applicable to this case 
 have been stated and referred to somewhat at length in Phillips 
 Academy v. Andover, 175 Mass. 118, and we do not deem it neces- 
 sary to repeat them here. 
 
 The history of Harvard College and of like institutions shows, 
 we think, that from the beginning dormitories and dining-halls have 
 been furnished by the college for the use of the students, and have 
 been regarded as devoted to college purposes. In addition to this, 
 the effect of the decisions in "Wesley an Academy v. Wilbraham, 99
 
 SECT. IV.] PRESIDENT, AC. OF HARVARD COL. V. ASSESSORS. 225 
 
 Mass. 599, and Mount Hernion Boys' School v. Gill, 145 Masf?. 139, 
 is plainly to exenijjt jiroporty applied to such uses. See also Yale 
 University v. New Haven, 71 Conn. ;jl(j and State i'. lioss, 4 Zabr. 
 497. We do not think that it makes any difference in principle 
 that the college, instead of furnisiiing board itself, provides a place, 
 without rent or compensation in any form, or a lease or any agree- 
 ment for a fixed term, for the use of students who ckib together for 
 the purpose of obtaining for themselves, with the assistance of the 
 college, food at cost. The property so used is occupied, it seems to 
 us, for the purposes for which the college was incorporated. Many 
 particuhirs are stated in the agreed facts in regard to No. 17 Kirk- 
 land Street, which is the parcel that we are now considering, which 
 we do not think it ne(,-essar\' to refer to, as it seems to us plain that 
 the projierty is exempt from taxation. 
 
 The history of the college and of the legislation relating to it 
 also shows, we think, that the president's house, during the earlier 
 years of the college at any rate, was regarded as almost, if not quite, 
 as necessary for the purposes of the institution as dormitories and 
 dining-halls. Public money was appropriated by the general court 
 to build it as it had been to build the college buildings, and the oc- 
 cupancy of it was evidently considered as official. The present house 
 was built with funds given expressly for the purpose of erecting 
 a dwelling-house for the president and his successors in office, and 
 since it was built has been occupied by them and their families. The 
 president is required to live in Cambridge. He pays no rent or 
 compensation for the use and occupation of the house, and has no 
 lease, but occupies it, if he chooses, so long as he performs the duties 
 of president. It, with several of the other houses that were taxed, 
 namely, Nos. 11, 25, and 37 Quincy Street, this being 17 Quincy St., 
 is now and was at the time of the assessment within the college 
 grounds, and the premises are kept in order and repair, including 
 grading, gravelling the walks, fertilizing, and repairing and cleaning 
 furnace, removal of ashes, etc., under the direction of the college 
 superintendent of buildings and the superintendent of grounds and 
 at the college expense. The whole lower floor, "except possibly the 
 kitchen, is used for Class Day, Commencement, and other receptions, 
 and for many hospitalities incident to the president's functions." 
 " The hall and drawing-room are also used for the convenience of 
 the college and the president for meetings of the faculty and com- 
 mittees, for conferences with university officers and students, for 
 calls on .university business, and for the annual meetings of the cor- 
 poration at which degrees are voted." The rest of the house consists 
 of the usual living and housekeeping rooms and chambers, and is 
 used by the president and his family as a dwelling-house. 
 
 It seems to us that on these facts the judge who heard the case 
 was justified in finding that the dominant or principal purpose of 
 the occupancy by the president was that for which the college was 
 incorporated. His occupation, it could be fairly said, was, so far as 
 the university was concerned, official, as the head of the universitv, 
 just as, for instance, the President occupies the White House, and
 
 226 TKESIBENT^ &C. OF HARVARD COL. V. ASSESSORS. [cilAP. II, 
 
 not in any just sense primarily or principally for his own private 
 benefit. 
 
 The remaining six houses are occupied by professors, three of 
 whom are deans, each charged with a portion of the administrative 
 duties formerly devolving exclusively on the president. Three of 
 the houses, as already observed, are within the college grounds. All 
 of them are kept in order and repair at the expense of the college 
 in the same manner and to the same extent as the house occupied 
 by the president. The halls and drawing-rooms in all of them, except 
 No. 37 Quincy Street, occupied by Professor Langdell, are used, 
 partly for the convenience of the college and partly for that of the 
 professor, for different college uses and purposes incident to his 
 duties as professor, chairman of committees, dean, and the like. In 
 the case of No. 11 Quincy street, the drawing-room and hall are 
 used by the professor for regular college exercises during the college 
 year. In the case of No. 16 Quincy Street, the professor is Chairman 
 of the Freshman Advisory Committee of the Faculty of Arts and 
 Sciences, consisting of about twenty persons, and he has a great 
 number of interviews in his drawing-room with students and parents. 
 In the case of 25 Quincy Street, the college in 1892 made additions 
 and improvements at its own expense so as to make the house 
 more convenient for the transaction of college business and the en- 
 tertaining of guests on college account. The additions as well as 
 the drawing-room and hall are used for different college purposes 
 incident to the several duties of the occupying professor. The parts 
 of the houses to which no references has been made are used by the 
 professors and their families, and consist of the usual living and 
 housekeeping rooms and chambers. In the fall of the year, when 
 the salaries of the professors are voted, they are fixed at certain 
 amounts '*' and tlie use of house, $750," or whatever the sum may 
 be ; otherwise the professor " pays no rent and has no other agree- 
 ment for his occupation and use of said house, but uses it as such 
 professor," We think that it was competent for the justice who 
 heard the case to find on these facts that the dominant considera- 
 tion in regard to the occupation of the houses by the several pro- 
 fessors had references to the performance of their duties as officers 
 and professors, rather than to the private benefit which they would 
 receive in the way of homes for themselves and their families, and 
 that he was justified in finding that the occupancy was for the pur- 
 poses for which the college w^as incorporated. 
 
 This case is distinguishable, we think, from Williams College v. 
 Williamstown, 167 Mass. 505. In the first place, there was no 
 question in that case as to the taxation of a building used for a dor- 
 mitory and dining-hall for the students. In the next place, the 
 occupation by the professors in this case clearly lacks the exclusive 
 character which it was held to have in that case. In the third place, 
 no use for college purposes is shown to have been made of the 
 houses occupied by the professors in that case as appears in this 
 case. In the fourth place, the sums fixed as compensation for the 
 use of the houses in that case were paid and received as rent, and
 
 SECT. IV.] I'KOPLE ex vel. Mizi'Aii i,oix;e l', burke. 227 
 
 were so treated by the court. In this case, the sums fixed for the 
 use of the houses were allowed as part of the compensation for ser- 
 vices as professors, thus tending to sliow, as said in Massacliusetts 
 Ciencral Hospital r. Soiiicivillc, 101 Mass. 31!J, ;3'^(>, that '"the occu- 
 pation was one merely by reason of service," and that the value jiut 
 ui)()n the use of the house was merely " a convenient mode of ad- 
 justing the compensation . . . and not as the income or fruit of 
 an estate granted."' Lastly, this case seems to be one where the 
 buildings are occupied, as it was saiil in Peirce v. Cambridge, 2 
 Cush. Gil, G13, Git, "with the permission of the college, and with- 
 out I the professors] having any estate tlierein, or paying any rent 
 therel'or," in which case the property would be exempt from taxa- 
 tion. See also White v. Baylcy, 10 V. B. (N. S.) 227. 
 
 The respondents rely on Third Congregational Society v. Spring- 
 field, 147 Mass. 396, which was a case where a parsonage was de- 
 clared to be unexempt. The court held that religious societies did 
 not come within the clause that we have been considering, but within 
 the seventh clause, and that the exemption was limited to houses 
 of religious worship only. That case is not applicable to this. 
 
 We think that the judgment of the Superior Court should be 
 affirmed. 
 
 So ordered. 
 
 PEOPLE ex rel. MIZPAH LODGE v. BURKE. 
 Court of Appeals of New York. 1920. 
 
 [Reported 228 A\ Y. 245.] 
 
 Pound, J. Relator claims to be exempt from general taxation on 
 its real property under subdivision 7 of section 4 of the Tax Law 
 (Laws 1909, c. 62, as amended; Consol. Laws, c. 60). It is an un- 
 incorporated subordinate lodge of the Independent Order of Odd 
 Fellows of the State of New York. It owns real estate in the city 
 of Buffalo on which it has a building containing halls, lodge room, 
 kitchen, and other rooms, which it uses itself part of the time and 
 also leases regularly to tenants — fraternal bodies or other associa- 
 tions — for their meetings and socia-l gatherings. 
 
 Exemption is sought on tlie ground that relator, "organized ex- 
 clusively for the moral or mental improvouiont " of its members and 
 for " religious, charitable, benevolent, and educational purposes," 
 uses its property " exclusively for carrying out thereupon " such 
 purposes of its organization. 
 
 The referee has not found the facts which sustain the contention 
 of exclusive use. We think the practice of leasing the property to 
 others destroys the exclusive nature of the use for the purposes of 
 its own organization. The meaning of the Tax Law is that if rents,
 
 228 TEOPLE ex rel. mizpah lodge v. burke. [chap. ii. 
 
 profits, or income are deriyed from the property, no exemption under 
 this clause may be claimed. 
 
 "It is the exclusive use of the real estate for carrying out thereupon 
 one or more of the purposes of the incorporation of the relator which 
 confers the right of exemption, and not the benefits accruing to it 
 and its useful work from the income derived from others in consid- 
 eration of their use of the real estate <tf or their purposes." (People 
 ex rel. Young Men's Ass'n v. Sayles, 32 App. Div. 1!J7, 202, affirmed 
 on opinion below 157 N. Y. 677.) 
 
 Eelator is primarily a lodge of a fraternal order and incidentally 
 a landlord. Its premises are used in part time for its own fraternal 
 purposes and in part are " leased or otherwise used for other pur- 
 poses" to produce an income to promote its own purposes. The 
 fact that some or all of its tenants are other fraternal bodies does 
 not alter the case. The controlling fact is the receipt of rents, profits, 
 and income. (People ex rel. Adelphi College v. Wells, 97 App. 
 Div. 312; affirmed 180 N. Y. 534.) 
 
 "Although we ought not, perhaps, to give to the word 'exclu- 
 sively' an interpretation so literal as to prevent an occasional use of 
 the relator's property for some purpose other than one or more of 
 those specified, yet the policy of the law is to construe statutes exempt- 
 ing property from taxation somewhere rigidly, and not to permit such 
 exemption to be established by doubtful implication. In other words, 
 the legislative intent to exempt any property from taxation can never 
 be presumed, but must always be expressed in language so clear as to 
 admit of no argument." (People ex rel. D. K. E. Society v. Lawler, 
 74 App. Div. 553, 557 ; affirmed 179 X. Y. 535.) 
 
 Eelator seeks exemption, secondly, on the ground that it is a fra- 
 ternal association " created to build and maintain a building or build- 
 ings for its meetings . . . and for the accommodation of other fra- 
 ternal bodies or associations," and that it applies its net income to a 
 liome for indigent Odd Fellows, their widows and orphans. The stat- 
 ute exempts the real property of associations which answer this 
 description. But relator was created for the purposes of an Odd 
 Fellows' lodge, nor does it now exist for the purpose of leasing 
 its property. It has the power to lease such property (Benevolent 
 Orders Law [Consol. Laws, c. 3] § 3), but its primary and in- 
 herent purpose is the fraternal end or aim itself, which it must 
 keep in view, while its powers are merely the incidental authority, 
 capacity, or right which it possesses to do such act as may effectuate 
 its purpose. 
 
 When we infer from the mere power to hold and lease real property 
 conferred on lodge trustees by section 3 of the Benevolent Orders Law, 
 that relator was " created to build a meeting place for itself and otlier 
 fraternal bodies or associations/' we confuse the meaning of purpose 
 and power, which are not synonymous, and lose sight of the true pur- 
 pose for which an Odd Fellows' Lodge is created, which is not to 
 maintain a hall for itself and to lease lodge rooms and other quarters 
 to fraternal and other associations for their social and festive func- 
 tions, but to promote the welfare of its own members as a fraternal
 
 SECT. IV.] CAMBKIDGE V. COUNTY COMMISSIONEKS. 229 
 
 organization. Corporations or associations may be created for the 
 purpose of building and leasing such a meeting place as the statute 
 contemphites, but mere subordinate lodges of fraternal orders are not 
 created for that purpose. The disposition of the net income to char- 
 itable purposes does not help the case. lielator's enterprise is char- 
 itable rather than mercenary, but it is not the kind of charitable 
 enterprise that comes within tlie letter of the statute. If it had been 
 the intention of the Legislature to exempt from taxation all lodge 
 buildings the net income of which was devoted to charitable purposes, 
 it would doubtless have expressed such intention without the use of 
 unnecessary or ambiguous words. So long as the State has not clearly 
 indicated its deliberate purpose to look with special favor upon the 
 use of lodge property for all the purposes that relator uses its prop- 
 erty for, we may not construe the law for its benefit. 
 
 . The referee has found as a finding of fact, and the findings have 
 been unanimously affirmed, that the relator was created to build and 
 maintain its building for the purposes indicated. This, however, is a 
 conclusion of law in conflict with the facts found, and not controlling 
 on this appeal. 
 
 The orders should be reversed, and the writ of certiorari dismissed, 
 with costs in all courts. 
 
 CAMBRIDGE v. COUNTY COMMISSIONERS. 
 Supreme Judicial Court of Massachusetts. 1874. 
 
 [Reported 114 Mass. 337.] 
 
 Colt, J. The upper stories of Holyoke House, a building owned 
 by the President and Fellows of Harvard College, are appropriated 
 to the students, and used for purposes within the college charter; 
 they are therefore exempt from taxation. Gen. Sts. c. 11, § 5. The 
 lower story, which is used for other puropses, is not exempt. The 
 question upon this petition for a certiorari is whether the rule 
 adopted by the assessors of Cambridge, for ascertaining the taxable 
 value of the last named portion, was erroneously changed by the 
 county commissioners on appeal to them by the college. 
 
 The valuation of the assessors was made by adding the value of the 
 land to the value of tlie lower story, including the foundations, as if 
 there had been a building of only one story, the whole of which was 
 subject to taxation. But the county commissioners estimated the taxa- 
 able value of tlie property at one third of the value of the whole 
 building, together with one half of the value of the land, and or- 
 dered tlie cit}' to remit a sum declared by them to be in excess of a 
 just and fair assessment. 
 
 The building and land, it is said, must be treated for the purpose 
 of the valuation as an organized whole. The upper stories cannot 
 e.xist without the land and foundations to support them. Some part 
 of the value of the lower story must enter into the value of the upper
 
 230 EVA^'OELICAL BAPTIST <feC. SOC. V. BOSTON. [cUAl'. II. 
 
 stories, while the upper part of the building must in the same way 
 be more or less important and valuable to the lower. To some ex- 
 tent the land and foundations are appropriated to college purposes, 
 and their whole value cannot fairly or legally be annexed to the 
 lower story of the building. 
 
 It was within the authority of the county commissioners to revise 
 an assessment made upon a wrong principle; and it is not shown 
 by the petitioners that any error was made in the rule adopted by 
 them. The principle upon which the apportionment was made is not 
 stated. It may have been made according to the estimated rentable 
 value of each part, or by some other rule equally just and equitable. 
 Their action is not open to revision upon the allegations in this 
 petition. 
 
 Petition dismissed. 
 
 EVANGELICAL BAPTIST BENEVOLENT AND 
 MISSIONARY SOCIETY v. BOSTON. 
 
 Supreme Judicial Court op Massachusetts. 1910. 
 
 [Reported 204 Mass. 28.] 
 
 Knowlton^ C. J. Each of these cases is an appeal by the peti- 
 tioner to the Superior Court from the refusal of the assessors of 
 the city of Boston to abate a tax assessed to the petitioner. The 
 petitioner was incorporated by a special act of the Legislature (St. 
 1857, c. 154) "for the purpose of securing the constant maintenance 
 in said Boston of evangelical preaching for the young and the desti- 
 tute, with free seats ; for the employment of colporteur and missionary 
 laborers in Boston and elsewhere; for the purpose of providing suit- 
 able central apartments to other and kindred benevolent and mis- 
 sionary societies, and for the general purpose of ministering to the 
 spiritual wants of the needy and destitute." By § 2 of the act it 
 was authorized to hold real and personal estate to the amount of 
 $350,000, and this property was exempted from taxation. It is now 
 holding property, the fair valuation of which is $911,000,^ and upon 
 its application to have this larger amount exempted from taxation, 
 it was decided in an action brought by this petitioner against the 
 city of Boston, as reported in 192 ]\Ia.ss. 412, that its right to an 
 exemption is limited to the amount named in its charter. 
 
 In the present petition it puts its claim upon different grounds, 
 and contends that it is entitled to exemption under the E. L. c. 12, 
 § 5, cl. 7, which is as follows : 
 
 " Seventh, Houses of religious worship owned by, or held in trust 
 for the use of, any religious organization, and the pews and fur- 
 niture; but the exception shall not extend to portions of such 
 houses appropriated for purposes other than religious worship or 
 instruction." 
 
 The petitioner's constitution recites that "this society is organized 
 
 * This wa3 the valuation of the Tremont Temple building made by the 
 
 assessors of the city of Boston.
 
 SECT. IV. J EVANGELICAL BAPTIST &C. SOC. V- BOSTON. 231 
 
 for the purpose of receiving, lioldinj^ and nianagin<f Ihe estate known 
 as the Treniont Temple, in accordance with the provisions of the 
 act of incorporation," etc. From tlie time of its incorporation it has 
 owned and managed this real estate, with different buildings upon 
 it at dilFerent times, as new structures have been erected to replace 
 those injured or destroyed by lire. The property is in a very attrac- 
 tive and important part of the business district of Boston. The 
 present building, like those that preceded it, is used in part for 
 business and in j^art for religious purposes. Important portions of 
 it were originally constructed and have always been used exclu- 
 sively for the transaction of business. Other parts have been used 
 regularly both for religious and business purposes. These parts 
 include five halls — Converse Hall, Lorimer Hall, Chapman Hall, 
 Gilbert Hall and Social Hall, with the Blue Room, parlors, cor- 
 ridors and other appurtenances. These have all been used regularly 
 by Tremont Temple Baptist Church for religious purposes, and 
 have also been rented very froc|uontly, and as often as opportunity 
 offered without interfering with the regular uses by this church, 
 for secular gatherings, and for different religiouc gatherings of other 
 organizations. H has been an important part of the business of 
 the petitioner to obtain an income from these rentals, although the 
 rental value of the use by the Tremont Temple Baptist Church has 
 been largely in excess of the rent received from other parties for 
 the use of the same parts of the building. Converse Hall has been 
 used as the main auditorium of this church. 
 
 It becomes necessary to consider the meaning of the R. L. c. 12, 
 § 5, cl. 7, above quoted. The purpose of the provision was to exempt 
 from taxation ordinary church edifices, owned and used in the usual 
 way for religious worship. Probably such an unusual condition as 
 appears in this case was never contemplated by the framers of the 
 statute. The special provision about ownership or holding in trust 
 was first enacted by the St. 186.5, c. 206. The form of this Statute, 
 as well as the more condensed forms of the later revisions of it 
 (see Pub. Sts. c. 11, § 5, cl. 7, R. L., ubi supra), which were not 
 intended to change its meaning, implies that the exemption was 
 intended only for houses owned by, or held in trust for, religious 
 organizations that occupy and use them for worship. "We are of 
 opinion that this clause of the present revision should ^e construed 
 as if the words " occupying and using them as such," were inserted 
 after the words, " religious organization." ^Ye do not think that 
 the statute applies to the owner of a liouse of religious worship, 
 even if that owner be a religious organization, that has never oc- 
 cupied or used the house for religious worship, but has held it only 
 to be let to others. Tf the petitioner be called a religious organiza- 
 tion, as in a broad sense it undoubtedly is, we do not think it is 
 such a kind of a religious organization, in reference to its ownership 
 of property, as the statute exempts from taxation as an owner. It 
 is not the owner of a house of religious worship which is occupied 
 and used by it as such. 
 
 The Tremont Temple Baptist Church is a religious organization
 
 232 EVAJfGELICAL BAPTIST &C. SOC. V. BOSTON. [ciIAP. II. 
 
 within the meaning of this statute. Is this building a house of 
 worship held in trust for this church? It is at least very doubt- 
 ful whetlier the building is a house of worship such as was in- 
 tended by the Legislature. Very spacious and valuable parts 
 of the building were never used for religious worship and have 
 no relation to a religious use. The other parts are used in part 
 for worship and in part for many other purposes. The build- 
 ing could hardly be called a church edifice. In many if not 
 most of its features, it has the characteristics of income-produc- 
 ing property. Those parts of the building which are used for wor- 
 ship are not held in trust for the Tremont Temple Baptist Church 
 in any strict or technical sense. The first instrument under which 
 the church held is called " a license or lease," and it purports to 
 license and empower the church to use the property on certain terms. 
 In other parts of the instrument it is called merely a " lease." The 
 petitioner reserves the right to sell and terminate the rights of the 
 church in the property at any time. By a modification of the orig- 
 inal indenture, bearing date December 5, 1863, it was provided, 
 among other things, that if the church should settle a minister with- 
 out submitting the matter of his selection to the directors of the 
 corporation, or otherwise than as provided in this new agreement, 
 it should be a violation of the covenants and agreements of the in- 
 denture, and should absolutely and finally detennine all rights, 
 privileges and estate of the church in or under the indenture, and 
 in and to the parts of the building therein mentioned. The sentence 
 ended with these words : " and the lease or license of said church to 
 occupy the same or any part thereof shall thereupon, ipso facto, 
 cease and determine." Another indenture was made on March 13, 
 1894, which modified the former agreements and reaffirmed them 
 in some parts. It is a contract between the parties in regard to the 
 management, use and occupation of different parts of a building 
 to be erected, which is the present building, and in regard to the 
 collection and disposition of rents received. The word " trust " 
 does not anywhere appear in it. In neither of the indentures is 
 there any reference to any trust as between the petitioner and the 
 church. While, in a broad sense, it may be said that some relations 
 of trust grow out of the undertakings of the parties, we do not think 
 that this building appears to be held in trust for the church, within 
 the meaning of the statute. 
 
 There is another consideration of some importance. The peti- 
 tioner seeks to apply this general statute for the exemption of houses 
 of worship to its ownership under a special charter by which its 
 right to hold property is limited to the amount of $350,000 in value. 
 Its ownership beyond that amount is without authority under its 
 charter. Some courts have held that the title of a corporation, to 
 property beyond the amount authorized to be held, is absolutely 
 void. But this court, after considering the subject at length in 
 Hubbard v. Worcester Art Museum, 194 Mass. 280, held that such 
 ownership is invalid as against the State, and that the public au- 
 thorities alone can take advantage of the irregularity.
 
 SECT. IV.] EPISCOPAL CHURCH, &C. V. PKIOLEAU. 233 
 
 The question at once arises whether, under a system that pro- 
 vides for the taxation of all property, unless an exemption is created 
 by statute and is plainly established, the general law invoked by this 
 petitioner can be held applicable to create an exemption in favor 
 of a party whose holding is ultra vires, and in excess of the authority 
 given by its charter. This exemption is claimed against an assess- 
 ment for city, county and State taxes. The claim is made against 
 the public authorities representing the State. We are of opinion 
 that a party, asking an exemption of his property under this general 
 statute, must come as an owner who has a title which the State is 
 bound to recognize. A corporation, which as against the State has 
 no right to hold such property, is not in a position to claim a statu- 
 tory exemption which is intended only for holding fully authorized 
 by law. We are of opinion that this petitioner, under the limita- 
 tions of its charter, has no standing, as an owner of this large amount 
 of property, to ask for the application of this general law. 
 
 Judgments affirmed. 
 
 THE PROTESTANT EPISCOPAL CHURCH OF THE 
 PARISH OF ST. PHILIP v. PRIOLEAU. 
 
 Supreme Court of South Carolina. 1902. 
 
 [Reported 63 S. C. 70.] 
 
 JoxES, J. This is an application in the original jurisdiction of 
 this court for a writ of mandamus to compel the county auditor of 
 Charleston county to correct the tax duplicate by striking therefrom 
 the assessment of the lot in the city of Charleston known as St. 
 Philip's Parsonage, which it is claimed by petitioner is exempt from 
 taxation under article 10, § 4, of the constitution. The only ques- 
 tion in the case arising on demurrer to the petition which is re- 
 ported herewith, is whether said property is exempt from taxation. 
 It appears from the petition and exhibits that the lot and build- 
 ings claimed to be exempt from taxation is the property of " The 
 Protestant Episcopal Church of the Parish of St. Philip, in Charles- 
 ton, in the State of South Carolina," which was incorporated under 
 an act approved December 20, 1791; that said lot and buildings 
 thereon have constituted and have been known as the parsonage of 
 said church for over one hundred years, and have never been taxed 
 until the year 1898. Avhen said property was placed on the tax books 
 and taxes levied thereon, then and ever since; that said lot and 
 buildings at the time of their assessment for taxation in 1898 were 
 not actually occupied by the rector or parson of said church but were 
 rented out, the rector or parson hiring another residence in a dif- 
 ferent locality for his personal convenience, and the rent derived 
 from said parsonage was appropriated to the salary of the rector 
 and so to the hiring of such other residence. 
 
 We are of the opinion, upon the facts stated, that said property is 
 
 N
 
 234 MASS. GENERAL HOSPITAL V. BELMONT. [CHAP. II. 
 
 exempt from taxation. Article 10, § 4, of the constitution, pro- 
 vides : " There shall be exempt from taxation . . . all . . . par- 
 sonages: . . . provided, that as to real estate this exemption shall 
 not extend beyond the buildings and premises actually occupied 
 by such . . . parsonages, . . . although connected with charitable 
 objects." The premises in question constituting and known as St. 
 Philip's Church parsonage, and being set apart for the actual use 
 and occupancy of its parson, does not lose its character as a "par- 
 sonage " merely because the parson for his personal convenience 
 should permit another to occupy said premises and use the rent 
 thereof in procuring another more convenient residence. It does 
 not appear that said premises used as a parsonage for over one 
 hundred years has ceased to be such. 
 
 It is therefore the judgment of this court that the writ of man- 
 damus issue as prayed for in this petition. 
 
 MASSACHUSETTS GENERAL HOSPITAL v. BELMONT. 
 Supreme Judicial Court of Massachusetts. 1919. 
 
 [Reported 233 Mass. 190.] 
 
 EuGG, C. J. These are two petitions under Part I, § 77 of the 
 general tax act, St. 1909, c. 490, appealing from the refusal of the 
 assessors of the town of Belmont to abate taxes alleged to have been 
 assessed illegally for the years 1915 and 1916 respectively upon real 
 estate of the petitioner devoted to the care of the insane under a 
 department known as the McLean Asylum and located in that town. 
 The taxes were assessed pursuant to St. 1914, c. 518, § 1, which 
 amended the exemption from taxation of the personal estate of char- 
 itable institutions and their real estate actually occupied for their 
 corporate purposes set forth in the general tax act, § 5, cl. 3, by 
 adding a proviso in these words : " nor shall the personal property 
 or real estate owned by such institutions or corporations and oc- 
 cupied by them or any department thereof wholly or partly as and 
 for an insane asylum, insane hospital, institution for the insane or 
 for the treatment of mental or nervous diseases, be exempt from 
 taxation unless at least one fourth of all property so occupied wholly 
 or partly, on the basis of valuation thereof, and one fourth of the 
 income of all trust and other funds and property held for the benefit 
 of such asylum, hospital or institution and not actually occupied 
 by it for such purposes, be used and expended entirely for the 
 treatment, board, lodging or other direct benefit of indigent insane 
 persons, or indigent persons in need of treatment for mental dis- 
 eases, as resident patients, without any charge therefor to such per- 
 sons either directly or indirectly." 
 
 The meaning and the constitutionality of St. 1914, c. 518, § 1, 
 are questions which lie at the threshold of the case. 
 
 1. The contentions made by the petitioner as to the construction 
 of the statute summarily stated are that the words "without any
 
 SECT. IV.] MASS. OKNEIIAL HOSPITAL V. BELMONT. 235 
 
 charge therefor" in tlie last clause of the amondmont mean in sub- 
 stance, without any charge for the use of the property occupied 
 by the institution or department in question for the purposes stated 
 or for benefits received through the expenditure of the income of 
 trust or other funds and property held for the use of the institution 
 or department and not actually occupied for such purposes, and 
 that the word " therefor " refers to the use of property and income 
 and not to " treatment, board, lodging or other direct benefit," We 
 are of opinion that these contentions cannot be adopted. The word 
 " therefor," according to the approved usages of languages ordi- 
 narily refers to tiie last and not to a more remote antecedent noun 
 or phrase. It is the natural import of the proviso as a whole that 
 the exoneration from charge relates to service rendered or furnished 
 and not alone to use of property or income. The legislative history 
 of the statute appears to disclose a purpose to make a material 
 change respecting the exemption from taxation of property of such 
 charitable institutions. Apparently in its practical working little 
 if any change would result from the construction put forward in 
 behalf of the petitioner. It is diflicult and perhaps not desirable 
 to attempt to lay down a precise and technical definition of "in- 
 digent persons" such as exists respecting the Avord "paupers." See 
 Opinion of the Justices, 11 Pick. 537. But in a broad sense in 
 this connection " indigent persons " include those insane persons 
 who by reason of poverty are unable, having due regard to other 
 imperative obligations resting upon them, to contribute any sub- 
 stantial amount to their support in the asylum. "Weeks v. Mansfield, 
 84 Conn. 544. In re Hybart, 119 N. C. 359. 
 
 The other parts of the statute present no insuperable difficulty in 
 construction. One fourth of the property occupied wholly or partly 
 for the insane asylum or other designated use, on the l)asis of valua- 
 tion, and one fourth of the income from property held for its benefit 
 must be devoted to the direct benefit of indigent insane without 
 charge. This does not of necessity require a physical line of demar- 
 cation between the portions of the real estate devoted to pay patients 
 and those given over to the use of free patients. Plainly it does 
 not mean a fractional use of the property based on numbers of pa- 
 tients. It signifies that, on a fair basis of computation, having 
 reference both to numbers of patients treated so far as concerns 
 enjoyment of property adapted for and applied to a use in common 
 by pay and free patients and to definite property so far as there 
 is a strict separation between pay and free patients, one fourth in 
 value shall be employed for the benefit of the latter. The same 
 method, so far as practicable, may be employed in determining the 
 expenditure of income. The statute is intended to be given a ra- 
 tional construction. Its operation must be adapted to tlie practical 
 solution of a specified problem. Within these somewhat compre- 
 hensive lines, the calculation of the required proportions of prop- 
 erties doubtless can be accomplished without undue friction. The 
 statute does not appear to l)e an unworkable piece of legislation. 
 Hemenway v. Milton, 217 Mass. 230.
 
 236 MASS. GEXEKAL HOSPITA.L. V. BELMONT. [CHAP. II. 
 
 2. "We are not able to perceive that any constitutional right of 
 the petitioner is infringed by the statute. 
 
 The petitioner does not claim, that it has any special e.xemption 
 from taxation as a part of its charter rights. See St. 1810, c. 94. 
 Whatever exemption it heretofore has enjoyed rested upon general 
 law declaratory of a scheme of public policy. That may be changed 
 by the General Court provided no other constitutional guaranty 
 is offended. Christ's Church v. Philadelphia, 24 How. 30. Grand 
 Lodge F. & A. Masons v. New Orleans, 166 IT. S. 143. Stanislaus 
 V. San Joaquin & King's Eiver Canal & Irrigation Co. 192 U. S. 
 201. Choate r. Trapp, 224 U. S. 665, 674. The question somewhat 
 argued respecting the ethics of inviting contributions from chari- 
 tably disposed persons on the footing that the beneficiary of their 
 gifts is to be exempt from taxation, and then revoking that exemp- 
 tion after large gifts have been made, is wholly legislative and not 
 judicial in its nature. It presents no question of constitutional law. 
 The law of taxation may be changed. In the absence of some 
 binding contract, no one has a legal right to the continuance of 
 such laws. Hanscom v. Maiden & Melrose Gas Light Co. 220 Mass. 
 1, 8. Cahen v. Brewster, 203 U. S. 543. 
 
 3. The statute here assailed does not deny to the petitioner the 
 equal protection of the laws guaranteed both by the State and Fed- 
 eral Constitutions. The Fourteenth Amendment to the Federal 
 Constitution secures the petitioner against being singled out either 
 by name or otherwise, directly or indirectly, and subjected to heavier 
 burdens than are imposed upon other like corporations, Reasonable 
 classification so far as concerns taxation or exemption from taxation 
 may be made by the Legislature. The constitutional principles 
 respecting the basis of such classification have been declared in nu- 
 merous cases. It was said by Chief Justice Fuller in Giozza v. 
 Tieman, 148 U. S. 657, 662: ""Nor, in respect of taxation was the 
 amendment intended to compel the State to adopt an iron rule of 
 equality; to prevent the classification of property for taxation at 
 different rates; or to prohibit legislation in that regard, special 
 either in the extent to which it operates or the objects sought to be 
 obtained by it. It is enough that there is no discrimination in favor 
 of one as against another of the same class. . . . And due process 
 of law within the meaning of the amendment is secured if the laws 
 operate on all alike, and do not sul)ject the individual to an arbi- 
 trarv' exercise of the powers of government." In Southern Railway 
 V. Greene, 216 U. S. 400, at page 417, occur these words: "While 
 reasonable classification is permitted, without doing violence to the 
 equal protection of the laws, such classification must be based upon 
 some real and substantial distinction, bearing a reasonable and 
 just relation to the things in respect to which such classification 
 is imposed; and classification cannot be arbitrarily made without any 
 substantial basis. Arbitrary selection, it has been said, cannot be 
 justified by calling it classification." In Citizen's Telephone Co. of 
 Grand Rapids v. Fuller, 229 U. S. 322, at page 329, is found the 
 statement ; " The power of exemption would seem to imply the power
 
 SECT. IV.] MASS. GENER.\.L HOSPITAL V. BELMOXT. 237 
 
 of discrimination, and in taxation, as in other matters of legislation, 
 classification is within the competency of the Legislature;" and at 
 page 331 : " Granting the power of classification, we must grant 
 Government the right to select the differences upon which the classi- 
 fication shall be based, and they need not be great or conspicuous. 
 Keeney v. New York, 2v"^ U. S. 52o, 536. The State is not bound 
 by any rigid equality. This is the rule; — its limitation is that it 
 must not be exercised in 'clear and hostile discriminations between 
 particular persons and classes.' See 223 U. S. 59, 62, 63. Thus 
 defined and tlms limited, it is a vital principle, giving to the Gov- 
 ernment freedom to meet its exigencies, not binding its action by 
 rigid formulas but apportioning its burdens and permitting it to 
 make those ' discriminations which the best interests of society 
 require.' " 
 
 It is to be borne in mind constantly that the present statute re- 
 lates only to the conditions under whicli exemption from the or- 
 dinary burdens of taxation is to l)e granted to certain kinds of 
 charitable corporations. It is not a classification for purposes of 
 taxation but of exemption from taxation. We consider only the 
 question presented and do not undertake to decide whether the 
 statute would be open to successful attack as a classification for 
 taxation. 
 
 The classification declared by the present statute is the selection 
 of insane asylums, insane hospitals, and institutions " for the insane 
 or for the treatment of mental or nervous diseases," the separation 
 of these from all other charities and a declaration of different con- 
 ditions respecting them as compared with other charities. Such a 
 classification on its face is not irrational. The Ijogislaturo has for 
 many years made various classifications touching the exemption 
 from taxation of charitable corporations. For example, all the real 
 and personal estate of incorporated agricultural societies is exempted 
 from taxation, while only the portions of the real estate and build- 
 ings of incorporated horticultural societies used for their offices, libra- 
 ries and exhibitions are tax free. Only those portions of houses of 
 religious worship appropriated to such worship and instruction are 
 exempted from taxation. The tax exempt property of incorporated 
 Grand Army posts or veterans' associations is limited to $"^0,000, 
 but there is no such limitation upon the value of real and tangible 
 personal estate held for units of the volunteer militia. The Bunker 
 Hill Mnmument, although oM-ned by a private association (St. 1823, 
 c. 1, and St. 1824, c. 122), has been exempted by name from taxa- 
 tion. Parsonages owned by religious societies used exclusively by 
 their ministers as dwelling houses are not exempt from taxation, 
 although dwelling houses of literar}\ educational, charitable and 
 scientific institutions and occupied permissively by their officers 
 are so exempt. Third Congregational Society of Springfield ik 
 Springfield, 147 Mass. 306. See general tax act. Part I, § 5, els. 
 4-7. There are numerous special statutes applying to named chari- 
 ties, rules as to taxation and to tax exemptions diff'ering somewhat 
 in their substance and details from each other and from the general
 
 238 MASS. GENERAL HOSPITAL V. BELMONT. [cHAP. II. 
 
 law. Yet it never has been suggested that these are unconstitutional 
 discriminations or preferences. See for example Northampton v. 
 County Commissioners, 145 Mass. 108; Old Soutli Association in 
 Boston r. Boston, 213 Mass. 299; Mount Auburn Cemetery v. Mayor 
 & Aldermen of Cambridge, 150 Mass. 12; Harvard College v. Alder- 
 men of Boston, 104 ilass. 4T0. 
 
 These dilferent provisions, which are in the nature of classifica- 
 tions of chariiable corporations for purposes of exemption from 
 taxation, have existed for many years and no contention has been 
 made that they transcended the constitutional power of the Legis- 
 lature. These statutes have the support of a long and unquestioned 
 usage. Of course this is not decisive. But clear reason is required 
 to upset as contrary to the Fourteenth Amendment a settled system 
 of tax exemptions. 
 
 One ground upon which exemptions from taxation of charitable 
 institutions like the petitioner can be justified in a constitutional 
 sense is that they minister to human and social needs which the 
 State itself might and does to a greater or less extent undertake to 
 satisfy. The ultimate obligation of the State thus is discharged 
 by the private charity. To that extent the State is relieved of its 
 burden. Opinion of the Justices, 195 Mass. 607, 609. An exemp- 
 tion from taxation is in the nature of an appropriation of public 
 funds, because, to the extent of the exemption, it becomes necessary 
 to increase the rate of taxation upon other properties in order to 
 raise money for the support of government. Appropriations of 
 public funds for charitable uses need not be uniform. Exemptions 
 need not be on the same footing for all, although they cannot be 
 framed upon an arbitrary or discriminatory basis. It is not nec- 
 essary to cite the many special statutes granting appropriations to 
 certain educational institutions and not to others, the constitution- 
 ality of which, so far as we are aware, has not been assailed. 
 
 It must fairly be assumed on this record, it seems to us, that the 
 present classification includes only the petitioner and one other 
 institution, the Xew England Sanitarium, located in the town of 
 Stoneham. The simple circumstance that only two institutions may 
 be included within a tax exemption classification is not conclusive 
 against its validity. It is a factor not to be lightly disregarded. The 
 fundamental question, however, is Avhether the classification rests 
 upon a rational foundation or is arbitrary, oppressive, whimsical 
 or visionary. The fact that laws are found to be so fashioned as 
 to be applicable in their practical operation to a single person often- 
 times points strongly to a designed inequality and unfair discrimina- 
 tion. Austin V. ]\rurray, 16 Pick. 121. Cotting v. Kansas City 
 Stock Yards Co. 183 U."' S. 79, 103. McFarland v. American Sugar 
 Eefining Co. 241 U. S. 79, 86. But the present statute does not 
 appear to us to fall within the class illustrated by the cases just 
 cited. A tax statute, although disguised as a classification but in 
 truth designed as revealed by its practical operation to select for 
 hostile discrimination a single person or corporation from other per- 
 sons or corporations of like legal standing or nature, cannot stand
 
 SECT, IV.] MASS. GENERAL irOSPITAT. V. BELMONT. 239 
 
 under the ro(juirement for equal laws. But a tax exemption statute 
 which rests upon a rational classification is not to be stricken down 
 ineri'ly because ail'ecting a few or even one in its practical operation. 
 Such a cla.ssilicalion as is made by tiie present statute may be 
 thought to bear a reasonable and just relation to a substantial dis- 
 tinction among charities. Insane asylums organized and operated 
 by private corporations may be thought to be dillerent in respect 
 of tax exemiJtiuu Iruni other charities. 
 
 The history of the statute as narrated in the record bears some 
 indication of a discriminatory basis. Jt affords ground for the argu- 
 ment put forward l)y the respondent that it was designed to relieve 
 what it terms an injustice arising from the exemption from taxation 
 of so much property within its territorial limits. Manifestly no 
 such relief could have been thought to be afforded provided the 
 statute is workable and can and will be complied with by the peti- 
 tioner. We think it can be, as already pointed out. Giving due 
 M-eight to all the arguments urged, however, they do not appear to 
 us to be of countervailing weight. This statute does not estaldish a 
 clearly hostile discrimination against a particular corporation or 
 person or class outside the limits of general usage, but on the con- 
 trary is within a custom respecting classification touching this gen- 
 eral subject which long has obtained in this Commonwealth. "The 
 Fourteenth Amendment was not intended to compel the State to 
 adopt an iron rule of equal taxation." Bell's Cap Railroad v. Penn- 
 sylvania, 134 U. S. 232, 237. " Hardship, impolicy or injustice of 
 State laws is not necessarily an objection to their constitutional 
 validity." Magoun v. Illinois Trust & Savings Bank, 170 U. S. 
 283, 293, 295. County of Mobile v. Kimball, 102 U. S. 691. The 
 power of the General Court with reference to the extent and char^ 
 acter of exemptions of charities from taxation is very broad, al- 
 though not unlimited. Without undertaking further to define the 
 restrictions upon legislative discretion in this particular, it is suffi- 
 cient to say that we think it cannot be pronounced beyond the power 
 of the Ijegislature to establish institutions designed for the treat- 
 ment and care of those afllicted with mental disease and disorder 
 as a class by themselves among charities for purposes of tax exemp- 
 tion under all the conditions disclosed by this record, even though 
 only two institutions appear to be affected. ... 
 
 So ordered.
 
 240 STATE ex rel. moox v. nygaakd. [chap, it, 
 
 SECTIOX Y. 
 INCOME TAX. 
 STATE ex rel MOON v. NYGAARD. 
 
 Supreme Court of Wisconsin. 1980. 
 
 [Reported 170 Wis. 415.] 
 
 Appeal from a judgment of the circuit court for Eau Claire 
 county: James Wickham, Circuit Judge. Affirmed. 
 
 The plaintiffs in this action were stockholders of the Sallie F. 
 Moon Company, a Wisconsin corporation. That company was or- 
 ganized in 1906, and its capital stock of $400,000 was issued to the 
 mother of relators in consideration of the transfer to it of her prop- 
 erty, and among such were 1,893 out of the 2,423 shares of the 
 capital stock of the Northwestern Lumber Company, also a Wiscon- 
 sin corporation. Although the charter of the Sallie F. Moon Com- 
 pany authorized the dealing in real and personal property, loaning 
 money, general merchandising, manufacturing, lumber and logging 
 business, it appears that it functioned merely as a holding company 
 in collecting returns from and conserving its assets and distributing 
 them among its stockholders. 
 
 Januar}' 1, 1911, the Northwestern Lumber Company had a sur- 
 plus of $5,268,851,19. This was reduced from year to year there- 
 after by dividends declared from that as well as from its earnings, 
 so that on Januarv 1, 1915, the surplus was $4,548,688.93, and on 
 January 1, 1916, $4,292,198.28. 
 
 The Northwestern Lumber Company made no profit in carrying 
 on its business during the years 1915 and 1916 respectively, as 
 appeared from its returns to the tax commission. 
 
 On the Ist of December, 1916 and 1917, resolutions were respec- 
 tively adopted declaring a dividend of fifty per cent on the outstand- 
 ing capital stock of the Northwestern Lumber Company, payable 
 out of the surplus fund that existed on January 1, 1911. Pursuant 
 thereto payment was made in 1916 to the Sallie F. Moon Company 
 of $47,325 and in 1917 of $94,650. 
 
 During the year 1917 the Sallie F. Moon Company paid to its 
 stockholders dividends aggregating $38,035, of which $5,700 was 
 paid to each of the three plaintiffs. Such dividends were substantially 
 and in effect paid out of the moneys received from the Northwestern 
 Lumber Company as above stated. 
 
 Due returns were made according to law by each of the said 
 corporations and the relators as individuals of their respective in- 
 comes during the years in question. 
 
 Each of the relators claimed a deduction from his income subject 
 to taxation to an extent of $5,322 from the $5,700 received from 
 the Sallie F. Moon Company. Such several claims for deductions 
 were allowed by the board of review of Eau Claire county on due 
 hearing, thereby overruling the assessment made against such re- 
 lators by the supervisor of assessors. The supervisor thereupon 
 appealed to the tax commission of Wisconsin, and on the hearing
 
 SECT. v.] STATE CX TCl. MOON V. NYGAARD. 24:1 
 
 before said body the action of the board of review was reversed and 
 the assessment made by the supervisor of assessors confirmed. There- 
 upon the relators obtained a writ of certiorari from the circuit court 
 for Eau Claire county to review such determination of the tax com- 
 mission. Upon hearing in the court below it was adjudged that 
 the assessment as taxable income made against each of the relators 
 for the year 1917, so far as it was based on the dividend of $.5,700 
 received from the Sallie F. Moon Company, must be vacated and 
 set aside. 
 
 From the judgment so entered an appeal was taken to this court 
 by the county clerk of Eau Claire county and by him as clerk of 
 the county income tax board of review for said county. 
 
 EsciiwEiLER, J. The appellant contends that the money paid 
 to the plaintiffs as stockholders of the Sallie F. Moon Company and 
 designated as dividends is taxable income of the relators although 
 the source of such dividends is a surplus accumulated prior to 1911 
 by the Northwestern Lumber Company and paid out by it to the 
 Sallie F. Moon Company in 1!)17 as a result of severally declared 
 dividends by the Northwestern Lumber Company in 1916. 
 
 The income tax law provides for the levying of a tax upon annual 
 incomes. Sub. 2, sec. 1087m — 2, Stats., in defining the term "in- 
 come," so far as material here now reads as follows : 
 
 "(b) All dividends derived from stocks and all interest derived 
 from money loaned or invested in notes, mortgages, bonds or other 
 evidence of debt of any kind whatsoever, provided, that the term 
 'dividends' as used in this section sliall he held to mean any dis- 
 tribution made hy a corporation, joint-stocl- company or association , 
 out of its earnings or profits accrued since January 1, 1911, and 
 paid to its sliareholders whether in cash or in stock of the corporation, 
 joint company or association." 
 
 The italicised portion of said sub. 2 (b) was added to the statute 
 as it then stood by ch, 247, Laws 1917, approved May 21st. 
 
 The word " dividend " as used in the subsection prior to the 
 amendment had been construed in Van Dyke v. Milwaukee, 159 
 Wis. 460, 159 X. W. 509, to mean that "ordinary dividends declared 
 by a going corporation, including mining corporations, will be con- 
 clusively presumed as against stockholders to be from earnings or 
 profits for purposes of income taxation." Page 464. 
 
 In State ex rel. Bundy v. Xygaard, 163 Wis. 307, 158 N. W. 87, 
 the word "income" as used in the statute before amendment was 
 defined to be " profit or gain derived from capital or labor, or from 
 both combined. ... It must be gain or profit." 
 
 Subsequentlv the cases of State ex rel. Pflster v. Widule, 166 Wis. 
 48, 163 N. W.'641 (decided in June, 1917), and State ex rel. Sallie 
 F. Moon Co. (a Wisconsin corporation) v. Wis. Tax Comm. 166 Wis. 
 287, 288, 163 N. W. 639, 165 N. W. 470 (decided in December, 
 1917, but argued in May of that year), repeated what was said in 
 the Van Dyke Case, supra, as to the definition given t'^ the word 
 " dividend."
 
 242 OSGOOD r. tax commissioner. [chap. it. 
 
 We construe the legislature definition now applicable to the term 
 *' dividend '' as it stands in the amended sec. 1087m — 2 as intended 
 to now permit the opening of the door of inquiry as to the source 
 from which came the money paid by a corporation to its stockholders, 
 although designated by it as dividends, the do(jr which was in efl'ect 
 declared in the prior cases completely closed. The result now is 
 that a stockholder in any corporation to whom, as stockholder, there 
 has been paid a sum of money under the designation of dividends 
 has the right to show that such payment or dividend was made out 
 of capital or surplus and therefore not taxable, instead of out of 
 earnings or profits accrued since January 1, 1911, which would be 
 taxable. That the fund in question passes through the treasury of 
 the Sallie F. Moon Company after leaving that of tlie Xorthwestern 
 Lumber Company and before reaching the hands of the relators does 
 not change the nature of the transaction. At no time on its passage 
 from the first company to the relators does it meet the present defini- 
 tion of the dividend which is to be considered as part of the taxable 
 income of an individual. 
 
 It follows that when, as here, the fund in question does not meet 
 the definition of taxable income, it is unnecessary to consider the 
 language of the same law providing for deductions and exemptions, 
 for they are properly considered only in reference to that which 
 would otherwise be taxable income. 
 
 Giving the words " earnings " and " profits " their plain, every- 
 day meaning, the payments in question here are not profits or earn- 
 ings accrued since January 1, 1911, to the Sallie F. Moon Company 
 and therefore do not meet the present statutory definition of taxable 
 income. The trial court was therefore right in his conclusion. 
 
 By the Court. — Judgment affirmed. 
 
 WiNSLOW, C. J, and Siebecker, J., dissent. 
 
 OSGOOD V. TAX COMMISSIONER. 
 Supreme Judicial Court of Massachusetts. 1930. 
 
 [Reported 235 Mass. 88.] 
 
 EuGG, C. J. This is a petition under St. 1916, c. 269, § 20. It 
 involves the validity of a tax assessed on an alleged gain in the 
 purchases or sales of intangible personal property under § 5 (c) 
 of said act. The salient facts are that the petitioner on Janu- 
 ary 1, 1916, was the owner of one thousand three hundred shares 
 of the preferred and one thousand share>s of the common stock of 
 the Draper Company, a Maine corporation conducting an exten- 
 si^'e manufacturing business at Hopedale in this Commonwealth. 
 That corporation had outstanding preferred stock of the par value 
 of $2,000,000 and common stock of tlie par value of $6,000,000. 
 The directors of that corporation, in June, 1916, caused a new 
 corporation to be organized under the laws of Maine, called the
 
 SECT. \'.J OSGOOD V. TAX COMMISSIONER. 243 
 
 Draper Corporation, wliich voted to issue its stock, all being com- 
 mon, of a par value of $17,500,000, in exchange for the stock of 
 the Draper Company, two and one half of its siiares for each one 
 share of the common stock of the old company, and one and one 
 quarter of its shares for each one share of the preferred stock of 
 tiie old company. Tlie petitioner acce})ted tlie oiler to exchange on 
 this basis and received for the surrender of her shares of stock in 
 the old company four thousand one hundred twenty-five shares of 
 stock in tlie Drajjcr Corporation. The new corporation became the 
 owner of substantially all of the stock of the obi company and 
 caused to be transferred to itself all the assets of the old c(;mpanv, 
 and carried on the business of tlie latter through the same officers 
 without interruj)tion and without outward indication of change. 
 The Tax Commissioner assessed a tax upon the gain which he as- 
 certained by subtracting the value of the shares in the old com- 
 pany on January 1, 11)16, (§ 7 of said act,) from the value of the 
 shares of the new company at the time of the exchange in July of 
 that year, Xo question now is raised as to the method of ascertain- 
 ing the tax. The amounts have been agreed upon. The question is 
 whether that gain under the circumstances disclosed is subject to 
 taxation under St. IDIG, c. 2G9, § 5 (c). Its governing words are, 
 " The excess of the gains over the losses received by the taxpayer 
 from purchases or sales of intangible personal property, whether or 
 not the said taxpayer is engaged in the business of dealing in such 
 property, shall be taxed at the rate of three per cent per annum." 
 
 Tax statutes must be construed strictly. The power to tax 
 must be conferred by plain words or it does not exist. It is not 
 to be extended by implication or by invoking the spirit of the law. 
 Sewall V. Jones, 9 Pick. 412. Hill v. Treasurer & Eeceiver General, 
 229 Mass. 474, 475. 
 
 The point to be decided is whether the transaction in which the 
 petitioner engaged rightly can be said to be comprehended within 
 the statutory words "purchases or sales." 
 
 Various definitions of "sale"' are to be found in decisions and 
 among text book writers. Those commonly given wiien the attempt 
 is made to fix wqth accuracy its meaning are familiar. It is said in 
 Benjamin on Sales, § 1, to be "a transfer of the absolute or general 
 property in a thing for a price in money." In § 2 that author elab- 
 orates, with references to authorities, the point that the price must 
 be in money and that any other consideration constitutes barter 
 or contract for the transfer of property. In Five Per Cent Cases, 
 110 U. S. 471, 478, Mr. Justice Cray said, "A sale, in the ordinary 
 sense of the word, is a transfer of property for a fixed price in money 
 or its equivalent." Gardner v. Lane, 12 Allen, 39, 43. Price in 
 money is essential to a strict sale. Tlie transfer of title for a 
 consideration of a dilTerent nature is a barter or exchange. See, 
 for other definitions, 35 Cyc. 25; 23 R. C. L. 1186. On the other 
 hand, there are numerous cases where the word "sale" in statutes 
 has been given a broader signification. The modern tendency is 
 in that direction. In Gallus v. Elmer, 193 Mass. 106, at page 109,
 
 24:-i OSGOOD V. TAX COMMISSIOIXER. [cHAP. II. 
 
 it was said by Mr. Justice Hammond, in liolding a transfer of 
 property by way of accord and satisfaction of a pre-existing debt to 
 be a sale contrar}' to the sales in bulk act, " While it is true that in 
 its strictest sense a sale is a transfer of personal property in con- 
 sideration of money paid or to be paid, still in the interpretation 
 of statutes it is often held to include barter and any transfer of 
 personal property for a valuable consideration." Said Chief Jus- 
 tice Bigelow, in Howard v. Harris, 8 Allen, 297, at page 299: "In 
 a general and popular sense, the sale of an article signifies the trans- 
 fer of property from one person to another for a consideration of 
 value, without reference to the particular mode in which the con- 
 sideration is paid. . . . The legal distinction between a sale and 
 an exchange is a purely artificial one ; the rules of law are the same 
 as applied to both transactions." A statute forbidding sales of 
 intoxicating liquor has been held to include barter and exchange as 
 well as strict sales. Commonwealth v. Clark, 14 Gray, 367, 372. 
 Commonwealth v. "Woelz, 219 Mass. 37, 38. Exchanges and con- 
 tracts to exchange are included within the definition of " sale " in 
 the sales act. St. 1908, c. 237, §§ 1, 9 (2), 75. Williston on Sales, 
 §§ 166, 170. See also Arnold v. North American Chemical Co. 232 
 Mass. 196, 199. Goward v. Waters, 98 Mass. 596. Friend v. 
 Childs Dining Hall Co. 231 Mass. 65, 68, 69. The word "sales'' in 
 the statute is used in combination with the word "purchases." 
 That is a word in its abstract meaning of somewhat more compre- 
 hensive signification. " It includes every lawful method of coming 
 to an estate by the act of a partv, as opposed to the act of law." 
 Burt r. Merchants' Ins. Co. 106 Mass. 356, 364. 
 
 The aim of the court in every instance must be to ascertain 
 as nearly as possible the intent and purpose of the Legislature. 
 
 On analysis, the transaction out of which this controversy arises 
 was this : The petitioner was the owner of stocks of an ascer- 
 tained value on January 1, 1916. In the following July, without 
 selling these stocks for cash, she used them as the consideration 
 with which to subscribe for and acquire by purchase other stocks 
 in a new and different corporation. Although the property owned 
 by the new corporation was identical with that owned by the old 
 corporation, it nevertheless plainly was a different legal entity. 
 Brighton Packing Co. v. Butchers Slaughtering & Melting Asso- 
 ciation, 211 Mass. 398. Marsh v. Southern Xew England Eailroad, 
 230 Mass. 483, 498. The stock obtained by the petitioner through 
 exchange was different in kind and not merely in degree from that 
 which she owned before. It was not the same corporation and the 
 stock itself was different in nature. A change of investment had 
 been made both in name and in essence. It would seem something 
 of a wrench to say that the disposal of the stock in the old corpora- 
 tion for stock in the new is not a sale for purposes of taxation, 
 when, if the same transaction was presented for consideration 
 under the sales act, it would inevitably be treated as a sale. It 
 hardly would be consistent to hold that exchanging grain for spir- 
 ituous liquors was a sale constituting a crime, as was held by this
 
 SECT, v.] DEGANAY l'. LEDERER. 245 
 
 court in Commonwealth v. Clark, 14 Gray, 367, and to say that ex- 
 changing stock in one corporation for stock in another corporation 
 was not a sale for taxation ])urposes. Whether the disposal of the 
 stock in the old company be treated as a strict sale or not, there 
 seems to be no escape from holding that the procurement of the 
 stock in the new corporation was a purchase. That word, unless 
 narrowed by its context, signifies the acquisition of title to any 
 commodity for cash, on credit, or for any other equivalent agreed 
 upon. This is its ordinary meaning according to the common un- 
 derstanding of the business world. Berger v. United States Steel 
 Corp. 18 Dick. 809, 817. Doubtless there are connections in 
 which the word is used in a more restricted sense. Robotham v. 
 Prudential Ins. Co. 19 Dick. 673, 685. People v. Duffy-Mc- 
 Innerney Co. 122 App. Div. (N. Y.) 336, affirmed in 193 X. Y. 636. 
 There is notliing in the context of the present statute to indicate 
 limitations upon the natural meaning of the word. "Purchase," 
 both in its popuhti- and in its legal signification is broad enough to 
 include the acquirement of stock through subscription as well as by 
 bidding on the stock exchange. 
 
 Tested by the difference in value of the stocks purchased as 
 compared with those exchanged for them at their appraisal at the 
 time fixed by § 7 of the act, the petitioner had realized a gain. 
 This is not the calculation of a mere paper profit or an unrealized 
 increase in value, which is not taxable under the act. Tax Commis- 
 sioner V. Putnam, 227 Mass. 522, 530. The gain had materialized 
 by procuring title to a wholly different kind of stock in a new cor- 
 poration, wliose market value was definite and ascertained. The 
 complainant had wholly parted with the old and become the legal 
 owner of new property. It follows that a tax on this gain was 
 lawful. 
 
 In accordance with the terms of the report, the entry may be, 
 judgment for the petitioner in the sum of $1,119.03 with interest 
 from July 7, 1919, and costs. 
 
 So ordered. 
 
 DeGANAY v. LEDERER. 
 SuPEEME Court of the United States. 1919. 
 
 [Reported 250 V. 8. 376.] 
 
 The Act of October 3, 1913, c. 16, § II, A, subdivision 1, 38 Stat. 
 166, provides : 
 
 "That there shall be levied, assessed, collected and paid annually 
 upon the entire net income arising or accruing from all sources in 
 the preceding calendar year to every citizen of the United States, 
 whether residing at home or abroad, and to every person residing 
 in the United States, though not a citizen thereof, a tax of 1 per
 
 246 DEGANAY V. LEDERER. [cHAP. IL 
 
 centum per annum upon such income, except as liereinafter pro- 
 vided; and a like tax sliall be assessed, levied, collected, and paid 
 annually upon the entire net income from all property owned and 
 of every business, trade, or profession carried on in the United 
 States by persons residing elsewhere." 
 
 Under this statutory provision a question arose as to the taxability 
 of income from certain securities of Emily E. DeGanay, a citizen 
 and resident of France. The District Court of the United States 
 for the Eastern District of Pennsylvania held the income from the 
 securities taxable. 239 Fed. Eep. 568. The case is here upon certifi- 
 cate from the Circuit Court of Appeals, from which it appears: 
 That Emilv R. DeGanay is a citizen of France, and resides in that 
 country. That her father was an American citizen domiciled in 
 Pennsvlvania, and died in 1885, having devised one-fourth of his 
 residuary estate, consisting of real property, to the Pennsylvania 
 Company for Insurance on Lives and Granting Annities, in trust 
 to pay the net income thereof to her. She also inherited from her 
 father a large amount of personal property in her own right free 
 from any trust. This personal property is invested in stocks and 
 bonds of corporations organized under laws of the United States 
 and in bonds and mortgages secured upon property in Pennsylvania. 
 Since 1885 the Pennsylvania Company has been acting as her agent 
 under power of attorney, and has invested and reinvested her prop- 
 erty, and has collected and remitted to her the net income therefrom. 
 The certificates of stocks, bonds and mortgages had been and were 
 in 1913 in the Company's possession in its offices in Philadelphia. 
 The Company made a return of the income collected for the plaintiff 
 for the year 1913 both from her real estate, which is not in contro- 
 versy here, and her net income from corporate stocks and bonds and 
 the bonds and mortgages held in her own right. The tax was paid 
 under protest and recovery was sought by the proper action. 
 
 The question certified is limited to the net income collected by 
 virtue of the power of attorney from the personal property owned 
 by the plaintiff in her own right. 
 
 The power of attorney, which is attached to the certificate, au- 
 thorizes the agent: 
 
 " To sell, assign, transfer any stocks, bonds, loans, or other secu- 
 rities now standing or that may hereafter stand in my name on the 
 books of any and all corporations, national, State, municipal or pri- 
 vate, to enter satisfaction upon the record of any indenture or mort- 
 gage now or hereafter in my name, or to sell and assign the same 
 and to transfer policies of insurance, and the proceeds, also any 
 other moneys to invest and reinvest in such securities as they may 
 in their discretion deem safe and judicious to hold for my account; 
 to collect and receipt for all interest and dividends, loans, stocks, 
 or other securities now or hereafter belonging to me, to endorse 
 checks payable to my order and to make or enter into any agreement 
 or agreernents they may deem necessary and best for my interest 
 in the management of my business and affairs, also to represent 
 me and in mv behalf, to vote and act for me at all meetings con-
 
 SECT, v.] DEGANAY V. LEDEREE. 247 
 
 nected with any company in which I may own stocks or bonds or be 
 interested in any way whatever, with power also as attorney or attor- 
 neys under it for that purpose to make and substitute, and to do aJl 
 lawful acts requisite for eU'eetin^' the preiuises, hereby ratifvinj^ aud 
 confirming all that the said attorney or substitute or substitutes 
 shall do thereni by virtue of these presents." 
 
 The question certilied is: "if an alien non-resident own stocks, 
 boiuls, and luortgages secured upon property in the United States 
 or payable by persons or corporations there domiciled ; and if the 
 income therefrom is collected for and remitted to such non-resident 
 by an agent domiciled in the United States; and if the agent has 
 physical possession of the certificates of stock, the bonds, and the 
 mortgages; is such income subject to an income tax under the Act 
 of October Ikl, 1913?" 
 
 The question submitted comes to this: l^ the income from the 
 stock, bonds, and mortgages, held by the Pennsylvania Company, 
 derived from property owned in the United States? A learned 
 argument is made to the effect that the stock certificates, bonds 
 and mortgages are not property, that they are but evidences of 
 the ownershi]) of interests which are property; that the prop- 
 erty, in a legal sense, represented by the securities, would exist 
 if the physical evidences thereof were destroyed. But we are of 
 opinion that these refinements are not decisive of congressional 
 intent in using the term "property" in this statute. Unless 
 the contrary appears, statutory words are presumed to be used 
 in their ordinary and usual sense, and with the meaning com- 
 monly attributable to them. To the general understanding 
 and with the common meaning usually attached to such descrip- 
 tive terme, bonds, mortgages, and certificates of stock are re- 
 garded as property. By State and federal Statutes they are 
 often treated as property, not as mere evidences of the interest 
 which they represent. In Blackstone v. Miller, 188 U. S. 189, 
 206, this court held that a deposit by a citizen of Illinois in a trust 
 company in the City of New York was subject to the transfer tax 
 of the State of Xew York .and said: "There is no confliet between 
 our views and the point decided in the case reported under the name 
 of State Tax on Foreign Held Bonds, 1.") Wall. 300. The taxation 
 in that case was on the interest on bonds liold out of the State. 
 Bonds and negotiable instruments are more than merely evidences 
 of debt. The debt is insepara1)le from the paper which declares and 
 constitutes it, by a tradition which comes down from more archaic 
 conditions. Bacon r. Hooker, 177 "^^assachusetts. 335, 337." 
 
 The Court of Appeals of New York, recognizing the same prin- 
 ciple treated such instruments as property in People ex rel. Jefferson 
 V. Smith, 88 N. Y. 576, 585. 
 
 " It is clear from the statutes referred to and the authorities cited 
 ajid from the understanding of l)usiness men in commercial transac- 
 tions, as well as of jurists and legislators, that mortgages, bonds, 
 bills and notes have for many purposes come to be regarded as prop- 
 erty and not as the mere evidences of debts, and thai; they may thus
 
 248 SHAFFER r. CAETER. [cHAP. II. 
 
 have a situs at the place wliere they are found like other visible, 
 tangible chattels." 
 
 We have no doubt that the securities, herein involved, are prop- 
 erty. Are they property within the United States? It is insisted 
 that the maxim mobilia ^equuntur persunain applies in this instance, 
 and that the situs of the property Avas at the domicile of the owner 
 in France. But this court has frequently declared that the maxim, 
 a fiction at most, must yield to the facts and circumstances of cases 
 which require it ; and that notes, bonds and mortgages may acquire 
 a situs at a place other than the domicile of the owner, and be there 
 reached by the taxing authority. It is only necessary to refer to 
 some of the decisions of this court. New Orleans v. Stempel, 175 
 U. S. 309; Bristol v. Washington County, 1T7 U. S. 133; Black- 
 stone r. Miller, supra; State Board of Assessors v. Comptoir Na- 
 tional d'Escompte, 191 U. S. 388; Carstairs v. Cochran, 193 U. S. 
 10; Scottish Union & National Ins. Co. v. Bowland, 196 U. S. 611; 
 Wheeler v. New York, 233 U. S. 434, 439 ; Iowa v. Slimmer, 248 
 V. S. 115, 120. Shares of stock in national banks, this court has 
 held, for the purpose of taxation may be separated from the domi- 
 cile of the owner, and taxed at the place where held. Tappan v. 
 Merchants' National Bank, 19 Wall. 490. 
 
 In the case under consideration the stocks and bonds were those 
 of corporations organized under the laws of the United States, and 
 the bonds and mortgages were secured upon property in Pennsyl- 
 vania. The certificates of stock, the bonds and mortgages were in 
 the Pennsylvania Company's offices in Philadelphia. Not only is 
 this so, but the stocks, bonds and mortgages were held under a 
 power of attorney which gave authority to the agent to sell, assign, 
 or transfer any of them, and to invest and reinvest the proceeds 
 of such sales as it might deem best in the management of the business 
 and affairs of the principal. It is difficult to conceive how property 
 could be more completely localized in the United States. There can 
 be no question of the power of Congress to tax the income from 
 such securities. Thus situated and held, and with the authority 
 given to the local agent over them, we think the income derived is 
 clearly from property within the United States within the meaning 
 of Congress as expressed in the statute under consideration. It fol- 
 lows that the question certified by the Circuit Court of Appeals 
 must be answered in the affirmative. 
 
 So ordered. 
 
 Me. Justice McEeynolds took no part in this case. 
 
 SHAFFER V. CARTER. 
 Supreme Court of, the United States. 1920. 
 
 [Reported 252 U. S. 37,] 
 Pitney, J. These are two appeals, taken under circumstances 
 that will be explained, from a single decree in a suit in equity
 
 SECT, v.] SIIAFFEE V. CARTER. 249 
 
 brought by appellant to restrain the enforcement of a tax assessed 
 against him for the year 1916 under the Income Tax Law of the 
 State of Oklahoma, on the ground of the unconstitutionality of the 
 statute. 
 
 A previous suit having the same object was brought by him in the 
 same court against the officials then in office, in which an application 
 for an interlocutory injunction heard before throe judges pursuant 
 to § 26G, Judicial Code, was denied, one judge dissenting. Shaffer 
 V. Howard, 250 Fed. Kep. 873. An appeal was taken to this court, 
 but, pending its determination, the terms of office of the defendants 
 expired, and, there being no law of the State authorizing a revival 
 or continuance of the action against their successors, we reversed 
 the decree and remanded the cause with directions to dismiss the 
 bill for want of proper parties. 740 U. S. 200. 
 
 After such dismissal the present defendant Carter, as State au- 
 ditor, issued another tax warrant and delivered it to defendant 
 Bruce, Sheriff of Creek County, with instructions to levy upon and 
 sell plaintiff's property in that county in order to collect the tax in 
 question ; and the sheriff having threatened to proceed, this suit 
 was commenced. An application for an interlocutory injunction, 
 heard before three judges, was denied upon the authority of the 
 decisions in 250 Fed. Eep. and of certain recent decisions of this 
 court. The decree as entered not only disposed of the application 
 but dismissed the action. Plaintiff, apparently unaware of this, 
 appealed to this court under § 266, Judicial Code, from the refusal 
 of the temporarv injunction. Shortly afterwards he took an appeal 
 under § 238, Judicial Code, from the same decree as a final decree 
 dismissing the action. The latter appeal is in accord with correct 
 practice, since the denial of the interlocutory application was merged 
 in the final decree. The first appeal (No. 531) will be dismissed. 
 
 The constitution of Oklahoma, besides providing for the annual 
 taxation of all property in the State upon an ad valorem basis, au- 
 thorizes (Art. 10, § 12) the employment of a variety of other 
 means for raising revenue, among them income taxes. 
 
 The act in question is c. 164 of the Laws of 1915. Its first section 
 reads as follows : " Each and every person in this State, shall be 
 liable to an annual tax upon the entire net income of such person 
 arising or accruing from all sources during the preceding calendar 
 year, and a like tax shall be levied, assessed, collected and paid an- 
 nually upon the entire net income from all property owned, and 
 of every business, trade or profession carried on in this state by 
 persons residing elsewhere.'' Subsequent sections define Avhat the 
 term " income " shall include ; prescribe how net income shall be 
 computed ; provide for certain deductions : prescribe varying rates 
 of tax for all taxable incomes in excess of $3,000, this amount being 
 deducted (bv way of exemption) from tlie income of each individual, 
 and for one living with spouse an additional $1,000, with further 
 deductions where there are children or dependents, exemptions be- 
 ing the same for resident and non-resident: require (§ 2) a return 
 on or before March first from each person liable for an income tax
 
 250 SHAFFER V. CARTKR. [cHAP. II. 
 
 under the provisions of the act for the preceding calendar year; 
 provide (§ 9) that the State Auditor shall revise returns and hear 
 and determine complaints, with power to correct and adjust the 
 assessment of income; that (§ 10) taxes shall become delinquent 
 if not paid on or before the first day of July, and the State Auditor 
 bhall have power to issue to any sheriff of the State a warrant cora- 
 numding him to levy the amount upon the personal property of the 
 delinciuent party; and (by >< 11) "Jf any of the taxes herein levied 
 become delinquent, they shall become a lien on all the property, 
 personal and real, of such delinquent person, and shall be subject to 
 the same penalties and provisions as are all ad valorem taxes." 
 
 Plaintiff, a non-resident of Oklahoma, being a citizen of Illinois 
 and a resident of Chicago in that State, was at the time of the 
 commencement of the suit and for several years theretofore (includ- 
 ing the3'ears 1915 and 1916) engaged in the oil business in Oklahoma, 
 having purchased, owned, developed, and operated a number of oil 
 and gas mining leases, and being the owner in fee of certain oil- 
 producing land, in that State. From properties thus owned' and 
 operated during the year 1916 he received a net income exceeding 
 $1,500,000, and of this he made, under protest, a return which 
 showed that, at the rates fixed by the act, there was due to the State 
 an income tax in excess of $76,000. The then State Auditor over- 
 ruled the protest and assessed a tax in accordance with the return; 
 the present Auditor has put it in due course of collection; and 
 plaintiff resists its enforcement upon the ground that the act, in 
 so far as it subjects the incomes of non-residents to the payment 
 of such a tax, takes their property without due process of law and 
 denies to them the equal protection of the laws, in contravention 
 of § 1 of the Fourteenth Amendment; burdens interstate com- 
 merce, in contravention of the commerce clause of § 8 of Art. 1 of 
 the Constitution ; and discriminates against non-residents in favor of 
 residents, and thus deprives plaintiff and other non-residents of the 
 })rivileges and immunities of citizens and residents of the State of 
 Oklahoma, in violation of § 2 of Art. IV. He also insists that the 
 lien attempted to be imposed upon his property pursuant to § 11 for 
 taxes assessed upon income not arising out of the same property 
 would deprive him of property without due process of law. 
 
 As ground for resorting to equity, the bill alleges that plaintiff is 
 the owner of various oil and gas mining leases covering lands in 
 Creek County, Oklahoma, and that the lien asserted thereon by 
 virtue of the levy and tax warrant creates a cloud upon his title. 
 Thisi entitles him to bring suit in equity (Union Pacific Ry. Co. v. 
 Cheyenne, 113 U. S. 516, 535; Pacific Express Co. v. Seibert 143 
 U. S. 339, 348; Ogden City v. Armstrong, 168 IT. S. 224, 237; Ohio 
 Tax Cases, 232 it. S. 576, 587; Creene v. Louisville & Intcrurban 
 R. R. Co., 244 U. S. 499, 506), unless the contention that he has 
 a plain, adequate, and complete remedy at law be well founded. 
 
 This contention is based, first, upon the provision of § 9 of c. 
 164, giving to the State Auditor the same power to correct and 
 adjust an assessment of income that is given to the county board
 
 SECT, y.] SHAFFER V. CARTER. 251 
 
 of equalization in cases Of ad valorem assepsments, taken in connec- 
 tion witii c. 107 of tlic Laws of ]!)15, wliicli pnnides (Art, 1, Subdiv. 
 B, § 2, p. 147) for an appeal from that board to the district court 
 of the county. In a recent decision (Berryhill v. Carter, 7G Okla- 
 homa, 248), the Supreme Court of tiie State held that an aggrieved 
 income taxpayer may have an appeal under this section, and that 
 thus '^all matters complained of may be reviewed and adjusted 
 to the extent that justice may demand." But the case related to 
 "correcting and adjusting an income tax retuni," and the decision 
 merely established the ap])eal to the district court as the appropriate 
 remedy, rather than an ap{)lication to the Supreme Court for a 
 writ of certiorari. It falls short of indicating — to say nothing of 
 plainly showing — that this procedure w^ould afford an adequate 
 remedy to a party contending that the income tax law itself was 
 repugnant to the Constitution of the United States. 
 
 Secondly, reference is made to § 7 of Subdiv. B, Art. 1, of c. 
 107, Oklahoma Laws 1915, p. 149, wherein it is provided that where 
 illegality of a tax is alleged to arise by reason of some action from 
 which the laws provide no appeal, the aggrieved person on paying 
 the tax may give notice to the officer collecting it, stating the grounds 
 of complaint and that suit w^ill be brought against him ; whereupon 
 it is made the duty of such officer to hold the tax until the final 
 determination of such suit if brought within thirty days; and if 
 it be determined that the tax was illegally collected, the officer is 
 to repay the amount found to be in excess of the legal and correct 
 amount. But this section is one of several that have particular 
 reference to the procedure for collecting ad valorem taxes; and 
 they are prefaced by this statement (p. 147) : " Subdivision B. To 
 the existing provisions of law relating to the ad valorem or direct 
 system of taxation the following provisions are added :" U^pon this 
 ground, in Gipsy Oil Co. v. Howard and companion suits brought 
 by certain oil-producing companies to restrain enforcement of taxes 
 authorized by the gross production tax law (Sess. Laws 1916, c. 
 39, p. 102), upon the ground that they were an unlawful imposi- 
 tion upon federal instrumentalities, tlie United States District Court 
 for the ^yestern District of Oklahoma held that the legal remedy 
 provided in § 7 of c. 107 applied only to ad valorem taxes, and did 
 not constitute a bar to equitable relief against the production taxes. 
 Defendants appealed to this court, and assigned this ruling for error, 
 inter alia; but they did not press the point, and the decrees were 
 affirmed upon the merits of the federal question. Howard v. Gipsy 
 Oil Co., 247 U. S. 503. 
 
 We deem it unnecessary to pursue further the question whether 
 either of the statutory provisions referred to furnishes an adequate 
 legal remedy against income taxes assessed under an unconstitu- 
 tional law, since one of the grounds of complaint in the present 
 case is that, even if the tax itself be valid, the procedure prescribed 
 by § 11 of the Income Tax Law for enforcing such a tax by impos- 
 ing a lien upon the taxpayer's entire property, as threatened to be 
 put into effect against plaintiff's property for taxes not assessed
 
 252 SHAFFER V. CARTER. [cHAP, II. 
 
 against the property itself and not confined to the income that 
 proceeded from the*^ same property, is not " due process of law," 
 within the requirement of the Fourteenth Amendment. For re- 
 moval of a cloud upon title caused by an invalid lien imposed for 
 a tax valid in itself, there appears to be no legal remedy. Hence, 
 on this ground at least, resort was properly had to equity for relief; 
 and since a court of equity does not " do justice by halves," and will 
 ■prevent, if possible, a multiplicity of suits, the jurisdiction extends 
 to the disposition of all questions raised by the bill. Camp v. Boyd, 
 229 TJ. S. 530, 551-552 ; McGowan v. Parish, 237 U. S. 285, 296. 
 
 This brings us to the merits. 
 
 Under the " due process of law " provision appellant makes two 
 contentions: first, that the State is without jurisdiction to levy a 
 tax upon the income of non-residents; and, secondly, that the lien 
 is invalid because imposed upon all his property real and personal, 
 without regard to its relation to the production of his income. 
 
 These are separate questions, and will be so treated. The tax 
 might be valid, although the measures adopted for enforcing it were 
 not. Governmental jurisdiction in matters of taxation, as in the 
 exercise of the judicial function, depends upon the power to enforce 
 the mandate of the State by action taken within its borders, either 
 in personam or in rem according to the circumstances of the case, 
 as by arrest of the person, seizure of goods or lands, garnishment of 
 credits, sequestration of rents and profits, forfeiture of franchise, 
 or the like; and the jurisdiction to act remains even though all 
 permissible measures be not resorted to. Michigan Trust Co. v. 
 Ferry, 228 TJ. S. 346, 353; Ex parte Indiana Transportation Co., 
 244 U. S. 456, 457. 
 
 It will be convenient to postpone the question of the lien until 
 all questions as to the validity of the tax have been disposed of. 
 
 The contention that a State is without jurisdiction to impose a 
 tax upon the income of non-residents, while raised in the present 
 case, was more emphasized in Travis v. Yale & Towne Mfg. Co., 
 decided this day, 252 U. S. 60, involving the income tax law of the 
 State of New York. There it was contended, in substance, that while 
 a State may tax the property of a non-resident situate within its 
 borders, or may tax the incomes of its own citizens and residents 
 because of the privileges they enjoy under its constitution and laws 
 and the protection they receive from the State, yet a non-resident, 
 although conducting a business or carrying on an occupation there, 
 cannot be required through income taxation to contribute to the 
 governmental expenses of the State whence his income is derived; 
 that an income tax, as against non-residents, is not only not a property 
 tax but is not an excise or privilege tax, since no privilege is granted ; 
 the right of the non-citizen to carry on his business or occupation 
 in the taxing State being derived, it is said, from the provisions 
 of the Federal Constitution. 
 
 This radical contention is easily answered by reference to funda- 
 mental principles. In our system of government the States have 
 general dominion, and, saving as restricted by particular provisions
 
 SECT, v.] SHAFFER V. CAKTEK. 253 
 
 of the Federal Constitution, complete dominion over all persons, 
 property, and business transactions wiliiin their borders; such assume 
 and perform the duty of preserving and protecting all such persons, 
 property, and business, and, in consequence, have the power normally 
 pertaining to governments to resort to all reasonable forms of taxa- 
 tion in order to defray the governmental expenses. Certainly they 
 are not restricted to property taxation, nor to any particular form 
 of excises. In well-ordered society, property has value chiefly for 
 what it is capable of producing, and the activities of mankind are 
 devoted largely to making recurrent gains from the use and develop- 
 ment of property, from tillage, mining, manufacture, from the em- 
 ployment of human skill and labor, or from a combination of some 
 of these ; gains capable of being devoted to their own support, and 
 the surplus accumulated as an increase of capital. That the State, 
 from whose laws property and business and industry derive the 
 protection and security without which production and gainful oc- 
 cupation would be impossible, is debarred from exacting a share of 
 those gains in the form of income taxes for the support of the 
 government, is a proposition so wholly inconsistent with fundamen- 
 tal principles as to be refuted by its mere statement. That it may 
 tax the land but not the crop, the tree but not the fruit, the mine 
 or well but not the product, the business but not the profit derived 
 from it, is wholly inadmissible. 
 
 Income taxes are a recognized method of distributing the burdens 
 of government, favored because requiring contributions from those 
 who realize current pecuniary benefits under the protection of the 
 government, and because the tax may be readily proportioned to their 
 ability to pay. Taxes of this character were imposed by several of 
 the States at or shortly after the adoption of the Federal Constitu- 
 tion. New York Laws 1778, c. 17; Eeport of Oliver Wolcott, Jr., 
 Secretary of the Treasury, to 4th Cong., 2d sess. (1796), concerning 
 Direct Taxes; American State Papers, 1 Finance, 423, 437, 429, 
 437, 439. 
 
 The rights of the several States to exercise the widest libertj' with 
 respect to the imposition of internal taxes always has been recognized 
 in the decisions of this court. In MeCulloch v- Maryland, 4 Wheat. 
 316, while denying their power to impose a tax upon any of the 
 operations of the Federal Government, Mr. Chief Justice Marshall, 
 speaking for the court, conceded (pp. 428-429) that the States 
 have full power to tax their own people and their own property, and 
 also that the power is not confined to the people and property of a 
 State, but may be exercised upon every object brought within its 
 jurisdiction ; saying : " It is obvious, that it is an incident of sover- 
 eignty, and is co-extensive with that to whieli it is an incident. All 
 subjects over which the sovereign power of a State extends, are objects 
 of taxation," etc. In Michigan Central R. R. Co. v. Powers, 201 IT. S. 
 245, the court, by Mr. Justice Brewer, said (pp. 292, 293) : "We 
 have had frequent occasion to consider questions of state taxation 
 in the light of the Federal Constitution, and the scope and limits 
 of National interference are well settled. There is no general super-
 
 254 SHAFFER V. CARTER. [CHAP. II. 
 
 vision on the part of the Nation over state taxation, and in respect 
 to the hitter the State has, speaking generally, the freedom of a 
 sovereign both as to objects and methods.'' That a State may tax 
 callings and occupations as well as persons and property has long 
 been recognized. " The power of taxation, however vast in its char- 
 acter and searching in its extent, is necessarily limited to subjects 
 within the jurisdiction of the State. These subjects are persons, 
 property, and business. . . . Jt [taxation] may touch business in 
 the almost infinite forms in wliich it is conducted, in professions, 
 in commerce, in manufactures, and in transportation. Unless re- 
 strained by provisions of the Federal Constitution, the power of 
 the State as to the mode, form, and extent of taxation is unlimited, 
 wliere the subjects to which it applies are within her jurisdiction." 
 State Tax in Foreign-Held Bonds, 15 Wall. 300, 319. See also 
 Welton V. Missouri, 1)1 U. S. 275, 278; Armour & Co. v. Virginia, 
 246 U. S. 1, 6 ; American Mfg. Co. v. St. Louis, 250 U. S. 459, 463. 
 
 And we deem it clear, upon principle as well as authority, that 
 just as a State may impose general income taxes upon its own citi- 
 zens and residents whose persons are subject to its control, it may, 
 as a necessary consequence, levy a duty of like character, and not 
 more onerous in its effect, upon incomes accruing to non-residents 
 from their property or business within the State, or their occupations 
 carried on therein; enforcing payment, so far as it can, by the ex- 
 ercise of a just control over persons and property within its borders. 
 This is consonant with numerous decisions of this court sustaining 
 etate taxation of credits due to non-residents, New Orleans v. Stem- 
 pel, 175 U. S. 309, 320, et seq.; Bristol v. Washington County, 177 
 U. S. 133, 145; Liverpool &c Ins. Co. v. Orleans Assessors, 221 U. 
 S. 346, 354; and sustaining federal taxation of the income of an 
 alien non-resident derived from securities held in this country, De 
 Ganay v. Lederer, 250 U. S. 376. 
 
 That a State, consistently with the Federal Constitution, may not 
 prohibit the citizens of other States from carrying on legitimate busi- 
 ness within its borders like its own citizens, of course is granted; 
 but it does not follow that the business of non-residents may not be 
 required to make a ratable contribution in taxes for the support of 
 the government. On the contrary, the very fact that a citizen of 
 one State has the right to hold property or carry on an occupation 
 or business in another is a very reasonable ground for subjecting 
 such non-resident, although not personally yet to the extent of his 
 property held, or his occupation or business carried on therein, to 
 a duty to pay taxes not more onerous in effect than those imposed 
 Tmder like circumstances upon citizens of the latter State. Section 
 2 of Art. IV of the Constitution entitles him to the privileges and 
 immunities of a citizen, but no more ; not to an entire immunity 
 from taxation, nor to any preferential treatment as compared with 
 resident citizens. It protects him against discriminatory taxation, 
 but gives him no right to be favored by discrimination or exemp- 
 tion. See Ward v. Maryland, 12 Wall. 418, 430. 
 
 Oklahoma has assumed no power to tax non-residents with respect
 
 SECT. v.] SllAFFKU V. (JAK'IKK. 255 
 
 to iucome derived from property or business beyond the borders 
 of the State. The first section of the act, while imposing a tax 
 upon iiihal)itants witli respect to their entire net income arising 
 from all sources, confines the tax upon non-residents to their net 
 income from property owned and business, etc., carried on within 
 the State. A similar distinction has been observed in our federal 
 income tax laws, from one of the earliest down to the present.^ The 
 Acts of 18G1 (1-.^ Stat. ;30!)) and 1SG4 (13 Stat. 281, 417) confined 
 the tax to persons residing in the United States and citizens residing 
 abroad. But in 18(50 (14 Stat. 137-138) there was inserted by 
 amendment the following: " And a like tax shall lie levied, collected, 
 and paid annually upon the gains, profits, and income of every 
 btisiness, trade, or profession carried on in the United States by 
 persons residing without the United States, not citizens thereof." 
 Similar provisions were embodied in the Acts of 1870 and 1894; 
 and in the Act of 1913 (38 Stat. IGG), after a clause imposing a 
 tax upon the entire net income arising or accruing from all sources 
 (with exceptions not material here) to every citizen of the United 
 States, whether residing at home or abroad, and to every person 
 residing in the Unitecl States though not a citizen thereof, the 
 following appears: "and a like tax shall be assessed, levied, collected, 
 and paid annually upon the entire net income from all property 
 owned and of every business, trade, or profession carried on in the 
 United States by persons residing elsewhere." Evidently this fur- 
 nished the model for § 1 of the Oklahoma statute. 
 
 No doubt is suggested (the former requirement of apportionment 
 having been removed by constitutional amendment) as to the power 
 of Congress thus to impose taxes upon incomes produced within 
 the borders of the United States or arising from sources located 
 therein, even though tlio income accrues to a non-resident alien. 
 And, so far as the question of jurisdiction is concerned, the due pro- 
 cess clause of the Fourteenth Amendment imposes no greater restric- 
 tion in this regard upon the several States than the corresponding 
 clause of Fifth Amendment imposes upon the United States. 
 
 It is insisted, however, both by appellant in this case and by the 
 opponents of the New York law in Travis v. Yale & Towne Mfg. 
 Co., that an income tax is in its nature a personal tax, or a subjec- 
 tive tax imposing personal liability upon the recipient of the in- 
 come; and that as to a non-resident the State has no jurisdiction 
 to impose such a liability. This argument, upon anaWsis, res^olves 
 itself into a mere question of definitions, and has no legitimate 
 bearing upon any question raised under the Federal Constitution. 
 
 * Acts of Anoiist o, 1861, c. 45, § 49, 12 Stat. 202, 300; June 30, 1864, 
 c. 173, §116, 13 Stat. 223, 281; July 4, 1864, Joint Kes. 77, 13 Stat. 417; 
 Julv 13, 1866, c. 184, § 0, 14 Stat. 08, 137-138; March 2, 1867, c. 160. § 
 13, '14 Stat. 471, 477-478; Julv 14, 1870. c. 2ri5, § 6, 16 Stat. 256, 2.^57; 
 Aujrust 27, 1804, e. 340, § 27, 28 Stat. 500, 5.-,3 ; October 3, 1013, c. 16, § 
 II, A. Subd. 1, 38 Stat. 114, 166; September 8, 1016, c. 463, Title I, 
 Part I, § 1, a, 30 Stat. 756; October 3, 1017, c. 63, Title I, §§ 1 and 2. 40 
 Stat. 300; February 24, 1010, e. 18, §§ 210, 213 (c), 40 Stat. 1057, 1062, 
 1066.
 
 256 SHAFFER V. CARTER. [ciIAP. II. 
 
 For, where the questioii is whether a state taxing law contravenes 
 rights secured by that instrument, the decision must depend not 
 upon any mere question of form, construction, or definition, but 
 upon the practical operation and effect of the tax imposed. St. 
 Louis Southwestern Ev. Co. v. Arkansas, 235 U. S. 350, 362 ; Moun- 
 tain Timber Co. v. Washinu-ton, 243 U. S. 219, 237; Crew Levick 
 Co. V. Pennsylvania, 245 U. S. 292, 294; American Mfg. Co. v. 
 St. Louis, 250 U. S. 459, 463. The practical burden of a tax imposed 
 upon the net income derived by a non-resident from a business 
 carried on Avithin the State certainly is no greater than that of a 
 tax upon the conduct of the business, and this the State has the 
 la'\\'ful power to impose, as we have seen. 
 
 The fact that it required the personal skill and management of 
 appellant to bring his income from producing property in Okla- 
 homa to fruition, and that his management was exerted from his 
 place of business in another State, did not deprive Oklahoma of 
 jurisdiction to tax the income which arose within its own borders. 
 The personal element cannot, by any fiction, oust the jurisdiction 
 of the State within which ' the income actually arises and whose 
 authority over it operates in rem. At most, there might be a ques- 
 tion whether the value of the service of management rendered from 
 without the State ought not to be allowed as an expense incurred 
 in producing the income ; but no such question is raised in the pres- 
 ent case, hence we express no opinion upon it. 
 
 The contention that the act deprives appellant and others sim- 
 ilarly circumstanced of the privileges and immunities enjoyed by 
 residents and citizens of the State of Oklahoma, in violation of § 
 2 of Art. IV of the Constitution, is based upon two grounds, which 
 are relied upon as showing also a violation of the " equal protection " 
 clause of the Fourteenth Amendment. 
 
 One of the rights intended to be secured by the former provision 
 is that a citizen of one State may remove to and carry on business 
 in another without being subjected in property or person to taxes 
 more onerous than the citizens of the latter State are subjected to. 
 Paul V. Virginia, 8 Wall. 168, 180; Ward v. Maryland, 12 Wall. 
 418, 430; Maxwell v. Bugbee, 250 U. S. 525, 527. The judge who 
 dissented in Shaffer v. Howard, 250 Fed. Rep. 873, 883, concluded 
 that the Oklahoma income tax law offended in this regard, upon 
 the ground (p. 888) that since the tax is as to citizens of Oklahoma 
 a purely personal tax measured by their incomes, while as applied 
 to a non-resident it is "essentially a tax upon his property and 
 business within the State, to which the property and business of 
 citizens and residents of the State are not subjected," there was a 
 discrimination against the non-resident. We are unable to accept 
 this reasoning. It errs in paying too much regard to theoretical 
 distinctions and too little to the practical effect and operation of 
 the respective taxes as levied ; in failing to observe that in effect 
 citizens and residents of the State are subjected at least to the same 
 burden as non-residents, and perhaps to a greater, since the tax im- 
 posed upon the former includes all income derived from their prop-
 
 SECT, v.] SHAFFER V. CAllTEK. 257 
 
 erty and business within the State and, in addition, any income 
 they may derive from outside sources. 
 
 Appellant contends that there is a denial to non-citizens of the 
 privileges and iinmunities tu which they arc entitled, and also a 
 denial of the equal protection of tiie laws, in that the act permits 
 residents to deduct from their gross income not only losses incurred 
 Avithin the State of Oklahoma but also those sustained outside of 
 that State, while non-residents may deduct only those incurred with- 
 in the fetate. The difference, however, is only such as arises nat- 
 urally from the extent of the jurisdiction of the State in the two 
 classes o| cases, and cannot be regarded as an unfriendly or unrea- 
 sonable discrimination. As to residents it may, and does, exert 
 its taxing power over their income from all sources, whether within 
 or without the State, and it accords to them a corresponding priv- 
 ilege of deducting their losses, wherever these accrue. As to non- 
 residents, tlie jurisdiction extends only to their property owned 
 within the State and their business, trade, or profession carried 
 on therein, and the tax is only on such income as is derived 
 from those sources. Hence there is no obligation to accord to them 
 a deduction by reason of losses elsewhere incurred. It may be re- 
 marked, in passing, that there is no shoA^-ing that appellant has 
 sustained such losses, and so he is not entitled to raise this question. 
 
 It is urged that, regarding the tax as imposed upon the l)usines3 
 conducted within the State, it amounts in the case of appellant's 
 business to a burden upon interstate commerce, because the products 
 of his oil operations are shipped out of the State. Assuming that 
 it fairly appears that his method of business constitutes interstate 
 commerce, it is sufficient to say that the tax is imposed not upon 
 the gross receipts, as in Crew Levick Co. v. Pennsylvania, 245 U. 
 S. 293, but only upon the net proceeds, and is plainly sustainable 
 even if it includes net gains from interstate commerce. U. S. Glue 
 Co. V. Oak Creek, 247 U. S. 321. Compare Peck & Co. v. Lowe, 
 247 U. S. 165. 
 
 Eeference is made to the gross production tax law of 1915 (c. 
 107, Art. 2, Subdiv. A, § 1 ; Sess. Laws 1915, p. 151), as amended 
 by c. 39 of Sess. Laws 1916 (p. 104), under which every person 
 or corporation engaged in producing oil or natural gas within the 
 State is required to pay a tax equal to 3 per centum of the gross 
 value of such product in lieu of all taxes imposed by the State, 
 counties, or municipalities upon the land or the leases, mining rights, 
 and privileges, and the machinery, appliances, and equipment, per- 
 taining to such production. It is contended that payment of the 
 gross production tax relieves the producer from the pnvment of the 
 income tax. This is a question of state law, upon which no con- 
 trolling decision by the Supreme Court of the State is cited. We 
 overrule the contention, deeming it clear, as a matter of construction, 
 that the gross production tax was intended as a substitute for the 
 ad valorem property tax but not for the income tax, and that there 
 is no such repugnance between it and the income tax as to produce 
 a repeal by implication. ISTor, eA^n if the effect of this is akin to
 
 258 SHAFFER V. CARTER. [cHAP. II. 
 
 double taxation, can it be regarded as obnoxious to the Federal 
 Constitution for that reason, since it is settled that nothing in that 
 instrument or in the Fourteenth Amendment ])revents the States 
 from imposing double taxation, or any other form of unequal taxa- 
 tion, so long as the inequality is not based upon arbitrary distinc- 
 tions. St. Louis Southwestern Ry. Co. v. Arkansas, 233 U. S. 350, 
 367-368. 
 
 The contention that there is a want of due process in the pro- 
 ceedings for enforcement of the tax, especially in the lien imposed 
 by § 11 upon all of the delinquent's property, real and personal, 
 reduces itself to this: that the State is without power to create a 
 lien upon any property of a non-resident for income taxes except 
 the very property from which the income proceeded; or, putting it 
 in another way, that a lien for an income tax may not be imposed 
 upon a non-resident's unproductive property, nor upon any partic- 
 ular productive property beyond the amount of the tax upon the 
 income that has proceeded from it. 
 
 But the facts of the case do not raise this question. It clearly 
 appears from the averments of the bill that the whole of plaintiff's 
 property in the State of Oklahoma consists of oil-producing land, oil 
 and gas mining leaseholds, and other property used in production 
 of oil and gas; and that, beginning at least as early as the year 1915, 
 when the act was passed, and continuing without interruption until 
 the time of the commencement of the suit (April 16, 1919), he 
 was engaged in the business of developing and operating these 
 properties for the production of oil, his entire business in that and 
 other States was managed as one business, and his entire net income 
 in the State for the year 1916 was derived from that business. Lay- 
 ing aside the probability that from time to time there may have 
 been changes arising from purchases, new leases, sales, and expira- 
 tions (none of which, however, is set forth in the bill), it is evident 
 that the lien will rest upon the same property interests which were 
 the source of the income upon which the tax was imposed. The entire 
 jurisdiction of the State over appellant's property and business 
 and the income that he derived from them — the only jurisdiction 
 that it has sought to assert — is a jurisdiction iji rem; and we are 
 clear that the State acted within its lawful power in treating his 
 property interests and business as having both unity and continuity. 
 Its purpose to impose income taxes was declared in its own constitu- 
 tion, and the precise nature of the tax and the measures to be taken 
 for enforcing it were plainly set forth in the Act of 1915; and 
 plaintiff having thereafter proceeded, with notice of this law, to 
 manage the property and conduct tlie business out of which pro- 
 ceeded the income now taxed, the State did not exceed its power 
 or authority in treating his property interests and his business as 
 a single entity, and enforcing payment of the tax by the imposition 
 of a lien, to be followed by execution or other appropriate process, 
 upon all property employed in the business. 
 
 No. 531. Appeal dismissed. 
 No. 580. Decree affirmed. 
 Mr. Justice McReyxolds dissents.
 
 SECT. v.] WISCO.\.Sl>' TltL'ST CO. V. PJIELPS. 259 
 
 STATE ex rel. WISCONSIX TRUST CO. v. PHELPS. 
 
 SUPUEME COUKT OF WiSCO.V.SIX. 1920. 
 [Reported 172 Wis. 147.] 
 
 ViNJE, J. The single question Tor doeisiou on this appeal is: Did 
 the Wisconsin Trust Company receive the income of tlie trust estate 
 for the year 1917 within tiie meaning of subdivision 3, % 1087 m2, 
 Stats. 1917? If it did, then under the provisions of subdivision 5, 
 § 1087 mlO, its duty was to re])urt it Un- taxation and pay an income 
 tax thereon. A solution of the question will be materially aided 
 by a reference to the conditions of the trust. The Wisconsin Trust 
 Company was made a trustee with the provision that, if it refused 
 to act, another \Vi.sconsin trust company should be appointed in its 
 stead. The funds of the estate were to be invested in such securities 
 as the laws of the State of Wisconsin permit trustees to invest in, 
 and vacancies in the trustees were to be filled by the county court 
 of Milwaukee county or its successor, and of course the trustees 
 must account to the county court of Milwaukee county. These 
 provisions indicate quite clearly that the testator intended' the trust 
 to be administered in Wisconsin, and wc must presume, in the ab- 
 sence of clear proof to the contrary, that the trustees have complied 
 with the provisions of the trust. 
 
 It appears without dispute that the Wisconsin Trust Company 
 has at all times been in the physical possession of the assets of the 
 trust estate, has kept all the accounts thereof, and has prepared and 
 filed its reports to the county court, the other trustees joining there- 
 in to the extent of certifying that they believe such reports to be 
 correct. 
 
 Now, let us see just what was done in this case as to the disputed 
 income. The Wisconsin Trust Company said to Gimbel Bros., 
 You may pay the income to Mrs. Behal instead of to me, as you 
 request; but I must be advised of all the transactions between you, 
 so that I can correctly keep and report the trust account; "and 
 proper receipts must be sent me by Mrs. Behal to protect me in my 
 account to the county court. Pursuant to such permission and direc- 
 tion the income was paid by Gimbel Bros, of Philadelpliia to Mrs. 
 Behal, presumably was a matter of convenience, since Mrs. Behal 
 lived in Philadelphia. The Wisconsin Trust Company credited the 
 income account of the estate with the amount paid to Mrs. Behal, 
 and debited the same account with the amount when Mrs. Behal's 
 receipt was received, and it accounted to the county court for the 
 amount so credited and debited. 
 
 In view of the provisions of the trust, the method of conducting 
 the trust estate, as well as the legal effect of the mode of payment, we 
 conclude that the transactions constituted in law a payment of the 
 income to the Wisconsin Trust Company, though no cash was re- 
 ceived by it. To hold otherwise were to permit shadow and not sub-
 
 2 GO TRAVIS r. YALE <fc TOWNE MFG. CO. [cHAP. II. 
 
 stance to control and to invite evasions of the payment of income 
 taxes by an exchange of receipts in lieu of cash or its equivalent. 
 
 Since we reach the result that the income assessed was received 
 by the Wisconsin Trust Company within the meaning of subdivision 
 o', § 108T m'i, the case falls withhi the rule of State ex rel. Wiscon- 
 sin Trust Co. V. Widule, 164 Wis. 56, 159 N. W. 630, and not with- 
 in that of Bayfield County v. Pishon, 163 Wis. 466, 156 N. W. 463. 
 A number of collateral questions argued are rendered immaterial 
 by the result reached upon the main facts of the case and are there- 
 fore not considered. 
 
 Judgment Affirmed. 
 
 Kerwin, J. took no part. Eschweiler and Eosenberry, JJ., 
 dissented. 
 
 TEAVIS V. YALE & TOWNE MFG. CO. 
 
 Supreme Court of the United States. 1920. 
 [Reported 252 U. S. 60.] 
 
 Pitney, J. This was a suit in equity, brought in the District 
 Court by appellee against appellant as Comptroller of the State of 
 New York to obtain an injunction restraining the enforcement of 
 the Income Tax Law of that State (c. 627, Laws 1919) as against 
 complainant, upon the ground of its repugnance to the Constitution 
 of the United States because violating the interstate commerce clause, 
 impairing the obligation of contracts, depriving citizens of the States 
 of Connecticut and New Jersey, employed by complainant, of the 
 privileges and immunities enjoyed by citizens of the state of New 
 York, depriving complainant and its non-resident employees of their 
 property without due process of law, and denying to such employees 
 the equal protection of the laws. A motion to dismiss the bill — 
 equivalent to a demurrer — was denied upon the ground that the 
 act violated § 2 of Art. IV of the Constitution by discriminating 
 against non-residents in the exemptions allowed from taxable in- 
 come; an answer was filed, raising no question of fact; in due course 
 there was a final decree in favor of complainant; and defendant 
 Took an appeal to this court under § 238, Judicial Code. 
 
 The act (§ 351) imposes an annual tax upon every resident of 
 the State with respect to his net income as defined in the act, at 
 specified rates, and provides also: "A like tax is hereby imposed 
 and shall be levied, collected and paid annually, at the rates specified 
 in this section, upon and with respect to the entire net income as 
 herein defined, except as hereinafter provided, from all property 
 owned and from every business, trade, profession or occupation 
 carried on in this state by natural persons not residents of the state." 
 Section 359 defines gross income, and contains this paragraph: "3. 
 In the case of taxpayers other than residents, gross income includes 
 only the gross income from sources within the state, but shall not
 
 SECT, v.] TKAVIS L\ YALE <fe TOWNE MFG. CO. 261 
 
 include annuities, interest on l)ank deposits, interest on bonds, notes 
 or other interest-bearing obligations or dividends from corporations, 
 except to the extent to which tlie same shall be a part of income 
 from any business, trade, profession or occupation carried on in 
 this state subject to taxation under this article." In § 3G0 provi- 
 sion is made for deducting in the computation of net income ex- 
 penses, taxes, losses, depreciation charges, etc.; but, by paragraph 
 11 of the same section, "In the case of a taxpayer other than a 
 resident of the state the deductions allowed in this section shall 
 be allowed only if, and to the extent tiiat, they are connected with 
 income arising from sources within the state; ..." By § 362, 
 certain exemptions are allowed to any resident individual taxpayer, 
 viz., in the case of a single person a personal exemption of $1,000, 
 in the case of the head of a family or a married person living witli 
 husband or wife, $2,000; and $200 additional for each dependent 
 person under 18 years of age or mentally or physically defective. 
 The next section reads as follows: "§ 363. Credit for taxes in 
 case of taxpayers other than residents of the state. Whenever a 
 taxpayer other than a resident of the state has become liable to 
 income tax to the state or country where he resides upon his net 
 income for the taxable year, derived from sources within this statx3 
 and subject to taxation under this article, the comptroller shall 
 credit the amount of income tax payable by him under this article 
 with such proportion of the tax so payable by him to the state or 
 country where he resides as his income subject to taxation imder 
 this article bears to his entire income upon which the tax so payable 
 to such other state or country was imposed; provided that such 
 credit shall be allowed only if the laws of said state or country 
 grant a substantially similar credit to residents of this state subject 
 to income tax under such laws." Section 366 in terms requires 
 that every "withholding agent" (including employers) shall deduct 
 and withhold 2 per centum from all salaries, wages, etc., payable 
 to non-residents, where the amount paid to any individual equals 
 or exceeds $1,000 in the year, and shall pay the tax to the Comp- 
 troller. This applies to a resident employee, also, unless he files a 
 certificate showing his residence address within the State. 
 
 Complainant, a Connecticut corporation doing business in New 
 York and elsewhere, has employees who are residents some of Con- 
 necticut others of Xew Jersey but are occupied in w^hole or in part 
 in complainant's business in New York. Many of them have annual 
 salaries or fixed compensation exceeding $1,000 per year, and the 
 amount required by the act to be witliheld by complainant from 
 the salaries of such non-resident employees is in excess of $3,000 per 
 year. Most of these persons are engaged under term contracts call- 
 ing for stipulated wages or salaries for a specifiod period. 
 
 The bill sets up that defendant, as Comptroller of the State of 
 New York, threatens to enforce the provisions of the statute against 
 complainant, requires it to deduct and withhold from the salaries 
 and wages payable to its employees residing in Connecticut or New 
 Jersey and citizens of those States respectively, engaged in whole
 
 262 TRAVIS V. YALE & TOWNE MFG. CO. [cilAP. II. 
 
 or in part in complainant's business in the State of New York, 
 the (axes provided in the statute, and threatens to enforce against 
 complainant the penalties provided by the act if it fails to do so; 
 that the act is unconstitutional for the reasons above specified ; and 
 that if complainant does withhold the taxes as required it will be 
 subjected to many actions by its employees for reimbursement of 
 tlie sums so withheld. No question is made about complainant's 
 right to resort to equity for relief; hence we come at once to the 
 constitutional questions. 
 
 That the State of New York has jurisdiction to impose a tax of 
 tliis kind upon the income of non-residents arising from any busi- 
 ness, trade, profession, or occupation carried on within its borders, 
 enforcing payment so far as it can by the exercise of a just control 
 over persons and property within the State, as by garnishment of 
 credits (of which the witiiholding provision of the New York law 
 is the practical equivalent) ; and that such a tax, so enforced, does 
 not violate the due process of law provision of the Fourteenth 
 Amendment, is settled bv our decision in Shaffer v. Carter, this 
 day announced, 252 U. S. 37, involving the income tax law of the 
 State of Oklahoma. That there is no unconstitutional discrimination 
 against citizens of other States in confining the deduction of ex- 
 penses, losses, etc., in the case of non-resident taxpayers, to such 
 as are connected witli income arising from sources within the taxing 
 State, likewise is settled by that decision. 
 
 It is not here asserted that the tax is a burden upon interstate 
 commerce ; the point having been abandoned in this court. 
 
 The contention' that an unconstitutional discrimination against 
 non-citizens arises out of the provision of § 366 confining the with- 
 holding at source to the income of non-residents is unsubstantial. 
 That provision does not in any wise increase the burden of the tax 
 upon non-residents, but merely recognizes the fact that as to them 
 the State imposes no personal liability, and hence adopts a conven- 
 ient substitute for it. See Bell's Gap R. R. Co. v. Pennsylvania, 
 134 U. S. 232, 239. 
 
 Nor has complainant on its own account any just ground of com- 
 plaint by reason of being required to adjust its system of accounting 
 and paying salaries and wages to the extent required to fulfill the 
 duty of deducting and withholding the tax. This cannot be deemed 
 an unreasonable regulation of its conduct of business in New York. 
 New York, Lake Erie & Western II. "R. Co. v. Pennsylvania, 153 
 TJ. S. 628, cited in behalf of complainant, is not in point. In that 
 case the State of Pennsylvania granted to a railroad company or- 
 ganized under the laws of New York and having its principal place 
 of business in that State the right to construct a portion of its 
 road through Pennsylvania, upon prescribed terms which were as- 
 sented to and complied with by the company and were doemedto 
 constitute a contract, not subject to impairment or modification 
 through subsequent legislation by the State of Pennsylvania, except 
 to the extent of establishing reasonable re.srulations touching the 
 management of the business done and the property owned by the
 
 SECT, v.] TRAVIS V. YALE <fe TOWNE MFG. CO. 203 
 
 company in that State, not materially interfering with or ohstructing 
 the substantial enjoyment of tiie rights previously granted. After- 
 wards, Pennsylvania undertook by statute to require the company, 
 whcQ making payment of coupons upon bonds previously issued by 
 it, payable at its otliee in the City of Xew York, to withhold taxes 
 assessed by the Stale of Pennsylvania against residents of tliat State 
 because of ownership of such bonds. The coupons were payable 
 to bearer, and when they were presented for payment it was prac- 
 tically impossible for the company to ascertain who were the real 
 owners, or whether they were owned by the same parties who o\vTied 
 the bonds. That statute was held 1') l)e an unreasonable regulation 
 and hence to amount to an imjiaii-mciit of the obligation of the 
 contract. 
 
 Jn the case at bar complainant, although it is a Connecticut 
 corporation and has its principal place of business in that State, 
 is exercising the })rivilege of carrying on business in the State of 
 New York without any contract limiting the State's power of regula- 
 ' tion. The taxes required to be withheld are payable with respect 
 to that portion only of the salaries of its employees which is earned 
 -within the State of New York. It might pay such salaries, or this 
 portion of them, at its place of business in New Y'ork ; and the fact 
 that it may be more convenient to pay them in Connecticut is not 
 sufficient to deprive the State of New York of the right to impose 
 such a regulation. It is true complainant asserts that the act impairs 
 the obligation of contracts between it and its employees; but there 
 is no averment that any such contract made before the passage of 
 the act required the wages or salaries to be paid in the State of Con- 
 necticut, or contained otlior pi'ovisions in anywise conflicting with 
 the requirement of withholding. 
 
 The District Court, not passing upon the above questions, held 
 that the act, in granting to residents exemptions denied to non-resi- 
 dents, violated the provision of § 2 of Art. IV of the Federal 
 Constitution: "The citizens of each State shall be entitled to all 
 Privileges and Immunities of Citizens in the several States " ; and, 
 notwithstanding the elaborate and ingenious argument submitted by 
 appellant to the contrary, we are constrained to affirm the ruling. 
 
 The purpose of the provision came under consideration in Paul 
 V. Virginia, 8 AVall. 168, 180, wdiere the court, speaking by Mr. 
 Justice Field, said : " It was undoubtedly the object of the clause 
 in question to place the citizens of each State upon the same footing 
 with citizens of other States, so far as the advantages resulting 
 from citizenship in those States are concerned. It relieves them 
 from the disabilities of alienage in other States; it inhibits dis- 
 criminating legislation against them by other States; it gives them 
 the right of free ingress into other States, and egress from them ; 
 it insures to them in other States the same freedom possessed by 
 the citizens of those States in the acquisition and enjoyment of 
 property and in the pursuit of happiness ; and it secures to them 
 in other States the equal jDrotection of their laws. It has been 
 justly said that no provision m the Constitution has tended so
 
 264 TRAVIS r. YALE it TOw>'E :mfg. CO. [chap. II. 
 
 strongly to constitute the citizens of the United States one people 
 as this." And in Ward v. Maryland, 13 Wall. 418, holding a dis- 
 criminatory state tax upon non-resident traders to be void, the court, 
 by Mr. Justice Clifford, said (p. 430) : "Beyond doubt those words 
 [privileges and immunities] are words of very comprehensive mean- 
 ing, but it will be sufficient to say that the clause plainly and un- 
 mistakably secures and protects the right of a citizen of one State 
 to pass into any other State of the Union for the purpose of engaging 
 in lawful commerce, trade, or business without molestation; to 
 acquire personal property; to take and hold real estate; to maintain 
 actions in the courts of the State ; and to be exempt from any higher 
 taxes or excises than are imposed by the State upon its own citizens." 
 
 Of course the terms "resident" and "citizen" are not synony- 
 mous, and in some cases the distinction is important (La Tourette 
 V. McMaster, 248 U. S. 465, 470) ; but a general taxing scheme 
 such as the one under consideration, if it discriminates against all 
 non-residents, has the necessary effect of including in the discrimina- 
 tion those Avho are citizens of other States; and, if there be no 
 reasonable ground for the diversity of treatment, it abridges the 
 privileges and immunities to which such citizens are entitled. In 
 Blake v. McClung, 173 U. S. 239, 247; 176 U. S. 59, 67, the court 
 held that a statute of Tennessee, declaring the terms upon which a 
 foreign corporation might carry on business and hold property 
 in that State, which gave to its creditors residing in Tennessee 
 priority over all creditors residing elsewhere, without special ref- 
 erence to whether they were citizens or not, must be regarded as 
 contravening the " privileges and immunities " clause. 
 
 The nature and effect of the crucial discrimination in the present 
 case are manifest. Section 363, in the case of residents, exempts 
 from taxation $1,000 of the income of a single person, $2,000 in 
 the case of a married person, and $300 additional for each dependent. 
 A non-resident taxpayer has no similar exemption; but by § 363, 
 if liable to an income tax in his own State, including income derived 
 from sources within New York and subject to taxation under this 
 act, he is entitled to a credit upon the income tax otherwise payable 
 to the State of New York by the same proportion of the tax payable 
 to the State of his residence as his income subject to taxation by 
 the New York Act bears to his entire income taxed in his own 
 State; "provided that such credit shall be allowed only if the laws 
 of said state . . . grant a substantially similar credit to residents 
 of this state subject to income tax under such laws." ' 
 
 * Readiufi: the statute literally, there would appear to he an additional 
 discrimination a<;ainst non-residents in that under § 366 the " withholding 
 agent" (employer) is required to witlihold 2 per cent from all salaries, 
 wages, etc., payable to any individual non-resident amounting to $1,000 or 
 mare in the year; whereas by § 351 the tax upon residents (indeed, upon 
 non-residents likewise, so far as this section goes), is only one per centum 
 uj)cn the first .$10,000 of net income. It is said, however, that the discrepancy 
 arose through an amendment made to § 351 while the bill was pending in 
 the legislature, no corresponding amendment having been made in § 366. 
 In view of this, and taking the whole of the act together, the Attorney 
 General has advised the Comptroller that § *366 requires withholding of
 
 SECT. V.l TIIAVLS V. YALE & TOWXE MFG. CO. 2G5 
 
 In tho concrete, the particular incidence of the discrimination 
 is upon citizens of Connecticut and New Jersey, neither of which 
 States has an income tax law. A consideraljle number of complain- 
 ant's employees, residents and citizens of one or the other of those 
 States, spend their working time at its office in the City of New 
 York, and earn their salaries there. The case is typical ; it being 
 a matter of common knowledge that from necessity, due to the 
 geographical situation of that city, in close proximity to the neigh- 
 boring States, many thousands of men and women, residents and 
 citizens of those States, go daily from tlieir homos to the city and 
 earn their livelihood there. They pursue their several occupations 
 side by side witli residents of the State of New York — in effect 
 competing with them as to wages, salaries, and other terms of em- 
 ployment. Whether they must pay a tax upon the first $1,000 or 
 $2,000 of income, while their associates and competitors who reside 
 in New York do not, makes a substantial difference. Under the 
 circumstances as disclosed, we are unable to find adequate ground 
 for the discrimination, and are constrained to hold that it is an 
 unwarranted denial to the citizens of Connecticut and New Jersey 
 of the privileges and immunities enjoyed by citizens of New York. 
 This is not a case of occasional or accidental inequality due to 
 circumstances personal to the tax])ayer (see Amoskeag Savings Bank 
 V. Purdy, 231 U. S. 373, 393-394'; Maxwell v. Bugbee, 250 U. S. 
 525, 543) ; but a general rule, operating to the disadvantage of all 
 non-residents including those who are citizens of the neighboring 
 States, and favoring all residents including those who are citizens 
 of the taxing State. 
 
 It cannot be deemed to be counterbalanced by the provision of 
 par. 3 of § 359 which excludes from the income of non-resident 
 taxpayers " annuities, interest on bank deposits, interest on bonds, 
 notes or other interest-bearing obligations or dividends from corpora- 
 tions, except to the extent to which tlie same shall be a part of 
 income from any business, trade, profession or occupation carried 
 on in this state subject to taxation under this article." This provi- 
 sion is not so conditioned as probably to benefit non-residents to 
 a degree corresponding to the discrimination against them; it seems 
 to have been designed rather (as is avowed in appellant's brief) to 
 preserve the preeminence of New York City as a financial center. 
 
 Nor can the discrimination be uplield, as is attempted to be done, 
 upon the theory that non-residents have untaxed income derived 
 from sources in their home Strifes or elsewhere outside of the State 
 of New York, corresponding to the amount upon which residents 
 of that State are exempt from taxation under this act. The dis- 
 crimination is not conditioned upon the existence of such untaxed 
 income; and it would bo rash to assume that non-residents taxable 
 in New York under this law, as a class, are receiving additional 
 income from outside sources equivalent to the amount of the exemp- 
 tions that are accorded to citizens of New York and denied to them, 
 only one per centum upon the first $10,000 of income. And the Comptroller 
 has issued regulations to that effect. Hence we treat the discrepancy as 
 if it did not exist.
 
 266 WILLIAMS V. SINGER. [ciIAP. II. 
 
 In the brief submitted by the Attorney General of New York in 
 behalf of appellant, it is said that the framers of the act, in embody- 
 ing in it the provision for iinoqual treatment of the residents of 
 other States with respect to the exemptions, looked fonvard to the 
 speedy adoption of an income tax by the adjoining States; in which 
 event, injustice to their citizens on the part of New York could 
 be avoided by providing similar exemptions similarly conditioned. 
 This, however, is wholly speculative; New York has no authority 
 to legislate for the adjoining States; and we must pass upon its 
 statute with respect to its effect and operation in the existing situa- 
 tion. But besides, in view of the provisions of the Constitution 
 of the United States, a discrimination by the State of New York 
 against the citizens of adjoining States would not be cured were 
 those States to establish like discriminations against citizens of the 
 State of New York. A State may not barter away the right, con- 
 ferred upon its citizens by the Constitution of the United States, 
 to enjoy the privileges and immunities of citizens when they go 
 into other States. Nor can discrimination be corrected by retalia- 
 tion ; to prevent this was one of the chief ends sought to be accom- 
 plished by the adoption of the Constitution. 
 
 Decree affirmed. 
 
 Mr. Justice McEeynolds concurs in the result. 
 
 WILLIAMS V. SINGEE. 
 House of Lords. 1920. 
 
 [Reported 1921. App. Cas. 65.] 
 
 Viscount Cave. My Lords, the question raised in these appeals 
 is whether income from foreign investments which is received 
 abroad by a person not domiciled in this country is chargeable with 
 income tax under the Income Tax Acts by reason of tlie fact that 
 the investments stand in the names of trustees who are domiciled 
 here. As the point raised in both cases is the same, the appeals 
 have been heard together. 
 
 In Williams v. Singer the respondents are the trustees of a 
 settlement under which the Princesse de Polignac is the bene- 
 ficial tenant for life in possession. The settlement is in English 
 form, and the trustees are all domiciled and resident in the 
 United Kingdom; but the Princess (who is a widow) is a French 
 subject by marriage, and is domiciled and resident abroad. 
 The settled fund, so far as it comes into question in these pro- 
 ceedings, consists of certain foreign investments of considerable 
 value, and under orders signed by the trustees the whole income 
 from 'these investments is paid to the account of the Princess at 
 a bank in New York, no part thereof being remitted to this country. 
 In these circumstances the Additional Commissioners for the
 
 SECT. v.] WILLIAMS V. SINGER. 267 
 
 Division of New Sanim in tlio county of Wilts (in which ono of 
 tiie respondents resides) made two assessments upon the respon- 
 dents for tiie year ended April 5, 1916 — namely, an assessment of 
 60,000/. in respect of foreign possessions and an assessment of 5000/. 
 in respect of foreiijn securities — these sums representing a|>- 
 proximatcly the income from the foreign investments comitrised 
 in the settlement as above mentioned. The respondents objected 
 to the assessments and appealed to the Special Commissioners 
 who, after argument, discharged them ; and on a case being stated 
 for the opinion (jf tiie Kings Bench Division Saukey, J. confirmed 
 the decision of the Special ('ommissioners. An appeal by the 
 Surveyor of Taxes to the Court of Appeal was dismissed, and the 
 Surveyor has appealed to this IFouse. 
 
 The facts in Tool r. lioyal JOxchange Assurance are in all ma- 
 terial particulars (with one exception) similar to those in the 
 other case. In this case the respondent company, which has its 
 principal place of business in the City of London, is the trustee 
 of the will of ^Ir. J. P. Mcllor (deceased) ; and the beneficial 
 tenant for life under the will is Mrs. II. P. Munthe, a Swedish 
 subject domiciled abroad. The will comprises foreign invest- 
 ments; and the whole income from such investments is paid directly 
 to Mrs. ]\Iunthe abroad, no part of such income being remitted to 
 this country. The District Commissioners of Taxes for the City of 
 London made assessments upon the respondent company in respect 
 of foreign possessions of 2015/. for the year ended April 5, 1915, and 
 2018/. for the year ended April 5, liilG, these sums representing the 
 income of the foreign investments above referred to. But these 
 assessments differed from those which are in question in Williams 
 V. Singer in one respect — namely, that instead of being made (as 
 in that case) upon the trustees by name without reference to any 
 trust, they were made upon the respondent company "as trustees 
 under the will of J, P. j\Iellor deceased for beneficiaiT Mrs. H. P. 
 ^lunthe." The respondent company appealed to the Special Com- 
 missioners, who discharged the assessments; and this decision also 
 has been affirmed by Sankey J. and the Court of Appeal and is the 
 subject of appeal to this House. 
 
 My Lords, it was decided in Colquhoun v. Brooks, 19 Q. B. D. -118, 
 that the tax imposed by the Income Tax Acts, 1843 and 1853 (Sch. D, 
 Cases 4 and 5), upon the income from foreign securities and posses- 
 sions was leviable upon so much only of that income as was re- 
 mitted to the United Kingdom. But that limitation was to some 
 extent abrogated by s. 5 of the Finance Act, 1914, which (so far 
 as material in this appeal) is as follows: "Income tax in respect 
 of income arising from securities, stocks, shares, or rents in any 
 place out of the United Kingdom shall, notwithstanding anything 
 in the rules under the fourth and fifth case in section one hundred 
 of the Income Tax Act, 1842, be computed on the full amount of 
 the income, Avhetlier the income has been or will be received in 
 the Ignited Kingdom or not .... and the provisions of the 
 Income Tax Acts (including those relating to returns) shall ap-
 
 268 WILLIAMS V. SIIs'GER. [cHAP. II. 
 
 ply accordingly, .... Provided that this section shall not apply 
 in the case of a person who satisfies the Commissioners of Inland 
 Eevenue that he is not domiciled in the United Kingdom, or that, 
 heing a British subject, he is not ordinarily resident in the United 
 Kingdom." 
 
 It is obvious that, having regard to the proviso to the above 
 section, the Princesse de I*oIignac and Mrs. Munthe, who are 
 domiciled abroad, could not have been assessed to income tax 
 in respect of the foreign income above referred to. But the 
 revenue authorities contend that they are entitled to levy tax upon 
 that income by means of assessments upon the trustees, who are 
 domiciled in this country. If this contention is upheld, the trustees 
 will of course be entitled to retain the tax so paid out of the trust 
 income payable to the beneficial life tenants, who will thus have to 
 bear tlie burden of the tax from which the proviso appears to re- 
 lie\'e them : but the appellants contend that this is the efl^ect of the 
 statutes. The question to be determined is whether they have 
 that effect. 
 
 In support of the above contention counsel for the appellants 
 relied principally upon the language of Sch. D to the Income 
 Tax Act, 1853, which provides that the duties thereby imposed 
 are to be deemed to be granted and made payable " for and in 
 respect of the annual profits or gains arising or accruing to any 
 person residing in the United Kingdom from any kind of prop- 
 erty whatever, whether situate in the United Kingdom or else- 
 where," and upon the first general rule in s. 100 of the Income 
 Tax Act, 1842, which provides that the duties upon profits imposed 
 by Sch. D are to be charged on and paid by the persons "receiving 
 or entitled unto" such profits; and they contended that as the 
 income in question in the cases under appeal " accrued " to the 
 trustees as the legal holders of the investments, and the trustees 
 are the persons legally " entitled " to receive it, they are the persons 
 chargeable under the Act. Indeed, I understood Mr. Cunliffe to go 
 so far as to say that, when funds are vested in trustees, the 
 revenue authorities are entitled to look to those trustees for the 
 tax, and are neither bound nor entitled to look beyond the legal 
 ownership. 
 
 My Lords, I think it clear that such a proposition cannot be 
 maintained. It is contrary to the express words of s. 42 of the 
 Income Tax Act, 1842, which provides that no trustee who shall 
 have authorized the receipt of the profits arising from trust prop- 
 erty by the person entitled thereto, and who shall have made a 
 return of the name and residence of such person in manner required 
 by the Act, shall be required to do any other act for the purpose of 
 assessing such person. And, apart from this provision, a decision 
 that in the case of trust property the trustee alone is to be looked 
 to would lead to strange results. If the legal ownership alone 
 is to be considered, a beneficial owner in moderate circumstances 
 may lose his right to exemption or abatement by reason of the fact 
 that he has wealthy trustees, or a wealthy beneficiary may escape
 
 SECT. v.] WILLIAMS V. SINGER. 269 
 
 super tax by appointing a number of trustees in less affluent cir- 
 cumstances. Indeed, if the Act is to be construed as counsel for 
 the a})pellants suggests, a beneficiary domiciled in this country may 
 altogether avoid the tax on this foreign income spent aljroad by the 
 simple expedient of appointing one or more foreign trustees. 
 Accordingly I put this contention aside. 
 
 On the other hand, I do not think it would be correct to say 
 that, whenever property is held in trust, the person liable to 
 be taxed is the beneficiary and not the trustee. Sect. 41 of the 
 Income Tax Act, 1842, renders the trustee, guardian or other per- 
 son who has the control of the property of an infant, married 
 woman, or lunatic chargeable to income tax in the place of such 
 infant, married woman, or lunatic; and the same section declares 
 that any i)ers()n not resident in (ireat Britain shall be chargeable 
 in the name of his trustee or agent having the receipt of any profits 
 or gains. Sect. 108 of the same Act, which deals with the profits 
 or gains arising from foreign possessions or foreign securities, 
 provides that in default of the owner or proprietor being charged, 
 the trustee, agent or receiver of such profits or gains shall be 
 charged for the same. And even apart from these special pro- 
 visions I am not prepared to deny that there are many cases in 
 which a trustee in receipt of trust income may be chargeable with 
 the tax upon such income. For instance, a trustee carrying on 
 a trade for the benefit of creditors or beneficiaries, a trustee for 
 charitable purposes, or a trustee who is under an obligation to 
 apply the trust income in satisfaction of charges or to accumulate 
 it for future distribution, appears to come within this category; 
 and other similar cases may be imagined. 
 
 The fact is that if the Income Tax Acts are examined, it will 
 be found that the person charged with the tax is neither the 
 trustee nor the beneficiary as such, but the person in actual re- 
 ceipt and control of the income which it is sought to reach. The 
 object of the Acts is to secure for the State a proportion of 
 the profits chargeable, and this end is attained (speaking generally) 
 by the simple and effective expedient of taxing the profits where 
 they are found. If the beneficiary receives them he is liable to 
 be assessed upon them. If the trustee receives and controls them, 
 he is primarily so liable. If they are under the control of a guar- 
 dian or committee for a person not sui juris or of an agent or 
 receiver for persons resident abroad, they are taxed in his hands. 
 But in cases where a trustee or agent is made chargeable with the 
 tax the statutes recognize the fact that he is a trustee or agent for 
 others and he is taxed on behalf of and as representing his bene- 
 ficiaries or principals. This is made clear liy the language of 
 many sections of the Act of 1842. For instance, s. 41 provides 
 that a person not resident in Great Britain shall be chargeable 
 "in the name of his trustee or agent. Sect. 44 refers to the 
 trustee or agent of any person as being assessed " in respect of " 
 such person, and gives him a right to retain the tax out of anv 
 money of such person coming to his hands. Sect. 51, under which
 
 270 MAGUIRE V. TREFRY. [cilAP. II. 
 
 trui;tees and others are bound to make returns, refers to the event 
 of the beneficiary being charged either " in the name of "' the trustee 
 or otlier person making the return, or in his own name. Sect. 53 
 refers to the trustee or agent as being charged " on account " of 
 the beneficiar}' ; and simihir expressions are found in other sections. 
 In short, the intention of the Acts appears to be that where a 
 beneficiary is in possession and control of the trust income and 
 is sui juris, he is tlie person to be taxed; and that while a trustee 
 may in certain cases be charged with the tax, he is in all such cases 
 to be treated as charged on behalf or in respect of his beneficiaries, 
 who will accordingly be entitled to any exemption or abatement 
 Avhich the Acts allow. 
 
 Applying the above conclusions to the present case, it follows 
 in my opinion, first, that the respondent trustees, who have 
 directed the trust income to be paid to the beneficial tenants 
 for life and themselves receive no part of it, are not assessable 
 to tax in respect of such income; and secondly, that even if they 
 were so assessable, they would be assessable as trustees on behalf 
 of the life tenants, who Avould accordingly be entitled to the benefit 
 of the exemption contained in the proviso in s, 5 of the Finance 
 Act, 1914. The assessments in question in Pool v. Royal Exchange 
 Assurance Co., which were made upon the respondents as trustees 
 for the beneficiary Mrs. ]\Iunthe, and were probably so made with 
 reference to ss. 41 and 108 of the Act of 1842, support this view 
 of the Acts ; but it does not appear to me that the absence of similar 
 words in the assessments in "Williams v. Singer makes any difference 
 in the result. 
 
 The above conclusion is supported by tlie consideration that 
 under the express words of s. 5 of the Finance Act, 1914, a per- 
 son therel)y charged with tax is authorized to deduct from the 
 taxable income " any annuity or other annual payment payable 
 out of the income to a person not resident in the United Kingdom." 
 It is difficult to believe that it was the intention of the Legislature, 
 while exempting from the tax any definite part of the income which 
 is payable to a person abroad, to impose the tax upon the whole 
 income when so payable. 
 
 For the above reasons I think that the contention of the ap- 
 pellants fails, and accordingly that these appeals should be 
 dismissed with costs. 
 
 MAGUIRE V. TREFRY. 
 
 Supreme Coukt of the Uxited States, 1920. 
 
 [Reported 25.3 U. S. 12.] 
 
 Day, J. Massachusetts has a statute providing for a tax upon 
 incomes (Gen. Acts Mass. 1910, c. 269). In the act imposing 
 the tax it is provided: "If an inhabitant of this commonwealth re-
 
 SKCr. v.] MAGUIIiE V. TREFltY. 271 
 
 ceives income from one or more executors, administrattjrs or trustees, 
 none of wliom is an inhabitant of this commonwealth or has de- 
 rived his appointment from a court of this commonwealtli, such 
 income sliall Iju subject to the taxes assessed by tiiis act, according 
 to the nature of tlie income received by the executors, adminis- 
 trators (ii- trustees." 
 
 The plaintiir in error is a resident of the State of Massachusetts, 
 {ind was taxed upon income from a trust created by tlie will of one 
 Matilda 1'. :\IacArthur formerly of Philadelphia. The plaintiff 
 in error under the will of the decedent was the beneficiary of a 
 trust thereby created. The securities were held in trust by the 
 Girard Trust Company of Philadelphia. Those which were di- 
 rectly taxable to the trustee were held exempt from taxation in 
 Massachusetts under tlie terms of the statute of that State. The 
 securities the income from which was held taxable in Massachusetts 
 consisted of the bonds of three corporations and certain certificates 
 of the Southern Pailway Equipment Trust. These securities were 
 held in the possession of the trustee in Pliiladelphia. The trust 
 was being administered under the laws of Pennsylvania. The 
 Supreme Judicial Court of ^lassachusetts held the tax to be valid. 
 230 Massachusetts, 503. 
 
 Of the nature of the tax the Chief Justice of Massachusetts, 
 speaking for the Supreme Judicial Court, said: "The income tax 
 is measured by reference to the riches of the person taxed actually 
 made available to him for valuable use during a given period. It 
 establishes a basis of taxation directly proportioned to ability to 
 bear the burden. It is founded upon the protection afforded to 
 the recipient of the income by the government of the Common- 
 wealth of his residence in his person, in his riglit to receive the 
 income and in his enjoyment of the income when in his possession. 
 That government provides for him all the advantages of living in 
 safety and in freedom and of being protected by law. It gives 
 security to life, liberty and the other privileges of dwelling in a 
 civilized community. It exacts in return a contribution to the 
 support of that government m'casurcd by and based upon the in- 
 come, in the fruition of which it defends him from unjust inter- 
 ference. It is true of the present tax, as was said by Chief Justice 
 Shaw in Bates c. Boston, 5 Cush. 93, at page 99, 'The assessment 
 does not touch the fund, or control it; nor does it interfere with 
 the trustee in the exercise of his proper duties; nor call him, nor 
 hold him, to any accountability. It affects only the income, after 
 it has been paid by the trustee' to the beneficiary." 
 
 We see no reason to doubt the correctness of this view of the 
 nature and effect of the Massachusetts statute, and shall accept it 
 for the purpose of considering the federal question before us, 
 which arises :Prom the contention of the plaintiff in error that the 
 imposition of the tax was a denial of due process of law within the 
 protection of the Fourteenth Amendment to the Federal Con- 
 stitution, because, it is alleged, the effect of the statute is to subject 
 property to taxation which is beyond the limits and outside the
 
 272 AIAGUIRE V. TREFKY. [CHAP. II. 
 
 jurisdiction of the State. To support this contention the plaintiff 
 in error relies primarily upon the decision of this court in Union 
 Eefrigerator Transit Co v. Kentucky, 199 U. S. 194. In that case 
 we held that tangible, personal property, permanently located in 
 another State than that of the owner, where it had acquired a situs, 
 and was taxed irrespective of the domicile of the owner, — was 
 beyond the taxing power of the State, and that an attempt to tax 
 such property at the owner's domicile was a denial of due process 
 of law under the Fourteenth Amendment. This ruling was made 
 with reference to cars of the Transit Company permanently em- 
 ployed outside the State of the owner's residence. In that case 
 this court in the opinion of Mr. Justice Brown, speaking for it, 
 expressly said that the taxation of intangible personal property 
 was not involved. (199 U. S. 211.) 
 
 It is true that in some instances we have held that bonds and bills 
 and notes although evidences of debt have come to be regarded as 
 property which may acquire a taxable situs at the place where 
 they are kept, which may be elsewhere than at the domicile of the 
 owner. These cases rest upon the principle that such instruments 
 are more than mere evidences of debt, and may be taxed in the 
 jurisdiction where located, and where they receive the protection of 
 local law and authority. Blackstone v. Miller, 188 U. S. 189, 206. 
 People ex rel. Jefferson v. Smith, 88 N. Y. 576, 585. At the last 
 term we held in DeGanay v. Lederer, 250 U. S. 376, that stocks 
 and bonds issued by domestic corporations, and mortgages secured 
 on domestic real estate, although owned by an alien non-resident, 
 but in the hands of an agent in this country with authority to deal 
 with them, were subject to the Income Tax Law of October 3, 
 1913, 38 Stat. 166. 
 
 In the present case we are not dealing with the right to tax 
 securities which have acquired, a local situs, but are concerned with 
 the right of the State to tax the beneficiary of a trust at her resi- 
 dence, although the trust itself may be created and administered 
 under the laws of another State. 
 
 In Fidelity & Columbia Trust Company v. Louisville, 245 U. S. 
 54, we held that a bank deposit of a resident of Kentucky in 
 the Bank of another State, where it was taxed, might be taxed as 
 a credit belonging to the resident of Kentucky. In that case Union 
 Eefrigerator Transit Co. v. Kentucky, supra, was distinguished, 
 and the principle was affirmed that the State of the owner's domi- 
 cile might tax the credits of a resident although e\idenced by debts 
 due from residents of another State. This is the general rule rec- 
 ognized in the maxim " mohilia sequuntur personam," and justify- 
 ing, except under exceptional circumstances, the taxation of credits 
 and beneficial interests in property at the domicile of the owner. 
 We have pointed out in other decisions that the principle of that 
 maxim is not of universal application and may yield to the ex- 
 igencies of particular situations. But we think it is applicable 
 here. 
 
 It is true that the legal title of the property is held by the trustee
 
 BECT. 
 
 .] MAGUIRE V. TREFRY. 273 
 
 in Pennsylvania. But it is so held for the benefit of the beneficiary 
 of the trust, and such beneficiary has an equitable right, title 
 and interest distinct from its legal ownership. " The legal owner 
 holds the direct and absolute dominion over the property in the view 
 of the law ; but the income, profits, or benefits thereof in his hands, 
 belong wholly, or in part, to others." 2 Story's Equity, 11th ed., 
 § 9(54. It is tins property riglit belonging to the beneficiary, realized 
 in the shape of income, which is the subject-matter of the tax 
 under the statute of Massachusetts. 
 
 The beneficiary is domiciled in Massachusetts, has the protection 
 of her laws, and there receives and holds the income from the trust 
 property. We find nothing in the Fourteenth Amendment which 
 prevents the taxation in Massachusetts of an interest of this char- 
 acter, thus owned and enjoyed by a resident of the State. The 
 case presents no difference in principle from the taxation of credits 
 evidenced by the obligations of persons who are outside of the 
 State which are held taxable at the domicile of the owner. Kirt- 
 land V. Hotchkiss, 100 U. S. 491. 
 
 AVe find no error in the judgment and the same is 
 
 Affirmed. 
 
 Dissenting, Mr. Justice McReynolds.
 
 2TJ: MAINE V. Gli.VXD TKUXK RAILWAY CO. [cHAP. III. 
 
 CHAPTER III 
 
 EXCISE TAX. 
 
 MAIXE V. GRAND TRUNK RAILWAY CO. 
 Supreme Court of the United Statp:s, 1893. 
 
 [Reported 142 U. S. 217.] 
 
 Field, J. Tlie tax, for tlie collection of which this action is 
 brought, is an excise tax upon the defendant corporation for the 
 privilege of exercising its franchises within the State of Maine. It 
 is so declared in the statute which inijjoses it; and that a tax of 
 this character is within the power of the State to levy there can 
 be no question. The designation does not always indicate merely 
 an inland imposition or duty on the consumption of commodities, 
 but often denotes an impost for a license to pursue certain callings, 
 or to deal in special commodities, or to exercise particular fran- 
 chises. It is used more frequently, in this country, in the latter 
 sense than in any other. The privilege of exercising tlie franchises 
 of a corporation within a State is generally one of value, and often 
 of great value, and the subject of earnest contention. It is natural, 
 therefore, that the corporation should be made to bear same pro- 
 portion of the burdens of government. As the granting of the 
 privilege rests entirely in the discretion of the State, whetlier the 
 corporation be of domestic or foreign origin, it may be conferred 
 upon such conditions, pecuniary or otherwise, as the State in its 
 judgment may deem most conducive to its interests or policy. It 
 may require the payment into its treasury, each year, of a specific 
 sum, or may apportion the amount exacted according to the value 
 of the business permitted, as disclosed by its gains or receipts of 
 the present or past years. The character of the tax, or its validity, 
 is not determined by the mode adopted in fixing its amount for any 
 specific period or the times of its payment. The whole field of in- 
 quiry into the extent of revenue from sources at the command of 
 the corporation, is open to the consideration of the State in de- 
 termining what may be justly exacted for the privilege. The rule 
 of apportioning the charge to the receipts of the business would 
 seem to be eminently reasonable, and likely to produce the most 
 satisfactory results, both to the State and the corporation taxed. 
 
 The court below held that the imposition of the taxes was a 
 regulation of com,merce, interstate and foreign, and therefore in 
 conflict v/ith the exclusive power of Congress in that respect; and 
 on that ground alone it ordered judgment for the defendant. This 
 ruling was founded upon the assumption that a reference by the
 
 CHAP, III.] MAINK V. GitAND TUUNK KAII.WAY CO. 275 
 
 statute to the transportation receipts and to a certain percentage 
 of the same in determining the amount of the excise tax, was in 
 effect the imposition of the tax upon sueli receipts, and therefore 
 an i liter ferorKc with interstate and foreign commerce. But a resort 
 lo those ix'ceipts was simply to a.scertain the value of the business 
 (k)ne bv tlie corporation, and thus oljtain a guide to a reasonable 
 conclusion as to the amount of the excise tax which should be levied; 
 and we are unable to perceive in that resort any interference with 
 transportation, domestic or foreign, (ner tlie road of the railroad 
 company, or any regulati(jn of conimcrce which consists in such 
 transportation. If the amount ascertained were specifically im- 
 posed as the tax, no objection to its validity would be pretended. 
 And if the inquiry of the State as to the value of the privilege 
 were limited to receipts of certain past years instead of the year 
 in which the tax is collected, it is conceded that the validity of the 
 tax would not be affected; and if not, we do not see how a reference 
 to the results of any other year could affect its character. There is 
 no levy by the statute on tlie receipts tliemselves, either in form or 
 fact; they constitute, as said above, simply the means of ascertaining 
 the value of the privilege conferred. 
 
 This conclusion is sustained by the decision in Home Insurance 
 Co. V. New York, 134 U. S. 5;)-i. The Home Insurance Company 
 was a corporation created under the laws of Xew York, and a por- 
 tion of its capital stock was invested in bonds of the United States. 
 By an act of the legislature of that State, of 1881, it was declared 
 that every corporation, joint stock company or a=sociation, then or 
 thereafter incorporated under any law of the State, or of any other 
 Stiite or country, and doing business in tlie State, with certain 
 designated exceptions not material to the question involved, should 
 be subject to a tax upon its corporate francliise or business, to be 
 computed as follows: if its dividend or dividends made or declared 
 during the year ending the first day of November, amounted to 
 six per centum or more upon the par value of its capital stock, 
 then the tax was to be at the rate of one-quarter mill upon the 
 capital stock for each one per cent of the dividends. A less rate 
 was provided where there was no dividend or a dividend less 
 than six per cent. The purpose of the act was to fix the amount 
 of the tax each year upon the franchise or business of the corpo- 
 ration by the extent of dividends upon its capital stock, or, where 
 there were no dividends, according to the actual value of the capital 
 stock during the year. The tax payable by the company, estimated 
 according to its dividends, under that law, aggregated seven thou- 
 sand five hundred dollars. The company resisted its payment, 
 asserting that the tax was, in fact, levied upon the capital stock of 
 the company, contending that there should be deducted from it a 
 sum hearing the same ratio thereto that the amount invest;ed in 
 bonds of the United States bore to its capital stock, and that the 
 law requiring a tax, without such reduction, was unconstitutional 
 and void. It was held that the tax was not upon the capital 
 stock of the company nor upon any bonds of the United States
 
 276 THOMAS i'. TNITED STATES. [cUAr, III. 
 
 composing a part of that stock, but upon the corporate fran- 
 chise or business of the company, and that reference was only 
 made to its capital stock and dividends for the purpose of deter- 
 mining the amount of the tax to be exacted each year. And 
 the court said : " The validity of the tax can in no way be de- 
 pendent upon the mode which the State may deem fit to adopt 
 in fixing the amount for any year which it will exact for the 
 franchise. No constitutional objection lies in the way of a legis- 
 lative body prescribing any mode of measurement to determine 
 the amount it will charge for the privileges it bestows." 
 
 The case of Philadelphia and Southern Steamship Co. v. Penn- 
 sylvania, 122 U. S, 326, in no way confiicts with this decision. 
 That was tlie case of a tax, in terms, upon the gross receipts of 
 a steamship company, incorporated under the laws of the State, 
 derived from the transportation of persons and property between 
 different States and to and from foreign countries. Such tax 
 was held, without any dissent, to be a regulation of interstate and 
 foreign commerce, and, therefore, invalid. We do not question the 
 correctness of that decision, nor do the views we hold in this case 
 in any way qualify or impair it. 
 
 It follows from what we have said, that the judgment of the 
 court below must be 
 
 Reversed, and the cause remanded, ivith directions to enter 
 judgment in favor of the State for the amount of the taxes 
 demanded; and it is so ordered. 
 
 Bradley^ Harlan^ Lamar and Brown dissented. 
 
 THOMAS V. UNITED STATES. 
 
 Supreme Court of the United States. 1904. 
 [Reported 192 U. S. 363.] 
 
 George C. Thomas was indicted for violation of the internal 
 revenue laws of the United States in that, being a broker in the 
 city of New York, he sold certain shares of Atchison preferred 
 stock and omitted the required revenue stamps from the mem- 
 orandum of sale. He demurred to the indictment on the ground 
 that the act of June 13, 1898, 30 Stat. 448, c. 448, which required 
 the stamps to be affixed, was unconstitutional. The demurrer 
 was overruled, the court, Thomas, J., delivering an opinion. 115 Fed. 
 Rep. 207. 
 
 Trial was had, defendant found guilty, and judgment rendered, 
 sentencing him to pay a fine of five hundred dollars. 
 
 The case was then brought here on writ of error. 
 
 Fuller, C. J. By the first clause of section eight of article I 
 of the Constitution, Congress is empowered " to lay and collect
 
 CHAP. III.] THOMAS r. united states. 277 
 
 taxes, duties, imposte and excises," "but all duties, imposts and 
 excises shall be uniform throughout the United States." 
 
 This division of taxation into two classes is recognized through- 
 out the Constitution. 
 
 By clause three of section two, representatives and direct taxes 
 are required to be apportioned according to the enumeration pre- 
 scribed, and by clause four of section nine, no cajutJition or other 
 direct tax can be laid except according to that enumeration. 
 
 By clause one of section nine, the migration or importation of 
 persons by the States was not to be prohibited prior to 1808, but 
 a tax or duty could be imposed on such importation, not exceeding 
 ten dollars for each person. 
 
 By clause five it is provided: "No tax or duty shall be laid on 
 articles exported from any State," 
 
 By clause two of section ten, no State can, "without the consent 
 of the Congress, lay any imposts or duties on imports or exports, 
 except what may be absolutely necessary for executing its inspection 
 laws." By clause three the States are forbidden, without the con- 
 sent of Congress, to "lay any duty of tonnage." 
 
 And these two classes, taxes so-called, and " duties, imposts 
 and excises," apparently embrace all forms of taxation contemplated 
 by the Constitution. As was observed in Pollock v. Farmers' Ix)an 
 and Trust Company, 157 U. S. 429, 557: "Although there have 
 been from time to time intimations that there might be some tax 
 which was not a direct tax nor included under the words ' duties, 
 imposts and excises,' such a tax for more than one hundred years 
 of national existence has as yet remained undiscovered, notwith- 
 standing the stress of particular circumstances has invited thorough 
 investigation into sources of revenue." 
 
 The present case involves a stamp tax on a memorandum or 
 contract of sale of a certificate of stock, which plaintiff in error 
 claims was unlawfully exacted because not falling within the class 
 of duties, imposts and excises, and being, on the contrary, a direct 
 tax on property. 
 
 There is no occasion to attempt to confine the words duties, 
 imposts and excises to the limits of precise definition. "We think 
 that they were used comprehensively to cover customs and excise 
 duties imposed on importation, consumption, manufacture and sale 
 of certain commodities, privileges, particular business transactions, 
 vocations, occupations and the like. 
 
 Taxes of this sort have been repeatedly sustained by this court, 
 and dii^tinguished from direct taxes under the Constitution. As 
 in Hylton r. United States, 3 Dallas, 171, on the use of carriages; 
 in Nicol r. Ames, 173 U. S. 509, on sales at exchanges or boards 
 of trade; in Knowlton v. Moore, 178 U. S. 41, on the transmission 
 of property from the dead to the living; in Treat v. White, 181 U. S. 
 264, on agreements to sell shares of stock denominated " calls " by 
 New York stock brokers; in Patton v. Brady, 184 U. S. 608, on 
 tobacco manufactured for consumption. 
 
 Brown r. Maryland, 12 Wheat. 419, and Fairbank i*. United
 
 278 NEW YOEiv ex rel. hatch v. keardon. [chap. hi. 
 
 States, 181 U. S. 283, are not in point. In the one the clause of 
 the Constitution was considered which forbids any State, with- 
 out the consent of Congress, to "lay any imposts or duties on im- 
 ports or exports," and in the other, that "no tax or duty shall be 
 laid on articles exported from any State." The distinction between 
 direct and indirect taxes was not involved in either case. 
 
 The sale of stocks is a particular business transaction in the 
 exercise of the privilege afforded by the laws in respect to cor- 
 porations of disposing of property in the form of certificates. The 
 stamp duty is contingent on the happening of the event of sale, 
 and the element of absolute and unavoidable demand is lacking. 
 As such it falls, as stamp taxes ordinarily do, within the second 
 class of the forms of taxation. 
 
 Judgment affirmed. 
 
 NEW YOEK ex rel. HATCH v. EEARDON. 
 Supreme Coukt of the United States. 1906. 
 
 [Revorted 204 V. 8. 152.] 
 
 Holmes, J. This is a writ of error to revise an order dismissing 
 a writ of liaheas corpus and remanding the relator to the custody 
 of the defendant in error. The order was made by a single Justice 
 and affirmed successively by the Appellate Division of the Supreme 
 Court, 110 App. Div. 821, and by the Court of Appeals, 184 N. Y. 
 431. The facts are these: The relator, Hatch, a resident of Con- 
 necticut, sold in New York to one Maury, also a resident of Con- 
 necticut, but doing business in New York, one hundred shares of the 
 stock of the Southern Eailway Company, a Virginia corporation, and 
 one hundred shares of the stock of the Chicago, Milwaukee and St. 
 Paul Eailroad Company, a Wisconsin corporation, and on the same 
 day and in the same place received payment and delivered the cer- 
 tificates, assigned in blank. He made no memorandum of the sale 
 and affixed to no document any stamp, and did not otherwise pay 
 the tax on transfers of stock imposed by the New York Laws of 
 1905, c. 241. He was arrested on complaint, and thereupon peti- 
 tioned for this writ, alleging that the law was void under the Four- 
 teenth Amendment of the Constitution of the United States. 
 
 The statute in question levies a tax of two cents on each hundred 
 dollars of face value of stock, for every sale or agreement to sell 
 the same, etc. ; to be paid by affixing and cancelling stamps for the 
 requisite amount to the books of the company, the stock certificate, 
 or a memorandum required in certain cases. Failure to pay the 
 tax is made a misdemeanor punisliable by fine, imprisonment, or 
 both. There is also a civil penalty attached. The petition for the 
 writ sets up only the Fourteenth Amendment, as we have mentioned, 
 but both sides have argued the case under the commerce clause of 
 the Constitution, Art. T, section 8, as well, and we shall say a few 
 words on that aspect of the question.
 
 CHAP. ITT.] NEW YOI?K CX rel. UATCTI V. UEARDOX. 279 
 
 It is true that a very similar stamp act of the United States, 
 the act of Juue 13, 1898, c. 448, § ^5, Seliedule A, 30 tStat. 448, 
 458, was upheld iiT Thomas v. United States, 1U2 U. S. 303, But 
 it is argued that (lill'iTeiit considerations apply to tlie States and 
 the tax is said to be had iimlci- the Fourteenth Aniendmeut for 
 several reasons. In tiie hrst place it is said to be an arbitrary dis- 
 crimination. This objeetion to a tax nmst be approached with the 
 greatest caution. The general expressions of the Amendment must 
 not be allowed to upset familiar and long-established methods and 
 processes by a formal elaboration of rules which its words do not 
 import. See Michigan Central liaili'oad Co. v. Powers, 201 U. S. 
 245, 21)3. Stamp acts necessarily are confined to certain classes of 
 transactions, and to classes which, considered economically or from 
 the legal or other possible points of view, are not very different 
 from otiior classes that escape. You cannot have a stamp act with- 
 out something that can be stamped conveniently. And it is easy 
 to contend that justice and equality cannot be measured by the 
 convenience of the taxing ])ower. Yet the economists do not con- 
 demn stamp acts, and neither does the Constitution. 
 
 The objection did not take this very broad form to be sure. But 
 it was said that there was no basis for the separation of sales of 
 stock from sales of other kinds of personal property, for instance, 
 especially, bonds of the same or other companies. But bonds in 
 most cases pass bv delivery and a stamp tax hardly could be en- 
 forced. See further, Nicol v. Ames, 173 U. S. 509, 522, 523. In 
 Otis V. Parker, 187 U. S. 60(5, ])ractical grounds were recognized 
 as sufficient to warrant a ])rohibition, which did not apply to sales 
 of other property, of sales of stock on margin, although this same 
 argument was pressed with great force. A fortiori do they warrant 
 a tax on sales, which is not intended to discriminate against or to 
 discourage them, but simply to collect a revenue for the benefit of 
 the whole community in a convenient way. 
 
 It is urged further that a tax on sales is really a tax on prop- 
 erty, and that therefore the act, as applied to the sliares of a foreign 
 corporation owned by non-residents, is a taking of pi'operty without 
 due process of law. Union Pefrigerator Transit Co. v. Kentucky, 
 199 U. S, 194. This argument presses the expressions in Brown v. 
 Maryland, 12 Wheat. 419, 444; Fairbank v. United States, 181 U. S. 
 283, and intervening cases, to new applications, and farther than 
 they properly can be made to go. Whether we are to distinguish or 
 to identify taxes on sales and taxes on goods depends on the scope 
 of tlie constitutional provision concerned. Compare Foppiano v. 
 Speed, 199 U. S. 501, 520. A tax on foreign bills of lading may be 
 held equivalent to a tax on exports as against Article I, section 9 ; 
 a license tax on importers of foreign goods may bo hold an un- 
 authorized interferonco M'ith commerce ; and yet it would be con- 
 sistent to sustain a tax on sales within the State as against the 
 Fourteenth Amendment so far as tliat alone is concerned. What- 
 ever the right of parties engaged in commerce among the States, a 
 sale depends in part on the law of the State where it takes place for
 
 2S0 ^'E^v york cx rel. hatch v. keaedon. [chap. hi. 
 
 its validity and, in the courts of that State, at least, for the mode of 
 proof. No one would contest the power to enact a statute of frauds 
 for such transactions. Therefore the State may make parties pay 
 for the help of its laws, as against this objection. A statute requir- 
 ing a memorandum in writing is quite as clearly a regulation of the 
 business as a tax. It is unnecessary to consider other answers to 
 this point. 
 
 Yet another ground on which the owners of stock are said to 
 be deprived of their property without due process of law is the 
 adoption of the face value of the shares as the basis of the tax. 
 One of the stocks was worth thirty dollars and seventy-five cents 
 a share of the face value of one hundred dollars, the other one 
 hundred and seventy-two dollars. The inequality of the tax, so 
 far as actual values are concerned, is manifest. But, here again 
 equality in this sense has to yield to practical considerations and 
 usage. There must be a fixed and indisputable mode of ascertain- 
 ing a stamp tax. In another sense, moreover, there is equality. 
 When the taxes on two sales are equal the same number of shares 
 is sold in each case ; that is to say, the same privilege is used to the 
 same extent. Valuation is not the only thing to be considered. As 
 was pointed out by the Court of Appeals, the familiar stamp tax 
 of two cents on checks, irrespective of amount, the poll tax of a 
 fixed sum, irrespective of income or earning capacity, and many 
 others, illustrate the necessity and practice of sometimes substitut- 
 ing count for weight. See Bell Gap Railroad Co. v. Pennsylvania, 
 134 U. S. 232; Merchant & Manufacturers' Bank v. Pennsylvania, 
 167 U. S. 461. Without going farther into a discussion which, 
 perhaps, could have been spared in view of the decision in Thomas 
 V. United States, 192 U. S. 363, and the constitutional restrictions 
 upon Congress, we are of opinion that the New York statute is valid, 
 60 far as the Fourteenth Amendment is concerned. 
 
 The other ground of attack is that the act is an interference 
 with commerce among the several States. Cases were imagined, 
 which, it was said, would fall within the statute, and yet would be 
 cases of such commerce; and it was argued that if the act embraced 
 any such cases it was void as to them, and, if void as to them, void 
 altogether, on a principle often stated. United States v. Ju Toy, 
 198 U. S. 253, 262. That the act is void as to transactions in com- 
 merce between the States, if it applies to them, is thought to be 
 shown by the decisions concerning ordinances requiring a license 
 fee from drummers, so called, and the like. Eobbins v. Shelby 
 County Taxing District, 120 U. S. 489; Stockard v. Morgan, 185 
 U. S. 27; Rearick v. Pennsylvania, 203 U. S. 507. 
 
 But there is a point beyond which this court does not consider 
 arguments of this sort for the purpose of invalidating the tax laws 
 of a State on constitutional grounds. This limit has been fixed in 
 many cases. It is that unless the party setting up the unconstitu- 
 tionality of the state law belongs to the class for whose sake the 
 constitutional protection is given, or the class primarily protected, 
 this court does not listen to his objections, and will not go into
 
 ciiAr. III.] ^'K\v YOUK ex rel. hatch r. keaedox. 281 
 
 imaginary cases, notwithstanding the seeming logic of the position 
 that it must do so, because ii' tor any reason, or as against any class 
 embraced, tlie law is unconstitutional, it is void as to all. Super- 
 visors V. Stanley, 105 U. S. 3U5, 311; Clark v. Kansas City, 17G 
 U. S. 114, 118; Lampasas v. Bell, 180 U. S. 276, 283, 28-1; Cronin 
 V. Adams, 1!)2 U. S. 108, 11-4. If the law is valid when confined 
 to the class of the party before the court, it may be more or less of 
 a speculation to inquire what exceptions the state court may read 
 into general words, or how far it may sustain an act tliat partially 
 fails. With regard to taxes, especially, perhaps it might be assumed 
 that tlie legislature meant them to be valid to whatever extent they 
 could be sustained, or some other peculiar principle might be applied. 
 See e. g. People's National Bank v. Marye, 191 C. S. 2T2, 283. 
 
 Whatever the reason, the decisions are clear, and it was because 
 of them that it was inquired so carefully in the drummer cases 
 whether the party concerned was himself engaged in commerce 
 between the States. Stockard v. Morgan, 185 U. S. 27, 30, 35, 36; 
 Caldwell v. North Carolina, 187 U. S. 6-22; Eearick r. Pennsylvania, 
 203 U. S. 507. Therefore we begin with the same inquiry in this 
 case, and it is plain that we can get no farther. There is not a 
 shadow of a ground for calling the transaction described such com- 
 merce. The comnmnications between the parties were not between 
 different States, as in Western Union Telegraph Co. v. Texas, 105 
 U . S. 460, and the bargain did not contemplate or induce the trans- 
 port of property from one State to another, as in the drummer cases, 
 liearick v. Pennsylvania, supra. The bargain was not affected in 
 any way, legally or practically, by the fact that the parties happened 
 to have come from another State before they made it. It does not 
 appear that the petitioner came into New York to sell his stock, as 
 it was put on his behalf. It appears only that he sold after coming 
 into the State. But we are far from implying that it would have 
 made any difference if he had come to New York with the supposed 
 intent before any bargain was made. 
 
 It is said that the property sold was not within the State. The 
 immediate object of sale was the certificate of stock present in 
 New York. That document was more than evidence, it was a con- 
 stituent of title. No doubt, in a more remote sense, the object was 
 the membership or share which the certificate conferred or made 
 attainable. More remotely still it was an interest in the property 
 of the corporation, which might be in other States than either the 
 corporation or the certificate of stock. But we perceive no relevancy 
 i'i the analysis. The facts that the property sold is outside of the 
 State and the seller and buyer foreigners are not enough to make 
 a sale commerce with foreign nations or among the several States, 
 and that is all that there is here. — On the general question there 
 should be compared with the drummer cases the decisions on the 
 other side of the line. Nathan v. I/niisiana, 8 TIow. 73 ; Woodruff 
 V. Parham, 8 Wall. 123; Brown v. Houston, 114 U. S. 622; Emert 
 V. Missouri, 156 U. S. 2sJ6. A tax is not an unconstitutional regu- 
 lation in every case where an absolute prohibition of sales would be
 
 282 EQUIT. LIFE ASSURANCE SOCIETY V. PENX. [ciIAl'. III. 
 
 one. American Steel and Wire Co. v. Speed, 192 U. S. 500. We 
 think it unnecessary to explain at greater length the reasons for 
 our opinion that the petitioner has suti'ered no unconstitutional 
 wrong. 
 
 Order affirmed. 
 
 EQUITABLE LIFE ASSUEANCE SOCIETY v. 
 PENNSYLVANIA. 
 
 Supreme Court of the United States. 1915. 
 
 [Reported 238 U. 8. 143.] 
 
 Holmes, J. The Equitable Life Assurance Society of the United 
 States, the plaintilf in error, does business in Pennsylvania. By 
 an act of June 28, 1895, that State levies an annual tax of two 
 per cent upon the gross premiums of every character received 
 from business done within the State during the preceding year. 
 The Company paid large taxes under this act, but appealed to the 
 state courts from charges made by the State Accounting Officer 
 in respect of premiums for the years 1906, 1907, 1908, 1909 and 
 1910, paid to the Company outside the State by residents of 
 Pennsylvania. The Supreme Court sustained the charge. 239 Pa. 
 St. 288. The whole discussion there was whether these items fell 
 within the statute. On that point of course the decision of the state 
 court is final, and as the Company is a foreign corporation and 
 this is held to be a tax for the privilege of doing business in the 
 State, it is obvious that the scope of the question before us is narrow, 
 being only whether the statute as construed deprives the Company 
 of its property without due process of law, contrary to the Four- 
 teenth Amendment, as alleged. It is true that the plaintiff in error 
 suggests a further infraction of that amendment in an assumption 
 by the Supreme Court of an unproved fact: that the beneficiaries 
 of the policies lived in Pennsylvania. But it is enough to answer 
 that we understand the decision when it uses the word beneficiaries 
 to mean parties to tlie contracts, the insured, and that the assumption 
 was warranted by the record as to them. 
 
 The grounds for the only argument open are that a State cannot 
 tax property beyond its jurisdiction, Union Transit Co. v. Kentucky, 
 199 U. S. 194; that it cannot effect that result indirectly by making 
 the payment a condition of the right to do local business, Western 
 Union Telegraph Co. v. Kansas, 216 IT. S. 1 ; Pullman Co. v. Kansas 
 216 U. S. 56; Ludwig v. Western Union Telegraph Co., 216 U. S. 
 146; and that as it could not prohibit the contracts it cannot im- 
 pose the tax. Allgeyer v. Louisiana, 165 U. S. 578. In aid of the 
 effort to make the foregoing decisions applicable it is argued that 
 this is a property tax. But, as we have said, the Supreme Court 
 of Pennsylvania speaks of it as a tax for the privilege of doing 
 business within the Commonwealth, and whether the statement
 
 CHAP. III.] EQUIT. LIFE ASSURANCE SOCIETY V. PENN. 283 
 
 is a construction of the act or not we a^ce with it so far at least 
 as to assume that if tliat characterizatiou is necessary to sustain 
 the tax, the Legislature meant to avail itself of any power appro- 
 priate to that end. 
 
 Without j^'oiiig into any preliminary matters that might he de- 
 bated it is enough for us to say that we agree with the Supreme 
 Court of the State in its line of reasoning; applying it to the claim 
 of constitutional rights whicli that court did not discuss. The 
 question is not what is doing business within a Stale in such a 
 sense as to lay a foundation for service of process tliere. It being 
 established that the relation of the foreign company to domestic 
 policy holders constituted doing business within the meaning of 
 the statute, tlie question is whetlier the Company may be taxed 
 in respect of it, in this way, whatever it may he called. We are 
 dealing with a corporation that has subjected itself to the juris- 
 diction of the State; there is no question that the State has a 
 right to tax it and the only doubt is whether it may take this item 
 into account in fixing the ligure of the tax. Obviously the limit 
 in that regard is a different matter from the inquiry whether the 
 residence of a policy holder would of itself give jurisdiction over 
 the Company. The argument of the state court is that the Com- 
 pany is protecting its insured in Pennsylvania equally whether 
 they pay their premiums to the Company's agent in Philadelphia 
 or by mail or in person to another in New York. 
 
 These arc policies of life insurance and according to the state- 
 ment of the plaintiff in error are kept alive and renewed to 
 residents of Pennsylvania by payments from year to year. The 
 fact that the State could not prevent the contracts, so far as that 
 may be true, has little bearing upon its right to consider the benefit 
 tlms annually extended into Pennsylvania in measuring the value 
 of the privileges tliat it does grant. We may add that the State 
 profits the Company equally by protecting the lives insured, 
 wherever the premiums are paid. The tax is a tax upon a privilege 
 actually used. The only question concerns the mode of measuring 
 the tax. Flint v. Stone Tracy Co., 220 U. S. 107, 162, 163. As 
 to that a certain latitude must be allowed. It is obvious that many 
 incidents of the contract are likely to be attended to in Pennsylvania, 
 such as payment of dividends when received in cash, sending an 
 adjuster into the State in case of dispute, or making proof of death. 
 See Connecticut ^lut. Life Ins. Co. v. Spratloy, i:2 U. S. 602, 611; 
 Pennsylvania Lumbermen's l\lut. Fire Ins. Co. v. Meyer, 197 V. S. 
 407, 415. It is not unnatural to take the policy holders residing in 
 the State as a measure without going into nicer if not impracticable 
 details. Taxation has to be determined by general principles, and 
 it seems to us impossible to say that the rule adopted in Pennsylvania 
 goes beyond what the Constitution allows. 
 
 Judgment affirmed.
 
 28-i COOK COUNTY V. FAIKBANK. [CHAP. III. 
 
 COOK COUNTY V. FAIRBANK. 
 
 Supreme Court of Illinois. 1906. 
 
 [Reported 222 III. 578.] 
 
 Haxd, J. This was an action of assnmpsit commenced by Kellogg 
 Fairbank and Benjamin Carpenter, appellees, as the executors of 
 the last will and testament of Nathaniel K. Fairbank, deceased, in 
 the superior court of Cook county, against Cook county, the ap- 
 pellant, to recover the sum of $1"^^50, which, as such executors, the 
 appellees had paid under protest to Patrick J. Cahill, as clerk of 
 the probate court of Cook county, for the docket fee provided to 
 be paid in an act entitled "An act to provide for fees of clerks of 
 probate courts in counties of the third class," approved May 39, 
 1879, in force July 1, 1879, and the various amendments thereto, 
 (Kurd's Stat. 1905, par. 63, chap. 53, p. 1075,) which amount had 
 been turned over by said Cahill, as such clerk, under the statute, 
 to the treasurer of said Cook county prior to the bringing of this 
 suit. The general issue was filed and the case was tried before 
 the court without a jury, which trial resulted ip a finding and 
 judgment in favor of the appellees for said sum of $1250 and costs, 
 and Cook county has prosecuted an appeal direct to this court on 
 the ground tliat the constitutionality of the paragraph of said 
 statute which provides for the payment of said docket fee is in- 
 volved, and upon propositions of law submitted was held to be void 
 by the trial court, which paragraph reads as follows: 
 
 " On application for the grant of letters testamentary, of ad- 
 ministration, guardianship or conservatorship, it shall be the duty 
 of the applicant to state in his or her petition the value of all the 
 real and personal estate of such deceased person, infant, idiot, 
 insane person, lunatic, distracted person, drunkard or spendthrift, 
 as the case may be, and on the grant of letters testamentary, ad- 
 ministration, guardianship or conservatorship, there shall be paid 
 to the clerk of said probate court, from the proper estate, and 
 charged as costs, a docket fee as follows: When the estate does not 
 exceed $5000, $5; and the sum [of] one (1) dollar for each and 
 every additional $1000 of the estate of such deceased person, infant, 
 idiot, insane person, lunatic, distracted person, drunkard or spend- 
 thrift as the case may l^e. In all cases where any deceased person 
 shall leave him or her surviving a widow or children resident of 
 this State, who are entitled out of said estate to a widow's or child's 
 award, and the entire estate real and personal of such deceased 
 person shall not exceed $2000, and in the case of any minor whose 
 estate real and personal does not exceed the sum of $1000, and 
 whose father is dead, and in all cases of any idiot, insane person, 
 lunatic, or distracted person, drunkard or spendthrift, when such 
 person has a wife or infant child dependent on such person for 
 support, and the entire estate of such person shall not exceed the
 
 CHAP. III.] COOK COUNTY V. lAlUBANK. 285 
 
 sum of $2000, the probate judge (by order of court) sliall remit 
 and release to such estate all of the costs herein provided for. In 
 all estates not exceeding $500 in value, the judge of the probate 
 court may in his discretion suspend, modify or remit the costs by 
 order of court duly made." 
 
 Tlie record siiows, without dispute, that the last will and testa- 
 ment of Nathaniel K. Fairbank was duly proven, admitted to probate 
 and ordered recorded in the probate court of Cook county on the 
 20th day of May, 1903, and on that day it was ordered that letters 
 testamentary issue to the appellees; that on the fifth day of June 
 following, the appellees denuuided of said Cahill that he issue and 
 deliver to them said letters testamentary, which he declined to do 
 unless they paid to him, as a condition precedent to their delivery, 
 a docket fee of $1250 which had been taxed by him against said 
 estate; tiuit thereupon the appellees filed their petition in the pro- 
 bate court of said county, in which they represented that the affairs 
 of said estate needed immediate and particular attention, and that 
 they, as the executors thereof, could not enter upon the discharge 
 of their duties as such executors %vithout possession of their letters 
 testamentary and that great loss might come to said estate if the 
 delivery of said letters was further delayed, which letters, they 
 averred, the said Cahill, upon demand, had refused to deliver to 
 them unless they first paid to him the sum of $1250 as a docket fee. 
 They also averred the paragraph of the statute requiring the pay- 
 ment of said docket fee was unconstitutional and void, and asked 
 that said clerk be ordered to deliver said letters to them forthwith 
 and without the payment of said docket fee. The prayer of the 
 petition was denied, and the appellees again protested, in writing, 
 against the payment of the said docket fee, but the clerk still per- 
 sisted in his refusal to deliver said letters w'ithout the payment of 
 said docket fee, whereupon the appellees paid to him, in open court, 
 said sum of $1250, and thereupon brought this suit to recover 
 back the amount so paid. 
 
 We Avill first consider the constitutionality of the paragraph 
 of the act of 1879 above set forth. 
 
 Section 12 of article 10 of the constitution of 1870 provides: 
 " The General Asseml)ly shall, by general law, uniform in its opera- 
 tion, provide for and regulate tlie fees of said officers [State, county 
 and township] and their successors, so as to reduce the same to a 
 reasonable compensation for sendees actually rendered." 
 
 While the amount demanded of the appellees by said clerk as a 
 condition precedent to the delivery to them of their letters testa- 
 mentary is designated in the statute "a docket fee," it is apparent 
 that the amount exacted by the clerk was in no way measured by 
 the amount or value of the services ])orformed by him, but the 
 charge against the estate depended entirely upon the size or amount 
 of the estate. If an estate does not exceed in value $2000 no docket 
 fee is to be taxed. If it is more than that amount and does not 
 exceed in value $5000 a docket fee of $5 is to be taxed, or if the estate 
 is of the size of the Fairbank estate a fee of $1250 is to be taxed.
 
 286 COOK COUNTY V. FAIRBANK. [oilAP. III. 
 
 although the docketing of the estate, in each case, in the office of 
 the clerk of the probate court would require the same amount of 
 labor by the clerk, and no more. The provision of the constitution 
 above referred to, required the General Assembly, by general law, 
 uniform in its operation, to regulate the fees of county officers in 
 such manner that the fees charged and collected by them shall be 
 "a reasonable compensation for services actually rendered." Clearly, 
 the. framers of that provision of the constitution intended that the 
 fees of probate courts in counties of the third class should be based 
 upon the amount, quality and character of the services performed 
 by the clerks of said courts, and not arbitrarily fixed on the basis 
 of the value or amount of the estates which might pass through 
 those courts, and we think it evident the amount designated in 
 said statute as a docket fee was not intended by the framers of 
 said statute to represent the value of services actually rendered by 
 the probate clerk in each estate in docketing the estate, but that said 
 statute was intended by its framers to furnish a means whereby 
 the public revenues of counties of the third class in the State would 
 be increased, by collecting through the probate court a charge upon 
 the designated estates. The amount sought to be retained by the 
 probate clerk was therefore, properly speaking, not a fee, but was a 
 burden or charge imposed upon said estate to raise money for public 
 purposes, regardless of the value of the services actually rendered 
 the estate, which is in conflict with the constitutional provision 
 hereinbefore set forth, and which would bring said burden or charge 
 within the well recognized definition of a tax, which may, in a gen- 
 eral sense, be defined to be a burden or charge imposed by the legis- 
 lative power of the State upon persons or property for public uses. 
 Dalrymple v. City of Milwaukee, 53 Wis. 178. 
 
 The view that a charge fixed by statute for the service to be 
 performed by an officer where the charge has no relation to the value 
 of the services performed, and where, as here, the amount collected 
 eventually finds its way into the treasury of the branch of govern- 
 ment whose officer or officers collect the charge, is not a fee but a 
 burden or charge in the nature of a tax, has been held in numerous 
 cases in the United States. In State v. Case, 1 L. R. A. (N. S.) 152, 
 decided by the Supreme Court of Washington in July, 1905, and 
 wherein was involved the constitutionality of a statute which re- 
 quired the payment of $5 in probate proceedings at the time the 
 first paper was filed, and thereafter, when the appraisement was 
 returned into court, an additional sum was to be paid, as follows: 
 $2.50 for estates between $1000 and $2000, increasing on a sliding 
 scale, depending on the value of the estate, the court said (p. 155) : 
 " It is true the statute calls the charge a ' fee,' but if it is apparent 
 upon the face of the statute that the charge is, in fact, not based 
 upon actual and necessary services rendered or to be rendered, but 
 is based entirely upon a property valuation_, thereby partaking of 
 the nature of tax, it would seem to be wholly immaterial by 
 what name the statute may designate it. . . . His service [those 
 of the. clerk] in the premises are purely clerical, and the amount
 
 CHAP. III.] COOK COUNTY V. FAIRBANK. 287 
 
 thereof depends upon the filings and records of each particular 
 case, which can in no reasonable sense be said Uj depend in each 
 given case upon the value of the estate. It seems clear, therefore, 
 that this statute exacts payments regulated by property valuations 
 alone, and that it must therefore be a tax upon property. 
 
 In State v. Mann, 76 Wis. 4G!), mandamus was brought to compel 
 the county judge to proceed with the administration of an estate. 
 The statute re(]uire(l the administrators to pay to the county treas- 
 ury, for the use of the county, in lieu of fees, a sum equal to one- 
 half of one per cent on $500,000 of the appraised value of said 
 estate and one-tenth of one per cent on the excess, which amounts, 
 as taxed, aggregated the sum of $2,631.95. Payment was required 
 on the return and approval of the inventory and was made a part 
 of tlie expense of administration. The court, in holding the act 
 unconstitutional, on page 477, said : " Besides, the amount of this 
 exaction is in no way dependent upon the amount or value of such 
 services of the judge or register of probate, but depends entirely 
 upon such valuation or appraisal of the estate. . . . Compensation 
 for services must necessarily be graduated by the amount, quality 
 and character of the services. But here the amount exacted bears 
 no relation to such services. . . . We must hold that the exaction 
 in question is not a probate fee, nor in lieu of nor equivalent to a 
 probate fee. It is nothing less than a charge imposed by the legis- 
 lature as a condition precedent to allowing the county court to 
 proceed with the administration of this estate. Such charge is 
 neceesarily a burden so imposed upon such administrators or such 
 estate, or both, to raise money for public purposes. This brings 
 it within a well recognized definition of a tax. ... It is very 
 obvious that the charge imposed by the act in question is essentially 
 a tax." 
 
 And in State v. Gorman, 40 Minn. 232, mandamus was brought 
 to compel the probate court to proceed with the settlement of an 
 estate, which it had refused to do until the sura of $5000 was paid. 
 The statute provided graduated fees, dependent upon the value of 
 the estate as shown by the inventor}'-. Between $2000 and $5000 
 a fee of $10 was exacted, ascending with the value of the estate, 
 until it provided that in estates of over $500,000 a fee of $5000 
 should be charged. The court, on page 233, said : " But the sums 
 required by this act to be paid into the county treasury must be re- 
 garded as taxes, in the ordinary sense of that word and as it is used 
 in the constitution. They are not in any proper sense fees or 
 costs assessed impartially or with regard to the expense occasioned 
 or services performed. The amounts are regulated wholly, but 
 arbitrarily, with regard to the value of the estate. They have no 
 proximate relation to the amount of the compensation to be paid 
 to the probate judge, nor to the other expenses of the court, nor 
 to the nature or extent of the services wliich may become necessary 
 in the proceedings. There is no necessary, natural or even probable 
 correspondence between the sums to be paid (widely different in 
 amounts with respect to estates of different values) and the nature
 
 288 COOK COUNTY V. FAIKBANK. [cHAP. III. 
 
 of the proceedings, or the character or extent of the services which 
 may be required in the probate court." 
 
 And Fatjo v. Pfister, 117 Cal. 83, was an action in which the 
 clerk of the superior court of Santa Clara county was sought to be 
 coerced to file an inventory and appraisement, which he had refused 
 to do until the sum of $200 was paid him as fees. The statute 
 required the payment of $5 on the filing of the petition for letters 
 of administration, also an additional payment of one dollar for 
 each $1000 of the appraised valuation of the estate in excess of 
 $3000, as shown by the inventory- and appraisement. The Supreme 
 Court held the charge to be a tax, saying (p. 85) : "It is perfectly 
 plain that the legislature has attempted, by that portion of sec- 
 tion 1 above quoted, to levy a property tax upon all estates of de- 
 cedents, infants and incompetents. The ad valorem charge for 
 filing the inventory is in no sense a fee or compensation for the 
 services of the officer, which are the same, as respects this matter, 
 in every estate, large or small. To call it a fee is a transparent 
 evasion." 
 
 If the General Assembly, under the guise of a docket fee, has 
 attempted, as we think it is apparent it has, to levy a property tax 
 upon all estates of deceased persons, infants, idiots, insane persons, 
 lunatics, distracted persons, drunkards and spendthrifts whose 
 estates exceed the amounts designated in said statute and which 
 are brought into the probate court of counties of the third class, 
 then the paragraph attempting to impose said tax is clearly uncon- 
 stitutional for numerous reasons other than that pointed out above. 
 First, it violates section 13 of article 4 of the constitution of this 
 State, because it embraces more than one subject and subjects that 
 are not included in its title ; second, it violates section 3 of article 9 
 of the constitution, in that it provides for exemptions of property 
 from taxation not specified in said section; third, it subjects the 
 property of the estate to double taxation, as it appears that the ex- 
 ecutors had paid all the taxes due upon the real and personal prop- 
 erty of the estate in the years 1902 and 1903 ; and fourth, it violates 
 section 1 of article 9 of the constitution, in this : that a tax is levied 
 which is not equal or uniform as to the class upon which it operates. 
 
 Nor can the charge or burden imposed be sustained upon the 
 ground that it amounts to no more than an inheritance or succession 
 tax. The contention that it does amount to such tax is fully met 
 by the fact that the statute in express terms applies not only to the 
 estates of deceased persons, but also to the estates of infants, idiots, 
 insane persons, lunatics, distracted persons, drunkards and spend- 
 thrifts. The tax here imposed is levied upon the body of the entire 
 estate if it exceeds $2000 in value, whether the estate is solvent or 
 insolvent, while an inheritance or succession tax is imposed, not 
 as a tax upon the estate, but upon the right of succession. ( Kocher- 
 sperger v. Drake, 167 111. 122; Magoun v. Illinois Trust and Savings 
 Bank, 170 U. S. 283.) In the Fatjo case the Supreme Court of 
 California said upon this branch of the case: "And it is not merely 
 an inheritance tax or at all analogous to an inheritance tax, as
 
 CHAP, in.] COOK COUNTY I'. FAIEBANK. 289 
 
 counsel would contend, for, in the first place, it applies not only to 
 the estates of decedents, but also to the estates of minors and in- 
 competents under guardianship; and as to the estates of decedents, 
 it applies not to the distributable residue after payment of debts 
 and expenses of administration, but to the whole body of the estate, 
 and would be collectible, if the law were valid, from an insolvent 
 estate as well as from one of equal appraised value and with no 
 liabilities." And in State v. Case, supra, the Supreme Court of 
 Washington, in reviewing two cases cited in support of the con- 
 stitutionality of the statute under consideration in tliat case, said 
 (p. 155): "Neither of said cases relates to property taxation. 
 The first discusses the Inheritance Tax law, and expressly holds 
 that such a tax is not a property tax but is a mere charge for the 
 privilege of succession to the ownership and enjoyment of property, 
 following Magoun v. Illinois Trust and Savings Bank, 170 U. S. 
 283, (42 L. ed. 1037, 18 Sup. Ct. Rep. 594,) which expressly dis- 
 tinguished such a charge from property taxes, which must be uniform 
 and equal under the State constitutions." 
 
 It is urged by appellant that this court, in the case of People v. 
 Hinrichsen, 161 111. 223, is committed to the view that the statute 
 fixing the fees of the Secretary of State for incorporating corpora- 
 tions, which are graduated according to the amount of the capital 
 stock of the corporation, is a valid exercise of legislative power. 
 We are of the opinion there is a well marked line of distinction be- 
 tween the Hinrichsen case and the case at bar. It is the same line 
 of demarkation pointed out in the inheritance tax cases heretofore 
 referred to. An inheritance tax was sustained on the ground that 
 it was not a tax upon property but upon the right of succession, 
 and that the State had the right to prescribe rules of descent and 
 conditions upon which property should be inherited. So with 
 the right of the State to establish fees in cases of persons desiring 
 to organize corporations. A corporation is a creation of the legis- 
 lature. Persons are not obliged to incorporate against their will. 
 If, however, they do incorporate they must accept the burdens im- 
 posed upon them by general law. Such, however, is not the case 
 with the statute authorizing the collection of the docket fee men- 
 tioned in the statute now under consideration. That, as was said 
 by Judge Cassoday in State i'. Mann, supra, " is nothing less than 
 a charge imposed by the legislature as a condition precedent to 
 allowing the county court to proceed with the administration of 
 this estate." 
 
 Our conclusion is, that the paragraph of the statute of 1879 
 
 authorizing the collection of a docket fee is unconstitutional and 
 
 void. 
 
 Judgment affirmed.
 
 290 ADAMS MOTOR CO. V. CLER. [CHAP. III. 
 
 ADAMS MOTOR CO. v. CLER. 
 Supreme Court of Georgia. 1920. 
 
 [Reported 149 Ga. 818.] 
 
 Beck, P. J. 1. The section of the general tax act passed by the 
 General Assembly of Georgia in the year 1918, which the plaintiffs 
 contend is invalid because it violates certain provisions of the State 
 and Federal constitutions, is in the following language : " 12th. 
 Automobiles. Upon every agent of, and upon every dealer in, 
 and upon every person soliciting orders for the sale of automobiles, 
 the sum set out below, viz. : In each county for each make of 
 such vehicle only one such tax for such make for each agency to 
 be taxed in any one county. Any agency having paid such tax 
 to be allowed any number of employees within the county wherein 
 such tax has been paid, free from such liabilities. Provided, that 
 any person, firm, or corporation paying this tax shall be permitted 
 to resell any automobile or other vehicle taken in exchange for 
 automobiles, without the payment of additional tax. In each 
 county with a population of less than 20,000, $27.50. In each 
 county with a population of between 20,000 and 30,000, $55.00. 
 In each county with a population of between 30,000 and 50,000, 
 $82.50. In each county with a population of between 50,000 and 
 75,000, $110.00. In each county with a population of between 
 75,000 and 100,000, $165.00. In each county with a population 
 of between 100,000 and 150,000, $220.00. In each county with a 
 population exceeding 150,000, $275.00." 
 
 The soundness of the criticisms upon this act depends upon 
 whether the section in question makes an arbitrary and unreason- 
 able classification of dealers in automobiles subject to the tax en- 
 closed by this section. After careful consideration of the sub- 
 ject of this inquiry it does not seem to us that the legislature, in 
 exercising its right to make a classification for the purpose of 
 imposing a tax like that in question, has acted arbitrarily and un- 
 reasonably. It is settled law that a tax upon a business is not a 
 tax upon property within the meaning of the ad valorem and uni- 
 formity clauses of the constitution, and it is not a valid objection 
 that another business or object is not taxed or is taxed a dif- 
 ferent amount. The requirement of this kind of classification 
 is that it shall be uniform upon all business of the same class. 
 Weaver v. State, 89 Ga. 639 (15 S. E. 840), and cases there cited. 
 Under the provisions of the section of the tax act in question, the 
 classification is made with reference to the population of the county 
 within which the business is carried on. ^nd to fix the amount of 
 the tax according to the population of a county is fixing it with 
 reference to a fact that is not arbitrarily chosen, but has some 
 relation to the question of the amount of tax that would be right 
 and proper. If the amount of tax fixed had to be precisely adjusted
 
 ClIAl'. 111.] ADAMS M0T(M: CO. V. CLICK. 291 
 
 80 as to impose the same burden upon every dealer in proportion 
 to the amount of business done or tlie opportunity for doing busi- 
 ness, it wouhl 1)0 extremely dillicult, if not impossible, to select 
 any fact or standard by which tiie classification could be made. 
 The only requirement is that the fact selected for the classification 
 under which a tax like that in question is imposed shall not be 
 arbitrary, but shall bear a reasonable relation to the tax imposed 
 upon the business. It may be true that a county witii less than 
 20,000 population may in some cases afford a more profitable field 
 for the conduct of business than an adjoinin<^ county havin<^ a 
 population of 30,000; but it cannot be held that the Icg-islature 
 in enacting the provision in question could not decide that there 
 was a reasonable relation between the population of a county and 
 the amount of business of a given character carried on in that 
 county. 
 
 Another ground taken by the plaintiffs is that the classification 
 between dealers who deal in one make of automobiles and dealers 
 who soil more than one make, without reference to the value of the 
 automobile sold, is arlutrary, discriminatory, xmd unrccxsonable. 
 And again we must reply that the fact selected by the legislature 
 as a ground for classification bears an actual relation to the classi- 
 fication made. As we said in discussing the other ground of attack 
 upon the act, it may not precisely fix an amount adjusted to the 
 amount of business that will be done by dealers in different classes, 
 but it is a fact that might reasonably be taken into consideration 
 in determining the tax to be imposed. In the case of Sawtell v. 
 Atlanta, 138 Ga. 687 (75 S. E. 982), an ordinance of the City 
 of Atlanta, imposing a tax of a fixed amount upon all ice houses, 
 ice manufacturers, or agencies not employing more than five wagons 
 for selling or delivery purposes, and for each adilitional wagon 
 above the number of five an additional tax of $10, was held to be 
 not invalid on the ground that it violated the constitutional pro- 
 vision that all taxes must be uniform upon the same class of 
 subjects. Under the ordinance there attacked, if the ice house 
 employed one or five wagons, the tax was $50; but if it employed 
 more than five wagons there was an additional tax of $10 for 
 each additional wagon. And in the case of Witham v. Stewart, 
 129 Ga. 48 (58 S. E. 463), it was said: "Section 2, par. 2, of 
 the act of the General Assembly, approved December 16th, 1902 
 (A. '02, p. 19), provides that a^* specific tax' of $10, for each of 
 the fiscal years 1903 and 1904, shall be levied 'upon the presidents 
 of each of the express, telegraph, steamboat, railroad, street-rail- 
 road, telephone, electric-light, sleeping and palace-car companies, 
 banks, building and loan associations, and gas companies doing 
 business in this State.' HcM, that under the provisions of said 
 act, where it appears tliat the same person is the president of two 
 or more banks, a tax of $10 may be collected from such person for 
 each bank of which he is president. It appearing in the present 
 case that the plaintiff in error was the president of several banks 
 doing business in this State, he was liable to be taxed in the amount
 
 292 ADAMS MOTOR CO. V. CI>ER. [cHAP, III. 
 
 specified in the above act for each bank of which he was the presi- 
 dent/' 
 
 2. There is no merit in the contention that the classification 
 was arbitrary, discriminatory, and unreasonable because of the 
 provision permitting any person who has paid the tax to resell 
 any automobile taken in exchange for an automobile without the 
 pa}Tnent of an additional tax. 
 
 The act in question not being invalid for any of the reasons set 
 fortli above, it follows that it is not in violation of the due-process 
 clause of the State and Federal constitutions. 
 
 Judgment a/firmed. All the Justices concur.
 
 CIIAr. IV, 1 MOORE V. KUCKGABER. 203 
 
 CHAPTER IV. 
 
 INHERITANCE TAX. 
 
 MOORE V. RUCKGABER. 
 Supreme Court of the United States. 1903. 
 
 [Reported 184 U. S. 593.] 
 
 This was also an action brought in the Circuit Court, for the 
 Southern District of New York by Ruckgaber, as executor of the 
 last will and testament of Louisa Augusta l^ipley-Pinede, against 
 the Collector of Internal Revenue, to recover an inheritance tax 
 paid to the defendant upon certain personal property in the city of 
 New York. It was argued with Eidman v. Martinez, 184 U. S. 578. 
 
 The material facts, as set forth in the certificate, are briefly as 
 follows : 
 
 The testatrix, Louisa Augusta Riple3'-Pinede, died at Ziirich, 
 Switzerland, on September 25, 1898, being at that time a non-res- 
 ident of the United States, and having, for at least eight years 
 immediately preceding her death, been domiciled in, and a perma- 
 nent resident of, the Republic of France. She left a will dated No- 
 vember 6, 1890, which was made in New York and in conformity to 
 the laws of that State, where the testatrix was then sojourning, 
 Avhereby she be(iueathed all her personal property in the United 
 States to her daughter, Carmelia von Groll, who was then, and is 
 now, also a non-resident of the United States, domiciled in Germany. 
 Said will was probated in the Surrogate's Court of Kings County, 
 New York, on February 17, 1899, and letters testamentary were 
 thereupon issued to the defendant in error, a resident of said county 
 and State, who alone qualified as executor. 
 
 At the time of her death the testatrix owned a claim in account 
 current against one Carl Goe])el and one ^lax Ruckgaber, Jr., con- 
 stituting the firm of Schulz & Ruckgaber, both of whom resided in 
 the county of Kings and State of New York. She was also the 
 owner of a share of stock in The Tribune Association, a New York 
 corporation. The testatrix was also the owner of bonds and coupons 
 of divers American corporations hereinafter particularly described. 
 Said chose in action, stock, bonds and certificate constituted all the 
 personal propertv of every kind in the United States of America 
 referred to in the said will. The value of the said property of the 
 testatrix at the date of her death, September 25, 1898^, as fixed and 
 determined by appraisers dulv appointed, was $105,670.70. On or 
 about the 15th dav of June, 1899, upon the written demand of the 
 collector of internal revenue for the first district of New York, and 
 under protest the executor did make and render in duplicate to the
 
 294 MOORE I'. RUCKGABEK. [CHAP. IV. 
 
 said collector a return of legacies arising from personal property of 
 every kind whatsoever, being in charge of trust of said executor, 
 passing from Louisa Augusta Kipley-Pinede to her said daughter by 
 her will as aforesaid. 
 
 The following questions of law which arose out of the foregoing 
 facts were certitied to this court: 
 
 " 1. Can the said personal property of the non-resident testatrix, 
 Louisa Augusta Kipley-Pinede, actually located within the United 
 States at the time of her death, September 25, 1898, be deemed to 
 have a situs in the United States for the purpose of levying a tax 
 or duty upon the transmission or receipt thereof under sections 29, 
 30 and 31 of the act of Congress entitled ' An act to provide ways 
 and means to meet war expenditures, and for other purposes,' ap- 
 proved June 13, 1898?" 
 
 " 2. Was the transmission or receipt of the said personal prop- 
 erty of the non-resident testatrix, Louisa Augusta Eipley-Pinede, 
 which was actually located in the United States at the time of her 
 death, September 25, 1898, subject to taxation under sections 29, 
 30 and 31 of the act of Congress entitled 'An act to provide ways 
 and means to meet war expenditures, and for other purposes,' ap- 
 proved Juno 13, 1898?" 
 
 Brown, J. This case differs from the one just decided only in 
 the fact that the will of the non-resident testatrix was executed in 
 New York, November 6, 1890, during a temporary sojourn there, 
 although, as in the preceding case, the testatrix was domiciled 
 abroad, and bequeathed her personal property in New York to a 
 daughter, who was married, and also lived abroad. 
 
 There can be no doubt whatever that, if Madame Pinede had 
 died intestate, the personal property would not have passed by 
 the law '"of any State or Territory," (using the words of the 
 act,) but by the laws of France. The question then is, whether 
 the condition is changed, if the property pass under a will executed 
 in this country. In the United States v. Hunnewell, 13 Fed. Rep. 
 617, cited in the preceding case, the will was executed in France, 
 but the decision of Mr. Justice Grav, holding that the tax was not 
 payable, was not put upon the ground that the will was executed 
 in a foreign country, but upon the broader ground that the legacy 
 duty was payable only upon the estate of persons domiciled within 
 the United States, In delivering the opinion he observed : " Sec- 
 tion 124" (of the similar act of 1864) "imposes a duty on legacies 
 or distributive shares arising from personal property ' passing from 
 any person possessed of such property, either by will, or by the 
 intestate laws of any State or Territory;' it does not make the duty 
 payable when 'the person possessed of such property' dies tes- 
 tate, if it would not be payable if sucli person died intestate; and 
 if Madame de la Valette had died intestate, her son would not 
 have taken a distributive share 'by the intestate laws of any State 
 or Territory,' but, if at all, by the law of France, the domicil of 
 his mother at the time of her death. And section 125, by requir- 
 ing the executor or administrator to pay the amount of this duty
 
 CHAP. IV.] MOORE V. EDCKGABEll, 295 
 
 to the ((jlloctor or deputy collector of the district of which the 
 deceased person was a resident, leads to the same (-onclusion." 
 
 The real question then is, as said by Mr. Justice Gray, whether 
 the act makes the duty pa}able when tiie person possessed of 
 sucli property dies testate, if it would not In; payable if such per- 
 son (lied intestate, althou;L,di the actual question involved in this 
 case differs from the one there involved, in the fact that in the 
 Hunnetvell case the will was executed abroad, while in tiie present 
 case it was executed in this country. 
 
 Bearing in niiiul tJie fact that the tax in tliis case is not upon 
 the property itself, but upon the transmission or devolution of 
 such property, tiie question again recurs, as it did in the preceding 
 case, whether the succession took effect in France or in New York. 
 We are aided in the solution of this problem by the language of 
 section 2694 of the New York Code of Civil Procedure, also cited 
 in the preceding case, which is as follows: "Except where special 
 provision is otherwise made by law, the validity and effect of a 
 testamentary disposition of any other" (than real) "property sit- 
 uated within the State, and the ownership and disposition of such 
 property where it is not disposed of by will, are regulated by the 
 laws of the Stale or country of which the decedent was a resident 
 at the time of his death." Now as, if Madame Piuede had died 
 without leaving a will, her property would have passed under the 
 intestate laws of France and been exempt from this tax, it follows 
 under the II unnewell case that it is equally exempt though it passed 
 by will. 
 
 The will of Madame Pinede is confined to her personal property 
 in this country, and the record does not show whether she was 
 possessed of other property in France or in any other foreign 
 country. If she had, that property would either pass by will ex- 
 ecuted there or under the intestate laws of her domicil. For reasons 
 stated in the prior opinion, we do not think Congress contemplated 
 by this act that the estates of deceased persons should be split up 
 for the ])urposes of distribution or taxation, but that, so far as re- 
 gards personal property, the law of the domicil should prevail. 
 
 A question somewhat to the converse of this arose in the Estate 
 of Romaine, 127 N. Y. 80, which was a proceeding to compel pay- 
 ment of an inheritance tax by the administrator of the estate of 
 Pomainc, wlio had died intestate in Virginia, leaving a brother 
 and sister resident in New York, as his next of kin. The act of 1887 
 subjected to an inheritance tax "all property which shall pass by 
 will or by the intestate laws of this State, from any person who 
 may die seized or possessed of the same while a resident of this 
 State, or if such decedent was not a resident of this State at the 
 time of his death, which property or any part thereof shall be within 
 this State." The question was whether the property of Komaine, 
 who died in Virginia intestate, was subject to the tax. After decid- 
 ing that the tax applied to two classes, namely, resident and non- 
 resident decedents, the court observed : " But does it apply to all 
 persons belonging to these two classes? It is not denied that it
 
 296 MATTER OF CUMMI^'GS. [CHAP. IV. 
 
 applies to all resident decendents, and to all non-resident testators, 
 but it is contended that it does not apply to non-resident intestates 
 because property ' which shall pass ... by the intestate laws of 
 this State ' is expressly mentioned to the implied exclusion of prop- 
 erty passing by the intestate laws of other States. This is the 
 pos'ition of the appellant, whose learned counsel claims that the act, 
 in its present form, was designed to meet cases of succession by will, 
 but not of succession by intestacy, unless the intestate was a resident 
 of this State. It is diflScult, however, to see why the legislature 
 should discriminate simply for the purposes of taxation between 
 the property of a non-resident decedent who made a will, and of 
 one who did not. It is not probable that there was an intention to 
 tax the estates of non-resident testators and to exempt those of 
 non-resident intestates, because there is no foundation for such a 
 distinction. . . . Property of the same kind, situated in the same 
 place, receiving the same protection from the law, and administered 
 upon in the same way, would naturally be required to contribute 
 toward the expenses of government upon the same basis, regardless 
 of whether its last owner died testate or intestate," 
 
 By parity of reasoning, we think it follows that no discrimination 
 was intended to be made between non-residents who died testate, 
 even though the will were made in this country, and those who 
 died intestate; and as we have held in the preceding case that the 
 law does not apply to non-residents who died intestate, or testate 
 under a will' executed abroad, w^e think it follows that it does not 
 apply to deceased persons domiciled abroad who left property by 
 will executed in this country. 
 
 The questions certified must, therefore, he answered in the 
 negative. 
 
 MATTER OF CUMMINGS. 
 
 Surrogate's Court, New York County. 1909, 
 
 [Reported 63 N. Y. Misc. 621.] 
 
 Cohalak, Surrogate. Appeal from an order fixing the tax. The 
 decedent made a will by which he appointed the Merchants' Loan 
 and Trust Company of Los Angeles, California, his executor, as 
 to so much of his property as was situated in that State, He ap- 
 pointed the Farmers' Loan and Trust Company of New York his 
 executor as to so much of his property as was situated in this State. 
 He died in 1904. Shortly after his death, a proceeding w^as brought 
 in the Superior Court of Los Angeles, California, for the probate 
 of his will. That court decided that the decedent w^as a resident of 
 the State of California; that certain provisions of the will creating 
 trust funds were invalid, and that that part of the property which 
 was located in California and designated in the will as constituting 
 a part of the trust fund should be distributed to his next of kin, 
 in accordance with the intestate laws of California. The property
 
 CHAP. IV.] MATTEi: OF CL'.\r MINGS. 297 
 
 located in California was subsequently distributed among decedent's 
 next of kin, in tlie manner provided by this decree, and in the pro- 
 portion prescribed by the intestate laws of California. In 1!)0G, the 
 Farmers' Loan and Trust Company, as executor in this .State, com- 
 menced a proceeding in the New York Supreme Court for the 
 construction of decedent's will. The court decided tliat the decedent 
 was a resident of the State; that tiie provisions of his will attempting 
 to create certain trust funds wore invalid, and that such property 
 shoukl be distributed in accordance with tiie intestate laws of this 
 State. In the proceeding instituted by the New York executor 
 to appraise the estate, in accordance with the provisions of the Trans- 
 fer Tax Act, the appraiser included in the taxalde assets of the 
 estate all the property of decedent which was situated in California, 
 and which, under the decree of the Superior Court of Los Angeles, 
 had been distributed among decedent's next of kin. The executor 
 contends that the transfer of that property is not taxable here and 
 has appealed from the order entered upon said report. Section 220 
 of the Transfer Tax Law provides : " A tax shall be and is hereby 
 imposed upon the transfer of any property . . . first, when the trans- 
 fer is by will or by the intestate laws of this State from any person 
 dying seized or possessed of the property while a resident of this 
 State." Before the tax can be imposed there must be a transfer 
 of the property, either by will or by the intestate laws of this State. 
 Assuming, in accordance witli the decision of the New York Su- 
 preme Court, that the decedent was a resident of this State, if that 
 part of his personal property which was situated in California passed 
 or was transferred to his next of kin by virtue of the intestate laws 
 of this State, such a transfer would be taxable here. Matter of 
 Swift, 137 X. Y\ 77. But, at the time the New York court decided 
 that he was a resident of this State, the property located in Cali- 
 fornia had already been distributed under and by virtue of a de- 
 cree of a court of competent jurisdiction in that State and in the 
 proportion prescribed by the intestate laws of that State. The prop- 
 erty having already been actually transferred under the intestate 
 laws of the State of California, there was no property there which 
 could be transferred under the intestate laws of this State. The 
 theory that the property passed under the intestate laws of this 
 State must give way to tlie fact that it was actually transferred 
 under the intestate laws of the State of California. The Superior 
 Court of Los Angeles being a court of competent jurisdiction, its 
 decree was entitled to full faith and credit in this court. Tilt r. 
 Kelsey, 207 IT. S. 43. Therefore, as the decedent's property in Cali- 
 fornia was not transferred to his next of kin by virtue of the intestate 
 laws of this State, the courts of this State have no jurisdiction to 
 impose a tax upon the transfer of such property. The order fixing 
 the tax should l)e reversed and the report remitted to the appraiser 
 for the purpose of excluding from tlie taxable assets of the estate 
 the value of decedent's property situated in California. 
 
 Decreed accordinghj.
 
 298 MAXWELI. V. BUGBEE. [CHAP. IV. 
 
 MAXWELL V. BUGBEE. 
 Supreme Court of the United States. 1919. 
 
 [Reported 250 U. S. 525.] 
 
 Day, J. These cases were argued and submitted together, in- 
 volve the same constitutional questions, and may be disposed of 
 in a single opinion. The attack is upon the inheritance tax law 
 of the State of Xew Jersey, and is based upon certain provisions 
 of the Federal Constitution. The statute has reference to the 
 method of imposing inheritance taxes under the laws of the State. 
 The constitutionality of the law upon both state and federal grounds 
 was upheld in the McDonald case by the Court of Errors and Ap- 
 peals, 90 N. J. L. 707. In the Hill case the judgment of the Su- 
 preme Court of New Jersey (91 N. J. L. 454) was affirmed by 
 the Court of Errors and Appeals, 92 N. J. L. 514. 
 
 The statute under consideration is an act approved April 9, 1914 
 (P. L. 1914, p. 267), being an amendment to an act approved 
 April 20, 1909 (P. L. 1909, p. 325), for taxing the transfer of 
 property of resident and non-resident decedents by devise, bequest, 
 descent, etc., in certain cases. The 1909 act is found in 4 Comp. 
 Stats. N. J., p. 5301, et seq., the amendment in 1 Supp. Comp. 
 Stats. N. J., pp. 1538-1542. The act of 1909, in its first section, 
 imposed a tax upon the transfer of any property, real and personal, 
 of the value of $500 or over, or of any interest therein or income 
 therefrom, in trust or otherwise, to persons or corporations, includ- 
 ing the following cases : 
 
 "First. When the transfer is by will or by the intestate laws 
 of this State from any person dying seized or possessed of the 
 property while a resident of the State. 
 
 " Second. When the transfer is by will or intestate law, of prop- 
 erty within the State, and the decedent was a non-resident of the 
 State at the time of his death." 
 
 The taxes thus imposed were at the rate of 5 per cent, upon the 
 clear market value of the property, with exemptions not necessary 
 to be specified, and were payable to the treasurer for the use of the 
 State of New Jersey. 
 
 And by § 12 it was provided that upon the transfer of property 
 in that State of a non-resident decedent, if all or any part of the 
 estate, wherever situated, passed to persons or corporations who 
 would have been taxable under the act if the decedent had been a 
 resident of the State, such property located within the State was 
 made subject to a tax bearing the same ratio to the entire tax which 
 the estate of such decedent would have been subject to under the act 
 if the non-resident decedent had been a resident of the State, as 
 the property located in the State bore to the entire estate of such 
 non-resident decedent wherever situated.
 
 CHAP. IV.] MAXWJiLL V. BUGBEE. 299 
 
 Tlie act, liaving first been amended by an act approved March 
 26, 1!)14 (P. L. 1!)14, p. 91), not necessary to be recited, was 
 again amended by the act approved April 9, 1914, whicii is now 
 under consideration (P. L. 1914, ]>. 207; 1 Supp. Comp. Stats. 
 N. J., pp. 1538-1542). Sections 1 and 12 were amended, the 
 former by confining the tax on the transfer of pro{)erty within the 
 State of non-resident decedents to real estate, tangible personal 
 property, and shares of stock of New Jersey corporations and of 
 national bunks located within the State; and by modifying the 
 former rate of 5 per centum iipon the clear market value of the 
 property passing, which was subject to exemptions in favor of 
 churches and other charitable institutions, and of parents, children, 
 and other lineal descendants, etc., by making 5 per centum the 
 applicable rate but subject to numerous exceptions, and in the ex- 
 cepted cases imposing diU'erent rates, dependent upon the relation- 
 ship of the beneficiary to the deceased and the amount of the prop- 
 erty transferred. Thus, " Property transferred to any child or 
 children, husband or wife, of a decedent, or to the issue of any 
 child or children of a decedent, siiall be taxed at tiie rate of one 
 per centum on any amount in excess of five thousand dollars, up to 
 fifty thousand dollars; one and one-half per centum on any amount 
 in excess to [of] fifty thousand dollars, up to one hundred and fifty 
 thousand dollars; two per centum on any amount in excess of one 
 hundred and fifty thousand dollars, up to two hundred and fifty 
 thousand dollars ; and three per centum on any amount in excess 
 of two hundred and fifty thousand dollars." 
 
 The modified formula for computing the assessment upon the 
 transfer of the estate of a non-resident decedent, prescribed in § 12 
 as amended by the act under consideration, is as follows: 
 
 "A tax shall be assessed on the transfer of property made subject 
 to tax as aforesaid, in this State of a nonresident decedent if all 
 or any part of the estate of such decedent, wherever situated, shall 
 pass to persons or corporations taxalde under this act, which tax 
 shall bear the same ratio to the entire tax which the said estate 
 would liave been subject to under this act if such nonresident de- 
 cedent had been a resident of this State, and all liis property, real 
 and personal, had been located within this State, as such taxable 
 property within this State bears to the entire estate, wherever sit- 
 uated ; provided, that nothing in this clause contained shall apply 
 to a specific bequest or devise of any property in this State." 
 
 An amendatory act, approved April 23, 1915 (P. L. 1915, p. 745; 
 1 Supp. Comp. Stats. N. J., p. 1542), repeated the provision last 
 quoted, and made no change in the act pertinent to the questions 
 here presented. 
 
 It is this method of assessment in the case of non-resident de- 
 cedents which is the subject-matter in controversy. 
 
 James IMcDonald died January 13, 1915, owning stock in the 
 Standard Oil Company, a New Jersey corporation, valued at
 
 300 MAXWELL r. BUGBEE. [ciIAP. IV. 
 
 $1,114,965, leaving an entire estate of $3,969,333.25, which included 
 some real estate in the State of Idaho. Of the entire estate, 
 $270,813.17 went to pay debts and expenses of administration. Mr. 
 McDonald was a citizen of the United States and a resident of the 
 District of Cohimbia, and left a will and a codicil which were 
 admitted to probate b}-- the Supreme Court of that District. The 
 executors are Lawrence Maxwell, a citizen of Ohio, and the Fulton 
 Trust Company, a New York corporation. The principal benefici- 
 aries under the will are citizens and residents of States of the United 
 States other than the State of New Jersey. Under the will the wife 
 takes by specific legacies ; the other beneficiaries are specific and gen- 
 eral legatees not related to the deceased and a son and two grand- 
 children, who take the residuary estate. 
 
 James J. Hill died May 29, 1916, intestate, a resident and citizen 
 of the State of Minnesota, leaving a widow and nine children. 
 Under the laws of Minnesota, the widow inherited one-third of the 
 real estate and personal property, and each of the children two- 
 twenty-sevenths thereof. The entire estate descending amounted to 
 $53,81-1,762, which included real estate outside of New Jersey, and 
 principally in Minnesota and New York, valued at $1,885,120. The 
 only property the transfer of which was subject to taxation in New 
 Jersey was stock in the Northern Securities Company, a New Jersey 
 corporation, valued at $2,317,564.68. The debts and administra- 
 tion expenses amounted to $757,571.20. 
 
 The amount of the assessment in the McDonald case was $29,071.68. 
 In the Hill case the tax assessed amounted to $67,018.43. Following 
 the statute, the tax was first ascertained on the entire estate as if 
 it were the estate of a resident of the State of New Jersey, with all 
 the decedent's property both real and personal located there; the 
 tax was then apportioned and assessed in the proportion that the 
 taxable New Jersey estate bore to the entire estate. 
 
 The thing complained of is, that applying the apportionment 
 formula fixed by the statute, in the cases under review, results in 
 a greater tax on the transfer of property of the estates subject to the 
 jurisdiction of New Jersey than would be assessed for the transfer 
 of an equal amount, in a similar manner, of property of a decedent 
 who died a resident of New Jersey. The cause of this inequality 
 is said to arise because of imposing the graduated tax, provided by 
 the statute, upon estates so large as these. If a resident, in the case 
 of a wife or children, the first $5,000 of property is exempt, the next 
 $45,000 is taxed at the rate of 1%, the next $100,000 at the rate 
 of 11/2%, the next $100,000 at the rate of 2%, and the remainder 
 at the rate of 3%. The contention is, that applying the apportion- 
 ment rule provided in the case of non-resident estates, a larger 
 amount of tax is assessed. 
 
 The correctness of the figures deduced from the application of 
 the statute as made ])y the counsel for plaintiffs in error is contested, 
 but in our view the differences are unimj)ortant unless the State is 
 bound to apply the same rule to the transmission of both classes of 
 estates.
 
 CIlAr. IV.] MAXWELL V. BUGBEE. 301 
 
 Counsel for plaint i(Ts in error sum up their objections to the 
 statute, based on the Federal Constitution, as follows : 
 
 (1) It taxes the estates of uun-rt'sidents more than those of 
 residents and therefore gives to residents privileges and immunities 
 denied to non-residents. 
 
 (2) It provides for a tax which bears unequally and tiierefore 
 is not imi)oried upon a uniform rule and it therefore denies to non- 
 lesidents the equal })roteetion of the laws. 
 
 (3) It taxes the transfer of a non-resident's property over which 
 the State of New Jersey has no jurisdiction while it expressly omits 
 like property of residents, that is, real estate without the State, and 
 thereby deprives the non-resident of his property without due process 
 of the law. 
 
 Before taking up these objections it is necessary to briefly consider 
 tlie nature of the tax. In Carr v. Edwards, 84 N. J. L. GO?, it was 
 held by the Xew Jersey Court of p]rrors and Appeals to be a tax 
 upon the special right, the creation of the statute, of an executor or 
 administrator of a non-resident decedent to succeed to property 
 having its situs in New Jersey. Of § 12, as it stood in the original 
 act of 1909, the court said: "That section contains nothing to in- 
 dicate that it is not the succession of the New Jersey representative 
 that is meant to be taxed. It is true that the tax is not necessarily 
 five per cent, upon the whole Xew Jersey succession. The amount 
 depends on the ratio of the New Jersey property to the entire estate 
 wherever situated. This, however, merely accords a measure of the 
 tax imposed; the tax is still by the very words of the section imposed 
 upon the property located within this state. The reason for adopting 
 this provision was to make sure that the rate of taxation in case of 
 non-resident decedents should equal but not exceed the rate imposed 
 in the case of resident decedents. . . . 
 
 "In the case of the estates of non-resident decedents, it is open 
 for the law of the domicile to provide, as testators sometimes do, 
 that such taxes shall be a general charge against the estate. Our 
 legislature must be assumed to have had in mind its lack of juris- 
 diction over legacies under a non-resident's will, and in order to 
 protect the New Jersey executor, administrator or trustee who paid 
 the tax, authorized its deduction from 'property for distribution.' 
 This phrase suffices to reach not only a distributive share of a resi- 
 dent's estate in case of intestacy, but the whole of the Xew Jersey 
 property of a non-resident when turned over to the executor or ad- 
 ministrator at the domicile of the decedent. -The provision for both 
 cases — legacies and property for distribution — demonstrates that 
 the legislature did not mean to provide, as counsel contends, for a 
 legaev duty only." 
 
 Tliis language correctly characterizes the nature and effect of 
 the tax as imposed under the amendment of 1914; but that act, 
 under which the present cases arise, instead of reaching " the whole 
 of the New Jersev property of a non-resident when turned over to 
 the executor or administrator at the domicile of the decedent.'" now 
 confines the transfer tax upon the property of non-resident decedents
 
 302 MAXWELL V. BUGBEE. [cHAP. IV. 
 
 to real estate and tangible personal property within the State, the 
 stock of New Jersey corporations, and the stock of national hanks 
 located within the State. 
 
 The tax is, then, one upon the transfer of property in New Jersey, 
 to be paid upon turning it over to the administrator or executor 
 at the domicile of tlie decedent. That transfers of this nature arc 
 within the ta.xing power of the State, and that taxes may be assessed 
 upon such riglits owing their existence to local laws, and to them 
 alone, is not disputed. The right to inherit property, or to receive 
 it under testamentary disposition, has been so frequently held to 
 be the creation of statutory hnv, that it is quite unnecessary to cite 
 the decisions whicli have maintained the principle. While this is 
 confessedly true, the assessment of such taxes is, of course, subject 
 to applicable limitations of tlie state and federal constitutions; it 
 is with the latter class only that tliis court has to do. 
 
 (1) Taking up, then, the objections raised under the Federal 
 Constitution, it is said that the law (a) denies to citizens of other 
 States the privileges and immunities granted to citizens of the State 
 of New Jersey, in violation of par. 1, § 2, Art. IV, of the Federal 
 Constitution, which reads : "■ The citizens of each State shall be 
 entitled to all privileges and immunities of citizens in the several 
 States;" (b) abridges the privileges and immunities of plaintiffs in 
 error, the deceased persons whom they represent, and those taking 
 by ^\-ill or intestacy under them, as citizens of the United States, 
 in contravention of § 1 of the Fourteenth Amendment. 
 
 The provision quoted from Art. IV of the Constitution was in- 
 tended to prevent discrimination by the several States against 
 citizens of other States in respect of the fundamental privileges of 
 citizenship. As is said by Judge Cooley in his Constitutional Limi- 
 tations, ?th ed., p. 569 : " It appears to be conceded that the Con- 
 stitution secures in each State to the citizens of all other States the 
 right to remove to, and carry on business therein; the right by the 
 usual modes to acquire and hold property, and to protect and de- 
 fend the same in the law ; the right to the usual remedies for the 
 collection of debts and the enforcement of other personal rights; 
 and the right to be exempt, in propei'ty and person, from taxes or 
 burdens which the property, or persons, of citizens of the same 
 State are not subject to." Paul r. Virginia, 8 Wall. 168, 180; Ward 
 r. Maryland, 12 Wall. 418, 430. 
 
 The Fourteenth Amendment recognized a distinction between 
 citizenship of the United States and citizenship of one of the States. 
 It provides : " No State shall make or enforce any law which shall 
 abridge the privileges or immunities of citizens of the United 
 States." What those privileges and immunities were was under 
 consideration in Slaughter-IIouse Cases, 16 Wall. 36, 72-79, where 
 it was shown (pp. 77-78) that it was not the purpose of this Amend- 
 ment, by the declaration that no State should make or enforce any 
 law which should abridge the privileges and immunities of citizens 
 of the United States, to transfer from the States to the Federal Gov- 
 ernment the security and protection of those civil rights that inhere
 
 CHAP. IV.] MAXWELL V. BUGBEE. 303 
 
 in state citizenship; and (p. 79) that tlie privileges and immunities 
 of citizens ot the United States thereby placed beyond abridgment 
 by the States were those which owe their existence to the Federal 
 Government, its national character, its constitution, or its laws. 
 To the same effect is Duncan v. Missouri, 152 U. S. 377, 382. 
 
 We are unable to discover in the statute before us, which regulates 
 and taxes tlie right to succeed to property in Xow Jersey upon the 
 death of a non-resident owner, any inl'ringemcnt of the rights of 
 citizenship either of the States or of the United States, secured by 
 either of the constitutional provisions referred to. We have held 
 that the protection tliat they afford to riglits inherent in citizenship 
 are not infringed by the taxation of the transfer of property witiiin 
 the jurisdiction of a State passing by will or intestacy where the 
 decedent was a non-resident of the taxing State, although the entire 
 succession was taxed in the State where he resided. Blackstone v. 
 Miller, 188 U. S. 189, 207. 
 
 Upon this point it is unnecessary to decide whether the case might 
 not be rested on a much narrower ground. The alleged discrim- 
 ination, here complained of, so far as privileges and immunities of 
 citizenship are concerned, is not strictly applicable to this statute 
 because the difference in the method of taxation rests upon residence 
 and not upon citizenship. La Tourette v. McMaster, 248 U. S. 
 465. 
 
 (2) It is next contended that the effect of including the property 
 beyond the jurisdiction of the State in measuring the tax, amounts 
 to a deprivation of property without due process of law because 
 it in effect taxes property beyond the jurisdiction of the State. 
 
 It is not to be disputed that, consistently with the Federal Con- 
 stitution, a State may not tax property beyond its territorial juris- 
 diction, but the subject-matter here regulated is a privilege to suc- 
 ceed to property which is witiiin the jurisdiction of the State. When 
 the State levies taxes within its authority, property not in itself 
 taxable by the State may be used as a measure of the tax imposed. 
 This principle has been frequently declared by decisions of this 
 court. The previous cases were reviewed and the doctrine applied 
 in Kansas City, Fort Scott & Memphis IJy. Co. v. Kansas, 240 U. S. 
 227, 232. After deciding that the privilege tax, there involved, did 
 not impose a burden upon interstate commerce, tliis court held that 
 'it was not in substance and elfect a tax upon property beyond the 
 State's jurisdiction, allliough a large amount of the property, which 
 was referred to as a measure of the assessment, was situated outside 
 of the State. In the present case the State imposes a privilege tax, 
 clearly within its authority, and it has adopted as a measure of that 
 tax the proportion which the specified local property bears to the 
 entire estate of the decedent. That it may do so within limitations 
 which do not really make the tax one upon property bevond its 
 jurisdiction, the decisions to which we have referred clearlv estab- 
 lish. The transfer of certain property within the State is taxed by 
 a rule which considers the entire estate in arriving at the amount of 
 the tax. It is in no just sense a tax upon the foreign property, real
 
 304: MAXWELL V. BUGBEE. [cHAP. IV. 
 
 or personal. It is only in instances where the State exceeds its au- 
 tliority in imposing a tax upon a subject-matter within its jurisdic- 
 tion in such a way as to really amount to taxing that which is beyond 
 its authority, that such exercise of power by the State is held void. 
 In cases of that character the attempted taxation must fail. Looney 
 V. Crane Co., 245 U. S. 178; International Paper Co. v. Massachu- 
 setts, 246 U. S. 135. To say that to apply a different rule regulating 
 succession to resident and non-resident decedents is to levy a tax 
 upon foreign estates, is to distort the statute from its purpose to 
 tax the privilege, which the statute has created, into a property tax, 
 and is unwarranted by any purpose or effect of the enactment, as 
 we view it. 
 
 (3) It is further contended that the tax bears so unequally upon 
 non-residents as to deny to them the equal protection of the laws. 
 
 The subject of taxes of this character was given full consideration 
 by this court in Magoun v. Illinois Trust & Savings Bank, 170 U. S. 
 283, in Avhich case a graded legacy and inheritance tax law of the 
 State of Illinois was sustained. The statute exempted all estates 
 valued at less than $20,000, if passing to near relations, or at less than 
 $500 if passing to those more remote, made the rate of tax increas- 
 ingly greater as the inheritances increased, and assessed it differently 
 according to the relationship of the beneficiary to the testator or in- 
 testate. The statute was attacked as void under the equal protection 
 clause of the Fourteenth Amendment, but was held to be valid. Of 
 this class of taxes the court said (p. 288) : " They [inheritance 
 taxes] are based upon two principles: 1. An inheritance tax is not 
 one on property, but one on the succession. 2. The right to take 
 property by devise or descent is the creature of the law, and not a 
 natural right — a privilege, and therefore the authority which con- 
 fers it may impose conditions upon it. From these principles it is 
 deduced that the States may tax the privilege, discriminate between 
 relatives, and between these and strangers, and grant exemptions ; 
 and are not precluded from this power by the provisions of the 
 respective state constitutions requiring uniformity and equality of 
 taxation." 
 
 And upon examining (pp. 296, 297) the classification upon which 
 the provisions of the Illinois statute were based, the court found 
 there was no denial of the equal protection of the laws either in dis- 
 criminating between those lineally and those collaterally related to 
 decedent, and those standing as strangers to the blood, or in in- 
 creasing the proportionate burden of the tax progressively as the 
 amount of the benefit increased. 
 
 Equal protection of the laws requires equal operation of the laws 
 upon all persons in like circumstances. Under the statute, in 
 the present case, the graduated taxes are levied equally upon all 
 interests passing from non-resident testators or intestates. The tax 
 is not upon property, but upon the privilege of succession, which the 
 State may grant or ^Wthhold. It may deny it to some and give it to 
 others. The State is dealing in this instance not with the transfer 
 of the entire estate, but only with certain classes of property that are
 
 CHAP. IV.] MAXWELL l\ BUGBEE. 30 
 
 subject to the jurisdiction of the State. It must find some rule 
 which will adequately deal with this situation. It has adopted that 
 of the j)roportion of the local estate in certain proijerty to the en- 
 tire estate of the decedent. In making classilication, which has been 
 uniformly held to be within the power of the State, inequalities 
 necessarily arise, for some classes are reached, and others omitted, 
 but this has never been held to render such statutes unconstitutional. 
 Beers v. Glynn, ^11 U. S. 477. This i)rinciple lias been recognized 
 in a series of cases in this court. Board of Education v. Illinois, 203 
 U. S. 553; Campbell v. California, 200 U. S. 87; Keeney v. New 
 York, 223 U. S. 525. It has been uniformly held that the Four- 
 teentli Amendment does not deprive tiie States of the right to de- 
 termine the limitations and restrictions upon the right to inherit 
 property, but "at the most can only be held to restrain such an 
 exercise of power as would exclude the conception of judgment and 
 discretion, and which would be so obviously arbitrary and unreason- 
 able as to be beyond the pale of governmental authority." Campbell 
 V. California, 200 U. S. 95. In upholding the validity of a gradu- 
 ated tax upon the transfer of personal property, to take effect upon 
 the grantor's death, we said in Keeney v. New York, 250 U. S. 535; 
 "The validity of the tax must be determined by the laws of New 
 York. The Fourteenth Amendment does not diminish the taxing 
 power of the State, but only requires that in its exercise the citizen 
 must be afforded an opportunity to be heard on all questions of lia- 
 bility and value, and shall not, by arbitrary and discriminatory pro- 
 visions, be denied equal protection. It does not deprive the State of 
 the power to select the subjects of taxation. But it does not follow 
 that because it can tax any transfer (Hatcl\ v. Reardon, 20-i U. S. 
 152, 159), that it must tax all transfers, or that all must be treated 
 alike/' 
 
 In order to invalidate this tax it must be held that the difference 
 in the manner of assessing transmission of property by testators or 
 intestates, as between resident and non-resident decedents, is so 
 ■wholly arbitrary and unreasonable as to be beyond the legitimate 
 authority of the State. We are not prepared so to declare. The 
 resident testator or intestate stands in a different relation to the 
 State than does the non-resident. The resident's property is usually 
 Avithin the ready control of the State, and easily open to inspection 
 and discovery for taxation purposes. In' means quite different from 
 those afforded in cases of local holdings of non-resident testators 
 or intestates. As to the resident, his entire intangible, and usually 
 most of his tangible property, pay tribute to the State when trans- 
 ferred bv will or intestacy ; the transfer of the non-resident's estate 
 is taxed only so far as his estate is located within the jurisdiction 
 and only so far as it comes within the description of " real property 
 Avithin this State, or of goods, wares, and mercliandise within this 
 State, or of shares of stock of corporations of this State, or of na- 
 tional banking associations located in tliis State." Simple contract 
 debts owing by New Jersey debtors to non-residents and some other 
 kinds of property of non-residents are exempt, although it is settled
 
 306 .MAXWELL l\ BUGBEE. [cHAP. IV. 
 
 that, for the purpose of founding administration, simple contract 
 debts are assets at the domicile of the debtor; Wyman v. Halstead, 
 109 U. S. 654, 656; and that the State of the debtor's domicile 
 may impose a succession tax; Blackstone v. Miller, 188 U. S. 189, 
 205; Baker v. Baker, Eccles & Co., 242 U. S. 394, 401. 
 
 The question of equal protection must be decided as between 
 resident and non-resident decedents as classes, rather than by the 
 incidence of the tax upon the particular estates whose representatives 
 are here complaining. Absolute equality is impracticable in taxa- 
 tion, and is not required by the equal protection clause. And in- 
 equalities that result not from hostile discrimination, but occasion- 
 ally and incidentally in the application of a system that is not 
 arbitrary in its classification, are not sufficient to defeat the law. 
 
 ill our o])inion, there are substantial differences which within the 
 rules settled by this court permit the classification which has been 
 accomplished by this statute. St. Louis Southwestern Ey. Co. v. 
 Arkansas, 235 U. S. 350, 367, and cases cited. 
 
 Finding no error in the judgments of the Court of Errors and 
 Appeals of the State of New Jersey, the same are 
 
 Affirvied. 
 
 Mr. Justice Holmes dissenting. 
 
 "»• 
 
 Many things that a legislature may do if it does them with no 
 ulterior purpose, it cannot do as a means to reach what is beyond 
 its constitutional power. That I understand to be the principle 
 of Western Union Telegraph Co. v. Kansas ; Pullman Company v. 
 Kansas, and other cases in 216 U. S. Western Union Telegraph 
 Co. V. Foster, 247 U. S. 105, 114. New Jersey cannot tax the 
 property of Hill or MacDonald outside tlie State and cannot use 
 her power over property within it to accomplish by indirection 
 what she cannot do directly. It seems to me that that is what she is 
 trying to do and therefore that the judgments of the Court of 
 Errors and Appeals should be reversed. 
 
 It seems to me that when property outside the State is taken 
 into account for the purpose of increasing the tax upon property 
 within it, the property outside is taxed in effect, no matter what 
 form of words may be used. It appears to me that this cannot be 
 done, even if it should be done in such a way as to secure equality 
 between residents in New Jersey and those in other States. 
 
 New Jersey could not deny to residents in other States the right 
 to take legacies which it granted to its own citizens, and therefore 
 its power to proliibit all legacies cannot be invoked in aid of a 
 principle that affects the foreign residents alone. In Kansas City, 
 Fort Scott & Memphis Ey. Co. v. Kansas, 240 U. S. 227, 235, the 
 State could have refused incorporation altogether and therefore 
 could impose the carefully limited condition that was upheld. 
 
 The Chief Justice, Mr. Justice VaxDea^\xter and Mr. Jus- 
 tice McEeynolds concur in the opinion that I express. 
 
 White, C. J., VanDevanter and McEeynolds, JJ., concurred 
 in the dissent.
 
 CTIAi'. I V.J' IN iiK ESTATE OF SWIFT. 
 
 306a 
 
 In re I:STATE OF SWIFT. 
 
 COUKT OF ArPEALS OF New Yokk. 1893. 
 [IlepoiiedVM New York, 77.] 
 
 Gray, J. James T. Swift died in .July, 1890, being a resident of 
 this State and leaving a will, by which he made a disposition of all his 
 property among relatives. After many legacies of money and of 
 various articles of personal property, he directed a division of his 
 residuary estate into four portions, and he devised and bequeathed one 
 portion to each of four persons named. The executors were given a 
 power of sale for the purpose of paying the legacies and of making the 
 distribution of the estate. At the time of his death, the testator's 
 estate included certain real estate and tangible personal property in 
 chattels, situated within the State of New Jersey, whicli were realized 
 upon by the executors and converted into moneys in hand. When, 
 upon their application, an appraisement was had of the estate, in order 
 to fix its value under the requirements of the law taxing gifts, legacies, 
 and inheritances, the surrogate of the county of New York, before 
 whom the matter came, held, with respect to the appraisement, that 
 the real and personal property situateil without the State of New York 
 were not subject to appraisal and tax under the law, and the excep- 
 tions taken by the comptroller of the city of New York to that deter- 
 mination raise the first and the principal question which we shall 
 consider. 
 
 Surrogate Ransom's opinion, which is before us in the record, con- 
 tains a careful review of the legal principles which limit the right to 
 impose the tax, and his conclusions are as satisfactory to my mind, as 
 they evidently were to the minds of the learned justices of the General 
 Term of the Supreme Court, who agreed in adirming the surrogate's 
 decree upon his opinion. 
 
 Tlie Attorney-General has argued that this law, commonly called the 
 collateral inheritance tax law, imposes not a property tax but a charge 
 for the privilege of acquiring property, and, as I apprehend it, the 
 point of his argument is that, as there is no absolute right to succeed 
 to propertv, the State has a right to annex a condition to the permis- 
 sion to take by will, or by tlie intestate laws, in tiie form of a tax, to 
 be paid by the persons for whose benefit the remedial legislation has 
 been enacted. That is, substantially, tlic way in which he puts the 
 proposition, and if the premise be true that the tax imposed is upon 
 the privilege to acquire, and. as he says in his brief, is like " a dutj'^ 
 imposed, payable by the beneficiary," possibly enough, we should have 
 to agree with him. We might think, in that view of the act, that the 
 situs of property in a foreign jurisdiction was not a controlling circum- 
 stance. But if we take up the provisions of the law by which the tax 
 is imnosed. and if we consider them as they are framed and tlie prin*
 
 306b IN EE ESTATE OF SWIFT. [ciIAP. IV. 
 
 ciple which then seems to underlie the peculiar system of taxation 
 created, I do not think that his essential proposition finds adequate 
 support. The law in force at the time of the decease of the testator is 
 contained in chapter 713 of the Laws of 1887, amending chapter 483 
 of the Laws of 1885, and is entitled '' An act to tax gifts, legacies, and 
 collateral inheritances in certain cases." 
 
 By the first section it is provided that " all property which shall pass 
 by will . . . from any person who may die seized or possessed of the 
 same, while a resident of this State, or, if such decedent was not a 
 resident of this vState at the time of his death, wliich property or any 
 part thereof shall be within this State, . . . shall be and is subject to 
 a tax ... to be paid ... for the use of the State," etc. 
 
 In the fourth section it is provided that " all taxes imposed by this 
 act, unless otherwise herein provided for, shall be due and payable at 
 the death of the decedent," etc. 
 
 By the sixth section, it is provided that the executor shall " deduct 
 the tax from the legacy or property, subject to said tax, or if the 
 legacy or property be not money, he shall collect the tax thereon upon 
 the appraised value thereof from the legatee, or person entitled to such 
 property, and he shall not deliver, or be compelled to deliver, any spe- 
 cific legacy or property subject to tax to any person until he shall have 
 collected the tax thereon," etc. The language of the act has been 
 justly condemned, for being involved and difficult to read clearly; but 
 considering the language employed in these and in other sections of the 
 law, in its ordinary sense, I think w^e would at once say that if the 
 legislature had not actually imposed a tax upon the property itself, 
 upon the death of its owner, it had certainly intended to impose a tax 
 upon its succession, which was to be a charge upon the property, and 
 •which operated, in effect, to diminish pro ta)do its value, or the capi- 
 tal, coming to the new owner under a will, or by the intestate laws- 
 Could any one say, after reading the provisions of this law, that it was 
 the legatee, or person entitled, who was taxed? I doubt it. Propertj', 
 which was the decedent's at the time of his death, is subjected to the 
 payment of a tax. The tax is to be deducted from the legacy ; or, 
 when deduction is not possible from the legacy not being in money, 
 and a collection from the legatee or the person entitled to the property 
 is authorized to be made, the tax so to be collected is described as 
 " the tax thereon," that is, on the property. 
 
 If it should be said that such an interpretation of the law is in con- 
 flict with a doctrine which some judges have asserted, respecting the 
 nature of this tax, I think it might be sufficient to say that the phrase- 
 ology of the New York law differs, more or less, from that of other 
 States, and seems peculiarly to charge the subject of the succession 
 with the payment of the tax. But I do not think it at all important 
 to our decision here that we should hold it to be a tax upon property 
 precisely. 
 
 A precise definition of the nature of this tax is not essential, if it is
 
 CHAP. TV.] IN EE ESTATE OF SWIFT. 30Cc 
 
 susccjitible of exact definition. Thus far, in this court, we have not 
 thought it necessary, in the cases couiing before us, to determine 
 whether the object of taxation is the property which passes, or not ; 
 though, in some, expressions may Ijc found which seem to regard the 
 tax in that light. Matter of Mcl'lierson, 10-4 N.'Y. 306; Matter of 
 Enston, 113 id. 174; Matter of Sherwell, 125 id. 37*J ; Matter of Ro- 
 maine, 127 id. 80 ; and Matter of Stewart, 131 id. 274. The idea of 
 tliis succession tax, as we may conveniently term it, is more or less 
 .compound ; the i)rincipal idea being the subjection of property, owner- 
 ship of which has ceased by reason of the death of its owner, to a 
 diminution, by the State reserving to itself a portion of its amount, if 
 in mone}-, or of its appraised value, if in other forms of property. The 
 accompanying, or the correlative idea should necessarily be that the 
 property, over which such dominion is thus exercised, shall be within 
 the territorial limits of the State at its owner's death, and, therefore, 
 subject to the operation and the regulation of its laws. The State, in 
 exercising its power to subject realty, or tangible property, to the 
 operation of a tax, must, by every rule, be limited to property- within 
 its territorial confines. 
 
 The question here does not relate to the power of the State to tax 
 its residents with respect to the ownership of property situated else- 
 where. That question is not involved. The question is whether the 
 legislature of the State, in creating this system of taxation of inherit- 
 ances, or testamentary gifts, has not fixed as the standard of right the 
 property passing by will, or by the intestate laws. 
 
 AVhat has the State done, in effect, by the enactment of this tax law? 
 It reaches out and appropriates for its use a portion of the property at 
 the moment of its owner's decease , allowing onh' the balance to pass 
 in the way directed by testator, or permitted b}- its intestate law, and 
 while, in so doing, it is exercising an inherent and sovereign right, it 
 seems very clear to my mind that it affects only property which lies 
 within it, and, consequentl}', is subject to its right of eminent domain. 
 The theory of sovereignty, which invests the State with the right and 
 the power to permit and to regulate the succession to property upon 
 its owner's decease, rests upon the fact of an actual dominion over 
 that property. In exercising such a power of taxation, as is here in 
 question, the principle, obviously, is that all propert}' in the State is 
 tributar}' for such a purpose and the sovereign power takes a portion, 
 or percentage of the property, not because the legatee is subject to 
 its laws and to the tax. but because the State has a superior right, or 
 ownership, by force of which it can intercept the property, upon its 
 owner's death, in its passage into an ownership regulated by the en- 
 abling legislation of the State. 
 
 The rules of taxation have become pretty well settled, and it is fun- 
 damental among them that there sliall be jurisdiction over the subject 
 taxed; or, as it has been sometimes expressed, the taxing power of 
 the State is coextensive with its sovereignty. It has not the power to
 
 306d IN KE ESTATE OF SWIFT. [cHAP. Tv. 
 
 tax directly either lands or tangible personal property situated in an- 
 other State or country. As to the hitter description of property no J 
 fiction transmuting its situs to the domicile of the owner is available, 
 when the question is one of taxation. In this connection the observa- 
 tions of Chief Judge Comstock, in lloyt r. Commissioners of Taxes, 
 23 N. Y. 224, and of some text-writers, are not inappropriately referred 
 to. He liad said tiiat lands and personal property having an actual 
 situation witliin the State are taxable, and, by a necessary implication, 
 that no other property can be taxed. He says, further, "If we say that 
 taxation is on the person in respect to the property, we are still without 
 a reason for assessing the owner resident here in respect to one part 
 of his estate situated elsewhere and not in respect to another part. 
 Both are the subjects of taxation in the foreign jurisdiction." 
 
 In Judge Cooley's work on Taxation it is remarked (p. 159) that 
 " a State can no more subject to its power a single person, or a single 
 article of propert}', whose residence or situs is in another State, than 
 it can subject all the citizens, or all the property of such other State to 
 its power." 
 
 Judge Coole}' had reference in his remarks to the case of bonds of a 
 railroad; for he cites the case of "the State Tax on Foreign-Held 
 Bonds '■ in the United States Supreme Court (15 Wallace, 300), where 
 Mr. Justice Field delivered the opinion, and, in the course of it, observed 
 that "• the power of taxation, however vast in its character and search- 
 ing in its extent, is necessarily limited to subjects within the jurisdic- 
 tion of the State." 
 
 Judge Story, in his work on the Contiict of Laws, speaking of tlie 
 subject of jurisdiction in regard to property, said (section 550) that 
 the legal fiction as to the situs of movables yields when it is necessary 
 for the purpose of justice, and, further, " a nation within whose terri- 
 tory any personal property is actually situated has an entire dominion 
 over it while tlierein, in point of sovereignty and jurisdiction, as it has 
 over immovable property situated there." 
 
 The proposition which suggests itself from reasoning, as from author- 
 ity, is that the basis of the power to tax is the fact of an actual domin- 
 ion over the subject of taxation at the time the tax is to be imposed. 
 
 The effect of tliis special tax is to take from the property a portion, 
 or a percentage of it, for the use of the State, and I think it quite 
 immaterial whether the tax can be precisely classified with a taxation 
 of property or not. It is not a tax ii[)on persons. If it is called a tax 
 upon the succession to tlie ownershi|) of property, still it relates to 
 and suV)jects the property itself, and when that is without the jurisdic- 
 tion of the State, inasmuch as the succession is not of property within 
 the dominion of the State, succession to it cannot be said to occur b}' 
 permission of the State. As to lands this is clearly the case, and 
 rights in or power over tliem are derived from or through the laws of 
 the foreign State or country. As to goods and chattels it is true ; for 
 their transmission abroad is subject to the permission of and regulated
 
 CHAP. IV.] IN RE ESTATE OF SWIFT. 30Go 
 
 by the laws of the State or country where actually situated. Jurisdic- 
 tion over them beloii<z;s to the c(jiirLs of thai Stute or country tor all 
 purposes of policy, or of adlniui^slration in l\w interests of its citzens, 
 or of those having enforceable rights, and their surrender, or transmis- 
 sion, is upon piinciples of coraity. 
 
 When succession to the owncrsliip of property is by the permission 
 of the State, then the permission can relate only to property over which 
 the State has dominion and as to which it grants the privilege or 
 permission. 
 
 Nor is the argument available that, by the power of sale conferred 
 upon the executors, there was an equital)lc conversion worked of the 
 lands in New Jersey, as of the time of the testator's death, and, hence, 
 that the property sought to be reached by the tax, in the eye of the 
 law, existed as cash in this State in the executor's hands, at the 
 moment of the testator's death. There might be some doubt whether 
 the main proposition in the argument is quite correct, and whether the 
 land did not vest in the residuary legatees, subject to the execution of 
 the power of sale. But it is not necessary to decide that question. 
 Neither the doctrine of equitable conversion of lands, nor any fiction 
 of situs of movables, can have any bearing upon the question under 
 advisement. The question of the jurisdiction of the State to tax is one 
 of fact and cannot turn u[)on theoiies or fictions ; which, as it has been 
 observed, have no place in a well adjusted system of taxation. 
 
 We can arrive at no other conclusion, in my opinion, than that 
 the tax provided for in this law is only enforceable as to property 
 which, at the time of its owner's death, was within the territorial limits 
 of this State. As a law imposing a si)ecial tax, it is to be strictly 
 construed against the State and a case must be clearly made out for its 
 application. We should incline against a construction which might 
 lead to double taxation ; a result possible and probable under a dif- 
 ferent view of this law. If the property in the foreign jurisdiction was 
 in land, or in goods and chattels, when, upon the testator's death, a 
 new title, or ownership, attached to it, the bringing into this State of 
 its cash proceeds, subsequently, no matter by what authority of will, 
 or of statute, did not subject it to the tax. A different view would be 
 against everv sound consideration of what constitutes the basis for 
 such taxation, and would not accord with an understanding of the 
 intention of the legislature, as more or less plainly expressed in these 
 acts. 
 
 Another question, which I shall merely advert to in conclusion, 
 arises upon a ruling of the surrogate with respect to appraisement, in 
 connection with a clause of the will directing that the amount of the 
 tax upon the legacies and devises should be jiaid as an expense of 
 administration. The appraiser, in ascertaining the value of the residu- 
 ary estate for the purpose of taxation, deducted the amount of the tax 
 to be assessed on prior legacies. The surrogate overruled him in this, 
 and held that there should be no deduction from the value of the resid-
 
 oOGf FKOT^I^'GlIAM V. siiAW. [chap. IV. 
 
 uary estate of the amount of the tax to be assessed, either upon prior 
 legacies, or upon its vaUie. He held that the legacies taxable should 
 be reported, irrespective of the provision of the will ; and that a mode 
 of payment of the succession tax prescribed by will is something with 
 which the statute is not concerned. I am satisfied with his reasoning 
 and can add nothing to its force. Manifestly, under the law that 
 which is to be reported by the appraiser for the purpose of the tax is 
 the value of the interest passing to the legatee under the will, without 
 any deduction for any purpose, or uuder any testamentary direction. 
 
 A question is raised as to the elfect upon the law, as contained in 
 the acts of 1885 and 1887, of the passage of chapter 215 of the Laws 
 of 1891 ; but as that has been the subject of another appeal, and is 
 fully discussed in the opinion in the Matter of the Estate of Prime, 136 
 K. Y. 347. reference will be made to it liere. 
 
 My brethren are of the opinion that the tax imposed under the act is 
 a tax on the right of succession, uuder a will, or by devolution in case 
 of intestacy ; a view of the law which my consideration of the question 
 precludes my assenting to. 
 
 They concur in my opinion so far as it relates to the imposition of a 
 tax upon real estate situated out of this State, although owned by a 
 decedent, residing here at the time of his decease ; holding with me 
 that taxation of such was not intended, and that the doctrine of equi- 
 table conversion is not applicable to subject it to taxation. But as to 
 the personal property of a resident decedent, wheresoever situated, 
 whether within or without the State, they are of the opinion that it is 
 subject to the tax imposed by the act. 
 
 The judgment below, therefore, should be so modified as to exclude 
 from its operation the personal property in New Jersey, and, as so 
 modified, it should be affirmed, without costs to either party as against 
 the other.^ 
 
 I 
 
 FROTHINGHAM v. SHAW. 
 
 Supreme Judicial Court of Massachusetts. 1899. 
 
 [Reported 175 Massachusetts, 59.] / 
 
 Morton, J. This is a petition by the plaintiff, as executor of the 
 will of one Joseph Frothinghara, for instructions in regard to the pay- 
 ment of a collateral inheritance tax on the residuary legacies. The 
 case was heard on agreed facts, and comes here by successive appeals 
 from decrees of the probate court and of a single justice of this court 
 finding that the tax was payable, and directing the executor to pay the 
 same. At the time of his death the testator was domiciled at Salem, 
 in this Commonwealth, and his estate, except certain real estate situ- 
 
 1 See In re Bronson, 150 N. Y. 1. — Ed.
 
 CHAP. IV.] ^EOTIIINGHA^^ V. SHAW. 306g 
 
 ated here, and appraised at 82100, and casli in a savings bank in 
 Salem amounting to 8'JU.j, was, and for many years had been, in the 
 hands of his agents in New Yoik, and consisted of bonds and stock 
 of foreign corporations, a certificate of indebtedness of a foreign cor- 
 poration, bond secured by mortgage on real estate in New Hampshire, 
 the makers living in New York, and of cash on deposit with a savings 
 l)ank and with indivithials in Brooklyn ; the total being upwards of 
 §40,000. There has been no administration in New York, and the 
 petitioner has taken possession of all the property except the real 
 estate, and has paid all of the debts and legacies except the residuary 
 legacies. None of the legacies are entitled to exemption if otherwise 
 liable to the tax. The appellants contend that the stocks, bonds, etc., 
 were not '' property within the jurisdiction of the Commonwealth," 
 within the meaning of St. 181)1, c. 425, § 1, and tliat, if they were, the 
 succession took place by virtue of the law of New York, and not of 
 this State. It is clear that, if the question of the liability of the tes- 
 tator to be taxed in Salem for the property had arisen during his life- 
 time, he would have been taxable for it under Pub. St. c. 11, §§4, 20, 
 notwithstanding the certificates, etc., were in New York (Kirkland v. 
 Hotchkiss, 100 U. S. 491 ; State Tax on Foreign-Held Bonds Case, 
 15 Wall. 300; Cooley, Tax'n [2d ed.], 371); and the liability would 
 have extended to and included the bonds secured by mortgage (Kirk- 
 land V. Hotchkiss, supra ; State Tax on Foreign-Held Bonds Case, 
 siqjrcf ; Hale v. Commissioners, 137 Mass. 111). It is true that the 
 Public Statutes provide that personal propert}', wherever situated, 
 whether within or without the Commonwealth, shall be taxed to the 
 owner in the place where he is an inhabitant. But it is obvious that 
 the legislature cannot authorize the taxation of property over which it 
 has no control, and the principle underlying the provision is that 
 personal property follows the person of the owner, and properlv may 
 be regarded, therefore, for the purposes of taxation, as having a situs 
 at his domicile, and as being taxable there. After the testator's death 
 the property would have been taxable to his executors for three years, 
 or till distributed and paid over to those entitled to it, and notice 
 thereof to the assessors ; showing that the fiction, if it is one, is con- 
 tinued for the purposes of taxation after the owners death. Pub. St. 
 c. 11, § 20, el. 7; Hardy r. Inhabitants of Yarmouth, 6 Allen, 277. 
 In the present case the tax is not upon property as such, but upon the 
 privilege of disposing of it by will, and of succeeding to it on the 
 death of the testator or intestate ; and it '* has," as was said in Minot 
 V. "Winthrop, infra, " some of the characteristics of a duty on the 
 administration of the estates of deceased persons." Minot v. Win- 
 throp, 162 Mass. 113; Callahan v. Woodbridge, 171 Mass. 595; 
 Greves v. Shaw, 173 Mass. 205; IMoody v. Shaw, 173 Mass. 375. In 
 arriving at the amount of the tax, the property- within the jurisdiction 
 of the Commonwealth is considered, and we see no reason for suppos- 
 ing that the legislature intended to depart from the principle heretofore
 
 306h FKOTHINGHAM V. SHAW. [cHAP. IV. 
 
 adopted, which regards personal property, for the purposes of taxation, 
 as having a situs at the domicile of its owner. This is the general rule 
 (Cooley/rax'n [•2d ed.], 372), and, tliough it may and does lead to 
 double taxation, that has not been accounted a sufficient objection to 
 taxing personal property to the owner during his life at the place of 
 his domicile, and we do not see that it is a sufficient objection to the 
 imposition of succession taxes or administration duties, under lilie 
 circumstances, after his death. In regard to the mortgage bonds, it 
 is to be noted, in addition to what has been said, that this case differs 
 from Callahan r. Woodbridge, supra. In that case the testator's 
 domicile was in Kew York, and it does not appear from the opinion 
 that the note and mortgage deed were in this State. In this case the 
 domicile was in this Commonwealth, and we think that, for the purposes 
 of taxation, the mortgage debt may be regarded as having a situs here. 
 This is the view taken in Hanson, Death Duties (4th ed.), 239, 240, 
 which is cited apparently with approval by Mr. Dicey, though he calls 
 attention to cases which may tend in aiwther direction. See Dicey, 
 Confl. Laws, 319, note 1. It seems to us, therefore, that for the 
 purposes of the tax in question the property in the hands of the 
 executor must be regarded as having been within the jurisdiction of 
 this Commonwealth at the time of the testator's death. See In re 
 Swift, 137 N. Y. 77 ; Jn re Miller's Estate, 182 Pa. St. 162. 
 
 The petitioner further contends that the succession took place by 
 virtue of the law of New York. But it is settled that the succession to 
 movable property is governed by the law of the owner's domicile at 
 the time of his death. This, it has been often said, is the universal 
 rule, and applies to movables wherever situated. Stevens v. Gaylord, 
 11 Mass. 256 ; Dawes v. Head, 3 Pick. 129, 144, 145 ; Fay v. Haven, 
 3 Mete. (Mass.) 109; Wilkins v. FMett, 9 Wall. 740; id. 108 U. S. 
 256 ; Freke v. Carbery, L. R. 16 Eq. 401 ; Attorney-General v. Camp- 
 bell,' L. R. 5 H. L. 524; Duncan v. Lawson, 41 Ch. Div. 394; Sill v. 
 Worswick, 1 H. Bl. 690 ; Dicey, Confl. Laws, 683 ; Story, Confl. Laws 
 (7th ed.), §§ 380, 481. If there are movables in a foreign country, 
 the law of tlie domicile is given an extra-territorial effect by the courts 
 of that country, and in a just and proper sense the succession is said 
 to take place by force of, and to be governed by, the law of tlie domi- 
 cile. Accordingly it has been held that legacy and succession duties, 
 as such, were payable at the place of domicile in respect to movable 
 property wherever situated, because in such cases the succession or 
 legacy took effect by virtue of the law of domicile. Wallace v. Attor- 
 ne°y-General (1865) 1 Ch. App. 1 ; Dicey, Confl. Laws, 785; Hanson, 
 Death Duties (4th ed.), 423, 526. With probate or estate or adminis- 
 tration duties, as such, it is different. They are levied in respect of 
 the control which every government has over the property actually 
 situated within its jurisdiction, irrespective of the place of domicile. 
 Laidley v. Lord Advocate, 15 App. Cas. 468, 483; Hanson, Death 
 Duties (4th ed.), 2, 03. Of course, any state or country may impose
 
 CHAP. IV.] I'KOTIll.NCillAM V. SHAW. 300l 
 
 a tax, aiul give it such name or no name as it chooses, which shall 
 embrace, if so inten<k'(l, the various grounds upon which taxes are or 
 may be levied in respect of the devolution of estates of deceased 
 persons, and whicli shall be leviable according as the facts in each 
 particular case warrant. In Englaud, for instance, the "■ estate duty," 
 as it is termed, under the Finance Act of 1894 (57&58 Vict. c. 30), has 
 largely superseded the probate duty, and under some circumstances 
 takes the place of the legacy and succession duty also. Hanson, Death 
 Duties (4th ed.), G2, 63, 81. But, whatever the form of the tax, the 
 succession takes place and is governed by the law of the domicile, and 
 if the actual situs is in a foreign country, the courts of that country 
 cannot annul the succession established by the law of the domicile. 
 Dammert r. Osborn, 141 N. Y. 5G4. In further illustration of the 
 extent to which the law of the domicile operates, it is to be noted that 
 the domicile is regarded as the place of principal administration, and 
 any other administration is ancillary to that granted there. Payment 
 bv a foreign debtor to the doiniciHary administrator will be a bar to a 
 suit brought by an ancillary administrator subsequently appointed. 
 Wilkins c. Ellett, st/pr<i ; Stevens v. Gaylord, supra; Hutchins v. 
 Bank, 12 Mete. (Mass.) 421 ; IMartin t: Gage, 147 Mass. 204. And 
 the domiciliary administrator has sufficient standing in the courts of 
 another State to appeal from a decree appointing an ancillary adminis- 
 trator. Smith V. Sherman. 4 Cush. 408. ^Moreover, it is to be observed 
 — if that is material — that there has been no administration in New 
 York, that the executor was appointed here, and has taken possession 
 of tlie property by virtue of such appointment, and must distribute it 
 and account for it according to the decrees of the courts of this Com- 
 monwealth. To say, thcrcf<Me. that the succession has taken place bj' 
 virtue of the law of New York, would be no less a fiction than the 
 petitioner insists that the maxim, Mobilia seqiiuntur personam, is 
 when applied to matters of taxation. The petitioner contends that in 
 Callahan v. Woodbridge, si/pra, it was held that the succession to the 
 personal property in this State took i)lace by virtue of the law of this 
 State, allliough the testator was domiciled in New York. We do not 
 so understand that case. That case and Greves i\ Shaw, sitprrt, and 
 Mood}- V. Shaw, supra, rest on the right of a State to impose a tax or 
 duty in respect to the passing on the death of a non-resident of personal 
 property belonging to him, and situated within its jurisdiction. We 
 think that the decree should be affirmed.^ So ordered. 
 
 ^ For the EngHsh doctrines as to the effect of their Revenue Laws on non-residents 
 and on foreign pro|ierty, see Dicey, Conflict of Laws, 781. 
 
 For cases on the Income Tax, see Calcutta Jute Mills v. Nicholson, 1 Ex. D. 428; 
 Cohiulioun f. Brooks, U App. Cas. 493. On Probate Duty, see Att.-Gen. r. Hope, 
 10. M. & R. r)30 ; Snd.'ley i-. Att.-Oen., [18H7] A. C. 11. On Leji.acy Duty, see 
 Thom[)son v. A<lv.-Gen., i2 CI. & F. 1 : chattield v. Bcrchtoldt. L. R. 7 Ch. 192. 
 On Succession Duties, see Att.-Gen. v. Campbell, L. R. 5 H. L. 524 ; Wallace v. Att.- 
 Gen., L. R. 1 Ch. 1, — Ed.
 
 S06j MATTER OF COOLEY. [CHAP. IV. 
 
 MATTER OF COOLEY. 
 Court of Appeals, Xew York. 1906. 
 [Reported 186 N. Y. 220.] 
 
 HiscoCK, J. The appellants complain because in fixing the transfer 
 tax upon certain shares of the capital stock of the Boston and Alban}' 
 Railroad Company which belonged to the estate and passed under the 
 will of the deceased who was a non-resident, said stock has been ap- 
 praised at its full market value as representing an interest in the prop- 
 erty of said corporation situate both in the State of New York and 
 elsewhere. It is insisted by them that under the peculiar facts of this 
 case the valuation placed for such purpose upon the stock should not 
 have been predicated upon the idea that the latter represented an in- 
 terest in all of the property of said corporation, but should have been 
 fixed upon the theory that it represented an interest in only a portion 
 of said property. 
 
 I think that their complaint is well founded and that the order 
 appealed from should be reversed and the assessment corrected 
 accordingl}-. 
 
 The Boston and Albany Railroad Company is a consolidation formed 
 by the merger of one or more New York corporations and one Massa- 
 chusetts corporation. The merger was authorized and the said consoli- 
 dated corporation duly and separately created and organized under the 
 laws of each state. It was, so to speak, incorporated in duplicate. 
 There is but a single issue of capital stock representing all the prop- 
 ert}- of the consolidated and dual organization. Of the track mileage 
 about five-sixths is in Massachusetts and one-sixth in New York. The 
 principal offices, including the stock transfer office, are situated in 
 Boston, and there also are regularl}' held the meetings of its stock- 
 holders and directors. The deceased was a resident of the State of 
 Connecticut, and owned four hundred and twenty-six shares of the 
 capital stock, the value of which for the purposes of the transfer tax 
 was fixed at the full market value of $252.50 per share of the par value 
 of 8100. 
 
 The provisions of the statute (L. 1896, ch. 908, § 220, as amd. L. 
 1897, ch. 284, § 2j, authorizing the imposition of this tax are familiar, 
 and read in part as follows : 
 
 " A tax shall be and is hereby imposed upon the transfer of an}- 
 property, real or personal, of the value of five hundred dollars or over, 
 or of an}' interest therein ... in the following cases : . . . 
 
 " 2. When the transfer is b}' will or intestate law. of property within 
 the State, and the decedent was a non-resident of the State at the time 
 of his death." 
 
 The present assessment is under the last clause, and as alread}' inti- 
 
 I
 
 CHAP. IV.] MATTER OF COOLEY. 300k 
 
 mated, the sole question, stated in practical form, is whether the 
 authorities of this Slate ought to levy a tax upon the full value of de- 
 cedent's holdings, recognizing simply the New York corporation and 
 regarding it as the sole owner of all of the property of the doul»ly in- 
 corporated New York-Massachusetts corporation, or whether they 
 should limit the tax to a portion of the total value, upon the theory that 
 the company holds its property in Massachusetts at least under its 
 incorporation in that State. 
 
 By seeking the aid of our laws and becoming incorporated under 
 them, the consolidated Boston and All)any Railroad Company became 
 a domestic corporation. (Matter of Sage, 70 X. Y. 220.) 
 
 The decedent, therefore, as the owner of Boston and Albany stock, 
 ma}' be regarded as holding stock in a domestic corporation, and it is so 
 clearly settled that we need only state the proposition that capital stock 
 in a domestic corporation, although held by a non-resident, will be re- 
 garded as having its situs where the corporation is organized, and is, 
 therefore, taxable in this State. (Matter of Bronson, 150 N. Y. 1.) 
 
 There is, therefore, no question but that the decedent, holding stock 
 in the Boston and Albany road, which was incorporated under the laws 
 of this State, left "■ property within the State" which is taxable here. 
 There is no doubt about the meaning of " property within the State," 
 as applied to this situation, or that it justifies a taxation by our au- 
 thorities of decedent's interest as a shareholder in the corporation 
 created under the laws of this State. The onl}' doubt is as to the 
 extent and value of that interest for the purposes of this proceeding. 
 For, altiiough the tax is upon the transfer and not upon the property 
 itself, still its amount is necessarily measured b\' the value of the 
 property transferred, and, therefore, we come to consider briefly the 
 nature of the stock here assessed as property and the theory upon 
 which its value should be computed. 
 
 The general nature of a shareholder's interest in the capital stock of 
 a corporation is easih* understood and defined. In Plympton v. Bige- 
 low (93 N. Y. 592) it is said that " The right which a shareholder in a 
 corporation has by reason of his ownership of shares is a right to par- 
 ticipate according to the amount of his stock in the surplus profits of 
 the corporation on a division, and ultimately on its dissolution, in the 
 assets remaining after payment of its debts." 
 
 In Jermain v. L. S. & M. S. Ry. Co. (91 N. Y. 483, 491) it was 
 said : " A share of stock represents the interest which the shareholder 
 has in the capital and net earnings of the corporation." 
 
 Therefore, since the shares of capital stock under discussion repre- 
 sented a certain interest in the surplus of assets over liabilities of the 
 Boston and Albany Railroad Company, the value of that stock is to be 
 decided b}' reference to the amount of property which said railroad com- 
 pany as incorporated in this State is to be regarded as owning for 
 the purposes of this proceeding.
 
 30G1 MATTER OF COOLET. [ciIAP, IV. 
 
 In the majority of cases at least a corporation lias but a single 
 coroorate creation and existence under the laws of one State, and by 
 viitue of such single existence owns all of its corporate property. 
 There is no difficulty in deti-rmining in such a case thai a shareholder 
 under such an incori)oralion has an interest in all of the corporate 
 property wherever and in how many different States situated. I shall 
 have occasion to refer to that principle herealter in another connection. 
 Even in the case of a corporation incorporated and having a separate 
 existence under the laws of more than one State, the stockholder would 
 for some purposes be regarded as having an interest in all the cor- 
 porate property independent of the ditferent incorporations. In the 
 present case the decedent, by virtue of his stock as between him 
 and the corporation, would be regarded as having an interest in all of 
 its property and entitled to the earnings thereon when distributed as 
 dividends and to his share of the surplus upon dissolution and liquida- 
 tion proceedings independent of the fact that there were two separate 
 incorporations. 
 
 But, as it seems to me, different considerations and principles apply 
 to this proceeding now before us for review. Our jurisdiction to assess 
 decedent's stock is based solely and exclusively upon the theory that 
 it is held in the Boston and Albany Railroad Company as a New York 
 corporation. The authorities are asserting jurisdiction of and assessing 
 his stock only because it is held in the New York corporation of the 
 Boston and Albany Railroad Company. But we know that said com- 
 pany is also incorporated as a Massachusetts corporation, and presum- 
 ably by virtue of such latter incorporation it has the same powers of 
 owning and managing corporate property which it possesses as a New 
 York corporation. In fact the location of physical property and the 
 exercise of various corporate functions give greater iini)ortance to the 
 Massachusetts than to the New York corporation, and the problem is 
 whether for the purpose of levying a tax upon decedent's stock upon 
 the theory that it is held in and under the New York corporation we 
 ought to say that such latter corporation owns and holds all of the 
 property of the consolidated corporation wherever situated, thus entirely 
 ignoring the existence of and the ownership of property by the Massa- 
 chusetts corporation. It needs no particular illumination to demon- 
 strate that if we take such a view it will clearly pave the way to a 
 corresponding view by the authorities and courts of Massachusetts 
 that the corporation in that State owns all of the corporate property 
 wherever situated, and we shall then further and directly be led to the 
 unreasonable and illogical result that one set of property is at the same 
 tmie solely and exclusively owned by two different corporations, and 
 that a person holding stock should be assessed ui^on the full value of 
 his stock in each jurisdiction. Whether we regard such a tax as is 
 here being imposed, a recompense to the State for protection aiforded 
 during the life of the decedent or as a condition imposed for creating
 
 CHAP. IV.] MATTER OF COOLEY. 30Gm 
 
 and .•illowint: ct'rt.'iin rights of transfer or of siioccssion to propertv upon 
 death, we shall have (.'ucli Slati- exacting fnll compensation npon one 
 succession and a dear case of <loni)le taxation. And if the corpc^ratioti 
 had been compelled for siillieient reasons to take out incorporation in 
 six or twenty (jther States each one of thi in might take the same view 
 and insist npon the same exaction until tlie value of the piopertv was 
 in whole or large proportion exhaustetl in paying for the (irivilef'e 
 of succession to it. While undoul)te(lly tlie legislati\e anthorit\' is 
 potent enough \<) pres(!ril>e and enforce double taxation, it is jjlain that, 
 measured by ordinary principles of justice, the result suggested would 
 be inequital)le and might be seriously i)iM-densome. 
 
 Double taxation is one which the courts should avf)i^^ whenever it is 
 possible within reason to do so. (Matter of James, lit N. Y. (j. 11.; 
 
 It is never to be presumed. Sometimes tax laws have that effect, 
 but if they do it is because the legislature has unmistakably so enacted. 
 All presumptions aie against such an imi)Osition. (Tennessee v. Whit- 
 worth, 117 U. S. 129.) 
 
 The law of taxation is to l)e construed strictly against the State in 
 favor of the taxpayer, as represented by the executor of the estate. 
 (Matter of Kayerweather, 143 N. Y. 114.) 
 
 It seems pretty clear that within tlu; principles of the foregoing and 
 many other cases which might be cited, we ought not to sanction a 
 course which will lead to a tax, measured by the fnll value of the dece- 
 dent's stock in each State upon the conflicting theories that the corpo- 
 ration in that State owns all of the property of the consolidated 
 company, unless there is something in the statute, or decisions under 
 the statute, which compels us so to do. I do not think there is in 
 either place such compelling authority. 
 
 No doubt is involved, as it seems to me, about the meaning and ap- 
 plication of the statute. The decedent's stock was "propertv within 
 the State," which had its .s77/<.s' here as being held in the New York cor- 
 poration, and the transfer of it was taxable here. There can be no 
 dispute about that. The question is simply over the extent and value 
 of his interest as such stockholder, in view of the other iricorporation 
 in Massachusetts. I see nothing in the statute which prevents ns (Vom 
 paying decent regard to the pi-inciples of interstate comity, :ind from 
 adopting a policy which will enal)le each State fairly to enforce its own 
 laws without oppression to the subject. This result will be attained l)y 
 regarding the New York corporation as owning the property situate in 
 New York and the INIassachusetts corporation as owning that situate in 
 Massachusetts, and each as owning a share of any property situate out- 
 side of either State or moving to and fro between the two States, and 
 assessing decedent's stock upon that theory. That is the oI)vions basis 
 for a valuation if we are to leave any room for the JNIassachusetts 
 corporation and for a taxation l>y that State similar in principle to our 
 own without double taxation.
 
 306n MATTER OF COOLEY. [CHAP. IV. 
 
 Some illustrations may be referred to which by analogy sustain the 
 gL'iieral principles involved. 
 
 Where a tax is levied in this State upon the capital or franchises of 
 a corporation organized as this railroad was, the tax is levied upon an 
 equitable basis. Thus by the provisions of section 6 of chapter 19 of 
 the Laws of 1869, under which the Boston and Albany railroad was 
 organized, the assessment and taxation of its capital stock in this State 
 is to be in the proportion '-that the number of miles of its railroad 
 situated in this State bears to the number of miles of its railroad 
 situated in the other State,'' and under section 182 of the General Tax 
 Law of the State of New York the franchise tax of a corporation is 
 based upon the ^mount of capital within the State. 
 
 Asain, assume tliat for purposes of dissolution or otherwise, re- 
 ceivers were to be appointed of the Boston and Albany railroad, there 
 can be no doubt that the receivers of it as a New York corporation 
 would be appointed by the courts of that State, and the receivers of it 
 as a Massachusetts corporation would be api)ointed by the courts of 
 that State, and that the courts would hold that in the discharge of their 
 duties the New York receivers should take possession of and admin- 
 ister upon the property of the New York corporation within the limits 
 of that State, and would not permit the Massachusetts receivers to 
 come within its confines and interfere with such ownership, and the 
 Massachusetts courts would follow a similar poUcy. Why should not 
 the State authorities for purposes of this species of taxation and valua- 
 tion, involved therein, adopt a similar theory of division of property? 
 
 We are not apprehensive lest, as suggested, New York corpora- 
 tions may take out incorporation in other States for the purpose of ex- 
 empting transfers of their capital stock from taxation under the 
 principles of this decision. We do not regard our decision as giving 
 encouragement to any such course. It is based upon and limited by 
 the facts as they are here presented, and there is no question whatever 
 but that the Boston and Albany railroad, in good faith and for legitimate 
 reasons, was equally and contemporaneously created both as a New 
 York and a Massachusetts corporation. It can no more be said that 
 being originally and properly a New York corporation it subsequently 
 and incidentally became a ^Massachusetts one than could be maintained 
 the reverse of such proposition. If in the future a corporation created 
 and organized under the laws of this State, or properly and really to 
 be regarded as a New York coi-poration, shall see fit either for the pur- 
 pose suggested, or for any other reason subsequently and incidentally 
 and for ancillary reasons, to take out incorporation in another State, a 
 case would arise not falling within this decision. 
 
 But it is said that this court has already made decisions which pre- 
 vent it from adopting such a construction as I have outlined, and 
 reference is made to Matter of Bronson (150 N. Y. 1) and Matter of 
 Palmer (183 N. Y. 238).
 
 CHAP. 
 
 IV.] MATTKR OF COOLEY. 30Co 
 
 I do not find :inytliing in those decisions which, interpreted as a 
 whole, with reference to the facts there being discussed, conflicts with 
 the views which I have advanced. 
 
 In the first case the question arose whether a tax might be imposed 
 upon a transfer of a non-resident decedent's residuary estate which 
 '^ consisted in shares of the capital stock and in the bonds of corpora- 
 tions incorporated under the laws of this State." So far as the discus- 
 sion relates to the question of taxing the bonds, it is immaterial. It 
 was held that the shares of capital stock were property which was taxa- 
 ble, it being said : •* The shareholders are persons who are interested in 
 the operation of the corporate property and franchises, and their shares 
 actually represent undivided interests in the corporate enterprise. The 
 corporation has the legal title to all the pro[)erties acquired and appurte- 
 nant, but it holds them for the pecuniary l>enefit of those persons who 
 hold the capital stock. . . . Each share represents a distinct interest 
 in the whole of the corporate property." In other words, Judge Gray, 
 in writing the majority opinion, was discussing the situation of a share- 
 holder in a domestic cori)oratiou which, so far as appears, was not 
 incorporated under the laws of anotlier State. Under such circum- 
 stances, of course, the New York corporation would be the owner of 
 all the property there was, and the shareholder's interest in such corpo- 
 ration would represent his interest in all of said property and be fairly 
 and justly taxable upon its full amount and value. No such situation was 
 presented as here arises. Tliere was no second or third corporation 
 under the laws of another State, which corporation might just as fairly 
 be said to be the owner of all the property as the New York corpora- 
 tion, thus raising the question here presented whether each corporation 
 should be regarded as owning and holding all of the property there 
 was for the purpose of laying the basis for taxation, or whether we 
 should adopt an equitable and reasonable view, giving credit to each 
 corporation for the purpose of taxation of owning some certain portion 
 of the entire property. 
 
 In the Palmer case again the question arose over taxing shares of 
 stock held by a non-resident decedent in a domestic corporation which 
 was not proved or considered to have been incorporated under the 
 laws of another State. It was insisted that the amount of the tax 
 should be reduced by the proportion of property owned by the corpo- 
 ration and located in other States, and tliis contention was overruled, 
 and, as it seems to me, for a perfectly good reason upon the facts in 
 that ease and which is not applicable to the facts here. As stated, 
 there was a single incorporation under the laws of this State, and tliat 
 domestic corporation owned all of the property in whatever State situ- 
 ated. Its corporate origin was under the laws of this State, and there 
 its corporate existence was centred. It just as fully and completely 
 owned and managed property situated in the State of Ohio as if it was 
 situated in the State of New York, and if the property in the foreign
 
 306p MATTER OF COOI.EY. [ciIAP, TV. 
 
 State was reduced to money, siu-h money would be turned into its 
 treasury in the State of New York. Under such circumstances there 
 was nothing else tiiat could reasonably be held tlian that tlie corpora- 
 tion owned all property wherever situatetl, and that the sharehold- 
 er's interest in such corporation represented and was based upon such 
 ownership of all the property. There was no double incorporation and 
 no chance for conllict l^etween an incorporation under the laws of this 
 State and a second one existing under the laws of another State, which 
 must either be reconciled by a just regard for the rights of both States 
 and the rights of the incorporation under each, or else double taxation 
 imposed upon a shareholder. 
 
 It is also argued that the courts of INIassachusetts have passed upon 
 the very contention here being made by appellants, and in the case of 
 Moody '■. Shaw (173 Mass. 375) have rejected the claim that the valu- 
 ation of stock in this same corporation for the puri)oses of transfer 
 taxation in Massachusetts should be based upon any apportionment of 
 property between the Massachusetts and New York corporations. 
 The opinion in that case does not seem to warrant any such con- 
 struction. Apparently the only question under discussion was whether 
 the transfer of stock in such corporation was taxable at all in Massa- 
 chusetts, and the question of any apportionment was not passed upon. 
 Such expressions as are found in the opinion touching that point cer- 
 tainly do not indicate to my mind that if involved and passed upon it 
 would have been decided adversely to the views here expressed. 
 
 Lastly, it is urged that there will be great practical difficulty in 
 making an apportionment of property for the purposes of valuation and 
 taxation upon the lines suggested, and the learned counsel' for the re- 
 spondent has suggested many difficulties and absurdities claimed to be 
 incidental to such course of procedure. Most of them certainly will 
 not arise in this case and they probably never will in any other. Of 
 course an appraisal based upon an apportionment of the entire prop- 
 erty of the consolidated company between the New York and Massachu- 
 setts corporations may be made a source of much labor and expense if 
 the parties so desire. Possibly it might be carried to the extent of a de- 
 tailed inventory and valuation of innumerable pieces of property. Upon 
 the other hand, an apportionment based upon trackage or figures drawn 
 from the books or l)alance sheets of the company may doubtless be 
 easily reached which will be substantially correct, and any inaccuracies 
 of which when reflected in a tax of one per cent upon 426 shares of 
 stock will be inconsequential. 
 
 The order of the Ai)i)ellate Division and of the Surrogate's Court of 
 the county of New York should be reversed, with costs, and the pro- 
 ceedings remitted to said Surrogate's Court for a reappraisal of the 
 stock in question in accordance with the views herein expressed. 
 
 CuLLKN, Ch. J., Gray, O'Briex, and Edward T. Bartlett, JJ., 
 concur ; Werner and Chase, JJ., dissent. 
 
 Order reversed, etc.
 
 CHAP. IV.] TllOUNK V. STATE. 307 
 
 TIIORNE V. STATE. 
 Supreme Couin- of .Minnesota. 1920. 
 
 [Reported 145 Minn. 412.] 
 
 TTOLT, J. Tlie court below determined that certain share certifi- 
 cates held by Samuel Tliorne, at his death, were subject to an 
 iniieritance or succession tax to the extent of 72.37 per cent of 
 their taxable value. The executors of his estate appeal from the 
 jiidi^nnent, contending that no part or proportion of the shares is 
 subject to the tax, while the state also appeals, claiming that no 
 deduction from the full taxable value should have been made. 
 
 The findings of fact were nuide upon the stipulations and admis- 
 sions of the parties. The substance of tliose deemed material to 
 the appeal may be thus stated : 
 
 Samuel Thorne, a resident of New York City, died there July 4, 
 1915, testate. The will was probated in Xew York and the appel- 
 lants, all residents of that state, were duly appointed executors. At 
 the time of death, Thorne owned 13,606 shares of "Great Northern 
 Iron Ore Properties Trustees' Certificate of Beneficial Interest," 
 hereinafter called beneficial certificates for short. They had been 
 in his possession in New York since their issuance to him and 
 were worth, on the stock market, $35.62 a share, at the time of his 
 death. Their origin, in brief, was this: 
 
 The Great Northern Raihvay Company, a Minnesota corporation, 
 had acquired many thousand acres of iron bearing ore in this state, 
 together with other property not a part of its transportation business. 
 Some eight subsidiary Minnesota corporations had been organized to 
 operate mines and handling facilities upon and in connection with 
 these mineral lands, and to deal in mines, mining leases and transact 
 other business. There were also two foreign companies or corpora- 
 tions, formed to hold and operate similar properties and business 
 in this state. All of the property held by the mining companies, 
 apparently, belonged to the Great Northern Railway Com])any. 
 The latter, realizing that mining and other industrial and com- 
 mercial business, not directly connected witli that of a common 
 carrier, should be placed in other hands tlian its own, contrived the 
 trust in which these beneficial certificates were issued. James J. 
 Hill, the president of the railway company and its moving spirit, 
 his son James N. Hill, and Robert I. Farrington had formed a 
 partnership under the laws of IMicbigan to deal in mineral lands 
 in Michigan, Wisconsin and ]\Iinncsota, and to take and hold bonds 
 and stocks of all sorts. The name assumed was the Lake Superior 
 Company, Limited. It was evidently designed to be a holding com- 
 pany, it held all the shares of stock of the various mining com- 
 panies above referred to for the benefit of the shareholders of the
 
 308 THORNE v. STATE. [cHAP. IV. 
 
 railway company, when in 190G, by resolution of the board of 
 directors of the railway compan}', this trust agreement was au- 
 thorized, and, pursuant thereto, the Lake Superior Company trans- 
 ferred to Louis AY. Hill, James N. Hill, Walter J. Hill and Edward 
 T. Xichols all of said shares in said mining companies in trust 
 during the life of certain chiklren named and for 20 years after 
 the death of the last survivor. The trustees were to issue, and did 
 issue, to each stockholder of the railway company as many sliares 
 of these beneficial certificates as he held of Great Northern railway 
 shares. The trustees were to use and exercise their powers as the 
 sole shareholders of the several mining companies and preserve 
 their existence; collect the dividends on the shares, or income to 
 accrue in virtue thereof ; pay taxes and expenses of the trust without 
 recourse to the beneficial certificate holders; after paying these ex- 
 penses they, from time to time and at least once in every year, were 
 to distribute and pay such portion of the net income or proceeds 
 of the property as they might deem proper to the beneficial certifi- 
 cate holders; they were given full power to sell or exchange the 
 shares of stock transferred to them by the Lake Superior Company, 
 and the interest of each and every beneficiary under the trust con- 
 tinues to be limited to the right to receive his proportional share 
 of dividends in such distribution as shall from time to time have 
 been determined ])y the trustees. The trustees, as such, in no way 
 participate in the management of the mining companies, but all 
 the said trustees, as individuals, together with other persons elected 
 b}'' them by exercise of their stock vote, are the officers and directors 
 of all the mining companies, except that .James N. Hill, residing 
 in New York, has not been an officer of any mining company and 
 Xichols, the other trustee also residing in Xew York, has never been 
 an officer in the Leonard Mining Company. A more complete out- 
 line of the trust may be had from the opinion in Venner v. Great 
 Northern Ry. Co. 117 Minn. 447, 136 N. W. 271. 
 
 The trust agreement was executed and delivered in New York, but 
 the shares of stock thereby transferred were delivered to the trustees 
 at St. Paul, Minnesota, where they have ever since been kept. The 
 president of the trustees had always lived in the city of St. Paul, 
 as did also one other trustee, during the life of Mr. Thorne, Two 
 of the trustees have resided in New York, where also is maintained 
 an office for the transfer and registering of the beneficial certificate 
 shares, and distributing the dividends thereon. The funds of the 
 trust are kept both in Minnesota and New York depositaries. The 
 meetings of the trustees have been few in number, and have gen- 
 erally been held in the city of New York. The trustees first adopted 
 by-laws or rules in January, 1013; these provide for monthly meet- 
 ings at the office of the president in St. Paul. The secretary of the 
 trustees and his office force and records have always been in St. Paul ; 
 this secretary and office force have also handled the business of the 
 mining companies. All dividends and other income from the min- 
 ing companies are paid to the trustees at St. Paul, but the dividend 
 checks to the registered beneficial certificate holders are issued and
 
 ClIAr. IV.] THOKNE V. STATE. 300 
 
 mailed from the Xew York ofTice. When Mr. Thome died the 
 trustees had $],113,L>G8.()!) of trut^t funds on deposit in New York 
 banks and $;i{,G88,86*J.31 in Minnesota banks, but there were no 
 funds in the hands of the trustees that they had determined to 
 distribute as dividends. Over ten million dollars have been dis- 
 tributed to the beneticial certificate holders since the formation of 
 the trust. The allorney gi-iicral has lieretofore ruled that the 
 beneficial certificates of this trust were not subject to a succession 
 tax. 
 
 The first contention of the executors is that the state is foreclosed 
 from claiming this tax by reason of the attorney general's practical 
 construction given the taxing statute. Numerous cases are cited as 
 to the binding force given by courts to the construction consistently 
 given for a considerable period of time to a statute by officials con- 
 nected with its enforcement or required to discharge executive or 
 administrative duties thereunder. State v. ^lofi'ctt, 64 Minn. 292, 
 G: X. W. 6S ; State v. Northern Pac. Rv. Co. 95 Minn. 43, 103 N. W. 
 731; Musgrove r. Baltimore & Ohio R. Co. Ill Md. 629, 75 Atl. 
 245; Tvler v. Treasurer, 226 Mass. 306, 115 N. E. 300, L.R.A. 
 191TD,^633; In re Week's Estate, 169 Wis. 316, 172 N. W. 732. 
 We, however, note that the question here is not strictly one of con- 
 struing the inheritance tax statute, but rather an ascertainment of 
 facts to determine Avhether or not the beneficial certificates in this 
 trust represent property rights within the jurisdiction of this state 
 so that a succession tax may be exacted. The deliberate omission of 
 the taxing authorities, up to the present time, to assert the right 
 to impose such a tax on securities of this sort, though entitled to 
 weight, ought not to be conclusive on the courts. To what extent 
 former officials have known the facts going to fix the situs of tliis 
 property is not disclosed. The statute that " when a transfer is 
 by will or intestate law, of property within the state or within its 
 jurisdiction and the decedent was a nonresident of the state at the 
 time of his death," the tax shall be imposed (section 2271, G. S. 
 1913), is so plain that it is not open to construction. 
 
 The able counsel for the executors have exhaustively considered 
 the legal status of the holders of the beneficial certificates to the 
 trust property and to the trustees under the instrument creating 
 the trust. The origin of trusts was no doubt for the protection of 
 the beneficiary so as to assure to him the income from the corpus 
 of the trust and closing every avenue by which he. or others, might 
 acquire, dispose of, impair or encumber the property itself. And 
 the courts when dealing with trusts have, of course, adopted and 
 applied principles of law which, as between the beneficiary, his 
 creditors and his trustees, conserve the trust estate and attain the 
 purposes of the trust. But it may be rloubted whether the legal 
 principle? formulated and applied by courts in such matters should 
 guide as rigidly when it comes to a contest by the state to impose 
 a succession tax upon the decedent's beneficiary interest in a trust. 
 However that mav be, we think the determinative question here is
 
 olO TllORKE V. STATE. [cHAP. IV. 
 
 the situs of the trust, rather than the legal nature of the interest the 
 holder of the beneticial certificates has or may assert to tlie trust 
 property. It inav not be doubted that the shares held by Mr. 
 Thome' represent ' property. They have participated in princely 
 earnings, and entitle the holder ultimately to share in the vast 
 properties represented by the shares of the mining companies con- 
 stituting the corpus of the trust. Xo matter how contingent or 
 uncertain, from a legal viewpoint, the interest represented by these 
 beneficial certificates of Mr. Thorne might be, they possessed a 
 very substantial value on the stock market. A trust dealing with 
 vast fortunes must have a home wliere its business is administered. 
 
 The outstanding facts wliicli seem to us to fix the domicile of 
 this trust in this state are these: The shares of the mining com- 
 panies, the corpus of the trust, have always remained here since 
 the transfer to the trustees; the president and secretary of the trus- 
 tees have always resided here; this secretary and his office force 
 have not only liad here charge of the trust estate, its records and 
 business, but such persons have also constituted the secretary and 
 office force of the mining companies ; the income from the trust 
 property, that is, from the shares in the mining companies, has al- 
 ways been accounted for and turned over to the trustees in this 
 state, and the trust was planned and authorized by the Great North- 
 ern Railway Company, a domestic corporation, and represents 
 property mostly situate in this state and which belonged to the 
 railway company when the trust agreement was made. The Great 
 Northern Eailway Company was the real settlor of the trust. We 
 hold that the trust to which these beneficial certificates pertain is 
 within the jurisdiction of the state and has a situs and location 
 therein. 
 
 The only other state that could possibly claim to be the seat of 
 this trust would be New York, and the only facts pointing to that 
 conclusion would be the execution of the trust agreement there, 
 the maintenance in New York City of transfer, registering and 
 dividend disbursing offices, the keeping of funds on deposit in New 
 York banks, the residence there of two trustees, and meetings of the 
 trustees held in that state. But it is readily appreciated that the 
 maintenance of the offices mentioned in New York City is to facili- 
 tate dealings on the stock market in these certificates and other 
 financial transactions, the same as like offices are there maintained 
 in the same building by the Great Northern Eailway Company. And 
 no doubt convenience dictated the meetings in New York City by 
 the trustees, and the execution there of the trust agreement, the 
 trustees here residing, actively engaged as officers of the railway 
 company and the mining companies, would naturally find frequent 
 visits to New York, the financial center, necessary, while business 
 journeys to the west by the New York trustees would likely be rare. 
 We entertain no doubt that, at any time while an owner, Mr. 
 Thorne could have come into the courts of this state for any relief 
 he might have shown himself entitled to in respect to his interest 
 in this trust. The case of Venner v. Great Northern Ry. Co. supra,
 
 CIIAl'. IV.] STATE V. KBELING. 311 
 
 was dispoped of on tlie facts admitted by the demurrer to the com- 
 plaint, and is not to be construed as liolding, as a matter of law 
 that the certificate holders cannot compel by appnjpriate suit a 
 distribution of accumulated eainings. Had there been but one 
 trustee, either a person domiciled in this state or a domestic cor- 
 jtoration such as a trust ccjinpany, with the corpus of the trust held 
 and managed as here was done, no question could well have been 
 raised as to the right to impose the tax, even though the trust agree- 
 ment were executed in New York, and even though a transfer and 
 dividend paying office were there kept, and even if it were doubtful 
 by the law of which state the validity of the trust agreement should 
 be determined. 
 
 The i)roj)osition that a trust has a situs so as to afford a basis for 
 chiiming an inheritance tax is not entirely novel, although courts in 
 det^'rmining the location may not always stress the same factors. 
 Varied importance is given to the residence of the trustees, the resi- 
 <lence of the settlor, tlie place of the administration of the trust, and 
 the location of the trust property. Professor J. H. Bealo, in an 
 article in the Harvard Law lleview for April, 1919 [Vol. 32, 
 page 6,31], arrives at the conclusion that a succession tax is payable 
 at the place of the administration or seat of the trust. The cases 
 cited by liim may not be directly in point, but have some bearing. 
 In re Cigala's Settlement Trusts, 7 Ch. Div. 351 ; In re Douglas 
 Co. V. Kountze, 84 Neb. 506, 121 N. W. 593. See also Peabody v. 
 Treasurer, 215 ^lass. 129, 102 N. E. 435. 
 
 Having reached the conclusion that the trust to which these bene- 
 ficial certificates attach has a location or situs within this state so as 
 to give jurisdiction to exact a succession tax when the holder of the 
 trust certificates dies, it follows tliat no reduction should be made 
 because some of the shares constituting the corpus of the trust are 
 shares of stock in foreign corporations. The trustees of a trust, 
 having a domicile within the state where the principal part of the 
 administration of the trust is conducted and the corpus of the trust 
 is kept and controlled, should be regarded for succession tax purposes 
 as if constituting a domestic concern or corporation. 
 
 On the state's appeal the judgment is reversed and the case is re- 
 manded with direction to amend the conclusion of law in the find- 
 ings and enter judgment in accordance with this opinion. 
 
 STATE V. EBELTXG. 
 Supreme Court of Wisconsin. 1919. 
 
 [Reported 169 Wis. 432.] 
 
 The county court of Brown Count j/. in determining the amount 
 upon which inheritance taxes imposed upon the estate of John H. 
 Ebeling, deceased, should be computed, deducted tlie amount of the
 
 312 STATE V. EBELIXG. [cHAP. IV. 
 
 federal estate tax imposed upon the estate, and determined that cer- 
 tain gifts made by decedent within six years prior to his death were 
 not subject to an inlieritance tax. The state and county appealed 
 from the judgment to the circuit court for Broivn Couniij, where 
 the judgment of the county court Avas affirmed. From such judg- 
 ment the state and county appealed. 
 
 The estate was valued at $33-2,819.33; $12,779.37, the amount of 
 the federal estate tax, was deducted from this amount in determin- 
 ing the amount upon which the inheritance tax should be computed. 
 The deceased died January 15, 1918. He had three children. Within 
 six years prior to his death he made gifts to them as follows : De- 
 cember 23, 1912, $1,000 to each; November 22, 1912, $1,000 to 
 each; October 31, 1913, $500 to each; December, 1913, $200 to 
 each; May, 1916, $500 to each; June 30, 1917, $10,000 to each 
 August 18, 1917, $5,318.33 to each; and October 1, 1917, $10,000 
 to each. 
 
 The court found that neither of said gifts nor all of them com- 
 bined constitute a material part of the estate of said testator; that 
 neither of said gifts nor all of them together was or were made in 
 the nature of a final disposition or distribution of said testator's 
 estate; that no one of said gifts was made by said testator in con- 
 templation of death ; and further, that if the law raised any pre- 
 sumption as to any of such gifts that they were made in contemplation 
 of death, said presumption is fully overcome by the evidence in the 
 case. 
 
 OwEx, J. It was held in Estate of Week, 169 Wis. 316, 172. N. W. 
 732, that the federal estate tax is not a proper deduction in determin- 
 ing the amount upon which the . state inheritance tax should be 
 computed. The county court erroneously allowed this deduction. 
 
 Prior to the enactment of ch. 613, Laws 1913, sec. 1087 — 1^ 
 Stats., imposed a tax upon three classes of transfers of property: 
 (1) by will; (2) by intestate laws; and (3) by gifts made in con- 
 templation of death of the donor or intended to take effect in posses- 
 sion or enjoyment at or after such death. Ch. 643, Laws 1913, 
 amended this section by adding at the end of sub. (3) the following: 
 
 " Every transfer by deed, grant, bargain, sale or gift, made within 
 six years prior to the death of the grantor, vendor or donor, of a 
 material part of his estate, or in the nature of a final disposition or 
 distribution tliereof, and without an adequate valuable consideration, 
 shall be construed to have been made in contemplation of death 
 within tlie meaning of this section." 
 
 The state contends that the amendment makes every gift of a 
 material part of the estate of a deceased person, when made within 
 six years prior to death, subject to an inlieritance tax. It is the 
 contention of the respondents that the amendment does not have 
 such conclusive effect, and that it accomplishes no more than to 
 make the gift, when made within six years prior to death, prima 
 facie evidence of the fact that it was made in contemplation of 
 death, thereby shifting the burden of proof upon that question. 
 
 In the case of State v. Thompson, 154 AVis. 320, 142 N. W. 647,
 
 CUAP. 
 
 IV.] STATE V. EBELIXG. 313 
 
 this court had under consideration the question of inheritance taxes 
 due from the estate of one Josej^h Dessert, who died at the age of 
 ninety-two. rructieally his entire estate was devised to his only 
 daughter and sole heir, Stella D. Thompson. She took hy the will 
 about $200,000. During tlie last six years of his life he gave her 
 approximately a half million dollars, mainly in two gifts, one made 
 tiiree years and the other four and one-half years prior to his death. 
 This court held that the gifts were not subject to inheritance taxes. 
 The circumstances of that case forcibly brought to the attention of 
 the legislature the fact that after a person had attained the age of 
 eighty-nine years, an age when lie could not expect to live many 
 more years, when his thoughts, naturally, were consumed rather 
 with the disposition of property already accumulated than with 
 the accumulation of more, he could bestow his property upon the 
 objects of his ijounty and thus evade the inheritance tax. This de- 
 cision was rendered May 31, 1913. The legislature was then in 
 session. Ten days thereafter Senate bill No. 575 was introduced 
 by the Joint Committee on Finance. This bill, without amend- 
 ment, was approved July 21st and became ch. 643, Laws 1913. 
 
 Now the question is this: Did the legislature intend to make 
 gifts and transfers of property, nuide within six years prior to 
 death, absolutely taxable, or was it simply providing a rule of evi- 
 dence? There can be little doubt that the legislation was prompted 
 by the decision in the Thompson Case. That was a case in which the 
 state was a party. It was regarded as an important case, not only be- 
 cause of the amount involved but as a precedent. The contention of 
 the state was rejected by the court. It seems quite reasonable to sup- 
 pose that the legislature in enacting the amendment intended to do 
 what it could in the way of moulding into law the doctrine con- 
 tended for by the state in that case. If it intended to make the 
 gift or transfer occurring within six years prior to death only prima 
 facie evidence of the fact that it was made in contemplation of 
 death, the legislative response was certainly weak and puerile. In 
 cases where the facts are easily ascertainable the burden of proof 
 is of the merest advantage. It is only in cases where the proof is 
 diffieult to obtain, such as violations of the excise laws, where 
 a rule of law constituting certain evidence a prima facie case is of 
 real advantage. With such a construction the amendment would 
 not have changed the result of the Thompson Case, and we may 
 well believe that the purpose of the legislature was to prevent such 
 a recurrence. 
 
 It is clear to our minds that the legislature intended to define 
 what should constitute a transfer in contemplation of death. It 
 was the legislative purpose to make the statute effective. It realized 
 that if a person after reaching the age of eighty or ninety years 
 could dispose of his property free from the tax, it could be easily 
 evaded by those possessing the larger fortunes. So it was enacted 
 not only that the tax should apply to gifts made in contemplation 
 of death but to gifts made within six years prior to death. 
 
 It is said that the legislature cannot declare a gift to U' in
 
 ;J14 STATE V. EBELING. [ciIAP. IV. 
 
 contemplation of death when it in fact is not so. It is admitted, 
 liowever, that the legislature may tax gifts inter vivos. Whether 
 these gifts, therefore, be held to be gifts in contemplation of death 
 or gifts inter vivos, they are not beyond the power of the legislature 
 to tax. If they be considered gifts inter vivos there is abundant 
 justification for the classification here made in segregating them 
 from other gifts inter vivos as objects of taxation, the basis for such 
 classification being the purpose to make the law taxing gifts made 
 in contemplation of death effective. It is recognized that in en- 
 acting a police regulation it may be found necessary to include 
 within the purview of the statute certain acts innocent and not in 
 themselves a subject of police regulation where the inclusion of 
 such acts is necessary, in the opinion of the legislature, to make 
 the police regulation elfective. Penncll v. State, 141 AVis. 35, 123 
 N. W. 115. Wliile a principle relating to police regulation does 
 not necessarily apply to the power of taxation, no reason is per- 
 ceived why the legislature may not, as here, make a classification of 
 gifts inter vivos and subject them to taxation for the purpose of 
 making effective taxation of gifts causa mortis. That it will occa- 
 sionally result in the taxation of gifts not in fact made in contem- 
 plation of death, which may be conceded, should not condemn the 
 classification if the classification be reasonably necessary to carry out 
 the legislative scheme for the taxation of gifts causa mortis. Nor 
 should it be condemned because there is no material distinction be- 
 tween those who fall immediately upon one side of the line and those 
 who fall immediately upon the other, as illustrated by the fact that a 
 gift one day less than six years prior to death is taxable, while a gift 
 made one day more than six years prior to death is not taxable. 
 That is always the case where the classification is of necessity fixed 
 by an arbitrary line of demarcation. As said in State v. Evans, 
 130 Wis. 381, 110 N. W. 241: 
 
 " Neither need we be disturbed by the fact that the line of de- 
 marcation between the classes is arbitrary. Wherever there is 
 a sliding scale of age, population, dimension, distance, or other 
 characteristic which is believed to justify classification, necessarily 
 the division between classes must be arbitrary, and legislation is 
 not to be declared void which adopts the age of twenty-one as mark- 
 ing the right to vote or manage property because the individual at 
 twenty years and eleven months may Ije as competent as at twenty- 
 one, nor, in a law distinguishing by population, because no appre- 
 ciable difference can be conceived between the town of 999 and the 
 town of 1,000, provided, generally, the class of those under twenty- 
 one years of age are less competent to vote or manage property 
 than the class of mankind above that age, or the class of towns 
 which do not include villages of 1,000 population are generally 
 less in need of the governmental powers conferred upon villages 
 than the class of towns which do contain villages of 1,000 and 
 upward. 
 
 The next question is whether these gifts, or any of them, con- 
 stitute a material part of the donor's estate. Obviously the law 
 
 I
 
 '5.1 K 
 
 CHAP. IV.] MATTER OF FEARING. 31 
 
 o 
 
 would be easier of administration if it were more definite in fixing 
 the cfiaracter or size of gilts to be deemed to have been made in con- 
 templation of death. Whether that is practicable or possible we do 
 not suggest. The use of the word " material " does not make the 
 law impossible of administration. Whether a gift constitutes a 
 material part of a donor's estate is left a judicial (juestiou. As the 
 legislature has not attempted to define with exactness what shall be 
 considered a material part of an estate, neither shall we. That 
 question must be left to be determined in each case as it arises. 
 In this case the estate was valued at about $.'3;3(),()0(J. We think 
 that occasional gifts of $5U0 or $1,000 made by a donor possessing 
 such an estate should not be deemed a material part thereof. None 
 of the gifts made prior to the year 1!)17 exceeded $1,000. We hold 
 that such gifts are not taxable. We hold that the gifts made in 1917, 
 of $10,000 to each of the children on June 30th, $5,318.33 to each 
 on August 18th, and $10,000 to each on October 1st, amounting 
 to more than $75,000, do constitute a material part of the estate 
 and that they are taxable. 
 
 By the Court. — Judgment reversed, and cause remanded with 
 directions to reverse the judgment of the county court, with direc- 
 tions to disallow the deduction made for the amount of the federal 
 estate tax and to include the amount of the gifts indicated in the 
 opinion as a part of the taxable estate. 
 
 MATTER OF FEARING. 
 Court of Appeals of New York. 1911. 
 
 [Reported 200 A\ Y. 340.] 
 
 Gray, J. The Appellate Division has affirmed a determination 
 of the surrogate of New York county that " bonds and other property, 
 located outside of this state" at the date of the death of Mrs. 
 Sheldon, a non-resident of this state, and transferred by her will, in 
 the exercise of a power of appointment contained in the will of 
 Daniel B. Fearing, were not subject to a transfer tax. Upon this 
 appeal by the comptroller of the state, it is argued, in the first place, 
 that the trust property, which was appointed by ]\Irs. Sheldon's 
 will, "was property of a resident decedent, . . . and, consequently, 
 taxable here, wheresoever situated." In the second place, it is ar- 
 gued that bonds, secured by mortgages of real estate situated in this 
 state, of which the trust estate was principally composed, " al- 
 though the instruments evidencing them are outside of the state, 
 constitute taxable property." 
 
 Daniel B. Fearing died in 1870, a resident of this state, leaving 
 a will; by which a trust was created for the life of his daughter, 
 Amey R. Sheldon, for her benefit. She was given the power to ap- 
 point by will the persons, to whom the trustees were to set over the
 
 316 MATTER OF FEARING. [cHAP. IV. 
 
 remainder of the trust estate upon her death, in the event of her 
 d3'ing without issue. At the time of her death ^Mrs, Sheldon was, 
 and had been for many 3"ears, a resident of the State of Khode 
 Island, and her will was there admitted to probate. She left no 
 issue and her exercise of the power of appointment conferred 
 by her father's will was in accord with its provisions. The surviv- 
 ing trustee of Fearing's will was, also, a resident of the same state 
 The trust estate, which was disposed of by the provisions of Mrs. 
 Sheldon's will, wholly, consisted of bonds, secured by mortgages of 
 real estate. Tlie mortgages were, mainly, of real estate within this 
 state, but none of them, or of the bonds, was, or had been, kept here. 
 Mr. Fearing died many years before the enactment of any statutje 
 charging the succession to estates of deceased persons with a tax. 
 After such an enactment was placed upon the statute books, it was 
 not until 189T that property, passing through the execution of a 
 power of appointment created by will, was subjected to taxation 
 when the will had become operative before the passage of the Tax 
 Law. Chapter 28-i of the Laws of 189 T added to the Transfer Tax 
 Law the following provision : " Whenever any person or corporation 
 shall exercise a power of appointment derived from any disposition 
 of property made either before or after the passage of this act, such 
 appointment when made shall be deemed a transfer taxable under 
 the provisions of this act in the same manner as though the property 
 to which such appointment relates belonged absolutely to the donee 
 of such power and had been bequeathed or devised by such donee 
 by will ; and whenever any person or corporation possessing such a 
 power of appointment so derived shall omit or fail to exercise the 
 same within the time provided therefor in whole or in part a 
 transfer taxable under the provisions of this act shall be deemed 
 to take place to the extent of such omissions or failure, in the 
 same manner as though the persons or corporations thereby be- 
 coming entitled to the possession or enjoyment of the property to 
 whicli such power related had succeeded thereto by a will of the 
 donee of the power failing to exercise such power, taking effect at 
 the time of such omission or failure." (Section 220, subd. 5.) 
 ISTo language could more clearly disclose the legislative intent that 
 property thereafter to pass by the exercise of a power of appoint- 
 ment should be taxed, irrespective of the time when the instrument 
 creating the power was executed. Such an appointment to others 
 was, for the purposes of taxation, to be deemed the equivalent of a 
 bequest, or devise, by the donee of the power of property belonging 
 to the donee. Prior to this amendment of the Transfer Tax Law, 
 there was no provision for the taxation of transfers under powers 
 of appointment ; but, with the passage of the amendment, the privi- 
 lege of exercising the power by will was subjected to the charge of 
 a tax upon the right of the appointees to take. Whereas, previously, 
 the source of the appointee's right of succession was deemed to be 
 in the will creating the power of appointment ; thereafter, it was 
 to be deemed to be in the execution of the power itself. The actual 
 transfer effected by the exercise of the power was to be taxed. The
 
 CHAP. IV.] MATTER OF FEARING. 317 
 
 legislature, in the exercise of its control over testamentary disposi- 
 tions of property, could validly burden such transfers with a tax, 
 regardless of the teclniical sources of the title of the appointee under 
 the rules of the common law. (See Matter of Dows, 167 N. Y. 227 ; 
 Matter of Delano, 17G ib. 48G.) As Mrs. Sheldon, in making a 
 will, exercised a privilege granted by the laws of her own state, and 
 not by those of this state, the transfers of property elfected thereby 
 were beyond the reach of our tax laws. The state had no dominion 
 over the property transferred. 
 
 The second proposition urged by the comptroller presents no new 
 question. It is covered by our decision in Matter of Bronson, (150 
 N. Y. 1 ) . The contention that, as the mortgages, which were given 
 to secure the payment of the bonds transferied by Mrs. Sheldon's 
 will, were of real estate in this state, the bonds represented invest- 
 ments taxable here, was disposed of by that case. The provision of 
 the Transfer Tax Law, which was then under consideration, was 
 that " a tax shall be and is hereby imposed upon the transfer of 
 any property . . . when the transfer is by will, or intestate law, 
 of property within the state, and the decedent was a non-resident 
 of the state at the time of his death." (L. 1892, ch. 399, sec. 1.) 
 This provision of tlie law has not been changed since its enactment 
 in 1892. In the Bronson case, the testator was a resident of the 
 state of Connecticut and a part of the residuary estate disposed of 
 by his will consisted in shares of the capital stock, and in the bonds, 
 of corjjorations incorporated under the laws of this state ; all of 
 which were in the testator's possession at his domicile. We held 
 the shares of stock to be taxable, as representing distinct interests 
 of the holder in the corporate property; but the bonds were held 
 not to be subject to any tax. It was considered that they did not 
 represent " property within the state " and, therefore, were not prop- 
 erty over which this state had any jurisdiction for the purposes of 
 taxation. The reasoning, upon which this conclusion was reached, 
 is as effective in the present case. Whether the bonds are secured, 
 as in the Bronson case, by mortgages of corporate property, or, as 
 in the present case, by mortgages of the property of individuals, 
 they represent, equally, debts of their makers, which, as choses in 
 action, under the general rule of law, are inseparable from the per- 
 sonality of the owner. Under that rule, as it was said in the Foreign 
 Held Bonds Case, (15 Wall. 300, 320), of the bonds there, they 
 "can have no locality separate from the parties to whom they are 
 due," and the legal situs of the iiidel)tedness, which they represent, 
 is fixed by the domicile of the creditor. The legal title to these bonds 
 in question was transferred by force of the laws of Ehode Island. 
 As their legal and actual situs was in a foreign state, upon no theory 
 were they within the operation of our Transfer Tax Law. I am un- 
 able to perceive the force of any argument, which seeks to find in the 
 feature of the mortgage a reason for limiting the rule of law applied 
 by us in the Bronson case. If bonds issued by domestic corporations 
 upon the security of mortgages of the corporate property are not 
 subject to taxation, when in the hands and physical possession of
 
 318 MATTER OF CLINCH. [cHAP. IV, 
 
 a non-resident decedent, as wo have decided in that case, then the 
 bonds {lassing under Mrs. Sheldon's will cannot be reached for taxa- 
 tion. In the Whiting case (150 N. Y. 27) decided at the same time 
 as was the Bronson Case, it was expressly stated that the bonds there 
 in question were subject to taxation "on account of their physical 
 presence in this state." There is no sound distinction between 
 this case and the Bronson case, which, as I view them, commends 
 itself to the judgment. 
 
 I, therefore, advise that we should affirm the order appealed 
 from. 
 
 CuLLEX, Cli. J., Werner, Willard Bartlett and Chase, JJ., 
 concur ; Vann, J., dissents ; HaighT;, J., not voting. 
 
 Order affirmed, with costs. 
 
 MATTEE OF CLINCH. 
 
 Court of Appeals of New York. 1905, 
 
 [Reported 180. N. Y. 300.] 
 
 Haight, C, J. The tax was imposed on the appellant as trustee 
 under the will of Eobert T. Clinch, deceased, upon the share of the 
 residuary estate of Charles J. Clinch, the father of said Eobert, 
 which was paid over to the executor of Eobert subsequent to his 
 decease. Eobert, at the time of his death, was a non-resident of 
 this state, residing in Paris, France. At that time his father's 
 estate had not been distributed. Subsequently distribution was had, 
 and the executor of Eobert received in satisfaction of his share of 
 his father's estate specific securities. It is not questioned that the 
 transfer from Charles to Eobert was subject to a transfer tax ; the 
 controversy here relates solely to the transfer under Eobert's will 
 to his legatees. The learned counsel for the appellant contends 
 that at the time of Eobert's death his interest in his father's estate 
 Avas a mere chose in action, the situs of which was not this state, 
 but at Eobert's domicile in France; that hence that was not property 
 within the state and subject to our inheritance laws, and that the 
 action of the executor subsequent to Eobert's death in receiving 
 in satisfaction of that chose in action specific securities held in this 
 state could not subject the property to our inheritance tax if it 
 was not liable to the imposition of such a tax at the time of Eobert's 
 death. We may concede for the discussion all the appellant claims 
 except the single proposition that a claim due a non-resident from 
 a resident of this state is not property wdthin this state subject to 
 the imposition of our transfer tax. It is true that in the case of 
 Matter of Phipps (77 Ilun, 325; affirmed on opinion below, 143 
 N. Y. 641) Judge Van Brunt said that the right to a legacy given 
 by the will of a resident of this state to a non-resident could not 
 be considered property located within this state. Subsequently 
 there was decided by this court four cases, Matter of Bronson,
 
 CHAP 
 
 IV.] MATTER OF CLINCH. 319" 
 
 Matter of Whitino^, Matter of Morf^^an, and Matter of TToudayer 
 (150 X. Y. 1 ; Id. 2?; Id. ;i5; Id. 37), all arisin^r under the Trans- 
 fer Tax Law. In those cases it was held that bonds of a New York 
 corporation held by a non-resident and in his possession at the 
 ' place of his domicile at the time of his death were not subject to 
 the tax, but that de])osits in bank in this state were so subject. In 
 the lloudayer case Judge \ann placed the liability of deposits in 
 bank to taxation on the broad ground that it was through the laws 
 and courts of this state that their repayment could be enforced. 
 The majority who concurred in that decision did not deem it nec- 
 essary to go so far, but were of opinion that a deposit in bank was 
 practically the same as actual money. In Matter of Blackstone 
 (171 N. Y. G83) we followed the decision in the lloudayer case and 
 again taxed the deposit of a non-resident in a New York trust 
 comi)any. That case was appealed to the Sujjreme Court of the 
 United States and our decision affirmed. (Blackstone v. Miller, 
 188 U. S. 189.) The Supreme Court took the same broad ground 
 held by Judge Vann in this court. It said that the doctrine that 
 the situs of personal j)roi)erty was the domicile of the owner was 
 merely a fiction which must yield to facts; that it was the law of 
 the place where the debtor resided which gave the debt validity 
 and forced the debtor to pay, and that it was within the constitu- 
 tional power of the state where the debtor resided to tax the obliga- 
 tion from hi in to a non-resident excepting, however, the case of 
 bonds and negotiable instruments which are considered to be not 
 merely evidence of the debt but inseparable from the debt itself. 
 This decision was but the logical result of an earlier determination 
 by the court in Chicago, Rock Island & P. R. Co. v. Sturm (174 
 U. S. 710) where it was held that a debt due from a resident to a 
 non-resident could be seized by a creditor of the latter in the dom- 
 icile of the debtor. Under the doctrine of the Blackstone case the 
 interest of Robert Clinch in his father's estate was subject to the 
 inheritance tax imposed by the laws of this state. 
 
 The order of the Appellate Division should be affirmed with costs. 
 
 Bautlktt, .1. 1 vote for affirmance and the opinion. 
 
 This court held in Matter of Zefita, Countess De Rohan-Chabot 
 (167 N. Y. 380), that the transfer tax could not be imposed on a 
 legacy of a residuary estate until the amount of that estate is as- 
 certained. The parties in interest in that case were all non-residents. 
 
 In tlio case at l)ar the transfer tax was imposed after the amount 
 of the residuary estate liad been ascertained, and clearly falls within 
 the law as laid down in the case cited. In the case before us the 
 parties are also non-residents. 
 
 The nature of the interest of a residuary legatee prior to a final 
 accounting of the executor was considered in Afatter of Phipps (77 
 Hun, 325; affirmed on opinion below, 143 N. Y. (Ml). 
 
 CuLLEN, Ch. J., Gray, O'Brien, Vann and Werner. JJ., concur 
 with opinion and memorandum. 
 
 Order affirmed^
 
 320 VA^"uxEM's estate. [chap. iv. 
 
 VAXUXEM'S ESTATE. 
 Supreme Court of Pennsylvania. 1905. 
 
 [Reported 212 Pa. 315.] 
 
 Potter, J. Louis C. Vanuxem, Esq., of Springfield township, 
 Montgomen^ county, made his last will and testament dated October 
 16, 1903. By item seven of his will he gives his executors full 
 power and discretion to sell any or all of his real estate, whenever 
 any such sale be necessar}' or expedient for any purpose of his estate, 
 administration, distribution or otherwise. He was seized of certain 
 real estate in Tennessee and Illinois, and upon this property, the 
 appraiser of collateral inheritance tax assessed taxes. This was 
 done upon the ground that the directions in the will worked an 
 equitable conversion of the lands into personal propert}', by authoriz- 
 ing the executors in their discretion to sell for distribution, and 
 the further fact that it became necessary to sell in order to pay the 
 pecuniary legatees. 
 
 The orphans' court sustained the action of the appraiser. It 
 was not pretended that the real estate in other states could be charged 
 with collateral inheritance tax as real estate, but only by reason 
 of the fact that it was necessary for the executors to sell it, in order 
 to provide the money to pay the pecuniary legacies. And that being 
 the case, the power to sell if necessary to make distribution, became 
 undep the manifest intent of the testator, a direction to sell. 
 
 The judge of the orphans' court thus reasons it out in his opinion : 
 " The pecuniary legacies are to be paid before those to whom the 
 residuary is given shall receive anything, because it is only what 
 remains of the estate, after the specific legacies are paid, that passes 
 as residue or remainder. These legacies pass to the legatees as 
 money. The testator intended them to be paid in cash. There is 
 nothing in the language of the will to show they are to be paid in 
 any other way. Their character is personalty. He must have - 
 foreseen the necessity for the sale of his real estate to carry out* 
 his scheme of dividing his estate by first bestowing gifts upon the 
 beneficiaries in the form of pecuniary legacies, else how were they 
 to be paid ? " 
 
 The pecuniary legacies aggregated nearly $700,000, or very much 
 more than the amount of the personal estate, so that we cannot 
 see any way by which the executors can escape converting the land 
 into money, in order to carry out the provisions of the will. We 
 agree with the conclusion of the court below, that "an equitable 
 conversion is as effectually accomplished by the will, and the duties 
 of the executors under it are the same as if it contained a positive 
 direction to sell." It follows as a matter of course that if sold, 
 the proceeds of these lands must come into the courts of Pennsyl- 
 vania for distribution. The tax, therefore, falls upon the legacies 
 themselves, rather than upon the lands which are* now appraised 
 in order to determine the amount of the tax.
 
 CHAP. IV.] VANUXEm's ESTATE. 321 
 
 The opinion of tlie ronrt below lia= met so clearly the qnefstions 
 involved in this appeal and has disposed of them so fully, that 
 further elaboration, upon our part, is both difficult and unnecessary. 
 
 The assignments of error are overruled and the decree of the 
 orphans' court is affirmed. 
 
 MiTciiKLL, C. J., dissenting. 1 would reverse this judgment. 
 The taxation of land not within the territorial limits of the state is 
 admittedly beyond the legislative power, and the taxation of the 
 value or the proceeds of such land, under whatever form or disguise 
 it is sought to be exercised, is upon the border line of (juestionable 
 jurisdiction and should be scrutinized closely with every presump- 
 tion against its validity. 
 
 But even if the lands in this case were within Pennsylvania there 
 was no proper conversion. They were devised as land to devisees 
 named, and there is in the will no direction to sell but only a power 
 and discretion to do so when the executors should deem it expedient. 
 The learned court below founded its judgment on the doctrine of 
 necessity to carry out the will. But on this point the case falls 
 clearly within the principle of Hunt's Appeal, 105 Pa. 128 (141), 
 where it was held, "the most that can be said is that the testator 
 made a mistake as to the extent of his estate, and a sale of his real 
 estate became necessary in order to pay his debts. But this is not 
 to the purpose. The scheme of his will did not contemplate this, 
 and if by reason of the depreciation of his property, or for other 
 causes a necessity to sell the real estate arose which was not foreseen 
 by the testator, it will not work a conversion for the obvious reason 
 that a conversion is always a question of intent." 
 
 The necessity to sell which effects a conversion is one which must 
 have been contemplated by the testator in order to carry out the 
 scheme of his will, not a necessity as a matter of fact arising out 
 of the actual circumstances of the estate after his death. Suppose 
 the personalty though insufficient to pay the pecuniary legacies at 
 the time of testator's death had so increased in value as to be 
 sufficient before the time of payment, clearly there would have been 
 no conversion which would require or justify an exertion of the 
 executor's discretion which would subject these devisees' land to the 
 payment of this tax ; and equally so in the contrary case of a suffi- 
 ciency of personalty at the death and a subsequent decline in value. 
 Either case would come exactly within the quotation above made 
 from Hunt's Appeal. To attribute the necessity to sell as within 
 the contemplation of the testator seems to me like attributing the 
 gift of foresight to those who are wise after the event. The testator 
 gave large pecuniary legacies, but he had personal estate of still 
 larger nominal value, and with this knowledge of his affairs he gave 
 his executors not a direction but only a discretion to sell. Clearly 
 he did not contemplate a sale as a necessity but only as a contingency 
 to be dealt with in the discretion of his executors. 
 
 T regard the present decision as at variance with the principles 
 of all our later decisions, particularlv Hunt's Appeal, supra ; TTand- 
 ley's Estate, 181 Pa. 339; Yerkes v. Yerkes. eOO Pa. 419; Sauer- 
 bier's Est., 202 Pa. 187: and Cooper's Est., 206 Pa. 628.
 
 322 MccuRDY r. mccurdy. [chap. IV. 
 
 McCURDY V. McCURDY. 
 Supreme Judicial Court of Massachusetts. 1908. 
 
 [Reported 197 Mass. 248.] 
 
 Knowlton, C. J. This is a bill for instructions to the plaintiffs 
 as executors of the will of John Albro Little, late of Morris Plains 
 in the State of New Jersey, deceased. The testator left real estate 
 in Massachusetts whose value, as appraised, if free from encum- 
 brances, is $'-i41,000. This is subject to a mortgage to the Cam- 
 bridge Savings Bank of $1::^0,000 and interest. He also left personal 
 estate here to the amount of about $9,000, and an undivided interest 
 in other real estate, which was appraised at about' $12,000. In 
 regard to this interest and the personal estate no question arises. 
 The question before us is whether the collateral inheritance tax to 
 be paid under the R. L. c. 15, §1, shall be computed upon the value 
 of the property without deduction for the encumbrance of the mort- 
 gage, or upon the value of the equity of redemption. 
 
 The testator was a non-resident, and by the terms of the statute 
 the tax on the succession is only upon " property within the jurisdic- 
 tion of the Commonwealth." The property in question is subject 
 to a lien in favor of a Massachusetts creditor of the testator. The 
 value of the testator's interest in it at the time of his death was 
 only the value of the equity of redemption. The savings bank is 
 entitled to be paid out of the real estate if not paid otherwise. If 
 it should proceed to collect its debt by an action at law against the 
 executors, they would be obliged, acting only in their official capa- 
 city under their appointment of Massachusetts, to obtain a license 
 to sell this real estate for the payment of the debt, in which case 
 all that would remain within the jurisdiction of the Commonwealth 
 would be the excess of the proceeds of the real estate above the 
 amount of the indebtedness under the mortgage. If the savings 
 bank should forclose its mortgage by a sale, the result would be 
 the same. 
 
 The Attorney General, in behalf of the treasurer and receiver 
 general of the Commonwealth, contends that the doctrine of equit- 
 able conversion and exoneration should be applied to relieve the 
 land from the encumbrance of the mortgage, and that the executors 
 should bring the proceeds of personal estate from the place of dom- 
 iciliary administration in New Jersey and apply it to the payment 
 of the debt here, so as to leave the land, free from the encumbrance, 
 within the jurisdiction of the Commonwealth. 
 
 The answer to this contention is, first, that the rights and obliga- 
 tions of all parties in regard to the payment of a tax of this kind 
 are to be determined as of the time of the death of the decedent. 
 This has been settled by our decisions. Hooper v. Bradford, 178 
 Mass. 95. Howe v. Howe, 179 Mass. 54G. Kingsbury v. Chapin, 
 196 Mass. 533. Secondly, the law of equitable conversion ought 
 not to be invoked merely to subject property to taxation, especially 
 when the question is one of jurisdiction between different States.
 
 CUAP. IV.] MCCURDY V. MCCUEDY. 323 
 
 In Custance v. Bradshaw, 4 ITare, 315, 335, it was said that ''equity 
 would not alter the nature of tiie property for the purpose only of 
 subjecting it to fiscal claims to which at law it was not liable in its 
 existing state." In Matter of Offemian, 25 App. Div. (X. Y.) 94, 
 the court says that equitable conversion should not be invoked 
 merely for the purpose of subjecting the property to taxation. To 
 the same effect is Matter of Sutton, 3 App. Div. (N. Y.) 208; 
 affirmed in 149 N. Y. G18. In Pennsylvania a different rule Ls 
 established. Ilandley's estate, 181 Penn. St. 339. 
 
 The only ground on which such a tax can be imposed upon the 
 succession to property of a non-resident is that the property is 
 within the jurisdiction of the Commonwealth. For the purpose of 
 increasing the amount within our jurisdiction the executors or ad- 
 ministrators here cannot be compelled to bring the proceeds of 
 personal estate from the place of domiciliary administration in an- 
 other State, to pay debts of Massachusetts creditors, secured by a 
 mortgage or lien upon land in this ("ommonwealth. Indeed, if the 
 ancillary administrators were dill'erent persons from the domiciliary 
 administrators or executors, they could not obtain such proceeds 
 for such a use in a foreign state. If the property subject to ancillary 
 administration was not enough to pay local creditors, these creditors 
 would be obliged to resort to the domiciliary adn)inistrator. 
 
 In this State and in New York it is decided that personal property 
 within the jurisdiction of a foreign State is subject to a succession 
 tax in the place of the decedent's domicil. Frothingham v. Shaw, 
 175 Mass. 59. In re Swift, 137 N. Y. 77. Matter of Curtis, 143 
 N. Y. 219. This doctrine furnishes a strong implication that per- 
 sonal property in the decedent's domicil should not be used to relieve 
 property sul)ject to a succession tax under the ancillary administra- 
 tion of" another State by discharging liens upon it for the purpose 
 of increasing this succession tax. The tax is to be estimated in 
 reference to the property that is within the jurisdiction of the 
 Commonwealth at the time of the testator's death. Callahan r. 
 Woodbridge, 171 Mass. 595. Greves v. Shaw, 173 Mass. 205. Moody 
 V. Shaw, 173 Mass. 375. 
 
 The precise point before us has been decided in New Y'ork ad- 
 versely to the contention of the Attorney General, although, under 
 the laws of that State, the relative rights and obligations of mort- 
 gagors and mortgagees are not exactly the same as in Massachusetts. 
 Matter of Skinner, 106 App. Div. (X. Y.) 217. Matter of Sutton, 
 3. App. Div. (X. Y.) 208. See also Matter of Strong, 17 X. J. 
 Law J. 234. 
 
 In Kingsbury v. Chapin, 196 :\Iass. 533, the right of an ancillary 
 administrator to transmit personal property for the payment of 
 debts in the place of the domiciliary administration in the same 
 proportion as the property there is needed and used for a like pur- 
 pose, is recognized. This is because assets, after paying local debts, 
 may always be transmitted to the domiciliary^ administrator. They 
 may be used by him for paying del)ts, or if not needed for that 
 purpose they will be distributed. But so much of them as is needed
 
 324 PLUNKETT V, OLD COLOXY TRUST CO. [cHAP, IV. 
 
 for the payment of debts does not pass in succession, and cannot 
 properly be taxed. This rule does not suggest the transmission of 
 personal property from the place of original administration for the 
 payment of debts in the place of ancillary administration. 
 
 We are of opinion that the amount of the indebtedness under 
 the mortgage is to be subtracted from the value of the real estate, to 
 determine the amount on which the tax should be computed. See 
 Kingsbui}' v. Chapin, uhi supra. 
 
 So ordered. 
 
 PLUNKETT V. OLD COLONY TRUST CO. 
 SuPEEME Judicial Court of Massachusetts. 1919. 
 
 [Reported 233 Mass. 471.] 
 
 RuGG, C. J. This case is reserved upon the pleadings for the 
 determination of this court. The material facts are that William 
 B. Plunkett, late of Adams in the county of Berkshire, died testate 
 on the twenty-fifth of October, 1917, leaving as his heirs at law 
 two sons, each of whom had children, and one of whom has since 
 deceased. His will was executed on the fifteenth of September, 
 1909, the first codicil on the twenty-third of October, 1911, and 
 the second codicil on the nineteenth of July, 1917. None of these 
 testamentary instruments contain any provision respecting the pay- 
 ment of succession or inheritance taxes under either State or federal 
 laws. The State legacy and succession tax had been enacted before 
 the execution of the will and remained in force as amended at the 
 time of the execution of both codicils. St. 1909, c, 490, Part IV. 
 The federal " estate tax " was enacted shortly before the execution 
 of the last codicil. The estate of the testator was of such size that 
 the federal tax assessed upon it was $72,476.1.5. The provision for 
 one son under the will and codicils was a gift outright of property 
 valued at $14,275, and a gift of property valued at $382,616.75 
 to a trustee upon a spendthrift trust, to pay the income to that son 
 during his life, with other life estates at his death and gifts over 
 of the remainder. A legacy amounting to $126,760 was given to 
 a trustee to hold until the testator's grandchildren should "arrive 
 at the age of twenty-five years respectively," when it was to be 
 divided equally among them. The residue of the estate, valued at 
 $381,109.72, was bequeathed to the testator's other son. This peti- 
 tion by the executors is brought to determine whether this federal 
 tax which has been paid should be charged entirely against the 
 residue of the estate or apportioned pro rata among all the devisees 
 and legatees. That is the single question presented. An important 
 factor in the answer of this question is the meaning of the federal 
 statute on the point whether the tax is imposed with reference to 
 the entire net estate or with reference to the particular devises, 
 bequests or distributive shares. 
 
 I
 
 CHAP. IV.] PLUNKETT V. OLD COLOXY TRUST CO. 325 
 
 The tax was established by the act of Congress of September 8, 
 1916, entitled "An Act to increase the revenue, and for other 
 purposes," as amended by the Acts of March 3, 1917, and of October 
 3, 1917. The relevant sections of the successive acts are grouped 
 respectively under "Title II, Estate Tax," " Title III, Estate Tax,'' 
 and "Title IX, War Estate Tax." The tax thus entitled is "im- 
 posed upon the transfer of the net estate of every decedent dying 
 after the passage of this Act." § 201. Subsequent sections contain 
 directions for the ascertainment of the net value of estates of de- 
 c-eased persons. Briefly and compendiously stated the net value com- 
 prehends all estate loft by a decedent within the purview of the act 
 after deducting debts, losses and expenses of administration and 
 an exemption of $50,000. §§ 202, 203. The tax is in general terms 
 and is a percentage upon the amount of the net estate. § 201. It 
 is due one year after the death of the decedent. § 204. It must 
 be paid by the executor or administrator, and no direction is found 
 in the act for apportionment among legatees or devisees. § 207. 
 The intent is expressed by § 208 that, unless otherwise directed by 
 will, the tax shall be paid out of the estate before distribution. The 
 tax, if not sooner paid, is made a lien upon the gross estate for a 
 period of ten years, except that it is divested as to such part as is 
 used to defray charges against the estate and expenses of administra- 
 tion when allowed by the court of appropriate jurisdiction. § 209. 
 
 The contention that the tax is on the particular devises, bequests 
 or distributive shares is met at the outset by the heading or title 
 given to the tax by the statute itself, which describes the kind of 
 pecuniary imposition levied as an " Estate Tax." This is properly 
 to be considered in interpreting a statute of the United States. 
 Knowlton v. Moore, 178 U. S. 41, 65. The sections of the act 
 prefaced by this heading or title refer exclusively to the value of 
 the " net estate " as the basis for the ascertainment of the tax. 
 There is no mention whatever in this connection of legacies, devises 
 or distributive shares. They are wholly omitted. The statute 
 ignores utterly the disposition made of the estate by the testator 
 or by the law as to intestate property, and looks only to the net 
 estate itself as defined. 
 
 The words of the act of Congress imposing the tax point strongly 
 toward the interpretation that the tax is on the estate and not on 
 the particular de\nses, legacies or distributive shares. The words 
 "net estate" are used uniformly in the operative parts of the act 
 to the exclusion of phrases of other significance. 
 
 Two considerations fortify this interpretation. 
 
 (1) The war revenue act of 1898, being an act approved on June 
 13 of that year, 30 U. S. Sts. at Large, 464, 465, plainly and by 
 its express words imposed a tax on particular legacies and distribu- 
 tive shares arising from the property left by a decedent and not on 
 the whole personal estate so left. Knowlton v. Moore, 178 U. S. 
 41, 43, 65, 67, 71. The contrast between the terms of that earlier 
 act and those of the present throws a clear light on the meaning 
 of the act here in question. If Congress had intended to le^7 a
 
 326 PLUNKETT V. OLD COLOXY TRUST CO. [cHAP. IV. 
 
 tax on legacies and distributive shares, it naturally would have 
 adopted the words of its act of 1898, which had been already used 
 and whose signification had been established by the highest judicial 
 authority. Employment of other language of quite diit'erent import 
 indicates a change of purpose. 
 
 (2) It is permissible to examine records of legislature proceed- 
 ings incident to the passage of a statute to illumine its doubtful 
 language, although its plain meaning cannot be thereby affected; 
 but for this purpose resort commonly cannot be had to the debates 
 of individual members. Old South Association in Boston v. Boston, 
 212 Mass. 209, 305, and cases there collected. United States v. St. 
 Paul, Minneapolis & Manitoba Eailway, 247 U. S. 310, 318. The 
 design of the framers of the act of 1916 to establish an estate tax 
 as distinguished from a legacy or distribution tax is manifested by 
 the report of the committee on ways and means of the national 
 House of Representatives, to which the revenue bill had been referred. 
 In that report made on July 5, 1916 (Report No. 922, 64th Con- 
 gress, 1st Session), page 5, under the heading "Estate Tax," are 
 found these words: "Thirty States have laws imposing inheritance 
 or share taxes both upon direct and collateral heirs. Twelve other 
 States have laws imposing inheritance taxes upon collateral heirs. 
 Your committee deemed it advisable to recommend a federal estate 
 tax upon the transfer of the net estate rather than upon the shares 
 passing to heirs and distributees or divisees and legatees. The 
 federal estate tax recommended forms a well-balanced system of 
 inheritance taxation as between the Federal Government and the 
 various States, and the same can be readily administered with less 
 conflict than a tax based upon the shares." 
 
 An estate tax as distinguished from a legacy or succession tax is 
 well recognized. It was said in Minot v. Winthrop, 162 Mass. 113, 
 124, "the right or privilege taxed can perhaps be regarded either 
 as the right ov privilege of the owner of property to transmit it on 
 his death, by will or descent, to certain persons, or as the right or 
 privilege of these persons to receive the property." The difference 
 between the nature of the two kinds of taxes was pointed out and 
 defined by a quotation from Hanson's Death Duties, by the present 
 Chief Justice of the United States in Knowlton v. Moore, 178 U. S. 
 41, at page 49, in these words : " "What it [that is, an estate tax] 
 taxes is not the interest to which some person succeeds on a death, 
 but the interest which ceased by reason of the death." An estate 
 tax is imposed upon the net estate transferred by death and not 
 upon the succession resulting from death. In re Roebling, 89 N. 
 J. Eq. 163. 
 
 The conclusion seems to us to follow irresistibly that the tax 
 here in question is an estate and not a legacy or succession tax. 
 This is in accord with the decision in Matter of Hamlin, 226 N- Y. 
 407. Although the precise point was not presented for decision 
 in Corbin v. Townshend, 92 Conn. 501, 505, People v. Pasfield, 
 284 111. 450, 453, State v. Probate Court of Hennepin County, 139 
 Minn. 210, 211, or Knight's Estate, 261 Penn. St. 537, 539, in each
 
 CHAP. IV.] OLD COLONY TRUST CO. V. BURRTLT.. 327 
 
 of those doci.sions llieie is Ji dictum to the effect that thi.-^ is an 
 estate tax. See, however, Fuller v. Gale, T8 X. H. 54-J. 
 
 The provisions of § 208 of the act res|jcctin<; "a just and equit- 
 able conrril'Ution " to one from whose sliare in the estate the tax 
 has been colLeted " by the y:)ersons wbose interest in the estate . . . 
 would have been reduced" if the tax had been paid before distribu- 
 tion, or "whose interest is subject to eijual or prior liability for the 
 T-ayment of taxes," afford no warrant for applying what may be 
 thought in a special instance to be general equitable considerations 
 in opposition to fixed principles as to the settlement of estates. That 
 section is inapplicable to the facts here disclosed. 
 
 The further step follows inevitably from what has been said that 
 the law jnakes no provision for apportionment of the tax among 
 legatees, but leaves it simply to be paid out of the estate before 
 distribution is nuide. 
 
 Tiie will and codicils of the testator contain no direction respect- 
 ing the payment of this tax. There is nothing written in any of 
 these testamentary instruments which rightly can be construed as 
 expressing the purpose of the testator on the subject. Although 
 the last codicil was executed after the enactment of the federal 
 taxing law, no reference is found therein touching the payment of 
 the taxes imposed. So far as any inference may be drawn, it would 
 seem to be that taxes were intended to fall where the law placed 
 them. It is not permissiide for us to speculate as to the existence 
 of an intent to make a different provision from that provided by 
 law in the absence of any expression of testamentary purpose on the 
 subject. It is the general rule that, failing any testamont^iry provi- 
 sion to the contrary, debts, charges and all just obligations upon an 
 estate must be paid out of the residue of an estate. The benefaction 
 conferred by the residuary clause of a will is only of that which 
 remains after all paramount claims upon tlie estate of the tesbitor 
 are satisfied. Tomlinson v. Bury, 145 Mass. 346. The tax is a 
 pecuniary burden or imposition laid upon the estate. Boston v. 
 Turner, 201 Mass. 190, 193. In its nature it is superior to the 
 claims of the residuary legatee. Since neither the act of Congress 
 nor the will and codicils make any other provision for the point of 
 ultimate incidence of this tax, it must rest on the residue of the 
 estate. Matter of Hamlin, 226 N. Y. 407, 418, 419. Decree is to 
 be entered instructing the executors accordingly. 
 
 So ordered. 
 
 OLD COLONY TRUST CO. v. BURRILL. 
 Supreme .TrniriAL Court of Massachusetts. 1921. 
 
 [Reported Ul X.E. liep. 321.] 
 
 Pierce, J. Charles L. Willoughby died January 9, 1919, a resi- 
 dent of Brookliiie in this commonwealth. His will and codicil were 
 allowed, and the petitioner was a])pointed executor thereof by a
 
 328 OLD' COLOXY TRUST CO. V. BURRILL. [CHAF. IV. 
 
 decree of the probate court of Norfolk county, on February 26, 
 1919. The property of the testator at his death was worth approx- 
 imately $l,o2:,000, and consisted of real estate in Massachusetts 
 worth $22,000, real estate in Illinois worth $875,000, and securities 
 and other personal property approximately worth $630,000. The 
 securities included stock in corporations organized under the laws 
 of Illinois, New Jersey and Wisconsin. 
 
 As executor, and under tlie authority conferred upon such persons 
 by article 14 of the will, the petitioner paid out of the residue of 
 the estate to the state of Illinois an inheritance tax assessed upon 
 the rights of the several beneficiaries under the will to succeed to 
 real and personal property situated in Illinois; it paid to the state 
 of New Jersey the inheritance tax assessed upon the rights of the 
 several beneficiaries to succeed to certain shares of stock in New 
 Jersey corporations ; it paid to the state of Wisconsin the inheritance 
 tax assessed upon the rights of the several beneficiaries to succeed 
 to certain shares of stock in a Wisconsin corporation; it paid to 
 the state of Illlinois, or to Cook county in that state, a tax upon the 
 specifically devised real estate in that state, assessed under the 
 Illinois Eeal Estate Tax Law prior to but payable after the death 
 of the testator ; and it also paid to the collector of internal revenue 
 at Boston an estate tax assessed under title 4 of the United States 
 Kevenue Act of 1918 (U. S. Comp. St. Ann. Supp. 1919, §§ 63363^ 
 a -633634k). 
 
 All these taxes were included in an affidavit of debts and expenses 
 filed with the commissioner of corporations and taxation for the 
 commonwealth, the executor claiming that all these taxes paid by 
 it from the residue should be treated by the Massachusetts tax 
 commissioner as debts and expenses of the estate, and deducted 
 from the residue before the tax due under the Massachusetts In- 
 heritance Tax Law upon the residue of the estate was computed. 
 The commissioner refused to deduct any part of the taxes paid 
 under the inheritance tax laws of Illinois, New Jersey, and Wiscon- 
 sin, as also 57.29 per cent of the taxes paid upon the Illinois real 
 estate and under the federal Estate Tax Law, this percentage^ being 
 determined by the proportion which said real estate, amounting in 
 value to $875,000, bore to the testator's total property, amounting 
 in value to $1,527,451.22. The commissioner assessed the INIass- 
 achusetts inheritance tax upon the residue in accordance with his 
 rulings upon the question of deductions. If those rulings were 
 wrong the sum of $7,022.54 was improperly assessed. The petitioner 
 paidihe tax assessed under protest as to the sum of $7,022.54; and 
 in accordance with the provisions of St. 1909, c. 490, part 4, § 20, 
 now G. L. c. 65, § 27, filed its petition for abatement in the probate 
 court for the county of Norfolk and that court decreed that the peti- 
 tion be dismissed. The case is before this court on appeal from the 
 decree of the probate court. 
 
 The question presented by the appeal is whether the commissioner 
 should have deducted from the estate upon which the tax upon the 
 residue was to be computed, the amounts which the petitioner paid
 
 CHAP. IV.] OLD COLONY TRUST CO. V. BUHRILL. 329 
 
 to Other states in which the decedent had property at his death, 
 the amount paid the United Sta»tes under the federal Estate Tax 
 Law, and the whole amount paid of taxes assessed upon foreign 
 real estate when such tax was assessed Ijcfore but was payable after 
 the death of the testator. 
 
 [1] St. 1909, c. 490, part 4, § 1, formerly St. 1907, c. 563, § 1, 
 now G. L. c. 65, § 1, provides that — 
 
 "All property within the jurisdiction of the commonwealth . . . 
 belonging to inhabitants of the commonwealth . . . which shall 
 pass by will . . . shall be subject to a tax," 
 
 St. 1907, c. 563, § 6, St. 1909, c. 490, part 4, § 6, G. L. c. 65, § 
 13, in part provide as follows, as respects the value of the property 
 of the estate for taxation : 
 
 " Except as hereinafter provided, said tax shall be assessed upon 
 the actual value of the property at the time of the death of the 
 decedent." 
 
 The phrase of St. 1909, c. 490, part 4, § 1, " which shall pass by 
 will," marks the time of the vesting of the right and not the time 
 of its enjoyment in possession, or the time when the property or 
 the amount of the property less debts and charges of administration 
 passes; as it does the time when the tax shall be computed upon 
 the amount of property which has passed. Callahan v. Woodbridge, 
 171 Mass. 595, 51 N. E. 176. The rights of all parties, including 
 the right of the commonwealth to its tax, vest at the death of 
 the testator. Kingsbury v. Chapin, 196 Mass. 533, 538, 83 N. E. 
 700, 13 Ann. Cas. 738^^ The statement in Hooper v. Shaw, 176 
 Mass. 190, at 191, 57 N". E. 361, "that these words most naturally 
 signify the property which the legatee actually would get were it 
 not for the state tax imposed by the sentence in which the words 
 occur," as pointed out in Hooper v. Bradford, 178 Mass. 95, 98, 
 59 N. E. 678, is not authority for any contention that the time 
 when the legatee gets possession is the time for the valuation. 
 
 [2] As the property passes to the beneficiaries for the purpose of 
 taxation with the death of the testator, and as the tax must be 
 computed on the value of the property after the deduction of 
 all existing lawful charges, debts and expenses of administration 
 (Hooper v. Bradford, 178 Mass. 95, 59 N. E. 678; Howe v. Howe, 
 179 Mass. 546, 61 X. E. 225, 55 L. R. A. 626 ; McCurdy v. McCurdy, 
 197 Mass. 248, 252, 83 X. E. 881, 16 L. R. A. [N. S.] 329, 14 
 Ann. Cas. 859; Pierce v. Stevens, 205 Mass. 219, 91 N. E. 319; 
 Baxter v. Treas. & Recvr. Gen., 209 Mass. 459, 95 X. E. 854 ; Hill 
 V. Treasurer & Recvr. Gen., 227 Mass. 331, 116 X. E. 509), it follows 
 that the question whether the inheritance taxes of other states, 
 the local taxes laid on land in foreign states, and the United States 
 estate tax are to be deducted, is resolved into the question whether 
 the several payments Avere made to relieve the estate from a general 
 charge upon it, to discharge debts or other obligations of the dece- 
 dent or to defray the legal expenses of administration. 
 
 [3] As regards the inheritance taxes imposed by the states of 
 Illinois, X^ew Jersey and Wisconsin, the executor does not claim
 
 330 OLD COLONY TEUST CO. V. BURRILL. [ciIAl'. IV. 
 
 that they were paid because they were a general estate charge or 
 debts of^ the decedent, but contends that the payment of them is 
 a proper charge of administration, because the beneficiaries who 
 received the taxed property would have had a claim against it as 
 executor if the property received was reduced in amount by reason 
 of the failure of the executor to pay such taxes in the manner pro- 
 vided bv the will of the testator. Sherman v. Moore, 89 Conn. 
 190, 93 All. 241 ; Corbin v. Townshend, 92 Conn. 501, 103 Atl. . 
 647. It would seem to be plain, in the absence of the authorization 
 of the will, that the charge upon the succession of the foreign prop- 
 erty was a tax which the executor was required to pay in order to 
 reduce that property to possession, for the purpose of administration 
 and distribution (see Van Bell's Estate, 257 Pa. 155, 101 Atl. 316) ; 
 and equally plain that under the will the executor could not properly 
 leave the burden of the foreign tax to remain where it fell, without 
 a violation of its legal obligation to the beneficiaries. It follows 
 that the refusal of the commonwealth to deduct the amount paid 
 by the executor, in discharge of the inheritance taxes imposed by 
 other states, was error. 
 
 [4, 5] The tax assessed upon land in Illinois, prior to but payable 
 after the death of the testator, was not a charge upon the general 
 estate ; nor was it a debt of the testator or of his estate, in the absence 
 of an express statute of which we have no evidence. Pierce v. 
 Boston, 3 Mete. 530; Appleton v. Hopkins, 5 Gray, 530; Boston, 
 r. Turner, 201 Mass. 190, 87 N. E. 634; New Jersey v. Anderson, 
 203 U. S. 483, 27 Sup". Ct. 137, 51 L. Ed. 284; People v. Dummer, 
 274 111. 637, 643, 113 N". E. 934. It was, however, a liability and 
 an obligation of the estate upon which it was assessed, which the 
 owner in his lifetime or the executor of the owner must discharge 
 or suffer if he would save the loss of that propertv. " Terra debit, 
 homo solvit." It would seem to be a matter of indifference whether 
 the procedure of recovery is that of an action in personam or in 
 rem. In either case the burden of the obligation is a charge of 
 administration. 
 
 [6] The United States estate tax should have been wholly de- 
 ducted. In its nature such a tax is a charge upon the net estate 
 transferred bv death, and not upon the succession re=?ulting from 
 death. Hooper v. Shaw, 176 Mass. 190, 57 N. E. 361; Plunkett 
 V Old Colonv Trust Co., 233 Mass. 471, 475, 124 N. E. 265, 7 A. 
 L. P. 696 ; Matter of Hamlin, 226 N. Y. 407, 124 N. E. 4, 7 A. L. 
 E. 701; People v. Xorthern Trust Co., 289 111. 475, 124 N. E. 
 662, 7 A. L. P. 709; Corbin v. Baldwin, 92 Conn. 99, 101 Atl. 
 834, Ann. Cas. 1918E, 932; In re Knight's Estate, 261 Pa. 537, 
 104 Atl. 765. The estate upon the death is, to the extent of the 
 tax, instantly depleted. People v. Bemis, 68 Colo. 48, 189 Pac. 
 32; United States v. Perkins, 163 U. S. 625, 630, 16 Sup. Ct. 
 1073, 41 L. Ed. 287. 
 
 The decree of the probate court must be reversed, and the cause 
 recommitted for action in accordance with this opinion. 
 
 Ordered accordingly.
 
 CHAP, v.] EICIIAItDSOX I'. BOSTON, 331 
 
 CHAPTER V. 
 
 OBLIGATION OF A TAX. 
 
 RICHARDSON v. BOSTON. 
 
 SUPREMTC JrniCIAL COUKT OF MASSACHUSETTS. 1889. 
 [Reported 148 Mass. 508.] 
 
 Holmes, J. These are suits to recover taxes for the year 1883, 
 upon two estates taken by the Conmionweallh on May ^5, 1883, 
 under St. 1882, c. 262. The legal title to one of them was in the 
 plaintitl's as trustees under the will of Samuel A. Way, (Miner v. 
 Pingree, 110 Mass. 47,) and as to the tax upon that one, the only 
 question is whetiier the taking relieved the i)iaintill's of liability. 
 The taking, of course, put an end to the city's lien upon the land, 
 and to its right to sell it. But as the taking was after May 1, the 
 plaintitl's were not discharged if they were personally liable for 
 the tax under our statutes. Kearns v. Cunniff, 138 Mass. 434, 437. 
 See Pub. Sts. c. 11, § 13; Amory v. Melvin, 113 Mass. 83, 87; Hill 
 V. Bacon, 110 Mass. 387, 388. We are of opinion that they were 
 so liable. 
 
 The Public Statutes provide remedies, " if a person refuses or 
 neglects to pay his tax," first, by distress of goods (Pub. Sts. c. 12, 
 § '8) ; next, by imprisonment (§ 14) ; finally, by action (§ 20). 
 It is settled that the remedy by imprisonment applies to taxes on 
 land. Snow v. Clark, 9 Gray, 190. The statutes plainly tell us 
 that the remedy by distress also applies to such taxes. For, by 
 § 23, a distress of cattle, etc., belonging to the owner of an estate 
 taxed to another, is authorized " in the same manner as if such 
 stock or produce were the property of the person so taxed," thus 
 clearly assuming that the cattle of the person taxed may be dis- 
 trained. The same conclusion follows from the fact that the remedy 
 by imprisonment is only given when suthcient goods cannot be found 
 to be levied upon (§ 14). Lothrop v. Ide, 13 Gray, 93. Hall v. 
 Hall, 3 Allen, 5. Snow v. Clark, 9 Gray, 190. It seems to us very 
 plain, that the third remedy, by action, is of equal scope, and that 
 the words " when a person neglects to .pay his tax " cannot be con- 
 strued to exclude taxes on real estate in this section, when they are 
 construed to include them in the others. It is to be remembered, 
 also, that taxes on real estate arc assessed, not to the estate, but 
 "to the person" who is owner or in possession on !May 1. Pub. 
 Sts. c. 11, § 13. 
 
 The history of our legislation adverted to in Sherwin v. Boston 
 Five Cents Savings Bank, 137 Mass. 444, if it cannot be said to 
 furnish any stronger argument than is to be found in the plain 
 words of the Public Statutes, at least leads to no dilTerent result. 
 By the older statutes, tlie general remedy for refusal to pay any 
 rate or tax was distress, and, in case of failure to find sufficient 
 chattels for the le^'^^ arrest. It applied to taxes on persons in respect 
 of their land as plainly as to other taxes. Colonial Laws of 1672,
 
 332 EICIIAEDSON V. BOSTON. [cHAP. V. 
 
 (Whitmore's ed.) 24. Prov. Laws, 1692-93, c. 27, § 2, c. 28, § 6, c. 
 41, § 7; 1693-94, c. 20, § 17; 1698, c. 5, § 1 ad finem ; 1699-1700, c. 
 26, §§ 13-15; 1730, c. 1, §§ 12-15; 1756-57, c. 11. St. 1785, c. 
 50, § 6, c. 70, §§ 2, 5, 8, 10, 14. Rev. Sts. c. 8, §§ 7, 11. 
 
 The power to sell real estate appears in Prov. Laws, 1731-32, 
 c. 9, as the only available means for collecting taxes upon unim- 
 proved lands belonging to non-resident proprietors. Prov. Laws, 
 1735-36, c. 6; 1745-46, c. 9, etc. St. 1785, c. 70, § 7. St. 1794, 
 c. 68. Rev. Sts. c. 8, § 19. It is then extended to the case of 
 removing o^mers (St. 1785, c. 70, § 6), and to some cases of taxes 
 assessed to persons in possession, but not owners (§ 15). But the 
 last cited section makes it plain that the remedies by distress and 
 arrest still apply to taxes for land, and are regarded as the general 
 remedies, by the proviso that if the persons assessed shall remain on 
 the estate nine months after the rate bill is committed to the collector, 
 "the said collector shall have no other remedy than against the 
 person or property of the person or persons assessed as aforesaid, 
 unless," etc. Distress and arrest for taxes on land are expressly 
 provided for also by § 10. 
 
 In Rev. Sts. c. 8, § 18, the lien for taxes on real estate has become 
 general; but again it is made plain that the lien does not exclude 
 tne remedies formerly available, not only by § 16, corresponding 
 to Pub. Sts. c. 12, § 23, already discussed, but by § 19, which 
 provides that, when a tax on real estate shall be assessed to a non- 
 resident owner, "the collector may, at his election, collect such tax 
 of the said owner, in like manner as in the case of a resident owner, 
 or he may collect the same by the sale of such real estate." As was 
 said, bv Shaw, C. J., of the lien created by one of the annual tax acts 
 which led to § 18 of the Revised Statutes: "It is a remedy super- 
 added to those of demand, distress and imprisonment; and could 
 not have been expected to be resorted to until other means and 
 remedies had failed." Hayden v. Foster, 13 Pick. 492, 495. The 
 tax acts which led to Rev. Sts. c. 8, § 18, are as follows: St. 1821, 
 c. 107, § 9 (February 23, 1822), as to lien in Boston; St. 1822, c. 
 108, § 9 (February 11, 1823), Boston; St. 1823, c. 133, § 9 (Feb- 
 ruary 21, 1824), lien made general; St. 1829, c. 27, § 8 (June 12, 
 1829) ; St. 1829, c. 8G, § 8 (March 9, 1830) ; St. 1830, c. 151, § 8 
 (February 28, 1831). 
 
 An exceptional personal liability was imposed by Prov. Laws, 
 1761-62, c. 16; St. 1785, c. 46, § 10. A right of action for rates 
 was given to the constables or collectors in case of death or removal 
 of the person " duly rated " or of her marriage, being a woman, 
 before payment. St. 1789, c. 4. The words "duly rated" embrace 
 the taxes on real estate. Rev. Sts. c. 8, § 15, adopt this act without 
 change. Rich v. Tuckerman, 121 Mass. 222. And by St. 1859, c. 
 171, the latter section was "extended to all cases in which taxes 
 committed to a collector have remained unpaid for one year after 
 such commitment," and this has been the law ever since. Gen. Sts. 
 c. 12, § 19. Pub. Sts. c. 12, § 20. If, as we think, it is plain that
 
 CHAP, v.] HAN.SOX COUNTY r. GRAY. 333 
 
 the giving of a lien upon real estate did not displace the earlier 
 remedies of distress and arrest, we can perceive no reason why the 
 existence of such a lien should cut down the ahsolute generality 
 of the words of the act of 185'J. We therefore are of opinion, as 
 we have said, that owners of real estate, proj)erly taxed for it, are 
 personally liable for the tax. See Sherwin v. Boston Five Cents 
 Savin*,^^ Hank, 137 Mass. 444; Cochran r. Guild, 10« Mass. 2!), 30; 
 Burr V. Wilcox, 13 Allen, *.^G9, 2^12 ; llilson v. Shearer, 9 Met. 504. 
 506; Sherwin v. Wigglesworth, 1-^9 Mass. 64. 
 
 As the plaintiil's were personally liable as of May 1, and as the 
 failure actually to assess and to collect the tax on that day does 
 not ail'ect their legal })Osition, it has not been argued that, if they 
 had paid them, they could have recovered, as on a partial failure 
 of the consideration of the tax. No such argument could prevail. 
 The plaintiffs, if they have been deprived of their land, have the 
 price paid them in its place, untaxed for the current year. Moreover, 
 when a personal, liability is imposed, it might be difficult to say 
 that the consideration of the tax is solely the protection of the 
 particular parcel of land, although the lien is confined to that. 
 Jenniug v. Collins, 99 Mass. 29, 33. Hayden v. Foster, 13 Pick. 
 493. 
 
 Judgment for the defendant. 
 
 HANSOX COUNTY v. GRAY. 
 Supreme Court of South Dakota, 1899. 
 
 [Reported 12 S. D. 124.] 
 
 Haxey, J. This appeal is from an order sustaining a demurrer 
 to the complaint. It appears upon the face of the complaint that 
 the plaintiff is one of the organized counties of this state; that in 
 1888 certain personal property, then owned by defendant and situate 
 within the plaintiff county, where defendant then resided, was duly 
 assessed, and certain taxes for territorial, county, and other purposes 
 were duly levied thereon, which have not been paid; that, before 
 the taxes so levied became due, defendant disposed of and removed 
 from the territory all of the personal property thus assessed ; that 
 he has since then been a non-resident of the territory and state; 
 that when said taxes became due and delinquent the treasurer of 
 said county was unable to collect same by distress and sale of per- 
 sonal property, by reason of his inability to find any such property" 
 of, or belonging to, the defendant in said county; that, when such 
 taxes became due and delinquent, defendant owned no real property 
 to which the lien of such taxes could attach. 
 
 Since prior to the levy of these taxes, the statutes of this state 
 have provided for the collection of taxes on personal property by 
 distress and sale, and have not at any time, so far as we are aware, 
 authorized the collection of such taxes by action. Comp. Laws. 
 §§ 1609-1618, inclusive. The special metliod thus provi(li>il is
 
 334: HA^*so^^ county v. gray. [chap. v. 
 
 plain, speedy, and adequate. There may be decisions which announce 
 a different doctrine, but the overwhelming weight of authority sus- 
 tains the view that a tax is not a "debt," in the ordinary sense of 
 that word; that, when the statute prescribes no special uianner for 
 its collection, it may be collected by an action at law, but, when an 
 adequate method is provided by statute, an action for its collection 
 cannot be maintained. Galling v. Commissioners, 93 N. C. 536; 
 Board of Com'rs r. First Xat. Bank (Kan. Sup.) 30 Pac. 22; 
 Water-supply Co. v. Bell (Colo. Sup.) 36 Pac. 1102; City of Cam- 
 den V. Allen, 26 N. J. Law, 398 ; City of Detroit v. Jepp, 52 Mich. 
 458, 18 N. W. 217; Ilibbard v. Clark, 56 N. H. 155; Eichards v. 
 Commissioners, 40 Xeb. 45, 58 X. W. 594; Louisville Water Co. 
 V. Com., 89 Ky. 244, 12 S. W. 300; State v. Piazza, QQ Miss. 426, 
 6 South. 316. 
 
 Appellant cites the following cases in support of its contention 
 that the special statutorv method is not exclusive : McLean v. Myers, 
 134 N. Y. 480, 32 N. E. 63; People v. Seymour, 16 Cal. 332; City f 
 
 of Davenport v. Chicago, E. I. & P. E. Co., 38 Iowa, 633 ; City of 
 Dubuque v. Illinois Cent. E. Co., 39 Iowa, 56; City of Burlington 
 V. Burlington & M. E. E. Co., 41 Iowa, 134; and Dollar Sav. Bank 
 V. U. S. 19 Wall. 227. McLean v. Myers does not sustain the con- 
 tention, because the New York statute under discussion in that case, 
 as shown by the opinion, expressly provides that the tax "may be 
 recovered, with interest and costs, by the receiver of taxes of said 
 city in an action in any court of record in this state," 134 N. Y. 
 484, 32 X. E. 63. People v. Seymour is not in point. In that case 
 the court construed and considered the constitutionality of a statute 
 expressly authorizing the collection of taxes by action. Undoubtedly, 
 the legislature has power to authorize the collection of taxes by 
 action, in addition to any special method, but it has not exercised 
 such power in this state. In City of Davenport v. Chicago, E. I. 
 & P. E. Co., the question was not properly before the court, and it 
 expressly refrained from intimating any opinion thereon. Careful 
 examination of the other Iowa cases cited show that only two of 
 the four judges then constituting the court concurred in the view 
 that a tax is a debt for which an action at law may be maintained, 
 although the statute provides a special remedy. It will be observed 
 that Judge Cole dissented, and Judge Miller held that the question 
 was not properly before the court. Whatever may be found in Dollar 
 Sav. Bank v. TJ. S. tending to support appellant's contention is 
 simply dicta, because the subject is dismissed with these words: 
 " But all this is superfluous, for the act of congress authorizes suits 
 at law to recover unpaid taxes. It enacts as follows : ' Taxes may 
 be sued for and recovered in the name of the United States in any 
 proper form of action before any circuit or district court of the 
 United States, for the district in which the liability for such taxes 
 mav have been, or may be, incurred, or where the party from whom 
 such tax is due may reside at the time of the commencement of 
 said action.'" 19 Wall. 240. Numerous other cases cited in digests
 
 CHAP, v.] UNITED STATES f. < II A M liKIM.l X. 335 
 
 auJ by text writers, as holding that an action will lie to recover 
 taxes without express statutory authority, notwithstanding an ade- 
 quate special method ol' collection has been provided, have been 
 examined, but not one has been found where the question is directly 
 de(i<]('d in favor of that view. The conclusion relative to the collec- 
 tion of taxes by an action at law, herein announced, was reached 
 by a majority of this court in Brule Co. v. King, 11 S. D. 204, 77 
 N. \V. lOT. Hut as one of the judges, without stating any reasons, 
 dissented in that case, it was deemed not improper to again consider 
 the (piestion, wiiich has been done with care and the assistance of 
 able counsel. It sliould be add('(I that the judge who dissented in 
 Brule Co. v. King did so on the ground tliat the question now <]v,- 
 cided was not involved therein, and without forming any opinion 
 in relation thereto. The order of the court below is 
 
 Affirmed. 
 
 UNITED STATES v. CHAMBERLIN. 
 Supreme Court of the United States. 1911. 
 
 [Reported 219 f7. S. 250.] 
 
 Huoiies, J. The question presented is whether an action lies 
 by the United States to recover the amount of a stamp tax payable 
 under the War Revenue Act of 1898 upon the execution of a convey- 
 ance. 
 
 If the statute creates an obligation to pay the tax, and does not 
 provide an exclusive remedy, the action must be regarded as well 
 brought. 
 
 At common law, customs duties were recoverable by the Crown 
 by an information in debt or an exchequer information in the nature 
 of a bill in equity for discovery and account. These inforiuations 
 rested, upon the general principle " that in the given case the couimon 
 law or the statute creates a debt, charge, or duty in the party 
 personally to pay the duties immediately upon the importation; 
 and that, therefore, the ordinar}' remedies lie for this, as for any 
 other acknowledged debt due to the crown." United States v. 
 Lyman, 1 Mason, p. 499. See also Comyn's Digest (Title " Debt,'' 
 A, 9) ; Bunbury's Reports, *pp. 97, 233, 225, 2G2. 
 
 Applying tliis principle it was held in the Lyman case, sjipra. 
 and in Meredith v. United States, 13 Pet. 486, that the Government 
 was entitled to maintain an action to recover duties upon imports 
 as a personal indebtedness of the importers. The duty to pay was 
 there derived from the language of the act of April 27, 1816, c. 
 107 (3 Stat, p. 310), that "there shall be levied, collected and 
 paid " the several duties mentioned, and in accordance with an 
 established rule of interpretation the charge of the duty on the goods 
 was taken to mean a personal charge against the owner. In the 
 case last cited the court by Mr. Justice Story said (p. t!)3) :
 
 336 UNITED STATES V. CHAMBERLIN. [cHAP. V. 
 
 "The first question is, wliether Smith and Buchanan were ever 
 personally indebted for these duties; or, in other words, whether 
 the importers of goods do, in virtue of the importation thereof, 
 become personally indebted to the United States for the duties due 
 thereon; or the remedy of the United States is exclusively confined 
 to the lien on the goods, and the security of the bond given for 
 the duties. It appears to us clear upon principle, as well as upon 
 the obvious import of the provisions of the various acts of Congress 
 on this subject, that the duties due upon all goods imported con- 
 stitute a personal debt due to the United States from the importer 
 (and the consignee for this purpose is treated as the owner and 
 importer), independently of any lien on the goods, and any bond 
 given for the duties. The language of the duty act of the 27th of 
 April, 1816, ch. 107, under which the present importations were 
 made, declares that ' there shall be levied, collected, and paid ' the 
 several duties prescribed by the act on goods imported into the 
 United States. And this is a common formulary in other acts laying 
 duties. Now, in the exposition of statutes laying duties, it has 
 been a common rule of interpretation derived from the principles 
 of the common law, that where the duty is charged on the goods, 
 the meaning is that it is a personal charge on the owner by reason 
 
 of the goods. So it was held in Attorney General v. , 2 
 
 Anst. R. 558, where a duty was laid on wash in a still; and it was 
 said by the court that where duties are charged on any articles in 
 a revenue act, the word ' charged ' means that the owner shall be 
 debited with the sum; and that this rule prevailed even when the 
 article was actually lost or destroyed before it became available to 
 the owner. Nor is there anything new in this doctrine; for it has 
 long been held that in all such cases an action of debt lies in favor 
 of the government against the importer, for the duties, whenever 
 by accident, mistake, or fraud, no duties, or short duties have been 
 paid." 
 
 A similar rule has been applied in the case of internal revenue 
 taxes. United States v. Washington Mills, by Clifford, J., 2 Cliff. 
 601, 607; Dollar Savings Bank v. United States, 19 Wall. 227; 
 United States v. Pacific Railroad, bv Miller and Dillon, JJ., 4 Dill. 
 66; United States v. Tilden, by Blatchford, J., 9 Ben. 368. 
 
 In Dollar Savings Bank v. United States, supra, an action of debt 
 was sustained to recover the amount of the internal revenue tax 
 imposed by the act of July 13, 1866, c. 184, 14 Stat. 138, on the 
 undistributed gains carried to the surplus fund of the bank. It 
 was objected that the act provided a special remedy for the assess- 
 ment and collection of the tax and that no other could be used. 
 But the court, finding no prohibition of the remedy by action, held 
 the argument untenable, saying (pp. 238-240) : 
 
 " It must also be conceded to lie a rule of the common law in 
 England, as it is in Pennsylvania and many of the other States, 
 that where a statute creates a right and provides a particular remedy 
 for its enforcement, the remedy is generally exclusive of all com- 
 mon-law remedies. 
 
 /
 
 CHAP, v.] UNITED STATES V. CIIAMBERLIX. 337 
 
 "But it is important to notice upon wliat the rule is founded. 
 The reason of the rule is that the statute, by providing a particular 
 remedy, manifests an intention to prohibit other remedies, and the 
 rule, therefore, rests upon a presumed statutory prohiljition. It 
 applies and it is enforced when any one to whom the statute is a 
 rule of conduct seeks redress for a civil wrong. lie is confined to 
 the remedy pointed out in the statute, for he is forbidden to make 
 use of any other. But by tlie Inlcnial Revenue law, the United 
 States are not prohibited from adopting any remedies for the re- 
 covery of a debt due to them wiiich are known to the laws of Pennsyl- 
 vania. The prohibitions, if any, either express or implied, contained 
 in the enactment of 1866, are for others, not for the government. 
 They may be obligatory upon tax collectors. They may prevent 
 any suit at law by such officers or agents. But they are not rules 
 for the conduct of the State. It is a familiar principle that the 
 King is not bound by any act of Parliament unless he be named 
 therein b}^ special and particular words. The most general words 
 that can be devised (for example, any person or persons, bodies 
 politic or corporate) affect not him in the least, if they may tend 
 to restrain or diminish any of his rights and interests. He may 
 even take the benefit of any particular act, though not named. The 
 rule thus settled respecting the British Crown is equally applicable 
 to this government, and it has been applied frequently in the dif- 
 ferent States, and practically in the Federal courts. It may be 
 considered as settled that so much of the royal prerogatives as be- 
 longed to the King in his capacity of parens patrice, or universal 
 trustee, enters as much into our political state as it does into the 
 principles of the British constitution. 
 
 " It must, then, be concluded that the government is not prohi- 
 bited by anything contained in the act of 1866 from employing 
 any common-law remedy for the collection of its dues. The reason 
 of the rule which denies to others the use of any other than the 
 statutory remedy is wanting, therefore, in applicability to the gov- 
 ernment, and the rule itself must not be extended beyond its reason.'* 
 See also United States v. Stevenson, 215 U. S. p. 197. » 
 
 The statute, in the Savings Bank case, contained a provision 
 (now in § 32 13, Rev. Stat.) which expressly authorized the bringing 
 of an action. But the court also found a sufficient basis for its 
 judgment in the general power of the Government to collect by suit 
 taxes that are due, where the statute imposing the tax docs not deny 
 that remedy. This point was presented, considered and decided in 
 the determination of the cause and the decision is none the less au- 
 thoritative because there was another ground for the ultimate con- 
 clusion. Railroad Co. r. Schutte, 103 U. S. p. 143; Union Pacific 
 Co. V. Mason City Co., 199 U. S. p. 166. 
 
 Neither Lane County v. Oregon, 7 Wall. 71, nor Meriwether v. 
 Garrett. 102 U. S. 472, relied upon by the defendants, involved the 
 question. In the former case it was held that the acts of Congress 
 of 1862 and 1863, making United States notes a legal tender for 
 debts, had no reference to taxes imposed by state authority. The
 
 338 UNITED STATES V. CHAMBERLIN. [cHAP. V. 
 
 Legal Tender Acts expressly provided that the notes slionld be re- 
 ceivable for national taxes and the context forbade the conclusion 
 that Congress intended to include state taxes under the term " debts,'* 
 and there was hence no conflict with the statute of Oregon which 
 required the taxes due the State to be collected in coin. 
 
 In Meriwether r. Garrett, supra, it was held that taxes ^evied 
 before the repeal of the charter of a municipality, other than such 
 as were levied in obedience to the special requirement of contracts 
 entered into under the authority of law, and such as were levied 
 under judicial direction for the payment of judgments recovered 
 against the city, could not be collected through the instrumentality 
 of a court of chancery at the instance of the city's creditors. Such 
 taxes could be collected only under authority from the legislature. 
 
 A tax may or may not be a " debt " xmder a particular statute, 
 according to the sense in which the word is found to be used. But 
 whether the Government may recover a personal judgment for a 
 tax depends upon the existence of the duty to pay, for the enforce- 
 ment of which another remedy has not been made exclusive. Whether 
 an action of debt is maintainable depends not upon the question 
 who is the plaintiff or in what manner the obligation was incurred, 
 but it lies whenever there is due a sum either certain or readily 
 reduced to certainty. Stockwell v. United States, 13 \Yall. p. 542. 
 
 Here the tax was a stamp tajj, but the language as clearly imports 
 the obligation to pay as did that of the statue before the court in 
 the Mereditli case, supra. Section 6 of the War Eevenue Act of 
 1898 provided that there should be "levied, collected and paid" 
 in respect of the instruments mentioned " by any person or persons, 
 or party who shall make, sign, or issue the same, or for whose use 
 or benefit the same shall be made, signed, or issued, the several taxes 
 or sums of money " set forth in the schedule which followed. There 
 is nothing in the nature of a stamp tax which per se negatives 
 either the personal obligation, otherwise to be derived from the 
 words imposing the tax, or its collection by action. The stamp is 
 to be affixed to the instrument "to denote said tax." Sections 7, 
 13, 14. Section 25 provided that the Commissioner of Internal 
 Eevenue .should cause to be prepared " for the payment of the taxes 
 prescribed in this Act suitable stamps denoting the tax on the docu- 
 ment, article, or thing to which the same may be affixed." The 
 stamp is the evidence, and its purchase the convenient means, of 
 payment. When a statute says that a person shall pay a given tax 
 I it obviously imposes upon that person the duty to pay, and this may 
 jbe enforced through the ordinary means adapted to the recovery 
 of a definite sum due, unless that course is clearly prohibited. 
 I The objection was made in the Savings Bank case, supra, that 
 I the tax had not been assessed. The court held, however, that no 
 other assessment than that made by the statute was necessary in 
 order to determine the extent of the bank's liability. Following 
 this rule, Judge Blatchford said in United States v. Tilden, 9 Ben. 
 p. 386, where the action was brought to recover unpaid taxes on 
 income : " The extent of the liability of the individual for income
 
 CHAP, v.] UNITED STATES V. ClIAMBERLIX. 339 
 
 tax is defmcd by the statute, equally witii the extent of the liability 
 of the bank for the tax on undistributed earnings. In each case 
 it is necessary, in an action of debt for the tax, to resort to sources 
 of information outside of the statute, to acertain the amount on 
 which the i)cr centum of tax iixed by the statute is to be calculated. 
 . . . The diilerence between the two cases, in that respect, if there 
 be any, will be, in every case, one of degree merely, not of principle. 
 The statute in imposing the per centum of tax on the income of 
 the individual, makes a charge on him of a sum which is certain 
 fop the purposes of an action of debt, because it can be made certain 
 through the action of a judicial tribunal, by following the rules 
 laid down in the statute. Tlmt is the principle of the decision in 
 the case of the bank, and it controls the present case." See also 
 King V. United States, 99 U. S. p. 233; United States v. Erie Rail- 
 way Co., 107 U. S. p. 2; United States v. Philadelphia & Reading 
 Railroad Co., 123 U. S. p. 114; and United States v. Snyder, 149 
 U. S. p. 215. The statute now before us fixes a tax of a specified 
 amount, according to the consideration or value of the lands conveyed. 
 
 It is insisted, however, that the provision for penalties excludes 
 the idea of a personal liability. Thus it is made a misdemeanor to 
 sign or issue one of the described instruments to which a stamp 
 has not been affixed, punishable under § 7 by a fine of not more 
 than one hundred dollars, and not exceeding two hundred dollars 
 under § 10 in the case of a bill or note. And under § 13, where 
 there is intent to evade the law, the olfense is punished '^by a fine 
 not exceeding fifty dollars, or by imprisonment not exceeding six 
 months, or both, in the discretion of the court." The unstamped 
 instrument is nuide inadmissible in evidence (§§ 7, 14), is not 
 allowed to be recorded (§ 15), and l)y the provision of § 13 is to 
 "be deemed invalid and of no effect." 
 
 But these penalties were provided in order to induce the payment 
 of the tax, and not as a substitute for payment. It cannot be sup- 
 posed tluit Congress intended, by penalizing delinquency, to deprive 
 the Government of any suitable means of enforcing the collection 
 of revenue. In large transactions, as in the case at bar, the fine 
 which could be imposed would be much less than the tax, and 
 no reason is suggested why the Go\ernment should forgo the 
 collection of that which, under the statute, is its due. Punishment 
 by imprisonment, under § 13, is imposed only where it can be 
 shown tliat there was an "intent to evade the provisions" of the 
 act, and while this remedy is a])propriate in such a case, and is 
 for the obvious purpose of discouraging evasion, it is without applica- 
 tion where, for any other reason, the tax has not been paid and 
 thereby the Government has lost its revenue. The provision in- 
 validating the instrument is likewise punitive. The object was not 
 primarily to deprive instruments of effect, but to insure the dis- 
 charge of the obligation to pay; and that obligation would still be 
 undischarged, even though, by reason of the non-payment, the in- 
 strument was deemed invalid. 
 
 Upon these grounds we conclude that the United States was en-
 
 340 STATE OF COLORADO r. HARBECK. [cHAP. V. 
 
 titled to maintain this action and that the demurrer should have 
 been overruled. The judgment is therefore 
 
 Reversed. 
 
 STATE OF COLORADO v. HARBECK. 
 Supreme Court of New York. Appellate Division. 1919. 
 
 [Reported 189 App. Div. 865.] 
 
 Action to recover an inheritance tax assessed by the State of 
 Colorado against the estate of John H. Harbeck, who died domiciled 
 in Colorado. The widow and executrix, defendant in this case, ac- 
 quired a domicil in New York after her husband's death.^ 
 
 Philbin, J. . . . The defendants contend that this action cannot 
 be maintained because : First, all proceedings upon which this action 
 is based were had in the State of Colorado without personal service 
 process upon the defendants and without appearance by them, and 
 are a nullity in so far as they and this action are concerned ;2 
 second, there is no authorization whatever under the laws of Colo- 
 rado or New York for this action; third, the alleged claim or cause 
 of action is of such character that our courts cannot entertain it. . . . 
 
 It now becomes necessary to take up the question as to the plain- 
 tiff's right to enforce this obligation in this State. It is contended 
 by defendants that section 17, 18, and 19 of the Colorado Inheritance 
 Tax Law of 1913 contain the sole remedy open to the plaintiff for 
 the collection of the taxes. We have seen that because of the ab- 
 sence from Colorado of the defendants and of any property therein 
 belonging to the decedent, no proceedings could be had imder those 
 sections. The defendants, although they admit having received the 
 notice by mail provided for in the Colorado statute, have not vol- 
 untarily submitted to the jurisdiction of that State or permitted 
 personal service to be made upon them therein. 
 
 Section 17, in brief, gives the County Court jurisdiction over the 
 property of a decedent and taxes thereon, and provides that the 
 County Court first acquiring jurisdiction shall retain the same " to 
 the exclusion of every other" (County Court). Section 18 provides 
 that, where the tax has not been paid the county court shall issue 
 a summons requiring the person interested in the property to appear 
 on a day certain, not more than three months after the date of the 
 summons, to show cause why the tax should not be paid. The 
 summons may be served in every respect as provided for a summons 
 in a civil action in rem unless otherwise provided in the act. Section 
 19 states that after the refusal or neglect to pay a tax within one 
 year from the accrual thereof, and where no bond has been given, 
 it shall be the duty of the Attorney-General to file a petition under 
 section 18 and press it to a final conclusion. The Attorney-General 
 is authorized to appear in behalf of the State in any and all inher- 
 itance tax matters before any court of record. Because of inability to 
 invoke the operation of the foregoing sections, the plaintiff should 
 not be deprived of all remedy, and compelled to abandon every effort 
 
 ^ This short statement of facts is substituted for that of the court. 
 ' The opinion on this point is omitted. The court held the tax valid.
 
 CHAP, v.] STATK OF COLOE^VDO V. IIAKBECK. 341 
 
 to keep the defendants to the obli{:jation they assumed as above stated. 
 There is nothing to prevent a State, a political corporation, from 
 seeking in the courts the relief or redress tiiat any otlier corporation 
 may demand. Delafield v. Illinois, 2 Hill, lOlJ. And it is to be noted 
 that section 13, in providing that the Attorney-General may apply 
 to have a person take out letters of administration, with the will an- 
 nexed, states as already indicated that such provision shall not pre- 
 vent the enforcement of the collection of any tax in any otlier manner 
 " as may be provided in this act or " by law." And section 19 says 
 that the Attorney-General shall be authorized to appear in behalf of 
 the State " in any and all inheritance tax matters before any court of 
 record." In Pinnacle Co. v. People, 58 Colo. 86, 90, it was held 
 that if a special remedy provided by statute for the collection of 
 taxes is not effectual to compel payment in spite of the taxpayer's 
 determination not to pay, resort may be had to an action against the 
 taxpayer. 
 
 The remedy sought by the plaintiff is not limited to its courts and 
 adequate enforcement can be had in ours. Howarth v. Angle, 163 
 N. Y. 179; Shipman v. Treadwell, 200 N. Y. 472. A different 
 situation was presented in Marshall v. Sherman, 148 X. Y. 9. 
 There the action was brought by a creditor of a Kansas bank to 
 enforce a statutory liability of a stockholder under a statute of that 
 State. It was held that there was no reason why the plaintiff 
 should be permitted to enforce the liability against a citizen of this 
 State in a form of action different from that which a creditor of 
 a domestic corporation may prosecute against a domestic stock- 
 holder. In the Howarth Case, supra, approved in Knickerbocker 
 Trust Co. V. Iselin, 185 N. Y. 54, 59, it was held that the enforce- 
 ment of a statutory liability against a resident stockholder for debts 
 of an insolvent foreign corporation does not rest upon the theory 
 that the laws of the foreign State are in force in this State, but 
 upon the contractual obligation the shareholder assumes to meet the 
 liability affixed by the statute to the ownership of stock. The de- 
 fendants in this case by their conduct assumed the statutory obliga- 
 tion and thereby made it their contractual obligation. 
 
 Public policy does not prohibit the assumption of jurisdiction 
 by this court and the principle of comit)^ demands it. Loucks v. 
 Standard Oil Co., 224 N. Y. 99. The Inheritance Tax: Law of 
 Colorado has precisely the same design as a similar law in this 
 State, and may indeed be said to be identical in its general provi- 
 sions and scope. It was apparently to avoid the full force of the 
 provisions of our own law that the defendants placed the decedent 
 in the position of a nonresident of this State. As was said in the 
 Loucks Case: 
 
 "A foreign statute is not law in this State, but it gives rise to an 
 obligation, which, if transitory, ' follows the person and may be en- 
 forced wherever the person may be found.' . . . ' No law can exist 
 as such except the law of the land : but ... it is a principle of 
 every civilized law that vested rights shall be protected.' . . . The 
 plaintiff owns something, and we help him to get it. . . . "We do
 
 342 MCGEE V. SALEM. [ciIAPo V, 
 
 this unless some sound reason of public policy makes it unwise for 
 us to lend our aid.'' . . . 
 
 Judgment reversed, with costs, and judgment directed for plain- 
 tiff as prayed for in the complaint, with costs. 
 
 McGEE V. SALEM. 
 Supreme Judicial Couet of Massachusetts. 1889. 
 
 [Reported 149 Mass. 238.] 
 
 Contract to recover $31.40, the amount of a tax paid under 
 protest. Trial in the Superior Court, without a jury, before Brig- 
 ham, C. J., who allowed a bill of exceptions, in substance as follows. 
 
 This action was heard and determined by the court, upon finding 
 the facts following. Prior to May 1, 1884, one Putnam was the 
 owmer of greenhouses upon land owned by one Emmerton, on Crom- 
 bie Street, in Salem. The assessors of the defendant city assessed 
 to Emmerton taxes upon the land for the year 1884, and to Putnam 
 " upon the greenhouses thereon, as real estate," as well as upon 
 other land on Mason Street in Salem, the stock in the greenhouses, 
 valued at $500, being assessed to Putnam as personal estate. The 
 entire tax assessed in 1884 to Putnam on his real and personal 
 estate was the sum of $59.75. Subsequently, Putnam was declared 
 to be an insolvent debtor, and in settling his estate his assignees in 
 insolvency sold the greenhouses to the plaintiffs, on January 1, 1886. 
 The tax for the year 1884 on the greenhouses remaining unpaid 
 in July, 1886, the defendant's collector of taxes proceeded to collect 
 it by a sale of the green houses as real estate, after due notice, by 
 public auction. 
 
 Before the day appointed for the sale, the plaintiffs duly paid 
 the tax to the collector, after signing a protest in writing, but in 
 paying it did not claim that the tax had been illegally assessed, or 
 that the same should be apportioned, or ask of the collector so to 
 apportion it that they could avoid the sale of the greenhouses by 
 paying so much of the tax assessed to Putnam on the greenhouses 
 as ' " real estate " as applied to them only, and not to the land on 
 which they were. 
 
 The judge ruled that upon these facts the action could not be 
 maintained, and found for the defendant; and the plaintiffs alleged 
 exceptions. 
 
 Field, J. We understand from the exceptions that the tax on 
 the land \ipon which the greenhouses stood, was assessed to Emmer- 
 ton, and that in this assessment the greenhouses were not included, 
 and that the tax on the greenhouses, considered apart from the land, 
 was assessed to Putnam as a tax on real estate. This separation of 
 the greenhouses from the land on wdiich they stood implies that 
 the assessors considered that the greenhouses belonged to Putnam 
 as personal property. These taxes were assessed as of May 1, 1884.
 
 CIIA!'. v.] MCGEt V. SALEM. 343 
 
 Putnam, alter this tax was assessed to him, became an insolvent 
 debtor, and the assignees of his estate, on January 1, 1886, sold 
 the greenhouses to the plaintiffs. The plaintiffs, therefore, so far 
 as appears took an absohite title to tiie greeiiiiouses, unless there 
 was a lien on them in lavor of the city of Salem for the payment 
 of tlie tax assessed to Putnam. 
 
 The Pub. Sts. c. 11, provide, in § 3, tiiat "real estate, for the 
 purposes of taxation, sluill include all lands within this State, and 
 all buildings and otlier things* erected on or affixed to the same" ; 
 in § 13, that "taxes on real estate shall be assessed, in the city or 
 town where the estate lies, to the person who is either the owner 
 or in possession thereof on the first clay of May" ; in § 20, that "all 
 personal estate, within or without the Commonwealth, shall be 
 assessed to the owner in the city or town where he is an inhaljitant 
 on the first day of Slay, except", etc.; and in § 53 require that the 
 buildings and lots of land be sej)arately described. 
 
 In Milligan v. Drury, 130 Mass. 4t^8, it was in effect decided that 
 buildings affixed to land, under an agreement between the owner of 
 the land and the owner of the buildings that they should remain 
 personal property, might be assessed with the land to the landowner; 
 and it was said that "the assessors were not obliged to inciuice into 
 the private contracts between the parties, but had the right to do 
 as they did, and assess together as real estate the land and the 
 buildings affixed tlioreto." It follows from this decision, that the 
 land and the buildings affixed thereto could be assessed together 
 as real estate to the person in possession of the land and the buildings 
 on the first day of May, as well as to the o^vIler of the land. 
 
 The question did not arise in that case whether a tax can be as- 
 sessed upon buildings which are personal property as a separate 
 tax from that assessed on the land to which the buildings are affixed, 
 and the question whether, if a tax can be so assessed, the buildings 
 should be taxed as real or personal estate, was not considered. There 
 are difficulties whatever view is taken. If the owner of the buildings 
 is an inhabitant of another town within the Commonwealth than 
 that in which the buildings are situated, and the buildings may be 
 assessed to him in one town as personal property, and also nuiy be 
 assessed in the other town as a part of the land to the landowner 
 or person in possession of the land, then there may be double taxa- 
 tion at the election of the assessors of the different to\\Tis. 
 
 While the stiitutes expressly declare that for the purposes of taxa- 
 tion real estate shall include buildings affixed to land, and expressly 
 provide for a separate description and valuation of the buildings 
 and the lots of land, yet the provisions relating to the collection of 
 a tax on real estate by a lien upon it and a sale of it, or of the rents 
 and profits, or by the purchase of the real estate in behalf of the 
 city or town, or by the taking of it for the city or town, as well a^ the 
 provisions for the redemption by the owner of real est<ate so taken 
 or sold, are, in many respects, inapplicable to buildings which are 
 personal property, and which must at some time be removed from
 
 344: MCGEE V. SALEM. [cHAP, V, 
 
 the land, or taken down if the owner of the land recpires it. Pub. 
 Sts. c. 12, §§ 24r-58. Buildings affixed to land are in their nature 
 real property, and they are only considered as personal property 
 between the parties to an agreement making them such and those 
 who purchase the land with knowledge of the agreement; they pass 
 as a part of the land to a purchaser for value without notice. Hunt 
 r. Bay State Iron Co. 97 Mass. 279. Dolliver v. Ela, 128 Mass. 557. 
 
 The questions we are discussing were considered in Flanders v. 
 Cross, 10 Cush. 514 but it was not necessary there to decide them, 
 although it was said that "there is no power in the collector to 
 divide tlie property, to levy on the building severed from the land, 
 as divisible parts of the same piece of real estate." This statement 
 we think is true. As the statutes relating to a sale of real property 
 to satisfy the lien for taxes do not provide for a sale of a building 
 apart from the land on which it stands, and as some of the provi- 
 sions are inconsistent with such a sale, we think it follows that a 
 building aflELxed to land cannot be taxed as real estate except in 
 connection with the land to which it is afiixed. The tax assessed 
 to Putnam on these greenhouses as real estate, therefore, was un- 
 authorized, and it is unnecessary to consider whether they could 
 have been taxed to him as personal estate. 
 
 It is contended that, if these greenhouses were wrongly included 
 in the real estate of Putnam for the purpose of taxation, yet, as 
 other land in Salem was rightly taxed to him, Putnam's remedy 
 would have been by a petition for abatement, and not by action, 
 and that the plaintiffs have only the rights and remedies which 
 Putnam would have had if he had not become an insolvent debtor, 
 and had remained the owner of the greenhouses. Howe v. Boston, 
 7 Cush. 273, 274. 
 
 It has been decided that for the collection of a tax assessed on 
 real estate a city or town has a remedy against the person and the 
 property generally of the person to whom the tax has been assessed, 
 and is not confined to the sale of the real estate itself. Sherwin v. 
 Boston Five Cents Savings Bank, 137 Mass. 444. Richardson v. 
 Boston, 148 Mass. 508. 
 
 It may be conceded that, if Putnam had remained the owner of 
 the greenhouses, the collector of taxes could have taken them by 
 distress, under the Pub. Sts. c. 12, §§ 8, 9, or have maintained 
 an action of contract against him, and attached them under § 20 
 of the same chapter, and that therefore Putnam could not main- 
 tain the present action if he had paid the tax, because unless 
 there is an abatement the assessment is good as against him, and 
 he is personally bound to pay the tax. But the plaintiffs by pur- 
 chasing the greenhouses did not succeed to the personal obliga- 
 tion of Putnam to pay the tax. If the tax was a lien on the green- 
 houses, the lien might have been enforced even after the plaintiffs 
 became the owners; but if there was no lien, the houses after they 
 became the property of the plaintiffs could not have been sold to. 
 pay a tax assessed to another person. As we have held that the 
 houses considered apart from the land could not lawfully be assessed
 
 CHAP, v.] KEER V. ATWOOD. 345 
 
 to Putnam as real estate, the tax would not constitute a lien upon 
 the greenhouses, althougli it might remain a valid tax against Put- 
 nam, because only taxes assessed on real estate constitute a lien. 
 
 As the plaintifl's were never personally liable to pay the tax, and 
 as there was no lien upon the greenhouses whereby they could be 
 sold to satisfy it, the remaining question is whether the plaintiffs 
 could pay the amount of the tax under protest to the collector of 
 taxes, who was unlawfully proceeding to collect it by a sale of the 
 greenhouses, and then bring an action to recover what they had 
 paid. The wrong of the collector is in threatening to take one 
 man's goods to pay a tax assessed to another. It may be said that 
 the payment was not compulsor}-, because the collector held no war- 
 rant authorizing him to levy upon or to sell the property of the 
 plaintiff. If the collector had intermeddled with the greenhouses 
 by taking possession, or by delivering possession to another person, 
 the plaintiffs could have maintained trespass, or trover, or replevin. 
 Independently of statute, it may be that this action could not be 
 maintained. See Boston & Sandwich Glass Co. v. Boston, 4 Met. 
 181; Forbes v. Appleton, 5 Cush. 115; Barrett v. Cambridge, 10 
 Allen, 48. 
 
 But by the Pub. Sts. c. 12, § 84, one of the alternative conditions 
 under which a tax paid may be recovered is that it was paid by 
 the plaintiff, after " a protest by him in writing." In the present 
 case, this was done. We think that the Legislature intended by this 
 provision that any person upon whom a collector makes a demand 
 for the payment of a tax included in his warrant, on the ground that 
 he is personally liable to pay it, or whose property the collector 
 proceeds to sell, on the ground that it is liable to be taken to satisfy 
 such a tax, may, instead of resisting the collector, or resorting to 
 other remedies, pay the tax under wTitten protest, and bring suit 
 to recover the amount paid. Such a course is the least troublesome 
 of any judicial proceedings which can well be taken to settle ques- 
 tions which are often of great difficulty. We think that, on the 
 facts recited in the exceptions, the action can be maintained. 
 
 Exceptions sustained. 
 
 KERR V. ATWOOD. 
 Supreme Judicial Court of Massachusetts. 1905. 
 
 [Reported 188 Mass. 506.] 
 
 Hammond, J. In this action to recover damages for an alleged 
 assault and false imprisonment, the defendant pleaded justification 
 under a tax warrant. 
 
 R. L. c. 13, § 26, under which the arrest was made, is as follows: 
 " If a person refuses or neglects to pay his tax for fourteen days 
 after demand and the collector cannot find sufficient goods upon 
 which it may be levied, he may take the body of such person and 
 commit him to jail until he pays the tax and charges of commitment 
 and imprisonment, or is discharged according to law." The main
 
 346 
 
 KERR V. ATWOOD. [cHAP. V. 
 
 question is whether there was evidence from which the jury might 
 tind that the defendant could not find sufficient goods within the 
 meaning of the term as used in this statute. 
 
 The jury were instructed in substance that it was the duty of 
 the defendant to make a diligent search, but that if before the arrest 
 the defendant demanded of the plaintifE that he exhibit goods for 
 the purpose of being taken on the warrant and the plaintiif, having 
 goods which he could have exhibited, failed to exhil)it them, then 
 as matter of law the defendant had made diligent search and could 
 lawfully arrest. We are of opinion that this instruction was correct. 
 
 After the adoption of our State Constitution, the first statute 
 authorizing arrest for non-payment of taxes was St. 1T85, c. 70, § 2. 
 It reads a? follows : " And if any person assessed as aforesaid to the 
 state or other tax, shall refuse or neglect to pay the sum or sums so 
 assessed, by the space of twelve days after demand thereof, and shall 
 neglect to show the constable or collector sufficient goods or chattels 
 Avhereby the same may be levied, in every such case, he may take the 
 body of the person so refusing, and him commit unto the common 
 gaol," etc. This provision appears in Eev. Sts. c. 8, § 11, in this 
 language: "If any person shall refuse or neglect, for fourteen days 
 after demand thereof made, to pay his tax, and the collector cannot 
 find sufficient goods, upon which it may be levied, he may take 
 the body of such person and commit him to prison," etc. And 
 through the various codifications the language has remained sub- 
 stantially the same. Gen. Sts. c. 12, § 13. Pub. Sts. c. 12, § 14. 
 St. 1888, c. 390, § 18. R. L. c. 13, § 26. There is nothmg m the 
 report of the commissioners on the Revised Statutes to show that 
 they intended to make any change in the statute, so far at least as 
 respects the effect of a refusal of the delinquent taxpayer, when 
 requested, to exhibit goods upon which levy may be made ; and we 
 think no change was m.ade. So far as respects the right to arrest, 
 the collector has made reasonable search when he has requested the 
 delinquent to exhibit goods upon which levy may be made; and if 
 the delinquent refuses or neglects to make such an exhibit the 
 collector may properly return that he cannot find sufficient goods. 
 It is the duty of the delinquent to pay his tax and, in default thereof, 
 after a certain time to exhibit to the collector upon demand goods 
 upon which levy may be made. The law does not impose upon the 
 collector the idle task of seeking elsewhere when with warrant in 
 hand he has asked the delinquent to show goods upon which to levy, 
 and the latter who should know fails to indicate where there may 
 be such goods. The instructions of the presiding judge were in 
 accordance with this view and were correct and pertinent to the 
 case. The evidence amply warranted the finding that the plaintiff 
 had refused upon demand to exhibit to the defendant goods upon 
 which to levy. 
 
 The question whether the defendant had made reasonable search 
 even if he had made no specific demand upon the plaintiff to exhibit 
 goods properly was left to the jury. In the first place the return 
 upon the warrant that he had "made diligent search for and was
 
 CHAP, v.] KERR V. AT WOOD. 347 
 
 unable to find goods and cliattels of the within named George L. 
 Kerr wliereof to make distress," althougli not conclusive evidence 
 in this action, was nevertheless prima facie evidence in favor of the 
 defendant Lothrop v. Ide, 13 CJray, !)3. Buinard v. Graves, 13 
 Met. 85. Tile jury well may have thought that in view of the duty 
 of the plaintiir to do what lie could, his general suspicious attitude 
 on the question, his oft repeated statement of his inability to pay 
 even the small sum due, and the existence of the mortgage, the de- 
 fendant was not ()l)ligod in law to iiuiuire about the household furni- 
 ture in tlu' dwelling house of tlic phiintilf, into which against his 
 will the defendant could not enter for the purpose of levying, nor, 
 in view of the character of the mortgage, to undertake to get from 
 either of the parties to the mortgage any information as to whether 
 it was valid as to the whole or any part of the articles in the store. 
 The jury well may have tliought that the jiriina facie case made out by 
 the return stood notwithstanding the other evidence. In Hall v. 
 Hall, 3 Allen, 5, cited by the plaintiff, it did not appear from the 
 return upon the warrant that the defendant made any search what- 
 ever. The case upon this branch of it was submitted to the jury 
 upon proper instructions, and the jury were warranted in finding 
 that the defendant had made diligent search and could not find 
 sufficient goods upon which to levy, and therefore had authority to 
 make the arrest. For cases bearing somewhat upon the questions 
 here discussed, see in addition to those above cited, Parker v. Aljbott, 
 130 Mass. 25; Bayley, petitioner, 132 Mass. 457; Flint v. Whitney, 
 28 Vt. 680. 
 
 Tlie (pu'stions whether there was unnecessary or improper delay 
 in proceeding to the jail at East Cambridge, or whether the plaintiff 
 was subjected to improper treatment were also for the jury, and 
 we see no error in the instructions on that point. The jury properly 
 might find that the delay was at the request of the plaintiff, or 
 that in any event it was not unreasonable, and that neither in being 
 placed in the cell of the police station nor in any other respect was 
 he treated improperly. We see no error in the manner in which 
 the court dealt with the requests of the plaintiff on this point. 
 
 The evidence as to whether the plaintiff ever had told the defend- 
 ant that he had in his house a piano or other property, or ever 
 offered or pointed out to the defendant any specific articles in his 
 store, or whether he was the George Tj. Kerr who gave the mortgage 
 and that he never told the defendant about the mortgage, was ad- 
 mitted properly, and so was the copy of the mortgage. The evidence 
 had a bearing upon the question of reasonable search. 
 
 The questions put to the plaintiff as to his ability to pay the tax 
 if he had not paid other bills did not exceed the latitude fairly 
 allowed in cross-examination, and we do not see how the plaintiff 
 could have been prejudiced by it. 
 
 We regard the statement by the judge in the charge that taxes 
 should be paid before private debts as simply introductory to what 
 followed, and in any event it could work no harm to the plaintiff. 
 
 The evidence that there was no other place of detention in Maiden
 
 348 SINGER SEWING MACHINE CO. V. BENEDICT. [cHAP, VI. 
 
 except the police station was admissible upon the question whether 
 the plaintiff was properly treated, and it was admitted rightly. 
 
 Exceptions overruled. 
 
 CHAPTER VI. 
 
 REMEDIES FOR ILLEGAL TAXATION. 
 
 SINGER SEWING MACHINE COMPANY v. BENEDICT. 
 Supreme Court of the United States. 1913. 
 
 [Reported 229 U. 8. 481.] 
 
 Van Devanter, J. This is a suit by the Singer Company, a 
 New Jersey corporation, to enjoin the collection of taxes levied by 
 the city and county of Denver, in the State of Colorado, The com- 
 pany made a return of taxable personal property at a valuation of 
 $3,800, to which the assessor added other personalty at a valuation of 
 $62,500, making a total assessment of $66,300, which was afterwards 
 embodied in a tax list delivered to the treasurer for collection. The 
 company tendered payment of $136.50, the amount of taxes due 
 on the property returned by it, and refused to pay the amount 
 attributable to the additional assessment. The treasurer declined 
 to accept the tender, and was threatening to enforce the entire tax, 
 when the suit was brought. The bill charged that the assessor, 
 although required by law to give the company timely notice of 
 the additional assessment, had failed to give it any notice, and that 
 it was thereby prevented from presenting objections to the increase 
 and obtaining a hearing and ruling thereon by the assessor and by 
 the proper reviewing authority to w^hich it was entitled by the 
 local law. There were also allegations to the effect that the com- 
 pany had no property within the city and county other than 
 that returned by it; that the additional assessment and the taxes 
 levied thereon were illegal because of the assessor's failure to give 
 the required notice; and that to enforce the collection of such taxes 
 would be violative of designated provisions of the Constitution of 
 the United States. The defendants demurred on the ground thati 
 the bill did not state a case for equitable relief, but the demurrer 
 was overruled. The defendants then answered repeating the objec- 
 tion made in the demurrer and interposing other defenses which 
 need not be noticed now. Upon the hearing a decree was entered 
 dismissing the bill, and the company appealed to the Circuit Court 
 of Appeals. That court held that there was an adequate remedy at 
 law, and affirmed the decree. 179 Fed. Rep. 628. The company 
 then took the present appeal.
 
 CHAP. VI.] SINGEK SEWING MACHINE CO. V. BENEDICT, 349 
 
 In the courts of tlie United States it is a guiding rule that a 
 bill in equity does not lie in any case where a plain, adequate and 
 complete remedy may be had at law. The statute so declares, Kev. 
 Stat., § 723, and the decisions enforcing it are without number. If 
 it be quite obvious that there is such a remedy, it is the duty of 
 the court to interpose the objection sua sponte, and in other cases 
 it is treated as waived if not presented by the defendant in limine. 
 lieynes v. Dumont, 130 U. S. 35-i, 395; Allen v. Pullman's Palace 
 Car Co., 13"J U. S. Go8. There was no waiver here. The objection 
 was made by the demurrer and again by the answer, and so, if it 
 was well grounded, it was as available to the defendants in the Cir- 
 cuit Court of Appeals to prevent a decree against them there as it 
 was in the Circuit Court. Boise Artesian Water Co. v. Boise City, 
 213 U. S. 276. 
 
 In the last case it was said of the pertinency of the guiding ruie 
 in cases such as this (p. 281) : ''A notable application of the rule 
 in the courts of tlie United States has been to cases where a demand 
 has been nuule to enjoin the collection of taxes or other impositions 
 made by state authority, upon the ground that they are illegal or 
 unconstitutional. The decisions of the state coui-ts in cases of this 
 kind are in conflict, and we need not examine them. It is a mere 
 matter of choice of convenient remedy for a State to permit its 
 courts to enjoin the collection of a state tax, because it is illegal 
 or unconstitutional. Very diiferent considerations arise where 
 courts of a different, though paramount, sovereignty interpose in 
 the same manner and for tlie same reasons. An examination of the 
 decisions of this court shows that a proper reluctance to interfere 
 by prevention with the fiscal operations of the state governments has 
 caused it to refrain from so doing in all cases where the Federal 
 rights of the persons could otherwise be preserved unimpaired. It 
 has been held uniformly tliat the illegality or unconstitutionality 
 of a state or municipal tax or imposition is not of itself a ground 
 for equitable relief in the courts of the United States. In such a 
 case the aggrieved party is left to his remedy at law, when that 
 remedy is as complete, practicable and efficient as the remedy iu 
 equity." 
 
 A statute of Colorado enacted in 1870 (Laws 1870, p. 123, § 106) 
 and embodied in subsequent revenue acts (2 Mills' Ann. Stat., § 
 3777; Laws 1902, c. 3, pp. 43, 146, § 202 ; Rev. Stat. 1908, § 5750) 
 declares that "in all cases where any ])erson shall pay any tax, in- 
 terest or cost, or any portion tliereof, tiiat shall thereafter be found 
 to be erroneous or illegal, whether tlio same be owing to erroneous 
 assessment, to improper or irregular levying of the tax, to clerical 
 or other errors or irregularities, the board of county commissioners 
 shall refund the same without abatement or discount to the tax- 
 payer." This statute imposes upon the county commissioners the 
 duty of refunding, without abatement or discount, taxes which 
 have been paid and are found to be illegal, and confers upon the 
 taxpayer a correlative right to enforce that duty by an action 
 at law. As long ago as 1879 the Supreme Court of the State, in
 
 350 SINGER SEWING MACHINE CO. V. BENEDICT. [ciIAr. VI. 
 
 holding that the invalidity of a tax afforded no ground for enjoin- 
 ing its enforcement, said of this statute: "Against an illegal tax 
 complainant has a f\ill and adequate remedy at law, and we see no 
 reason why in this case he should not be remitted to that remedy." 
 Price V. Kramer, 4 Colorado, 546, 555. And again : " The statute 
 furnishes another remedy in such cases which is complete and ade- 
 quate." Woodward v. pfUsworth, Id. 580, 581. And that this view 
 of the statute still prevails is shown in llallett v. Arapahoe County, 
 40 Colorado, 308, 318, decided in 1907, where, in refusing equitable 
 relief against the collection of taxes alleged to be illegal, the court 
 said (p. 318): "By § 37Tr, 2 Mills' Ann. Stat., it is provided 
 that taxes paid which shall thereafter be found to be erroneous or 
 illegal, shall be refunded, without abatement or discount, to the 
 taxpayer. No statement appears in either of the complaints from 
 which it can be deduced that the remedy afforded the plaintiff by 
 this section is not adequate." 
 
 We refer to these cases, not as defining the jurisdiction in equity 
 of the Circuit Court, for that they could not do (Payne v. Hook, 
 7 Wall. 425, 430; Whitehead v. Shattuck, 138 IT. S. 146; Smythe r. 
 Ames, 169 U. S. 466, 516), but as showing that the Colorado 
 statute gave to one who should pay illegal taxes a right to recover 
 back from the county the money so paid. This right was one which 
 could be enforced by an action at law in the Circuit Court, no less 
 than in the state courts, if the elements of Federal jurisdiction, 
 such as diverse citizenship and the requisite amount in controversy, 
 were present. Ex parte McNiel, 13 Wall. 236, 243; United States 
 Mining Co. v. Lawson, 134 Fed. Rep. 769, 771. Thus it will be 
 perceived that, if the taxes in question were illegal and void, as 
 asserted, the company had a remedy at law. It could pay them 
 and, if the commissioners refused to refund, have its action against 
 the county to recover back the money. Such a remedy, as this court 
 often has' held, is plain, adequate and complete in the sense of the 
 guiding rule before named, unless there be special circumstances 
 showing the contrar}'. Dows v. Chicago, 11 Wall. 108, 112; State 
 Railroad Tax Cases, 92 U. S. 575, 613-614; Shelton v. Piatt, 139 
 U. S. 591, 597; Allen v. Pullman's Palace Car Co., Id. 658, 661; 
 Indiana Manufacturing Co. v. Koehne, 188 IT. S. 681, 686. 
 
 But it is said that in an action to recover back the money the tax 
 list would be treated as the judgment of a special tril)unal conclu- 
 sively determining all questions in favor of the validity of the tax. 
 It well may be that, if the list were regular on its face, it would be 
 presumptive evidence that the tax was valid, but we find nothing 
 in the statutes of Colorado or in the decisions of its Supreme Court 
 which goes to the length suggested. The plain implication of the 
 section providing for repayment is othenvnse. Another section (Rev. 
 Stat., § 5677) declares that the tax list " shnll be prima facie evidence 
 that the amount claimed is due and unpaid," and the only deci=ion 
 cited by the company speaks of the assessment as being presumptively 
 right " in the absence of any evidence to the contrary." Singer 
 Manufacturing Co. v. Denver, 46 Colorado, 50.
 
 CHAP. VI.] KNIGHT V. THOMAS- 35l 
 
 It also is said that there were special circumstances calling for 
 equitable relief, in that tiie act oi' the assessor in making the addi- 
 tional assessment without giving any notice of it wiis necessarily 
 a fraud, an accident, or a mistake. No such claim was made in 
 the bill, and even liad it been it would be unavailing unless founded 
 up(jn something nujre than the charge that no notice was given and 
 that the company had no property within the city and county other 
 than that returned by it. We say this because the fraud, accident 
 or mistake which will justify equitable relief must be something 
 more than what is fairly covered by the charge here made, for 
 otherwise the well settled rule that mere illegality in a tax affords 
 no ground for such relief would be a myth. There really would be 
 no case in which the illegality could not be said with equal propriety 
 to be the result of fraud, accident or mistake, for it always arises 
 out of some deviation from law or duty. 
 
 Concluding, as we do, that the company had a plain, adequate and 
 complete remedy at law, the decree dismissing the bill is 
 
 Affirmed. 
 
 KNIGHT l: THOMAS. 
 SuFREME Judicial Coui;t of Maine. 1900. 
 
 [Reported 93 Me. 494.] 
 Haskell, J. Petition for mandamus by several taxpayers of a 
 town to compel the assessors to assess certain real estate in the town 
 at a just and fair valuation, that had previously been undervalued, 
 and to assess certain other real estate that liad therefore been omitted 
 from taxation. 
 
 I. It is objected that the writ cannot issue at the instance of the 
 petitioners, who are individuals. 
 
 It is settled law, in this state, that the writ can only issue at the 
 instance of public officers, to subserve a public right. Sanger v. 
 (V)unty Commissioners, 25 Maine, 291; Mitchell v. Boardman, 79 
 Maine, 469; Weeks v. Smith, 81 Maine, 538. But, as stated in the 
 last named case, an individual may move for the writ " when his 
 personal rights have been invaded beyond those rights that he 
 enjoys as a part of the public and that are common to every one." 
 
 The public consists of the entire community, persons who pay 
 taxes and persons who do not. Their interest is the raising of rev- 
 enue by taxation or otherwise to provide for the expenses of govern- 
 ment, public works, public institutions and public charges. The 
 individual taxpayer's interest is in common with all these, but he 
 has another interest peculiar to himself, that taxes shall be assessed 
 equally, so that his burrlen shall not be greater than equality of 
 taxation shall impose. His personal interest, therefore, by the omit- 
 ting of property from taxation in his own town would be invaded 
 thereby beyond that enjoyed in common with the public, and he 
 may well be allowed to move for the writ in protection of it.
 
 352 LOEWENTHAL V. PEOPLE. [cHAP. VI. 
 
 II. It is objected that the writ will not lie to command assessors, 
 •who intend to assess a certain parcel of land, to assess the same 
 at its just and fair value. Their oath requires them to do that, 
 and mandamus could not require more. It may require them to 
 assess, but the assessment is matter of judgment, and it must be 
 their own judgment, honestly given of course. Any other assessment 
 would be corrupt, and the remedy for that must be elsewhere. Other- 
 wise, numdamus would simply work an appeal from the appraisal 
 of property made by the assessors, which is not at all the proper 
 function of the writ. To have all the property assessed is a private 
 right; to have the assessment according to law is a public right. 
 The assessors are public officers, sworn to a faithful discharge of 
 their duty. The individual has a right to have them act. The 
 public has the right to their official action, honestly performed under 
 their oath, and with this the individual must be content, unless the 
 legislature shall pro^ade a remedy. The legislature has already 
 provided such remedy as it thought wise by E. S., c. 77, § 6, where 
 jurisdiction is conferred upon this court to hear and determine all 
 complaints relating to any unauthorized votes to raise money by 
 taxation, or to exempt property therefrom. 
 
 III. As to the land not assessed, the petitioner might have had 
 the writ if the court below, in its discretion, had seen fit to award 
 it, for the writ is a prerogative to be withheld or granted in the 
 exercise of discretion. It is not a writ of right. Morsell v. First 
 Natl. Bank of Washington, 91 U. S. 357. Nor can it now be issued 
 to any effective purpose. The assessment must have long since been 
 made. To issue it would be an idle ceremony. Mitchell v. Board- 
 man, 79 Maine, 471. The petitioner is not aggrieved by the ruling 
 below. 
 
 Exceptions overruled. Petition dismissed. 
 
 LOEWENTHAL v. PEOPLE. 
 SuPEEME Court of Illinois. 1901. 
 
 [Reported 192 III. 222.] 
 
 BOGGS, J. This was an application by the appellee county collector 
 of Cook county, to the county court of said county, for a judgment 
 and order of sale against lands and lots delinquent for the taxes 
 le\-ied thereon for the year 1899. The delinquent list contained 
 four lots in the city of Chicago of which the appellant was the owner. 
 The appellant appeared and filed objections to the rendition of 
 judgment against each and all of the said lots. The objections 
 were heard upon a stipulation setting forth the testimony of the 
 witnesses, and also certain facts; were overruled, and an order and 
 judgment for the sale of the lots granted as prayed by the collector. 
 This is an appeal to reverse the judgment and order of sale. 
 
 It appeared from the stipulation the appellant was the owmer of 
 the lots on the first day of April, 1899; that their total fair cash 
 value did not then exceed the sum of $153,000; that the valuation
 
 CHAP. VT.] LOEWENTIIAL V. PEOPLE. 353 
 
 of the lots *as returned by the board of assessors to the board of 
 review was $206,575; that George C. Fry, a duly authorized agent 
 of the appellant, " at various times called at the office of the assessors 
 for the purpose of ascertaining the value at which said property 
 had been assessed; that as soon as he wa.s able to learn from said 
 board of assessors the valuation fixed by said board of assessors, 
 said Fry called at the office of the board of review and filed a com- 
 plaint, in writing, objecting to the amount at which said pnjperty 
 had been assessed; that said complaint was filed during the latter 
 part of August, ISU'J, and not on or before the first Monday in 
 August, but that said comjdaint was filed as soon as said Fry, rep- 
 resenting the owner of said property, and as soon as B. Loewenthal, 
 the owner of said property, could learn the amount at which said 
 property had been assessed, and that the reason the said written 
 complaint was not filed with the board of review on or before the 
 first Monday in August, was because it was impossible, on or before 
 the first day of August, to learn the value at which said property 
 had been assessed ; that when he went to the office of said board 
 of review to make said complaint he was unable to see any member 
 of the board of review in person, but was referred to a clerk standing 
 at a desk in the front part of the office ; that when he handed the 
 complaint to said clerk, said clerk informed said Fry that the said 
 objection would be called up before the board of review in its due 
 course and would be considered by the board of review, and that he. 
 Fry, as agent of said objector, would receive due notice by mail 
 when such objection would be taken up for hearing by said board 
 of review; that he did not, nor did the said B. Loewenthal, nor 
 any person acting on his behalf, receive any notice of any hearing 
 of said objection before said board of review, but that said Fry on 
 several subsequent occasions called at the office of said board of 
 review and inquired of the clerks placed in charge of said office 
 by said board of review as to when said objection Avould come up 
 for hearing, and was each time informed that said objection had 
 not yet been reached in its order but it would be taken up in due 
 course, and that prior to said hearing said Fry and the said objector 
 would receive notice in writing of the time of said hearing; that 
 the said Fry and the said B. Loewenthal depended upon the state- 
 ments made by said clerk in the office of the board of review and 
 expected such notice of a hearing upon said objections, but that 
 no such notice was ever received by said Fry or by said Loewenthal, 
 and while said Fry and said Loewenthal were still waiting in expecta- 
 tion of receiving notice of such hearing, the tax books were closed 
 and delivered by the board of review to the county clerk ; that no 
 hearing was ever given by said board of review upon the objections 
 filed against the assessment on said property, so far as is known 
 to the said Loewenthal or said Fry, or any person for said Loewen- 
 thal or said Fry." 
 
 The st^atute secures to every person whose property is assessed 
 for taxes the right to a hearing before the board of review on a 
 complaint in writing that the property has been assessed too high.
 
 354 LOEWEXTIIAL V. PEOPLE. [cHAP. VI. 
 
 The board are required to review the assessment upon such complaint 
 and correct the same as shall appear to be just. This provision 
 is of vital importance to the tax-payer, and it is against every 
 principle of right and justice that he should be deprived of all op- 
 portunity to contest the fairness of the assessment. The constitu- 
 tion authorized the General Assembly to provide such revenue as 
 shall be needful by levying a tax by valuation, so that every person 
 and corporation sliall pay a tax in pro])ortioii to tlie value of his 
 or her property, and the provisions of the statute are designed 
 to accomplish that purpose. The requireuient of the statute for a 
 hearing of the complaint is mandatory, and no person ought to be 
 required to pay a tax without a compliance with the law which 
 entitles him to such hearing. 
 
 Saction 1 of article 9 of the constitution of 1870, except so much 
 thereof as relates to the imposition of taxes upon certain specified 
 occupations, is as follows: "The General Assembly shall provide 
 such revenue as may be needful by levying a tax, by valuation, so 
 that every person and corporation shall pay a tax in proportion to 
 the value of his, her or its property — such valuation to be ascer- 
 tained by some person or persons, to be elected or appointed in such 
 manner as the General Assembly shall direct, and not otherwise." 
 
 In obedience to this constitutional requirement that the value 
 of property assessable for taxation shall be ascertained by some 
 person or persons elected or appointed in such manner as the Gen- 
 eral Assembly shall elect for that purpose, and not by other persons 
 or other manner, the General Assembly, by an act entitled "An 
 act for the assessment of property," etc., approved February 25, 
 1898, (Kurd's Stat. 1899, p. 1441-,) provided that the value of 
 real property situate in Cook county, as is the property in ques- 
 tion, should be ascertained by a board of assessors, consisting of 
 five persons, to be elected in the manner as prescribed in section 
 3 of the act. The act further provided the board of assessors shall 
 have authority to designate and appoint deputy assessors to perform 
 such duties connected with the assessment of property as may be 
 assigned to them. Section 32 of the act authorizes the selection 
 of three persons, by election, to constitute a board of review, and 
 section 35 empowers the persons composing such board of review, 
 among other duties, on complaint that any propc ty has been assessed 
 too high by the board of assessors, to ascertain the true assessable 
 value of such property and approve or correct the assessment of such 
 property as made by the board of assessors. 
 
 Under the said provision of the constitution hereinbefore referred 
 to, and of the said act of February 25, 1898, made in pursuance 
 thereof, the valuation of property for the purposes of taxation in said 
 city of Chicago and county of Cook is committed to the persons com- 
 posing said board of assessors, in the first instance, and the persons 
 composing the board of review, when sitting in review of the action 
 of said board of assessors. The power does not reside in the courts 
 to revise the assessments made by these bodies, on the ground, alone, 
 they fell into an error of judgment in estimating the value of the
 
 chap'. VT.] LOENVK.NTllAI, r. TEOPLE. ^55 
 
 property. This principle was declared in People ex rei. r. Lots 
 in Asiiley, 122 111. 297, and many decisions of this court declaring 
 or illustrating it are there collected. In later cases, notably Keokuk 
 Bridge Co. r. People, 145 111. 5!J0, Spring Valley Coal Co. v. People, 
 157 id. 543, Clement v. People, 177 id. 144, and Keokuk Bridge 
 Co. V. People, IGl id. 514, the doctrine has been re-affirmed. In 
 Clement v. People, supra, we said : " We have repeatedly held that 
 the courts have no power to revise an assessment merely because 
 of a difference of opinion as to the reasonableness of tlie valuation 
 placed upon the property. On an application for judgment against 
 lands for delinquent taxes it may be objected that the tax is not 
 authorized by law, or is assessed upon property not subject to taxa- 
 tion, or that the property has been fraudulently assessed at too 
 high a rate." 
 
 The contention, here, on the part of the appellatit is, the county 
 court of Cook county became vested with authority and jurisdiction 
 to ascertain the true valuation of his property for the purposes of 
 taxation, for the reason that the board of review had failed or refused 
 to review the assessment of his propert}'- made by the board of as- 
 sessors, as required of them by the provisions of the second para- 
 graph of section 35 of the said act of February 25, 1898, though 
 he had complained, in writing, to said board of review that the 
 estimate of the value of his said property made by the board of 
 assessors was too high. 
 
 Conceding that the board of review refused to perform a plain 
 dutv imposed upon it by law, to ascertain the fair cash value of his 
 lots and review and correct the estimate of such value made by the 
 board of assessors, could the appellant lawfully take no further 
 steps to procure an estimate to be made by the tribunal empowered 
 to perform such duty, refuse to pay the taxes levied on the estimated 
 values as made by the board of assessors and standing approved 
 by the non-action of the board of review, and demand that the 
 county court, when asked to enter judgment against his lots as 
 delinquent for such taxes, should take upon itself the duty of esti- 
 mating the true fair cash value of his property? AVe think not. 
 His duty was to employ the ample remedy provided by the law 
 to compel the board of review to discharge the duties imposed upon 
 them by law, and ascertain the tnie fair cash value of his property 
 and revise the action of the board of assessors accordingly. The 
 board of review, and not the courts, are invested with the power to 
 estimate the value of assessable property, and he should have sought 
 the aid of the courts, not to estimate the value of his property, 
 but to command the board of review to perform that duty. 
 
 In the case of Beidler v. Kochersperger, 171 111. 5G3, which was 
 an appeal from the decree of the circuit court dismissing, for want 
 of equity, a bill in chancery which sought to enjoin the collection 
 of a tax, hocause. as alleged, the property had been over-assessed, 
 and that appellant fded his complaint with the board of supervisors 
 sitting as a board of review, and while said complaint was pending 
 before a committee of that board to whom it had been referred
 
 356 LOEWEXTHAL V. PEOPLE. [ciIAP. VI. 
 
 the board adopted a general resolution confirming the assessment 
 returned by the assessors, without notice to appellant or an opportu- 
 nity to be heard before the board and without considerincr his com- 
 plaint, and thus disposed of and completed its work as a board of 
 review, we said (p. 566) : "The statute imposed upon the board of 
 supervisors, as an absolute duty, to entertain, consider and determine 
 the application of appellant for relief with respect of the alleged 
 over-valuation of his property. Courts of law possessed ample 
 power to enforce the performance of this duty by the board. Ap- 
 pellant could have applied to such courts for a writ of mandamus 
 to compel the board to perform the duty so charged upon it by the 
 statute, — that is, to hear, consider and decide as to the alleged 
 grievance. . . . It is the policy of our law the whole matter of the 
 valuation of propert}' for taxation shall be committed to the control 
 of the assessor, the board of review and the board of supervisors 
 of the respective counties. (People ex rel. v. Lots in Ashley, 122 111. 
 297.) It was therefore incumbent upon the appellant to have 
 availed himself of the ample and adequate remedy of the writ of 
 mandamus to secure action on the part of the board of supervisors, 
 in order that his grievances, if any he justly had, should be heard 
 and determined. The law gave him his day in court. Neither 
 fraud, accident nor mistake of fact intervened to prevent or excuse 
 him from availing himself of his legal right. He did not seek his 
 legal remedy, and whether he misconceived the law or was simply' 
 negligent, it is well settled he cannot invoke the aid of a court of 
 chancery to relieve him." In Kochersperger v. Larned, 172 111. 
 86, and Kinley Manf. Co. v. Kochersperger, 17-4 id. 379, the same 
 doctrine was announced and applied as in the Beidler case. 
 
 Appellant urges that it appears from the stipulated facts that- 
 the board of review did not refuse to grant him a hearing; on the 
 contrar}', they constantly expressed a willingness and intention to 
 do so ; and that the first intimation he had that he would not be 
 afforded a hearing by the board of review was, that said board had 
 delivered the books containing the assessment of real property to 
 the county clerk. He contends, therefore, that he could not have 
 maintained mandamus in anticipation of a supposed evasion or 
 omission of duty on the part of the board ; that mandamus will not 
 lie to compel an officer to do an act which he expresses a willingness 
 to do, and that the board were without power to make any changes 
 or revision of the assessments after they had transferred the books 
 of assessment to the county clerk; that therefore mandamus would 
 not lie, either while the books were in the hands of the board of 
 review or after such books had been transferred to the county clerk. 
 
 An}^ evasion of a positive duty by an officer or a legal tribunal, 
 amounting to a virtual refusal to perform the duty, is all that is 
 needed to maintain a writ of mandamus. (Illinois State Board of 
 Dental Examiners v. People, 123 111. 227). Conduct from which a 
 refusual can be conclusively implied is equivalent to a positive refusal. 
 (People ex rel. v. Town of Mt. Morris, 137 111. 576; 14 Am. &
 
 CHAP. VT.] LOEWENTIIAL V. PEOPLE. 357 
 
 Eng. Ency. of Law, — 1st ed. — lOT.) The evasions of dutj- shown 
 by the stipulation and the transfer of the books of assessment to 
 the county clerk constituted a refusal tx) act by conclusive implica- 
 tion, and the appellant could have applied for a writ of matidantus 
 at once upon being advised that the board of review had delivered 
 the books of assessment to the county clerk without acting on his 
 complaint. 
 
 Counsel for appellant are in error in the view that mandamus 
 would be unavailing after the board of review had delivered the 
 books of assessment to the county clerk. Section 38 of the act of 
 1898 (Hurd's Stat. 3 899, p. 1-453,) provides that the board of re- 
 view in the county of Cook shall, on or before the 7th day of 
 September, annually, complete its work and make the necessary 
 entries in the assessment books to make the assessments conform 
 to the changes made therein by said board, and shall attach to said 
 books of assessment an affidavit, after a form prescribed in the 
 section; and section 43 of the same act requires the board of review 
 to deliver the assessment books, when so completed, to the county 
 clerk. But a proviso added to said section 38 of said act provides 
 'Hhat in counties containing 125,000 or more inhabitants the board 
 of review shall also meet from time to time and whenever necessary 
 to consider and act upon complaints and to further revise the assess- 
 ment of real property as may be just and necessary." 
 
 Without assuming tx) declare that this proviso has further or other 
 effect, it is clear, under the provisions thereof, the courts, by means 
 of a writ of mandamus, could compel the board of review to convene 
 after the said 7th day of September for the purpose of performing 
 a duty which rested upon them when the books were declared to be 
 completed, as did, in this instance, tiie duty to consider and act 
 upon the complaint of the appellant. An inferior tribunal which 
 has omitted, and by evasion refused, to perform an official duty 
 while officially conveneu, cannot, by adjoiu'ning its meeting sine die, 
 place itself beyond the coercive power of the courts to compel the 
 performance of a duty enjoined by law. It may be required to 
 re-convene and perfonn its legal functions. If, as was remarked 
 in People v. Board of Supervisors, 185 111. 288, it is the general 
 rule mandamus will not be gi-anted in anticipation of a default or 
 failure of official duty, it must be that the writ can be availed of 
 after the omission or failure has occurred, otherwise the observance 
 or non-observance of the statutory duty would become a matter wholly 
 resting in the uncontrollable discretion of the public officer or official 
 tribunal charged with the duty. The appellant should have availed 
 himself of this writ, and thereby obtained the revision of the estimate 
 of the value of his property as made by the board of assessors. The 
 countv court correctly overruled his objections to the application 
 for judgment against his lots. 
 
 The judgment appealed from is affirmed. 
 
 Judgment affirmed. 
 
 Magruder and Cartwright, JJ., dissented.
 
 358 SIIENANGO FUR^vACE CO. l\ FAIRFIELD. [ciIAI'. VI. 
 
 SHENANGO FURNACE COMPANY v. FAIEFIELD 
 
 TOWNSHIP. 
 Supreme Court of Pennsylvania. 1905. 
 
 [Reported 229 Pa. 3.37.] 
 
 Mestrezat, J. This is a bill filed by the plaintiff company (a) 
 to restrain the defendants from collecting a balance of road taxes 
 alleged to be due for the year 1907, (b) for an accounting to as- 
 certain the amount paid by the plaintiff inadvertently and by mis- 
 take on account of such taxes in excess of the amount legally due, 
 and (c) for a decree that defendants pay to plaintiff the amount 
 of such excess. 
 
 The defendant township is of the second class and the plaintiff 
 company o\\tis coal lands in the township, the adjusted valuation 
 of which for 1906 was $19,400. Prior to March, 1907, tlie township 
 assessor returned a valuation of the lands to the county commis- 
 sioners which was very largely in excess of the valuation for 1906. 
 The valuation so returned to the commissioners was revised and 
 reduced by them sitting as a board of revision on June 25, 1907. 
 From this valuation plaintiff appealed to the common pleas, which 
 finally adjudicated the valuation in December, 1907 at $330 per 
 acre, or $248,820 in all. On the first Monday of March, 1907, the 
 township supervisors met and fixed the rate for road tax at eight 
 mills for that year. At that time there was no " adjusted valuation '* 
 for 1907. On May 31, 1907, an agent of plaintiff tendered to the 
 tax collector the sum of $156.20, being the amount of the road tax 
 for 1907, at the rate of eight mills on the valuation for 1906. The 
 tender was refused because, as the collector said, he had no duplicate 
 and was without authority to receive the tax. In the early part 
 of January, 1908, the tax collector gave the plaintiff company notice 
 to pay taxes based upon the 1907 valuation, the sum claimed being 
 $2,091.14, and within a few days plaintiff paid to the collector 
 $1,722.56, being the amount claimed in the notice, less certain 
 deductions which the plaintiff alleged should be made. Shortly 
 after this, plaintiff demanded the refunding of all over $156.20, 
 the amount due on the valuation for 1906. This was refused and 
 the collector demanded the balance, $368.58; whereupon, in Feb- 
 ruary, 1908, this bill was filed. An answer and replication were 
 filed"^ and the case was referred by asfreement to a referee who rec- 
 ommended a decree enjoining the collection of the balance of $368.58 
 and directing payment to the plaintiff by defendants of $1,566.36, 
 the difference between the amount paid by plaintiff and $156.20, 
 the amount due on the 1906 valuation. A final decree in accordance 
 with the referee's report was entered by the court below. The 
 defendants have appealed. 
 
 It is conceded by the parties that under our recent rulings the 
 levy for road taxes made by the supervisors on the first Monday of 
 March, 1907, should have iseen made on the adjusted valuation for 
 1906, and that a court of equity has jurisdiction to restrain the 
 collection of the $368.58, the balance claimed by the township for
 
 CHAP. VT. j SHENANGO FUUNACE CO. I'. FAIRFIELD. 369 
 
 taxes due from the plaintiff company on the valuation of 1907. 
 
 There was sufficient evidence to warrant the court below in findin;; 
 that the plaintilf tendered the sum of $156.20, on May 31, 1907, 
 in })aynient <.f the road taxes for that year admitted to be due by 
 the plaint ill'. The fourth assignment, therefore, cannot be sustained. 
 
 In ascertaining the right of the j)laintiff company to have re- 
 funded the sum of $1,5GG.36, taxes paid by the company on the I'JO? 
 valuation, two questions must be considered: (1) Was the payment 
 a voluntary one in the legal sense which prevents its recovery back, 
 and (2) was it made under such mistake or ignorance of facts that 
 the plaintiff is entitled to have the money repaid. 
 
 1. Was the payment of the money, under the facts of the case, 
 voluntarily made by the plaintiff so that he, for this reason, is not 
 entitled to have it refunded ? This question is settled by a long 
 line of decisions in this state and, hence, we are not required to 
 treat or consider it as one of first impression. C. P. Dyer, tho 
 vice-president of the plaintiff company and authorized to act for 
 it in the matter, directed the payment to be made by the proper 
 ofTicer of the company. While testifying at length in the case, the 
 facts found by the learned referee and the court below being based 
 upon his testimony, he does not even suggest that any official of 
 the defendant township at any time ever threatened to resort to 
 legal process for the collection of the taxes, or exacted them by 
 duress, or went beyond making a demand for their payment, or 
 did any act by which the plaintiff was misled. Neither does it 
 appear by the evidence nor is it claimed by Mr. Dyer or any other 
 representative of the plaintiff company that it made the payment 
 under protest or with notice of an intention to reclaim any part of 
 the sum paid. The case is entirely barren of any such facts, and 
 it is, therefore, clear that under the settled law of this state the 
 payment was voluntary and not such as to justify the plaintiff in 
 demanding the repayment of the money. 
 
 In Lackey v. Mercer County, 9 Pa. 318, a donation tract of land 
 was sold by the county to the plaintiff for taxes. He entered and 
 improved the land which was subsequently recovered by the donee. 
 While in possession, the plaintiff paid the taxes assessed against the 
 land, and after he was ousted, he brought an action to recover the 
 amount paid by him on a void assessment, the land being exempt 
 from taxes. The court entered judgment on a case stated for the 
 county. GiBsox, C. J., in affirming the judgment said: "A single 
 fact in the cause turns the scale against the plaintiff — the payment 
 was voluntar)'. The cases agree that a party who has paid an un- 
 founded demand without constraint, cannot recover it back: it was 
 his folly to part with his money, and he must submit to lose it. . . . 
 The taxes were assessed and the plaintiff paid tliem, .... without 
 objection, when the collector called on him, and without warning to 
 tho county that the money would be reclaimed. There could not be 
 a more bald case of voluntar}' payment. His course was to np])eal 
 from the assessor to the county commissioners, and, if they would 
 not exonerate him, stand a distress and sale, for which he would
 
 360 SHENANGO FL'ENACE CO- V. FAIRFIELD. [cHAP. VI. 
 
 infallibly have recovered by action of trespass. . . . Independently 
 of that (a proper contribution to the public treasury), however, a 
 sufficient answer to his action is the fact that he made it without 
 compulsion." 
 
 Allentown Borough v. Saeger, 20 Pa. 421, was an action to recover 
 back the amount of taxes illegally assessed by the borough on moneys 
 at interest and paid to the tax collector. In reversing a judgment 
 for the plaintiff this court, by Lowkie, J., said: "Part of the taxes 
 charged against Saeger was legal and part illegal, and he paid 
 the whole on demand, and now seeks to recover back the part that 
 was illegally assessed. It cannot be allowed. The case is very- 
 different from that of payment to an individual by mistake. It 
 was submission to legitimate authority which was prima facie right 
 in its .exercise. The taxing officers performed their duty as well 
 as they knew how, and the tax was submitted to by one who was 
 interested in the purposes for which it was raised, though it might 
 have been resisted in legal form. This was an assent to pay more 
 in support of the government of the town than the town had a right 
 to demand, and the law does not imply the duty of refunding. If 
 it had been paid under protest, that is, with notice that he would 
 claim it back, this would repel the implication of an assent, and 
 give rise to the right of reclamation. In another aspect it is unlike 
 to a payment to an individual. It is a contribution to a common 
 fund, in the benefits of which he, as a citizen or property-holder, 
 participates. It is intended for immediate expenditure for the 
 common good, and it would be unjust to require its repayment, 
 after it has been thus, in whole or in part, properly expended, 
 which would often be the case if suit could be brought for its 
 recovery without notice having been given at the time of payment; 
 and there would be no bar against its insidious spring but the 
 statute of limitations. On these principles the defendant below is 
 entitled to the judgment." 
 
 In Taylor v. Board of Health, 31 Pa. 73, the Philadelphia board 
 of health collected a state tax of $1.00 a head on immigrants and 
 the plaintiff, the consignee of passenger ships, paid this tax during 
 six years. It was then held that the tax was unconstitutional, and 
 the plaintiff sued to recover the money he had paid. In affirming 
 a judgment for the defendant, this court, by Loweie, J., said (p. 
 74) : " If the case of the Borough of AllentowTi v. Saeger was decided 
 upon a proper principle, then the judgment .... is very plainly 
 right. In that case the taxing officers had no authority at all for 
 imposing the tax complained of, and, as it was paid without objec- 
 tion, it was presumed to have been expended for public purposes, 
 and held to be irrevocable from the district whose officers imposed 
 it. In the present case, .... the plaintiff seeks to recover back 
 the taxes voluntarily paid by him. We state the case as one of 
 a voluntarv^ payment of taxes, because there is no pretense that 
 the defendant officers did any more than demand the tax under 
 a supposed authority of law; and this is no more a compulsion 
 than when an individual demands a supposed right. The threat
 
 CHAP. VI.] SHENANGO FURNACE CO. V. FAIRFIELD. 301 
 
 that is supposed to underlie such demands is a legally harmless 
 one; that, in case of refusal, the api)ropriate legal remedies will 
 be resorted to." 
 
 In Union Insurance Co. v. Allegheny, lUl Pa. 2.j0, the sheriff's 
 vendee of land paid under protest municipal taxes assessed against 
 him hefore the sheriff's sale. Judgments had been entered for the 
 taxes after the sale but their lien had been discharged by the sale. 
 The city solicitor dcnumded payment -with threat to proceed to en- 
 force payment by sale. The court entered judgment for the city 
 which was affirmed by this court in an opinion by Mr. Justice MpcuR 
 who reviews the authorities on the subject, and says, inter alia (p. 
 25T) : "By application to the equitable powers of the court or by 
 bill in equity execution might have been stayed, and the claim re- 
 moved from the record. No immediate and urgent necessity existed 
 for the payment of the taxes to protect the property of the plaintiffs. 
 Its goods were not aVxmt to be seized." 
 
 In Peebles r. Pittsburg, 101 Pa. 304, municipal assessments 
 were levied on plaintiif's property and he paid on notice that if they 
 were not paid in thirty days they would be collected by process of 
 law. ITo paid under protest with notice that if not legally liable 
 he would seek to recover them back. Later the act under which 
 the assessments were made Avas held unconstitutional, and he brought 
 assumpsit to recover the sum paid. In affirming a judgment for the 
 defendant this court, by (Jreex, J., said (p. 308) : "The payments 
 were not compulsory. They were not made under any duress of 
 person or goods or under any impending danger of seizure or sale 
 of property. ... In the latter case (AUentown Boro. v. Saeger, 
 20 Pa. 421), the money was paid to an ordinary tax collector, who, 
 it must be supposed, was armed with a warrant in the usual manner. 
 ... It is worthy of remark that in the case just referred to (Union 
 Pacific E. E. Co. v. Commissioners, 98 U. S. 541), the claim paid 
 was for taxes and the treasurer had in his hands at the time a 
 warrant which would have authorized him to seize the goods of the 
 company to enforce collection. . . . Notwithstanding all this it was 
 held that no recovery could l)e had because in fact no attempt had 
 been made to put the warrant in force." 
 
 The subject of voluntary payments and the right of the payor 
 to recover them back from the payee is elaborately discussed and 
 the authorities reviewed by chief Justice Paxson in De la Cuesta 
 V. Insurance Co., 13G Pa. 62. After quoting from the opinion in 
 Christ Church Hospital v. Philadelphia, 24 Pa. 229, the chief justice 
 says (p. 70) : "We have here, succinctly stated, the principle upon 
 which the doctrine rests in its application to a warrant for the 
 collection of taxes. If the demand is illegal, and the party can 
 save himself and his property in no other way, he may pay under 
 protest and recover it back. But if other means are open to him 
 by which he may prevent the sale of his property : if a day in court 
 is accorded to him, he must resort to such means." 
 
 The same doctrine is announced and applied in Hospitiil r. Phila. 
 Co., 24 Pa. 229; Phila. v. Cooke, 30 Pa. 56; McCrickart r. Pittsburg,
 
 362 FNDERWOOD TYPEWRITER CO. V. CHAMBERLAIN. [cnAP. VI. 
 
 88 Pa, 133; Pavne et al. v. Coudersport Borough School Dist., 168 
 Pa. 386. 
 
 Applying the doctrine of these cases to the case in hand, it is 
 apparent that the payment made hy the plaintiff in January, 1908, 
 was voluntary and not compulsory. Tlie collector made no threat 
 to enforce payment or to execute his warrant, if one he had. As we 
 have said, there was no duress against the person, nor was the money 
 paid under protest or with notice that it would be reclaimed. The 
 payment, therefore, was entirely voluntary. As pointed out in the 
 authorities cited, if the plaintiff company denied the legality of the 
 road tax assessed on the 1907 valuation, its duty was to tender the 
 amount lawfully due under the 1906 valuation, refuse to pay the 
 balance demanded, and if necessary invoke the aid of a chancellor 
 to restrain its collection just as it has successfully done in this pro- 
 ceeding as to the excess alleged to be yet due the township. This 
 would have given the plaintiff its day in court and ample protection 
 against payment of the taxes which it seeks to reclaim in this 
 proceeding. ... 
 
 The decree entered by the learned court below must be sustained 
 so far as it enjoins the defendants from collecting $368.58, the bal- 
 ance of taxes alleged to be due, and dismissed so far as it directs 
 the repayment to the plaintiff of the sum of $1,566.36, the difference 
 between the amount of taxes legally due from the plaintiff and the 
 sum paid by it to the defendants. As thus modified, the decree is 
 affirmed. 
 
 UNDERWOOD TYPEWRITER COMPANY v. 
 CHAMBERLAIN. 
 
 Supreme Court of Ekeors of Connecticut. 1917. 
 
 [Reported 92 Conn. 199.] 
 
 Action to recover the amount of a tax laid under Part IV of the 
 Act of 1915, alleged to have been paid by the plaintiff under protest 
 and to escape irreparable injury to its property, brought to the Su- 
 perior Court in Hartford County where a demurrer to the prayers 
 for relief was sustained (Burpee, J.) and judgment rendered ((xager, 
 J.) for the defendant, from which the plaintiff appealed. Error; 
 demurrer overruled. 
 
 Wheeler, J. ... If the plaintiff, with full knowledge of the facts, 
 paid this tax voluntarily, he cannot recover it, even though the tax 
 were invalid and paid under protest. Sheldon v. South School Dis- 
 trict, 24 Conn. 88, 91. The tax in question was paid " under protest, 
 in order to escape irreparable injury through the enforcement of 
 the penalties and coercive features of the Act," the complaint alleges. 
 The admissions of the demurrer go no further than the terms of 
 the Act. 
 
 The tax would become due under the Act on or before August 
 1st. Ten days thereafter, and upon notice and demand of payinent 
 by the State treasurer, five per centum of the unpaid tax would
 
 CHAP. VT.] UNDERWOOD TVPEWniTER CO. V. CIIAMBEREAI \. 303 
 
 automatically be added to it, and interest at the rate of three-fourthfi 
 of one per centum per month upon such tax from the date the tax 
 became due, would l)e added. 
 
 Further, the unjjaid tax became a lien upon the real estate of the 
 Company within the State from the time the tax became due and 
 was unpaid, and from the filing of a certificate, signed by the State 
 treasurer, in the land records of the town. Since the filing of the 
 certificate might he contemporaneous with the date when the tax 
 became due and unpaid, the Company was in danger of having 
 this lien placed upon its property from such date. 
 
 The Company was confronted with this situation : Though it 
 contested the validity of the tax successfully it could not prevent 
 the filing of the lien upon its property. And if it were unsuccessful, 
 no matter what merit its claims possessed, the lien would attach, 
 and the five per centum penalty and the nine per centum interest 
 would accrue. The lien might prove a serious burden upon its 
 credit, while the actual pecuniary losses, suffered or threatened, 
 involved a hardship and loss which no company should be compelled 
 to face. It could not measure the extent of these penalties, because 
 it could not know the time the tax litigation would take. It would 
 be unfair to it to compel it to take this risk of loss as the condition 
 of its right to test the validity of the tax. It should have that right 
 ■without condition, and by a clear and certain remedy. 
 
 This is common practice and it is sound public policy. It is not 
 to the advantage of the State that those whom it seeks to tax should 
 refuse to pay their taxes in order to test their validity. Such a 
 course, if largely followed, might cause the State more than an 
 inconvenience in the disturbance of the budget upon which the 
 payment of its governmental obligations depended. The more orderly 
 course is a compliance with the law by a payment, reserving the 
 right to contest the validity of the required payment. 
 
 The payment of the tax in question was not a voluntary one, it 
 was in the contemplation of the law a paA'ment under duress of 
 the penalties of the Act. And this we hold from a consideration 
 of the provisions of the Act, and without a consideration of any 
 remedies by way of distress which the State might have for the 
 enforcement of payment of this tax. A payment of a tax made to 
 avoid the onerous penalties of the Act imposing the tax for its non- 
 payment, is not a voluntary payment. The more modem doctrine 
 supports this view. Robertson v. Frank Brothers Co., 132 U. S. 17, 
 10 Sup. Ct. 5; Atchison, T. & S. F. Ry. Co. v. O'Connor, 223 U. S. 
 280, 285, 32 Sup. Ct. 216. 
 
 We reached practically the same conclusion in Seeley v. Westport, 
 47 Conn. 294, 299, on a petition to restrain a town and its officers 
 against a le\7 upon real estate. We said : " We think therefore that 
 the law is so that a man may protect his land from a sale, or prevent 
 a cloud upon his title, by paying the tax and have his remedy to 
 recover it back if the tax was illegal and unjust." 
 
 It was not necessary for the plaintiff to wait until demand was 
 made by the State treasurer; the tax was due August 1st, it was
 
 3G4 ^"AT. METAL EDOE BOX CO, r. READSBOKO. [ciIAP. VT. 
 
 paid July 29th, and the lien might have been made effective on 
 August 1st. The compulsion of the law began when the tax was 
 due, and it would have served no purpose to have permitted the 
 defendant to have made demand, or to have been about to file the 
 lien, before paying the tax. The plaintiff pursued the orderly 
 course, it paid under protest and upon pressure of the la^v's 
 duress. . . . 
 
 There is error and the judgment is reversed and the Superior 
 Court directed to overrule Xhe defendant's demurrer to the claims 
 for relief. 
 
 NATIONAL METAL EDGE BOX CO. v. EEADSBORO. 
 Supreme Court of Vermont. 1920. 
 
 [Reported 111 Atl Rep. 386.] 
 
 Miles, J. This is an action on contract to recover money paid 
 the defendant under an alleged protest, upon taxes claimed by the 
 plaintiff to have been illegally and improperly assessed against it. 
 At the close of the evidence both parties moved for a directed ver- 
 dict. The motion of the plaintiff was granted, and upon the verdict 
 thus directed judgment was rendered for the plaintiff. To the 
 direction of the verdict and judgment thereon the defendant was 
 allowed an exception and also an exception to the court's refusal 
 to grant its motion for a directed verdict. 
 
 The evidence tended to show that the plaintiff is a corporation, 
 organized under the laws of Pennsylvania and located and having 
 its principal place of business at Philadelphia, but is doing quite 
 an extensive business in the defendant town, where it owns real 
 and personal property of large value; that for the year 1917, the 
 plaintiff filed with the listers of the defendant its inventory of tax- 
 able property in that town, and in that inventory, to question 25a, 
 which is as follows: "On April 1, 1917, what was the aggregate 
 amount of existing debts then due or thereafter to become due to 
 the maker hereof from all solvent debtors within or without the 
 state of Vermont?" — it answered: "31,635." The answer was 
 correct, but the plaintiff insisted, before and at the time the inven- 
 tory was delivered to the listers, that those debts were not taxable, 
 because their situs was in Pennsylvania and not in Readsboro, and 
 because they consisted of charges of book representing the purchase 
 price of tangible personal property on which no interest was charged. 
 No question is made but that those debts consisted of charges of 
 books representing the purchase price of tangible personal property; 
 but the defendant claimed that there was no evidence in the case 
 tending to show that no interest was charged upon them nor evi- 
 dence tending to show they had their situs in Pennsylvania. 
 
 [1] The principal question raised is whether there was evidence 
 tending to show those two claims. The evidence bearing upon the 
 question of the situs of the accounts assessed tended to show that 
 the accounts originating from the business in Readsboro were kept 
 
 /
 
 CHAP. VI.] XAT. METAL EDGE BOX CO. V. READSBORO. 365 
 
 at the plaintiff's home office in Pliiladelphia, except some small 
 matters fn no way connected with the accounts in question, and all 
 the branch office at Readsboro had to do with keeping those accountd 
 was to send to the home oifice in Philadelphia a statement of the 
 daily transactions and accounts originating during the day, which 
 were usually sent on the following day after tlie transaction occurred 
 and the account originated. A copy of the statements was kept at 
 the oifice in Readsljoro, and the originals were entered ujton the 
 books of the plaintiff in riiiladelphia. 'J'he pay roll of the employes 
 at Keadsboro was sent to the plaintiff at Philadelphia, and checks 
 were returned with which to pay the employes. All the merchandise 
 manufactured and sold from the I)ram-h business at Peadsljoro wh,s 
 paid for at the oifice of the jdaintilf at Philadel})hia. All the plain- 
 tiff's business matters originating at Keadsboro were attended to at 
 the plaintiff's home office in Philadelphia. The business conducted at 
 Readsboro consisted in manufacturing pa]>er box board and pulp, 
 which was principally sent tu Philadcljjhia, but some was shipped 
 elsewhere on orders from the Philadelphia office, in which case a 
 memorandum of the shipment was sent to the home office. The 
 office at Readsboro had nothing to do Avith the sale of the goods 
 manufactured there, nor with fixing the price for which they were 
 sold. We think this evidence clearly tended to show that the situs 
 of the accounts assessed by the listers of defendant was in Penn- 
 sylvania, and not in Readsboro. 
 
 [2] It is a general rule of law, with few, if any exceptions, that 
 debts can have no locality separate from the parties to whom they 
 are due. Says Mr. Justice Field, respecting this rule, in Cleveland, 
 etc., R. R. Co. V. Pennsylvania, 83 U. 8. (15 Wall.) 300, 21 L. Ed. 
 179: 
 
 " This principle might be stated in many different wa3's, and sup- 
 ported by citations in numerous adjudications, but no number of 
 authorities and no forms of expression could add anything to its 
 obvious truth, which is recognized upon its simple statement." 
 
 With the creditor debts are property and may be taxed. All the 
 property there can be in debts belongs to the creditor. Cleveland, 
 etc., R. R. Co. V. Pennsylvania, fnipra: Bullock r. Guildford, 59 
 Vt. 516, 9 Atl. 360; State v. Clement National Bank, 84 Yt. 167, 
 199, 78 Atl. 944, Ann. Cas. 1912D, 22. The accounts assessed were 
 not only due to and owned by the plaintiff, whose domicile was in 
 Pennsylvania, but the accounts themselves were in fact permanently 
 held and situated in Pennsylvania and not in Readsboro. 
 
 [3-5] Btit the defendant contends, though that may be so, the 
 plaintiff cannot recover ii_ this suit ; because its exclusive remedy 
 was by appeal from the lister's decision to the board of civil au- 
 thority, and if not satisfied with their decision, by appeal to the 
 commissioner of taxes, and it cites in supnort of this contention 
 sections 785, 834, and 842 of the General Laws. The proceedings 
 provided for in those sections nil relate to errors and mistakes of 
 the listers in the assessment of taxable property, and not to prop- 
 erty over which they have no jurisdiction or right to assess. In
 
 l]6() NAT. METAL EDGE BOX CO. V. READSBORO. [cHAP. VI. 
 
 Babcock v. Granville, 4-i Vt. 325, an action in assumpsit to re- 
 cover money paid on taxes, under protest, one of the defenses in- 
 sisted upon was that the plaintiff's exclusive remedy was under 
 section GG of chapter 15 of the CJeneral Statutes, which provided, 
 among other things, that the board of civil autliority " may abate, 
 in whole or part, any tax, which has been assessed on the list of 
 any person, in which there is manifest error or in which there is a 
 mistake of the listers or assessors who made up such list." This 
 court held in that case that it was not the exclusive remedy, 
 and that the action was maintainable. While the remedy for errors 
 and mistakes in assessments by the listers, under that statute, was 
 by abatement, instead of by a hearing before the board and appeal 
 to the conmiissioner of taxes, the principle involved is the same, 
 and goes to the extent of supporting the plaintiff's contention that, 
 for an illegal assessment, the taxpayer is not confined to tlie statutory 
 remedy. The court in Babcock v. Granville say that many actions 
 of that kind have been brought in this state and have been main- 
 tained. It was early laid down in this state that where the tax 
 is illegal and therefore void the money paid under protest may be 
 recovered in an action at law. Henry v. Chester, 15 Vt. 460, 470. 
 But the defendant further contends that the tax was not illegal, 
 because the plaintiff included the debts mentioned in the answer 
 to question 25a in its inventory. The case shows this was done at 
 the insistence of the listers who took the inventory, and subject to 
 the plaintiff's objection that the accounts were not taxable. In these 
 circumstances the listers were not misled, and so were not justified 
 in assessing property not taxable, on the ground that the plaintiff 
 was stopped from claiming their illegality. 
 
 [6] The defendant further contends that the tax was not illegal 
 in fact. But a tax assessed against a person upon nontaxable prop- 
 erty, is illegal and it requires no citation of authorities in support 
 of this holding. 
 
 [7] The defendant further contends that the evidence shows that 
 the tax was paid voluntarily. We think it does not. A check in 
 payment of the tax assessed upon the accounts in question was de- 
 livered to the treasurer of defendant by the plaintiff's superintendent, 
 in a letter of the following tenor : 
 
 "October 18, 1917. 
 
 " Mr. C. H. Brown, Treasurer, Readsboro, Vt. — Dear Sir : We 
 understand that unless the village and town of Eeadsboro tax for 
 1917 is paid according to the assessment, as per bill September 22, 
 1917, we will subject ourselves to a penalty of 8 per cent. 
 
 "In order to avoid the penalty, we are inclosing herewith our 
 check for $4,762.15, but are making this payment under protest 
 with a view of taking the necessary proceedings to recover the excess 
 tax, which we are obliged to pay on the erroneous and improper 
 assessment. The erroneous assessment complained of is on the item 
 No. 25a of $31,635.44 on our tax inventory returned to listers in 
 April, 1917, on which the tax charged is $996.50, less discount 
 4 per cent. $956.64, and for which bill is herewith inclosed."
 
 CHAP. VT.] NAT. METAl. KIHIK Il()\ CO. V. READBHORO. 307 
 
 Tills letter was signed b}- the plaintifT. While it is a hopeless un- 
 dertaking to attempt to reconcile the authorities from different 
 jurisdictions and extract therefrom a rule that will apply to every 
 case involving the question of protest, we think that in our own de- 
 cisions we have a rule that is followed by all our cases, upon the 
 point here involved. The point upon which conflict arises in the 
 different jurisdictions lies in the determination of what degree of 
 coinpidsion is necessary to make the payment involuntary. We 
 hold in lino with our former decisions that the plaintiff had a right to 
 expect, in the circumstances of the case, that unless it paid the tax 
 within the time limited, in due course a warrant would issue, and 
 the collection be enforced with costs and it be subjected to the 
 penalty. This was all the compulsion necessary to make the payment 
 involuntary and the protest available under our former holdings. 
 Stowe V. Stowe, 70 Vt. GOO, 41 Atl. 1042; Allen v. Burlington, 45 
 Vt. 202; Babcock v. Granville, supra. 
 
 The view we take respecting the situs of the accounts assessed 
 renders it unneccessary to consider whether interest was charged on 
 those accounts, as that question now becomes immateral. We find 
 no error in the judgment and proceedings below, and the same is 
 afiirm.ed.
 
 36S PECK V. LOWE. [chap. VII. 
 
 CHAPTER VII. 
 
 THE FEDERAL INCOME TAX. 
 PECK V. LOWE. 
 
 SUPEEME COUET OF THE UNITED STATES. 1918. 
 [Reported 247 U. 8. 165.] 
 
 Tan Devaxtee^ J. This was an action to recover a tax paid under 
 protest and alleged to have been imposed contrary to the constitu- 
 tional provision (art. 1, sec. 9, cl. 5) that "No tax or duty shall 
 be laid on articles exported from any State." The judgment below 
 was for the defendant. (234 Fed. 125.) 
 
 The plaintiff is a domestic corporation chiefly engaged in buying 
 goods in the several States, shipping them to foreign countries, and 
 there selling them. In 1914 its net income from this business was 
 $30,173.66 and from crther sources $12,436.24. An income tax for 
 that year, computed on the aggregate of these sums, was assessed 
 against it and paid under compulsion. It is conceded that so much 
 of the tax as was based on the income from other sources was valid, 
 and the controversy is over so much of it as was attributable to the 
 income from shipping goods to foreign countries and there selling 
 them. 
 
 The tax was levied under the act of October 3, 1913 (c. 16, sec. II, 
 38 Stat. 166, 1T2), which provided for annually subjecting every 
 domestic corporation to the payment of a tax of a specified per 
 centum of its " entire net income arising or accruing from all sources 
 during the preceding calendar year." Certain fraternal and other 
 corporations, as also income. from certain enumerated sources, were 
 specifically excepted, but none of the exceptions included the plain- 
 tiff or any part of its income. So, tested merely by the terms of the 
 act, the tax collected from the plaintiff was rightly computed on its 
 total net income. But as the act obviously could not impose a tax 
 forbidden by the Constitution, we proceed to consider whether the 
 tax, or rather the part in question, was forbidden by the constitu- 
 tional provision on which the plaintiff relies. 
 
 The sixteenth amenrlment, although referred to in argument, has 
 no real bearing and may be put out of view. As pointed out in recent 
 decisions, it does not extend the taxing power to new or excepted 
 subjects, but merely removes all occasion, which otherwise might ex- 
 ist, for an apportionment among the States of taxes laid on income, 
 whether it be derived from one source or another. Brushaber v. 
 Union Pacific E. E. Co., 240 U. S. 1, 17-19; Stanton v. Baltic 
 Mining Co., 240 U. S. 103, 112-113.
 
 SECT. IV.] PECK V. LOWE. 369 
 
 The Constitution broadly empowers Congress not only " to lay 
 and collect taxes, duties, imposts and excises," but also '* to regulate 
 commerce with foreign nations." So, if the prohibitory clause in- 
 voked by tiie plaintitl' bo nut in the way. Congress undoubtedly has 
 power to lay and collect such a tax as is here in question. That 
 clause says '' No tax or duty shall be laid on articles exported from 
 any State." Of course it (lualifies and restricts the power to tax as 
 broadly conferred. But to what extent? The decisions of this court 
 answer that it excepts from the range of that power articles in course 
 of exportation, Turpin v. Burgess, 117 U, S. 50-4, 507; the act or 
 occu])ation of exporting, Brown v. Maryland, 13 Wheat. 419, 445; 
 bills of lading for articles being exported, Fairbanks v. United States, 
 181 U. S. 283; charter parties for the carriage of cargoes from 
 State to foreign ports, United States v. Hvoslef, 237 U. S. 1 ; and 
 policies of marine insurance on articles being exported — such in- 
 surance being uniformly regarded as " an integral part of the expor- 
 tation " and the policy as " one of the ordinary shipping documents," 
 Thames and Mersey Ins. Co. v. United States, 237 U. S. 19. In 
 short, the court has interpreted the clause as meaning that exporta- 
 tion must be free from taxation, and therefore as reciuiring "not 
 simply an omission of a tax upon the articles exported, but also a 
 freedom from any tax which directly burdens the exportation." 
 Fairbanks v. United States, supra, pp. 292-293. And the court has 
 indicated that where the tax is not laid on the articles themselves 
 while in course of exportation the true test of its validity is whether 
 it "so directly and closely" bears on the "process of exporting" 
 as to be in substance a tax on the exportation. Thames and Mersey 
 Ins. Co. V. United States, supra, p. 25. In this view it has been 
 held that the clause does not condemn or invalidate charges or taxes, 
 not laid on property' while being exported, merely because they affect 
 exportation indirectly or remotely. Thus a charge for stamps which 
 each package of manufactured tobacco intended for export was re- 
 quired to bear before removal from the factory was upheld in Pace v. 
 Burgess, 92 U. S. 372, and Turpin v. Burgess, 117 U. S. 504; and 
 the application of a manufacturing tax on all filled cheese to cheese 
 mannfactured under contract for export, and actually exported, was 
 upheld in Cornell v. Coyne, 192 U. S. 418. In that case it was said, 
 page 427: "The true construction of the constitutional provision is 
 that no burden by way of tax or duty can be cast upon the exportation 
 of articles, and does not mean that articles exported are relieved 
 from the prior ordinary burdens of taxation which rest upon all 
 property similarly situated. The exemption attaches to the export 
 and not to the article before its exportation." 
 
 "While fully assenting and adhering to the interpretation which has 
 been put on the clause in giving effect to its spirit as well as its 
 letter, we are of opinion that to broaden that interpretation would 
 be to depart from both the spirit and letter. 
 
 The tax in question is unlike any of those heretofore condemned. 
 It is not laid on articles in course of exportation or on anything 
 which inherently or by the usages of commerce is embraced in ex-
 
 370 CEOCKER V. MALLEY. [CHAP. VTL. 
 
 portation or any of its processes. On the contrary, it is an income 
 tax laid generally on net incomes. And while it can not be applied 
 to any income which Congress has no power to tax (see Stanton t'. 
 Baltic Mining Co., supra, p. 113), it is both nominally and actually 
 a general tax. It is not laid on income from exportation because of 
 its source, or in a discriminative way, but just as it is laid on other 
 income. The words of the act are " net income arising or accruing 
 from all sources." There is no discrimination. At most, exporta- 
 tion is affected only indirectly and remotely. The tax is levied after 
 exportation is completed, after all expenses are paid and losses ad- 
 justed, and after the recipient of the income is free to use it as he 
 chooses. Thus what is taxed — the net income — is as far removed 
 from exportation as are articles intended for export before the expor- 
 tation begins. If articles manufactured and intended for export are 
 subject to taxation under general laws up to the time they are put in 
 course of exportation, as we have seen they are, the conclusion is 
 unavoidable that the net income from the venture when completed, 
 that is to say, after the exportation and sale are fully consummated, 
 is likewise subject to taxation under general laws. In that respect the 
 status of the income is not different from that of the exported articles 
 prior to the exportation. 
 
 For these reasons we hold that the objection urged against the 
 tax is not well grounded. 
 
 Judgment affirmed. 
 
 CEOCKEE V. MALLEY. 
 Supreme Court of the United States. 1919. 
 
 [Reported 249 U. 8. 223.] 
 
 Holmes, J. This is an action to recover taxes paid under protest 
 to the collector of internal revenue by the petitioners, the plaintiffs. 
 The taxes were assessed to the plaintiffs as a joint-stock association 
 within the meaning of the income tax act of October 3, 1913 (c. 16, 
 sec. 2, G. (a), 38 Stat. 114, 166, 172), and were levied in respect of 
 dividends received from a corporation that itself was taxable upon 
 its net income. The plaintiffs say that they were not an association 
 but simply trustees, and subject only to the duties imposed upon 
 fiduciaries by section 2, D. The Circuij; Court of Appeals decided 
 that the plaintiffs, together, it would seem, with those for whose 
 benefit they held the property, were an association, and ordered judg- 
 ment for the flefcndant, reversing the judgment of the District 
 Court. (250 Fed. 817.) 
 
 The facts are these : A Maine paper-manufacturing corporation 
 with eight shareholders had its mills on the Nashua Eiver, in Massa- 
 chusetts, and owned outlying land to protect the river from pollution. 
 In 1912 a corporation was formed in Massachusetts. The Maine 
 corporation conveyed to it seven mills and let to it an eighth that 
 was in process of construction, together with the outlying lands and
 
 SECT. IV.] CROCKER V. MALLEY. 371 
 
 tenements, on a long lease, receiving the stock of the Massachusetts 
 corporation in return. The Maine corporation tlieu transferred to 
 the plaiiitill's as trustees the ice of the propurty, subject to lease* left 
 the Massacliusetts stock in tlieir hands, and was dissolved. By the 
 declaration of trust the phiintill's declared tliat they held the real 
 estate and all other property at any time received by them there- 
 under, subject to the j)rovisions thereof, "for the benefit of the cestui 
 que trusts (who shall be trust beneliciarie.s only, without partner- 
 ship, associate, or other relation whatever inter sese) " upon trust to 
 convert the same into money and distribute the net proceeds to the 
 persons then holding the trustees' receipt certificates — the time of 
 distribution being left to the discretion of the trustees, hut not to 
 be postponed beyond the end of 20 years after the death of specified 
 persons then living, in the meantime the trustees were to have the 
 powers of owners. They were to distribute what they determined to 
 be fairly distributable net income according to the interests of the 
 cestui que trusts but could apply any funds in their hands for the 
 repair or development of the property held by them, or the acquisi- 
 tion of other property, i)ending conversion and distri])ution. The 
 trust was explained to be i)i'cause of the determination of the Maine 
 corporation to dissolve without waiting for the final cash sale of its 
 real estate, and was declared to be for the benefit of the eight share- 
 holders of the ]\raine company who wore to receive certificates subject 
 to transfer and subdivision. Then followed a more detailed statement 
 of the power of the trustees and provision for their compensation, 
 not exceeding 1 per cent of the gross income unless with the written 
 consent of a majority in interest of the cestui que trusts. A similar 
 consent was required for the filling of a vacancy among the trustees 
 and for a modification of the terms of the trust. In no other matter 
 had the beneficiaries any control. The title of the trust was fixed for 
 convenience as the Massachusetts Realty Tnist. 
 
 The declaration of trust on its face is an ordinary real estate trust 
 of the kind familiar in Massachusetts, unless in the particular that 
 the trustees' receipt provides that the holder has no interest in any 
 specific property and that it purports only to declare the holder en- 
 titled to a certain fraction of the net proceeds of the property when 
 converted into cash "and meantime to income." The only property 
 expressly mentioned is the real estate not transferred to the Massa- 
 chusetts corporation. Altliough the trustees in fact have held the 
 stock of that corporation nnd have collected dividends upon it, their 
 doing so is not contemplated in terms by the instrument. It does 
 not appear verv clearly that the eight Maine shareholders might not 
 have demanded it liad they been so minded. The function of the 
 trustees is not to manage the mills but simply to collect the rents and 
 income of such property as may be in their liands, with a large dis- 
 cretion in the application of it. but with a recognition that the re- 
 ceipt holders are entitled to it subject to the exercise of the powers 
 confided to the trustees. In fact, the whole income, less taxes and 
 similar expenses, hasibeen paid over in due proportion to the holders 
 cf the receipts.
 
 O ( 
 
 2 CEOCKER V. MALLEY. [CHAP. VII. 
 
 There can be little doubt that in Massachusetts this arrangement 
 would be held to create a trust and nothing more. " The certiticate 
 holders . . . are in no way associated together nor is there any pro- 
 vision in the [instrument | for any meeting to be held by them. The 
 only act which (under the [declaration of] trust) they can do is to 
 consent to an alteration ... of the trust " and to the other matters 
 that we have mentioned. They are confined to giving or withholding 
 assent, and the giving or withholding it " is not to be had in a 
 meeting but is to be given by them individually." " The sole right 
 of the cesiuis que trust is to have the property administered in their 
 interest by the trustees, who are the masters, to receive income 
 while the trust lasts, and their share of the corpus when the trust 
 comes to an end." Williams v. Milton, 215 Mass. 1, 10, 11; lb., 8, 
 The question is whether a different view is required by the terms of 
 the present act. As by D, above referred to, trustees and associations 
 acting in a fiduciary capacity have the exemption that individual 
 stockholders have from taxation upon dividends of a corporation 
 that itself pays an income tax, and as the plaintiffs undeniably are 
 trustees, if they are to be subjected to a double liability the language 
 of the statute must make the intention clear. Gould v. Gould, 245 
 U. S. 151, 153; United States v. Isham, 17 Wall. 496, 504. 
 
 The requirement of G (a) is that the normal tax thereinbefore im- 
 posed upon individuals shall be paid upon the entire net income ac- 
 cruing from all sources during the preceding year "to every corpo- 
 ration, joint-stock company or association, and every insurance 
 company, organized in the United States, no matter how created or 
 organized, not including partnerships." The trust that has been de- 
 scribed would not fall under any familiar conception of a joint-stock 
 association, whether formed under a statute or not. Smith v. An- 
 derson, 15 Ch. D. 247, 273, 274, 277, 282. Eliot v. Freeman, 220 
 U. S. 178, 186. If we assume that the words "no matter how 
 created or organized " apply to " association " and not only to 
 "insurance company," still it would be a wide departure from 
 normal usage to call the beneficiaries here a joint -stock association 
 when they are admitted not to be partners in any sense, and when 
 they have no joint action or interest and no control over the fund. 
 On the other hand the trustees by themselves can not be a joint- 
 stock association within the meaning of the act unless all trustees 
 with discretionary powers are such, and the special provision for 
 trustees in D is to be made meaningless. We perceive no ground 
 for grouping the two — beneficiaries and trustees — together, in 
 order to turn them into an association, by uniting their contrasted 
 functions and powers, although they are in no proper sense asso- 
 ciated. It seems to be an unnatural perversion of a well-known in- 
 stitution of the law. 
 
 We do not see either that the result is affected by any technical 
 analysis of the individual receipt holder's rights in the income re- 
 ceived by the trustees. The description most in accord with what 
 has been the practice would be that, as the receipts declare, the 
 holders, until distribution of the capital, were entitled to the
 
 SECT. IV.j CHICAGO TITLE & TEUST CO. V. SMIETANKA. 
 
 373 
 
 income of the fund subject to an unexercised power in the trustees 
 in their reasonable discretion to divert it to the improvement of the 
 capital. But even if it were said that the receipt holders were not 
 entitled to the ineume as such until they got it, we do not discern 
 how that would turn them into a joint-stock company. Moreover 
 the receipt holders did get it, and the question is what portion it 
 was the duty of the trustees to withhold. 
 
 We presume that the taxation of corporations and joint-stock 
 companies upon dividends of corporations that themselves pay the 
 income tax was for the purpose of discouraging combinations of the 
 kind now in disfavor, by which a corporation holds controlling in- 
 terests in other corporations which in their turn may control otlierp, 
 and so on, and in this way concentrates a power that is disapproved. 
 There is nothing of that sort here. Upon the whole case we are of 
 opinion that the statute fails to show a clear intent to subject the 
 dividends of the Massachusetts corporation's stock to the extra tax 
 imposed by G (a). 
 
 Our view upon the main question opens a second one upon which 
 the Circuit Court of Appeals did not have to pass. The District 
 Court, while it found for the plaintiffs, ruled tliat the defendant was 
 entitled to retain out of the sum received by him the amount of the 
 tax that they should have paid as trustees. To this the plaintiffs 
 took a cross writ of error to the Circuit Court of Appeals. There can 
 be no question that although the plaintiffs escape the larger liability, 
 there was probable cause for the defendant's act. The Commissioner 
 of Internal Revenue rejected the plaintiff's claim, and the statute 
 does not leave the matter clear. The recovery therefore will be from 
 the United States. (T^ev. Stats., sec. 989.) The plaintiffs, as they 
 themselves alleged in their claim, were the persons taxed, whether 
 they were called an association or trustees. They were taxed too 
 much. If the United States retains from the amount received by it 
 the amount that it should have received, it can not recover that sum 
 in a subsequent suit. 
 
 Judgment of the Circuit Court of Appeals reversed; judgment 
 of the District Court affirmed. 
 
 CHICAGO TITLE & TRUST CO. v. SMIETANXA. 
 District Court of the United States. 1921. 
 
 [Reported 275 Fed. 60.] 
 
 Page, District Judge. Persons owning capital stock of five street 
 railways in Chicago, desiring to effect a imitary control of the prop- 
 erties, executed the agreement out of which grows the question here, 
 viz. : bid that agreement create a joint-stock company or association, 
 taxable under section TT, G (a) of the Federal Revenue Act of 1913 ? 
 Such a tax was paid bv the plaintiff under protest, and it brings this 
 (and four similar suits) against the defendant, a former internal-
 
 374 CHICAGO TITLE <fc TRUST CO. V. SMIETANKA. [ciiAP. VII. 
 
 revenue collector, to recover the money paid on the ground that it was 
 au illegal tax. 
 
 The question arises upon a demurrer to the declaration. 
 
 It is strongly urged upon the court that this case presents a trust 
 similar to what is known as the Massachusetts Trust, and that it 
 L-umos within the purview of and is governed by Crocker v. Malley, 
 249 IT. S. 223. However, I find that it has features which show 
 it to be quite different from the Crocker case. The Supreme Court 
 in that case said: 
 
 "The trust that has been described would not fall within any 
 familiar conception of a joint-stock association." 
 
 And 
 
 "If we assume that tlie words 'no matter how created or organ- 
 ized' apply to 'association' and not only to 'insurance company,' 
 still it woukl be a wide departure from normal usage to call the bene- 
 ficiaries here a joint-stock association when they are admitted not to 
 he partners in any sense, and when they have no joint action or interest 
 and no control over the fund. On the other hand, the trustees by 
 themselves can not be a joint-stock association within the meaning of 
 the act unless all trustees with discretionary powers are such ... We 
 perceive no ground for grouping the two — beneficiaries and trustees 
 — together in order to turn them into an association by uniting their 
 contrasted functions and powers, although they are in no proper 
 sense associated." 
 
 In Eliot V. Freeman, 220 U. S. 186, the court said : 
 
 The language of the act of 1909, "now or hereafter organized 
 under the laws of the United States," imports an organization de- 
 riving power from statutory enactment. 
 
 Section 38 of the act of 1909 reads: 
 
 That every corporation, joint-stock company, or association or- 
 ganized for profit and having a capital stock represented by shares, 
 and every insurance company, now or hereafter organized under the 
 laws of the United States, or of any State or Territory of the United 
 States, or under the acts of Congress applicable to Alaska, etc., shall 
 be subject to pay annually, . . . 
 
 The act of 1913 reads: 
 
 That the normal tax . . . shall be levied, assessed, and paid annu- 
 ally upon the entire net income arising or accruing . . . during the 
 preceding calendar year to every corporation, joint-stock company, 
 or association, and every insurance company organized in the United 
 States, no matter how created or organized, not including partner- 
 ships. 
 
 It is contended that the words " no matter how organized " in the 
 act of 1913 relate to insurance companies only, but the court is of 
 the opinion that those words relate back to the worris "everv corpo- 
 ration, joint-stock company, or association," so that what is meant
 
 SECT. IV.] CHICAGO TITLE & TRUST CO. V. SMIETANKA. 375 
 
 is that all such concerns (not including partnership) are included 
 and are taxable. Eliot v. Freeman, supra. 
 
 There are material dill'erences between the so-called trust in this 
 case and the trust in Crocker v. Alalley. The trustees here, except for 
 certain fixed things, are not principals at all, but are mere agents of 
 the committee hereinal'ter referred U). Tiie parties who conceived 
 and drew up the agreement in question simply built up an organiza- 
 tion by the use of language that reads in many respects much like the 
 old corporation law of Illinois. Tlicy superimposed that organiza- 
 tion ujjon the four or five corporations owning tiie street railway 
 system of the city of Chicago by placing the legal title to the capital 
 stock of those corporations in the trustees named, who are to do cer- 
 tain specified tilings only, and l)y providing for a committee, which 
 controls even the power of the trustees to vote the capital stock of 
 the street railway companies. This committee is elected by what is 
 called particii)ating shareholders, who hold certificates of common 
 and preferred participating shares issued by the trustees in lieu of 
 the cai)ital stocks of the corporations. The whole agreement is shot 
 through Avith provisions for control by the committee, particularly 
 upon page 25 — 
 
 And from time to time the trustees may give proxies to any person 
 or persons to vote such stock; but in voting upon any of such stock 
 the trustees shall follow the directions or instructions, if any, that 
 may be given to the trustees by the committee. 
 
 And again, on page 30, where it undertakes to enumerate the 
 powers of the trustees, they use this language — 
 
 Subject to any rights of the trustees of the said collateral trust 
 indenture dated January 3, 1910, as specified therein, and subject 
 to the terms of the written approval or consent of the committee in 
 any case where under the terms of this trust agreement such approval 
 or consent is authorized or required, the trustees shall have such 
 power, etc. 
 
 Again — 
 
 To invest at any time . . . any sum or sums . . . which the 
 committee may approve. 
 
 And again, in (i), to — 
 
 Vote upon any of the shares, constituting any part of the deposited 
 securities, in favor of any lawful consolidation, merger, or reorgan- 
 ization of the properties, franchises, or shares of any of the companies 
 . . . upon such terms and conditions as shall be approved by both 
 the committee and the trustees. 
 
 In Crocker v. Malley, the Supreme Court does not undertake to 
 say whether there could be such a thing as an association not organ- 
 ized under some law; but T am of the opinion that there can bo such 
 an association and that the organization here sliown is witliin the 
 statute.
 
 376 TAX COMMISSIONER V. PUTXAM. [cHAP. VII. 
 
 It is claimed by counsel that if any organization ever becomes an 
 association it thereby necessarily becomes a partnership, but there 
 are, in my opinion, certain limitations and conditions that prevent 
 the agreement here from creating an ordinary partnership. 
 
 The demurrer is sustained. 
 
 TAX COMMISSIOXEE v. PUTNAM. 
 
 Supreme Judicial Couet of Massachusetts. 1917. 
 
 [Reported 227 Mass. 522.] 
 
 EuGG, C. J. The Forty-fourth Amendment to the Constitution 
 of this Commonwealth, approved and ratified by the people in No- 
 vember, 1915, is in these words: "Full power and authority are 
 hereby given and granted to the General Court to impose and levy 
 a tax on income in the manner hereinafter provided. Such tax 
 may be at different rates upon income derived from different classes 
 of property, but shall be levied at a uniform rate throughout the 
 Commonwealth upon incomes derived from the same class of prop- 
 erty. The General Court may tax income not derived from property 
 at a lower rate than income derived from property, and may grant 
 reasonable exemptions and abatements. Any class of property the 
 income from which is taxed under the provisions of this article 
 may be exempted from the imposition and levying of proportional 
 and reasonable assessments, rates and taxes as at present authorized 
 by the Constitution, This article shall not be construed to limit 
 the power of the General Court to impose and levy reasonable duties 
 and excises." The inquiry raised on this record chiefly concerns 
 the meaning of " income " as that word is used in the grant of power 
 to the General Court to " impose and levy a tax on income." 
 
 The Constitution of Massachusetts is a frame of government for 
 a sovereign power. It was designed by its framers and accepted 
 by the people as an enduring instrument, so comprehensive and 
 general in its terms that a free, intelligent and moral body of 
 citizens might govern themselves under its beneficent provisions 
 through radical changes in social, economic and industrial condi- 
 tions. It declares only fundamental principles as to the form of 
 government and the mode in which it shall be exercised. Certain 
 great powers are conferred and some limitations as to their exercise 
 are established. The original Constitution and all its x\mendments 
 together form one instrument. It is to be interpreted in the light 
 of the conditions under which it and its several parts were framed, 
 the ends which it was designed to accomplish, the benefits which it 
 was expected to confer, and the evils which it was hoped to remedy. 
 It is a grant from the sovereign people and not the exercise of a 
 delegated power. It is a statement of general principles and not 
 a specification of details. Amendments to such a charter of gov-
 
 SECT. IV.] TAX COMMISSIOXER V. PUTNAM. 377 
 
 ernment ought to be construed in the same spirit and according 
 to the same rules as the original. It is to be interpreted as the Con- 
 stitution of a State and not as a statute or an ordinary piece of 
 legislation. Its words must be given a construction adapted to carry 
 into elt'ect its purpose. 
 
 Tiie cases at bar raise four main questions: 
 
 (1) Are excesses of gains over losses in the purchase and sale 
 of intangible personal property by one not engaged in the business 
 of dealing in such property taxable as income? 
 
 (2) Are gains derived from the sale of rights to subscribe for 
 new shares of stock to be issued by an existing corporation taxable 
 as income? 
 
 (3) Is a stock dividend, declared and issued by a corporation 
 after the statute went into effect, out of an accumulation of profits 
 earned and invested in its business before the statute was enacted, 
 taxable as income? 
 
 (4) Is a cash dividend declared and paid after the statute went 
 into effect out of prolits earned before the statute took effect, tax- 
 able as income? 
 
 1. We proceed to the discussion of the first main question. 
 
 Pursuant to the grant of power given bv the Forty-fourth Amend- 
 ment, the income tax law, St. li'lG, c. 269, was enacted. It is provided 
 by § 5 that " Income of the following classes received by any in- 
 habitant of this Commonwealth, during the calendar year prior to 
 the assessment of the tax, shall be taxed as follows: . , . (c) The 
 excess of the gains over the losses received by the taxpayer from the 
 purchases or sales of intangible personal property, whether or not 
 the said taxpayer is engaged in the business of dealing in such prop- 
 erty, shall be 'taxed at the rate of three per cent per annum. . . .'' 
 The act took effect so as to include the income of the calendar year 
 1916. The tax commissioner issued a bulletin to be used in the prep- 
 aration of income tax returns, giving the " Approved Valuation " of 
 stocks on January 1, 1916. No question has been raised as t« the 
 accuracy of this valuation. By the express terms of § 7 of the in- 
 come tax act the value of the 'intangible personal property on Jan- 
 uary 1, 1916, if owned by the taxpayer on that date, and its value 
 on the date acquired in the event of purchase after that date, is 
 made the basis of computation for determining gains and losses. 
 
 The defendant Putnam on January 1, 1916, owned certain shares 
 of stock in corporations, which he sold during the calendar year 
 1916 at sums in excess of the prices given in the "Approved Valua- 
 tion" bulletin, so that the net profits realized exceeded his total 
 losses. He also bought certain stocks during the year 1916 and 
 sold them during the same year at a profit. It is contended on his 
 behalf that these gains do not constitute " income" within the mean- 
 ing of that word 'in the Fortv-fourth Amendment. 
 
 The Forty-fourth Amendment was adopted by the General Court 
 and l)y it proposed to the people after prolonged study and at the 
 end of various efforts under the errant of power to tax contained 
 in c. 1 § 1, art. -4 of the Constitution to establish a general and
 
 37S TAX COMMISSIONER V. PUTNAM. [cHAP. VII. 
 
 extensive income tax. Numerous resolves of the Legislature have 
 been passed from time to time extending over many years, providing 
 for the investigation of the subject of taxation by special commis- 
 sions and committees. The reports from these sources were volu- 
 minous and most, if not all of them, suggested some form of tax 
 on incomes from investments. Advisory opinions to the General 
 Court or one of its branches by the justices of this court touching 
 particular phases of the matter are to be found in Opinions of the 
 Justices, 195 Mass. 607, 208 Mass. 616, 220 Mass. 613. All the 
 schemes thus proposed either were not acceptable to the Legislature 
 or appeared to he in conflict with grant of the power to tax contained 
 in tlie Constitution. It became necessary to declare unconstitutional 
 one statute of this general nature. Perkins v. Westwood, 226 Mass. 
 268. The adoption and ratification of the Forty-fourth Amendment 
 under these circumstances renders imperative the inference that 
 the word " income " was there used witli the purpose of setting at 
 rest any doubt about the full and complete power of the Legislature 
 to deal with " income " as a subject of taxation. That word was 
 employed to express a comprehensive idea. It is not to be given 
 a narrow or constricted meaning. It must be interpreted as includ- 
 ing every item which by any reasonable understanding can fairly 
 be regarded as income. One purpose of the amendment was to avoid 
 with reference to anything rightly describable as " income," the 
 requirement of c. 1, § 1, art. 4 of the Constitution, that property 
 taxes must be "proportional . . . upon all . . . estates lying" 
 within the Commonwealth, and to enable income to be taxed at a rate 
 not " proportional " to all other property and to exempt from other 
 taxation the property from which such income arises. 
 
 " Income " like most other words has different meanings depend- 
 ent upon the connection in which it is used and the result intended 
 to be accomplished. One purpose of its use in the Forty-fourth 
 Amendment doubtless was to distinguish property flowing out 
 of an original investment from that which in its inherent nature 
 is permanent investment, already subject to the ample taxing power 
 of c. 1, §1, art. 4. But that is not its exclusive signification in the 
 amendment. In its ordinary and popular meaning, "income" is 
 the amount of actual wealth which comes to a person diiring a given 
 period of time. At any single moment a person scarcely can be said 
 to have income. The word in most, if not all, connections involves 
 time as an essential element in its measurement or definition. It 
 thus is differentiated from capital or investment, which commonly 
 means the amount of wealth which a person has on a fixed date. 
 Income may be derived from capital invested or in use, from labor, 
 from the exercise of skill, ingenuity or sound judgment, or from 
 a combination of any or all of these factors. One of the most recent 
 of its definitions is "the gain derived from capital, from labor, or 
 from both combined." Stratton's Independence, I^td. v. Howbert, 
 231 IT. S. 399, 415. Doubtless it would be difficult to give a com- 
 prehensive definition which can be treated as universal and final. 
 It is common speech for one to say that he made so much money
 
 SECT. IV.] TAX CUMMISSIONKK I', PUTNAM. 37*J 
 
 during a particular twelve months and to mean thereby that he has 
 iiKTuased his wealth to that amount. Such a remark made by one 
 not engaged permanently or inlenuittently in business or any gain- 
 ful occupation naturally means that by casual purchases or sales 
 of property made in the exercise of good judgment he has augmented 
 tiie total value of his ])r()j)erly. The decisive word in the Forty- 
 fourth Amendment is " income." That is a word which not ouly had 
 been much discussed by legislators and in the press in connection 
 with taxation, but which also is in everyday use. The common 
 meanings attached to it by lexicographers, therefore, have weight 
 in determining what the people may be supposed to have thought 
 its signification to have been when voting for the amendment. It 
 is defined as that "gain . . . which proceeds from labor, business, 
 or property; commercial revenue or receipts of any kind, including 
 wages or salaries, the proceeds of agriculture or commerce, the rent 
 of houses, or the return on investments," and also as " The amount 
 of money coming to a person or corporation within a specified time 
 . . . wlicther as payment for services, interest, or profit from in- 
 vestment." Its usual synonyms are gain, profit, revenue. It is 
 used in this sense also by writers upon taxation and economics. 
 
 The gains and profits made as a result of carrying on a business 
 of buying and selling goods had been held to be taxable as income 
 under the tax law long before the adoption of the Forty-fourth 
 Amendment. Wilcox v. County Commissioners, 103 Mass. 544. 
 It there was recognized that such income miglit accrue in part from 
 goods purchased before the period of time for which the income 
 was to be reckoned. Gain made in the conduct of a business which 
 consists of making purchases and sales generally is recognized as 
 income. Of course, one engaged in the business of buying and sell- 
 ing intangible personal property was equally suliject to taxation 
 on gains derived thei'efroni under the law as it was before 1016. 
 Such incomes had been taxed for many years immediately before 
 the adoption of the amendment. It hardly can be thought that the 
 people, in conferring the power to tax incomes, intended to per- 
 petuate for all time a distinction between incomes derived from 
 a business of buying and selling property, on the one side, and the 
 profits realized by one not engaged in such business but occasionally 
 and casually and not as a business making purchases and sales of 
 the same kind of property, on the other side, and to grant to their 
 representatives authority to tax the one and to deny them authority 
 to tax the other. In some connections profits of this kind have been 
 held to be income. ParVs estate, 173 Penn. St. 190. 
 
 The federal income tax law of 1013 may be presumed to have 
 been more or less familiar to the members of the General Court and 
 the people during the discussion accompanying the adoption of the 
 Fortv-fourth Amendment. The phrase of that law, c. 16. § 5B of 
 the Acts of Comzress, approved Ootohor 3, 1013, (38 F. S. Sts. at 
 Large, 167,) is significantly brond and inclusive: "The net income 
 of a taxable person shall include gains, profits, and income derived 
 from . . . dealings in property', whether real or personal, growing
 
 380 TAX COMMISSIONER V. PUTNAM. [CHAP. VII. 
 
 out of the ownership or use of or interest in real or personal prop- 
 ert)^ ... or gains or profits and income derived from any source 
 whatever." The mind of the ordinary legislator and voter would 
 naturally infer from these words that gains like those here in ques- 
 tion would be subject to the federal income tax. That act was passed 
 under the Sixteenth Amendment to the United States Constitution 
 which authorized a tax only on '' income." It is matter of common 
 ^Jcnowledge that under the federal income tax act an income tax 
 "was levied upon gains derived from purchases and sales similar to 
 those here in question, and that the right to do so was asserted by 
 the revenue othcers of the United States. Presumably this was 
 known by the members of the Legislatures of 1914 and 1915, 
 by which the Forty-fourth Amendment was agreed to, and by the 
 people who approved and ratified it. It is not pertinent to inquire 
 here whether that interpretation of the United States income tax 
 ultimately will be sustained. See Gray v. Darlington, 15 Wall. 63; 
 Gauley Mountain Coal Co. v. Hays, 144 C. C. A. 408; Lynch v. 
 Turrish, 236 Fed. Eep. 653, and cases cited at page 660. Compare 
 Stanton r. Baltic Mining Co. 240 U. S. 103; Von Baumbach v. 
 Sargent Land Co. 242 U. S. 503, 525; Brushaber v. Union Pacific 
 Railroad, 240 U. S. 1. The relevant fact is that the right to levy 
 such a tax on gains of this kind as an income tax was asserted by 
 the federal authorities and generally acquiesced in by the taxpayer 
 as bearing upon what scope shall be given to the word "income" 
 contemporaneously used in the Forty-fourth Amendment. 
 
 If the word "incomes" or the words "gain, profit and income" 
 had been used, it hardly would be contended that the intendment 
 of the amendment was not comprehensive. But in the framing of 
 constitutions words naturally are employed in a compendious sense 
 as expressive of general ideas rather than of the fine shades of close 
 distinctions. The simple and dignified diction of our Constitution 
 does not readily lend itself to technical and narrow definition. 
 Terse statement of governmental principles in plain language, and 
 not amplification in the delicate niceties of words, characterizes its 
 composition. 
 
 The fair and almost irresistible conclusion from all these con- 
 siderations is that the word "income" in the Fort^'-fourth Amend- 
 ment has a generic meaning and includes gains, profits and revenues. 
 
 The gains received from sales of stocks come within the defini- 
 tions of " income " heretofore stated. They are derived from the 
 application of sagacity to the use of capital in making purchases 
 and resales at an advance. The transactions could not be carried 
 out except by the use of capital and the profit is derived directly 
 from the capital in combination with skill in selecting the time 
 for purchase and for sale. 
 
 It is true that in some other connections profits and gains arising 
 from the increase in value of investments and realizerl by sale are 
 treated as a part of the principal and not as income. That is so of 
 trust estates. But, as has been pointed out, it is not true where 
 business is conducted which consists of making sales and purchases.
 
 SECT. IV.] TAX COMMISSIONER V. PUTNAM. 381 
 
 Williams v. Milton, 215 Mass. 1, 11. Wilcox v. County Commis- 
 sioners, 103 Mass. 544. 
 
 A very different question would arise if the attempt were made 
 to tax as income to increase in value of the capital investment in 
 intangibles whicli had accrued to tin? owner from a date of purchase 
 long anterior to the enactment of the tax act. Such a construction 
 of a statute would not be adopted except as the imperative result 
 of unequivocal words, and even then serious questions might arise 
 as to the validity of such an act. See Gray v. Darlington, 15 Wall. 
 63; Bailey v. Railroad Co. lOG U. S. 109, 114; McCoach v. MinehiU 
 & Schuylkill Haven Kailroad, 22S U. S. 295. 300. That would be 
 an attempt to tax as income an increment in value of the capital 
 investment which had occurred and been realized in possession pre- 
 vious to the taking eifect of the tax law. It might be regarded as 
 an effort to convert into income that which already had become 
 capital. See Mitchell Brothers v. Doyle, 225 Fed. Rep. 437. That 
 is not the situation in the case at bar. The income tax act accord- 
 ing to the express provisions of § 7 and as interpreted, by the com- 
 missioner in its application to these defendants, is to be levied only 
 on such increases in values as have been realized by sales within the 
 year, using as the basis of value in instances where stock was owned 
 by the taxpayer on January 1, 1916, the fair cash value at that time. 
 Thus the income as ascertained for tax purposes is the annual in- 
 come in its strict sense. It is a direct apportionment of the incre- 
 ment from this source to the year in which it was received and 
 converted into cash. See Doyle v. Mitchell Brothers, 235 Fed. Rep. 
 686 ; 149 C. C. A. 106 ; Biwabik Mining Co. v. United States, 242 
 Fed. Rep. 9, and Cleveland, Cincinnati, Chicago & St. Louis Railway 
 V. United States, 242 Fed. Rep. 18, each decided by the Circuit Court 
 of Appeals for the Sixth Circuit on May 8, 1917. Therefore no 
 question either of statute interpretation or constitutionality is 
 raised in the cases at bar as to an attempt to tax gains on the 
 value of property which have not been realized by sale and which 
 would be known in common speech as mere paper profits, and noth- 
 ing to that point is here decided. 
 
 The argument against the validity of the tax, as likely to cause 
 confusion in keeping accounts of trustees and others and in making 
 divisions and apportionments, is based merely on convenience and 
 cannot be regarded as of much weight. Illustrations were put in 
 argument and readilv can be imagined of instances where hardship 
 may be wrought by this decision. But that is likely to be true of 
 every general rule of law and particularly of tax statutes. 
 
 These reasons lead to the conclusion that the tax upon gains in 
 excess of losses arising from the sales of stock during the year 1916 
 is a tax upon income and not upon principle. • _ 
 
 In reaching tliis conclusion we are not unmindful of decisions 
 of other jurisdictions more or less apparently at variance. See for 
 example,' Crav r. Darlington, 15 Wall. 63: Hudson Bay Co. v. 
 Stevens, 25 T. L. R. 700; Tehran (Johore) Rubber Syndicate, Ltd. 
 V. Farmer, 47 Sc. L. Rep. 816; Lynch r. Turrish, 236 Fed. Rep.
 
 382 TAX COMMISSIONER V. PUTNAM. [CHAP. VII. 
 
 653 ; 149 C. C. A. 649, and cases there collected ; Lynch v. Hornby, 
 236 Fed. Rep. 661 ; 149 C. C. A. 657. But the grounds upon which 
 this judgment rests are such as to render unnecessary a critical ex- 
 aniinatioii, of those decisions. They relate to other statutes enacted 
 under constitutional provisions different from those of the Forty- 
 fourth Amendment. 
 
 The word '' income " is susceptible of a meaning sufficiently broad 
 to include gain of the kind and from the sources here in question. 
 The circumstances under which the Forty-fourth Amendment was 
 adopted are of persuasive force in requiring the conclusion that it 
 was the purpose of the people to include within its scope everything 
 that by reasonable intendment can be said to be income. 
 
 The income tax act does not violate the provisions of the Forty- 
 fourth Amendment so far as concerns this item of income. It does 
 not levy a tax at a different rate upon incomes derived from the 
 same class of property. The rate levied upon gains from the sales 
 of intimgible personal property is three per cent, § 5 (c), while 
 that upon the dividends from stock and interest on bonds and notes 
 is six per cent, § 2. But these two sources of income do not belong 
 to the same class. When a classification is made of property for 
 purposes of taxation, the question is, as was said in Nicol v. Ames, 
 173 U. S. 509, 521, "whether there is any reasonable ground for 
 it, or whether it is only and simply arbitrary, based upon no real 
 distinction and entirely unnatural." A classification will not be 
 declared void as unreasonable " unless it was plainly and grossly 
 oppressive and unequal, or contrary to common right." Oliver v. 
 Washington Mills, 11 Allen, 268, 279. The tax upon interest and 
 dividends is levied upon a return which comes to the owner of the 
 principal security without further effort on his part. The tax upon 
 excess of gains over losses in the purchases and sales of intangible 
 personal property is levied, not upon income derived from a specific 
 property but from the net result of the combination of several fac- 
 tors, including the capital investment and the exercise of good judg- 
 ment and some measure of business sagacity in making purchases 
 and sales. Gain derived in this way, to express it in " summary and 
 comprehensive form," " is the creation of capital, industry, and 
 skill." Wilcox V. County Commissioners, 103 Mass. 544. It is not 
 the production of capital alone and does not arise solely from a 
 simple investment. 
 
 The question was somewhat argued at the bar whether the tax 
 authorized by the Forty-fourth Amendment and levied by the in- 
 stant statute is whollv a property tax, as was said in Opinion of the 
 Justices, 220 Mass. 613, 623, 625, Perkins v. Westwood, 226 Mass. 
 268, Pollock V. Farmers' Loan & Trust Co. 157 U. S. 429, 581; 
 s. c. 158 U. S. 601, or whether in some aspects and applications it 
 may be an excise. Springer v. United States, 102 U. S. 586, 602, 
 Brushaber v. Union Pacific Railroad, 240 U. S. 1, 16, 17, Flint v. 
 Stone Tracy Co. 220 U. S. 107, 150, 152, Glasgow v. Rowse, 43 Mo. 
 479, 491, Waring v. Mayor & Aldermen of Savannah, 60 Ga. 93, 
 100, Drexel & Co. v. Commonwealth, 46 Penn. St. 31, 40. It is not
 
 <-/ 
 
 SECT. IV.] TAX COMMISSIONER V. PUTNAM. 38.j 
 
 necessary to do more than to refer to 220 Mass. 623-627, for it is 
 plain that the Fort3'-fourth Amendment nuxlilied the provisions of 
 e. 1, § 1, art. 4 oi" the Constitution, to the effect that property taxes 
 must be proportional, so tiiat the Legislature now has power to levy 
 taxes upon whatever rightly may be held to be "income" at ditl'erent 
 rates upon ineome derived from diU'erent classes of property, pro- 
 vided there is uniformity in rate upon incomes from the same classes 
 of property. It follows that in this connection the rule stated in 
 Gleason v. Mclvay, 134 Mass. 419, and O'Keett'e v. Somerville, 190 
 Mass. 110, to the effect that no valid excise can be imposed upon 
 the exercise of a natural right, has no relevancy. 
 
 2. The second question is whether gains derived from the sale of 
 rights to subscribe for new shares of stock to be issued by a corpora- 
 tion are taxable as income. 
 
 The respondent Putnam received during 191G proceeds from the 
 sale of rights, declared in that year, to subscribe to shares of new 
 stock ill corporations in which he was a stockholder previous to 
 1916. 
 
 The same reasons ^vllich already have been stated, as to the right 
 to treat gains in excess of losses from purchases and sales of intan- 
 gible personal property as subject to an income tax, lead to the 
 conclusion that gains arising from the sale of rights to subscribe 
 for new stock issued by corporations may also be treated as income 
 by the General Court for purposes of taxation under the Forty- 
 fourth Amendment. Such rights are themselves a species of intan- 
 gible property. They come to the stockholder as a gratuity. They 
 are a new thing of value which he did not possess before. The 
 amount for which he sells them is a gain. 
 
 In the management of trusts as between a life tenant and remain- 
 derman rights to subscril)e for stock, Atkins i'. Albree, 12 Allen, 
 359, 3G1, Davis v. Jackson, 152 Mass. 58, 61, and stock dividends, 
 D'Ooge V. Leeds, 176 Mass. 558, 560, Rand v. Hubbell, 115 Mass. 
 461, are regarded as capital and not as income in this Common- 
 wealtli. The rule of this Commonwealth, to the effect that as be- 
 tween life tenant and remainderman stock dividends are treated as 
 capital and not as income, perhaps may have grown up in part at 
 least by reason of its convenience and it appears to be widely adopted. 
 Gibbons v. :Mahon, 136 U. S. 549. 
 
 But, however that may be, it is manifest that there is no inherent, 
 necessary and immutable reason why stock dividends should always 
 be treated as capital. This is apparent because in several jurisdic- 
 tions thev are treated either in whole or in part as income and not 
 as capital. ^Matter of Osborne, 209 N. Y. 450. (See McTiOuth v. 
 Hunt, 154 N. Y. 179; Robertson v. de Brulatour, 188 N. Y. 301; 
 Lowrv V. Farmers' Loan & Trust Co. 172 N. Y. 137.) Pratt v. 
 Douglas, 11 Stew. 516, 541. F.-irp's Appeal, 28 Penn. St. 368. Hol- 
 brook V. Ilolbrook, 74 N". IT. 201, 203, 204. Pritchitt v. Nashville 
 Trust Co. 96 Tenn. 472. Hite v. Hite, 93 Kv. 257. Thomas v. 
 Gregg, 78 Md. 545. Goodwin 7-. :NrcGaughey, 108 Minn. 248. 
 Soehnloin r. Soehnlein, 146 Wis. 330, 339. The same is true of our
 
 384 TAX COMMISSIONER V. PUTNAM. [CHAP. VII. 
 
 rule (which prevails also at least in the federal and English courts, 
 see Gibbons v. Mahou, 136 U. S. 549, 567; Bouch v. Sproule, 12 
 App. Cas. 385) to the effect that rights to subscribe for new stock 
 which have a market value are to be attributed to principal and not 
 to income. Some other States hold the value of such rights to be 
 income and not principal. Wiltbank's Appeal, 64 Penn. St. 256. 
 See Lord v. Brooks, 52 N. H, 72. 
 
 It seems impossible to say, when a kind of gain is in many States 
 held even as between life tenant and remainderman to be income 
 and not capital, that the word "income," used in an amendment 
 to the Constitution adopted for the express purpose of enabling a 
 tax to be levied broadly on all that rightly may be described as in- 
 come, should be construed as excluding such gains simply because 
 this court has held that it was not income in a single branch of law 
 while numerous other courts have held the contrary even upon that 
 point. However strong such an argument might be when urged as 
 to the interpretation of a statute, it is not of prevailing force as to 
 the broad considerations involved in the interpretation of an amend- 
 ment to the Constitution adopted under the conditions preceding 
 and attendant upon the ratification of the Forty-fourth Amend- 
 ment. 
 
 The rights to subscribe for stock, when sold and converted into 
 cash, rightly may be treated as taxable as a gain on the sale of in- 
 tangibles under § 5 (c) of the income tax act. These rights com- 
 monly are represented by certificates and pass by indorsement. They 
 are a species of intangible property. They are not regarded or- 
 dinarily as a profit from the prosecution of the business, but are 
 an inherent and constituent part of the shares. Atkins v. Albree, 
 12 Allen, 359, 361. Hyde v. Holmes, 198 Mass. 287, 293. Their 
 sale resulted from an exercise of judgment to that effect on the part 
 of the stockholder. They are indistinguishable in principle from a 
 sale of the stock itself, and gains derived from sales of such rights 
 fall within the same class of income. The statute in this regard 
 is not in conflict with the amendment. 
 
 The question whether rights to subscribe for stock, which are 
 exercised by subscription, are taxable as income is not raised on this 
 record and is not decided. 
 
 3. The third question is whether a stock dividend, declared and 
 paid after the statute went into effect out of profits earned before 
 it took effect, is taxable as income. The respondent Garfield received 
 during 1916 a stock dividend declared in that year on shares of 
 stock in corporations owned by her before that time. 
 
 The stock dividends in the Garfield case were declared out of an 
 accumulation of earnings which before 1916 had been invested in 
 permanent additions to the plants of the corporations involved. It 
 is urged that these earnings, therefore, had become a part of capital 
 before 1916 and hence cannot in the nature of things be taxed as 
 income. It is true that, in instances of this sort arising between 
 life tenant and remainderman, the fact that the surplus of a corpora- 
 tion has been used in permanent increases of the property devoted
 
 SECT. IV.] TAX COMMISSIONER V. PUTNAM. 385 
 
 to the business of the corporation is of tentimes of significance. Minot 
 V. Paine, 99 Mass. 101, 111. Hemenway v. Hemenway, 181 Mass. 
 40G, -IIU. But upon this point the inquiry is as to the intention of 
 the Legislature as numifested by the words it has used. Those per- 
 tinent in this connection are in § 2 (b), where are subjected to the 
 tax. " Dividends on shares in all corporations and joint stock com- 
 panies . . . [with exceptions not here material] . . . No distri- 
 bution of capital, whether in liquidation or otherwise, shall be 
 taxable as income under this section; but accumulated profits shall 
 not be regarded as capital under tiiis provision." That which orig- 
 inally had been earnings in the case at bar had never been dis- 
 tributed as a cash dividend or in any other form. Its use had been 
 such as to add to the value of the capital. It doubtless had increased 
 that value prior to 191G. But the act of the corporation in 1916 
 was in substance a distribution of certificates of title to represent 
 this increment of value with all the advantages that might flow 
 therefrom. It was the issuance to the stockholder of a new thing 
 of value, transferable, transmissible and salable separate and apart 
 from that which before he had possessed. " Accumulated profits " 
 as used in the statute are words of sufficiently comprehensive scope 
 to include profits which had been earned and invested as had those 
 here in question. The words " accumulated profits " are used as 
 the antithesis of " distribution of capital." The latter would include 
 payment of a part of the capital investment sold and returned to 
 the shareholders, whereby the capacity of the corporation to carry 
 on business was impaired or depleted. See, for example, Lvnch v. 
 Hornby, 236 Fed. Bep. 661 ; 149 C. C. A. 657. Other illustrations 
 might be put. But the words " distribution of capital " do not 
 readily lend themselves to an issue of new stock, which in its last 
 analysis represents surplus earnings of the corporation for the time 
 being applied to increase of plant and which arc intended to be 
 continued to that use. In essence the thing which has been done 
 is to distribute a symbol representing an accumulation of profits, 
 which instead of being paid out in cash is invested in the business, 
 thus augmenting its durable assets. In this aspect of the case the 
 substance of the transaction is no different from what it would be 
 if a cash dividend had been declared with the privilege of subscrip- 
 tion to an equivalent amount of new sliares. The stock dividoud 
 was declared strictly out of an accumulation of earnings applied 
 to business uses and not out of increased market value of capital 
 investment. See Thayer v. Burr, 201 N. Y. 155. That which the 
 stockholder had before was a fractional interest in the property of 
 the corporation. So far as concerned the accumulation of profits, 
 there was a possibility that they might be paid out in whole or in 
 part as a cash dividend by authority of the corporation. By the 
 issue of the stock rlivirlend that possibility is gone and the stock- 
 holder now has evidence of a permanent interest in the corporate 
 enterprise of which he cannot be deprived. It is a thing different 
 in kind from the thing which the stockholder owned before. From 
 the viewpoint of the stockholder, he has received in the form of
 
 386 TAX COMMISSIONER V. PUTNAM. [ciIAP. VII. 
 
 dividend in stock a thing with which theretofore he could have no 
 tangible dealings. The certificate for the new shares of stock repre- 
 senting the stock dividend may have a materially greater value than 
 the less tactile right to a share in the accumulated profits wliich 
 he had before. The fact that the surplus had been accumulated 
 before the income tax law went into etfect is not of consequence 
 in this particular. The thing of value which is taxed as income, 
 namely the dividend in stock, did not come into his possession or 
 right to possession until the year for which he is taxed. It is this 
 thing of value which is taxable at the time when it comes into his 
 right to possession, Edwards v. Keith, 145 C. C. A. 298. Van 
 Dyke v. Milwaukee, 159 Wis. 460. 
 
 The contention that stock dividends are not taxable as income, 
 because in this Commonwcalili they are treated as capital and not 
 as income as between life tenant and remainderman, has been dis- 
 posed of by what has been said already in discussing the second 
 question here raised respecting the taxability as income of rights 
 to subscribe for new shares of stock. 
 
 The stock dividends, so far as regards the source from which 
 they come to the stockholder and the imj)assive nature of his receipt 
 of them, are derived from the same class of property from which 
 are derived ordinary dividends and rightly may be classified with 
 them under § 3 of the income tax act. The two should be taxed, 
 as they are in the statute, at the same rate. 
 
 So far as there may be anvthiug at variance with this conclusion 
 in Lynch v. Turrish, 236 Fed. Eep. 053; 149 C. C. A. 649, we are 
 constrained not to follow it. See in this connection Southern Pacific 
 Co. V. Lowe, 238 Fed. Eep. 847. 
 
 Therefore, in this particular the income tax act is not in conflict 
 with the requirements of the Forty-fourth Amendment as to uni- 
 formity of rate on incomes derived from the same class of property. 
 
 4. The fourth question is whether a cash dividend declared and 
 paid after the statute took effect, out of profits earned before it 
 was enacted, is taxable as income. 
 
 The respondent Putnam received during 1916 an extra cash div- 
 idend of thirty-three and one third per cent on certain shares of 
 corporate stock owned by him befoi-e 1916, which was declared out 
 of undistributed earnings accrued before March, 1913. 
 
 It is the general and long established rule in this Commonwealth 
 that cash dividends received on corporate stock are to be treated 
 as income and not as capital. Talbot v. Milliken, 221 Mass. 367. 
 Gray v. Hemenway, 223 Mass. 293. There is no reason in the cir- 
 cumstances of the case at bar for varying that rule. The present case 
 is well within the scope of these decisions. A stockholder has no in- 
 dividual interest in the profits of a corporation until a dividend 
 has been declared. The accumulation of a surplus does not of itself 
 entitle stockholders to a dividend. Smith v. Hurd, 12 Met. 371. 
 New York, Lake Erie, & V\^estern Eailroad v. Mckals, 119 TJ. S. 
 296. TTumphrevs v. McKissock, 140 TJ. S. 304. United States 
 Radiator Corp. v. New York, 208 N. Y. 144, 152. The extra cash
 
 SECT. IV.] TOWNE V. EISNER. 387 
 
 dividend was declared out of surplus earnings which haa accumu- 
 lated during twenty-three years i)revious to March 1, \\)\',). Al- 
 though it was large and had been accumulating l"or a long time, it 
 was not the less a cash dividend. It came to the shareholder as 
 his individual ])roperty for the first time when it was declared and 
 paid in t'JKJ. it was not in substance or eifect a distribution of 
 cn])ilal. ^Moreover, it is expressly provided in § :^ of the income 
 tax law that "No distribution of capital, whetiier in liquidation or 
 otherwise, shall be taxable as income under tliis section ; but accumu- 
 lated profits shall not be regarded as capital under this provision." 
 Manifestly it was not intended hereby to change the general rule 
 recognized in numerous cases in addition to those heretofore cited. 
 
 The decision upon the first three main questions is by a majority 
 of the court, and is unanimous upon the fourtli question. It follows 
 that in each case the entry must l)e 
 
 Peremptory writ of mandamus to issue. 
 
 TOWNE V. EISNER. 
 Supreme Court of the United States. 1918. 
 
 [Reported 245 U. 8. 418.] 
 
 Holmes, J. This is a suit to recover the amount of a tax paid 
 under duress in respect of a stock dividend alleged by the Govern- 
 ment to be income. A demurrer to the declaration was sustained 
 by the District Court and judgment was entered for the defendant. 
 242 Fed. Hep. 702. The facts alleged are that the corporation voted 
 on December 17, 1913, to transfer $1,500,000 surplus, being profits 
 earned before January 1, 1913, to its capital account, and to issue 
 fifteen thousand shares of stock representing the same to its stock- 
 holders of record on December 2G; that the distribution took place 
 on January 2, 1914, and that the plaintiff received as his due pro- 
 portion four thousand one hundred and seventy-four and a half 
 shares. The defendant compelled the plaintiff to pay an income 
 tax upon this stock as equivalent to $417,450 income in cash. The 
 District Court held that the stock was income within the meaning 
 of the Income Tax of October 3, 1913, c. 16, S3ction 11; A, 
 subdivisions 1 and 2; and B. 38 Stat. 114, 166, 167. It also held 
 that the act so construed was constitutional, Avhereas the declara- 
 tion set up that so far as the act purported to confer power to make 
 this levy it was unconstitutional and void. 
 
 The Government in the first place moves to dismiss the case for 
 want of jurisdiction, on the ground that the only question here is 
 the construction of the statute not its constitutionality. It argues 
 that if such a stock dividend is not income within the meaning of 
 the Constitution it is not income within the intent of the statute, 
 and hence that the meaning of the Sixteenth Amendment is not
 
 388 TOWNE V. EISNER. [cHAP. VII. 
 
 an immediate issue, and is important only as throwing light on the 
 construction of the act. But it is not necessarily true that income 
 means the same thing in the Constitution and the act. A word 
 is not a crystal, transparent and unchanged, it is the ^kin of 
 a living thought and may vary greatly in color and content accord- 
 ing to the circumstances and the time in which it is used. Lamar 
 V. United States, 240 U. S. GO, 65. "Whatever the meaning of the 
 Constitution, the Government had applied its force to the plain- 
 tiff, on the assertion that the statute authorized it to do so, before 
 the suit was brought, and the court below has sanctioned its course. 
 The plaintiff says that the statute as it is construed and admin- 
 istered is unconstitutional. He is not to be defeated by the reply 
 that the Government does not adhere to the construction by virtue 
 of which alone it has taken and keeps the plaintiff's money, if this 
 court should think that the construction would make the act un- 
 constitutional. While it keeps the money it opens the question 
 whether the act construed as it has construed it can be maintained. 
 The motion to dismiss is overruled. Billings v. United States, 232 
 U. S. 261, 276. Altman & Co. v. United States, 224 U. S. 583, 
 596, 597. 
 
 The case being properly here, however, the construction of the 
 act is open, as well as its constitutionality if construed as the Gov- 
 ernment has construed it by its conduct. Billings v. United States, 
 ubi supra. Notwithstanding the thoughtful discussion that the case 
 received below we cannot doubt that the dividend was capital as 
 well for the purposes of the Income Tax Law as for distribution 
 between tenant for life and remainderman. A\Tiat was said by this 
 court upon the latter question is equally true for the former. "A 
 stock dividend really takes nothing from the property of the corpora- 
 tion, and adds nothing to the interests of the shareholders. Its 
 property is not diminished, and their interests are not increased. 
 . . . The proportional interest of each shareholder remains the 
 same. The only change is in the evidence which represents that 
 interest, the new shares and the original shares together represent- 
 ing the same proportional interest that the original shares repre- 
 sented before the issue of the new ones." Gibbons v. Mahon, 136 
 U. S. 549, 559, 560. In short, the corporation is no poorer and the 
 shareholder is no richer than they were before. Logan County v. 
 United States, 169 U. S. 255, 261. If the plaintiff gained 'any 
 small advantage by the change, it certainly was not an advantage 
 of $417,450, the sum upon which he was taxed. It is alleged and 
 admitted that he receives no more in the way of dividends and that 
 his old and new certificates together are worth onlv what the old 
 ones were worth before. If the sum had been carried from surplus 
 to capital account without a corresponding issue of stock certificates, 
 which there was nothing in the nature of things to prevent, we do 
 not suppose that any one would contend that the plaintiff had 
 received an accession to his income. Presumably his certificate 
 would have the same value as before. Again, if certificates for 
 $1,000 par were split up into ten certificates each, for $100, we pre-
 
 SECT. IV.] EISNER V. MACOMBEE. 389 
 
 sume that no one would call the new certificates income. What has 
 happened i? that the plaiiitiir's old coitificates have been split up 
 in effect and have diminished in value to the extent of the value of 
 the new.^ 
 
 Judgment reversed. 
 
 EISNER V. MACOiEBER. 
 Supreme Court of the United States. 1920. 
 
 [Reported 252 U. 8. 189.] 
 
 Pitney, J. This case presents the question whether, by virtue 
 of the Sixteenth Amendment, Congress has the power to tax, as in- 
 come of the stockholder and without apportionment, a stock dividend 
 made lawfully and in good faith against profits accumulated by the 
 corporation since March 1, 1913. 
 
 It arises under the Revenue Act of September 8, 1916, c. 463, 39 
 Stat. 756 et seq., which, in our opinion (notwithstanding a conten- 
 tion of the Government that will be noticed), plainly evinces the 
 purpose of Congress to tax stock dividends as income. 
 
 The facts, in outline, are as follows : 
 
 On January 1, 1916, the Standard Oil Company of California, 
 a corporation of that State, out of an authorized capital stock of 
 $100,000,000, had shares of stock outstanding, par value $100 each, 
 amounting in round figures to $50,000,000. In addition, it had 
 surplus and undivided profits invested in plant, property, and busi- 
 ness and required for the purposes of the corporation, amounting 
 to about $-15,000,000, of which about $20,000,000 had been earned 
 prior to March 1, 1913, the balance thereafter. In January, 1916, 
 in order to readjust the capitalization, the board of directors decided 
 to issue additional shares sufficient to constitute a stock dividend of 
 50 per cent of the outstanding stock, and to transfer from surplus 
 account to capital stock account an amount equivalent to such issue. 
 Appropriate resolutions were adopted, an amount equivalent to the 
 par value of the proposed new stock was transferred accordingly, 
 and the new stock duly issued against it and divided among the 
 stockholders. 
 
 Defendant in error, being the owner of 2.200 shares of the old stock, 
 received certificates for 1,100 additional shares, of which 18.07 per 
 cent., or 198.77 shares, par value $19,877, were treated as represent- 
 ing surplus earned between March 1, 1913', and January 1, 1916. 
 She was called upon to pay, and did pay under protest, a tax imposed 
 under the Revenue Act of 19 IG, based upon a supposed income 
 of $19,877 because of the new shares; and an appeal to the Com- 
 missioner of Internal Revenue having been disiiUowed, she brought 
 action against the Collector to recover the tax. In her complaint 
 she alleged the above facts, and contended that in imposing such 
 
 ' See Ace. Commissioners of Tiitemal Revenue v. Blott, [1021] 2 A. C. 171.
 
 390 EISA'KIt V. MACOMBEK. [cilAl'. Vll. 
 
 a tax the Eevenue Act of 1916 violated Art. I, § 2, cl. 3, and Art. 
 I, § 9, cl. 4, of the Constitution of the United States, requiring 
 direct taxes to be apportioned according to population, and that 
 the stock dividend was not income within the meaning of the Six- 
 teenth Amendment. A general demurrer to the complaint was over- 
 ruled upon the authority of Towne v. Eisner, 245 U. S. 418; 
 and, defendant having failed to plead further, final judgment 
 went against him. To review it, the present writ of error is 
 prosecuted. 
 
 The case was argued at the last term, and reargued at the present 
 term, both orally and by additional briefs. 
 
 We are constrained to hold that the judgment of the District 
 Court must be affirmed : First, because the question at issue is con- 
 trolled by Towne v. Eisner, supra; secondly, because a reexamina- 
 tion of the question, with the additional light thrown upon it by 
 elaborate arguments, has confirmed the view that the underlying 
 ground of that decision is sound, that it disposes of the question 
 here presented, and that other fundamental considerations lead to 
 the same result. 
 
 The fundamental relation of "capital" to "income" has been 
 much discussed by economists, the former being likened to the tree 
 or the land, the latter to the fruit or the crop; the former depicted 
 as a reservoir supplied from springs, the latter as the outlet stream, 
 to be measured by its flow during a period of time. For the present 
 purpose we require only a clear definition of the term " income," 
 as used in common speech, in order to determine its meaning in 
 the Amendment; and, having formed also a correct judgment as 
 to the nature of a stock dividend, we shall find it easy to decide 
 the matter at issue. 
 
 After examining dictionaries in common use (Bouv. L. D. ; Stand- 
 ard Diet.; Webster's Internat. Diet.; Century Diet.), we find little 
 to add to the succinct definition adopted in two cases arising under 
 the Corporation Tax Act of 1909 (Stratton's Independence v. How- 
 bert, 231 U. S. 399, 415; Doyle v. Mitchell Bros. Co., 247 U. S. 
 179, 185) — "Income may be defined as the gain derived from 
 capital, from labor, or from both combined," provided it be under- 
 stood to include profit gained through a sale or conversion of capital 
 assets, to which it was applied in the Doyle case (pp. 183, 185). 
 
 Brief as it is, it indicates the characteristic and distinguishing 
 attribute of income essential for a correct solution of the present 
 controversy. The Government, although basing its argument upon 
 the definition as quoted, placed chief emphasis upon the word 
 "gain," which was extended to include a variety of meanings; while 
 the significance of the next three words w\as either overlooked or 
 misconceived. " Derived — from, — capital " ; — " the qaxn — de- 
 rived — from — capital," etc. Here we have the essential matter: 
 not a gain accruing to capital, not a growth or increment of value 
 in the investment; but a gain, a profit, something of exchangeable 
 value proceeding from the property, severed from the capital how- 
 ever invested or employed, and coming in, being " derived," that is.
 
 SECT. IV.] EISNEK V. MACOMBEE. 391 
 
 received or drawn hy the recipient (the taxpayer) for his separate 
 use, Ijonefit and disposal; — that is income derived from property. 
 Nothing else answers the description. 
 
 The same lundamental conception is clearly set forth in the Six- 
 teenth Amendment — "incomes, from whatever source derived" — 
 the essential thou-i:ht being expressed with a conciseness and lucidity 
 entirely in harmony with the form and style of the Constitution. 
 
 Can a stock dividend, considering its essential character, be 
 brought within the definition? To answer this, regard must be 
 had to the nature of a corporation and the stockholder's relation 
 to it. We refer, of course, to a cori)oration such as the one in the 
 case at bar, organized for profit, and having a capital stock divided 
 into shares to which a nominal or par value is attributed. 
 
 Certainly the interest of the stockholder is a capital interest, and 
 his certilkates of stock are but the evidence of it. They state the 
 number of shares to wdiich he is entitled and indicate their par value 
 and how the stock may be transferred. They show that he or his 
 assignors, immediate or remote, have contributed capital to the en- 
 terprise, that lie is entitled to a corresponding interest proportionate 
 to the whole, entitled to have the property and business of the com- 
 pany devoted during the corporate existence to attainment of the 
 common objects, entitled to vote at stockholders' meetings, to receive 
 dividends out of the corporation's profits if and when declared, and, 
 in the event of liquidation, to receive a proportionate share of the 
 net assets, if any, remaining after paying creditors. Short of liqui- 
 dation, or until dividend declared, he has no right to withdraw any 
 part of either capital or profits from the common enterprise ; on the 
 contrary, his interest pertains not to any part, divisible or indivisible, 
 but to the entire assets, business, and affairs of the company. ISTor 
 is it the interest of an owner in the assets themselves, since the cor- 
 poration has full title, legal and equitable, to the whole. The stock- 
 holder has the right to have the assets employed in the enterprise, with 
 the incidental rights mentioned ; but, as stockholder, he has no right 
 to withdraw, only the right to persist, subject to the risks of the 
 enterprise, and looking only to dividends for his return. If he de- 
 sires to dissociate himself from the company he can do so only by 
 disposing of his stock. 
 
 For bookkeeping purposes, the company acknowledges a liability 
 in form to the stockholders equivalent to the aggregate par value 
 of their stock, evidenced by a "capital stock account." If profits 
 have been made and not divided they create additional bookkeeping 
 liabilities under the head of "profit and loss," "undivided profits," 
 "surplus account," or tlie like. None of these, however, gives to 
 the stockholders as a body, much less to any one of them, either a 
 claim afrainst the goinsr concern for any particular sum of money, 
 or a right to any particular portion of tlie assets or any share in 
 them unless or until the directors conclude that dividends shall be 
 made and a part of the company's assets segregated from the com- 
 mon fund for the purpose. The dividend normally is payable in 
 money, under exceptional circumstances in siune other divisible
 
 392 EISNEK V. MACOMBER, [CIIAP. VII. 
 
 property; and when so paid, then only (excluding, of course, a 
 possible advantageous sale of his stock or winding-up of the com- 
 pany) does the stockholder realize a profit or gain which becomes 
 his separate property, and thus derive income from the capital that 
 he or his predecessor has invested. 
 
 In the present case, the corporation had surplus and undivided 
 profits invested in plant, property, and business, and required for 
 the purposes of the corporation, amounting to about $45,000,000, 
 in addition to outstanding capital stock of $50,000,000. In this the 
 case is not extraordinary. The profits of a corporation, as they 
 appear upon the balance sheet at the end of the year, need not be 
 in the form of money on hand in excess of what is required to meet 
 current liabilities and finance current operations of the company. 
 Often, especially in a growing business, only a part, sometimes a 
 small part, of the year's profits is in property capable of division; 
 the remainder having been absorbed in the acquisition of increased 
 plant, equipment, stock in trade, or accounts receivable, or in de- 
 crease of outstanding liabilities. When only a part is available 
 for dividends, the balance of the year's profits is carried to the 
 credit of undivided profits, or surplus, or some other account having 
 like significance. If thereafter the company finds itself in funds 
 beyond current needs it may declare dividends out of such surplus 
 OT undivided profits ; otherwise it may go on for years conducting a 
 successful business, but requiring more and more working capital 
 because of the extension of its operations, and therefore unable to 
 declare dividends approximating the amount of its profits. Thus 
 the surplus may increase until it equals or even exceeds the par 
 value of the outstanding capital stock. This may be adjusted upon 
 the books in the mode adopted in the case at bar — by declaring a 
 " stock dividend." This, however, is no more than a book adjust- 
 ment, in essence not a dividend but rather the opposite; no part of 
 the assets of the company is separated from the common fund, noth- 
 ing distributed except paper certificates that evidence an antecedent 
 increase in the value of the stockholder's capital interest resulting 
 from an accumulation of profits by the company, but profits so far 
 absorbed in the business as to render it impracticable to separate 
 tbem for withdrawal distribution. In order to make the adjust- 
 ment, a charge is made against surplus account with corresponding 
 credit to capital stock account, equal to the proposed "dividend"; 
 the new stock is issued against this and the certificates delivered 
 to the existing stockholders in proportion to their previous holdings. 
 This, however, is merely bookkeeping that does not affect the aggre- 
 gate assets of the corporation or its outstanding liabilities; it affects 
 only the form, not the essence, of the "liability" acknowledged by 
 the corporation to its own shareholders, and this through a readjust- 
 ment of accounts on one side of the balance sheet only, increasing 
 '' capital stock " at the expense of " surplus " ; it does not alter the 
 preexisting proportionate interest of any stockholder or increase 
 the intrinsic value of his holding or of the aggregate hoklin.gfs of 
 the other stockholders as they stood before. The new certificates
 
 SECT. IV.] EISNER V. MACOMBER. 393 
 
 simply increase the number of the sliares, with consequent dilution 
 of the value of each share. 
 
 A " stock dividend '' shows tliat the company's accumulated profits 
 have been capitalized, instead of distributed to the stockiiolders or 
 retained as surplus available for distribution in money or in kind 
 should opportunity offer. Far from being a realization of profits 
 of the stockholder, it tends rather to postpone such realization, in 
 that the fund represented by the new stock has been transferred 
 from surplus to capital, and no longer is available for actual dis- 
 tribution. 
 
 The essential and controlling fact is that the stockholder has 
 received nothing out of the company's assets for his separate use 
 and benefit; on the contrary, every dollar of his original investment, 
 together with whatever accretions and accumulations have resulted 
 from employment of his money and tiiat of the other stockholders 
 in the business of the company, still remains the property of the 
 company, and subject to business risks which may result in wiping 
 out the entire investment. Having regard to the very truth of the 
 matter, to substance and not to form, he has received nothing that 
 answers the definition of income within the meaning of the Six- 
 teenth Amendment. 
 
 Being concerned only with the true character and effect of such 
 a dividend when lawfully made, we lay aside the question whether 
 in a particular case a stock dividend may be authorized by the local 
 law governing the corporation, or whether the capitalization of prof- 
 its may be the result of correct judgment and proper business policy 
 on the part of its management, and a due regard for the interests 
 of the stockholders. And we are considering the taxability of bona 
 fide stock dividends only. 
 
 We are clear that not only does a stock dividend really take noth- 
 ing from the property of the corporation and add nothing to that 
 of the shareholder, but that the antecedent accumulation of profits 
 evidenced thereby, while indicating that the shareholder is the richer 
 because of an increase of his capital, at the same time shows he has 
 not realized or received any income in the transaction. 
 
 It is said that a stockholder may sell the new shares acquired in 
 the stock dividend; and so he may, if he can find a buyer. It is 
 equally true that if he does sell, and in doing so realizes a profit, 
 such profit, like any other, is income, and so far as it may have 
 arisen since the Sixteenth Amendment is taxable by Congress with- 
 out apportionment. The same would be true were he to sell some 
 of his original shares at a profit. But if a shareholder sells dividend 
 stock he necessarily disposes of a part of his capital interest, just 
 as if he should sell a part of his old stock, either before or after 
 the dividend. What he retains no longer entitles him to the same 
 proportion of future dividends as before the sale. His part in the 
 control of the company likewise is diminished. Tims, if one holding 
 $60,000 out of a total $100,000 of the capital stock of a corporation 
 should receive in common with other stockholders a 50 per cent 
 stock dividend, and should sell his part, he thereby would be reduced
 
 394 EISNER V. MACOMBER. [cHAP. VIT. 
 
 from a majority to a minority stockholder, having six-fifteenths 
 instead of six-tenths of the total stock outstanding. A correspond- 
 ing and proportionate decrease in capital interest and in voting 
 power would befall a minority holder should he sell dividend stock; 
 it being in the nature of things impossible for one to dispose of any 
 part of such an issue without a proportionate disturbance of the 
 distribution of the entire capital stock, and a like diminution of 
 the seller's comparative voting power — that " right preservative 
 of rights" in the control of a corporation. Yet, without selling, 
 the shareholder, unless possessed of other resources, has not the 
 wherewithal to pay an income tax upon the dividend stock, Nothing 
 could more clearly show that to tax a stock dividend is to tax a 
 capital increase, and not income, than this demonstration that in 
 the nature of things it requires conversion of capital in order to 
 pay the tax. 
 
 Throughout the argument of the Government, in a variety of 
 forms, runs the fundamental error already mentioned — a failure 
 to appraise correctly the force of the term "income" as used in the 
 Sixteenth Amendment, or at least to give practical effect to it. Thus, 
 the Government contends that the tax " is levied on income derived 
 from corporate earnings," when in truth the stockholder has " de- 
 rived " nothing except paper certificates which, so far as they have 
 any effect, deny him present participation in such earnings. It 
 contends that the tax may be laid when earnings " are received 
 by the stockholder," whereas he has received none; that the profits 
 are " distributed by means of a stock dividend," altliough a stock 
 dividend distributes no profits; that under Act of 1916 "the tax 
 is on the stockholder's share in corporate earnings," wlien in truth 
 a stockholder has no such share, and receives none in a stock div- 
 idend ; that " the profits are segregated from his former capital, 
 and he has a separate certificate representing his invested profits 
 or gains," whereas there has been no segregation of profits, nor 
 has he any separate certificate representing a personal gain, since 
 the certificates, new and old, are alike in what they represent — a 
 capital interest in the entire concerns of the corporation. 
 
 We have no doubt of the power or duty of a court to look 
 through the form of the corporation and determine the question of 
 the stockholder's right, in order to ascertain whether he has received 
 income taxable by Congress without apportionment. But, looking 
 through the form, we cannot disregard the essential truth disclosed; 
 ignore the substantial difference between corporation and stock- 
 holder; treat the entire organization as unreal; look upon stock- 
 holders as partners, when they are not such; treat them as having 
 in equity a right to a partition of the corporate assets, when they 
 have none; and indulge the fiction that they have received and 
 realized a share of the profits of the company which in truth they 
 have neither received nor realized. "We must treat the corporation 
 as a substantial entity separate from the stockholder, not only be- 
 cause such is the practical fact but because it is only by recognizing 
 such separateness that any dividend — even one paid in money or
 
 SECT. IV.] . EISNER V. MACOMBEB. 395 
 
 property — can be regardefl as income of the stockholder. Did we 
 regard corporation and stockholders as altogether identical, tiiere 
 would be no income except as the corporation acquired it; and while 
 this would be taxable against the corporation as income under ap- 
 propriate provisions of hiw, the individual stockholders could not 
 be separately and additionally taxed with respect to their several 
 shares even when divided, since if tiiere were entire identity between 
 them and the company they could not be regarded as receiving any- 
 thing from it, any more than if one's money were to be removed 
 from one pocket to another. 
 
 Conceding that the mere issue of a stock dividend makes the 
 recipient no richer tiian before, the Government nevertheless con- 
 tends that the new certificates measure the extent to wliicli the gains 
 accumulated by the corporation liave made him the richer. There 
 are two insuperable difliculties with this: In the first phice, it would 
 depend upon how long he had hekl the stock whether the stock 
 dividend indicated the extent to which he had been enriclied by the 
 operations of the company; unless he had held it throughout such 
 operations the measure would not hold true. Secondly, and more 
 important for present purposes, enrichment through increase in 
 value of capital^ investment is not income in any proper meaning 
 of the term. 
 
 The complaint contains averments respecting the market prices 
 of stock such as plaintiff held, based upon sales before and after the 
 stock dividend, tending to sliow that the receipt of the additional 
 shares did not substantially change the market value of her entire 
 holdings. This tends to show that in this instance market quota- 
 tions reflected intrinsic values — a thing they do not always do. 
 But we regard the market prices of tlie securities as an unsafe 
 criterion in inquiry such as the present, when the question must be 
 not what will the thing sell for, but what is it in truth and in essence. 
 
 It is said there is no difference in principle between a simple 
 stock dividend and a case where stockholders use monev received 
 as cash dividends to purchase additional stock contemporaneously 
 issued by the corporation. But an actual cash dividend, with a 
 real option to the stockholder either to keep the money for his own 
 or to reinvest it in new sliares, would be as far removed as possible 
 from a true stock dividend, such as the one we have under considera- 
 tion, where nothing of value is taken from the company's assets 
 and transferred to the individual ownership of the several stock- 
 holders and thereby subjected to their disposal. 
 
 The Government's reliance upon the supposed analogy between 
 a dividend of the corporation's own shares iuid one made by distrib- 
 uting sliares owned by it in the stock of another company, calls 
 for no comment beyond the statement that the latter distributes 
 assets of the company among the shareholders while the former 
 does not ; and for no citation of authority except Peabody v Eisner 
 247 U. S. 347, 349-350. 
 
 Two recent decisions, proceeding from courts of high jurisdiction, 
 are cited in support of the position of the Government.
 
 396 EISNEE V. MACOMBEK. [cHAP. VII. 
 
 Swan Brewery Co., Ltd., v. Eex [191-i] A. C. 231, arose under 
 the Dividend Duties Act of Western Australia, which provided that 
 " dividend " should include " every dividend, profit, advantage, or 
 gain intended to be paid or credited to or distributed among any 
 members or directors of any company," except, etc. There was a 
 stock dividend, the new shares being alloted among the shareholders 
 pro rata; and the question was whether this was a distribution of 
 a dividend within the meaning of the act. The Judicial Committee 
 of the Privy Council sustained the dividend duty upon the ground 
 that, although " in ordinary language the new shares would not be 
 called a dividend, nor would the allotment of them be a distribution 
 of a dividend," yet, within the meaning of the act, such new shares 
 were an "advantage" to the recipients. There being no constitu- 
 tional restriction upon the action* of the lawmaking body, the case 
 presented merely a question of statutory construction, and mani- 
 festly the decision is not a precedent for the guidance of £his court 
 when acting under a duty to test an act of Congress by the limita- 
 tions of a written Constitution having superior force. 
 
 In Tax Commissioner v. Putnam (1917), 227 Massachusetts, 
 622, it was held that the 44th Amendment to the constitution of 
 Massachusetts, which conferred upon the legislature full power to 
 tax incomes, "must be interpreted as including every item which 
 by any reasonable understanding can fairly be regarded as income" 
 (pp. 526, 531) ; and that under it a stock dividend was taxable as 
 income, the court saying (p. 535): "In essence the thing which 
 has been done is to distribute a symbol representing an accumula- 
 tion of profits, which instead of being paid out in cash is invested 
 in the business, thus augmenting its durable assets. In this aspect 
 of the case the substance of the transaction is no different from what 
 it would be if a cash dividend had been declared with the privilege 
 of subscription to an equivalent amount of new shares." We cannot 
 accept this reasoning. Evidently, in order to give a sufficiently 
 broad sweep to the new taxing provision, it was deemed necessary 
 to take the symbol for the substance, accumulation for distribution, 
 capital accretion for its opposite; while a case where money is paid 
 into the hand of the stockholder with an option to buy new shares 
 with it, followed by acceptance of the option, was regarded as iden- 
 tical in substance with a case where the stockholder receives no money 
 and has no option. The Massachusetts court was not under an 
 obligation, like the one which binds us, of applying a constitutional 
 Amendment in the light of other Constitutional provisions that 
 stand in the way of extending it by construction. 
 
 Upon the second argument, the Government, recognizing the force 
 of the decision in Towne v. Eisner, supra, and virtually abandoning 
 the contention that a stock dividend increases the interest of the 
 stockholder or otherwise enriches him, insisted as an alternative 
 that by the true construction of the Act of 1916 the tax is imposed 
 not upon the stock dividend but rather upon the stockholder's share 
 of the undivided profits previously accumulated by the corporation ; 
 the tax being levied as a matter of convenience at the time such
 
 SECT. IV.] EISNEE V. MACOMBEU. 397 
 
 profits become manifest through tlie stock dividend. If so con- 
 strued, would the act be constitutional ? 
 
 That Congress has power to tax shareholders upon their property 
 interests in the stock of corporations is beyond question; and tliat 
 such interests might be valued in view of tiie condition of the com- 
 pany, including its accumulated and undivided profits, is equally 
 clear, But that this would be taxation of property because of owner- 
 ship, and hence would require apportionment under the provisions 
 of the Constitution, is settled beyond peradventure by previous 
 decisions of this court. 
 
 The Government relies upon Collector v. Hubbard (1870), 12 
 Wall. 1, 17, Avhich arose under § 117 of the Act of June 30, 18G4, 
 C..1T3, 13 Stat. 223, 282, providing that "the gains and profits of 
 all companies, whether incorporated or partnership, other than the 
 companies specified in this section, shall be included in estimating 
 the annual gains, profits, or income of any person entitled to the 
 same, whether divided or otherwise," The court held an individual 
 taxable upon his proportion of the earnings of a corporation al- 
 though not declared as dividends and although invested in assets 
 not in their nature divisible. Conceding that the stockholder for 
 certain purposes had no title prior to dividend declared, the court 
 nevertheless said (p. 18) : "Grant all that, still it is true that the 
 owner of a share of stock in a corporation holds the share with all 
 its incidents, and that among those incidents is the right to receive 
 all future dividends, that is, his proportional share of all profits 
 not then divided. Profits are incident to the share to which tlie 
 owner at once becomes entitled provided he remains a member of 
 the corporation until a dividend is made. Eegarded as an incident 
 to the shares, undivided profits are property of the shareholder, 
 and as such are the proper subject of sale, gift, or devise. Undivided 
 profits invested in real estate, machinery', or raw material for the 
 purpose of being manufactured are investments in which the stock- 
 holders are interested, and when such profits are actually appro- 
 priated to the payment of the debts of the corporation they serve 
 to increase the market value of the shares, whether held by the 
 original subscribers or by assignees." In so far as this seems to 
 uphold the right of Congress to tax without apportionment a stock- 
 holder's interest in accumulated earnings prior to dividend declared, 
 it must be regarded as overruled by Pollock v. Farmers' Loan & 
 Trust Co., 158 U. S. 601, 627, 628, 637. Conceding Collector v. 
 Hubbard was inconsistent with the doctrine of that case, because 
 it sustained a direct tax upon property not apportioned among 
 the States, the Government nevertheless insists that the Sixteenth 
 Amendment removed this obstacle, so that now the Hubbard case 
 is authority for the power of Congress to levy a tax on the stock- 
 holder's share in the accumulated profits of the corporation even 
 before division by the declaration of a dividend of any kind. Mani- 
 festly this argument must be rejected, since the Amendment applies 
 to income only, and what is called the stockholder's share in the 
 accumulated profits of the company is capital, not income. As we
 
 398 LY^'CIl V. TURKISH. [cHAP. VII. 
 
 have pointed out, a stockholder has no individual share in accumu- 
 lated profits, nor in any particular part of the assets of the corpora- 
 tion, prior to dividend declared. 
 
 Thus, from every point of view, we are hrought irresistibly to the 
 conclusion that neither under the Sixteenth Amendment nor other- 
 wise has CongTcss iH)wer to tax without apportionment a true stock 
 dividend made lawfully and in good faith, or the accumulated profits 
 behind it, as income of the stockholder. The Eevenue Act of 1916, 
 in so far as it imposes a tax upon the stockholder because of such 
 dividend, contravenes the provisions of Article I, § 2, cl. 3, and 
 Article I, § 9, cl. 4, of the Constitution, and to this extent is in- 
 valid notwithstanding the Sixteenth Amendment. 
 
 Holmes, Day, Braxdeis and Clarke, JJ., dissenting.^ 
 
 LYNCH V. TUERISH. 
 SuPEEME Court of the United States. 1918. 
 
 [Reported 247 U. 8. 221.] 
 
 McKenna, J. Suit to recover an income tax, paid under protest, 
 assessed iinder the act of October 3, 1913, 38 Stat. 166. 
 
 The facts, as admitted by demurrer, are these : Eespondent, Tur- 
 rish, who was plaintiff in the trial court, made a return of his income 
 for the calendar year 1914 which showed that he had no net income 
 for that year; afterwards the Commissioner of Internal Eevenue 
 made a supplemental assessment showing that he had received a 
 net income of $32,712.08, which, because of specific deductions and 
 exemptions, resulted in no normal tax, but as the net income exceeded 
 the sum of $20,000 the commissioner assessed an additional or super 
 tax of one per cent upon the excess, resulting in a tax of $127.12, 
 which was sought to be recovered. The reassessment was based 
 upon certain sums received by the plaintiff in the year 1914 as dis- 
 tributions from corporations subject to the income tax law and held 
 by the commissioner to be income derived from dividends received 
 by the plaintiff on stock of domestic corporations ; of which the sura 
 of $79,975, received as a distribution from the Payette Lumber & 
 Manufacturing Co., and without which no tax could have been levied 
 against the plaintiff, is here in dispute. 
 
 Prior to March 1, 1913, and continuously thereafter until the 
 surrender of his stock as hereinafter mentioned, plaintiff was a 
 stockholder in the Payette Co., which was organized in the year 1903 
 with power to buy, hold, and sell timberlands, and in fact never en- 
 gaged in any other business than this except minor businesses in- 
 cidental to it. Immediately after its organization this company be- 
 
 * The diasentinjj opinions slioiild he road. See also E. H. Warren, " Taxa- 
 bility of Stock Dividends as Income," 3.3 Harvard Law Review, 885.
 
 SECT. IV.] LYNCH V. TUliitlSJi. 399 
 
 gan to invest in timberlands, and prior to March 1, 1913, had thus 
 invested approximately $1,3^5,000. 
 
 On March 1, VJl'S, tlie vahie of its assets was not less than .$;VJOU, 
 000, oi" wliicli sum the value of the timberlands was not less than 
 $2,875,000. The increase was due to tlic gradual rise in the market 
 value of tile lands. At that date the value of Turrish's stock was 
 twice its par value, or $irjlJ,!j.jO, and about that time he and all the 
 other stockholders gave an option to sell their stock for twice its par 
 value. Tile holders of the option formed another company, called 
 the Boise-I*ayette Lunil)er Co., and transferred the options to it. 
 The options liaving been extended to December .'51, l!ii;}, the new 
 company infoi-med tlie Payette Co. and its stockholders shortly be- 
 fore this date tiiat instead of exercising the option it preferred and 
 proposed to purciiase all of the assets of tiie Payette Co., paying to 
 that company sucii a purchase price that there would be available 
 for distribution to its stockholders twice the par value of their stock. 
 The stockholders by resolution authorized this sale, and, pursuant 
 to tiiis and a resolution of the directors, the Payette Co. transferred 
 to the new company all of its assets, property, and franchises, and 
 upon the completion of the transaction found itself with no assets 
 or property, except cash to the amount of double the par value of 
 its stock wiiich had been paid to it by the new company, and witli no 
 debt, ljal)ilities, or obligations except tliose whicli tiu; new com])any 
 had assumed. The casii was distributed to the stockholders on the 
 surrender of their certificates of stock, and the company went out 
 of business. In this way, upon the surrender of his shares, Turrish 
 received $159,050, being double tlieir par value. 
 
 The Commissioner of Internal Revenue considered that of this 
 sum one-half was not taxal)le, being the liquidation of the par value 
 of Turrish's stock, but that the other half was income for the year 
 li)l-i and taxable under the act of 1913. 
 
 The question in the case is thus indicated. The District Court 
 took a different view from that of the Commissioner of Internal 
 Revenue and therefore overruled the demurrer to Turrish's complaint 
 and entered judgment for him for the sum prayed, which judgment 
 was affirmed bv the Circuit Court of Appeals for the Eighth Circuit. 
 (236 Fed. 653.) 
 
 The point in the case seems a short one. It, however, has pro- 
 voked much discussion on not only the legal but the economic dis- 
 tinction between capital and income and by what processes and at 
 what point of time the former produces or becomes the latter. And 
 this in resolution of a statute whicli concerns the activities of men 
 and intended, it miirht be supposed, to be without perplexities and 
 readily solvable by the offhand conceptions of those to whom it was 
 addressed. 
 
 The provisiona of the act, so far as material to be noticed, are the 
 following: That there is assessed "upon the entire net income aris- 
 ing or accruing from all sources in the preceding calendar year to 
 every . . . person residing in the United States ... a tax of one per 
 centum per annum upon such income. . . ." (Par. A, subdiv. 1.)
 
 400 LYNCH V. TURRISn. [chap. VII. 
 
 In addition to that tax, which is denominated the normal income 
 tax, it is provided that there shall be levied "upon the net income 
 of every individual an additional tax ... of one per centum per 
 annum upon the amount by which the total net income exceeds" 
 certain amounts, and the person subject to tlie tax is required to 
 make a personal return of his total net income from all sources under 
 rules and regulations to be prescribed by the Commissioner of Inter- 
 nal Eevenue. (Subdiv. 2.) 
 
 By paragraph B it is provided that, subject to certain exemptions 
 and deductions, "the net income of a taxable person shall include 
 gains, profits, and income derived from salaries, wages, or compen- 
 sation for personal service . . . also from interest, rent, dividends, 
 securities, or the transaction of any lawful business carried on for 
 gain or profit, or gains or profits and income derived from any source 
 whatever." 
 
 After specifying the exemptions and deductions allowed, the law 
 declares as follows : 
 
 " The said tax shall be computed upon the remainder of said net 
 income of each person subject thereto, accruing during each preced- 
 ing calendar year ending December thirty-first: Provided, however, 
 That for the year ending December thirty-first, nineteen hundred 
 and thirteen, said tax shall be computed on the net income accruing 
 from March first to December thirty-first, nineteen hundred and thir- 
 teen, both dates inclusive. . . ." (Par. D.) 
 
 It will be observed, therefore, that the statute levies a normal tax 
 and an additional tax upon net incomes, derived from whatever 
 source, " arising or accruing " each preceding calendar year ending 
 December 31, except that for the year ending December 31, 1913, 
 the tax shall be computed on the net income accruing from March 1, 
 1913, to December 31, 1913. 
 
 And in determining the application of the statute to Turrish we 
 must keep in mind that on the admitted facts the distribution re- 
 ceived by him from the Payette Co. manifestly was a single and final 
 dividend in liquidation of the entire assets and business of the com- 
 pany, a return to him of the value of his stock upon the surrender of 
 his entire interest in the company, and at a price that represented 
 its intrinsic value at and before March 1, 1913, when the act took 
 effect. 
 
 The District Court and the Circuit Court of Appeals decided that 
 the amount so distributed to Turrish was not income within the 
 meaning of the statute, basing the decision on two propositions, as 
 expressed in the opinion of the Circuit Court of Appeals, by Sanborn, 
 Circuit Judge — (a) The amount was the realization of an invest- 
 ment made some years before, representing its gradual increase dur- 
 ing those years, "and which reached its height before the effective 
 date of the law, that is, before March 1, 1913, and the mere change 
 of form of the property " as from real to personal property, or from 
 stock to cash" was not income to its holders because the value of 
 the property was the same after as before the change ; (h) the timber-
 
 SECT. IV.] LYNCH V. TURKISH. 401 
 
 lands were the property, capital, and capital assets of their legal and 
 equitable owner and the enhancement of their value during a series 
 of years " prior to the eirective date of the income-tax law, although 
 divided or distrihutcd by dividend or otherwise subsequent to tliat 
 date, does not become income, gains, or profits taxable under such 
 an act." 
 
 For proposition "a" the court cited Colleetor v. Iluljbard, 12 
 Wall. 1 ; Bailey v. llailroad Conijjany, 22 Wall. GO-i, and the same 
 case in lOG U. S. 109. For proposition "&" Gray v. Darlington, 
 15 Wall. 63, was relied on. 
 
 The Oovornnicnt opposes both contentions by an elaborate argu- 
 ment containing definitions of capital and income drawn from legal 
 and economic sources and given breadth to cover a number of other 
 cases submitted with this. The argument, in effect, makes any in- 
 crease of value of property income, emerging as such and taxable 
 at the moment of realization by sale or some act of separation, as by 
 dividend declared or by distribution, as in the instant case. 
 
 To sustain the argument these definitions are presented : 
 
 1. Capital is anything, material or otherwise, capable of owner- 
 ship, viewed in its static condition at a moment of time, or the rights 
 of ownership therein. 
 
 2. Income is the service or return rendered by capital during a 
 period of time. . . . 
 
 4. Net income ("profits") is the difference between income and 
 outgo. . . . 
 
 7. In the actual production and distribution of capital there is a 
 constant conversion of capital into income, and vice versa. 
 
 8. The attempt to conceal this conversion by treating "income" 
 as the standard return from intact " capital " only leads to confusion 
 of the value of capital with capital itself. 
 
 From these definitions are deduced the following propositions, 
 which are said to be decisive of the problems in the cases : 
 
 1. Income being derived from the use of capital, the conversion 
 or transfer of capital always produces income. 
 
 2. Mere appreciation of capital value does not produce "income," 
 nor mere depreciation " outgo." 
 
 3. Xet income is the difference between actual "income" and ac- 
 tual " outgo." 
 
 4. Income is not confined to money income, but includes anything' 
 capable of easy valuation in money. 
 
 It will be observed that the breadth of definition and the breadth 
 of application are necessary to the refutation of the reasoning of the 
 Circuit Court of Appeals. There is direct antagonism, the court 
 basing its reliance, it says, upon what it asserts is the common sense 
 and understanding of the words of the law, and the exposition of like 
 laws by the decisions of this court. The Government's resource is 
 the discussion of economists and the fact, concrete and practical, of 
 wealth not only increased but come to actual hand. The instant case
 
 402 ly:j^ch v. tuekisu. [chap. vii. 
 
 is an example. Turrish's stock doubled in value. He paid for it 
 $79,975.00; he received $159,950.00. It requires a struggle to re- 
 sist the influence of the fact, but we are aided and fortified by our 
 own precedents and saved from such intricate and subtle discussion 
 and an elaborate review of other cases cited in confirmation or op- 
 position. 
 
 In Collector v. Hubbard, supra, the distinction between a corpo- 
 ration and its stockholders was recognized and that the stockholder 
 had no title for certain purposes to the earnings of the corporation, 
 net or other, prior to a dividend being declared, but they might be- 
 come capital by investment in permanent improvements and thereby 
 increase the market value of the shares, " whether held by the orig- 
 inal subscribers or by assignees." In other words, it was held that 
 the investments of the corporation were the investments of the stock- 
 holders; that is, the stockholders could have an interest, taxable 
 under the act considered, though not identical with the corporation. 
 This was repeated in Bailey v. Railroad Co., 22 Wall. 604, 635, 636. 
 
 The latter case came here again in 106 U. S. 109, and it was then 
 declared that the purpose of an income tax law was to tax the income 
 for the year that it accrued ; in other words, no tax in contemplation 
 of the law accrues upon something except for the year in which that 
 something — earnings, profits, gains, or income — accrues. In that 
 case the subject of the tax was a scrip dividend, but the certificate 
 did not show the year of the earnings and testimony as to the partic- 
 ular year was admitted. The principle applies to tlie case at bar. 
 If increase in value of the lands w^as income, it had its particular 
 time and such time must have been within the time of the law to be 
 subject to the law, that is, it must have been after March 1, 1913. 
 But, according to the fact admitted, there was no increase after that 
 date and therefore no increase subject to the law. There was con- 
 tinuity of value, not gain or increase. In the first proposition of the 
 Court of Appeals we, therefore, concur. 
 
 In support of its second proposition it adduced, as we have seen. 
 Gray v. Darlington, 15 Wall. 63. The case arose under the income 
 tax law of 1867, which levied "upon the gains, profits, and income 
 of every person, . . . whether derived from any kind of property 
 ... or from any other source whatever ... a tax of 5 per centum 
 on the amount so derived over $1,000 ... for the year ending the 
 thirty-first of December next preceding the time for levying, collect- 
 ing and paying said tax." 
 
 Darlington, in 1865, being the owner of certain United States 
 Treasury notes, exchanged them for United States bonds. In 1869 
 he sold the bonds at an advance of $20,000 over the cost of the notes 
 and upon this amount was levied a tax of 5 per centum as gains, 
 profits, and income for that year. He paid the tax under protest and 
 sued to recover, and prevailed. This court, by Mr. Justice Field, 
 said: 
 
 " The question presented is whether the advance in the value of the 
 bonds, during this period of four years, over their cost, realized by 
 their sale, was subject to taxation as gains, profits, or income of the
 
 SECT. IV.] SOUTH EKN PACIFIC CO. V. LOWE. 403 
 
 plaintiff for the year in which the bonds were sold. The answer 
 whicli .should l;e given to this (juestion does not, in our judgment, 
 admit of any doubt. The advance in the value of property during 
 a series of years can, in no just sense, be considered the gains, profits, 
 or income of any one particular year of the series, although the entire 
 amount of the advance he at one time turned into money by the sale 
 of the property. The statute looks, witii some exceptions, for sub- 
 jects of taxation only to annual gains, profits, and income.'* 
 
 And again : 
 
 " The mere fact that property has advanced in value between the 
 date of its acquisition and sale does not authorize the imposition of 
 a tax on the amount of the advance. Mere advance in value in no 
 sense constitutes tiie gains, profits, or income specified by the statute. 
 It constitutes and can be treated merely as increase of capital." 
 
 This case has not been since questioned or modified. 
 
 The Government feels the impediment of the case and attempts to 
 confine its ruling to the exact letter of the act of March 2, 1867, and 
 thereby distinguish that act from the act of 1U\:^ and give to the 
 latter something of retrospective effect. Opposed to this there is a 
 presumption, resistless except against an intention imperatively 
 clear. The Government, however, makes its view depend upon dis- 
 putable differences between certain words of the two acts. It urges 
 that the act of 1913 makes the income taxed one "arising or accru- 
 ing" in the preceding calendar year, while the act of 1867 makes the 
 income one "derived." Granting that there is a shade of difference 
 between the words, it can not be granted that Congress made that 
 shade a criterion of intention and committed the construction of its 
 legislation to the disputes of purists. Besides, the contention of the 
 Government does not reach the principle of Gray v. Darlington, 
 which is that the gradual advance in the value of property during a 
 series of years in no just sense can be ascribed to a particular year, 
 not therefore as " arising or accruing," to meet the challenge of the 
 words, in the last one of the years, as the Government contends, and 
 taxable as income for that year or when turned into cash. Indeed, 
 the case decides that such advance in value is not income at all, but 
 merely increase of capital and not subject to a tax as income. 
 
 We concur, therefore, in the second proposition of the Circuit 
 Court of Appeals as well as in the first and affirm the judgment. 
 
 Brandeis and Clarke, JJ., concur in the result. 
 
 SOUTIIETJX PACIFIC CO. v. LOWE. 
 Supreme Court of the Uxited States. 1918. 
 
 [Reported 247 U. S. .330.] 
 
 Pitney, J. This case presents a question arising under the 
 Federal income tiix act of October 3, 1913 (ch. 16, 38 Stat. 114, 
 166). Suit was brought by plaintiff in error against the collector
 
 404 SOUTHEKN PACIFIC CO. V. LOWE. [ciIAP. VII. 
 
 to recover taxes assessed against it and paid under protest. There 
 ■were two causes of action, of which only the second went to trial, it 
 having been stipulated that the trial of the other might be postponed 
 until the linal determination of this one. So far as it is preseiited 
 to us, the suit is an effort to recover a tax imposed upon certain divi- 
 dends upon stock, in form received by the plaintifE from another 
 corporation in the early part of the year 1914, and alleged by the 
 plaintiif to have been paid out of a surplus accumulated not only 
 prior to the effective date of the act but prior to the adoption of the 
 sixteenth amendment to the Constitution of the United States. The 
 district court directed a verdict and judgment in favor of the col- 
 lector (-^SS Fed. Eep. 847), and the case comes here by direct writ 
 of error under section 238, Judicial Code, because of the constitu- 
 tional question. That our jurisdiction was properly invoked is 
 settled by Towne v. Eisner, 245 U. S. 418, 425. 
 
 The case was submitted at the same time with several other cases 
 arising under the same act and decided this day, viz, : Lynch, col- 
 lector, V. Turrish, and Lynch, collector, v. Hornby, and Peabody v. 
 Eisner, collector. 
 
 The material facts are as follows: Prior to January 1, 1913, and 
 at all times material to the case, plaintiff, a corporation organized 
 under the laws of the State of Kentucky, owned all the capital stock 
 of the Central Pacific Railway Co., a corporation of the State of 
 dtah, including the stock registered in the names of the directors.^ 
 This situation existed continuously from the incorporation of the 
 railway company in the year 1899. That company is the successor 
 of the Central Pacific Railroad Co. and acquired all of its properties, 
 Avhich constitute a part of a large system of railways owned or con- 
 trolled by the Southern Pacific Co. The latter company, besides 
 being sole stockholder, was in the actual physical possession of the 
 railroads and all other assets of the railway company, and in charge 
 of its operations, which were conducted in accordance with the terms 
 of a lease made by the predecessor company to the Southern Pacific 
 and assumed by the railway company, the effect of which was that 
 the Southern Pacific should pay to the lessor company $10,000 per 
 annum for organization expenses, should operate the railroads, 
 branches, and leased lines belonging to the lessor, and account annu- 
 ally for the net earnings, and if these exceeded 6 per cent on the 
 existing capital stock of the lessor the lessee should retain to itself one- 
 half of the excess; advances by the lessee for account of the lessor 
 Avere to bear lawful interest, and the lessee was to be entitled at any 
 time and from time to time to refund to itself its advances and in- 
 terest out of any net earnings which might be in its hands. The 
 provisions of the lease were observed by both corporations for book- 
 keeping purposes. The Southern Pacific acted as cashier and banker 
 for the entire system; the Central Pacific kept no bank account, its 
 earnings being deposited with the bank account of the Southern 
 
 ' There was another question, eonoerninf!; a dividend paid hj the Reward 
 Oil Co., whose stock likewise was owned by the Soutlicrn Pacific Co., but the 
 contention of plaintiff in error respecting this item has been abandoned.
 
 SECT. IV.] SOUTHERN TACIFIC CO. V. LOWE. 405 
 
 Pacific; and if the Central Pacific needed money for additions and 
 betterments or for making up a deficit of current earnings tiie neces- 
 sary funds were advanced by the Soutliern Pacific. As a result of 
 these operations and of the conversion of certain capital assets of the 
 Central Pacific Co., tliat company showed upon its books a large 
 surplus accumulated i)ri(jr to January ], l'J];j, principally in the 
 form of a debit against the Southern Pacific, which at the same tiine, 
 as sole stockholder, was entitled to any and all dividends that might 
 be declared, and being in control of the board of directors was able 
 to and did control the dividend policy. The dividends in question 
 were declared and paid during the first six months of the year 1914 
 out of this surplus of the Central Pacific accumulated prior to Janu- 
 ary 1, 1013; but the payment was only constructive, being carried 
 into effect by bookkeeping entries which simply reduced the appar- 
 ent surplus of the Central Pacific and reduced the apparent indebted- 
 ness of the Southern Pacific to the Central Pacific by precisely the 
 amount of the dividends. 
 
 The question is whether the dividends received under these cir- 
 cumstances and in this manner by the Southern Pacific Co. were 
 taxable as income of that company under the income tax act of 
 1913.1 
 
 The act provides in § 2, par. A, subdiv. 1 (38 Stat. 166), "that 
 there shall be levied, assessed, collected, and paid annually upon 
 the entire net income arising or accruing from all sources in the 
 preceding calendar year'' to every person residing in the United 
 States a tax of 1 per cent per annum, with exceptions not now 
 material. By paragraph G (a) (p. 172), it is provided "that the 
 normal tax hereinbefore imposed upon individuals [1 per cent] like- 
 wise shall be levied, assessed, and paid annually upon the entire net 
 income arising or accruing from all sources during the preceding 
 calendar year to every corporation . . . organized in the United 
 States," with other provisions not now material. 
 
 It is provided in paragraph G (b), as to domestic corporations, 
 that such net income shall be ascertained by deducting from the 
 gross amount of the income of the corporation (1) ordinary and 
 necessary expenses paid within the year in the maintenance and op- 
 eration of its business and properties, including rentals and the like ; 
 (3) losses sustained within the year and not compensated by insur- 
 ance or otherwise, including a reasonable allowance for depreciation 
 by 'use, wear and tear of property, if an}^, and in the case of mines 
 a certain allowance for depletion of ores and other natural deposits; 
 (3) interest accrued and paid within the year upon indebtedness of 
 the corporation, within the prescribed limits ; (4) National and 
 State taxes paid. It will bo observed that moneys received as divi- 
 dends upon the stock of other corporations are not deducted, as they 
 
 * In addition, a question was made in the District Court as to a special 
 dividend declared by the Central Pacific out of the proceeds of sale of certain 
 land on 'Long Island, taken in satisfaction of a debt and sold in December, 
 1913. As to this, however, no argument is submitted by plaintilT in error, 
 the facts arc not clear, and we pass it without consideration.
 
 406 SOUTHERN PACIFIC CO. V. LOWE. [cHAP. Vil. 
 
 are in computing the income of individuals for the purpose of the 
 normal tax under this act (p. 167), and as they were in computing 
 the income of a corporation under the excise tax act of August 5, 
 1909 (ch. 6, 36 Stat. 11, 113, § 38). 
 
 By })aragraph (J (c) the tax upon corporations is to he computed 
 upon the entire net income accrued within each calendar year, but 
 for the year 1913 only upon the net income accrued from March 1 
 to December 31, to be ascertained by taking five-sixths of the entire 
 net income for the calendar year. 
 
 The purpose to refrain from taxing income that accrued prior to 
 March 1, 1913, and to exclude from consideration in making the 
 computation any income that accrued in a preceding calendar year, 
 is made plain by the provision last referred to ; indeed, the sixteenth 
 amendment, under which for the first time Congress was authorized 
 to tax income from property without apportioning the tax among the 
 States according to population, received tlie approval of the requisite 
 number of States only in February, 1913. Pollock v. Farmers' Loan 
 & Trust Co., 157 U.S. 429, 581; 158 U. S. 601, 637; Brushaber v. 
 Union Pacific Eailroad, 240 U. S. 1, 16. 
 
 We must reject in tliis case, as we have rejected in cases arising 
 under the corporation excise tax act of 1909 (Doyle, collector, v. 
 Mitchell Bros. Co., and Hays, collector, v. Gauley Mountain Coal Co., 
 decided May 20, 1918), the broad contention submitted in l^ehalf of 
 the Government that all receipts — everything that comes in — are 
 income within the proper definition of the term " gross income," and 
 that the entire proceeds of a conversion of capital assets, in whatever 
 form and under whatever circumstances accomplished, should be 
 treated as gross income. Certainly the term "income" has no 
 broader meaning in the 1913 act than in that of 1909 (see Stratton's 
 Independence v. Howbert, 231 U. S. 399, 416, 417), and for the 
 present purpose we assume there is no difference in its meaning as 
 used in the tM'o acts. This being so, we are bound to consider ac- 
 cumulations that accrued to a corporation prior to January 1, 1913, 
 as being capital, not income, for the purposes of the act. And we 
 perceive no adequate ground for a distinction, in this regard, between 
 an accumulation of surplus earnings, and the increment due to an 
 appreciation in value of the assets of the taxpa3^er. 
 
 That the dividends in question were paid out of a surplus that 
 accrued to the Central Pacific prior to January 1, 1913, is undis- 
 puted; and we deem it to be equally clear that this surplus accrued 
 to the Southern Pacific Co. prior to that date, in every substantial 
 sense pertinent to the present inquiry, and hence underwent nothing 
 more than a change of form when the dividends were declared. 
 
 We do not rest this upon the view that for the purposes of the act 
 of 1913 stockholders in the ordinary case have the same interest in 
 the accumulated earnings of the company before as after the decla- 
 ration of dividends. Tbe act is quite different in this respect from 
 the income tax act of June 30, 1864 (oh. 173, 13 Stat. 223, 281, 282), 
 under which this court held, in Collector v. Hubbard, 12 Wall. 1, 16, 
 that an individual was taxable upon his proportion of the earnings
 
 SJiiOT. iV.J eoUTiiKliJS I'ACll-IC CO. V. LOWE. 
 
 407 
 
 of the corporation although not declared as dividends. That de- 
 cision was based upon tlie very special lanj^uage of a clause of section 
 117 of the act (13 Stat. 2ti-^) that -the gains and profits of all 
 companies whether incorporated or partnership, other than the com- 
 panies specified in this section, shall be included in estimating the 
 annual gains, profits, or income of any ])crsoii entitled to the same, 
 wlieLiier divided or otherwise." The act of I'.UiJ contains no similar 
 language, but on the contrary deals with dividends as a particular 
 item of income, leaving them free from the normal tax imposed up<m 
 individuals, subjecting them to the graduated surtaxes only when 
 received as dividends (38 Stat. 1G7, par. B), and subjecting the in- 
 terest of an individual shareholder in the undivided gains and profits 
 of his corporation to these taxes only in case the company is formed 
 or fraudulently availed of for the purpose of preventing the imposi- 
 tion of such tax by permitting gains and profits to accumulate instead 
 of being divided or distributed. Our view of the effect of this act 
 upon dividends received by the ordinary stockholder after it took 
 effect but paid out of a surplus that accrued to the corporation before 
 that event, is set forth in Lynch, collector, v. Hornby, decided this 
 day. 
 
 We base our conclusion in the present case upon the view that it 
 was the purpose and intent of Congress, while taxing " the entire net 
 income arising or accruing from all sources " during each year com- 
 mencing with the first day of March, 1913, to refrain from taxing 
 that which in mere form only, bore the appearance of income accru- 
 ing after that date, wliile in truth and in substance it accrued before; 
 and upon the fact that the Central Pacific and the Southern Pacific 
 were in substance identical because of the complete ownership and 
 control wliieh the latter possessed over the former, as stockholder 
 and in other capacities. While the two companies were separate 
 legal entities, yet in fact, and for all practical purposes they were 
 merged, the former being but a part of the latter, acting merely as 
 its agent and sul)ject in all things to its proper direction and control. 
 And, besides, the funds represented by the dividends were in the 
 actual possession and control of the Southern Pacific as well before 
 as after the declaration of the dividends. The fact that the books 
 were kept in accordance with the provisions of the lease, so that 
 these funds appeared upon the accounts as an indebtedness of the 
 lessee to the lessor, can not be controlling, in view of the practical 
 identity between lessor and lessee. Aside from the interests of cred- 
 itors and the public — and there is nothing to suggest that the in- 
 terests of either were concerned in the disposition of the surplus of 
 the Central Pacific — the Southern Pacific was entitled to dispose of 
 the matter as it saw fit. There is no question of there being a surplus 
 to warrant the dividends at the time they were made, hence any 
 speculation as to what might have happened in case of financial re- 
 verses that did not occur is beside the mark. 
 
 It is true that in ordinary cases the mere accumulation of an ade- 
 quate surplus does not entitle a stockholder to dividends until the 
 directors in their discretion declare them. Xew York, etc.. Pail-
 
 •iOS LYNCH V. HORNBY. [cHAP. VII. 
 
 road V. Nickals, 119 U. S. 296, 306; Gibbons v. Mahan, 136 U. S. 
 oJ:9, 558. And see Humphreys v. McKissock, 1-10 U. S. 30-1, 312. 
 But tliis is not the ordinary case. In fact the discretion of the di- 
 rectors was affirmatively exercised by declaring dividends out of the 
 surplus that was accumulated prior to January 1, 1913; it does not 
 appear that any other fair exercise of discretion was open; and the 
 complete ownershiij and right of control of the Southern Pacilic at 
 all times material makes it a matter of indifference whether the vote 
 was at one time or another. Under the circumstances, the entire 
 matter of the declaration and paj'inent of the dividends was a paper 
 transaction to bring the books into accord with the acknowledged 
 rights of the Southern Pacific; and so far as the dividends repre- 
 sented the surplus of the Central Pacific that accumulated prior to 
 Januar)' 1, 1913, they were not taxable as income of the Southern 
 Pacific within the true intent and meaning of the act of 1913. 
 
 The case turns upon its very peculiar facts, and is distinguishable 
 from others in which the question of the identity of a controlling 
 stockholder with his corporation has been raised. Pullman Car Co. 
 V. Missouri Pacific Co., 115 U. S. 587, 596; Peterson v. Chicago, 
 Eock Island & Pacific Eailway, 205 U. S. 364, 391. 
 
 Judgment reversed, and the cause remanded for further proceed- 
 ings in conformity with this opinion. 
 
 Claeke, J., dissents. 
 
 LYNCH V. HOEXBY. 
 Supreme Couet of the TJxited States. 1918. 
 
 [Reported 247 V. 8. 339.] 
 
 Pitney, J. Hornby, the respondent, recovered a judgment in the 
 United States District Court against Lynch, as collector of internal 
 revenue, for the return of $171, assessed as an additional income tax 
 under the act of October 3, 1913 (ch. 16, 38 Stat. 114, 166), and 
 paid under protest. The Circuit Court of Appeals affirmed the Judg- 
 ment (236 Fed. 661), and the case comes here on certiorari. It was 
 submitted at the same time with Lynch, collector, v. Turrish, South- 
 ern Pacific Co. V. Lowe, collector, and Peabody v. Eisner, collector, 
 arising under the same act, and this day decided. 
 
 The facts, in brief, are as follows: Hornby, from 1906 to 1915, was 
 the owner of 434 (out of 10,000) shares of the capital stock of the 
 Cloquet Lumber Co., an Iowa corporation, which for more than a 
 quarter of a century had been engaged in purchasing timber lands, 
 manufacturing the timber into lumber and selling it. Its shares had 
 a par value of $100 each, making the entire capital stock $1,000,000. 
 On and prior to March 1, 1913, by the increase of the value of its 
 timber lands and through its business operations, the total property 
 of the company had come to be worth $4,000,000, and Hornby's stock, 
 the par value of which was $43,400, had become worth at least
 
 SECT. IV.] LYNCH l'. IIOENBY. 409 
 
 $150,000. In the year 1914 the conipaDV was engaged in cutting its 
 standing timber, manufacturing it into lumber, selling the lumber, 
 and distributing tiic proceeds among its stockholders. In that year 
 it thus distributed dividends aggregating $G50,<J00, of which $"-i40,- 
 000, or 24 per cent of the par value of the capital stock, was derived 
 from current earnings, and $410,000 from conversion into money of 
 ])r()perty that it owned or in which it had an interest on March 1, 
 VJio. Hornby's share of the latter amount was $lT,7iJ4, and this 
 not having been included in his income tax return, the Commissioner 
 of Internal Revenue levied an additional tax of $171 on account of 
 it, and this forms the subject of tlie present suit. 
 
 The case was tried in the District Court and argued in the Circuit 
 Court of Appeals together with Lynch, collector, v. Turrish, 236 
 Fed. 653, and was treated as presenting substantially the same 
 cjuestion upon the merits. In our opinion it is distinguishable from 
 the Turrish case, where the distribution in question was a single 
 and final dividend received by Turrish from the Payette Co. in liqui- 
 dation of the entire assets and business of the company and a return 
 to him of the value of his stock upon the surrender of hi? entire in- 
 terest in the company, at a price that represented its intrinsic value 
 at and before ]\Iarch 1, 1913, when the income tax act took effect. 
 
 In the present case there was no winding up or liquidation of the 
 Cloquet Lumber Co. nor any surrender of Hornby's stock. He was 
 but one of many stockholders, and had but the ordinary stock- 
 holder's interest in the capital and surplus of the company — that is, 
 a right to have them devoted to the proper business of the corporation 
 and to receive from the current earnings or accumulated surplus 
 such dividends as the directors in their discretion might declare. 
 Gibbons v. Mahon, 136 U. S. 549, 557. The operations of this com- 
 pany in the year 1914 were, according to the facts pleaded, of a 
 nature essentially like those in which it had been engaged for more 
 than a quarter of a century. The fact that they resulted in convert- 
 ing into money, and thus setting free for distribution as dividends, 
 a part of its surplus assets accumulated prior to March 1, 1913, does 
 not render Hornby's share of those dividends any the less a part of 
 his income ^^'ithin the true intent and meaning of the act, the perti- 
 nent language of which is as follows (38 Stat. 166, 167) : 
 
 "A. Subdivision 1. That there shall be levied, assessed, collected, 
 and paid annually upon the entire net income arising or accruing 
 from all sources in the preceding calendar year to every citizen of 
 the United States, . . . and to every person residing in the United 
 States, ... a tax of 1 per centum per annum upon such income, 
 except as hereinafter provided; . . . 
 
 " B. That, subject only to such exemptions and deductions as are 
 hereinafter allowed, the net income of a taxable person shall include 
 gains, profits, and income derived from salaries, wages, or compen- 
 sation for personal service. . . . also from interest, rent, dividends, 
 securities, or the transaction of any lawful business carried on for 
 gain or profit, gains or profits and income derived from any source 
 whatever."
 
 410 LYNCH V. HOKNBY. [ciIAP. VII. 
 
 Among the deductions allowed for the purpose of the normal tax 
 is " seventh, the amount received as dividends upon the stock or from 
 the net earnings of any corporation, . . . which is taxable upon its 
 net income as hereinafter provided." There is a graduated additional 
 tax, commonly known as a " surtax," upon net income in excess of 
 $20,00(\ including income from dividends, and for the purpose of 
 this additional tax '" the taxable income of any individual shall em- 
 brace the share to which he would be entitled of the gains and profits, 
 if divided or distributed, whether divided or distributed or not, of 
 all corporations . . . formed or fraudulently availed of for the pur- 
 pose of preventing the imposition of such tax through the medium 
 of permitting such gains and profits to accumulate instead of being 
 divided or distributed." 
 
 It is evident that Congress intended to draw and did draw a dis- 
 tinction between a stockholder's undi\ided share or interest in the 
 gains and profits of a corporation prior to the declaration of a divi- 
 dend, and his participation in the dividends declared and paid, treat- 
 ing the latter in ordinary circumstances as a part of his income for 
 the purposes of the surtax, and not regarding the former as taxable 
 income unless fraudulently accumulated for the purpose of evading 
 the tax. 
 
 This treatment of undivided profits applies only to profits per- 
 mitted to accumulate after the taking effect of the act, since only 
 with respect to these is a fraudulent purpose of evading the tax 
 predicable. Corporate profits that accumulated before the act took 
 effect stand on a different footing. As to these, however, just as we 
 deem the legislative intent manifest to tax the stockholder with re- 
 spect to such accumulations only if and when and to the extent that 
 his interest in them comes to fruition as income — that is, in dividends 
 declared — so we can perceive no constitutional obstacle that stands 
 in the way of carrying out this intent when dividends are declared 
 out of a pre-existing surplus. The act took effect on March 1, 1913, 
 a few days after the requisite number of States had given approval 
 to the sixteenth amendment, under which for the first time Congress 
 was empowered to tax income from property without apportioning 
 the tax among the States according to population. Southern Pacific 
 Co. V. Lowe, supra. That the retroactivity of the act from the date 
 of its passage (October 3, 1913) to a date not prior to the adoption of 
 the amendment was permissible is settled by Brushaber v. Union 
 Pacific Eailroad, 240 U. S. 1, 20. And we deem it equally clear 
 that Congress was at liberty under the amendment to tax as income, 
 without apportionment, everything that became income in the ordi- 
 nary sense of the word after the adoption of the amendment, includ- 
 ing dividends received in the ordinary course by a stockholder from a 
 corporation, even though they were extraordinary in amount and 
 might appear upon analysis to be a mere realization in possession of 
 an inchoate and contingent interest that the stockholder had in a 
 snrplus of corporate assets previously existing. Dividends are the 
 appropriate fruit of stock ownership, are commonly reckoned as in- 
 come, and are expended as such by the stockholder without regard
 
 SECT. IV.] LYNCH V. IIOIIXBY. 4ll 
 
 to whether they are declared from the most recent earnings or from 
 a surplus accuinuhited from the earnings of the past or are based 
 upon tfie increased value of the proj^erty of the corporation. The 
 stockliolder is in the ordinary case a different entity from the corpo- 
 ration, and Congress was at liberty to treat the dividends as coming 
 to him ah extra and as constituting a part of his income when they 
 came to hand. 
 
 Hence we construe the provision of the act that "the net income 
 of a taxable person shall include gains, profits, and income derived 
 from . . . interest, rent, dividends, ... or gains or profits and in- 
 come derived from any source whatever" as including (for the pur- 
 poses of the additional tax) all dixidciids declared and paid in the 
 ordinary course of business by a corp(jration to its stockholders after 
 the taking effect of the act (March 1, 1913), whether the current 
 earnings or from the accumulated surjjlus nuide up of past earnings 
 or increase in value of corporate assets, notwithstanding it accrued to 
 the corporation in whole or in i)art prior to March 1, 1913. In short, 
 the word '' dividends " was employed in the act as descriptive of one 
 kind of gain to the individual stockholder, dividends being treated 
 as the tangible and recurrent returns upon his stock, analogous to 
 the interest and rent received upon other forms of invested capital. 
 
 In the more recent income tax acts, provisions have been inserted 
 for the purpose of excluding from tiie eil'ect of the tax any dividends 
 declared out of earnings or profits that accrued prior to March 1, 
 1913. This originated with the act of September 8, 1916, and has 
 been continued in the act of October 3, 1917. We are referred to 
 the legislative history of the act of 1916, which it is contended indi- 
 cates that the new definition of the-term " dividends " was intended 
 to be declaratory of the meaning of the term as used in the 1913 
 act. We can not accept this suggestion, deeming it more reasonable 
 to regard the change as a concession to the equity of stockholders 
 granted in the 1916 act, in view of constitutional questions that had 
 been raised in this case, in the companion case of Lynch, collector, 
 V. Turrish, and perhaps in other cases. These two cases were com- 
 menced in October, 1915, and decisions adverse to the tax were ren- 
 dered in tlic District Court in January, 1916, and in the Circuit 
 Court of Appeals September 4, 1916. 
 
 We repeat that under the 1913 act dividends declared and paid in 
 the ordinary course by a corporation to its stockholders after March 
 1, 1913, whether from current earnings or from a surplus accumu- 
 lated prior to that date, were taxable as income to the stockholder. 
 
 We do not overlook the fact that every dividend distribution di- 
 minishes by just so much the assets of the corporation, and in a theo- 
 retical sense reduces the intrinsic value of the stock. But, at the 
 same time, it demonstrates the capacity of the corporation to pay 
 dividends, holds out a promise of further dividends in the future, 
 and quite probably increases the market value of the shares. In our 
 opinion. Congress laid hold of dividends paid in the ordinary course 
 as de facto income of the stockholder, without regard to the ultimate 
 effect upon the corporation resulting from their payment.
 
 412 PEABODY V. EISNEK. [cHAP. VII. 
 
 Of course, we are dealing here with the ordinary stockholder re- 
 ceiving dividends declared in the ordinary way ol" business. Lynch, 
 collector, v. Turrish and Southern Pacific Co. v. Lowe, collector, this 
 day decided, rest upon their special facts and are plainly distinguish- 
 able. 
 
 It results from what we have said that it was erroneous to award 
 a return of the tax collected from the respondent, and that the judg- 
 ment should be 
 
 Eeversed, and the cause remanded to the district court for further 
 proceedings in conformity with this opinion. 
 
 PEABODY V. EISNER. 
 Supreme Coukt of the United States. 1918. 
 
 [Reported 247 V. 8. 347.] 
 
 PiTXEY, J. This case arose under the Federal income tax act of 
 October 3, 1913 (ch. 16, 38 Stat. Ill, 166). The controversy is 
 over the first cause of action set up by plaintiff in error in a suit 
 against the collector for the recovery of an additional tax exacted in 
 respect of a certain dividend received by plaintiff in the year 1911, 
 the facts being as follows: On and prior to March 1, 1913, and 
 thenceforward until payment of the dividend in question, petitioner 
 was owner of 1,100 shares (out of a total of 2,000,000 shares out- 
 standing) of common stock of the Union Pacific Pailroad Co., of 
 the par value of $100 each, and during the same period the company 
 had large holdings of the common and preferred stocks of the Balti- 
 more & Ohio Eailroad Co. On March 2, 1914, the Union Pacific 
 declared and paid an extra dividend upon each share of its common 
 stock, amounting to $3 in cash, $12 in par value of preferred stock 
 of the Baltimore & Ohio, and $22.50 in par value of the common 
 stock of the same company; the result being that petitioner received 
 as his dividend upon his holding of Union Pacific common stock 
 $3,300 in cash, 132 shares of Baltimore & Ohio preferred and 247i/o 
 shares of Baltimore & Ohio common stock. In his income return for 
 1914 he included as taxable income $4.12 per share of this dividend, 
 or $4,532 in all, and paid his tax upon the basis of this return. 
 Afterwards he was subjected to an additional assessment upon a 
 valuation of the balance of his dividend, and this, having been paid 
 under protest, is the sul)ject of the present suit, the theory of which 
 is that the entire earnings, income, gains, and profits from all sources 
 realized by the Union Pacific Railroad Co. from March 1, 1913, to 
 March 2, 1914, remaining after the payment of prior charges, did not 
 exceed $4.12 per share of the Union Pacific common stock, and that 
 the cash and Baltimore & Ohio stock disposed of in the extra divi- 
 dend (so far as they exceeded the value of $4.12 per share of Union 
 Pacific) did not constitute a gain, profit, or income of the Union
 
 SECT. IV.] GULF OIL COEPOKATION V, LEWELLYX. 413 
 
 Pacific, and therefore did not constitute a gain, profit, or income of 
 the plaintiff arising or accruing eitlier in or for tlie year 1914 or for 
 any period subsequent to Marcli 1, I'Jlii, the date when tiie income 
 tax law took effect. Tlie District Court overruled tiiis contention 
 upon the authority of Southern Pacific Co. v. Lowe, 238 Fed, 847, 
 and Towne v. Eisner, 242 Fed. 702. The latter case has since been 
 reversed (245 U. S. 418), but only upon the ground that it related 
 to a stock dividend which in fact took nothing from the propertv of 
 the corporation and added nothing to the interest of the shareholder, 
 but merely changed the evidence which represented that interest. 
 Southern Pacific Co. v. Lowe, collector, has been reversed this day, 
 but only upon the ground that the Central Pacific Railway Co., 
 which paid the dividend, and the Southern Pacific Co., which re- 
 ceived it, were in substance identical corporations because of the 
 complete ownership and control which the latter possessed over the 
 former as stockholder and in otlier capacities, so that while the two 
 companies were separate legal entities, yet in fact and for all practical 
 purposes the fonncr was but a part of the latter, acting merely as its 
 agent and subject in all things to its direction and control ; and for 
 the further reason that the funds represented by the dividend were 
 in the actual possession and control of the Southern Pacific Co. as 
 well before as after the declaration of the dividend. In this case the 
 plaintiff in error stands in the position of the ordinary stockholder, 
 whose interest in the accumulated earnings and surplus of the com- 
 pany are not the same before as after the declaration of a dividend ; 
 his right being merely to have the assets devoted to the proper busi- 
 ness of the corporation and to receive from the current earnings or 
 accumulated surplus such dividends as the directors in their discre- 
 tion may declare ; and without right or power on his part to control 
 that discretion. 
 
 It hardly is necessar\' to say that this case is not ruled by our de- 
 cision in Towne v. Eisner, since the dividend of Baltimore & Ohio 
 shares was not a stock dividend but a distribution in specie of a 
 portion of the assets of the Union Pacific, and is to be governed for 
 all present purposes by the same rule applicable to the distribution 
 of a like value in money. It is controlled by Lynch, collector, v. 
 Hornby, this day decided. 
 
 Judgment affirmed. 
 
 GULF OIL COPPOEATIOX v. LEWELLYN". 
 Supreme Couet of the United States. 1918. 
 
 [Reported 248 U. S. 7\.] 
 
 Holmes, J. This is a suit to recover a tax levied upon certain 
 dividends as income under the act of October 3, 1913 (ch. 6, § 2. 
 38 Stat. 114, 166). The District Court gave judgment for the plain-
 
 414 GULF OIL COEPORATION V. LEWELLYJST. [CHAP. VII. 
 
 tiff (242 Fed. 7U9), but this judgment was reversed by the Circuit 
 Court of Appeals (245 Fed. 1, 158 C. C. A. 1). 
 
 The facts may be abridged from the findings below as follows: 
 The petitioner was a holding company owning all the stock in the 
 other corporations concerned except the qualifying shares held by 
 directors. These companies with others constituted a single enter- 
 prise, carried on by tlie petitioner, of producing, buying, transporting, 
 refining, and selling oil. The subsidiary companies had retained 
 their earnings, although making some loans inter se, and all their 
 funds were invested in properties or actually required to carry on 
 the business, so that the debtor companies had no money available 
 to pay their debts. In January, 1913, the petitioner decided to take 
 over the previously accumulated earnings and surplus and did so in 
 that year by votes of the companies that it controlled. But, disre- 
 garding the forms gone through, the result was merely that the peti- 
 tioner became the holder of the debts previously due from one of its 
 companies to another. It was no richer than before, but its property 
 now was represented by stock in and debts due from its subsidiaries, 
 wdiereas formerly it was represented by the stock alone, the change 
 being effected by entries upon the respective companies' books. The 
 earnings thus transferred had been accumulated and had been used 
 as capital before the taxing year. Lynch v. Turrish, 247 U. S. 221, 
 228. 
 
 We are of opinion that the decision of the District Court was right. 
 It is true that the petitioner and its subsidiaries were distinct beings 
 in contemplation of law, but the facts that they were related as 
 parts of one enterprise, all owned by the petitioner, that the debts 
 were all enterprise debts due to members, and that the dividends 
 represented earnings that had been made in former years and that 
 practically had been converted into capital, unite to convince us that 
 the transaction should be regarded as bookkeeping rather than as 
 " dividends declared and paid in the ordinary course by a corpora- 
 tion." L}Tich V. Hornby, 247 U. S. 339, 346. The petitioner did 
 not itself do the business of its subsidiaries and have possession of 
 their property as in Southern Pacific Co. v. Lowe, 247 U. S. 330, 
 but the principle of that case must be taken to cover this. By 
 § 2, G (c) (38 Stat. 174) and S (Id., 202), the tax from January 
 1 to February 28, 1913, is levied as a special excise tax, but in view 
 of our decision that the dividends here concerned were not income, 
 it is unnecessary to discuss the further question that has been raised 
 imder the latter clause as to the effect of the fact that excise taxes 
 upon the subsidiary corporations had been paid. 
 
 Judgment reversed.
 
 SECT. IV.] DOEESCHUCK V. UNITED STATES. 415 
 
 DOERSCHUCK v. UNITED STATES. 
 District Couet of the United States. 1921. 
 
 [Reported 274 Fed. 730.] 
 
 Chatfield, J. 'I'he plaintiff in each of the above actions has paid 
 income tax on one-quarter of an issue of debenture bonds of the 
 North Anioriciin Jirewing Company, which came into tlie liands of 
 the phiintills because of the ownership by each of 1,230 shares (or 
 one-quarter) of the entire capital stock of said North American 
 Brewin<,f ("umpany. The chrectors of said corporation had voted an 
 issue of $T;58,0U0 of (lel)onturo bonds from a surphis or undivided 
 profits amounting to $810,308.09, which had accrued between 1906 
 and July 1, 1916. 
 
 The portion of the bonds representing surplus earned before 
 March 1, 1913, was not taxed and hence is not involved in those 
 actions. The balance, viz., $262,334.44 was assessed as income for 
 the year 1916, during wiiich year each of the plaintiffs had received 
 his one-quaiter part of said funds. 
 
 In the case of Eisner v. Macombor, 252 U. S. 189, shares of stock 
 were issued in the form of a dividend to stockholders, leaving owner- 
 ship of the property in the stockholders the same as before the issu- 
 ance ; that is, the property representing the value of the stock was 
 the same, and the only change was that each stockholder held two 
 certificates representing in the aggregate and in theory tiie same 
 stock value as previously had been represented by one certificate. 
 It was held in that case that such stock dividend was not equivalent, 
 for the purposes of income tax, to the payment of a dividend in prop- 
 erty or in cash, and was not to be taxal)le as income under the law 
 of September 8, 1916, sections 1, 2, ahd 3. 
 
 The plaintiffs in the present action rely upon the case of In re 
 Fechheimor Fishel Co., 212 Fed. 357, which holds that debenture 
 bonds, having the characteristic features of preferred stock, are, 
 from the standpoint of creditors of the corporation when the corpo- 
 ration becomes insolvent, no different than such preferred stock. 
 
 It would follow from this that for the purpose of liquidation or 
 dissolution of the corporation, or for consideration in insolvency or 
 bankruptcy proceedings, such debenture holders would not rank as 
 general creditors. 
 
 Plaintiffs also cite the case of Cass v. Realty Securities Co., 148 
 App. Div. 96, Avhich held that bonds having a definite date and con- 
 ditioned as were the debenture bonds in the present action, were for 
 the purposes under consideration in that case equivalent to preferred 
 stock and should not be considered as bonds in the usual meaning of 
 that word. 
 
 It has been held in Peabody v. Eisner. 247 U. S. 347, that a divi- 
 dend of shares in another corporation is taxable as income of tho
 
 416 UNITED STATES V. GUINZBERG. [CHAP. VII. 
 
 corporation owning the shares and distributing it as a dividend in 
 specie rather than in money. 
 
 In Stratton's Independence v. Howbert, 231 U. S. 399, it was held 
 that the transformation of ores in a mine into cash proceeds through 
 the business of mining was a production of income in so far as net 
 profits were concerned, and that the amount by which the body of 
 ore was reduced should not be added as a part of the expenses of con- 
 ducting the business. This illustrates the dilference between the 
 production of income and the mere changing of form in which 
 capital may be owned by the individual stockholder. 
 
 In Eisner r. Macomber, supra, at p. 208, the court says : 
 
 " The stockholder has the right to have the assets employed in the 
 enterprise, with the incidental rights mentioned ; but, as stockholder, 
 he has no right to withdraw, only the right to persist, subject to the 
 enterprise, and looking only to dividends for his return." 
 
 It is apparent, therefore, in the present case that the plaintiffs 
 received an actual payment (in the form of securities available for 
 disposition in the market, and entirely served or distinguished from 
 their control of the property as stockholders) of profits which the 
 company wished to distribute as earnings to its stockholders. It did 
 this by distribution of obligations which, like a promissory note, 
 called for the payment of cash, and did not invest the holder with 
 merely a difi'erent form of holding of stock. 
 
 There is no question here between the persons receiving this divi- 
 dend and creditors, as to priority of payment. Evidently so far as 
 these debenture bonds are concerned, the corporation was solvent, 
 and to whatever extent they might be of value, this value was sepa- 
 rated from any stockholders' control of the corporation. As stated 
 in Eisner v. Macomber, supra, at p. 212 : 
 
 " It is said that a stockholder may sell the new shares acquired in 
 the stock dividend; and so he may, if he can find a buyer. It is 
 equally true that if he does sell, and in doing so realizes a profit, 
 such profit, like any other, is income, and so far as it may have arisen 
 since the Sixteenth Amendment is taxable by Congress without 
 apportionment." 
 
 The debenture bonds in the suit at bar fall into the class of stock 
 sold rather than stock held in a continued status of shareholder. 
 
 The complaints should be dismissed. 
 
 UNITED STATES v. GUINZBERG. 
 Circuit Court of Appeals. 1921. 
 
 [Reported 278 Fed. 363.] 
 
 Manton, Circuit Judge. On the 17th of February, 1913, the 
 L B, Kleinert Eubber Co. declared a dividend of 18 per cent to com- 
 mon stockholders of record on January 30, 1913. This dividend
 
 BECT. IV.] UNITED STATES I'. GUINZBEIiG. 417 
 
 was payable July 1, 1913. The defendant in error was a stock- 
 holder on the 30th of January, 1913. The dividend was declared 
 out of the profits of the company earned during the year VJ12. It 
 was the only dividend paid during the year 1913. The declaration 
 of this dividend was in accordance with the established practice of 
 20 years' standing that one dividend in each year was declared in 
 February out of the earnings of the company, and made payable 
 the following July 1. The reason given for the postponement of the 
 payment of the dividend until July 1 in each year was to permit the 
 corporation to have use of the earnings in its business as a bank 
 balance. This purpose was said to be to avoid being forced to bor- 
 row money. The defendant in error, in liis return for 1913, did not 
 include the dividend so received by him, amounting to $70,380, and 
 it is because of his failure to pay an income tax on such sum that 
 this action was brought. 
 
 We think that the dividend declared prior to March 1, 1913, the 
 effective date of the income tax law here considered, was not income 
 when paid because it was part of the capital of the defendant in error 
 on March 1, 1913. By the declaration of a dividend, the earnings 
 of the company to the extent declared were separated from the 
 property of the corporation and were appropriated by that action 
 to the then stockholders, who became creditors of the corporation 
 for the amount of the dividend. The relation then created was that 
 of debtor and creditor. N. Y. Trust Co. et al., v. Edwards, Su- 
 preme Court, decided November 14, 1921 ; Wheeler v. Northwestern 
 Sleigh Co., 39 Fed. 437; People ex rel. U. S. Trust Co. i'. Barker, 
 &Q Hun. 131; Billingham v. Gleason Mfg. Co., 101 App. Div. 476; 
 affd. 185 N. Y. 571. It is the separation of the earnings from the 
 balance of the corporate property, together with the promise to pay 
 arising from the declaration of the dividend, that works this change. 
 The holder of stock, with respect to the dividend, is on a par with 
 the other creditors of the corporation. Staats v. Biograph Co., 236 
 Fed. 454. The fact that the dividend is payable at a future date 
 does not alter the rights thus created. The obligation of the corpo- 
 ration as debtor commences with the declaration of the dividend, 
 although the payment is postponed for the convenience of the com- 
 pany. The rights of the stockholders are immediately vested the 
 moment the dividend is declared. N. Y. Trust Co., etc. r. Ed- 
 wards, etc., supra. The action of the board of directors is the ap- 
 propriation of a portion of the earnings to the defendant in error 
 as the holder of a certificate of stock. The same rule prevails in the 
 State courts of New York, under which laws the corporation here 
 in question was organized. TToppor v. Sage, 113 N. Y. 530. The 
 fact that they are payable at a future time is immaterial. Matter 
 of Kernocheii, 104 X. Y. 618. 
 
 The income tax Act as of March 1, 1913, provides: 
 
 "A. Subdivision 1. That there shall be levied, assessed, collected 
 and paid annually upon the entire net income arising or accruing 
 from all sources in the preceding calendar year to every citizen of
 
 418 UNITED STATES V. GUINZBEEG. [CHAP. VII. 
 
 the United States, whether residing at home or abroad, and to every 
 person residing in the United States though not a citizen thereof, 
 a tax of 1 per centum per annum upon such income, except as here- 
 inafter proviiied ; and a like tax shall be assessed, levied, collected, 
 and paid annually upon the entire net income from all property 
 owned and of every business, trade, or profession carried on in the 
 United States by persons residing elsewhere. . . ." 
 
 "D. The said tax shall be computed upon the remainder of said 
 net income of each person subject thereto, accruing during each pre- 
 ceding calendar year ending December 31: Provided, hotvever, That 
 for the year ending December 31, 1913, said tax shall be computed 
 on the net income accruing from March 1 to December 31, 1913, 
 both dates inclusive. , . ." 
 
 We think that under this Act the income which accrued after 
 March 1, 1913, only is taxable. Anything which accrued prior to 
 March 1, 1913, was part of the taxpayer's principal at the time when 
 this Act became effective. Property held prior to March 1, 1913, 
 must be considered as capital, and the dividends in question must 
 be treated as such. The Act provides that " the entire net income 
 arising or accruing from all sources in the preceding calendar year 
 to every citizen of the United States . . ." shall be taxed. Accumu- 
 lations that accrued to a corporation prior to January 1, 1913, were 
 held to be capital and not income for the purpose of the Act in 
 Southern Pacific Co. v. Lowe, 247 U. S. 330. The term " income " 
 has been held to have no broader meaning in the 1913 Act than in 
 the 1910 Act. Stratton's Independence v. Howbert, 231 U. S. 417. 
 The Supreme Court based its conclusion in the Southern Pacific 
 ease {supra) upon the view that it was the purpose and intent of 
 Congress, while taxing the entire net income "arising or accruing" 
 from all sources during each year, commencing the 1st day of March, 
 1913, to refrain from taxing that which, in mere form only, bore the 
 appearance of income accruing after that date, while in truth and 
 substance it accrued before. Under the 1909 Act the expression 
 " income received during such year " was held to look to the time 
 of realization rather than the period of accrument "except as a 
 taking effect of the Act on a specific date (January 1, 1909) excludes 
 income that accrued before that date." Hayes v. Cauley Mt. Coal 
 Co., 247 U. S. 193. In the Hayes case, it was held that income 
 received within the year for which the assessment was levied, whether 
 it accrued within that year or some preceding year, when the Act 
 was in effect, could be taxed, but it excluded all income that accrued 
 prior to January 1, 1909, although afterwards received while the 
 Act was in effect. Value received by shareholders on the surrender 
 of their certificates of stock where the company sold all its property 
 and made final distribution of the proceeds to the shareholders, and 
 where the amount received by each was twice the par value of the 
 stock, but represented no increase since the effective date of the Act, 
 it was held that it did not "arise or accrue" after the Act became 
 effective. In Maryland Casualty Co. v. United States, 251 U. S.
 
 SECT. IV.], UNITED STATES V. PHELLIS. 419 
 
 342, cited by the Government, the income tax Act of 1913 was con- 
 sidered in so far as it concerned the dealing with corporations as 
 distinguished from dealings with individuals and which imposed a 
 tax, under the language of one paragraph, upon income " arising or 
 accruing" during the year and under another paragraph of the Act 
 uj)()n income received within the year, it was held that it was not 
 sullicient for income to accrue witldn the year in order to render the 
 corporation taxable, but the income must have been received by the 
 corporation. But tiiis was due to ambiguous paragraphs of the Act 
 which taxed the corporation, it was a construction favorable to the 
 taxpayer under such paragraphs. Nowhere in the opinion is there a 
 suggestion that the court changed the rule announced in Southern 
 Pacific Co. v. Lowe, supra, and Hayes v. Coal Co., supra, wherein it 
 was held that income which had accrued prior to March 1, 1U13, if 
 received thereafter, would not be taxable. 
 
 The case at bar is dilFerent from the eases where commissions are 
 to be received at a future date u])on a contingency and where there 
 is no fixed certainty of such receipt. There it can not be said that 
 the income has accrued. Edwards v. Iveith, 231 Fed. 110; Woods 
 V. Lewellyn, 252 Fed. 106. Dividends declared and paid in the 
 ordinary course by a corporation to its stockholders after March 1, 
 1913, whether from current earnings or from surplus accumulated 
 prior to that date, have been held to be taxable as income to the 
 stockholder. Lynch v. Hornby, 247 U. S. 339. "We deem the 
 legislative intent numifest only if and when, and to the extent that, 
 his interest in them comes to fruition as income — that is, in divi- 
 dends declared." Eisner v. ]\Iacomber, 252 U. S. 204. 
 
 We conclude that upon the declaration of a dividend the debt was 
 immediately created in favor of the defendant in error, payable at a 
 future date. By that action a vested right was created in favor of 
 the stockholder, who could sell his right by assigning or pledging or 
 otherwise disposing of it, and this was not income arising and accru- 
 ing within the meaning of the statute such as might be taxed under 
 the income tax act of March 1, 1913, here in question. The same 
 views are expressed in the rulings of the Treasury Department 
 (Treasury Decision 2048, November 12, 1914). 
 
 We find no error below, and the direction of a judgment for the 
 defendant is affirmed. 
 
 UNITED STATES v. PHELLIS. 
 Supreme Court of the United States. 1921. 
 
 [Reported 257 U. S.] 
 
 Pitney, J. The court below sustained the claim of C. W. Phellis 
 for a refund of certain moneys paid by him under protest in dis- 
 charge of an additional tax assessed against him for the year 1915, 
 based upon alleged income equivalent to the market value of 500
 
 420 U^'ITED STATES V. PHELLIS. [CHAP. VII. 
 
 shares of stock of a Delaware corporation called the E. I. du Pont 
 de Nemours & Co., received by him as a dividend upon his 250 shares 
 of stock of the E. I. du Pont de Xemours Powder Co., a New Jersey 
 corporation. The United States appeals. 
 
 From the findings of the Court of Claims, read in connection with 
 claimant's petition, the following essential facts appear : In and prior 
 to September, 1915, the New Jersey company had been engaged for 
 many years in the business of manufacturing and selling explosives. 
 Its funded debt and its capital stock at par values were as follows : 
 
 5% mortgage bonds $1,230,000 
 
 41/9% 30-year bonds 14.166,000 
 
 Preferred stock ($100 shares) 16,068,600 
 
 Common stock ($100 shares) 29,427,100 
 
 Total $60,891,700 
 
 It had an excess of assets over liabilities showing a large surplus 
 of accumulated profits; the precise amount is not important, except 
 that it should be stated that it was sufficient to cover the dividend 
 distribution presently to be mentioned. In that month a reorganiza- 
 tion and financial adjustment of the business was resolved upon and 
 carried into effect with the assent of a sufficient proportion of the 
 stockholders, in which a new corporation was formed under the laws 
 of Delaware with an authorized capital stock of $240,000,000, to 
 consist in part of debenture stock bearing 6 per cent cumulative 
 dividends, in part of common stock; and to this new corporation all 
 the assets and good will of the New Jersey company were transferred 
 as an entirety and as a going concern, as of October 1, 1915, at a 
 valuation of $120,000,000, the new company assuming all the obli- 
 gations of the old except its capital stock and funded debt. In pay- 
 ment of the consideration the old company retained $1,484,100 in 
 cash to be used in redemption of its outstanding 5 per cent mort- 
 gage bonds, and received $59,661,700 par value in debenture stock 
 of the new company (of which $30,234,600 was to be used in taking 
 up, share for share and dollar for dollar, the preferred stock of the 
 old company and redeeming its 30-year bonds), and $58,854,200 
 par value of the common stock of the new company which was to be 
 and was immediately distributed among the common stockholders of 
 the old company as a dividend, paying them two shares of the new 
 stock for each share they held in the old company. This plan was 
 carried out by appropriate corporate action; the new company took 
 over all the assets of the old company, and that company besides 
 paying off its 5 per cent bonds acquired debenture stock of the new 
 company sufficient to liquidate its 4% per cent 30-year bonds and 
 retire its preferred stock, additional debenture stock equal in amount 
 at par to its own outstanding common stock, and also two shares of 
 common stock of the Delaware corporation for each share of the out- 
 standing common stock of the New Jersey corporation. Each holder 
 of the New Jersey company's common stock (including claimant) 
 retained his old stock and besides received a dividend of two shares
 
 SECT. IV.] UNITED STATES V. PHELLIS. 421 
 
 for one in common stock of the Delaware company, and the New 
 Jersey corporation retained in its treasury 6 per cent debenture stock 
 of the Delaware corporation ecjuivalent to the par value of its own 
 outstandinf^ common stock. The i)ersonnel of the stockholders and 
 ollicers of llie two corporations was on October 1, I'Jlo, identical, the 
 new company having elected the same officers as the old; and the 
 holders of common stock in both corporations had the same propor- 
 tionate stockholding in each. After the reorganization and the dis- 
 tribution of the stock of the Delaware corporation, tiie Xew Jersey 
 corporation continued as a going concern, and still exists, but except 
 for the redemption of its outstanding bonds, tlie exchange of deben- 
 ture stock for its preferred stock, and the liolding of debenture stock 
 to an amount equivalent to its own outstanding common and the 
 collection and disposition of dividends thereon, it has done no busi- 
 ness. It is not, liowever, in process of liquidation. It has received 
 as income upon the Delaware company's debenture stock held by it 
 dividends to the amount of 6 per cent per annum, which it has paid 
 out to its own stockholders, including the claimant. The fair mar- 
 ket value of the stock of the Xew Jersey corporation on September 
 30, 1915, prior to the reorganization, -was $T9o per share, and its 
 fair market value, after the execution of the contracts between the 
 two corporations, was on October 1, 1915, $100 per share. The fair 
 market value of the stock of the Delaware corporation distributed 
 as aforesaid was on October 1, 1915, $347.50 per share. The Com- 
 missioner of Internal Revenue held that the 500 shares of Delaware 
 company stock acquired by claimant in the distribution was income 
 of the value of $347.50 per share and assessed the additional tax 
 accordingly. 
 
 The Court of Claims, observing that from the facts as found claim- 
 ant's 250 shares of stock in the New Jersey corporation were worth 
 on the market, prior to the transfer and dividend, precisely the same 
 that the same shares plus the Delaware company's shares received 
 by him were worth thereafter, and that he did not gain any increase 
 in the value of his aggregate holdings by the operation, held that 
 the whole transaction was to be regarded as merely a financial reor- 
 ganization of the business of the company, producing to him no 
 profit and hence no income, and that the distribution was in effect 
 a stock dividend nontaxable as income under the authority of Eisner 
 V. Macomber, 252 U. S. 189, and not within the rule of Peabody v. 
 Eisner, 247 U. S. 347. 
 
 "We recognize the importance of regarding matters of substance 
 and disregarding forms in applying the provisions of the sixteenth 
 amendment and income tax laws enacted thereunder. In a number 
 of cases besides those just cited we have under varving conditions 
 followed the rule. Lvnch i\ Turrish, 247 U. S. '221 ; Southern 
 Pacific Co. V. Lowe, 247 U. S. 330: Gulf Oil Corporation v. Lewel- 
 lyn. 248 IT. S. 71. 
 
 The Act under which the tax now in question was imposed (Act of 
 Oct. 3, 1913, ch. 16, 38 Stat. 114, 166-167) declares that income 
 shall include, among other things, gains derived "from interest, rent.
 
 422 UNITED STATES V. PIIELLIS. [cilAP. VII. 
 
 dividends, securities, or the transaction of any lawful business carried 
 on for gain or profit, or gains or profits and income derived from any 
 source whatever." Disregarding the slight looseness of construction, 
 we interpret "gains, profits, and income derived from . . . divi- 
 dends," etc., as meaning not that everything in the form of a divi- 
 dend must be treated as income, but that income derived in the way 
 of dividends shall be taxed. Hence the inquiry must be whether the 
 shares of stock in the new company received by chiimant as a dividend 
 by reason of his ownership of stock in the old company constituted 
 (to apply the tests laid down in Eisner t-. Macomber, 253 U. S. 
 189, 207) a gain derived from capital, not a gain accruing to capi- 
 tal, nor a growth or increment of value in the investment, but a gain, 
 a profit, something of exchangeable value proceeding from the prop- 
 erty, severed from the capital however invested, and coming in — that 
 is, received or drawn by the claimant for his separate use, benefit, 
 
 and disposal. 
 
 Claimant's capital investment was represented by his New Jersey 
 shares. Whatever increment of value had accrued to them prior to 
 September 30, 1915, by reason of the surplus profits that theretofore 
 had been accumulated by the company, was still a part of claimant's 
 capital, from which as yet he had derived no actual and therefore no 
 taxable' income so far as the surplus remained undistributed. As yet 
 he had no right to withdraw it or any part of it, could not have such 
 right until action by the company or its proper representatives, and 
 his interest still was but the general property interest of a stock- 
 holder in the entire assets, business, and affairs of the company — 
 a capital interest, as we declared in Eisner v. Macomber, 252 U. S. 
 
 189, 208. 
 
 Upon the face of things, however, the transfer of the old company s 
 assets to the new company in exchange for the securities issued by 
 the latter, and the distribution of those securities by the old company 
 among its stockholders, changed the former situation materially. 
 The common stock of the new company, after its transfer to the old 
 company and prior to its distribution, constituted assets of the old 
 company which it now held to represent its surplus of accumulated 
 profits^- still, however, a common fund in which the individual 
 stockholders of the old company had no separate interest. But when 
 this common stock was distriljnted among the common stockholders 
 of the old company as a dividend, then at once — unless the two com- 
 panies must be regarded as substantially identical — the individual 
 stockholders of the old company, including claimant, received assets 
 of exchangeable and actual valne severed from tlieir capital interest 
 in the old company, proceeding from it as the result of a division of 
 former corporate profits, and drawn by them severally for their in- 
 dividual and separate use and benefit. Such a gain resulting from 
 their ownership of stock in tlie old company and proceeding from it 
 constituted individual income in the proper sense. 
 
 That a comparison of the market value of claimant's shares in the 
 New Jersey corporation immediately before, with the aggregate 
 market value of those shares plus the dividend shares immediately
 
 SECT. IV.] UNITED STATES V. PIIELLIS. 423 
 
 after, the dividend showed no change in the aggregate — a fact relied 
 upon hy the Court of Claims as demonstrating that claimant neither 
 gained nor lost pecuniarily in the transaction — seems to us a cir- 
 ciMiistance of no particular imj)ortance in the jjresent in<|uiry. As- 
 suming the market values were a precise relicx of intrinsic values, 
 they would show merely that claimant ac(juired no increase in aggre- 
 gate wealth through the mere effect of the reorganization and conse- 
 quent dividend, not that the divideml did not constitute income. 
 There would remain the presumption that tiie value of the New Jer- 
 sey shares immediately prior to the transaction rellected the original 
 capital investment plus the accretions which had resulted through 
 the company's business activities and constituted its surplus; a sur- 
 plus in which, until dividend made, the individual stockholder had 
 no property interest except as it increased the valuation of his capital. 
 It is the appropriate function of a dividend to convert a part of a 
 surplus thus accumulated froTu property of the compnnv into prop- 
 erty of the individual stockholders; the stockliolder's share being 
 thereby released to and drawn by him as profits or income derived 
 from the company. That the distribution reduces the intrinsic 
 capital value of the shares by an equal amount is a normal and neces- 
 sary effect of all dividend dislrihiilions — whether large or snmll 
 and whether paid in money or in other divisible assets — but such 
 reduction constitutes the dividend none the less income derived by 
 the stockholder if it represents gains previously acquired by the cor- 
 poration. Hence, a comparison of aggregate values immediately be- 
 fore with those immediately after the dividend is not a proper test 
 for detormin-ing whether individual income, taxable against the 
 stockholder, has been received by means of the dividend. 
 
 The possibility of occasional instances of apparent hardship in the 
 incidence of the tax may be conceded. AVhere, as in this case, the 
 dividend constitutes a distribution of profits accumulated during an 
 extended period and bears a large proportion to the par value of the 
 stock, if an investor happened to buy stock shortly before the divi- 
 dend, paying a price enhanced by an estimate of the capital plus the 
 surplus of the company, and after distribution of the surplus, with 
 corresponding reduction in the intrinsic and market value of the 
 shares, he were called upon to pay a tax upon the dividend received, 
 it might look in his case like a tax upon his capital. But it is only 
 apparently so. In buying at a price that reflected the accumulated 
 profits, he of course acquired as a part of the valuable rights pur- 
 chased the prospect of a dividend from the accumulations — bought 
 ** dividend on," as the phrase goes — and necessarily took subject to 
 the burden of the income tax proper to be assessed against liim bv 
 reason of the dividend if and when made. He simply stepped into 
 the shoes, in this as in other respects, of the stockholder whose shares 
 he acquired, and presumal)ly the prospect of a dividend influenced 
 the price pn id, and was discounted by tlie prospect of an income tax 
 to be paid thereon. Tn short, the question whether a dividend made 
 out of company profits constitutes income of the stockholder is not 
 affected by antecedent transfers of the stock from hand to hand.
 
 424 UNITED STATES V. PHELLIS. [cHAP. VII. 
 
 There is more force in the suggestion that, looking through and 
 through the entire transaction out of which the distribution came, 
 it was but a financial reorganization of the business as it stood be- 
 fore, without diminution of the aggregate assets or chancre in the 
 general corporate objects and purposes, without change of personnel 
 either in officers or stockholders, or change in the proportionate in- 
 terest of any individual stockholder. The argument, in effect, is that 
 there was no loss of essential identity on the part of the company, 
 only a change of the legal habiliments in which the aggregate cor- 
 porate interests were clothed, no substantial realization by individual 
 stockholders out of the previous accumulation of corporate profits, 
 merely a distribution of additional certificates indicating an increase 
 in the value of their capital holdings. Tliis brings into view the 
 general effect of the combined action of the entire body of stock- 
 holders as a mass. 
 
 In such matters, what was done, rather than the design and pur- 
 pose of the participants, should be the test. However, in this Case 
 there is no difference. The proposed plan was set out in a written com- 
 munication from the president of the iSTew Jersey corporation to the 
 stockholders, a written assent signed by about 90 per cent of the 
 stockholders, a written agreement made between the old company and 
 the new, and a bill of sale made by the former to the latter, all of 
 which are in the findings. The plan as thus proposed and adopted, 
 and as carried out, involved the formation of a new corporation to 
 take over the business and the business assets of the old; it was to 
 be and was formed under the laws of a different State, which neces- 
 sarily imports a different measure of responsibility to the public, and 
 presumably different rights between stockholders and company and 
 between stockholders inter se, than before. The articles of association 
 of neither company is made to appear, but in favor of the asserted 
 identity between the companies we will assume (contrary to the 
 probabilities) that there was no significant difference here. But the 
 new company was to have authorized capital stock aggregating $240,- 
 000,000 — nearly four times the aggregate stock issues and funded 
 debt of the old company — of which less than one-half ($118,515,900) 
 was to be issued presently to the old company or its stockholders, 
 leaving the future disposition of a majority of the authorized new 
 issues still to be determined. There was no present change of officers 
 or stockholders, but manifestly a continuation of identity in this 
 respect depended upon continued unanimous consent or concurrent 
 action of a multitude of individual stockholders actuated by motives 
 and influences necessarily to some extent divergent. In the light of 
 all this we can not regard the new company as virtually identical 
 with the old, but must treat it as a substantial corporate body with 
 its own separate identity, and its stockholders as having property 
 rights and interests materially different from those incident to owner- 
 ship of stock in the old company. 
 
 The findings show that it was intended to be established as such, 
 and that it was so created in fact and in law. There is nothing to 
 warrant us in treating this separateness as imaginary, unless the
 
 SECT. IV.] UNITED STATES V. PIIELLIS. 425 
 
 identity of the body of stockholders and the transfer in solido of the 
 manui'acturing business and assets from the old company to the new 
 necessarily have that effect. But the icU-ntity of stockholders was but 
 a temporary condition, subject to chan<je at any moment at the 
 option of any individual. As to the assets, the very fact of their 
 transfer from one company to the other evidenced the actual separate- 
 ness of the two companies. 
 
 But further, it would be erroneous, we think, to test the question 
 whether an individual stockholder derived income in the true and 
 substantial sense through receiving a part in the distriljution of the 
 new shares, by regarding alone the general eU'ect of the reorganiza- 
 tion upon the aggregate body of stoekiiolders. The liability of a 
 stockholder to pay an individual income tax must be tested by the 
 effect of the transaction upon the individual. It was a part of the 
 purpose and a necessary result of the plan of reorganization, as 
 carried out, that common stock of the new comjjany to the extent 
 of $5 8, 8 54,;;^ 00 should be turned over to the old company, treated by 
 it as assets to be distributed as against its liability to stockholders 
 for accrued surplus, and thereupon distributed to them " as a divi- 
 dend." Tlie assent of the stockholders was based upon this as a part 
 of the plan. 
 
 In thus creating the common stock of the new company and trans- 
 ferring it to the old company for distribution pro rata among its 
 stockholders, the parties were acting in the exercise of their rights 
 for the very purpose of placing the common stockholders individually 
 in possession of new and substantial property rights in esse, in 
 realization of their former contingent right to participate eventually 
 in the accumulated surplus. No question is made but tliat the pro- 
 ceedings taken were legally adequate to accomplish the purpose. 
 The new common sfocl- became treasury assets of the old company, 
 and was capable of distribution as the manufacturing assets whose 
 place it took were not. Its distribution transferred to the several 
 stockholders new individual property rights which they severally 
 were entitled to retain and enjoy, or to sell and transfer, with pre- 
 cisely the same substantial benefit to each as if the old company had 
 acquired the stock by purchase from strangers. According to the 
 findings the stock thus distributed was marketable. There was 
 neither express nor implied condition, arising out of the plan of 
 reorganization or otherwise, to prevent any stockholder from selling 
 it; and he could sell his entire portion or any of it without parting 
 with his capital interest in the parent company, or affecting his pro- 
 portionate relation to the interests of other stockholders. ^Miether 
 he sold the new stock for money or retained it in preference, in 
 either case when he received it he received as his separate property 
 a part of the accumulated profits of the old company in which pre- 
 viously he had only a potential and contingent interest. 
 
 It thus appears that in substance and fact, as well as in appearance, 
 the dividend received by claimant was a gain, a profit, derived from his 
 capital interest in the old company, not in liquidation of the capital 
 but in distrilmtion of accumulated profits of the company; something
 
 426 EOCKEFELLEE V. UNITED STATES. [ciIAr. VII. 
 
 of exchangeable value produced by and proceeding from his invest- 
 ment therein, severed from it and dra^\^l by him for his separate use. 
 Hence it constituted individual income within the meaning of the 
 income tax law as clearly as was the case in Peabody v. Eisner, 247 
 U. S. 347. 
 
 Judgment of the Court of Claims reversed, and the cause re- 
 manded with directions to dismiss the suit. 
 
 McReyxolds, J., dissenting. In the course of its opinion, citing 
 Eisner v. Macomber, 252 U. S. 189, 213, the Court of Claims de- 
 clared : 
 
 " We think the whole transaction is to be regarded as merely a 
 financial reorganization of the business of the company and that 
 this view is justified by the power and duty of the court to look 
 through the form of the transaction to its substance." And further, 
 " It seems incredible that Congress intended to tax as income a 
 business transaction which admittedly produced no gain, no profit, 
 and hence no income. If any income had accrued to the plaintiff by 
 reason of the sale and exchange made it would doubtless be taxable." 
 
 There were perfectly good reasons for the reorganization, and the 
 good faith of the parties is not questioned. I assume that the statute 
 was not intended to put an embargo upon legitimate reorganizations 
 when deemed essential for carrying on important enterprises. Eisner 
 V. Macomber was rightly decided, and the principle which I think 
 it announced seems in conflict with the decision just announced. 
 
 Mr. Justice Vax Devantee concurs in this dissent. 
 
 EOCKEFELLEE v. UNITED STATES. 
 Supreme Court of the United States. 1921. 
 
 [Reported 257 TJ. S.'] 
 
 Pitney, J. These two cases were argued together, turn upon 
 like facts, and may be disposed of in a single opinion. They in- 
 volve the legality of certain income taxes assessed against the plain- 
 tifl; in error in the one case, and against the testator of plaintiffs in 
 error in the other, under the income tax provisions of the act of 
 October 3, 1913 (ch. 16, 38 Stat. 114, 166-167), by reason of cer- 
 tain distributions of corporate stocks received by the respective tax- 
 payers under the following circumstances: In and prior to the year 
 1914, the Prairie Oil & Gas Co., a corporation of the State of 
 Kansas, was engaged in producing, purchasing, and selling crude 
 petroleum, and transporting it through pipe lines owned by the com- 
 pany in the States of Kansas and Oklahoma, and elsewhere. At the 
 same time the Ohio Oil Co., a corporation of the State of Ohio, was 
 engaged in producing and manufacturing petroleum and mineral 
 oil and transporting the same through pipe lines owned by it in the 
 States of Ohio, Indiana, Illinois and Pennsylvania. In the month 
 of June, 1914, it was judicially determined by this court (The Pipe
 
 SECT. IV.] EOCKEFELLEE V. UNITED STATES. 427 
 
 Line Cases, 234 U. S. 548) that with respect to the transportation 
 business these companies were common carriers in interstate com- 
 merce, subject to tlie act to regulate commerce as amended by act of 
 June 2^J, I'JUG (cli. 35'Jl, 34 Stat. 5«4), and as such subject to the 
 supervision of tlie Interstate Commerce Commission. By act of 
 September 2G, rJ14 (ch. 311, 38 Stat. 717), tlie remainder of tlieir 
 business became subject to the supervision of tlie Federal Trade 
 Commission. In order to avoid a probable conilict of Federal au- 
 thority in case the combined business of production and transporta- 
 tion should continue to be carried on as theretofore, it was in each 
 case, upon advice of counsel, determined that the pipe-line j)roperty 
 should be owned and operated by a separate corporation. In the case 
 of the Ohio company an added reason for segregation lay in the fact 
 that by a section of the Ohio General Code its entire gross receipts, 
 including those derived from business other than transportation, 
 were subject to an annual assessment of 4 per cent cluirgeable against 
 the gross receipts of companies engaged in the transportation busi- 
 ness. For these reasons, the stockholders of the Prairie Oil & Gas 
 Co, caused a corporation to be organized, under the laws of the State 
 of Kansas, by the name of the Trairie Pipe Line Co., to which all 
 the pipe-line property of the Prairie Oil & Gas Co. was transferred 
 in consideration of the issue and delivery of the entire capital stock 
 of the new company, to be distributed pro rata to the stockholders 
 of the Prairie Oil & Gas Co. And similarly, tiie stockholders of the 
 Ohio Oil Co. caused a corporation to be formed, under the laws of 
 that State, by the name of the Illinois Pipe Line Co., to which all 
 the pipe-line property of the Ohio Oil Co. was transferred in con- 
 sideration of tile issue to it of the entire capital stock of the new 
 company, which was to be distributed at once by the old company 
 to its stockholders pro rata. These arrangements were carried out 
 in like manner in both cases, except that in the case of the Kansas 
 companies the stock of the pipe-line company was issued directly 
 to the stockholders of the oil company, whereas in the case of the 
 Ohio companies the pipe-line company issued its stock to the oil 
 company, but in the same resolution by which the contract was made, 
 an immediate distribution of the new stock among the oil company's 
 stockholders was provided for, and in fact it was carried out. The 
 aggregate valuation of the Prairie pipe lines was $27,000,000, that 
 of the Ohio pipe lines $20,000,000, and the total capitalization of 
 the respective pipe-line companies equaled these amounts. 
 
 In each case, the oil company had a surplus in excess of the stated 
 value of its pipe lines and of the par value of the total stock of the 
 corresponding pipe-line company; so that tRe transfer of the pipe 
 lines and the distribution of the stock received for them left the 
 capital of the respective oil companies unimpaired and required no 
 reduction in their outstjinding issues. 
 
 Messrs. Rockefeller and Harkness, respectively, were holders of 
 large amounts of the stock of both the Prairie and the Ohio oil com- 
 panies and in the distributions each received an amount of stock 
 in each of the pipe-line companies proportionate to his holdings in
 
 428 EOCKEFELLEK V. UNITED STATES. [ciIAP. VII. 
 
 the oil companies. This occurred in the year 1915. Neither Mr. 
 Rockefeller nor Mr. Harkness nor the latter's executors sold any of 
 the stock in the pipe-line companies. 
 
 Income tax assessments for the year 1915 were imposed upon 
 Messrs. Eockefeller and Harkness, based upon the value of the stocks 
 thus received as dividends; and these assessments are in question in 
 the present suits, both of which were brought in the District Court 
 of the United States for the Southern District of New York: one 
 by the United States against Mr. Eockefeller, the other by the ex- 
 ecutors of Mr. Harkness against the collector. In each case the facts 
 were specially pleaded so as to present the question whether the 
 distribution of the stocks of the pipe-line companies among the 
 stockholders of the oil companies constituted, under the circum- 
 stances, dividends within the meaning of the act of 1913, and in- 
 come within the meaning of the sixteenth amendment. In each case 
 a final judgment was rendered sustaining the assessment, and the 
 judgments are brought here by direct writs of error under section 
 238, Judicial Code, because of the constitutional question. 
 
 Under the facts as recited we deem it to be too plain for dispute 
 that in both cases the new pipe-line company shares were in sub- 
 stance and effect distributed by the oil company to its stockholders ; 
 as much so in the case of the Kansas company where the new stock 
 went directly from the pipe-line company to the stockholders of 
 the oil company, as in the case of the Ohio company where the new 
 stock went from the pipe-line company to the oil company and by it 
 was transferred to its stockholders. Looking to the substance of 
 things the difference is unessential. In each case the consideration 
 moved from the oil company in its corporate capacity, the new com- 
 pany's stock issued in exchange for it was distributed among the oil 
 company's stockholders in their individual capacity, and was a sub- 
 stantial fruit of their ownership of stock in the oil company, in 
 effect a dividend out of the accumulated surplus. 
 
 The facts are in all essentials indistinguishable from those pre- 
 sented in United States v. Phellis, decided this day. In these cases 
 as in that, regarding the general effect of the entire transactions re- 
 sulting from the combined action of the mass of stockholders, there 
 was apparently little but a reorganization and financial readjust- 
 ment of the affairs of the companies concerned, here a subdivision 
 of companies, without immediate effect upon the personnel of the 
 stockholders, or much difference in the aggregate corporate activities 
 or properties. As in the Phellis case, the adoption of the new ar- 
 rangement did not of itself produce any increase of wealth to the i 
 stockholders, since whatever was gained by each in the value of his i 
 new pipe-line stock was at the same moment withdrawn through a 
 corresponding diminution of the value of his oil stock. Neverthe- 
 less the new stock represented assets of the oil companies standing 
 in the place of the pipe-line properties that before had constituted 
 portions of their surplus assets, and it was capable of division among 
 stockholders as the pipe-line properties were not. The distribution, 
 whatever its effect upon the aggregate interests of the mass of stock-
 
 SECT. IV.] TOWNE V. MCELLIGOTT. 420 
 
 holders, constituted in the case of each individual a gain in the form 
 of actual exchangeable assets transferred to him from tlie oil com- 
 pany for his separate use in partial realization of his former in- 
 divisible and contingent interest in the corporate surplus. It was 
 in substance and effect, not merely in form, a dividend of profits by 
 the corporation, and individual income to the stockhohler. 
 
 The opinion just delivered in United States i'. Piiellis sufficiently 
 indicates the ground of our conclusion that the judgment in each of 
 the present cases must be affirmed. 
 
 Clajike, J., took no part in the consideration or decision of these 
 cases. 
 
 Van Devanter and McUeyxolds, J J., dissent. 
 
 TOWNE V. McELLIGOTT. 
 District Court of the United States. 1921. 
 
 IReported 274 Fed. 960.] 
 
 This case arises upon demurrer to a complaint by a taxpayer for 
 money paid on income taxes. It raises two questions : First, whetlier 
 the profits realized upon the sale of the plaintiff's shares of stock 
 were correctly computed; second, whether a surtax of 72 per cent 
 on such profits was confiscatory. 
 
 The first question depends upon these facts: The plaintiff owned 
 shares in a corporation before March 1, 1913, and bought other 
 shares thereafter. Later he received a stock dividend of 50 per cent 
 upon all his shares. In 1918 he sold some of his shares, including 
 those certificates which he had held on March 1, 1913, those which he 
 had bought later, and some of those which he had received as a 
 stock dividend. The tax was collected on the following basis: The 
 plaintiff was charged with the gross sale price and credited on each 
 sliare sold with the average cost of all the shares. This average for 
 each share was computed by dividing the gross cost of all such shares 
 by the number of the shares, including the shares declared as a 
 stock dividend. The plaintiff argues that he should be credited with 
 the actual cost of each certificate, computing the cost of the shares 
 declared as a stock dividend at nothing. Thus the difference between 
 the parties is whether in estimating the taxpayer's credit on each 
 share sold, the stock dividend shares should be brought into hotchpot 
 with the shares on which the stock dividend was declared. 
 
 Learned Hand, D. J. I shall take up the second point first, 
 since if it were sound it would dispose of the whole case. In brief it 
 comes to this, that a tax of 72 per cent on the last increment of the 
 plaintiff's income, and a tax of 50 per cent upon his whole income, 
 is confiscatory, and if so, void under the Fifth Amendment. The 
 term "confiscatory," when so used, is clearly one of degree, because 
 literally all taxes are pro tanto confiscatory. Except as it imports 
 some inequality of burden, not here suggested, it can mean nothing
 
 430 TOWNE V. MCELLIGOTT. [cHAP. VII. 
 
 but that there is a measure to the amount which the Government 
 may seize in taxes for its own purposes. The plaintiff relies on cer- 
 tain language in Brushaber v. Union Pacific Railway, 2-iO U. S. 1, 
 24, 25, which, broken from its context, he thinks helps his conten- 
 tion. The meaning of that language is only that there may be 
 inequalities in the rates of levy great enough to become a confisca- 
 tion of the income w^hich suffered the highest rates. The Chief 
 Justice identified possible confiscation with a tax "so wanting in 
 bases for classification as to produce such a gross and patent in- 
 equality as to inevitably lead to the same conclusion," i.e., the con- 
 clusion that the property was confiscated. I do not read this language 
 as giving any color for arguing that when the inequalities are lawful 
 the rates may be confiscatory as a whole, nor is there any such sug- 
 gestion in the books that I have seen. 
 
 In fact, our war taxes are not out of relation to the sums levied 
 by other civilized nations faced with the same exigencies as the 
 Great War imposed upon us. In critical periods of a nation's life 
 the power to tax may be necessary to preserve it, and perhaps there 
 is no limit beyond which it may not subject the property within its 
 reach to contribution. I need not go so far as that in this case ; it is 
 enough that the powers of Congress are to be interpreted, not by 
 dialectical ingenuity but by the current practices of nations in the 
 exercise of similar powers. It is true that these powers are limited 
 and that those limits must be observed, however little they circum- 
 scribe the analogous powers of other legislatures. Yet when the 
 question is of the interpretation of those broad counsels of modera- 
 tion contained in the Fifth Amendment, we must interpret the 
 limitations themselves with an eye to the practices which have become 
 tolerated elsewhere among civilized nations. Were it not so, we 
 should be limited forever to the political usages of 1789, and those 
 amendments which were intended to protect the individual against 
 extravagant or invidious discrimination would become a strait- 
 jacket upon the Nation's freedom. 
 
 The second point is raised by Eisner v. Macomber, 252 U. S. 189, 
 and must be ruled by its implications. Under the doctrine of that 
 case a stock dividend is not regarded as new property at all. The 
 old certificates represented precisely the same property as the old 
 and new do thereafter. The old shares have proliferated, as it were, 
 and although the right they represented has now suffered a cellular 
 division into smaller units of greater number, that is all that has 
 happened. In view of this it seems to me difficult to avoid regard- 
 ing the old and new shares together as anything more than the 
 evidence of a right which has persisted unchanged through the 
 declaration of the dividend. It might have been possible to look at 
 the new shares as declared from the surplus and the surplus as not 
 included in the old shares (at least not in the same sense as the 
 new shares comprise it), but all such notions were expressly repudi- 
 ated in the prevailing opinion. If so, each of the new shares whether 
 contained in the old or the new certificates represents a part of the 
 original property purchased, and in selling the first certificate the
 
 SECT. IV.] TOWNE V. MCELLIGOTT. 431 
 
 stockholder has not sold the whole of what he ori^nally bought and 
 should not be credited wilii tiie whole i)ur{lui.<e price. Judge J{ose, 
 in Safe Deposit, etc. Co. v. Miles, 273 Fed. 82:ii, has adopted the 
 same theory of computing an income tax in a stronger ca.se. There 
 the plaintiff sold some "rights" declared upon his stock, and Judge 
 Kose computed his profit in substantially tlie same way a.s 1 suggest 
 here. 
 
 The plaintiff answers this argument by saying that if so, all 
 sliares at any time held l)y a stockholder must be brought into hoteh- 
 pot and averaged. 1 scarcely think that consistency requires me to 
 go so far. The law nuiy, and in fact does, recognize an identity in 
 every share which can indeed be traced upon the books of tin; com- 
 pany, at least until certificates are consolidated and later subdivided. 
 The j)urchase of a number of shares can be earmarked by the certif- 
 icate and it is an enormous convenience to keep the purchase 
 separate. Yet it is possible and consistent when new shares are 
 declared to attribute them ratably in subdivision of those already 
 issued. They are not so entered on the books, it is true, but the 
 books are not kept in accordance with the underlying doctrine of 
 Eisner v. Macomber, supra, in any event. At least the earlier cer- 
 tificates need not lose their separate identity because new shares are 
 filiated to them in proper proportion. 
 
 An illustration wall make clear what I mean. Suppose a man has 
 certificate A for 100 shares bought at $100, certificate B for 100 
 bought at $150, and certificate C for 100 bought for $200. Suppose, 
 further, that a stock dividend of 50 per cent is declared and he gets 
 one certificate D for 150 shares without paying anything. If he 
 sells certificate A he would be deemed to sell not the whole of his 
 first purchase but only two-thirds of it, and he could credit himself 
 with only $6,666. If he sold certificate B he would credit himself 
 with $10,000, and if certificate C with $13,333. If he sold certifi- 
 cate D he could credit himself with $15,000, made up of $3,333 
 from his first purchase, $5,000 from his second, and $6,666 from 
 his third. If, on the other hand, he sold only a part of certificate D, 
 some arbitrary rule of apportionment must be adopted allocating 
 the shares sold among his purchases. The most natural analogy is 
 with payment upon an open account, wdiere the law has always 
 allocated the earlier payments to the earlier debts in the absence of 
 a contrary intention. Accordingly, if all the new shares were not 
 sold at once, I think the first sales would be attribut<?d to the first 
 purchases still remaining unsold when the stock dividend was de- 
 clared. I do not see that this method will result in confusion in its 
 application, and it carries into effect the underlying theory of 
 Eisner v. Macomber, svpra. 
 
 The tax at bar was not computed quite in this way, because all the 
 purchases before the declaration of the stock dividend were brought 
 into hotchpot. This, I think, was inconsistent with the theory of 
 the identity of the shares involved in each purchase. It must, there- 
 fore, be recalculated, which the parties have kindly consented to do 
 if they are told the rule. The credits will be computed as follows:
 
 432 MEKCHAIS^TS' LOAN AND TEUST CO. V. SMIETANKA. [CHAP. VU. 
 
 Upon each certificate held on March 1, 1913, two-thirds its value on 
 tliat day, i.e., $230. Upon each certificate bought at $100, $66%. 
 Upon each certificate for stock dividend shares, if issued against any 
 specified earlier certificate, the same credit per share as the shares of 
 that certificate. If the certificate of new shares is not so earmarked, 
 or if but one certificate was issued for the new shares, then credit 
 will be allowed of two-thirds the value of the shares on March 1, 
 11)13, until half the number of shares have been sold which the 
 plaintiff held on March 1, 1913, and retained the stock dividend. 
 
 The formal disposition of the demurrer will depend upon this 
 calculation. If the tax is less than that collected the demurrer will 
 be overruled and the plaintiff will take judgment for the difference; 
 if it is greater, or the same, the demurrer will be sustained and the 
 complaint dismissed with costs. 
 
 MEECHANTS' LOAN AND TEUST CO. v. SMIETANKA. 
 Supreme Court of the United States. 1931. 
 
 [Reported 255 U. 8. 509.] 
 
 Clarke, J. A writ of error brings this case here for review of a 
 judgment of the District Court of the United States for the North- 
 ern District of Illinois, sustaining a demurrer to a declaration in 
 assumpsit to recover an assessment of taxes for the year 1917, made 
 under warrant of the income tax act of Congress approved September 
 8, 1916 (39 Stat., ch. 463, p. 756), as amended by the act approved 
 October 3, 1917 (40 Stat., ch. 63, p. 300). Payment was made under 
 protest, and the claim to recover is based upon the contention that 
 the fund taxed was not " income " within the scope of the sixteenth 
 amendment to the Constitution of the United States, and that the 
 effect given by the lower court to the act of Congress cited renders 
 it unconstitutional and void. This is sufficient to sustain the writ of 
 error. Towne v. Eisner, 245 U. S. 418. 
 
 Arthur Eyerson died in 1912, and the plaintiff in error is trustee, 
 under his will, of property the net income of which was directed to 
 be paid to his widow during her life and after her death to be used 
 for the benefit of his children, or their representatives, until each child 
 should arrive at 25 years of age, when each should receive his or her 
 share of the trust fund. 
 
 The trustee was given the fullest possible dominion over the trust 
 estate. It was made the final judge as to what " net income " of 
 the estate should be, and its determination in this respect was made 
 binding upon all parties interested therein, "except that it is my 
 will that stock dividends and accretions of selling values shall be 
 considered principal and not income." 
 
 The widow and four children were living in 1917.
 
 SECT. IV.] MEHCHANTS' LOAN AND TEUST CO. V. SMIETANKA. 433 
 
 Among the assets which came to the custody of the trustee were 
 9,522 shares of the capital stock of Joseph T. Eyerson & Son, a 
 corporation. It is averred that the cash value of these shares, on 
 March 1, 1'J13, was $501,798, and that they were sold for 
 $l,280,!iy6.64 on February 2, 1917. The Commissioner of Internal 
 Revenue treated the difference between the value of the stock on 
 March 1, 1913, and the amount for which it was sold on February 2, 
 1917, as income for the year 1917, and upon that amount assessed 
 the tax which was paid. No question is made as to the amount of 
 the tax if the collection of it was lawful. 
 
 The ground of the protest and the argument for the plaintiff in 
 error here is that the sum charged as "income" represented appreci- 
 ation in the value of the capital assets of the estate which was not 
 *' income " within the meaning of the Sixteenth Amendment and 
 therefore could not, constitutionally, be taxed without apportion- 
 ment as required by § 2, cl. 3, and by § 9, cl. 4, of Art. 1 of tlie 
 Constitution of the United States. 
 
 It is first argued that the increase in value of the stock could not 
 be lawfully taxed under the act of Congress because it was not in- 
 come to the widow, for she did not receive it in 1917, and never 
 can receive it, that it was not income in that year to the children, 
 for they did not then and may never receive it, and that it was not 
 income to the trustee, not only because the will creating the trust 
 required that " stock dividends and accretions of selling value shall 
 be considered principal and not income," but also because in the 
 " common understanding " the term " income " does not comprehend 
 such a gain or profit as we have liere, which it is contended is really 
 an accretion to capital and therefore not constitutionally taxable 
 under Eisner v. Macomber, 252 U. S. 189. 
 
 The provision of the will may be disregarded. It was not within 
 the power of the testator to render the fund nontaxable. 
 
 Assuming for the present that there was constitutional power to 
 tax such a gain or profit as is here involved, are the terms of the 
 statute comprehensive enough to include it? 
 
 Section 2 (n) of the act of September 8, 1916 (39 Stat. 757; 
 40 Stat. 300, 307, §212), applicable to the case, defines the income 
 of " a taxable person " as including " gains, profits, and income 
 derived from . . . sales, or dealings in property, whether real or 
 personal, growing out of the ownership or use of or interest in real 
 or personal property ... or gains or profits and income derived from 
 any source whatever." 
 
 Plainly the gain we are considering was derived from the sale of 
 personal property, and, very certainly, the comprehensive last clause 
 "gains or profits and income derived from any source whatever," 
 must also include it, if the trustee was a "taxable person" within 
 the meaning of the act when the assessment was made. 
 
 That the trustee was such a " taxable person " is clear from 
 § 1204 (1) (c) of the act of October 3, 1917 (40 Stat 331), which 
 requires that "trustees, executors . . . and all persons, corporations 
 or associations, acting in any fiduciary capacity, shall make and
 
 434 MEECHANTS" LOAN AND TRUST CO. I'. SMIETANKA. [ciIAr. VIZ. 
 
 render a return of the income of the person, trust, or estate for whom 
 or which they act, and be subject to all the provisions of this title 
 which apply to individuals." 
 
 And section 2 (h), act of September 8, 1916, supra, specifically 
 declares that the "income received by estates of deceased persons 
 during the period of administration or settlement of the estate, . . . 
 or any kind of property held in trust, including such income accumu- 
 lated in trust for the benefit of unborn or unascertained persons, or 
 persons with contingent interests, and income held for future distri- 
 bution under the terms of the will or trust shall be likewise taxed, 
 the tax in each instance, except when the income is returned for the 
 purpose of the tax by the beneficiary, to be assessed to the executor, 
 administrator, or trustee, as the case may be." 
 
 Further, section 2 (c) clearly shows that it was the purpose 
 of Congress to tax gains, derived from such a sale as we have here, 
 in the manner in which this fund was assessed, by providing that 
 " for the purpose of ascertaining the gain derived from the sale or 
 other disposition of property, real, personal, or mixed, acquired 
 before March 1, 1913, the fair market price or value of such prop- 
 erty as of March 1, 1913, shall be the basis for determining the 
 amount of such gain derived." 
 
 Thus, it is the plainly expressed purpose of the act of Congress 
 to treat such a trustee as we have here as a " taxable person," and 
 for the purposes of the act to deal with the income received for 
 others precisely as if the beneficiaries had received it in person. 
 
 There remains the question, strenuously argued, whether this gain 
 in four years of over $700,000 on an investment of about $500,000 
 is " income " within the meaning of the Sixteenth Amendment to 
 the Constitution of the United States. 
 
 The question is one of definition and the answer to it may be 
 found in recent decisions of this court. 
 
 The corporation excise tax act of August 5, 1909 (36 Stat. 11, 
 112), was not an income tax law, but a definition of the word "in- 
 come " was so necessary in its administration that in an early case it 
 was formulated as " A gain derived from capital, from labor, or 
 from both combined." Stratton's Independence v. Howbert, 231 
 U. S. 399, 415. 
 
 This definition, frequently approved by this court, received an 
 addition, in its latest income tax decision, which is especially sig- 
 nificant in its application to such a case as we have here, so that it 
 now reads : " Income may be defined as a gain derived from capital, 
 from labor, or from both combined, provided it he understood to 
 include profit gained through sale or conversion of capital assets." 
 Eisner v. Macomber, 252 U'. S. 189, 207. 
 
 The use of this definition of "income" in the decision of cases 
 arising under the corporation excise tax act of August 5, 1909, 
 and under the income tax acts is, we think, decisive of the case 
 before us. Thus, in two cases arising under the corporation excise 
 tax act: 
 
 In Hays v. Gauley Mountain Coal Co., 247 U. S. 189, a coal com-
 
 SECT. IV.] merchants' LOAN AND TEUST CO. V. SMIETANKA. 435 
 
 pany, without corporate authority to tra<l<' in stocks, purchased 
 shares in another coal-niining company in 1902, whicli it sold in 
 lini, realizing a profit of $210,000. Over tJie same objection made 
 in this case, that the I'und was merely converted capital, tliis court 
 held that so much of the prolit upon the sale of the stock as accrued 
 subsequent to the effective date of the act was properly treated as in- 
 come received during 11)1 1, in assessing the tax for that year. 
 
 ill United Slates v. Cleveland, Cincinnati, Chicago & Si. Louis 
 Railway Co., 247 U. S. Iii5, a railroad company purchased shares of 
 stock in another railroad company in 1900 which it sold in 1909, 
 realizing a profit of $811,000. Here, again, over the same objection' 
 this court held that the part of the profit whicli accrued subsequent 
 to the ellective date of the act was properly treated as income re- 
 ceived during the year 1909 for the purposes of the act. 
 
 Thus, from the i)rice realized from the sale of stock by two in- 
 vestors, as distinguished from dealers, and from a single transac- 
 tion, as distinguished from a course of business, the value of the 
 stock on the effective date of the ta.\ act was deducted and the result- 
 ing gain was treated by this court as "income " by which the tax was 
 measured. 
 
 It is obvious that these decisions in principle rule the case at bar 
 if the word '* income " has the same meaning in the income tax act 
 of 1913 that it had in the corporation excise tax act of 1909, and 
 that it has the same scope of meaning was in effect decided in 
 Southern Pacific Co. v. Lowe, 247 U. S. 330, 335, where it was assumed 
 for the purposes of decision that there was no difference in its mean- 
 ing as used in the act of 1909 and in tlie income tax act of 1913. 
 There can be no doubt that the word must be given the same mean- 
 ing and content in the income tax acts of 1916 and 1917 that it had 
 in the act of 1913. When to this we add that in Eisner v. Macom- 
 ber, ftuprn, a case arising under the same income tax act of 191fi 
 which is here involved, the definition of "income" which was ap- 
 plied was adopted from Stratton's Independence v. Howbert, supra, 
 arising under the corporation excise tax act of 1909, with the addi- 
 tion that it should include "profit gained through sale or conver- 
 sion of capital assets," there would seem to be no room to doubt 
 that the word must be given the same meaning in all of the income 
 tax acts of Congress that was given to it in the corporation excise 
 tax act and that wliat that meaning is lias now become definitely 
 settled by decisions of this court. 
 
 In determining the definition of the word " income " thus ar- 
 rived at, this court has consistently refused to enter into the refine- 
 ments of lexicographers or economists and has approved, in the 
 definitions quoted, what it believed to be the commonly understood 
 meaning of the term which must have been in the minds of the 
 people when they adopted the Sixteenth Amendment to the Con- 
 stitution. Dovle /•. Alitchell Bros. Co.. 247 V. S. 179, 1S5; Eisner 
 V. Macomber, 252 U. S. 189, 206, 207. Notwithstanding the full 
 argument heard in this case and in the series of cases now under 
 consideration, we continue entirely satisfied with that definition.
 
 436 MEIlCHA^'Ts'' LOAX AXD TRUST CO. I". SMIETAXKA. [ciIAP. VII. 
 
 and, since the fund here taxed was the amount realized from the 
 sale of the stock in 19 IT, less the capital investment as determined 
 by the trustee as of March 1, 1913, it is palpable that it was a 
 "gain or profit " " produced by " or " derived from " that invest- 
 ment, and that it " proceeded," and was " severed " or rendered 
 severable, from it, by the sale for cash, and thereby became that 
 "realized gain" which has been repeatedly declared to be taxable 
 income within the meaning of the constitutional amendment and 
 the acts of Congress. Doyle v. Mitchell Bros. Co. and Eisner v. 
 Macomber, supra. 
 
 It is elaborately argued in this case, in Xo. 609, Eldorado Coal 
 & Mining Co. v. Harry W. Mager, collector, etc., submitted with it, 
 and in other cases since argued, that the word " income," as used in 
 the Sixteenth Amendment and in the income tax act we are con- 
 sidering, does not include the gain from capital realized by a single 
 isolated sale of property but that only the profits realized from sales 
 by one engaged in buying and selling as a business — a merchant, a 
 real estate agent, or broker — constitute income which may be taxed. 
 
 It is sufficient to say of this contention that no such distinction 
 was recognized in the Civil AYar income tax act of 1867 (14 Stat. 
 471, 478), or in the act of 1894 (28 Stat. 509, 553), declared un- 
 constitutional on an unrelated ground; that it was not recognized 
 in determining income under the excise tax act of 1909, as the cases 
 cited, supra, show ; that it is not to be found, in terms, in any of the 
 income tax provisions of the internal revenue acts of 1913, 1916, 
 1917 or 1919; that the definition of the word "income" as used 
 in the Sixteenth Amendment, which has been developed by this 
 court, does not recognize any such distinction ; that in departmental 
 practice, for now seven years, such a rule has not been applied ; and 
 that there is no essential difference in the nature of the transaction 
 or in the relation of the profit to the capital involved, whether the 
 sale or conversion be a single, isolated transaction or one of many. 
 The interesting and ingenious argument, which is earnestly pressed 
 upon us, that this distinction is so fundamental and obvious that it 
 must be assumed to be a part of the "general understanding" of 
 the meaning of the word " income," fails to convince us that a con- 
 struction should be adopted which would, in a large measure, defeat 
 the purpose of the amendment. 
 
 The opinions of the courts in dealing with the rights of life 
 tenants and remaindermen in gains derived from invested capital, 
 especially in dividends paid by corporations, are of little value in 
 determining such a question as we have here, influenced as such 
 decisions are by the terms of the instruments creating the trusts 
 involved and by the various rules adopted in the various jurisdic- 
 tions for attaining results thought to be equitable. Here the trustee, 
 acting within its powers, sold the stock, as it might have sold a 
 building, and realized a profit of $700,000, which at once became 
 assets in its possession free for any disposition within the scope of 
 the trust, but for the purposes of taxation to be treated as if the 
 trustee were the sole owner.
 
 SECT. IV.] GOODRICH V. EDWARDS. 437 
 
 Gray v. Darlington, 15 Wall. 63, much relied upon in argument, 
 was sufficiently cli?tinguislie(l from cases such as we have here in 
 Hays V. Gauley Mountain Coal Co., 247 U. S. IHI), TJl. The 
 differences in tlie statutes involved render inapplicable the expres- 
 sions in the opinion in that case (not necessary to the decision of 
 it) as to distinctions between income and increase of capital. 
 
 In Lynch v. Turrish, 247 U. S. 221, also much relied upon, it 
 is expressly stated that, " according to the fact admitted, there was 
 no increase after that date (March 1, 1913) and therefore no in- 
 crease subject to tlie law." For this reason the questions here dis- 
 cussed and decided were not there presented. 
 
 The British Income Tax decisions are interpretations of statutes 
 so wholly different in their wording from the acts of Congress which 
 we are considering that they are cpiite without value in arriving 
 at the construction of the laws here involved. 
 
 Another assessment on a small gain realized from a sale of bonds, 
 also made by the trustee in 1917, does not present any questions 
 other than those which we have discussed, and therefore it does not 
 call for separate consideration. 
 
 The judgment of the District Court is affirmed. 
 
 Holmes and Brandeis, JJ., because of prior decisions of the 
 court, concur only in the judgment. 
 
 GOODRICH I'. EDWARDS. 
 Supreme Court of the United States. 1921. 
 
 [Reported 255 U. 8. 527.] 
 
 Clarke, J. The plaintiff in error sued the defendant, a col- 
 lector of internal revenue, to recover income taxes assessed in 1920 
 for the year 1916 and paid under protest to avoid penalties. A 
 demurrer to the complaint was sustained and the constitutional 
 validity of a law of the United States is so involved, that the case 
 is properly here by writ of error. Towne v. Eisner, 245 U. S. 418. 
 
 Two transactions are involved. 
 
 (1) In 1912 the plaintiff in error purchased 1,000 shares of the 
 capital stock of a mining company, for which he paid $500. It is 
 averred that the stock was worth $695 on March 1, 1913, and that 
 it was sold in March, 1916, for $13,931.22. The tax which the 
 plaintiff in error seeks to recover was assessed on the difference 
 between the value of the stock on March 1, 1913, and the amount 
 for which it was sold. 
 
 (2) The plaintiff in error being the owner of shares of the capital 
 stock of another corporation, in 1912 exchanged them for stock, in 
 a reorganized company, of the then value of $291,600. It is averred 
 and admitted that on March 1, 1913, the value of this stock was 
 $148,635.50, and that it was sold in 1916 for $269,346.25. Al- 
 though it is thus apparent that the stock involved was of less value
 
 438 GOODRICH V. EDWARDS. [CHAP. Vn. 
 
 on March 1, 1913, than when it was acquired, and that it was 
 ultimately sold at a loss to the owner, nevertheless the collector 
 assessed the tax on the difference between the value on March 1, 
 1913, and the amount for which it was sold. 
 
 The plaintiff in error seeks to recover the whole of these two 
 assessments. 
 
 The same contention is made with respect to each of these pay- 
 ments as was made in No. 608, Merchants Loan & Trust Co., as 
 trustee, v. Julius F. Smietanka, collector of internal revenue, this 
 day decided, viz., that the amounts realized from the sales of the 
 stocks were in their inherent nature capital as distinguished from 
 income, being an increment in value of the securities while owned 
 and held as an investment and tlierefore not taxable under the 
 Eevenue Act of 1916 (39 Stat. 756) as amended in 1917 (40 Stat. 
 300) or under any constitutional law. 
 
 With respect to the first payment. It is plain that this assess- 
 ment was on the profit accruing after March 1, 1913, the effective 
 date of the act, realized to the owner by the sale after deducting 
 his capital investment. The question involved is ruled by No. 608, 
 supra, and the amount was properly taxed. 
 
 As to the second payment. The Government confesses error in 
 the judgment with respect to this assessment. The stock was sold 
 in the year for which the tax was assessed for $23,253.75 less than 
 its value when it was acquired, but for $120,710.75 more than its 
 value on March 1, 1913, and the tax was assessed on the latter 
 amount. 
 
 The act under which the assessment was made provides that the 
 net income of a taxable person shall include gains, profits, and in- 
 come derived from . . . sales or dealings in property, whether real 
 or personal ... or gains or profits and income derived from any 
 source whatever. (39 Stat. 757; 40 Stat. 300, 307.) 
 
 Section 2 (c) of this same act provides that "for the purpose of 
 ascertaining the gain derived from a sale or other disposition of 
 property, real, personal, or mixed, acquired before March 1, 1913, 
 the fair market price or value of such property as of March 1, 1913, 
 shall be the basis for determining the amount of such gain derived." 
 
 And the definition of " income " approved by this court is : "A 
 gain derived from capital, from labor, or from both combined, pro- 
 vided it be understood to include profits gained through sale or 
 conversion of capital assets.^' Eisner v. Macomber, 252 U. S. 
 189, 207. 
 
 It is thus very plain that the statute imposes the income tax on 
 the proceeds of the sale of personal property to the extent only that 
 gains are derived therefrom by the vendor, and we therefore agree 
 with the Solicitor General that since no gain was realized on this 
 investment by the plaintiff in error no tax should have been 
 assessed against him. 
 
 Section 2 (c) is applicable only where a gain over the original 
 capital investment has been realized after March 1, 1913, from a 
 sale or other disposition of property.
 
 SECT. IV.] LAWRENCE V. WAEDELL. 439 
 
 It results that the judgment of the District Court as to the first 
 assessment, as we have described it, is allirmed, and that as to the 
 second assessment it is reversed, and \\w case is remanded to that 
 court for further proceedings in coniurmity with tiiis opinion. 
 
 Eeversed in part; alHrmed in part. 
 
 Holmes and Braxdkis, JJ., because of prior decisions of the 
 court, concur only in tlie judgment. 
 
 LAWRENCE i'. WARDELL. 
 Circuit Court of Appeals. 1921. 
 
 [Reported 273 Fed. 205.] 
 
 In an action by plaintifT Lawrence to recover certain sums paid 
 under protest to the delV-ndant collector of internal revenue, tlie 
 District Court sustained a general demurrer to the complaint and 
 entered judgment of dismissal. Writ of error was taken out in 
 order to present the question whether sections 210 and 211 of the 
 revenue act of 1918 ap|)ly to the 1918 income of a citizen of the 
 United States residing in the Philippine Islands. 
 
 The facts are these : 
 
 Plaintiff, a citizen of the United States, was a resident of the 
 Philippine Islands in 1918 and until March, 1919. In Januar}', 
 1919, in the Philippines plaintiff paid an income tax representing the 
 full amount of tax upon his 1918 income computed in accordance with 
 the revenue act of 191G, as amended by the revenue act of 1917. 
 In March, 1919, plaintiff became a resident of California and in 
 July, 1919, was required by the defendant collector to pay income 
 tax upon liis 1918 income computed in accordance witli the revenue 
 act of 1918, with credit for the amount paid in the Philippines. 
 Defendant paid under protest and his claim for refund wavS denied. 
 The position of the plaintiff is that by section 1400 of the revenue 
 act of 1918, Title T of the revenue act of 1916 as amended by the 
 revenue act of 1917 is still in force as to 1918 income of residents 
 of the Philippine Islands; that by section 261 of the revenue act 
 of 1918 plaintiff was required to pay in the Philippines the income 
 tax as provided l)y the revenue act of 1916 on his whole income of 
 1918; that sections 210 and 211 of the revenue act of 1918 imposed 
 an income tax only in lieu of the corresponding taxes of the revenue 
 acts of 1916 and 1917 and are not applicable where the earlier acts 
 stand unrepealed; tliat the legislature of tlie Philip]Miu' Islands has 
 not amended or modified or repealed the income tax provisions of the 
 revenue acts of 1916 and 1917 as to the income of the year 1918. 
 On the other hand it is contended that the act of 1916, as amended 
 by the act of 1917, was, so far as it affected the I'hilippine Islands, 
 enacted by Congress in its capacity of a local legislature for the
 
 440 LAWKEXCE V. \VAKDELL. [CHAP. VII. 
 
 Philippine Islands, and that the revenue act of 1918 imposes a tax 
 equally upon all citizens of the United States withont regard to 
 the place of residence. Summarizing the pertinent statutes, they 
 are as follows : 
 
 B}' the revenue act of 1916, Title I, part 1, it is provided in sec- 
 tion 1 (a) that taxes should he levied and collected annually upon 
 the entire net income received in the preceding calendar year by 
 every individual a citizen or resident of the United States. Sec- 
 tion 23 made the provisions of the title extend to Porto Kico and 
 the Philippine Islands, provided that the administration of the law 
 and the collection of taxes imposed in Porto Eico and the Philippine 
 Islands should be by internal-revenue officers of the government of 
 those islands, and that all revenue collected in those islands under 
 the act " shall accrue intact to the general governments thereof." 
 By the revenue act of 1917, approved October 3, 1917, it is provided, 
 section 1 — 
 
 That in addition to the normal tax imposed by the subdivision 
 (a) of section one of the act entitled "An act to increase the 
 revenue, and for other purposes," approved September 8, 1916, there 
 shall be levied, assessed, collected, and paid a like normal tax of two 
 per centum upon the income of every individual a citizen or resident 
 of the United States received in the calendar year 1917 and every 
 calendar year thereafter. 
 
 The provisions did not extend to the Philippines, and the local 
 legislature was given power to amend or repeal income taxes in 
 force. The revenue act of 1918, approved February 24, 1919, Title 
 II, part 2, provides — 
 
 Sec. 210. That in lieu of the taxes imposed by subdivision (a) 
 of section 1 of the revenue act of 1916 and by section 1 of the 
 revenue act of 1917 there shall be levied, collected, and paid for 
 each taxable year upon the net income of every individual a normal 
 tax at the following rates : . . . 
 
 Sec. 211. (a) That, in lieu of the taxes imposed by subdivision 
 (&) of section 1 of the revenue act of 1916 and by section 2 of the 
 revenue act of 1917, but in addition to the normal tax imposed by 
 section 210 of this act, there shall be levied, collected, and paid 
 for each taxable year upon the net income of every individual, a 
 surtax equal to the sum of the following: . . . 
 
 Sec. 222. (a) That the tax computed under part 2 of this title 
 shall be credited with — 
 
 (1) In the case of a citizen of the United States the amount of 
 any income, war-profits and excess-profits taxes paid during the 
 taxable year to any foreign country, upon income derived from 
 sources therein, or to any possession of the United States; and . . . 
 
 Sec. 260. That any individual who is a citizen of any possession 
 of the United States (but not otherwise a citizen of the United 
 States) and who is not a resident of the United States, shall be 
 subject to taxation under this title only as to income derived from 
 sources within the United States, and in such case the tax shall be 
 computed and paid in the same manner and subject to the same con-
 
 SECT. IV.] LAWRENCE V. WAKDELL. 441 
 
 ditions as in the case of other persons who are taxable only as to 
 income derived from such sources. 
 
 Sec, 261. That in Porto liico and the Philippine Islands the 
 income tax shall be levied, assessed, collected, and paid in accord- 
 ance with the provisions of tlie revenue act of I'JIG as amended. 
 
 Returns shall be made and taxes sliall be paid under Title I of 
 such act in Porto Pico or the Philippine Islands, as the case may be, 
 by (1) every individual wiio is a citizen or resident of Porto Rico 
 or the Philippine Islands, or derives income from sources therein 
 . . . An individual who is neither a citizen nor a resident of Porto 
 Rico or tlie Philippine Islands, but derives income from sources 
 therein, shall be taxed in Porto Rico or the Philippine Islands as 
 a nonresident alien iiulividual . . . 
 
 The local legislature has power to amend or repeal the income tax 
 laws in force in the islands. 
 
 Sec. 1400 (n) of the revenue act of 1918 provided: 
 That tlic following parts of acts are hereby repealed subject to 
 the limitations provided in subdivision (h), 1. The following titles 
 of the revenue act of 1916, Title I, called the income tax . . . ; 
 (3) the following titles of the revenue act of 1917 : Title I (called 
 "War income tax"); . . . Title XII (called "Income-tax amend- 
 ments"). ..(b) Title I of the revenue act of 1916 as amended by 
 the revenue act of 1917 shall remain in force for the assessment 
 and collection of the income tax of Porto Rico and the Philippine 
 Islands, except as may be otherwise provided by their respective 
 legislatures. 
 
 Hunt, J. By the statutes above cited Congress extended the 
 provisions of the revenue law of 1916 to the Philippine Islands, 
 and authorized the assessment and levies to be made by the ad- 
 ministrative internal-revenue officers of the Philippine government, 
 but instead of requiring the taxes when collected to be paid into 
 the Treasury of the General Government of the United States, 
 directed that they should accrue to the general government of the 
 Philippine Islands. A like policy obtained and still obtains as to 
 Porto Rico. The purpose of such legislation was to enable the 
 governments of those islands, respectively, to have sufficient revenue 
 to meet their needs and to receive the money through the most 
 direct channels, and not have to await appropriation by Congress. 
 The policy was not new. For example, in the island of Porto Rico, 
 ever since the institution of civil government in ^lay, 1900, customs 
 duties collected have been turned over to the insular treasury by the 
 collector of customs for the island to be expended as required by 
 law for the government and benefit of the island "instead of being 
 paid into the Troasnrv of the United States." Act of Congress, 
 April 12, 1900 (Supplement R. S., U. S.. vol. 2, p. 1128). 
 
 The power of Congress in the imposition of taxes and providing 
 for the collection thereof in the possessions of the United States 
 is not restricted by constitutional provision. ? 8, Art. I. which may 
 limit its general power of taxation as to uniformity and apportion- 
 ment when legislating for the mainland or United States proper.
 
 442 LAWRENCE V. WAKDELL. [CIIAP. VII. 
 
 for it acts in the premises under the authority of par. 2, § 3, 
 Art. IV of the Constitution, which clothes Congress with power to 
 make all needful rules and regulations respecting the territory or 
 other property belonging to the United States. Binns v. United 
 States, 194 U. S. 486; Downes v. Bidwell, 182 U. S. 244. 
 
 When Congress enacted the revenue act of October 3, 1917, by 
 section 5 it saw fit to provide expressly that the provisions of the 
 title should not extend to the Philippines or Porto Rico, and the local 
 legislatures were given power to amend, alter, modify, or repeal the 
 income tax laws in force in the islands, respectively. The result 
 was that under the act of 1916 the entire net income of every in- 
 dividual, a citizen or resident of the United States, resident in the 
 Philippines, became taxable thereunder, as subject to the jurisdic- 
 tion of the Philippines in respect to tax matters. But Congress, 
 acting doubtless under the after-war needs, passed the revenue act 
 of 1918, changed the situation, and made the net income of every 
 individual citizen of the United States taxable no matter where he 
 resides. In the place of the taxes imposed by the act of 1916 (sub>- 
 div. (a), sec. 1), and by the act of 1917 (sec. 1) the net income of 
 '•' every individual " was subject to the rate prescribed (sec. 210) ; 
 and in place of taxes imposed by subdivision (&), section 1 of the 
 act of 1916, and section 2 of the act of 1917, but in addition to the 
 normal tax imposed by section 210 of the act the surtaxes prescribed 
 should be collected. 
 
 The comprehensiveness of the 1918 act is as great as language 
 could make it, for it applied to the income of every individual, 
 changing the rates and obviously imposing taxes at the new rates 
 where no tax could have been imposed prior to the 1918 act. 
 
 We are unable to infer that by using the words " in lieu of," 
 Congress meant to tax only those incomes of individuals who had 
 been subject to taxation under tlie two prior acts. It is more reason- 
 able to hold that where the individual was liable under the prior act 
 of 1916, the new act of 1918 became the controlling standard. 
 Where, by the act of 1917, he was relieved of the increased rates of 
 that act, but had been subject to the 1916 act, he was covered by 
 the provisions of the 1918 act, and in the event he was never before 
 included he became liable under the very broad terms of the act of 
 1918. Section 260, supra, of the act of 1918, also leads to the con- 
 clusions indicated. The language there used discriminates, by mak- 
 ing individuals who are citizens of a possession of the United States, 
 yet not otherwise citizens of the United States, and who are not 
 residents of the United States, subject to be taxed only as to income 
 derived from sources within the United States. Unless such a 
 person has income so derived he is not subject to the act. 
 
 In the repealing clauses of the act of 1918, as quoted in the state- 
 ment of the case, the act of 1916, as amended by the act of 1917, 
 in force in the Philippines, was continued in force, except as might 
 be otherwise provided by the local legislature. As a general statute 
 of the United States there was clear repeal but as to the Philippines 
 the act of 191G was kept alive, as direct legislation by Congress with
 
 SECT. IV.] GAVIT V. IRWIN. 143 
 
 respect to the local affairs of the island and not as a general statute 
 of the United States. 
 
 A citizen of the United States residing in the Philippines becomes 
 subject to the inroino tax law undor the act of 1!J18, By section 
 2G1, supra, of tiiat act, the tax shall be levied, collected and paid in 
 accordance with the act of 1916, as amended, returns to be made 
 and taxes to be paid under Title I of the act by "every individual 
 who is a citizen or resident" of the island, the local legislature hav- 
 ing power as already defined. The citizen of the United States 
 residing in the island is in. much the same position as is a citizen 
 of a State where there is a State income tax. The fact of residence 
 in the l'hilii)pines avails him no more than would the fact of resi- 
 dence in a State. 
 
 Section 222 of the act of 1918 in providing for credits for taxes 
 makes the taxes computed under Part II of the title subject to a 
 credit (1) in the case of a citizen of the United States the amount 
 of any income taxes paid during the taxable year to any foreign 
 country upon income derived from sources therein, " or to any 
 possession of tlie United States." It is argued that a citizen of the 
 United States resident of the islands is not subject to taxation 
 under the 1018 act because the return of the "possession" is not 
 a return under tlie act of 1916, though it is a return under a local 
 act. Section 222 allows to one residing in the Philippines a credit 
 upon the tax computed under Part II of the 1918 act, but there is 
 nothing to indicate that there is exemption to the citizens residing in 
 the islands. He may have paid to the island treasury such amounts 
 as are due, but still bo liable to the United States for a sum in ex- 
 cess of that paid in the islands. 
 
 The regulations of the Treasury' Department (Rogs. 45, arts, 
 1131, 1132) have been framed upon the construction which we have 
 adopted; and as credit appears to have been given to plaintiff for 
 the amount of taxes which he had already paid in the Philippines, 
 we think he cannot complain of the judgment rendered against him. 
 
 The judgment is affirmed. 
 
 GAVIT V. TPWTX. 
 DiSTEiCT Court of the United States. 1921. 
 
 [Reported 275 Fed. 643.] 
 
 Cooper, District Judge. By the will of Anthony N. Brady, de- 
 ceased, he divided his estate into six equal parts, and devised one- 
 sixth of his estate in trust to his executors, who were thereby made 
 trustees. The trustees were directed to apply so much of the in- 
 come and profits from such one-sixth as in their discretion they 
 thought necessary for the support and maintenance of decedent's
 
 444 GAVIT r. IRWIX. [chap. VII. 
 
 granddaughter, Marcia Ann Gavit, daughter of the plaintiff herein, 
 and to divide the remainder of the income of such one-sixth, nat 
 necessary for the support of the granddaughter, into two parts, one 
 of said parts to be paid to the plaintitf during his life, but not longer 
 than the infancy of the daughter, Marcia Ann Gavit, and not longer 
 than her natural life, should she die before attaining the age of 'il 
 
 years. 
 
 During the tax years of 1913, 1914, and 1915, the plaintiff re- 
 ceived certain sums of money under the provisions of the Brady will, 
 upon which he has been required to pay, as normal tax, additional 
 tax, and penalties, the sum of $21,60v!.16. He paid this under pro- 
 test, and appealed to the Commissioner of Internal Revenue, who 
 decided against him, and the plaintiff has now brought this action 
 to recover such amount of taxes, with interest. 
 
 The question before the court, arising upon a demurrer to the 
 complaint, is whether or not the moneys so received by the plaintiff 
 under the aforesaid provisions of the Brady will are taxal)le as in- 
 come, within the meaning of the Income Tax Act of October 3, 1913 
 (38 Stat. 114). 
 
 The plaintiff contends that the moneys thus received by him are 
 not income, under the provisions of the act of 1913, especially in 
 view of the provisions of subdivision B of such act, and that, even if 
 they come under the act of 1913, they are not income within the 
 meaning of the sixteenth amendment to the Constitution of the 
 United States, and that the statute is unconstitutional. 
 
 The courts have held that income, within the meaning of the Con- 
 stitution and the Income Tax Act passed pursuant to the sixteenth 
 amendment, must be taken in the common understanding of the 
 term. Eisner v. Macomber, 252 U. S. 189, 40 Sup. Ct. 189, 64 L. 
 Ed. 521, 9 A. L. R. lovO. Income, as laid clown by the United States 
 Supreme Court, within the purview of the Constitution, is defined 
 
 as: 
 
 ". . . The gain derived from capital, from labor, or from both 
 combined, provided it be understood to include profits gained through 
 a sale or conversion of capital assets." Eisner v. Macomber, 252 
 U. S. 189, citing Stratton Ind. v. Howbert, 231 U. S. 399, 415, and 
 Doyle V. Mitchell Bros. Co., 247 U. S. 179, 185. 
 
 in the same case (Eisner v. Macomber) the relation of capital to 
 income is expressed as follows : 
 
 "The fundamental relation of ^capital' to 'income' has been 
 much discussed by the economists, the former being likened to the 
 tree or the land, the latter to the fruit or the crop ; the former de- 
 picted as a reservoir supplied from springs, the latter as the outlet 
 stream, to be measured by its flow during a period of time." 
 
 Since the moneys received by plaintiff were not income from labor, 
 nor from labor and capital combined, nor from the sale or conversion 
 of capital assets, we have only to do with income received from capi- 
 tal. Income, as now considered, is, after the severance, separate and 
 apart from the capital ; it is as separate and apart from the capital as 
 the fruit from the tree, the crops from the land after severance, or the
 
 SECT. IV.] GAVIT V. IRWIX. 445 
 
 waters in the outlet stream after passing out of the reservoir. It is 
 something which has grown out of or issued from capital, leaving the 
 capital unimpaired and intact. Having these considerations in mind, 
 it cannot he said that these moneys received hy the plaintiff arose 
 from any capital of his. So far as appears from the pleadings in this 
 case, he had no laud, trees, or reservoir to jjruduce crops, fruit, or 
 outlet water — no capital of any kind whatever. 
 
 If the Income Tax Law of 191 3, therefore, is intended only to 
 tax the income, which is the fruit of the taxpayer's lahor, or the in- 
 come from the taxpayer's capital, in which he has a present owner- 
 ship (or at least a vested future interest, meantime receiving the 
 income or the gain from the sale or conversion of the taxpayer's 
 capital assets), then the money received hy the plaintiff is not income 
 as to him, because he has not and never will have the slightest owner- 
 ship, present or future, vested or contingent, in the capital producing 
 this income. If this is income, therefore, it is the income, not of the 
 capital of the plaintiff", but of the capital of a portion of the Brady 
 estate, which capital will never be that of the plaintiff. 
 
 There is nothing in the act of 1913 which taxes income which is 
 not the income of the citizen or the individual sought to be taxed. 
 The levy, assessment, and payment is upon the net income of a 
 "citizen." Section A, subdivision 1. " Ijidividuals" are chargeable 
 with the normal and the additional income tax. Section A, subdivi- 
 sion 2. The return required by section A, subdivision 2, is a per- 
 sonal return. An estate is not a " citizen " nor a " person." There is 
 nothing in the act of 1913 which shows any intent to tax the 
 income of estates, as distinguished from the income of a citizen 
 or individual resident of the country. There is in the act no de- 
 finition of citizen or individual which makes either of these terms 
 include estates. 
 
 It is true that section A, subdivision 1, speaks of "income arising 
 or accruing from all sources ... to every citizen" and section A, 
 subdivision 2, used the language, "income derived from any source 
 whatever." This must, however, be held to mean moneys which are 
 essentially income, and which are income received from the labor or 
 capital, or both, or the sale or conversion of the capital assets, of the 
 person sought to be taxed, and to be limited by the provisions of sub- 
 division B. 
 
 The act of 1913 in section II, subdivision B, purports to define the 
 income of a taxable person liable to tax. There is no suggestion in 
 subdivision B of any tax upon the income of estates, as distinguished 
 from the income of individuals. This subdivision B, in defining 
 what shall be deemed to be income of a "taxable person," provides 
 that the net income of a "taxable person" shall include "income 
 from, but not the value of property acquired by gift, bequest, devise 
 or descent." This means that there shall be included, within the 
 taxable income of a person liable to tax, the income which he shall 
 receive from property acquired by gift, bequest, devise, or descent. 
 It should be construed as if the statute read : 
 
 " The income of a taxable person shall include the income from
 
 446 GAVIT r. IRWIN. [CIIAP. VII. 
 
 property acquired by gift, bequest, devise or descent, but not the 
 value of che property itself." 
 
 The transfer of possession and the beneficial use of property ac- 
 quired by a person by gift, bequest, devise, or descent is usually de- 
 layed by reason of the necessity for operating the legal machinery 
 required to execute the provisions of the law of trusts, probate, and 
 intestacy. Ofttimes the property which the person thus receives is 
 withheld for a period of time, and he does not get the corpus or 
 capital of the property which he receives by gift, bequest, devise, or 
 descent until a long time after the right thereto is created. During 
 all this suspension of absolute ownership and possession of the prop- 
 erty thus acquired, interest or income accrues. The intent of sub- 
 division B is to tax to the person the income which accrued and is 
 received by him from the property acquired by gift, bequest, devise, 
 or descent, and which property has been withheld from him. There 
 is no suggestion in subdivision B that the income of estates as such, 
 regardless of what disposition is made of the income, shall be taxable, 
 and the tax thereon paid by any person, either in his individual 
 right or as fiduciary. 
 
 The other provisions of the act relating to fiduciaries are in entire 
 harmony with this construction. Subdivision 2, paragraph D, re- 
 quires the guardians, trustees, etc., of persons who are subject to an 
 income tax because of the amount of income received from such prop- 
 erty, acquired by gift, bequest, devise, or descent, to make a return 
 of the net income of such persons, subject to this tax, for whom such 
 guardians or trustees act. Subdivision 2, paragraph E, provides that, 
 where the income of any person subject to tax shall exceed $3,000 for 
 any taxable year, the guardian, trustee, etc., of such person shall with- 
 hold and deduct from the income paid to such person the amount of 
 the income tax on such income so paid to such person. The last 
 provisions relating to fiduciaries are machinery to safeguard the 
 government's obtaining the income tax on the income of persons 
 from property which they acquire by gift, bequest, devise, or descent, 
 which property and the income therefrom is temporarily in posses- 
 sion and custody of fiduciaries. 
 
 To make these fiduciary provisions and subdivision B applicable, 
 and to bring a person thereunder, there must be both income of the 
 property received by gift, bequest, devise, or descent, and also the 
 property or capital itself. Unless there is both, there is no income 
 within the meaning of these provisions of the Income Tax Law, and 
 no income tax to be paid ; nor is there any return to be made by the 
 fiduciaries, nor any tax to be withheld from the moneys paid to the 
 beneficiary. 
 
 Applying this to the case at bar, we must find as to the plaintiff 
 both the income from the property acquired by gift, bequest, devise, 
 or descent, and the property itself, within the meaning of the Income 
 Tax Law of 1913. If these moneys received by the plaintiff from the 
 trustees from this one-sixth portion of the Brady estate are income 
 as to him, where is the property acquired by the plaintiff from the 
 Brady estate — in other words his capital, either in present possession
 
 SECT. IV.] GAVIT V. lEWIN. 447 
 
 or right of future possession, from which the income arose? Clearly 
 tliere is none, lie never gets the jiroperty whicli produces the income. 
 So as to him there is not Ijotii the property acquired by gift, bequest, 
 devise, or descent and the income thereof. 
 
 The learned district attorney recognizes and concedes that " in- 
 come" must be something separate, apart, and distinct from 
 "capital," both belonging to the plaintill". lie argues in his brief 
 that the right to receive the moneys must, of necessity, be the capital 
 or corpus from which the moneys received by the plaintilf accrued. 
 This contention does not carry conviction. Heirs have a right to 
 inherit. 'J'hat does not make the inheritance income. So, too, an 
 instrument providing for the future transfer of property would give 
 the transferee the right to it, but would not thereby make the trans- 
 ferred property income. 
 
 Moreover, there is nothing fixed, absolute, or certain about the 
 plaintiff's right to receive any moneys in any year under the provi- 
 sions of the will. If the trustees elect that the whole amount of the 
 income of the one-sixth is necessary for the support of the testator's 
 granddaughter as she grows older and as her expenses increase, the 
 plaintilf gets nothing. His right is extinguished. To call such a 
 right property or capital, or the equivalent thereof, within the pro- 
 visions of the act of 1913, would be unreasonable. 
 
 Further consideration of the character or legal status of the 
 moneys received by plaintiff may be helpful. If the will had pro- 
 vided that the income of this one-sixth of the Brady estate, during 
 the first year after his death, should be paid to the plaintiff, and the 
 income thereafter appropriated to the support of his granddaughter 
 so far as necessary, and the balance accumulated for her benefit, 
 would any one contend that the payment to the plaintiff in the one 
 year was income within the meaning of the act of 1913? If the tes- 
 tator in his will had provided for such payment during the first two 
 years after his death, would any one contend that the moneys paid 
 to the plaintilf during the two years was income within the meaning 
 of the act of 1913? 
 
 "Would it not be clear that this was property acquired by bequest or 
 devise by the plaintilf, the value of which is provided by subdivision 
 B of the act of 1913 to be not taxable as income? Does the fact that 
 the plaintiff received a portion of the income of this one-sixth for 
 three years under the act of 1913, and may receive it longer, change 
 its character from capital to income under this act? Under no cir- 
 cumstances can it last longer than fifteen years, the granddaughter 
 being six years of age. It may cease immediately. 
 
 From the foregoing it must be determined that there is no pro- 
 vision of the Income Tax Law of 1913 by which it can belield that 
 the moneys received by plaintiff during these years 1913, 1914, and 
 1915 are income and taxable. While ithe moneys received by plain- 
 tiff are income as to the estate, they are not income as to the plaintiff. 
 As to him, they are the property acquired bv bequest or devise, and 
 therefore not taxable. It was not until 1916 that any provision was 
 made in the income tax act for a tax upon the income of estates, aa
 
 448 MILES r. SAFE DEPOSIT AND TKUST CO. [ciIAP. VII. 
 
 Avell as a tax upon the income of persons. By the amendment of 1916 
 (Act Sept. 8, 1916, c. 463 [Comp. St. § 6336a et seq.]) it was pro- 
 vided for the first time that the income of estates or of any kind of 
 property held in trust shoukl be taxed to the estates. Merchants' 
 Loan & Trust Co. v. Smietanka, 255 U. S. 509, 41 Sup. Ct. 386. 
 The Congress, while making this amendment, also eliminated from 
 the Income Tax Law that provision of subdivision B in the act of 
 1913 which provided that an income tax should be levied upon the 
 income received by persons from property acquired by gift, jjequest, 
 devise, or descent, but not upon the property itself. 
 
 It may then be presumed, in the light of this amendment, that the 
 legislative intent in 1916 was to cover the defect, if it may be termed 
 such, and to change the statute to include cases similar to the one in 
 question not before included. Its insertion indicates that Congress 
 at least was doubtful whether the previous act included income of 
 estates. United States v. Field, 255 U. S. 257, 41 Sup. Ct. 256; 
 United States v. Bashaw, 50 Fed. 749, 754, 1 C. C. A. 653. 
 
 In view of this holding that the moneys received by the plaintiff 
 are not income within the meaning of the act of 1913, it is not neces- 
 sary to pass upon its constitutionality. 
 
 The demurrer is overruled. 
 
 MILES V. SAFE DEPOSIT AND TEUST CO. 
 Supreme Couet of the United States. 1922. 
 
 [Reported I Bull. Int. Rev. 25, 352.] 
 
 Pitney, J. Defendant in error, a corporation organized under 
 the laws of Maryland and authorized to act as guardian, was on 
 January 30, 1919, appointed by the orphans' court guardian of Frank 
 R. Brown, an infant, whose father had died intestate about a year 
 before. The son as next of kin became entitled to 35 shares of the 
 stock of the Hartford Fire Insurance Company, and they were trans- 
 ferred to defendant in error as such guardian, and still are held by 
 it in that capacity. At that time the capital stock of the insurance 
 company issued and outstanding consisted of 20,000 shares of the par 
 value of $100 each. Later in the year the company, under statutory 
 authority, increased its capital stock to 40,000 shares of the same 
 par value. The resolution of the stockholders sanctioning the in- 
 crease provided that the right to subscribe to the new issue should be 
 offered to the stockholders at the price of $150 per share, in the pro- 
 portion of one share of new stock to each share of stock held by them ; 
 subscriptions to be payable in installments and the directors to have 
 power to dispose of shares not so subscribed and paid for in such 
 manner as they might determine to be for the best interests of the 
 company. In July, 1919, defendant in error, pursuant to an order 
 of the orphans' court, sold the subscription right to 35 shares owned 
 by its ward for $12,546.80, equivalent to $358.48 per share. The
 
 SECT. IV.] MILES l'. SAFE DEPOSIT AND TRUST CO. 449 
 
 Commissioner of luternal Kevenue, holding that this entire amount 
 was income lor the year, under the provisions of the Act approved 
 February ^4, 1919 (eh. 18, 40 Stat. lO.'^T), assessed and plaintilf in 
 error collected a tax amounting to $l,i;JU.T7 by reason of it. De- 
 fendant in error, having paid this under protest and unavailingly 
 appealed to the Commissioner, claiming that none of the amount so 
 received was income within the meaning either of the Act or of the 
 sixteenth amendment, brought this action against the collector to 
 recover the entire amount of tax so assessed and paid. The case was 
 tried before the District Court without a jury on stipulated facts 
 and evidence. Plaintilfs extreme contention that the subscription 
 riglit to new stock and also the proceeds of the sale of the right were 
 wholly capital and not in any part subject to be taxed as income, was 
 overruled upon the authority of Merchants' Loan & Trust Companv 
 V. Smietanka ('355 U. 8. 509), then recently decided. The trial 
 court, in the second place, held that, of the proceeds of the sale of the 
 subscription rights, so much only as represented- a realized profit 
 over and above the cost to plaintiff of what was sold was taxable as 
 income. In order to compute the amount of the profit, the court 
 commenced with the value of the old shares prior to authorization 
 of the stock increase, which upon the basis of evidence contained in 
 the stipulation was taken to be what they were assessed at by the 
 United States for purposes of the estate tax at the death of the ward's 
 father, viz, $710 per share, and added the $150 necessary to be paid 
 by a stockholder or his assignee in order to obtain a share of the new 
 stock, making the cost of two shares (one old and one new) $8G0 
 and half of this the cost of one share. 
 
 The sale of the subscription rights at $358.48, the purchaser to 
 pay the issuing company $150 per share, was treated as equivalent 
 to a sale of the fully-paid shares at $508.48 each, or $78.48 in excess 
 of the $430 which represented their cost to plaintiff; and this dif- 
 ference multiplied by 35, the number of shares or rights sold, yielded 
 $2,746.80 as the gain realized out of the entire transaction. Upon 
 this the court held plaintiff to have been properly taxable, and upon 
 nothing more ; no income tax being assessable with respect to the 35 
 shares still retained, because although they were considered worth 
 more, ex-rights, than the $430 per share found to be their cost, the 
 difference could not be regarded as a taxable profit unless or until 
 realized by actual sale (273 Fed. Eep. 822). To review the final 
 judgment entered pursuant to the findings and opinion, which sus- 
 tained only in part plaintiff's demand for a refund of the tax paid, 
 the collector of internal revenue prosecuted a direct writ of error 
 from this court under section 238, Judicial Code, because of the con- 
 stitutional questions involved. 
 
 There is but one assignment of error, based upon a single excep- 
 tion, which denied that plaintiff was entitled to recover anything 
 whatever; hence the correctness of the particular recovery awarded 
 is not in form raised ; but the trial judge, having the complete facts 
 before him, almost of necessity passed upon them in their entirety 
 in order to determine, according to truth and substance, how much
 
 450 MILES V. SAFE DEPOSIT AND TRUST CO. [cHAP. VH. 
 
 of what plaintiff received was, and how much was not, income in the 
 proper sense; as is proper in a case involving the application of the 
 sixteenth amendment (Eisner i'. Macomber, 252 U. S. 189, :^06; 
 United States v. Phellis, November 21, 1921, 257 U. S.— ), and in 
 order to review the judgment, it will be proper for us to analyze the 
 reasoning upon which it was based. 
 
 It is not in dispute that the Hartford Fire Insurance Company is 
 a corporation of the State of Connecticut and that the stock increase 
 in question was made under authority of certain acts of the legisla- 
 ture and certain resolutions of the stockholders, by which the right to 
 subscribe to tiie new issue was offered to existing stockholders upon 
 the terms mentioned. It is evident, we think, that such a distribu- 
 tion in and of itself constituted no division of any part of the accu- 
 mulated profits or surplus of the company, or even of its capital; it 
 was in eifect an opportunity given to stockholders to share in con- 
 tributing additional capital, not to participate in distribution. It 
 was a recognition by the company that the condition of its affairs 
 warranted an increase of its capital stock to double the par value 
 of that already outstanding, and that the new stock would have a 
 value to the recipients in excess of $150 per share; a determination 
 that it should be issued pro rata to the existing stockholders, or so 
 many of them as would pay that price. This privilege of itself was 
 not a fruit of stock ownership in the nature of a profit; nor was it 
 a division of any part of the assets of the company. 
 
 The right to subscribe to the new stock was but a right to par- 
 ticipate, in preference to strangers and on equal terms with other 
 existing stockholders, in the privilege of contributing new capital 
 called for by the corporation — an equity that inheres in stock 
 ownership under such circumstances as a quality inseparable from 
 the capital interest represented by the old stock, recognized so uni- 
 versally as to have become axiomatic in American corporation law. 
 Gray v. Portland Bank, 3 Mass. 364; Atkyns v. Albree, 12 Allen, 
 359, 361; Jones v. Morrison, 31 Minn. 140, 152-153; Eidman v. 
 Bowman, 58 111. 444, 447; Humboldt Driving Park Association v. 
 Stevens, 34 Neb. 528, 534; Electric Co. v. Electric Co., 200 Pa. 516, 
 520-523, 526; Wall v. Utah Copper Co., 70 N. J. Eq. 17, 28, et seq.; 
 Stokes V. Continental Trust Co., 186 N". Y. 285. Evidently this in- 
 herent equity was recognized in the statute and the resolution under 
 which the new stock here in question was offered and issued. 
 
 The stockholder's right to take his part of the new shares, there- 
 fore — assuming their intrinsic value to have exceeded the issuing 
 price — was essentially analogous to a stock dividend. So far as the 
 issuing price was concerned, payment of this was a condition pre- 
 cedent to participation, coupled with an opportunity to increase his 
 capital investment. In either aspect, or both, the subscription right 
 of itself constituted no gain, profit, or income taxable without appor- 
 tionment under the sixteenth amendment. Eisner v. Macomber, 252 
 U. S. 189, is conclusive to this effect. 
 
 But in that case it was recognized (p. 212) that a gain through 
 sale of dividend stock at a profit was taxable as income, the same as
 
 SECT. IV.] MILES V. SAFE DEPOSIT AND TRUST CO. 4^1 
 
 a gain derived through sale of some of the original shares would 
 be. In that as in other recent cases this court has interpreted " in- 
 come" as including gains and profits derived through sale or con- 
 version of capital assets, whether done by a dealer or trader, or 
 casually by a nontrader, as by a trustee in the course of changing 
 investments. jMcrehants' I^oan & Trust Company v. Smietanka, 
 255 U. S. 501), 51;-5l^0. 
 
 Hence the District Court rightly held defendant in error liable 
 to income tax as to so much of the proceeds of sale of the sub- 
 6(!ription rights as represented a realized {jrofit over and above the 
 cost to it of what was sold. How the gain should be computed is a 
 matter of some contention by the Government in this court; but it 
 admits of little doubt. To treat the stockholder's right to the new 
 shares as something new and independent of the old, and as if it 
 actually cost nothing, leaving the entire proceeds of sale as gain, 
 would ignore the essence of the matter, and the suggestion can not 
 be accepted. The District Court proceeded correctly in treating the 
 subscription rights as an inci-case inseparable from the old shares, 
 not in the way of income but as (•ai)ital; in treating tiie new shares 
 if and when issued as indistinguishable legally and in the market 
 sense from the old ; and in regarding the sale of the rights as a sale 
 of a portion of a capital intorost that included the old shares. What 
 would have happened had defendant in error decided to accept the 
 new shares and pay the issuing price instead of selling the rights is 
 of no consequence; in that event there would have been no realized 
 profit, hence no taxable income. What resulted or might have re- 
 sulted to defendant in error's retained interest in the company, de- 
 pending upon whether the purchaser exercised his right to subscribe 
 or allowed it to lapse, or whether in the latter event the stock was 
 sold by the directors, is of speculative interest only. Defendant in 
 error resorted to the market for the sale of a part of its capital in- 
 terest, concededly sold at an advance over cost, and what the profit 
 actually was is the sole concern here ; not whether it might have been 
 more or less, nor whether the purchaser disposed of the stock to 
 advantage. 
 
 That a comparison of the cost at acquisition and the selling price 
 is proper under section 202(a) of the Act (40 Stat. 1069), where, as 
 here, property was acquired and sold within the same taxing year, 
 we understand to be conceded. Under the stipulation, the court 
 below was warranted in finding $710 per share to have been the fair 
 market value of the old stock when turned over to the guardian, 
 and treating this as its cost to the trust. Tt was proper to add to 
 this the $150 required to be paid to the company and treat the total 
 as the cost to plaintiff of each two shares, one of which was to pass 
 to the purchaser. This in essence is the method adopted by the 
 Treasurv Department in the case of a sale of dividend stock, in 
 Regulations 45, 1920 edition, article 1547, which reads: 
 
 Art. 1.'i47. f^nJp of aforl- rprewpd ns (JiviclpnfJ. — Stock in a cor- 
 poration received as a dividend does not constitute taxable income to
 
 452 MASSEY V. LEDEKER. [CHAP. VII. 
 
 a stockholder in such corporation, but any profit derived by the 
 stockholder from the sale of sucli stock is taxable income to him. 
 [Following Eisner v. Macomber, supra.] For the purpose of ascertain- 
 ing the gain or loss derived from the sale of such stock, or from the 
 sale of the stock with respect to which it is issued, the cost (used to in- 
 clude also, where required, the fair market value as of March 1, 1913) 
 of botli the old and new shares is to be determined in accordance with 
 the following rules: 
 
 (1) Where the stock issued as a dividend is all of substantially the 
 same character or preference as the stock upon which the stock divi- 
 dend is paid, the cost of each share of both the old and new stock 
 ■will be the quotient of the cost, or fair market value as of March 1, 
 1913, if acquired prior to that date, of the old shares of stock di- 
 vided by the total number of the old and new shares. . . . 
 
 That the averaging of cost might present more administrative 
 difficulty in a case more complicated than the present, as where the 
 old shares were acquired at different times, is not a sufficient ground 
 for denying the soundness of the method itself. 
 
 Various suggestions, more or less ingenious, as to how the profit 
 ought to be computed, made by counsel for defendant in error and 
 by an amicus curiae, have been examined and found faulty for 
 reasons unnecessary to be mentioned. Upon the whole, we are satis- 
 fied that the method adopted by the District Court led to a correct 
 result. 
 
 Judgment affirmed. 
 
 MASSEY V. LEDEEER. 
 District Couet of the United States. 1921. 
 
 [Reported 277 Fed. 123.] 
 
 Thompson, District Judge, This is a suit "brought against the 
 defendant, as collector of internal revenue for the First District of 
 Pennsylvania, to recover the sum of $21.31, being the amount of 
 additional income tax alleged to have been unlawfully assessed 
 against the plaintiff for the year 1917 under Eevenue Acts Sept. 
 8, 1916, and Oct. 3, 1917 (Comp. St. 1918, 6336^a et seq.), and 
 paid under protest to the defendant. The facts are as follows: 
 
 In February, 1918, the plaintiff filed with the defendant a return 
 of his taxable income for the year 1917. Of his gross income, the 
 sum of $8,880 was received as interest on bonds of certain corpo- 
 rations containing covenants, varying in form, but to the same effect, 
 agreeing to pay to the bondholder interest at the prescribed rate 
 without deduction of taxes imposed under any law of the United 
 States. The normal tax of 2 per cent upon the income thus derived 
 was $1 77.60, which was accordingly so assessed by the Commissioner 
 of Internal Eevenue, and withheld and paid under the provisions of 
 title 12, § 1205, subd. (c), of the Eevenue Act of October 3, 1917,
 
 SECT. IV.] MASSEY V. LEDERER. 453 
 
 amending subdivision (c) of section 9 of the Revenue Act of Septem- 
 ber 8, 1916 (Comp. St. 1918, § 6336i), by the corporate obligors of 
 said bonds. In September, 1919, the pluintitf was notified by the 
 Commissioner of Internal Revenue that, upon an office audit of his 
 income tax returns for 1917, the said amount of $1TT.G0 payable 
 by the several corporations under the tax-free covenants of the said 
 bonds was " in the nature of additional income to bondholder," and 
 was subject under the Revenue Acts of 191G and 1917 to additional 
 taxes of '<?1.3l. Taxes to that amount were accordingly assessed and 
 paid by the plaintiff under protest. A claim for refund having been 
 duly made and rejected by the Commissioner of Internal Revenue, 
 the instimt suit was brought. 
 
 The question involved is whether the sum of $177.60, represent- 
 ing the aggregate of the normal 2 per centum tax, withheld by the 
 corporate obligors and by them respectively paid to the defendant, 
 constitutes an increment of taxable income which should have been 
 included in the plaintiff's return as part of his gross income for the 
 year 1917. There is no dispute in the case that the taxes assessed 
 upon the amount in question were assessed under the applicable pro- 
 visions of the acts of 1916 and 1917 as to percentage. 
 
 Title 12, § 1200, of the Revenue Act of 1917 (Comp. St. 1918, 
 § 6336b), defining the net income of taxable persons provides: 
 
 " (a) That, subject only to such exemptions and deductions as are 
 hereinafter allowed, the net income of a taxable person shall include 
 gains, profits, and income, derived from . . . interest, rent, divi- 
 dends, securities, ... or gains or profits and income derived from 
 any source whatever." 
 
 The situation may be stated as follows: The plaintiff was the 
 holder of corporate obligations by the terms of which the obligors, 
 respectively, contracted to pay interest annually at a certain rate 
 upon the principal debt. They contracted in addition that the 
 amount paid should be without deduction for taxes due the United 
 States. It goes without saying that this covenant included taxes 
 otherwise payable by the individual upon the principal or interest 
 received. , 
 
 [1] Under the statutes, interest received by the bondholder is 
 made subicct to an income tax at varying rates, and title 12, § 1205, 
 subd. (c). of the -Revenue Act of 1917, requires that the normal tax 
 shall be withheld by corporate obligors where the obligation contains 
 a tax free covenant or contract. In such case the tax is imposed 
 upon the inrlividual o^\Tiing the obligation, but instead of being 
 paid by him, and recoverable by liim from the corporate obligor, 
 Congress, in order to prevent multiplicity of collections and obtain 
 direct payment, has providerl that the tax shall be paid to the govern- 
 ment by the corporation, which has obligated itself to pav the tax 
 for the bonrlliolfler. The money paid bv the corporate obligor pays 
 the debt of the individual owner to the United States, and not a debt 
 of the obligor to the United States; it being under its contract ob-
 
 454 MASSEY V. LEDEKEil. [cHAP. VII. 
 
 ligated not only to the bondowner, but by statute required to pay 
 directly to the government and not to the owner. It pays under the 
 statute because of its contract with the owner, and not because of 
 any tax assessed against it. By assuming to pay the interest free of 
 taxes, when the interest accruing to the bondholder is made subject 
 to taxes and it pays those taxes to the government for the individual, 
 the same situation is created as when a tenant under a lease cov- 
 enants to pay the taxes upon real estate. The rental of the leased 
 premises is thereby increased by the amount of the taxes, and the 
 total becomes income to the lessor, subject under the revenue acts 
 to deduction, but nevertheless income equally with the rent named 
 in the lease. 
 
 The tax-free covenant in the bonds is equivalent to an agree- 
 ment of the obligors to pay to the owners the agreed rate of in- 
 terest plus the taxes, and it is immaterial whether the taxes are 
 paid by the owners of the bonds to the government and the amount 
 thereof paid by the obligors to the owners, or whether under the 
 coventmt and the statute the taxes are paid direct to the government 
 by the obligors. This conclusion is sustained by the reasoning in 
 the case of Houston Belt & Terminal Eailwav Co. v. United States, 
 250 Fed. 1, 162 C. C. A. 173; Blalock v. Georgia Railway & Electric 
 Co., 246 Fed. 387, 158 C. C. A. 451 ; and Eensselaer & Saratoga 
 Eailroad Co. v. Irwin (D. C), 239 Fed. 739, affirmed in 249 Fed. 
 726, 161 C. C. A. 636. 
 
 [2] The taxes paid for the plaintiff by the corporation come 
 within the definition of income as "gains, profit, and income de- 
 rived from any source whatever," in the act of 1917. 
 
 [3] The contention of counsel for the plaintiff is that the duty 
 imposed upon corporate obligors by the act of 1917, where their obli- 
 gations contain tax-free covenants, constitute in effect an imposition 
 of the tax directly upon the corporation, and that the argument is 
 strengthened because the corporation is not allowed to deduct taxes 
 so paid under tax-free covenants from its gross income, while de- 
 ducting certain portions of the interest paid upon its obligations. I 
 perceive nothing in this argument to indicate that the tax is laid 
 upon the corporation rather than upon the individual. It is the 
 normal tax of 2 per cent, upon the individual which the corporation 
 is obliged to withhold. 
 
 The argument that Congress intended to lay the tax on the corpo- 
 ration, because it did not permit the tax so paid to be the subject of 
 a deduction, has little weight, when we find that Congress also did 
 not allow corporations a deduction for all of the interest paid by 
 them, but only for interest upon the amount of their indebtedness, 
 not in excess of their paid-up capital stock, or, if none, the amount 
 of capital employed plus one-half of the interest-bearing indebted- 
 ness then outstanding. The not income upon which taxes are pay- 
 able is what remains out of gross income after deduction of what is 
 permitted to be deducted by law, and we cannot draw the broad con- 
 clusion that Congress intended the 2 per cent normal tax imposed on 
 the individual to be construed as a tax not upon him, but upon the
 
 SECT. IV.] UNITED STATES V. VAXDEEBILT. 455 
 
 corporate obligor becuude of tlie denial uf tliu riglit lo deduct such 
 taxes so paid from the gross income of the obligor. Traylor Engi- 
 neering & Manufacturing Co. v. Lederer ( IJ. C), 266 Fed. '583 ; First 
 National Bunk of Jackson v. McXecl, 2;{8 Fed. 55'J, 1')! (\ ('. A. 
 495. 
 
 The conclusion is that the j)laintilF is not entitled to recover, and 
 judgment will be entered for the defendant. 
 
 UNITED STATES v. VAXDERBILT. 
 DiSTiucT Court of the United States. 1921. 
 
 [Reported 275 Fed. 1()!».J 
 
 The cases arise upon tlie demurrers to complaints at law to re- 
 cover the income taxes upon certain legacies left the defendants 
 under the will of Alfred (i. Vanderbilt, who died in 1915. The 
 will disposed of a large estate, and set up various independent trusts 
 of indefinite duration. The only parts relevant to these cases are the 
 eleventh and sixteenth clauses, which read as follows : 
 
 "Eleventh. I give and bcMiueath to my brother Keginald C. Van- 
 derbilt five hundred thousand dollars (5()U,0U0) ; to mv uncle, 
 Frederick W. Vanderbilt, two hundred thousand dollars (200,000) ; 
 to Frederick M. Da vies five hundred thousand dollars (500,000) ; to 
 Henry B. Anderson two hundred thousaiul dollars (200.000) ; to 
 Frederick L. Merriam two hundred and lil'ty thousand dollars (250,- 
 000) ; to Charles E. Crocker ten thousand "dollars (10,000), and to 
 Howard Lockwood one thousand dollars (1,000)." 
 
 "Sixteenth. I nominate and apjjoint my brother, Reginald C. 
 Vanderbilt, my uncle, Frederick W. Vanderbilt, Henry B. Anderson, 
 Frederick M. Davies, and Frederick L. Merriam executors of this 
 my will and trustee of the several trusts created by this my will, 
 
 "I direct that no bond shall be required in any state or country 
 to qualify my said executors to act as such or as trustees hereunder. 
 
 " The bequests herein made to my said executors are in lieu of all 
 compensation or commissions to which they would otherwise be en- 
 titled as executors or trustees." 
 
 The defendants, so named as executors and trustees, qualified, and 
 have administered and are now administering the estate. The ques- 
 tion is whether the legacies so given are exempt as " bequests," or 
 liable to the income tax as "compensation for personal services." 
 
 Learned Hand, Dist. J. (after stating the facts as above). 
 There seems to me no question whatever that these legacies, in part, 
 anyway, are "compensation for personal services."' When the testa- 
 tor provided that tliey should be "in lieu of all compensation or 
 commissions to which they would otherwise be entitled as executors 
 and trustees," he could only have meant to substitute the legacies 
 in the place of their statutory compensation. Tf a substitute, the
 
 456 UNITED STATES V. VANDERBILT. [CIIAP. VII. 
 
 legacies must themselves have been compensation, and since the 
 commissions would certainly have been for " personal services," the 
 substitute itself was the same. It is true that the form of the compen- 
 sation is a "bequest,'" and a '"'bequest'"' is exempt; hence there is a 
 verbal contradiction between one part of the statute and the other. 
 Yet I cannot doubt that all bequests are not exempt. Suppose, for 
 instance, that a man agreed to leave another a legacy if he would 
 take care of him while he lived. The legacy would be a "bequest"; 
 but can any one suppose that it would not be " compensation for per- 
 sonal services'^ which would be taxable? 
 
 The defendants argue that such legacies are payable, thovigh the 
 executor do not complete his services. That is true. The English 
 rule was that a legacy to an executor was presumably virtute officii 
 and in recompense for his services, and he must assent to his appoint- 
 ment. Lewis V. Matthews, L. R. 8 Eq. 2? 7. Yet very little was 
 necessar}^ much less than formal qualification. Harrison v. Rowley, 
 4 Ves. 212. Indeed, in Brydges v. Wotten, 1 Yes. & Beam. 134, trus- 
 tees were allowed their legacies, though they had done nothing, prob- 
 ably because the legacies were payable before the trustees could 
 qualify. If so, the rule does not truly apply to trustees. In America, 
 where executors generally receive statutory commissions, such be- 
 quests have been spoken of as compensation which must be earned. 
 Matter of Tilden, 44 Hun (X. Y.), 441; Renshaw v. Williams, 75 
 Md. 498, 23 Alt. 905. In some cases the language of the will ap- 
 parently indicated as much (Harper's Appeal, 111 Pa. 243, 2 Atl. 
 861), or at least admitted of that interpretation (Richardson v. 
 Richardson, 145 App. Div. 540, 129 N. Y. Supp. 941). Morris v. 
 Kent, 2 Edw. Ch. (X. Y.) 175, much relied on by the defendants, 
 decides nothing to the point, though the Vice Chancellor in his 
 opinion quotes obiter the English rule that any indication of an 
 assent to qualify is enough. 
 
 It seems to me to make no difference whether such bequests be re- 
 garded as payable merely on condition of qualification, or only after 
 the services are rendered. I assume the first to be the correct rule, 
 and certainly in the cases at bar the legacies were all payable long 
 before the services could be completed, because there were trusts of 
 indefinite duration, which might extend 30 years or more. The leg- 
 acies were given with the chance that the executors and trustees 
 might not complete their services. I regard the point, however, as 
 immaterial because the bequests are in either case equally " compen- 
 sation for personal services." Suppose a master pays his servant in 
 advance, trusting that he will live to complete. Is the hire not a 
 " compensation for personal services " ? It is prospective compen- 
 sation, indeed ; but none the less it is not gratuitous, it is given to 
 procure and to pay for the services. At least, how can it be said 
 that it is not compensation, if the servant enters and completes his 
 employmerit? 
 
 Therefore T attach no importance to the point of which so much is 
 made, that the executor becomes entitled to his legacies on express- 
 ing his assent. More important is the opposite side of the same rule.
 
 SECT. IV.] JACKSON V. SMIEITAXKIA. 457 
 
 that without such assent he does not become entitled. This rule is 
 not because he gets tlie betjuest eo nomine; it makes no diU'erenee 
 that he is named in the will. Moreover, if the theory were that the be- 
 quest is given oidy to the ollice, he nmst qualify, which he need not. 
 ,The condition that he must assent can only be because such bequests 
 are treated as in recompense for his .services, and .so the books put 
 it. He must at least undertake to perform while he can. If tliey 
 were true legacies, he would get them whether he <iualifi('(l or not. 
 Demurrers overruled, with judgments of redpundeat ouster 
 within 20 days. 
 
 JACKSON V. SMIETANKA. 
 CiECUiT Court of Appeals. 1921. 
 
 [Reported 267 Fed. 932.] 
 
 Baker, Circ. J. Jackson, plaintiff, filed a declaration to recover 
 income taxes paid by him under protest. Defendant's demurrer was 
 sustained; plaintiff declined to plead over; and this writ of error 
 challenges the consequent judgment. 
 
 From May, 1913, to April, 1918, plaintiff served as a railroad 
 receiver under appointment of the District Court at Chicago. Plain- 
 tiff accepted the employment under an order providing that he " be 
 paid on account of his services at the rate of $2,000 per month " and 
 that on termination of his trust he " shall be at liberty to apply for 
 such further compensation as to the court may then appear reason- 
 able and just." For the years 1913 to 1917 inclusive plaintiff made 
 returns on the basis of " income received " ; and, respecting this re- 
 ceivership, he had neither a business system nor books nor unpaid 
 allowances for service from which he could have made returns of 
 " income accrued." In 1918 plaintiff was allowed and paid " as final 
 payment for all services rendered by him during the receivership 
 herein the additional sum of $100,000." On March 14. 1919, plaintiff 
 file his retuni for 1918, showing the receipt of said $100,000, and also 
 filed amended returns for 1913 to 191T inclusive, in which he claimed 
 that pro raia parts of said $100,000 were "accrued income" of those 
 years. On April 16, 1919, the collector rejected the amended returns 
 and demanded normal taxes and surtaxes on the $100,000 so received 
 in 1918. Plaintiff then prepared and on April 22, 1919, presented 
 to the District Court a petition for a nunc pro tunc order showing 
 that the additional compensation was earned and had accrued in 
 equal monthly installments throu<rhout the receivership, and the 
 order as tendered was entered. Thereupon plaintiff', on May 28, 
 1919, paid $26,826 under protest, and subsequently brought this 
 action to recover the difference. $19,973. 
 
 Tnless some effect is to be given to tlie nunc pro iunc order, the 
 collector was right. Section 213 of the TJevcnue Act of 1818 requires 
 a return of "income derived from salaries or compensation for per-
 
 458 JACKSON V. SMIETANKA. [cHAP. VII. 
 
 sonal service " and provides that the amount thereof " shall be included 
 in the gross income for the taxable year in which received by the tax- 
 paver unless under methods of account permitted under subdivision 
 (b) of section 212 any such amounts are to be properly accounted 
 for as of a diflerent period." That subdivision permits a return 
 "upon the basis of the taxpayer's annual account period (fiscal year 
 or calendar year, as the case may be) in accordance with the method 
 of accounting regularly employed in keeping the books of such tax- 
 payer; but if no such method of accounting has been so employed, 
 or if the method employed does not clearly reflect the income, the 
 computation shall be made upon such basis and in such manner as 
 in the opinion of the Commissioner does clearly reflect the income." 
 Not only do the facts of this case demonstrate that there is no per- 
 mission in that subdivision to save plaintiif from the direct mandate 
 of section 213, but article 32 of Regulations 45 (authorized by section 
 1309 of the Act) explicitly requires that " where no determination of 
 compensation for personal services is had until the completion of the 
 services, the amount received is income for the calendar year of its 
 determination." Plaintiff from time to time during the receiver- 
 ship had applied to the court for additional compensation, and the 
 court had always refused. Manifestly such refusals were in ac- 
 cordance with the original order of appointment, which plainly 
 denied any intermediate right to additional compensation and left 
 the question of what additional compensation, if any, would be fair 
 to be determined when the trust ended and to be dependent upon the 
 outcome of the administration. And whether the regulation means 
 that the compensation is income of the year in which the deter- 
 mination of the amount is made or is income of the year in which 
 payment is made, is immaterial in the present case, for both deter- 
 mination of amount and payment thereof occurred in 1918. 
 
 A year after plaintiff had finally stepped out of the District Court 
 and a month after his liability to make a true return of his income 
 for 1918 had become fixed, plaintiff reappeared in court and obtained 
 the aforesaid nunc pro tunc order. Respecting the general question 
 of a court's authority to make nunc pro tunc orders or judgments, 
 plaintiff cites certain authorities,^ which we supplement by calling 
 attention to others.^ In regard to the present order it suffices to 
 say : There was no misprision of a clerical ofiicer ; no new facts ; no 
 newly discovered evidence concerning former issues of fact; no fail- 
 ure in the court to enter the original order exactly as the court in- 
 tended to enter it ; even if the petition for the nunc pro tunc order 
 had tendered an issue which interested the original parties (the rail- 
 road company and its creditors), no steps were taken by the afore- 
 
 ^ Foster's Fed. Pr. (6th Ed.) vol. 2, §§ 447, 447a, 448; Lewis v. Holmes, 
 224 Fed. 410; Farmers & Merchants Bank v. Arizona M. S. & L. Ass'n, 220 
 Fed. 1; Accord v. Western Pocahontas, 156 Fed. 989; Kaw Valley Drainage 
 District V. U. P. Rid. Co., 163 Fed. 836. 
 
 ^ Brooks V. Ry. Co., 102 U. S. 107; Brown v. Schulten, 104 IT. S. 410; In 
 re Wipht, 134 U. S. 136; Hickman v. Fort Scot, 141 U. S. 415; Gagnon v. 
 United States, 193 U. S. 451; Wetmore v. Karrick, 205 U. S. 141; Brown 
 V. United States, 196 Fed. 351.
 
 SECT. IV.] IIOLBROOK V. MOORE. 459 
 
 time receiver to have them join issue; the petition was heard ex 
 parte; and as to the government all the matters in the District Court 
 were res inter alios. 
 
 The judgment is affirmed. 
 
 HOLBROOK V. MOORE. 
 United States District Court. 1921. 
 
 [Reported Am. Hull. No. 4, 99.] 
 
 Per Curiam (orally). Tliis case was submitted to the court 
 sitting as a jury, and a jury being specially waived in writing, the 
 court heard the testimony and the arguments of counsel and has 
 since considered the briefs on both sides. 
 
 The facts are somewhat unique, and I confess just a little diffi- 
 culty with the case. Plaintiff is president of a real estate company 
 doing business here in the city of St. Louis. He is also, of course, a 
 director in that company. He and two others of the directors (of 
 whom there are five in all) made the orders and passed tlie resolu- 
 tions to wliich I shall hereafter refer. The remaining two directors 
 had notliing to do with these orders and resolutions. 
 
 Plaint iir and the two directors having to do with the resolution 
 that I shall mention owned 75 per cent of the capital stock; 25 per 
 cent is in the hands of other stockholders, presumably in the hands, 
 among others, of the two directors not taking part in the orders and 
 resolutions to which I liave before referred. 
 
 In the years preceding March 1, 1913, the date at which the 
 income-tax act took effect, that is, the act of October 3, 1913, plain- 
 tiff was the active manager of the corporation of which he is director 
 and president. The affairs of his corporation seem to have been 
 very successful and profitable. It was deemed by plaintiff and two 
 of the directors that his services for the years 1909, 1910, 1911, and 
 1912 were such as reasonably to entitle him to additional compensa- 
 tion to that allowed him by the iniles and by-laws of the board of 
 directors. No agreement as to the amount of that compensation was 
 ever arrived at by anybody up until December, 1913. 
 
 Plaintiff relying, as he says, upon the promise of two directors, 
 became indebted to the company, tuid this indebtedness was carried 
 on the books of the company as overdrafts. These overdrafts of 
 plaintiff amounted in December, 1913, to about $70,000. In this 
 month and year (plaintiff and two other directors concurring) 
 plaintiff was allowed a credit upon the books of the company for 
 $50,000, leaving the plaintiff owing the company at that time $20,000 
 on his overdrafts. Although seven years have passed, neitlier the 
 other two directors nor the stockholders have ever affirmatively 
 acquiesced in this allowance, although plaintiff was given credit for 
 it upon the books of the companv in December, 1913, in the sum 
 that I have heretofore stated — $50,000.
 
 460 HOLBROOK V. MOORE. [CHAP. VII. 
 
 In the year 1913 the Holbrook-Blackwelder Eeal Estate Trust 
 Co. (I believe this is the exact style of it) made out its return as it 
 was required to do by the law then in force, as a basis of assessment 
 against it of an income tax for the year 1913. It may have been, 
 perhaps, in January, 1914, but that cuts no figure in the case. In 
 tins return it took credit for the $50,000 that it had allowed to 
 plaintiif on its books, as an expense. It is true that it happened, 
 fortuitously, that the company during the year 1913 had lost $76,- 
 000, so that it had to pay no income tax at all. It would not have 
 had to pay it in any event. 
 
 Upon this $50,000 so carried to the credit of plaintiff upon the 
 books of his company in 1913, the defendant assessed against him 
 an income tax amounting to, I believe, $990.36. This tax the 
 plaintiff paid. After the usual procedure, he l)rought suit against 
 the defendant, Moore, in order to secure a refund. The question is 
 whether this tax was correctly or incorrectly assessed against him 
 under the law then in force. I have reached the conclusion that 
 it was. 
 
 Up until December, 1913, and on the 28th of the month, I be- 
 lieve, there had never been an ascertainment of the amount that 
 plaintiff should have from the company as additional compensation; 
 that matter was left undetermined. It is true that he had gotten 
 the money and had spent it in the years preceding the taking effect 
 of the income-tax act of October, 1913. Upon the books of the 
 company he owed it overdrafts not only for the $50,000, but for an 
 amount largely in excess of that sum. Up to that time he had never 
 gotten it and it was not certain that he ever would get it. But at 
 this time the credit to come to him was finally settled upon and 
 segregated by an order of the board. It may be said, since only 
 two members of the board (in addition to plaintiff himself) ac- 
 quiesced in this, that therefore it was no order, and that since the 
 other two directors and the stockholders have never to this good 
 day acquiesced in it, that it was no order. I take it that the com- 
 pany is foreclosed by the fact that they took credit for it when they 
 made their income tax return for the year following the year at 
 which they passed this credit to plaintiff upon the corporation's books. 
 
 I am led to the conclusion that I have reached largely by the case 
 of Jackson v. Smietanka, 267 Fed. 932. . . . 
 
 This Jackson case is the one that I find nearest to the facts in 
 this case. As I stated in the beginning, the case is a close and 
 difficult one, but I have concluded both upon the reasoning and 
 under the authority of the Jackson case, that the judgment should 
 be for the defendant. 
 
 It is so ordered.
 
 SECT. IV.] LEDERER V. NOETHERX TRUST COMPAXY. 401 
 
 LEDERER v. NORTHERN TRUST COMPAXY. 
 Circuit Court of Appeals. 1920. 
 
 [Reported 262 Fed. 52.] 
 
 "WOOLLEY, Circ. J. The question is wliethcr tlic c-oliateral inherit- 
 ance tax imposed by the Pennsylvania act of 1887 fails within the de- 
 ductions allowed by section 203 of the Federal estate tax act of 1!)16 
 in an-iving at the value of the "net estate" on whicii alone the 
 Federal act imposes the tax. In other words, is the amount which 
 the decedent's estate paid the Commonwealth of Pennsylvania jus a 
 collateral inheritance tax either (a) "an administration expense/' 
 or (b) "a claim against the estate," or (c) one of "such other 
 charges against the estate as are allowed by the laws of the jurisdic- 
 tion . . . under which the estate is being administered?" 
 
 This controversy concerns broadly the privileges which govern- 
 ments make the subject of "death duties" — the privileges of giv- 
 ing and the privilege of receiving property on death, and the 
 conditions imposed and price exacted by the State for the exercise 
 of those privileges. Magoun v. Illinois Trust & Savings Bank, 170 
 U. S. 283, 287; Maxwell v. Bughee, 250 U. S. 525. 
 
 The question here turns on the nature of the two taxes, Federal 
 and State. It concerns generally the Federal tax, which both parties 
 concede to be an estate tax; that is, a tax that relates not to an 
 interest to which some person has succeeded by inheritance, bequest, 
 or devise, but to an interest which has ceased by reason of death ; 
 and it is imposed not upon the interest of the recent owner or upon 
 his privilege to dispose of it, but upon the transfer of the interest 
 in its devolution. The nature of the Federal tax being conceded, 
 the matter for decision concerns particularly the nature of the col- 
 lateral inheritance tax of Pennsylvania, and raises the question 
 whether tJiat tax is an estate tax, which, like the Federal tax, i.on- 
 cerns an interest which has ceased upon death, the burden of wliich 
 is imposed upon the estate of a decedent, as claimed by the executors, 
 or is a legacy or succession tax, whicli concerns the privileges of re- 
 ceiving such an interest, the burden of wliich is imposed upon the 
 legatee or other beneficiary, as claimed by the collector. 
 
 The bearing of this question on the case in hand is that if the 
 collateral inheritance tax of Pennsylvania is an estate tax and is 
 therefore a " charge " against the estate " allowed " in its settle- 
 ment by the laws of Pennsylvania, then the refusal of the collector 
 to deduct the amount of the tax from the gross in ascertaining the 
 net estate of the decedent as a basis of assessment was unwarranted. 
 If, on the other hand, it is a tax charged not against the estate, but 
 against the legatee as a condition imj)osed u]X)n the transfer of the 
 Icijracv, then the net estate of the decedent, determined without de- 
 ducting the collateral inheritance tax paid the Commonwealth of 
 Pennsylvania, was properly computed under the Federal act, and 
 the tax assessed against the simie was lawful.
 
 462 LEDERER V. NORTHERN TRUST COMPANY. [CIIAP. VII. 
 
 The nature of collateral iuheritance taxes has beeu the subject of 
 many decisions, both Federal and JState. The general principle of 
 sucli of tiieni as are termed legacy and succession taxes, when not 
 otherwise affected by statutory provisions, is that the tax is upon 
 the legacy before it reaches the hands of the legatee, whose property 
 it becomes only after it has yielded its contribution to the iState and 
 after it has su'tfered a diminution to the amount of the tax in return 
 for the legislature's assent to the bequest. Knowlton v. Moore, 178 
 U. S. 41, following United States v. Perkins, 1G3 U. S. 635; Ma- 
 goun V. Illinois Trust & Savings Bank, 170 U. S. 283; Magee v. 
 Grima, 8 How. 490, 493. 
 
 But in looking for the nature of the collateral inheritance tax 
 under consideration, it is not necessary to seek light from statutes 
 and decisions of other States, for the act shows its nature by its 
 own clear expressions aided by interpretations repeatedly made by 
 the Supreme Court of Pennsylvania. 
 
 The acts provide that "all estates . . . shall be subject" to the 
 tax ; that executors and administrators shall pay the tax ; that until 
 they pay it they shall not be discharged; that the auditor general's 
 receipt for its payment shall be a proper voucher in the settlement 
 of the estate ; and that in stating an account in the orphans' court 
 the tax shall be allowed and deducted before a balance for distribu- 
 tion is struck. 
 
 The tax, which operates practically as a deduction from the share 
 of tbe beneficiary, is, nevertheless, charged against and paid by the 
 estate. In using the words "all estates" shall be subject to the tax, 
 the Supreme Court of Pennsylvania has held that the legislature 
 contemplated the property of the decedent, not the interest therein 
 of the legatee or distributee (Debusto's Estate, 24 Legal Intell. 
 474; Howell's Estate, 147 Pa. 164) ; that the tax is imposed only 
 once, and that is before the legacy has reached the legatee and before 
 it has become his property; that it must be retained and paid by 
 the executor or administrator who has the decedent's property in 
 charge; that which the legatee really receives is not taxed at all; 
 his property is that which is left after the tax has been taken off. 
 Finnen's Estate, 196 Pa. 72. In Jackson v. Meyers, 257 Pa. 104, 
 where the question was squarely raised, the Supreme Court decided 
 that the collateral inheritance tax of Pennsylvania is not levied 
 upon an inheritance or legacy but upon the estate of the decedent, 
 holding that what passes to the legatee is simply the portion of the 
 estate remaining after the State has been satisfied by receiving 
 the tax. 
 
 These decisions by the Supreme Court of Pennsylvania, constru- 
 ing a statute of its own State, are binding on this court in a case 
 of this kind. From these decisions it appears to be settled in 
 Pennsylvania that the collateral inheritance tax of that State is an 
 estate tax, not a legacy tax, and that as such it is levied upon and 
 made a charge against the estate of the decedent. 
 
 Consistently with this view, the Supreme Court of Pennsylvania 
 recently held, in a situation just the reverse of this, that in deter-
 
 SECT. IV.] PRENTISS C. KISXEK. 463 
 
 iiiiiiing the amount of a dt'cedent's estate for the purpose of assess- 
 ing the Pennsylvania colhileral inheritance tax, the Federal estate 
 tax under consideration should first he deducted as a charge against 
 the estate. Knight's Kstale, 2i')[ I'a. ~y.i~i. 
 
 We are of opinion that the collateral inheritance tax of Pennsyl- 
 vania clearly falls within the provision of the Federal act as a 
 "charge" against the estate of a decedent "allowed hy the laws of 
 the jurisdiction . . . under which the estate is heiiig settled," and 
 is, therefore, properly deductihle from the gross estate in determin- 
 ing the net estate against which the Federal tax is assessed. There 
 is, therefore, no occasion to go furtlier and decide the other ques- 
 tions raised at the argument, wliether the Slate collateral inheritance 
 tax is also an "administration expense," or a "claim against the 
 estate," similarly deductihle under section 203 of the Federal act 
 in ascertaining the docedent's net esbitc as a hasis of taxation. A 
 consideration of these aspects of the tax would require us to recon- 
 cile at least two opposing decisions rendered under State statutes 
 with the different provisions (Oorbin v. Townshend, 92 Conn. 501, 
 103 Atl. 647; In re Sherman's Estate, 166 N. Y. Supp. 19); and 
 to determine whether the terms "administration expenses" and 
 "claims against the estate," as found in the statute, are restricted 
 to or extended beyond their ordinary meaning. 
 
 As this case arose before the act of February 24, 1919, by which 
 the terms of the act of September 8, 1916, were materially changed, 
 this decision has no bearing on the later statute. 
 
 The judgment below is affirmed. 
 
 PEENTISS V. EISNER. 
 
 Circuit Court of Appeals. 1920. 
 [Reported 267 Fed. 16.] 
 
 This cause comes here on writ of error to the United States Dis- 
 trict Court for the Southern District of New York. 
 
 The facts are stated in the opinion. 
 
 Rogers, Circ. J. This is an action to recover from the de- 
 fendant the sum of $7,432.88 witli interest, which amount the 
 plaintiff alleges she was wrongfully compelled to pay to the de- 
 fendant as collector of internal revenue. 
 
 It appears that the plaintiff and her then husband, since deceased, 
 filed with the defendant a joint return of tlieir net incHime for the 
 vear 1913, pursuant to the act of Congress approved October 3, 
 1913 (TJ. S. Stat. L., vol. 38, pt. 1, ch. 16, Sec. II, p. 166). 
 
 The aforesaid act of Congress, in paragraph B, page 167, provided 
 as follows : 
 
 That, subject only to such exemptions and deductions as herein- 
 after allowed, the net income of a taxaltle person shall include
 
 464 PRENTISS V. EISNER. [ciIAP. VII. 
 
 gains, profits, and income, including . . . but not the value of 
 property acquired by gift, bequest, devise, or descent . . . 
 
 That in computing the net income for the purpose of the normal 
 taxes there shall be allowed as payment; . . . third, all national, 
 State, count}', school, and municipal taxes paid within the year, not 
 including those assessed against local benefits. 
 
 And in paragraph D, page 168, it provided as follows: 
 
 The said tax shall be computed upon the remainder of said net 
 income of each person subject thereto accruing during each preced- 
 ing calendar year ending JDecember thirty-first: Frovided, however. 
 That for the year ending December thirty-first, nineteen hundred 
 and thirteen, said tax shall be computed on the net income accruing 
 from March first to December thirty-first, nineteen hundred and 
 thirteen, both dates inclusive, after deducting five-sixths only of 
 the specific exemptions and deductions herein provided for. 
 
 It appears, too, that in the year 1913 the plaintiff inherited a 
 portion of her father's estate and that on the inheritance thus re- 
 ceived by her the State of New York assessed against her an in- 
 heritance tax of $259,805.71, which amount she paid on December 
 11, 1913. 
 
 The plaintiff in making her income return under the act of Con- 
 gress included therein as a deduction five-sixths of the inheritance 
 tax which she had paid to the State of New York, which amounted 
 to $216,504.75. This deduction was not allowed by the Commis- 
 sioner of Internal Eevenue, and he levied and assessed against her 
 an additional tax of $7,432.88. Thereupon she instituted this action 
 to recover back the amount so paid. 
 
 The complaint was demurred to upon the ground that it did not 
 state facts sufficient to constitute a cause of action. The court below 
 sustained the demurrer and dismissed the complaint. 
 
 The question of law thus presented is whether the payment by the 
 plaintiff of the inheritance tax to the State of New York was a 
 proper deduction from her income tax return for the year 1913. 
 That is the sole question herein involved. The plaintiff's contention 
 is that the inheritance tax which she paid to the State of New York 
 was a tax paid to a State, and therefore under the act of Congress 
 the plaintiff was entitled to make the deduction of five-sixths of the 
 amount so paid in making her income return. 
 
 The Commissioner of Internal Revenue in making the ruling to 
 which reference has been made stated that — 
 
 A collateral inheritance tax levied under the laws of the State 
 of New York being, as it is, a charge against the corpus of the estate, 
 does not constitute such an item as can be allowed as a deduction in 
 computing income t^x liability to either the estate or beneficiary 
 thereof. 
 
 The district judge in sustaining the demurrer states that he did 
 not regard the New York transfer tax " as imposing a tax upon the
 
 SECT. IV.] PRENTISS V. EISNER. 46 
 
 plaintiff's right of succession which is deductible in her income-tax 
 return." 
 
 Material provisions of the New York transfer tax act may be 
 found in the margin. 
 
 The New York act reads as follows in section 220 of Article X : 
 
 A tax shall be and is hereby imposed upon the transfer of . . . 
 property. . . to persons or corporations in the following cases . . . : 
 (1) When the transfer is by will or by the intestate laws of this 
 State ... (4) when the transfer is by deed . . . intended to take 
 effect in possession or enjoyment at or after sucli death. . . . The 
 tax imposed hereby shall be upon the clear market value of such 
 property at the rates hereinafter prescribed. 
 
 Section 224 reads as follows: 
 
 Lieji of tax and collection hy executors, administrators, and trus- 
 tees. — Every such tax shall be and remain a lien upon the property 
 transferred until paid and the person to whom the property is so 
 transferred, and the executors, administrators, and trustees of every 
 estate so transferred shall be personally liable for such tax until its 
 payment. Every executor, administrator, or trustee shall have full 
 power to sell so much of the property of the decedent as will enable 
 him to pay such tax in the same manner as he might be entitled by 
 law to do for the payment of the debts of the testator or intestate. 
 Any such executor, administrator, or trustee having in charge or in 
 trust any legacy or property for distribution subject to such tax 
 shall deduct the tax therefrom and shall pay over the same to the 
 State comptroller or county treasurer, as herein provided. If such 
 legacy or property be not in money, he shall collect the tax thereon 
 upon the appraised value thereof from the person entitled thereto. 
 He shall not deliver or be compelled to deliver any specific legacy or 
 property subject to tax under this article to any person until he 
 shall have collected the tax thereon. If any such legacy shall be 
 charged upon or payable out of real property, the heir or devisee 
 shall deduct such tax therefrom and pay it to the executor, ad- 
 ministrator, or trustee, and the tax shall remain a lien or charge on 
 such real property until paid, and the payment thereof shall be en- 
 forced by the executor, administrator, or trustee, in the same man- 
 ner that payment of the legacy might be enforced, or by the district 
 attorney under section two hundred and thirty-five of this chapter. 
 If any such legacy shall be given in money to any such person for 
 a limited period, the executor, administrator, or trustee shall retain 
 the tax upon the whole amount, but if it be not in money, he 
 shall make application to the court having jurisdiction of an ac- 
 counting hy him, to make an apportionment, if the case require it, of 
 the sum to bo ]iaid into his hands by such legatee, and for such 
 further order relative thereto as the case may require. 
 
 The right to dispose of propertv hy will is statutory. The matter 
 has always been recognized as within tlio legislative control. In the 
 reign of Henry II (1154-1189) a man's personal property was, at
 
 466 PEENTISS V. EISNEK. [CHAP. Vn. 
 
 his death, divided into three equal parts, if he died leaving a wife 
 and children: One part went to his wife, another to his children, 
 and only the remaining third could he disposed of by his will. And, 
 at least after the establishment of the feudal system and prior to 
 the enactment of the statute of wills (32 Henry VIII), the right 
 to make a will of real estate was not known to the English law. 
 
 There lias been and still is a difference of opinion among tlie 
 courts as to the exact nature of an inheritance tax. It is generally 
 agreed that such a tax is not upon the property or money bequeathed. 
 The dispute is over the question whether the tax is laid on the 
 privilege of receiving the property so transmitted. The right to 
 transmit and the right to receive are distinct, and each is alike 
 under the legislative control. The distinction between the right to 
 transmit and the right to receive is important and upon the distinc- 
 tion depends the right to deduct or not to deduct the amount of the 
 tax in the income return submitted to the Federal Government. 
 
 The Circuit Court of Appeals in the Third Circuit has recently 
 decided Lederer v. Northern Trust Co., 263 Fed. 52. In that case 
 the question arose as to the right to deduct a tax paid under the 
 collateral inheritance tax act of the State of Pennsylvania. The 
 answer to be given to that question depended upon whether the 
 Pennsylvania tax was an estate tax, the burden of which was im- 
 posed upon the estate of a decedent as claimed by the executors, or 
 was a legacy tax, the burden of which was imposed upon the legatee 
 or beneficiary. It happened that the Supreme Court of Pennsylvania 
 in Jackson v. Meyers, 257 Pa. 104, had squarely decided that the 
 collateral inheritance tax of that State was not levied upon an in- 
 heritance or legacy, but upon the estate of the decedent, and had 
 held that what passed to the legatee was simply the portion of the 
 estate remaining after the State had been satisfied by receiving the 
 tax. The Circuit Court of Appeals held that the decision of the 
 Supreme Court of Pennsylvania construing the inheritance tax law 
 of that State was binding on the Federal courts, and that inasmuch 
 as the tax was held by that court as a tax on the estate and not 
 a tax on the inheritance, the amount of the tax so paid was properly 
 deductible in computing tlie net estate under the act of Congress of 
 September 8, 1916. Under a like state of facts we should have no 
 difficulty in reaching a like conclusion. But the case with which we 
 are dealing presents a different question, involving as it does the 
 tax law not of Pennsylvania but of New York. 
 
 In 1900 the Supreme Court in Knowlton v. Moore, 178 TJ. S. 41, 
 had under consideration a tax imposed under the war revenue act 
 of June 13, 1898 (20 Stat. 448). The opinion in that case is ex- 
 haustive and occupies about 70 pages. It deals with the subject of 
 death duties and sustains the constitutional right of Con.gress to 
 impose death duties. In the course of the opinion, which was writ- 
 ten by Justice (now Chief Justice) White, it was said: 
 
 Thus, looking over the whole field, and considering death duties 
 in the order in which we have reviewed them — that is, in the Eo-
 
 SECT. IV.] PEENTISS V. EISNER. 467 
 
 man and ancient law; in that of modern France, Germany, and 
 otlier continental countries; in England and those of her colonies 
 where such laws have been enacted, in the legislation of the United 
 States and the several States of tiie Union — the following ap- 
 pears: Although diU'ercnt modes of assessing such duties prevail, 
 and although tliey have dill'crent accidental names, such as probate 
 duties, stamp duties, taxes on the transaction, or the act of passing 
 of an estate or a succession, legacy taxes, estate tiixes, or privilege 
 taxes, nevertheless tax laws of this nature in all countries rest in 
 their essence upon the principle that death is the generating source 
 from which the particular taxing power takes its being and that it 
 is the power to transmit, or the transmission from the dead to the 
 living, on which such Uixes are more immediately rested. 
 
 It thus appears, as the opinion of the court, that in general death 
 duties are imposed on the power to transmit. However, the im- 
 mediate question with which we are now concerned is whether the 
 so-called tax which the New York law has imposed, and which is 
 herein involved, is a tax upon the power to transmit or is laid on the 
 power to receive. In 188!) a testator within the State of New York 
 died and devised and bequested all his estate, botii real and per- 
 sonal, to the Government of the United States. The Surrogate's 
 Court imposed an inheritance tax upon the personal property. The 
 case was taken on appeal to the general term of the Supreme Court 
 of New York and later to the New York Court of Appeals, by each 
 of which it was afhrmed. It was then taken to the Supreme Court of 
 the United States, by which it was in like manner affirmed. The 
 question was whether the personal property hequeathed to the 
 United States was subject to an inheritance tax under the laws 
 of New York. The Supreme Court held the property to be subject 
 to the tax. United States v. Perkins, 163 U. S.*^ 6v>5. In the 
 course of its opinion the court said : " In this view the so-called 
 inheritance tax of the State of New York is in reality a lim- 
 itation upon the power of a testator to bequeath his property to 
 ■whom he pleased; a declaration that, in the exercise of that power, 
 he shall contribute a certain percentage to the public use; in other 
 words, that the right to dispose of his property by will shall remain, 
 but subject to a condition that the State has a right to impose. 
 Certainly, if it be true that the right of testamentary disposition is 
 purelv statutory, the State has a riglit to require a contribution to 
 the jniblic treasury before the bequest shall take effect. Thus the 
 tax is not upon property, in the ordinary sense of the term, but 
 upon the right to dispose of it, and it is not until it has yielded its 
 contribution to the State that it becomes the property of the lega- 
 tee." And the court went on to say: "That the tax is not a tax 
 upon the property itself, but upon its transmission by will or by 
 descent, is also held both in New York and in several other States." 
 We find no case in the subsequent decisions of the New York Court 
 of Appeals in which that court disclaims the constniction placed by 
 tlie Supreme Court of the United States on the New York decisions.
 
 468 PKENTISS V. EISNER. [CHAP. VH. 
 
 or in any way qualifies or overrules the proposition that the " tax " 
 under the Isew York law is not one upon the property, but is one 
 upon the right to dispose of it by will or by descent. In the absence 
 of such a decision it seems to be our duty to follow the law as it is 
 laid down in the Perkins case, unless there can be found in the New 
 York statute in force, when the present tax was laid, some sub- 
 stantial difference from the statute in force when that case was de- 
 cided in the particular now being considered. If such a difference 
 exists we have failed to detect it, and learned counsel have failed 
 to point out in what it consists. 
 
 The New York Court of Appeals in 1919, in Matter of "Watson, 
 226 X. Y. 38-4, 399, the court, in discussing a provision in the New 
 York inheritance tax law imposing a tax upon the transfer of prop- 
 erty at the time of death which had not theretofore paid any tax, 
 local or State, said: "The beneficiary has no claim to the property 
 of an ancestor except as given by law, and, if the State has a right 
 to impose a tax at all upon the passing of property, the transferee 
 takes only what is left after the tax is paid." The opinion quotes 
 at page 396 from the opinion of the Supreme Court of the United 
 States in the matter of Penfield, 216 N. Y. 163, 167, 1915, that 
 under the New York law the inheritance tax is not upon the prop- 
 erty but upon the right to dispose of it. There is not one word of 
 criticism, not one word of dissent, and not the slightest suggestion 
 of disapproval of that proposition anywhere in the opinion. 
 
 In matter of Penfield, supra, the New York court declares what 
 it had several times before stated, that " the transfer tax is not a 
 tax upon property, but upon the right of succession to property." 
 The language of the statute is that the tax is " due and payable at 
 the time of the transfer " ; that is, at the death of the decedent. It 
 accrues at that time. 
 
 Now a succession tax is a tax upon a transfer of property in gen- 
 eral and as such is distinguishable from a legacy duty, which is a 
 tax upon a specific bequest. Under the New York law the succes- 
 sion tax creates a lien upon the estate of the decedent at the moment 
 of his death. The right of the State to the amount of this lien at- 
 taches at that time and it must be paid before the transferee, legatee, 
 or devisee ever gets anything, and the executor or administrator is 
 personally liable for the tax until it has been paid. Under such a 
 law we do not see that the transferee pays the tax. In stating this 
 conclusion we have not overlooked what was said in the matter of 
 Gihon, 169 N. Y. 443, 447, where it is said that "though the ad- 
 ministrator or executor is required to pay the tax, he pays it out 
 of the legacy for the legatee, not on account of the estate. The re- 
 quirement of the statute that the executor or administrator shall 
 make the payment is prescribed to secure such payment, because 
 the Government is unwilling to trust solely to the legatee." The 
 fact, however, remains that if a legacy left \>y a will is $10,000 and 
 the executor has paid to the State on its account a tax of $500 and 
 then has turned over to the legatee $9,500, the legatee has received 
 not $10,000 but $9,500, and the legatee has been enriched only to
 
 SECT. IV.] UNITED STATES V. WOODWARD. 469 
 
 the extent of the amount which he has himself received, and he has 
 not paid tlie tax nor has it been paid by his authority, nor by any- 
 one representing him. The payment has been made by the personal 
 representative of the deceased, and in making it he has acted under 
 authority of the statute. 
 
 As was said by Judge Gray in Matter of Swift, 137 N". Y. 77, 
 ""What lias tlie State done, in efl'oct, by the enactment of this tax 
 law? It reaches out and appropriates for its use a portion of tlie 
 property at the moment of its owner's decease; allowing only the 
 balance to pass in the way directed by the testator, or permitted by 
 its intestate law." 
 
 We admit that the New York cases on the subject of taxable 
 transfers are confused and not always clear and consistent. But 
 until the New York Court of Appeals authoritiitively states that the 
 law of Xew York is not what the Supreme Court of the TTnitod 
 States said it was in the Perkins case, this court has no alternative 
 but to hold that the New York transfer act does not impose a tax 
 on a legatee's right of succession which is deductible in her income 
 tax return. The legacy which the plaintiff herein received under 
 the will of her fatlier did not become her property until after it 
 had suffered a diminution to the amount of the tax, and the tax 
 that was paid thereon was not a tax paid out of the plaintiff's in- 
 dividual estate but was a payment out of tlie estate of her deceased 
 father of that part of his estate which the State of Xew York had 
 appropriated to itself which payment was the condition precedent 
 to the allowance by the State of the vesting of the remainder in the 
 legatee. 
 
 Judgment affirmed. 
 
 UNITED STATES v. WOODWARD. 
 Supreme Court of the Uxited States. 1921. 
 
 [Reported 256 U. 8. 632.] 
 
 Van Devaxter, J. This is an appeal from a Judgment in favor 
 of the executors of Joseph H. Woodward, deceased, for money 
 claimed to have been erroneously exacted from them as a tax on the 
 income of his estate while in their hands. 
 
 The testator died December 15, 1917. The revenue act of 1916^ 
 "imposed upon the transfer of the net estate of every decedent"' 
 dying thereafter a tax which it called an " estate tax." The act fixed 
 the amount of the tax at a named percentage " of the value of the net 
 estate," made the tax a lien upon the " entire gross estate," required 
 that it be paid " out of the estate " before distribution, declared that 
 it should "be due one year after the decedent's death," charged the 
 executor or administrator with the duty of pa3ang it, and declared 
 that the receipt therefor should entitle him to a credit for the amount 
 
 ' Ch. 46.3. Title IT. 30 Stat., 777; ch. 150. Title III, 39 Stat., 1002; ch. 63, 
 Title IX, 40 Stat., 324.
 
 470 UNITED STATES V. WOODWARD. [CHAP. VII. 
 
 in the usual settlement of his accounts. Under that act these execu- 
 tors were required to pay an estate tax of $-189,834.07. The tax be- 
 came due December 10," 1918, and they paid it February 8, 1919. 
 Shortly thereafter the executors made a return, under the revenue 
 act of 1918,' of the income of the testator's estate for the taxable 
 year 1918 and claimed in the return that in ascertaining the net in- 
 come for that year the estate tax of $489,834.07 should be deducted. 
 The Commissioner of Internal Kevenue refused to allow the deduc- 
 tion and assessed an income tax of $165,075.78 against the estate. 
 Had the deduction been allowed there would have been no taxable 
 net income for that year and no part of the $105,075.78 would have 
 been collectible. Tayment of that sum, as so assessed, was pressed on 
 the executors and they paid it under duress. Then after taking the 
 necessary steps to entitle them to do so, they brought this suit in the 
 Court of Claims to recover the money thus exacted from them. 
 
 The sole question for decision is, was the estate tax paid by the 
 executors, and claimed by them as a deduction in the income tax 
 return for the year 1918, an allowable deduction in ascertaining the 
 net taxable income of the estate for that year ? The Court of Claims 
 held that it was. 
 
 The solution of the question turns entirely upon the statutory 
 provisions under which the two taxes were severally collected. The 
 act of 1918, by sections 210, 211, and 219, subjects the net income 
 "received by estates of deceased persons during the period of ad- 
 ministration of settlement" to an income tax measured by fixed 
 percentages thereof; by sections 212 and 219 requires that the net 
 income be ascertained by taking the gross income, as defined in section 
 213, and making the deductions named in section 214, and by section 
 214 makes express provision for the deduction of " taxes paid or 
 accrued within the taxable year imposed (a) by the authority of the 
 United States, except income, war-profits and excess-profits taxes." 
 This last provision is the important one here. It is not ambiguous, 
 but explicit, and leaves little room for constniction. The wordsof its 
 major clause are comprehensive and include every tax which is 
 charged against the estate by the authority of the United States. 
 The 'excepting clause specifically enumerates what is to be expected. 
 The implication from the latter is that the taxes which it enumerates 
 would be within the major clause were they not expressly excepted, 
 and also that there was no purpose to except any others. Estate taxes 
 were as well known at the time the provision was framed as the ones 
 particularly excepted. Indeed, the same act, by sections 400-410, 
 expressly provides for their continued imposition and enforcement. 
 Thus their omission from the excepting clause means that Congress 
 did not intend to except them. 
 
 The act of 1916 calls the estate tax a "tax" and particularly de- 
 nominates it an " estate tax." This court recently has recognized that 
 it is a duty or excise and is imposed in the exertion of the taxing power 
 of the United States. New York Trust Co. v. Eisner ( — U. S. — ) . 
 
 1 Ch. 18 Title II, §§ 210-214, 219. 1405, 40 Stat., 1062-1067, 1071, 1151.
 
 SECT. IV.] UNITED STATES V. AETNA LIFE INSURANCE CO. 471 
 
 It is made a charge on the estate and is to be paid out of it by the 
 adiiiinistrator or executor substantially as otlier taxes and ciiarges 
 are j)aid. Jt becomes due not at the time of tlie decedent's death, as 
 suggested by counsel for the (iovcrnment, Imt one year thereafter, 
 as the statute plainly provides. It does not segregate any part of 
 the estate from the rest and keep it from passing to the administrator 
 or executor for j)urposes of administration, as counsel contend, but 
 is made a general charge on the gross estate and is to be paid in 
 money out of any available funds or, if there be none, by converting 
 other proi)erty into money for the purpose. 
 
 Jlere the eslate tax not only "accrued," which means became due, 
 during the taxable year of 1!)18, but it was paid before the income 
 for that year was returned or required to be returned. When the re- 
 turn was nuule the executors claimed a deduction by reason of that 
 tax. Wo hold that under the terms of the act of 1!)18 the deduction 
 should have been allowed. 
 
 Judgment affirmed. 
 
 UNITED STATES r. AETNA LIFE INSURANCE CO. 
 United States District Court, inio. 
 
 "^ [Reported 260 Fed. 333.] 
 
 Garvin, J. This action is submitted to the court for determi- 
 nation upon an agreed state of facts. It appears that the defend- 
 ant, an insurance company incorporated under the laws of the State 
 of Connecticut, was subject to pay annually during the years 1!)0!J, 
 1910, and lUll, with respect to the carrying on and doing of its 
 business, the excise tax imposed by section 38 of tiie act of Congress 
 approved August 5, 190!), and was subject in all respects to the pro- 
 visions of that section. 
 
 On or before March 1 in each of these ^ears the defendant dulv 
 made its return to the collector of internal revenue in the proper 
 district in tlie form prescribed by the Commissioner of Internal Rev- 
 enue as required by said section, which returns showed that the net 
 income of the defendant for each of these three years exceeded $5,000. 
 
 On or about June 1 of the years 1910, 1911, and 1912 an excise 
 tax under said act was duly assessed against the defendant for the 
 years ending December ,31, 1909, 1910, and 1911, respectively, said 
 tax being 1 per cent on the net income of the defendant. The tax 
 was in each case paid as assessed. 
 
 When the defendant hied its return showins: its net income for the 
 year ending December 31, 1909, it deducted $479,025 as "taxes paid 
 during the year ending December 31, 1909, imposed under authority 
 of the United States or States and Territories thereof." Of this sum 
 it is conceded that $409.9fi7.36 was lawfully deducted. It is claimed 
 by the plaintiff that defendant should al.'^o have paid a tax of 1 per 
 cent on the remainder, $69,637.64, i. e., $696.56. Of the latter sum 
 defendant admits liability to the extent of $227.62, leaving $468.96
 
 472 rXITED STATES V. AETXA LIFE liNSUKAXCE CO. [CIIAP. VII. 
 
 in dispute. The amount admitted for 1910 is $343.17, $413.41 
 being in dispute. For 1911, $543.28 is admitted, $527,60 being in dis- 
 pute. These sums in dispute represent taxes paid by various corpora- 
 tions upon shares of their stock owned by defendant, which taxes 
 were imposed during the several years 1909, 1910, and 1911 by the 
 State of Connecticut under chapter 54 of the public acts of 1905. 
 
 The deductions allowed a corporation by the act of August 5, 1909, 
 include " all sums paid by it within the year for taxes imposed under 
 authority of the United States or of any State or Territory thereof, 
 or imposed by the Government of any foreign country as a condition 
 to carry on business therein." The taxes in question were not paid 
 by the "defendant, but in its behalf by other corporations. 
 
 While it is true that "a statute providing for the imposition of 
 taxes is to be strictly construed, and all reasonable doubts in respect 
 thereto resolved against the Government and in favor of the citi- 
 zen " (Mutual Benefit Life Insurance Co. v. Herold, 198 Fed. 199, 
 and cases therein cited), no doubtful meaning is here involved. The 
 language of the act is clear and explicit. The allowable deductions 
 in the case of a domestic corporation are plainly set forth. 
 
 Deductions allowed from gross income in the case of a domestic 
 corporation : 
 
 Second. Such net income shall be ascertained by deducting from 
 the gross amount of the income of such corporation, joint stock 
 company or association, or insurance company, received within the 
 year from all sources 
 
 (First) all the ordinary and necessary expenses actually paid 
 within the year out of income in the maintenance and operation of 
 its business and properties, including all charges such as rental or 
 franchise payments, required to be made as a condition to the con- 
 tinued use or possession of property; 
 
 (Second) all losses actually sustained within the year and not 
 compensated by insurance or otherwise, including a reasonable al- 
 lowance for depreciation of property, if any, and in the case of in- 
 surance companies the sums other than dividends, paid within the 
 year on policy and annuity contracts and the net addition, if any, 
 required by law to be made within the year to reserve funds ; 
 
 (Third) interest actually paid within the year on its bonded or 
 other indebtedness not exceeding the paid-up capital stock of such 
 corporation, Joint stock company or association, or insurance com- 
 pany, outstanding at the close of the year, and in the case of a bank, 
 banking association or trust company, all interest actually paid by it 
 within the year on deposits ; 
 
 (Fourth) all sums paid by it within the year for taxes imposed 
 under the authority of the United States or of any State or Territory 
 thereof, or imposed by the Government of any foreign country as a 
 condition to carry on business therein ; 
 
 (Fifth) all amounts received by it within the year as dividends 
 upon stock of other corporations, joint stock companies or associa- 
 tions, or insurance companies, subject to the tax hereby imposed.
 
 SECT. IV.] UNITED STATES V. AETNA LIFE INSURANCE CO. 473 
 
 If it had been the intention to permit such a deduction as defend- 
 ant urges, the act would have provided tlmt there be included '* all 
 sums paid by it or in its behalf within the year." 
 
 Defendant relies upon a decision by the Treasury Department 
 rendered March 24:, 1916, reading in part: 
 
 You are advised that when a' corporation pays taxes for its stock- 
 holders, such payments represent a portion of the earnings of the cor- 
 poration, which instead of being distributed to tbe stockholders in the 
 form of dividends is used in payment of taxes which the stockholders 
 individually owe. Should you instead of paying the taxes, pay over 
 this sum to the stockholders, the stockholders would be required to 
 return the amount as income received, and would then be entitled 
 to deduct the same under the item of taxes paid during the year. 
 Under the excise tax law a stockholder which is a corporation is en- 
 titled to deduct from gross income all dividends received from an- 
 other corporation subject to tax, and therefore is entitled to deduct 
 as a dividend that portion of the earnings of the corporation in 
 which it owns stock, which is represented by the stockholder's tax. 
 For the years 1909 to 1912, inclusive, therefore, the corporation 
 which is a stockholder will be entitled to an additional deduction on 
 account of the taxes paid for it by the corporation issuing the stock, 
 for the reason that it produces the same result as if the corporation 
 owning the stock was required to return as income for these years 
 the full amount of the dividend, including that portion of the divi- 
 dend diverted to pay tax, and then took credit as a deduction for 
 this entire amount under the item of dividends received from other 
 corporations, and also took credit for the amount of taxes paid imder 
 that item. Under the income-tax law, however, a corporation is 
 not entitled to deduct from gross income dividends received from 
 other corporations. Consequently if it claims the benefit of deduct- 
 ing from gross income taxes paid for it by another corporation it 
 must include such amount in income as the deduction counterbal- 
 ances the receipt. As you, the stockholder in this case, did not re- 
 turn as income the amount in question, you are not entitled under 
 the income-tax law to deduct the same. The claim on account of the 
 tax assessed for the year 1913 is accordingly rejected, and you will 
 find inclosed notice of demand for payment of this tax. 
 
 The claim for the abatement of the additional tax assessed for 
 1912 has received favorable consideration for the reason above 
 stated. 
 
 This decision points out that a corporation making a claim such 
 as is advanced by defendant must have included in its return as 
 income the taxes which were paid in its behalf by other corporations. 
 No such return was made by defendant herein, therefore the decision 
 is not in point even if it were controlling on the court. 
 
 There was no refusal or neglect to make a return within the mean- 
 ing of the act and therefore no penalty will be allowed. 
 
 Judgment for plaintiff for $2,52If.0Jt, with interest from June 
 9, 1915.
 
 474 MENTE V. EISNER. [CHAP. VII. 
 
 MENTE V. EISNER.. 
 
 Circuit Couet of Appeals. 1920. 
 [Reported 266 Fed. 161.] 
 
 Waed, Circ. J. Section II, subdivision 2 B, of the act of Oc- 
 tober 3, 1913, provides tliat in computing net income for purposes 
 of normal tax there shall be allowed as a deduction "... Fourth: 
 Losses actually sustained during the 3'ear, incurred in trade or aris- 
 ing from fires, storms, or shipwreck and not compensated for by in- 
 surance or otherwise." 
 
 Mente, a member of the firm of Mente & Co., engaged in the busi- 
 ness of manufacturing jute bags, and bagging, cotton bags, and 
 materials for covering cotton bales, filed his income returns for the 
 year March 1 to December 31, 1913, and for the whole year of 1914. 
 He had for some three years been buying and selling cotton on the 
 cotton exchange for his individual account, in no way connected with 
 the business of Mente & Co., and he deducted from his gross income 
 in each year losses sustained in the year resulting from these trans- 
 actions as " losses incurred in trade." 
 
 Eisner, as collector of internal revenue for the third district of 
 the State of jSI'ew York, assessed an additional tax upon these de- 
 ductions, which Mente paid under protest, taking an appeal to the 
 Commissioner of Internal Eevenue under sections 3220 and 3228, 
 United States Revised Statutes, and the regulations of the Secretary 
 of the Treasury in pursuance thereof, who rejected his claim. 
 Thereupon Mente began this action against Eisner, as collector, to 
 recover the amounts so paid with interest and costs. 
 
 T. D. 2090, dated October 14, 1914, reads: 
 
 Loss, to be deductible, must be an absolute loss, not a speculative 
 or fluctuating valuation of continuing investment, but must be an 
 actual loss, actually sustained and ascertained during the tax year for 
 which the deduction is sought to be made. It must be incurred in trade 
 and be determined and ascertained upon an actual, a completed, a 
 closed transaction. The term "in trade'' as used in the law is held 
 to mean the trade or trades in which the person making the return 
 is engaged ; that is, in which he has invested money otherwise than 
 for the purpose of being employed in isolated transactions, and to 
 which he devotes at least a part of his time and attention. A person 
 may engage in more than one trade and may deduct losses incurred 
 in all of them, provided that in each trade the above requirements 
 are met. As to losses on stocks, grain, cotton, etc., if these are in- 
 curred by a person engaged in trade to which the buying and selling 
 of stocks, etc., are incident as a part of the business, as by a member 
 of a stock, grain, or cotton exchange, such losses may be deducted. 
 A person can be engaged in more than one business, but it must be 
 clearly shown in such cases that he is actually a dealer, or trader, or 
 manufacturer, or whatever the occupation may be, and is actually 
 engaged in one or more linos of recognized business, before losses
 
 SECT. IV.] COHEN V. LOWE. 47 
 
 i> 
 
 can be claimed with respect to either or more than one line of busi- 
 ness, and his status as such dealer must be clearly established. 
 
 Both parties havin*;^ moved for the direction of a verdict. Judge 
 Grubb directed a verdict in favor of the defendant. 
 
 We think tiiat the language "losses incurred in trade" is cor- 
 rectly construed by the Treasury Departiucnt as meaning in the 
 actual business of the taxpayer as distinguished from isolated trans- 
 actions. If it had been intended to permit all lo.sses to be deducted 
 it would have been easy to say so. Some eU'ect must be given to the 
 words "in trade." 
 
 There is an inconsistency in making profits derived from such 
 transactions a ])art of the taxpayer's gross income and on the other 
 hand allowing him no deduction for losses. But tax laws are not 
 required to be perfect or even consistent. It must be determined 
 from the facts in each case whether or not the losses claimed to be 
 deducted have been incuned in a business. 
 
 In this case the court must be taken to have found as a matter of 
 fact that these transactions in 1913 and 1914 did not constitute a 
 business. Such a finding is binding upon us. 
 
 Judgment affirmed. 
 
 COHEN V. LOWE. 
 United States District Court. 1916. 
 
 [Reported 234 Fed. 474.] 
 
 Grubb, J. Gentlemen of the jury, this is an action by the 
 plaintiff, Mr. Cohen, who has paid the income tax for the year 1913, 
 to the Government on the Government basis, and claims that he 
 paid in excess of what the law would have required him to pay, and, 
 therefore, has brought this suit to recover back the excess. 
 
 There are three items on which he claims he overpaid the Govern- 
 ment when he made the payment on the income tax; two of them 
 are matters of law as to whicli there is no question of fact, and which 
 do not require consideration of the jury at all, but require the de- 
 cision of the court without a jury; the other one depends upon a 
 question of fact, and not upon a question of law, and is therefore 
 properly determinable by a jury, with instructions from the court. 
 
 The plaintiff is suing to recover that excess from the Government, 
 having already paid the tax under protest. The item which requires 
 your decision relates to the amount of depreciation in the building 
 that he owned at No. 320 West Eighty-fourth Street during the tax 
 year of 1913. The law requires him to pay a tax on the net income 
 derived from that building, and it allows him, as a deduction from 
 the amount of net income which he receives, among other things, 
 this deduction : 
 
 A reasonable allowance for the exhaustion, wear, and tear of 
 
 property arising out of its use or cmployinent in th(^ business, not
 
 476 COHEN V. lowe. [chap. vir. 
 
 to exceed, in the case of mines, 5 per cent of the gross value, at the 
 mine, of the output for the year for which the computation is made, 
 but no deduction shall be made for any amount of expense of re- 
 storing property or making good the exhaustion thereof, for which 
 an allowance is or has been made. 
 
 So the question to be submitted to you for decision arises under 
 the provision of law allowing that deduction. 
 
 There is no question that the plaintiff was entitled to a deduction 
 for wear and tear of this building, and the Government allowed him, 
 I believe, 3 per cent — he claims 5 per cent — and the question for 
 you to determine is whether he is entitled to any greater allowance 
 for depreciation over and above what the Government allowed him, 
 which is 3 per cent. 
 
 The burden would be upon him reasonably to satisfy you from the 
 evidence that he was entitled to an allowance of an amount greater 
 than 3 per cent in order to obtain that allowance because, as I say, 
 he is the plaintiff asserting the claim. You will see from the lan- 
 guage of the law itself that the allowance is for wear and tear when 
 it relates to a building and exhaustion when it relates to mines or 
 property of that kind, but wear and tear when it relates to a build- 
 ing; that means the physical deterioration that a building suffers 
 during the tax year; it does not include the depreciation in value 
 due to a loss in rental value, because of modern buildings going up 
 with better facilities than the old building' had; that is not the idea. 
 
 The idea is the amount of physical loss or deterioration that the 
 building suffers during the tax year — that, of course, is a narrow 
 question. It depends upon what you believe would be the life of 
 the building, the length of life, the number of years that the build- 
 ing would remain in a condition to be habitable for the uses for 
 which it was constructed, not merely how many years it would 
 stand without being condemned and torn down, but how many years, 
 in your judgment from the evidence, it would remain so as to be 
 habitable for the general purposes for which it was constructed — 
 that is, in this case, for use as an apartment house. That would be 
 the life of the building, and when you arrive at that you could 
 readily ascertain the amount of annual depreciation that the build- 
 ing would suffer, because it would be fair to assume that the de- 
 terioration would have accrued over the life of the building, and the 
 average amount of deduction each year for depreciation would cover 
 the annual percentage. 
 
 The parties have agreed that you might render your verdict in the 
 form of a special verdict ; that is, by determining what, if any, per- 
 centage over and above the 3 per cent the plaintiff is entitled to for 
 depreciation. If he has not reasonably satisfied you from the evi- 
 dence that he is entitled to any percentage over the 3 per cent, then 
 you can just bring in a verdict on that issue for the defendant, the 
 Government, because they have already allowed him 3 per cent. If 
 you are reasonably satisfied from the evidence that the plaintiff is 
 entitled to more than 3 per cent, then the parties have agreed that
 
 SECT. IV.] COHEN V. LOWE. 477 
 
 you should render a verdict for the plaintiff in the form of per- 
 centage; that is, what percentage it would be over 3 per cent that 
 you lind the plaiutiii' is entillod to, and your verdict in that event 
 might be at any figure between ;j and 5 per cent. It is admitted 
 that the plaintitf claims oidy 5 per cent. 
 
 So you are to determine here two questions: In tlie first place, 
 wiiether there is any excess pvcr 3 ])er cent allowable for the build- 
 ing during the tax year of 1!J13. If you fail to be reasonably satis- 
 fied from the evidence that there is any excess, then you will return 
 a verdict for the CJovernment, the defendant in this case. If you are 
 reasonably satisfied from the evidence that the allowance made by 
 the Government was too small, then it would be your duty to return 
 a verdict indicating what your belief from the evidence is as to the 
 proper rate of depreciation which should be allowed him, if it should 
 be in excess of 3 per cent, and return that verdict. 
 
 As I say, it is conceded that the plaintiff does not claim he is 
 entitled to more than 5 per cent for depreciation; the law itself 
 mentions 5 per cent, but that only relates to exhaustion of mines by 
 taking the ore out of it ; it has no limitation or effect on this question 
 of depreciation on a structure. 
 
 As to the evidence, you heard the testimony read to you of the 
 two witnesses, 'Mr. Kempner and Mr. Cohen, the plaintiff, and you 
 heard Mr. Oarbcr, a witness for the Government, testify orally. 
 Those are the witnesses whose testimon}^ you are to consider as re- 
 lating to the question of the amount of depreciation properly allow- 
 able for the use of this building during the tax year of 1913. Look 
 at them with the idea of making up your proper judgment as to 
 what the life of the building would be, in years, and how much, on 
 that basis, it would be proper to allow each year for depreciation 
 and when you arrive at that you have arrived at the matter sub- 
 mitted to you for your decision. 
 
 I have some requests to charge which I will read to you along with 
 what I have already said, they being part of the law of the case. 
 These requests are asked by the Government: 
 
 You are instructed that the only deduction for depreciation of this 
 building to which plaintiff' is entitled on his income-tax return is 
 a reasonable allowance for the exhaustion, wear, and tear of the 
 building, arising out of its use as an apartment house, and no de- 
 duction shall be made for any amount of expense of restoring the 
 building, or making good the exhaustion thereof, for which an al- 
 lowance is otherwise made by you, or has already been made by the 
 Commissioner of Internal Tfevenue; you shall allow no deduction 
 for any amount paid out for permanent improvements or better- 
 ments made to increase the value of the building. 
 
 Of course, what he has spent out for repairs, he has already taken 
 off by only returning the net income, so that that naturally is not 
 considered under this deduction, which is an additional deduction 
 after the net income is arrived at. 
 
 You are further instructed that the words '* exhaustion, wear, and 
 tear of the building, arising out of its use as an apartment house,"
 
 47s yASTTVTT.T.-R^ CHATTANOOGA & ST. L. RY. V. U. S. [ciIAr. VIIo 
 
 contemplate only depreciation of the physical property itself, irre- 
 spective of outside iniiuences on its value, or its adaptability to the 
 use originally intended, or to the environments in which it finds 
 itself after a period of years. 
 
 You are further instructed that plaintiff is not entitled to any 
 allowance for depreciation by reason of the decrease in the rental 
 value of the building or by reason of a decrease iii the income de- 
 rived tiierefrom. 
 
 You are further instructed that plaintiff is not entitled to any 
 allowance for depreciation by reason of the decrease in the value of 
 the building, arising from its lack of modern improvements and 
 from its antiquity in that respect caused by the advance in the art 
 of constructing apartment buildings with modern and up-to-date 
 improvements, arrangements, and conveniences. 
 
 Mr, ^Matthews. 1 would also ask your honor to instruct the 
 jury that it is to be assumed in this case, since the ordinary wear 
 and tear improvements were made to the building in 1913, that such 
 would be the case throughout its life. 
 
 The Court. I think that is true, gentlemen of the jury. The 
 life of the building is to be measured upon the basis of the owner 
 of the building keeping it in proper repair during the future as well 
 as during the tax year. 
 
 Just return your verdict in the shape of a percentage you agi'ee 
 on, if any, over and above the 3 per cent ; if you do not agree to any 
 percentage above 3 per cent, then just bring in your verdict for the 
 defendant. 
 
 Take the case, gentlemen. 
 
 (Whereupon the jury retired, and rendered a verdict in favor of 
 the defendant.) 
 
 Mr. Kaye. I should just like to ask the question whether the 
 jury considers 3 per cent an adequate allowance. 
 
 The Foreman of the Jury. Yes, sir. 
 
 NASHVILLE, CHATTANOOGA & ST. LOUIS EAILWAY 
 CO. V. UNITED STATES. 
 
 Circuit Court of Appeals. 1920. 
 
 [Reported 269 Fed. 351.] 
 
 Xnappen", Circ. J. This case is before this court a second 
 time. In substance it is this: In June, 1916, the United States, 
 under the direction of its Commissioner of Internal Kevenue, 
 brought suit to recover from defendant an excise tax of 1 per cent 
 claimed to be due from it for each of the years 1909 and 1910, under 
 section 38 of the revenue act of August 5, 1909 (36 Stat. 11, 112, 
 ch. 6), which makes every corporation to which it applies "subject 
 to pay annually" a special excise tax of 1 per cent on its net income, 
 to be (If'tcrminefl by deducting from gross income, among other
 
 SECT. IV.] NASHVILLE, CHATTANOOGA & ST. L. KY. r. U. S. 479 
 
 things, operating expenses, losses sustained, " including a reasonable 
 allowance for depreciation of property," interest on indebtedness, 
 and taxes. The declaration alleged the filing by defendant with the 
 Commissioner of Internal ifeveiiuc, on February 25, 1910, and Feb- 
 ruary 21, 1911, respectively, of returns of its net income for the 
 respective years 1909 and 1910; that both returns were incorrect as 
 to the amount of defendant's income, that for 1909, in that it in- 
 cluded, as an item of deduction from gross income, an alleged charge 
 of $26,000 to expenses, which was not a necessar} expense actually 
 paid out of income in the maintenance and operation of its business 
 and properties; those for both years, in that thev included charges 
 to depreciation of roadway amounting to $249,024.54 for the year 
 1909 and $239,229.70 for the year 1910, which were not charged 
 against the capital valuation of the roadway on its books and were 
 not reasonable allowances for depreciation of roadway within the 
 meaning of the act; that the three items named were disallowed by 
 the Commissioner of Internal Kevenue and held by him to be in- 
 correctly charged ; and that they were in fact not correct and proper 
 deductions from gross income; and that the total amounts so de- 
 ducted, which should have been included as net income in said re- 
 turns, were for the year 1909 $2T5,024.54 and for 1910 $239,229.70; 
 that the defendant was thus indebted to the United States and sub- 
 ject to pay an income tax of 1 per cent upon the amounts stated ; 
 that it had failed and refused to make payment and that the alleged 
 taxes were thus due from defendant and payable by it to the United 
 States. 
 
 The railway company demurred to the declaration upon grounds, 
 so far as now important, (a) that the Government could not recover 
 an excise tax in advance of an assessment by the Commissioner of 
 Internal Eevenue, and (b) that the railway company, having made 
 its returns and paid the assessments made by the commissioner, 
 could be made subject to no further obligation unless the commis- 
 sioner should discover some item to be false within three years from 
 March 1 of the year succeeding the calendar year for which the re- 
 turn is made. The trial court sustained the demurrer. This court 
 reversed that action, and remanded the case for further proceedings 
 and trial (249 Fed. 678). The railway company then pleaded nil 
 debet to each of the two counts of the declaration, together with 
 special pleas to each count, raising the identical questions which had 
 before been presented by its demurrer to the Government's declara- 
 tion. The Government's demurrers to these special pleas were 
 sustained by the District Court, on the authority of this court's de- 
 cision. Upon trial by jury there were verdict and judgment against 
 the railway company for $5,142.50, being 1 per cent upon the 
 amount of the three items in question. This writ is to review that 
 judgment. 
 
 1. Upon the present hearing, counsel for the railway company in 
 support of its special pleas, overruled below, has again argued at 
 great length the questions presented to and considered by this court 
 under defendant's demurrer to the Government's declaration. All
 
 480 ^-ASHVlLl-E, CIIATTA^-OOGA & ST. L. KY. V. U. S. [cilAI'. VII. 
 
 of these questions, which relate equally to the special pleas, were, 
 upon careful consideration, decided by this court against defendant's 
 contention. It is unnecessary here to repeat the grounds of that de- 
 cision, which sufficiently appear from our published opinion (249 
 Fed, 678). The argument now advanced sheds no additional light 
 upon the subject. We content ourselves with saying that we find no 
 reason to depart from our former conclusions. The assignments of 
 errors numbered 1 to 5, inclusive, are accordingly overruled. 
 
 2. The remaining assignments relate to the refusal to direct ver- 
 dict for defendant, to the charge as given, and to the refusal of 
 certain of defendant's requested instructions. A consideration of the 
 criticisms relating to the charge will aid in determining whether 
 there was a case for the jury. 
 
 Defendant conceded on the trial that the deduction of the $26,000 
 item in its return for 1909 was not authorized. The court accord- 
 ingly properly instructed that the Government was entitled to a 
 verdict for at least $260.00 on this account. The substance of the 
 charge otherwise was that the question of fact to be determined was 
 merely whether tlie deductions made bv defendant in its excise 
 tax reports for the years 1909 and 1910, viz, $249,024.54 for the 
 former year, and $239,229.70 for the latter year, were in whole or 
 in part reasonable allowances for depreciation of roadway during 
 those respective years; that if such allowances were reasonable the 
 Government is not entitled to recover ; that if they were not reason- 
 able the Government was entitled to a verdict for 1 per cent of the 
 amounts improperly deducted. The jury was specifically instructed 
 to consider, first, " the depreciation, either physical or functional, 
 in the value of those parts of the roadway which have not been re- 
 paired or renewed or replaced," and, second, " what has been the 
 effect of the repairs, renewals and replacements that have been made 
 to other parts, and determine whether, after you strike a final bal- 
 ance at the end of the year, the roadway is of greater or less value, 
 or of equal value, than or to that which it was at the beginning of the 
 year"; and that if it should be found "that the value of the road- 
 way, its actual value, is as great at the end of the year, after these 
 repairs and replacements have been made for which credit has been 
 given as an expense deduction, then there is no depreciation in value 
 of . . . the roadway, within the meaning of the statute"; but that 
 "if after making such repairs, replacements and renewals in the 
 different units of the roadways it should be found that some parts 
 have been made more valuable by the putting in of new parts in 
 place of worn-out parts, yet the depreciation in the rest of the road- 
 way, in the deterioration, obsolescence, etc., of other units which 
 have not been charged, and so little done in repairing and replac- 
 ing that at the end of the year, taking it as a whole, the depreciation 
 in value has exceeded the repairs, replacements and renewals, so 
 that it is worth less than it was ... to that extent the railway is 
 entitled to a deduction of 1 per cent." 
 
 The first specific criticism to the charge is that depreciation was 
 made to depend upon the relative value of the roadway "in dollars
 
 SECT. I\. J NASHVILLE, CIIATTANOOOA <fe ST. L. RY. V. U. S. 4Sl 
 
 and cents" at the bcf^inninfjf and end of the respective years. The 
 contention is that the criterion is " earn in <^ power," " value for use," 
 not its value to an investor. In point of fact, the court did not use 
 the expression "dollars and cents" in its charge to the jury. Its 
 various expressions were "value," "net value," "actual value," 
 " real value," doubtless ineaniuf^ intrinsic value, value in " dollars and 
 cents" as distinguished from market value, which defendant's tes- 
 timony showed might be affected by considerations other than in- 
 trinsic value. 
 
 The cTJticism is without merit. Xot only is it clear that iriarket 
 value was not meant, but the criticism loses all point through the 
 specific admission of defendant's counsel, made upon the trial, 
 that "the road as a whole, for the purpose of carr\'ing on the busi- 
 ness of a common carrier, was just as valuable at the end of the 
 year as at the beginning," and by the equally express admission of 
 defendant's chief engineer, not only to the same effect as that of 
 counsel, but, further, that it would l)e worth as much to " any per- 
 sons that wanted to buy it for a railroad." 
 
 The further criticism is made that "the court refused to permit 
 the jury to consider depreciation, physical or functional, in the units 
 constituting roadway, track, and structures," the argument being 
 that "a railroad is a composite property, it is impossible to figure 
 depreciation of a road as a whole without first considering deprecia- 
 tion of the units." 
 
 The court, however, did not instruct that depreciation of units 
 could not be considered in determining the ultimate question 
 whether there was not depreciation in the roadway as a whole. It 
 is true that after stating that there would be no depreciation if 
 repairs, renewals, and replacements had placed the roadway in the 
 same value as at the beginning of the year, it was said: "In that 
 sense you should not consider each of the individual units that enter 
 into the roadway." But the meaning of that statement was made 
 clear by the paragraph immediately following: "It was not intended 
 to have a system of bookkeeping with reference to each particular 
 crosstie or each particular rail, but you should look to the value of 
 the roadway as a whoje, comparing its value at the beginning of the 
 year with its value at the end of the year." Further evidence of the 
 meaning of the charge appears from the later use of the term " net 
 value"; also by earlier reference to the making of repairs, renewals, 
 and replacements in the roadway by "taking out units that had de- 
 cayed or whose usefulness was at an end and putting in others; tak- 
 ing out crossties, deca^'cd crossties, worthless crossties and putting in 
 new crossties, taking out rails worn out and putting in new^ rails; 
 repairing and replacinir different units in its roadways system from 
 time to time''; as well a^ by the instruction that the jurv should 
 consider "depreciation, either physical or functional, in the value 
 of tliose parts of the roadway which have not been repaired or re- 
 newed or replaced, then also consider what has been the effect of 
 the repairs, renewals, and replacements that have been made to 
 other parts, and determine whether after you strike a final balance
 
 4S2 NASHVILLE, CHATTANOOGA <fe ST. L. KY. V, V. S. [cHAr. VII. 
 
 at the end of the year the roadway is of greater or less value, or of 
 equal value, than or to that which it was at the beginning of the 
 
 year/' . . . 
 
 The contention on wliich defendant seems to rest its chief criti- 
 cism seems to be that, notwithstanding the roadway as a whole was 
 intrinsically just as valuable at the end of the year as at the begin- 
 ning of the year, that is to say, although depreciation in given units 
 had'^been fuUv overcome by appreciation in others, the railway com- 
 pany would still be entitled to credit for depreciation in such in- 
 dividual units as had depreciated. We think this contention of 
 defendant not sustained by reason or authority, and that the court 
 correctly charged the true criterion. If, as is not entirely clear, it 
 is meant to further suggest that the consideration of functional (as 
 distinguished from physical) depreciation was not allowed by the 
 charge to be taken into account, the suggestion is plainly without 
 merit. Not only did the court define the roadway as including 
 *' structures connected with the roadway, such as stations, tool 
 houses and matters of that sort," but it included in depreciation a 
 lessening of original values "due to wear and tear, decay, gradual 
 decline from obsolescence, that is, getting out of date and inade- 
 quacy." In our opinion the jury was given the correct rule for de- 
 termining the existence or nonexistence of depreciation, which 
 accords with the " ordinary and usual sense " of that term " as un- 
 derstood by business men." — Van Baumbach v. Sargent Land Co. 
 242 U. S. 503, 524. To say that property can depreciate without 
 impairment of either intrinsic value or efficiency is to our minds a 
 solecism. 
 
 3. The refusal to direct verdict. The sole question in this regard 
 is whether or not there was substantial testimony tending to sup- 
 port the Government's contention that there was during the years 
 1909 and 1910 no net depreciation in the intrinsic value of the 
 roadway and structures considered as a unit. It is not highly im- 
 portant to the determination of this question whether the contro- 
 versy arose q4 one theory and was tried on another, nor whether the 
 claimed depreciation would have been allowed imder the system of 
 bookkeeping employed by the Government had the charges therefor 
 been set up on the railway company's books (249 Fed. 686). 
 
 It appears that defendant arrived at the depreciation charges by 
 estimating the value of the perishable structures as one-third the 
 cost of the road (less equipment and real estate), and then taking 3 
 per cent of this one-third value, on the theory that the average life 
 of the various perishable elements was 33 ^/^ years. Whether or not 
 these depreciation estimates were reasonable was a question for the 
 jury. 
 
 In our opinion there was substantial testimony tending to sup- 
 port the Government's contention. It appeared that there was ex- 
 pended in round numbers for maintenance of way and structures; 
 that is to say, for repairs, renewals, and replacements for the year 
 1909, $1,600,000, and for the year 1910, $1,554,000, and that no 
 substantial part of these sums was carried in defendant's accounting
 
 SECT. IV.] SMIETAXKA V. FIRST TRUST AND SAVINGS BANK. 483 
 
 as additions and betterments. It was admitted by defendant's chief 
 engineer that the expenditures for 1909 "kept the road in a normal 
 condition to carry on its business," that " its normal condition was 
 a good condition/' and that the expenditures " had made good 
 the normal amount of depreciation." There was testimony by 
 competent witnesses of railway experience that " there may be de- 
 preciation in the units comprising the roadway, track, and structures 
 of the railroad, while there is no depreciation in the machine as a 
 whole"; also that it is possible "to maintain the roadway, track, 
 and structures so that there will be no depreciation if we consider 
 the roadway, track, and structures as a composite whole"; also that 
 "the service life of any normally operated and normally and well 
 maintained railroad is perpetual, and it is maintained in the condi- 
 tion of property serving its purpose by annual renewals and replace- 
 ments." The testimony, considered as a whole, tended to support 
 the conclusion that the amounts expended by defendant during 
 the years in question for repairs, renewals, and replacements should 
 and would have fully offset the depreciation in the various units, 
 and that the defendant's railway and structures were, as a whole, 
 maintained throughout the years in question in fully as good con- 
 dition, and were of fully as great intrinsic value, as at the beginning 
 of the respective years. The jury would have been clearly justified 
 in inferring from the testimony of defendant's chief engineer, taken 
 as a whole, that the value of the roadway had not depreciated during 
 the two years in question; in other words, that the repairs and re- 
 newals that had been made were of such a character as to leave the 
 road at the end of each year of value equal to that at the beginning 
 of the year. That oflficer's testimony so impressed the trial judge, 
 who stated his opinion from the evidence that "there is no reason- 
 able deduction for depreciation established." Defendant did not 
 directly controvert the situation so shown. Its chief, if not its only, 
 reliance seems to have been on the proposition that in spite of it all 
 there was inevitable annual depreciation in some of the perishable 
 elements not entirely renewed or replaced, so justifying the contention 
 that for this reason there was depreciation wathin the meaning of the 
 act, even though the roadway as a whole had not decreased in value. 
 To this argument, as already said, we cannot assent. It follows 
 that the trial judge rightfully refused to instruct verdict for 
 defendant. 
 
 Finding no error in the record, the judgment of the District 
 Court is affirmed. 
 
 SMIETAOTvA IK FIRST TRUST AND SAA'IXGS BANK. 
 Supreme Court of the United States. 1022. 
 
 [42 8vp. Ct. Rep. 223.] 
 
 Tatt. r. T. The question presented for decision is whether, 
 ■under the income tax law of 1913, income held and accumulated by
 
 J:S4 SMIETANKA V. FIRST TEUST AND SAVINGS BANK. [CHA.P. VII. 
 
 a trustee for the benefit of unborn and unascertained persons was 
 taxable. Tiie accumulations of income were $789,905.65 for the 
 years 1913, 1914, and 1915, and the tax collected by the petitioner 
 as collector, and paid under protest by the trustee, the respondent, 
 amounted to $3G,G38.69. Respondent brought suit for this sum 
 against the petitioner in the District Court for the Northern Dis- 
 trict of Illinois, and judgment was rendered against it on demurrer 
 to the declaration. The judgment was reversed by the Circuit Court 
 of Appeals. (2G8 Fed. Kep. 230.) As this case arises under the 
 revenue laws and the judgment of the Circuit Court is final (sec. 128 
 of tlie .huiifial Code), certiorari issued under section 240 of the code. 
 The income tax here in question was provided for in "An Act to 
 reduce tariff duties and to provide revenue for the Government and 
 for otlier purpose.-," enacted October 3, 1913 (38 Stat. 114), and is 
 embodied in Section 11 of that Act (pp. 16G et seq.). The tax is 
 imposed by paragraph A, subdivision 1. It levies a normal tax of 1 
 per cent upon the entire yearly income arising from all sources ac- 
 cruing to every citizen of the United States and to every person in 
 the United States residing there. In subdivision 2, an additional or 
 surtax is levied on the net income of every individual. Under para- 
 graph G, the normal tax imposed on individuals is extended to cor- 
 porations. Paragraph B defines the net income of individuals and 
 specifies the deductions. Paragraph D makes provision for returns 
 by persons and then says: 
 
 " Guardians, trustees, executors, administrators, agents, receivers, 
 conservators and all persons or associations acting in a fiduciary 
 capacity shall make and render a return of the net income of the 
 person for whom they act, subject to this tax, coming into their 
 custody or control and management and be subject to all the pro- 
 visions of this section which apply to individuals." 
 
 Paragraph E provides that, among others, all lessees or mort- 
 gagors of real or personal property, trustees acting in any trust 
 capacity, executors, administrators, agents, receivers, conservators, 
 having control, receipt, custody, disposal or payment of annual 
 gains, profits and income of another person, exceeding $3,000 for any 
 taxable year, who are required to make return in behalf of another, 
 shall deduct the normal tax on the income and pay it to the United 
 States, and they are each made personally liable for such tax. It is 
 further declared that these payments of the tax at the source shall 
 only apply to the normal tax thereinbefore imposed on individuals. 
 
 It is obvious from a reading of the statute, the relevant provisions 
 of which we have summarized, that Congress was seeking to require 
 fiduciaries to make return and pay the normal tax due from persons 
 subject to the tax on such income as the fiduciaries were receiving 
 for such persons. There was nowhere in the Act a payment required 
 of the fiduciary of a tax upon the income of the^ estate or trust prop- 
 erty, the income from which he collects, except as it is to inure to 
 the benefit of a person or an individual from whose income he is
 
 SECT. IV.] SMIETAXKA V. FIKST TEUST AND SAVINGS BANK. 485 
 
 authorized and required to deduct the normal tax tliereon. There 
 must have been a taxable person lor whom the fiduciary was acting 
 to make the provisions relied upon by the Government applicable. 
 There was no provision for tlic payment " at tlie source " by tlie 
 fiduciary of anything but the nornml tax. It was intended that tiie 
 additional or surtax should be paid by the cestui que trust. Jlere 
 there wns no cestui (jue trust to pay a surtax. 
 
 Xo lan^aiage in the Act included a tax on income received by a 
 trustee by him to be accumulated for unborn or unascertained bene- 
 ficiaries. There was indicated in the taxing paragraph A the con- 
 gressional intention to tax citizens everywhere, and noncitizens, 
 resident in the United States, including persons, natural and cor- 
 porate, on income from every source less allowed deductions. But 
 nowlicre were words used wiiich can be stretched to include unborn 
 beneficiaries for whom income may be accumulating. It may be 
 that Congress had a general intention to tax all incomes, whether 
 for the benefit of persons living or unborn, but a general intention 
 of this kind must be carried into language which can be reasonably 
 construed to eil'ect it. Otherwise the intention can not be enfonoil 
 by the courts. The provisions of such Acts are not to be extended 
 by implication. Treat v. White, 181 U. S. 26-t, 267; United States 
 V. Field, 255 U. S. 257; Gould v. Gould, 245 U. S. 151, 153. 
 
 The Treasury Department did not attempt, for two years, to 
 collect a tax on income of this character. Tiiis was in accord with tlie 
 ruling of Deputy Commissioner of Internal Eevenue Speer, dated 
 Fel)ruary 9, 1915, published by the department. (Corporation 
 Trust Co. Income Tax Service 1915, p. 426.) He held that "tlie 
 income tax can be levied only on such income as is payable to some 
 natural or artificial person subject to the provisions of the law." 
 
 Subsequently this ruling was changed and the Commissioner of 
 Internal Revenue held that " when the beneficiary is not in cssp and 
 the income of the estate is retained by the fiduciary, such income 
 will be taxable to the estate as for an individual, and the fiduciary 
 will pay the tax both normal and additional." 
 
 This seems to us to graft sometliing on the statute that is not 
 there. It is an amendment and not a construction, and such an 
 amendment was made in subsequent income tax laws, as we shall 
 see. 
 
 Counsel for the Government cite the case of Merchants Loan tS: 
 Trust Company v. Smietanka (255 TJ. S. 509) to support their con- 
 tention. It does not do so, because it deals with an amendment 
 of the provision here under discussion. The issue there was the 
 legality of an income tax levied against a trustee for income re- 
 ceived by him under a testamentary trust to pay the net income to 
 the widow for life and afterwards to the children. It was held that 
 the trustee was a taxable person under the Act of October 3, 1917 
 (40 Stat. 331), which required trustees to render a return of the 
 income for the person, trust or estate for whom or which thev act. 
 
 The Act of September 8, 1916 (39 Stat. 757). specifically de- 
 clared that the inconu' accumulated in trust for the benefit of un-
 
 486 UNITED STATES V. COULBY. [cHAP. VII. 
 
 born or unascertained persons should be taxed and assessed to the 
 trustee. It is obvious that in the Acts subsequent to that of 1913, 
 Congress sought to make specific provision for the casus omissus in 
 the earlier Act. 
 
 This case is not unlike that of United States v. Field (255 U. S. 
 257). The Eevenue Act of 1916 imposed a tax on the estate of a 
 decedent at the time of his death. Tlie Government sought to tax 
 property passing under a decedent's testamentary execution of a 
 general power of appointment. It was held that while in equity 
 property passing under such a power might be treated as assets of 
 the donee for the use of his creditors if executed in favor of a vol- 
 unteer, it was not subject to distribution as part of the estate of the 
 donee and was not taxable. In the later Act, such property was 
 expressly included. This was thought by the court to show at least 
 a legislative doubt whether the earlier Act included such property. 
 This court said (p. 264) that it would have been easy for Congress 
 to express a purpose to tax such property but it had not done so. 
 In the Act of 1913, it would have been easy to require a trustee 
 to pay an income tax received by him for unborn beneficiaries or 
 for the trust or the estate. But Congress did not do so. In the 
 next Act, it did so. We cannot supply the omission in the earlier 
 Act. 
 
 The judgment of the Circuit Court of Appeals is affirmed. 
 
 UNITED STATES v. COULBY. 
 District Court of the United States. 1918. 
 
 [Reported 251 Fed. 982.] 
 
 Westexhaver, Dist. J. This is an action at law to recover 
 $588.45, with interest and penalties thereon, alleged to be due 
 as unpaid income tax for the nine months ending December 31, 
 1913, under the Federal income tax law of 1913. A jury trial 
 was waived by the parties and the case has been submitted to me 
 for decision upon an agreed statement of facts. Briefly the facts 
 are these: 
 
 The defendant, during the period in question, was a member of 
 a partnership by the name of Pickands, Mather & Co. This part- 
 nership was then the owner of stocks in certain corporations which 
 were taxable upon their net income under the provisions of section 
 G of the income tax law. Dividends were declared and paid by these 
 corporations upon the stocks held therein by the partnership. The 
 defendant, in making return of his income for taxation, included 
 as a part of his gross income his share of the profits of the partner- 
 ship, but deducted therefrom such part thereof as was derived by or 
 through the partnership from dividends on stocks in these corpora- 
 tions taxable upon their net income. 
 
 Later, on or about June 27, 1917, the Commissioner of Internal
 
 SECT. IV.] UNITED STATES V. COULBY. 487 
 
 Revenue examined the defendant's return and disallowed the de- 
 ductions tlius made and assessed the normid tax of 1 per cent 
 against the defendant on such deduction. The item of $588.45 
 represents that assessment. 
 
 The exact question presented for decision is whether or not a 
 member of a partnership must include as a part of his net income 
 subject to the normal tax such part of his income derived from or 
 throu^di a partnership whicli has been received by that partnership as 
 dividends on stocks owned by it in corporations taxable upon their 
 net income under section G of the Federal income tax law of 1913. 
 
 Plaintiff's contention that profits thus derived are a part of the 
 partner's net income, and sul)ject to the normal tax, is based on 
 the following paragraph of section D : 
 
 Provided further, That any persons carrying on business in part- 
 nership shall be liable for income tax only in their individual 
 capacity, and the share of the profits of a ])artnership to which 
 any taxable partner would be entitled if tlie same were divided, 
 whether divided or otlierwise, shall be returned for taxation and 
 the tax paid under the provisions of this section. 
 
 An examination of the entire income tax law convinces me that 
 plaintiff's contention is erroneous. Section B defines what shall 
 constitute the net income of a taxable person ; it includes his gains, 
 profits, and income derived, not merely from salaries, wages, or 
 compensation for personal service, but also from businesses, trade, 
 commerce, or sales or dealings in property, or the transaction of 
 any lawful business carried on for gain or profit. This plainly 
 includes such gains and profits derived from or through a part- 
 nership. 
 
 Section B also states what deductions shall be made from the 
 gross income of a taxable person in order to ascertain the net 
 income for the purpose of levying the normal tax. Among these 
 deductions is the amount received as dividends upon the stock or 
 from the net earnings of any corporation, joint-stock company, 
 association, or insurance company which is taxable upon its net 
 income. 
 
 Section G provides for the normal tax upon the entire net in- 
 come of corporations. It expressly excludes partnerships therefrom. 
 This net income of corporations is subject only to the normal tax 
 such as is levied on the income of any natural taxable person, and 
 not to the additional tax provided for by subdivision 2 of section 
 A. This income from corporations received by a natural taxable 
 person is exempt only from the normal income tax, and not from 
 such additional tax. 
 
 Taking these provisions as a whole, the paragraph of section D re- 
 lating to partnerships above quoted must be considered and construed 
 in the light of the general scheme thus outlined. No provision 
 is anywhere made requiring a return to be made by a partnership 
 upon its income. Tliis is true notwithstanding section D requires 
 copartnerships, having the control, receipt, disposal, or payment of
 
 488 UNITED STATES V. COULBY. [CHAP. VII. 
 
 fked income of another person subject to tax, to make a return in 
 behalf of that person and to deduct the same. This provision deals 
 ^vith the tiduciary relationship of guardians, trustees, executors, 
 and so forth, having the possession and control of other person's 
 property; but as regards an ordinary partnership and its ordinary 
 business, the statement is true that no return is required to be made 
 umler the Federal income tax law of 1913 by a partnership. 
 
 Partnerships are expressly excluded from section G, requiring 
 returns and payment of the normal tax by corporations. If Con- 
 gress had intended that partnerships, as such, should be taxable 
 upon their net income, the logical place to have so provided would 
 have been in section G, and to have excluded from the net income 
 of a natural taxable person, subject to the normal tax, that part 
 of his income derived from a partnership just as is provided with 
 respect to his income derived from a corporation. 
 
 This law, therefore, ignores for taxing purposes the existence of 
 a partnership. The law is so framed as to deal with the gains 
 and profits of a partnership as if tliey were the gains and profits 
 of the individual partner. The paragraph above quoted so provides. 
 The law looks through the fiction of a partnership and treats its 
 profits and its earnings as those of the individual taxpayer. Unlike 
 a corporation, a partnership has no legal existence aside from the 
 members who compose it. The Congress, consequently, it would 
 seem, ignored, for taxing purposes, a partnership's existence, and 
 placed the individiial partner's share in its gains and profits on the 
 same footing as if his income had been received directly by him 
 without the intervention of a partnership name. 
 
 It follows from these considerations that legally the defendant's 
 share of the gains and profits of the Pickands, Mather & Co., derived 
 from corporations taxable on their net incomes, is to be treated 
 as if the same had been received by him directly from the tax- 
 paving corporations. 
 
 The contrary contention is based on a literal reading of the words, 
 "the share of the profits of a partnership to which any taxable 
 partner would be entitled if the same were divided, whether divided 
 or otherwise, shall be returned for taxation and tax paid." This sen- 
 tence follows language plainly ignoring the existence of partnerships 
 for taxing purposes. Section B had alreadv provided what should be 
 regarded as net income in language sufficiently comprehensive to 
 include the gains and profits from business carried on in a partner- 
 ship name. The words just quoted evidently apply only to the 
 possibility that a partnership micrht not divide its gains and profits, 
 but retain them in the firm name or business. It was to meet 
 this possibility that these words were added, and not to provide 
 an unequal and unique method of taxing a partner's gains and 
 profits from a partnership. 
 
 The contention to the contrary is narrow and literal, even if not 
 lacking in plausibility. Tt is a contention, however, contrary to the 
 spirit and sreneral policy of the act; it destroys uniformity and 
 equality and should not be adopted unless required by the express
 
 SECT. IV.] KEMPEE MILITARY SCHOOL V. CliUTClILET. 489 
 
 language oi" the statute, in my opiiiion, the language of the statute 
 does not so require; but, on the contrary, when the entire act is 
 ■examined, it does give a right to the deduction. 
 
 Counsel lor plaiutilF invoke tlie legal principles that an exemp- 
 tion in a tax law must be clearly expressed and will not be implied ; 
 that power to tax will not be taken away unless the lawmaking 
 power has done so in clear and unequivocal language, and that 
 inasmuch as unii'ormity and ccpiality is dillicull, if nut impossible' 
 oI attainment in tax laws, the inequality which might result froni 
 the Government's contention should not be permitted to control 
 the language of the law. Numerous authorities illustrating these 
 legal ])rinciples are cited. These principles are well settled, and 
 1 assume ample power in Congress to have assessed defendant's 
 income derived from a partnership in the manner contended for. 
 It is my opinion, however, that Congress has not done so. 
 
 Counsel for plaintiff call attention to the fact that the Federal 
 income tax law of September 8, 1916, now provides that members 
 of partnerships shall be allowed credit for their proportionate share 
 of partnership gains and profits derived from corporations taxable 
 on their net income, and nrge that this is a change of the law, 
 and evidences a belief of the lawmaking body that the 1913 income 
 tax law had provided differently. 1 do not agree with this conten- 
 tion. In my opinion, this provision was inserted in the 1916 act 
 to put at rest tlie present controversy rather than to cliange the 
 law, and is to be regarded only as a legislative recognition of the 
 scope and intent of the prior law. Tlie applicable authorities, in 
 my opinion, are the following: Bailey v. Clark, 21 Wall. 28-4;. Johnson 
 V. Southern Pacific Co., 196 U. "S. 1 : Wetmore v. Markoe, 196 
 U. S. 68. 
 
 Judgment is rendered in favor of defendant. An exception 
 may be noted on behalf of plaintiff. 
 
 KEMPER MILITARY SCHOOL v. CRUTCITLEY. 
 District Court of the United States. 1921. 
 
 [Reported 274 Fed. 125] 
 
 Van Valkenbukgh, J. The plaintilf in this action seeks to 
 recover the sum of $52,166.81 income taxes, with interest and 
 penalty, alleged to have been illegally exacted from the plaintiff by 
 the defendant for the year 1918. The basis of plaintiff's alleged right 
 to recover the above sum is that it is exempt from tax as an educa- 
 tional institution, which was organized and operated exclusively for 
 educational purposes, and that no part of its net earnings inures 
 to the benefit of any private stockholder or individual. This de- 
 fense is asserted under the following exemptions specifically pro- 
 vided by the Congress :
 
 490 KEMPER MILITARY SCHOOL V. CRUTCHLEY. [ciIAP. VII. 
 
 Corporations organized and operated exclusively for religious, 
 charitable, scientific, or educational purposes, or for the prevention 
 of cruelty to children or animals, no part of the net earnings of 
 which inures to the benefit of any private stockholder or individual. 
 
 The plaintiff was incorporated June 15, 1909, under the pro- 
 visions of chapter 12, article 9, of the Eevised Statutes of Missouri, 
 1899, governing the formation of private corporations for manufac- 
 turing and business purposes. This statute appears as article 7 
 of chapter 33 of the Eevised Statutes of 1909, concerning private 
 corporations, and deals with corporations organized for pecuniary 
 profit and gain. Plaintiff was not organized under the article of 
 the same chapter, which deals with benevolent, religious, scientific, 
 educational, and miscellaneous associations not intended for pe- 
 cuniary gain or profit. 
 
 The school was originally of individual ownership. For many 
 years prior to its incorporation it was o^^^led by Col. T. A. Johnston, 
 now its president and principal stockholder. He purchased it 
 originally for approximately $12,000; since which time large addi- 
 tions and betterments have been made until its present total assets are 
 shown to be $348,796.01, its liabilities $96,522.88, and its net 
 resources $252,273.13. Its present attendance totals about 435 
 pupils. In 1918 and 1919, during war activities, it had a few 
 over 500. In 1918 the charge was $600 per pupil for tuition, 
 board, and lights. The charge now has been raised to $700. In 
 addition thereto it sells to the pupils uniforms and books, upon 
 which it makq^ a profit. 
 
 It receives minor items of income from other sources which do 
 not require detailed consideration. 
 
 For the calendar year 1918 its gross income amounted to 
 $205,153.26, of which the sum of $5,083.11 was received from 
 sources other than tuition; after making statutory deductions the 
 net income remaining amounted to $79,788.01. The figures in- 
 volved are not in dispute except as to some claims for deduction 
 to which reference will be hereafter made. 
 
 When the school was incorporated Col. Johnston transferred the 
 property to the corporation, receiving stock therefor. The re- 
 maining shares of stock were subscribed for by teachers, and the 
 officers and board of directors are made up of such. These teachers 
 paid for their stock out of their earnings. A dividend of 6 per 
 cent has been paid upon all stock since the date of the incorporation. 
 
 That the corporation is operated exclusively for educational pur- 
 poses may be conceded. If the law had stopped there and had 
 evidenced the purpose of exempting all such, the contention of 
 the Government would be without merit, but the law further 
 provides that, not only must the corporation be organized and 
 operated exclusively for educational purposes, but that no part of 
 its net earnings should inure to the benefit of any private stock- 
 holder or indiviflual. The case of State ex rel. J. L. Sillers v. 
 Johnston (214 Mo. 656), in which this same school was under
 
 SECT. IV.] KEMPER MILITAEY SCHOOL V. CEUTCIILEY. 491 
 
 discussion, is not in point. There tlie scliool was exempt under 
 a provision of the State constitution and statute wliicli exempts 
 from taxation real estate " used exclusively for schools/' The 
 element of private pecuniary gain was not involved; and, further 
 more, the construction of a State court upon a State constitution 
 or law could not ali'ect a Federal statute of dillerent intendment 
 and uncontrolled by State laws. 
 
 This corporation, while devoted to educati<jnal purposes, was 
 confessedly organized for private pecuniary profit and gain. Its 
 teachers all receive salaries. In addition thereto, they have all, 
 including Col. Johnston, received an annual dividend of G per 
 cent upon their stock since tlie date tiie corporation was organized. 
 Wliile under the terms of the statute we are concerned chiefly 
 with net earnings, nevertheless it may appropriately be remarked 
 that the increase in value of the school property inures to the 
 stockholders of this business corporation. It might at any time be 
 sold and the purchase price divided proportionately to such hold- 
 ings. Upon ultimate dissolution the holders of these shares of 
 stock would receive the proceeds of the property, including ac- 
 cumulated income. 
 
 The chief insistence is that because all the shareholders are 
 officers, directors, and teachers in the institution they are not 
 " private stockholders or individuals." This involves a narrowness 
 of definition that can not be entertained in view of the obvious 
 purpose and spirit of the act. The distinction is not between private 
 and official, whether the latter be used in a military or an institu- 
 tional sense. The word " private " as here used is the antonym of 
 "public" — a private stockholder as distinguished from the general 
 public — the supposed beneficiary of the benevolent activities of 
 an institution devoted exclusively to public betterment. Private 
 pecuniary profit and gain is the test to be applied. This corporation 
 was, and is, undeniably organized and operated for that purpose. 
 
 It does not detract, even in small degree, from the merit and 
 worthy service of the plaintiff, as a valuable institution of learning, 
 to hold, as we must, that it is not exempt from the tax imposed. 
 
 Plaintiff further contends that — 
 
 Even if it were liable to pay said taxes, they should not be col- 
 lected for the year 1918 because it expended in the necessary furni- 
 ture and fixtures the sum of $13,086.68 and for buildings and 
 other necessary improvement $81,188.35, amounting in the aggregate 
 to $94,275.03, which amount was expended for the upkeep and 
 expansion of the plaintiff's plant and for the comforts and neces- 
 sities of said school. 
 
 To this claim the defendant answers that plaintiff, in its appeal 
 to the Commissioner of Internal Revenue in its claim for the abate- 
 ment of said taxes and for refund, never at any time asserted or 
 claimed that it had failed to take credit for any deduction in its 
 said return of income for the vear 1018, which it was entitled to
 
 492 FINK V. NORTHWESTERN MUTUAL LIFE INS. CO. [ciIAI'. VII. 
 
 take, in computing its net income for that year, under the act of 
 Congress, and that said claim was never at any time presented by 
 the plaintiff to the Commissioner of Internal Revenue for his 
 consideration and decision thereon; further, that in computing 
 its net income for the year 1918 plaintiff deducted, in its said 
 return of income for said year, a reasonable allowance for the 
 exhaustion, wear, and tear of the property used in its trade or 
 business, including a reasonable allowance for obsolescence. These 
 I allegations of the answer are sustained by the testimony. The 
 law provides for a reasonable allowance for exhaustion, wear and 
 tear, etc., as conceded by defendant, and as claimed by plaintiff in 
 its return and allowed by the collector and commissioner. It further 
 provides that in computing net income no deduction shall in any case 
 be allowed in respect of any amount paid out for new buildings, or for 
 permanent improvements or betterments made to increase the value 
 of any property or estate. It follows that this claim for deduction, 
 in the sum of $94,275.03, or any part thereof, can not be indulged. 
 It appearing that the grounds upon which plaintiff relies for 
 recovery are untenable, and there being no dispute that the amount 
 of the tax levied was correct if plaintiff's contentions are not sus- 
 tained, it follows that judgment must be entered for the defendant, 
 and it is so ordered. 
 
 riXK V. XORTHWESTEEX MUTUAL LIFE 
 IXSURANCE CO. 
 
 Circuit Court of Appeals. 1920. 
 
 [Reported 267 Fed. 968.] 
 
 Page, Circ. J. This case comes here on a writ of error to re- 
 verse the judgment for plaintiff in the District Court, entered 
 by Judge Geiger (see 248 Fed. 568, where the facts are fully stated). 
 The insurance company, the defendant in error, will herein be known 
 as plaintiff, and the collector of internal revenue, plaintiff in error, 
 will herein be known as defendant. 
 
 The Commissioner of Internal Revenue amended plaintiff's re- 
 turns of income for the years 1909 and 1910, filed under the 
 excise tax law of August 5, 1909, and thereby greatly increased the 
 tax. This suit was brought to recover that increase, paid under 
 protest. 
 
 Defendant states the following as the questions involved, and 
 they will be determined as written : 
 
 I. 
 
 1. Wliether dividends applied at the option of the policyholders 
 to purchase paid-up additions and annuities were not income for 
 the year in which so applied within the meaning of the act. 
 
 2. "\i\Tiether dividends applied at the option of the policyholders
 
 SECT. IV.] FINK V. NORTHWESTERN MUTUAL LIFE INS. CO. 493 
 
 in partial payment of renewal premiums were not income for the 
 year in which so applied within the meaning of the act. 
 
 The excise tax act of August 5, U)09 (36 Stats. L., ch. 6, p. 11 
 (llJi)), provides: 
 
 . . . Every insurance company . . . organized under the laws . . . 
 of any State . . . sliall be subject to pay annually a special excise 
 tax . . . equivalent to one per centum upon tlie entire net income 
 over and above $5,000 received by it from all sources during such 
 year, exclusive, etc. . . . Such net income shall be ascertained by 
 deducting from the gross amount of the income of such . . . in- 
 surance company, received icilhin the year from all sources, . . . 
 (second) . . . and in the case of insurance companies the sum other 
 than dividends, paid within the year on policy and annuity contracts 
 and the net addition, if any, required by law to be made within the 
 year to reserve funds; 
 
 Disregarding the deductions, the basis for the tax is "income 
 . . . received . . . during such year." 
 
 Plaintilf is a mutual insurance compan}', organized under the 
 laws of Wisconsin, and annually collects level premiums which are 
 sufficiently large to pay the insurance cost, including reserves, and 
 all of the expenses of the business. Usually there is something 
 left over for a surplus, which surplus is required by the laws of 
 the State of Wisconsin to be divided among the policyholders. The 
 dividend of surplus is in no sense a dividend of profits. By dividing 
 such a surplus by means of the so-called "dividend," the company 
 simply says to its policyholders: "There is available to you, from 
 funds heretofore paid by you to this company, a sum of money that 
 may be used by you for the payment of premiums, paid-up addi- 
 tions, annuities, or for whatever use you may choose to make of it." 
 
 The excise law did not take effect until January 1, 1909, and. 
 inasmuch as the surplus converted into dividends in 1909 was re- 
 ceived by the company before the law went into effect, that surplus, 
 converted into dividends, was not income for 1909. The surplus 
 from premiums, out of which the dividends for 1910 were declared, 
 was a part of the income for 1909, and formed a basis for taxation, 
 under the excise law, for that year, and could not, as dividends, 
 form a basis for further taxation. In other words, the fair inter- 
 pretation of the statute is that income forms a basis for taxation 
 only for the year in which it was received. Herold v. Mutual Bene- 
 fit Life Ins. "Co., 201 Fed. 918; Maryland Casualty Co. v. United 
 States, decided by the Supreme Court of the United States January 
 12, 1920; Hays 'v. Gauley Mt. Coal Co., 247 U. S. 192. There is 
 nothing in Maryland Casualty Co. v. United States, supra, out of 
 harmony with this interpretation. It was said that funds of an in- 
 surance company, which had escaped taxation in the year in which 
 they were received because they had been set aside as a reserve in 
 that year and therefore had formed no basis for taxation, mic^ht, if 
 they were released from that reserve to the general uses of the com-
 
 494 FIXK V. NOKTHWESTEKX MUTUAL LIFE INS. CO. [CHAP. VIE. 
 
 pany, be treated as income for the year in which they were so 
 released. 
 
 II. 
 
 3. TThether premiums due and deferred and interest due and 
 accrued, but not actually collected in cash, were not income within 
 the meaning of the act. 
 
 In Hays v. Gauley Mt. Coal Co., supra, this question was answered 
 contrary to the contention of the Government in the following 
 language : 
 
 The expression "income received during such year" employed 
 in the act of 1909, looks to the time of realization rather than to 
 the period of accruement, except as the taking effect of the act on a 
 specified date (Jan. 1, 1909), excludes income that accrued before 
 that date. 
 
 See also Maryland Casualty Co. v. United States, supra. 
 
 III. 
 
 4. Whether interest on policy loans, which by the terms of the 
 contract was added to the principal of the loan when it became due 
 and remained unpaid by the policyholders, was not income within 
 the meaning of the act. 
 
 This question is answered contrary to the Government's conten- 
 tion bv Board of Assessors, etc., v. New York Life Ins. Co., 
 216 U.'S. 517. 
 
 IV. 
 
 5. Whether increases in the value of assets because of accrual of 
 discounts were no income, and decreases in value of assets because 
 of amortization of premiums on bonds were a deduction from income 
 under the act. 
 
 In the reassessment the commissioner added to income for the 
 two years a total as "Accrual of discount," of $67,268.96, and de- 
 ducted for "Depreciation" (amortization of bonds) for the two 
 years, $231,654.86. In his findings of fact. Judge Geiger said: 
 
 Plaintiff waived objection in each amended return made by the 
 Commissioner of Internal Eevenue to the item "Accrual of dis- 
 count" and to the item "Depreciation." 
 
 Thereupon the court disposed of those items by deducting the 
 "Accrual of discount" from the "Depreciation," giving plaintiff 
 a net deduction of $164,385.90. Inasmuch as plaintiff waived ob- 
 jection to items "Accrual of discount," the propriety of such a 
 charge will not be discussed here. If deduction by reason of amor- 
 tization of premiums on bonds was proper, it must have been so 
 under the following provision of the statute, viz : 
 
 All losses actually sustained within the year and not compensated 
 by insurance or otherwise, including a reasonable allowance for de- 
 preciation of property, if any.
 
 SECT. IV.] FINK V. NORTH WESTERN MUTUAL LIFE INS. CO. 495 
 
 There was no sale. The item arose from mere book adjustments. 
 In our opinion amortization of bonds does not come within any 
 definition of " Jiepreciation " uiidcjr tfiis or similar acts. Jn con- 
 sidering the excise statute, the Supreme Court has said: 
 
 What was here meant by "Depreciation of property"? We think 
 Congress used the expression in its ordinary and usual sense as un- 
 derstood by business men. It is common knowledge that business 
 concerns usually keep a depreciation account, in which is charged 
 off the annual losses for wear and tear, and obsolescence of struc- 
 tures, machinery, and personalty in use in the business. 
 
 The court then said that it did not consider the statute covered 
 a depreciation of a mine by exhaustion of the ores. Von Baurabach 
 V. Sargent l^and Co., 242 U. S. 534. See also Lumber Mut. Fire 
 Ins. Co. V. Mallev, 256 P'ed. 383; Baldwin L. Works v. McCoach, 221 
 Fed. 59; Van Dyke v. Milwaukee, 159 Wis. 4G0. 
 
 Plaintiff's claim that this question is not within the issues in this 
 case is clearly overborne by its second and eleventh assignments of 
 reasons why the tax is excessive and illegally assessed, viz : 
 
 2. No greater amount of taxes should have been . . . collected 
 ... for the year 1909 than the sum of $43,729.78, etc. 
 
 No. 11 is similar. It seems clear that a suit of this character is 
 for all purposes a contest between the Government and the tax- 
 payer, the question being, how much tax should the plaintiff have 
 paid? In Crocker v. ]\Ialley, 249 U. S. 223, the court found that 
 the tax actually assessed against the plaintiffs as a joint stock as- 
 sociation was improperly assessed and collected because the plain- 
 tiffs were not a joint stock association, but simply trustees. At 
 page 235, the court said: 
 
 The district court, while it found for the plaintiffs, niled that 
 the defendant was entitled to retain . , , the amount of the tax that 
 they should have paid as trustees. . . . The Commissioner of In- 
 ternal Eevenue rejected the plaintiffs' claim, and the statute does 
 not leave the matter clear. The recovery, therefore, will be from 
 the United States. (Rev. Stats., sec 989.) The plaintiffs, as they 
 themselves alleged in their claim, were the persons taxed, whether 
 they were called an association or trustees. They were taxed too 
 much. If the United States retains from the amount received by 
 it the amount that it should have received, it cannot recover that 
 sum in a subsequent suit. 
 
 See also Missouri River, F. S. & G. R. Co. v. United States, 19 
 Fed. 67. Plaintiff cites the Eaton cases, 218 Fed. 188. The reason 
 given by the court, in the first case, for allowing items "Bonds 
 for accrual of discount" and "Bonds for amortization of pre- 
 miums " is — 
 
 Because the testimony shows that the method of annually scaling 
 down the book values of bonds purchased at a premium, and making
 
 496 FINK V. NOKTIIWESTERN MUTUAL LIFE INS. CO. [CHAP. VII. 
 
 additions to the book value of bonds purchased below par ... is in 
 accordance with the law and the requirements of the insurance de- 
 partments of the different States. 
 
 The record here shows no such practice by plaintiff. What law 
 that action was in accordance with, the decision does not say, but it 
 certainly was not in accordance with the excise tax act. Whether it 
 was in accordance with the requirements of the insurance depart- 
 ments of the different States makes no difference. The only clause, 
 if any, under the excise law which would permit the commissioner 
 to exercise any influence upon deductions is the following, relating 
 to deductions: "The net addition, if any, required by law to be 
 made within the year to reserve funds." Under authority of Mary- 
 land Casualty Co. v. United States, supra, the requirement of the 
 insurance commissioner as to reserves would be a thing " required 
 by law.'* 
 
 We are of opinion that decreases in value of assets because of 
 amortization of premiums on bonds were not a proper deduction, 
 and that there should be deducted from the judgment of the court 
 below the sum of $1,643.86, with interest thereon at the rate of 6 per 
 cent from January 22, 1912, to the date of the entry of the original 
 judgment on November 16, 1917. 
 
 V. 
 
 6. Whether an addition to the reserve funds because of liability 
 on supplementary contracts not involving life contingencies and can- 
 celed policies upon which a cash surrender value may be demanded 
 was deductible from gross income under the act. 
 
 The excise law permits insurance companies to deduct "the net 
 addition, if any, required by law to be made within the year to re- 
 serve funds." 
 
 Section 1952 of the Wisconsin State law provides : 
 
 In determining the amount of the surplus to be distributed there 
 •shall be reserved an amount not less than the aggregate net value 
 of all the outstanding policies. 
 
 Under this section and section 1950, the insurance commissioner 
 of Wisconsin, as of December .31, in the years 1908, 1909, and 1910, 
 certified his computation of reserves, and did not include reserves as 
 against the contracts in question. 
 
 All the actuary would say about what was required by the insur- 
 ance commissioner with reference to the reserve in question was, that 
 the blank that the company was compelled to fill in contained an 
 item "reserve liabilities," but that no such item was included in 
 ■''net reserve funds." 
 
 Section 1946x defines "'reserve' at any time within the policy 
 year" and "terminal reserve." The latter is defined to be — 
 
 The sum sufficient, with the net premiums coming due, to provide 
 for the future mortality charges, and mature the policy according
 
 SECT. IV.] FINK V. NORTHWESTERN MUTUAL LIFE INS. CO. 407 
 
 to its terms, all computed upon the table of mortality adopted and 
 the rate of interest assumed. 
 
 Tlie end to be reached in life insurance is to mature the policy 
 by building up a resen'e. The basis of arriving at that desired end 
 is the table of mortality and the rate of interest assumed, and by the 
 use of them the net premium is fixed and the reserve is built up 
 from net premiums. Repeating the process of making the terminal 
 reserve from year to year, until tiie time when tiie payment of pre- 
 miums ceases, matures the policy. The net premium coming due is 
 the foundation of the reserve. Actuary Evans states it thus : 
 
 The reserve is the balance of cash that the company must have 
 on hand in order to pay out the contract, assuming that the future 
 premiums under the policy are paid to the comi)any, or, in other 
 words, the increase in the reserve on the policy would be, specifically, 
 the amount of the premium for that year paid in, interest on the 
 entire sum, and the cost of the insurance deducted. 
 
 The assistant secretary (Anderson) explained that — 
 
 When the policy becomes a claim, it is charged off in the death 
 loss account as a disbursement . . . for the full amount of the . . . 
 policy. 
 
 When asked what, if anything, is deducted from the general re- 
 serve fund when death occurs, he answered: 
 
 A corresponding amount to the death loss which was taken out 
 of disbursements — the reserve — is held on that policy. 1 mean 
 that one part of reserve account is wiped out and another created. 
 
 Just here is the misconception as to what is a life insurance re- 
 serve. The reserve meant in the law is that fund which is built up 
 to mature the policy. Of course, at the time when the money is 
 taken out of the reserve account and is not used for immediate pay- 
 ment, it must be held somehow. In other words, it is reserved for 
 the purpose of future payment. The full amount is there at the 
 beginning, and there is nothing that has to be built up or matured. 
 Nothing more can be reserved on that account. 
 
 We are of opinion that the decrease in the net value of assets be- 
 cause of amortization of premiums on bonds was not proper, and 
 that the decrease in the net value of assets because of liability on 
 supplementary contracts not involving life contingencies and can- 
 celed polices upon which a cash surrender value may be demanded 
 was not proper, and that there should be deducted from the judg- 
 ment of the court below on account of the first item the sum of 
 $1,643.86 and on account of the latter item the sum of $9,969.08, 
 an aggregate of $11,61 •.\94, as of January 22, 1912, and that judg- 
 ment should be entered for the sum of $131,755.84, being the princi- 
 pal of the original judgment less said sum of $11,612.94, with interest 
 thereon at 6 per cent from January 22, 1912, with costs in the 
 district court, which said interest amounts, to the date of the entry
 
 498 MCCOACU V. INS. CO. OF NORTH AMERICA. [cUAP. VII. 
 
 of the judgment in the district court on December 16, 1917, to 
 $46,641.57. It is adjudged that each party pay its own costs of the 
 proceedings in tliis court. 
 
 McCOACH V. INSUEANCE COMPANY OF NOETH 
 
 AMEEICA. 
 
 Supreme Court of the United States. 1917. 
 
 [Reported 244 U. S. 585.] 
 
 Mr. Justice Pitney delivered the opinion of the court. 
 This was an action brought by respondent, a fire and marine in- 
 surance company of the State of Pennsylvania, to recover a part of 
 the excise taxes exacted of it for the years 1910 and 1911 under the 
 act of August 5, 1909 (chap. 6, § 38, 36 Stat. 11, 112). As the case 
 comes here, only two items are in dispute, one for each of the years 
 mentioned, representing the tax upon amounts added in each of 
 those years to that part of what are called its " reserve funds " that 
 is held against accrued but unpaid losses. 
 
 The act imposed upon every insurance company organized under 
 the laws of the United States or of any State an annual excise tax 
 with respect to the carrying on or doing business equivalent to 1 per 
 cent upon its entire net income over and above $5,000, with excep- 
 tions not here pertinent. The second paragraph of section 38 pro- 
 vided: 
 
 Such net income shall be ascertained by deducting from the gross 
 amount of the income of such . . . insurance company . . . (second) 
 all losses actually sustained within the year and not compensated 
 by insurance or otherwise, including a reasonable allowance for de- 
 preciation of property, if any, and in the case of insurance com- 
 panies the sums other than dividends paid within the year on policy 
 and annuity contracts and the net addition, if any, required by law 
 to be made within the year to reserve funds. 
 
 The italics indicate the particular words upon which the contro- 
 versy turns, the question being whether, within the meaning of the 
 act of Congress, "reserve funds," with annual or occasional addi- 
 tions, are " required by law," in Pennsylvania, to be maintained by 
 fire and marine insurance companies, other than the "unearned 
 premium" or "reinsurance reserve," known to the general law of 
 insurance. 
 
 The District Court rendered a judgment in plaintiff's favor, ex- 
 cluding, however, the disputed items (218 Ped. 905). On plain- 
 tiff's wait of error the Circuit Court of Appeals reversed this 
 judgment, with instructions to allow the claim in full (224 Fed. 
 657), and the case was brought here by writ of certiorari. 
 
 Plaintiff was chartered by a special act, but is subject to the State 
 
 insurance law. Its business is confined to fire and marine insurance. 
 
 The law of Pennsylvania (act of June 1, 1911, P. L. 607, 608) 
 
 creates a State insurance commissioner with supervisory control over
 
 SECT. IV.] MCCOACll V. INS. CO. OF NOETll AMERICA. 499 
 
 the companies; provides in section 4 that he shall see that all the laws 
 of the Commonwealth respecting insurance companies are faithfully 
 executed, authorizing him to make examinations, to have access to 
 all the books and papers of any conipany, to examine witnesses 
 relative to its affairs, transactions, and condition, to publish the re- 
 sult of his examination when he deems it for the interest of the 
 policyholders to do so, and to suspend the entire business of any 
 company during its noncompliamc witli any provision of law obliga- 
 tory upon it, or whenever he sliall find tliat its assets are insulii- 
 cient to justify its continuance in business, and whenever he finds 
 any company to be insolvent or fraudulently conducted, or its assets 
 insufficient for the carrying on of its business, he is to communicate 
 the facts to the attorney general. By section 15 every insurance 
 company is required to file annual statements with the commissioner, 
 upon blank forms to be furnished by him, such as shall seem to him 
 best adapted to elicit a true exhibit of their financial condition. 
 Sections 7, 8, and 9, set forth in the margin,^ make specific pro- 
 visions for ascertaining the reserve for different classes of companies 
 other than life insurance companies. Another act of the same date 
 (P. L. 1911, p. 5:»i)) provides for judicial proceedings at the instance 
 of the insurance commissioner looking to the dissolution of insolvent 
 and delinquent companies. Its provisions need not be quoted. 
 
 A previous act (April 4, 1873, P. L. 20, 22) required a specific 
 reinsurance reserve against unexpired risks on fire, marine, and in- 
 land policies. The act of 1911, just quoted, requires the maintenance 
 of a subshmtially similar reserve; and, with respect to casualty com- 
 panies and these only, that a reserve be maintained against unpaid 
 
 * Sec. 7. In determining the liabilities upon its contracts of insurance 
 of any insurance company oilier tiian life insurance, and the amount such 
 company should hold a» a reserve for reinsurance, he shall, for casualty 
 insurance companies, charge one-half of the premium on all annual policies 
 written within one year, and on policies written for more than one year he 
 shall charge one-half of the current year's premiums plus the whole of the 
 premiums for subsequent years. For fire insurance companies he shall 
 charge fifty per centum of the premiums written in their policies upon all 
 unexpired risks that liave one year or less than one year to run, and a pro 
 lata of all premiums on risks having more than one year to run ; on per- 
 petual policies he shall charge the deposit received less a surrender charge 
 of not exceeding ten per centum thereof. For marine and inland risks he shall 
 charge fifty per centum of the premium written in the policy upon yearly 
 risks, and the full amount of the j)remium written in the policy upon all 
 other marine and inland risks not terminated. 
 
 Sec. 8. He shall, in calculating the reserve against unpaid losses of casu- 
 alty companies, other than losses under liability policies, set down by care- 
 ful estimate in each case the loss likely to be incurred against every claim 
 presented, or that may be presented in pursuance of notice from the insured 
 of the occurrence of an event tliat may result in a loss, and the sum of the 
 items so estimated shall be the total amount of the reserve . . . 
 
 Sko. 9. Having charged as a liability the reinsurance and loss reserves, 
 as above defined for insurance companies of this Commonwealth other than 
 life, and adding thereto all other debts and claims agjtinst the company, 
 the commissioner shall, in case he finds the capital of the companv im- 
 paired twenty per centum, give notice to the company to make good the 
 capital within sixty days . . .
 
 /' 
 
 500 MCCOACH r. IXS. CO. of XOKTH AMERICA. [cHAP. VII. 
 
 losses based upon the amount of claims presented. The reference 
 in section 9 to '' reinsurance and loss reserves as above defined " is 
 limited by what precedes it ; and the section deals not alone with 
 " reserves " but requires " all other debts and claims " to be ac- 
 counted as liabilities. 
 
 It appears that under this legislation, and under previous statutes 
 in force since 18T3, the insurance commissioner has required plain- 
 tiff and similar companies to return each year, as an item among 
 their liabilities, the net amount of unpaid losses and claims, whether 
 actually adjusted, in process of adjustment, or resisted. And, al- 
 though this practice has not been sanctioned by any decision of the 
 Supreme Court of the State, it is relied upon as an administrative 
 interpretation of the law. 
 
 Conceding full effect to this, it still does not answer the question 
 whether the amounts required to be held against unpaid losses, in 
 the case of fire and marine insurance companies, are held as " re- 
 serves" within the meaning of the Pennsylvania law or of the act 
 of Congress, however they may be designated upon the official forms. 
 As already appears, the Pennsylvania act specifically requires debts 
 and claims of all kinds to be included in the statement of liabilities, 
 and treats them as something distinct from reserves. The object is 
 to exercise abundant caution to maintain the companies in a secure 
 financial position. 
 
 The act of Congress, on the other hand, deals with reserves not 
 particularly in their bearing upon the solvency of the company but 
 as they aid in determining what part of the gross income ought to 
 be treated as net income for purposes of taxation. There is a specific 
 provision for deducting "all losses actually sustained within the 
 year and not compensated by insurance or otherwise.'* And this 
 is a sufficient indication that losses in immediate contemplation but 
 not as yet actually sustained were not intended to be treated as part 
 of the reserve funds, that term rather having reference to the funds 
 ordinarily held as against the contingent liability on outstanding 
 policies. 
 
 In our opinion, the reserve against unpaid losses is not "re- 
 quired by law" in Pennsylvania within the meaning of the act of 
 Congress. 
 
 It results that the judgment of the Circuit Court of Appeals 
 should be reversed and that of the District Court affirmed. 
 
 Ueversed. 
 
 The Chief Justice and Mr. Justice McKenna dissent. 
 
 Mr. Justice McEetxolds took no part in the consideration or de- 
 cision of the case.
 
 SECT. IV.] MARYLAND CASUALTY CO. V. UNITED STATES. 501 
 
 MARYLAND CASUALTY CO. t-. UNITED STATES. 
 Supreme Court of tiii: Unitpid States, 19j0. 
 
 [Reported 251 U. 8. 342.] 
 
 Clarke, J. Under warrant of the act of Congress approved 
 August 5, 1909 (36 Stat., ch. (], pp. 11, 113), the (.iovernmeiit col- 
 lected from the claimant, a corporation organized as an insurance 
 company under the laws of ]\Iar}'land, an excise tax for the years 
 1909, 1910, 1911, and 1912, and, under warrant of the act of Con- 
 gress of Octoher 3, 1913 (38 Stat., ch. 16, pp. 114, 166), it likewise 
 collected an excise tax for the first two months of 1913 and an in- 
 come tax for the remaining months of that year. 
 
 This suit, instituted in the Court of Claims, to recover portions 
 of sucii payments claimed to have been unlawfully collected, is here 
 for review upon appeal from the judgment of that court. 
 
 The claimant was engaged in casualty, liability, fidelity, guaranty, 
 and surety insurance, but the larger part of its business was em- 
 ployers' liability, accident, and, in the later of the years under con- 
 sideration in tliis case, workmen's compensation insurance. 
 
 By process of elimination the essential questions of difference be- 
 tween the parties ultimately became three, viz. : 
 
 (1) Should claimant be charged, as a part of its gross income 
 each year, with premiums collected by agents but not transmitted 
 by them to its treasurer within the year ? 
 
 (2) May the amount of gross income of the claimant be reduced 
 by the aggregate amount of the taxes, salaries, brokerage, and re- 
 insurance unpaid at the end of each year, under the provisions in 
 both the excise and income tax laws allowing deductions of "net 
 addition, if any, required by law to be made within the year to 
 reserve funds " ? 
 
 (3) Should the decrease in the amount of reserve funds required 
 by law for the year 1913 from the amount required for 1912 be 
 treated as " released reserve " and charged to the company as in- 
 come for 1913? 
 
 Of these in the order stated. 
 
 Section 38 of the excise tax act (36 Stat. 112) provides that every 
 corporation organized under the laws of any State as an insurance 
 company "shall he subject to pay annually a spec-ial excise tax with 
 respect to the carrying on or doing business . . . equivalent to 1 per 
 centum upon the entire net income . . . received by it from all 
 sources during such year." 
 
 The income tax act (38 Stat. 173) provides (sec. G, paragraph 
 (a) ) that the tax shall be levied upon the entire " net income arising 
 or accruing from all sources during the preceding calendar year." 
 But in paragraph (b), providing for deductions, gross income is de- 
 scribed as tliat ^'received within the year from all sources." So 
 that, with respect to domestic corporations, it is clear enough that 
 no change was intended by the use of the expression " arising or ac-
 
 
 
 502 MARYLAND CASUALTY CO. V. TXITED STATES. [CHAP. VII. 
 
 cruing" in the income tax act, and that tlio tax should be levied 
 under both acts upon the income "received" during the year. 
 Southern Pacific Co. v. Lowe, 247 U. S. 330, 335. 
 
 The claimant did business in many States, through many agents, 
 with whom it had uniform written contracts which allowed them 
 to extend the time for payment of the premiums on policies, not to 
 exceed 30 days from the date of policy, and required that on the 
 fifth day of each calendar month they should pay or remit, in cash 
 or its equivalent, the balance due claimant as shown by the last pre- 
 ceding monthly statement rendered to it. 
 
 Under the provisions of such contracts obviously the agents were 
 not required to remit premiums on policies written in November 
 until the fifth of January of the next year and on policies written 
 in December not until the following February. 
 
 Much the largest item of the gross income of the company was 
 premiums collected on policies of various kinds. Omitting reference 
 to earlier and tentative returns by the claimant and amendments by 
 the Government, it came about that claimant took the final position 
 that the only premiums with which it could properly be charged as 
 net income "" received by it . . . during each year " were such as 
 were collected and actually paid to its treasurer within the year. 
 This involved omitting from gross income each year "premiums in 
 course of collection by agents, not reported on December 31," which 
 varied in amount fron/$584,000 in one year to $1,020,000 in an- 
 other. The amount, if deducted one year, might appear in the 
 return of the claimant for the next year, but the rate might be 
 different. 
 
 The Government, on the other hand, contended that the claimant 
 should return the full amount of premiums on policies written in 
 each year, whether actually collected or not. 
 
 The Court of Claims refused to accept the construction of either 
 of the parties and held that the claimant should have returned, not 
 all premiums written by it, but all which were actually received by it 
 during the year and that receipt by its agents was receipt by the 
 company, within the meaning of the act of Congress. 
 
 The claimant contends that premiums paid to its agents but not 
 remitted to its treasurer were not " received by it during the year," 
 chiefly for the reason that while in possession of the agents the 
 money could not be attached as the company's property (Maxwell v. 
 McGee, 66 Mass. 137), and because money, while thus in the pos- 
 session of agents was not subject to beneficial use by the claimant 
 and therefore cannot, with propriety, be said to have been received 
 by it, within the meaning of the act. 
 
 On the other hand it is conclusively argued: That payment of 
 the premium to the agent discharged the obligation of the insured 
 and called into effect the obligation of the insurer as fully as pay- 
 ment to the treasurer of the claimant could have done ; that in the 
 popular or generally accepted meaning of the words "received by 
 it" (which must be given to them, Maillard v. Lawrence, 16 How. 
 251), receipt by an agent is regarded as receipt by his principal ; that
 
 SECT. IV.} MAEYLAND CASUAI/IV CO. V. UNITED STATES. 503 
 
 under their contract collected premiums in possession of the agents 
 of the claimant were subject to use by it in an important respect 
 before tliey were transmitted to the treasurer of the company, for 
 tiie agency contract provided tliat " the agent will pay on demand, 
 out of any funds collected by him for account of premium and not 
 remitted to the company, such drafts as may be drawn on iiim by the 
 company . . . for the purpose of settling claims, deducting the 
 amount from the next succeeding monthly remittance"; and that 
 only imperative language in tlie statute would justify a construction 
 which would place it in the power of the claimant, by private con- 
 tract with its agents, to shift payment of taxes from one taxing 
 year into another. 
 
 The claimant withheld fmni its returns collections in the custody 
 of its agents at the end of each year, and because in its amendments 
 the Oovernment had included all premiums writtx-n in each year, 
 whether or not collected, the Court of Claims, having reached the 
 conclusion thus approved by us, allowed the claimant J)0 days in 
 which to show the amount of premiums received by it and its agents 
 within each of the years in controversy, but the claimant failed to 
 make such a showing, and thereupon tiie court treated the return of 
 premiums written as the correct one and very properly, so far as 
 this item is concerned, dismissed claimant's petition. 
 
 Second. In the same words the excise and income tax acts pro- 
 vide that " the net addition, if any, required by law to be made 
 within the year to reserve funds " may be deducted from gross in 
 determining the amount of net income to be taxed. 
 
 Finding its authority in this provision of tlie law, the claimant 
 in all of its returns treated as "reserves," for the purpose of deter- 
 mining whether the aggregate amount of them each year was greater 
 or less than in the preceding year, and of thereby arriving at the 
 "net addition to reserve funds" which it was authorized to deduct 
 from gross income, the following, among others, viz, " reserve for 
 unearned premiums," " special reserve for unpaid liability losses," 
 and "loss claims reserve." Unearned premium reserve and special 
 reserve for unpaid liability losses are familiar types of insurance 
 reserves, and tlie Government in its amended returns allowed these 
 two items, but rejected the third, "loss claims reserve." 
 
 The Court of Claims, somewhat obscurely, held that the third 
 item sliould also be allowed. This "loss claims re!=erve" was in- 
 tended to provide for the liquidation of claims for unsettled losses 
 (other than those provided for by the reserve for liability losses) 
 which had accrued at the end of the tax year for whicli the return was 
 made and the reserve computed. The finding that the insurance de- 
 partment of Pennsylvania, pursuant to statute, lias at all times since 
 and including 1909 required claimant to keep on hand, as a con- 
 dition of doing business in that State, " assets as reserves sufficient 
 to cover outstanding losses," justifies the deduction of this reserve 
 as one required by law to be maintained, and the holding that it 
 should have been allowed for all of the years involved is approved. 
 
 But the Court of Claims approved the action of the Government
 
 504 MAKYI.AND CASUALTY CO. V. UNITED STATES. [cHAP. VII. 
 
 in rejecting other claimed deductions of reserves for "unpaid taxes, 
 salaries, brokerage, and reinsurance due other companies." The 
 court gave as its reason for this conclusion tliat the " net addition, 
 if any, required by law to be made within the year to reserve funds," 
 which the act of Congress permitted to be deducted from gross in- 
 come, was limited to reserves required by express statutory provision, 
 and did not apply to reserves required by the rules and regulations 
 of State insurance departments when promulgated in the exercise 
 of an appropriate power conferred by statute. 
 
 In this the Court of Claims fell into error. It is settled by many 
 recent decisions of this court that a regulation by a department of 
 Government addressed to and reasonably adapted to the enforcement 
 of an act of Congress, the administration of which is confided to such 
 department, has the force and efEect of law if it be not in conflict 
 with express statutory provision. United States v. Grimaud, 220 
 U. S. 506; United States v. Birdsall, 233 U. S. 223, 231; United 
 States V. Smull, 236 U. S. 405, 409, 411; United States v. More- 
 head, 243 U. S. 607. The law is not different with respect to the 
 rules and regulations of a department of a State government. 
 
 But it is contended by the claimant that it w^as required to provide 
 "reserves" for the payment of the rejected items of liability, be- 
 cause the Court of Claims found that pursuant to statutes the in- 
 surance department of Pennsylvania required the company, as a 
 condition of doing business in that State, to keep on hand " assets 
 as reserves " sufficient to cover all claims against the company, 
 " whether due or accrued " ; because the department of New York 
 required it to maintain " reserves sufficient to meet all of its accrued 
 but unpaid indebtedness in each year " ; and because the department 
 of Wisconsin required it to carry " sufficient reserves to cover all of 
 its outstanding liabilities." 
 
 "\Miether this contention of the claimant can be justified or not 
 depends upon the meaning which is to be given to the words "re- 
 serve funds" in the two acts of Congress we are considering. 
 
 The tenn " reserve " or " reserves " has a special meaning in the 
 law of insurance. While its scope varies under different laws, in 
 general it means a sum of money, variously computed or estimated, 
 which, wdth accretions from interest, is set aside, " reserved," as a fund 
 with which to mature or liquidate, either by payment or reinsurance 
 with other companies, future unaccrued and contingent claims, and 
 claims accrued, but contingent and indefinite as to amount or time 
 of payment. 
 
 In this case, as we have seen, the term includes "unearned pre- 
 mium reserve" to meet future liabilites on policies, "liability re- 
 serve" to satisfy claims, indefinite in amount and as to time of 
 payment, but accrued on liability and workmen's compensation pol- 
 icies, and " reserve for loss claims " accrued on policies other than 
 those provided for in the "liability reserve," but it has nowhere been 
 held that "reserve," in this technical sense, must be maintained to 
 provide for the ordinary running expenses of a business, definite in 
 amount and which must be currently paid by every company from
 
 SECT. IV.] MAliYLAND CASUALTY CO. i'. UNITED STATES. 505 
 
 its income if its business is to continue, such as taxes, salaries, rein- 
 surance, and unpaid brokerage. 
 
 The requirements relied ujjon, of the insurance departments of 
 New York, Tennsvlvania, and Wisconsin that "assets as reserves" 
 must be maintained to cover "all claims," "all intlebtedness," "all 
 outstanding liabilities," in terms might include the rejected items 
 wc are considering, but })lainly the departments, in these expressions, 
 used the word " reserves " in a nonteclinical sense as equivalent tfj 
 "assets," as is illustrated by the Massachusetts requirement that each 
 company sball *' hold or reserve assets" for tlie payment of all claims 
 and obligations, 'i'he distinction between the " reserves" and general 
 assets of a company is obvious and familiar and runs through the 
 statements of claimant and every other insurance company. That 
 provision for the payment of ordinary expenses such as we are consid- 
 ering was not intended to be provided for and included in " reserve 
 funds," as the term is used in the acts of Congress, is plain from 
 the fact that the acts permit deductions for such charges from income 
 if paid within the year, and the claimant was permitted in this case 
 to deduct large sums for such ordinary expenses of the business — 
 specifically, large sums for taxes. The claimant did not regard any 
 such charges as properly covered by " reserves " and did not so include 
 them in its statement for 11)0!). In its 1910 return "unpaid taxes" 
 and "salaries" first appear as "reserves," and in 1911 " brokerage" 
 and "reinsurance" are added. This earlier, though it is now 
 claimed to have been an uninstructed or inexpert, interpretation of 
 the language of the acts, was nevertheless the candid and correct 
 interpretation of it, and the judgment of the Court of Claims in this 
 respect is approved. 
 
 Third. The year 1913 was the only one of those under consider- 
 ation in which the aggregate amount of reserves which the claimant 
 was required by law to keep fell below the amuunt so required for 
 the preceding year. The Government allowed only "unearned pre- 
 mium" and "unpaid liability loss," reserves to be considered in 
 determining deductions. In 1913 the "unpaid liability loss reserve" 
 decrease exceeded the "unearned premium reserve" increase by over 
 $2 TO, 000, and this amount the Government added to the gross income 
 of the claimant for the year, calling it "released reserve," on the 
 theory that the difference in the amount of the reserves for the two 
 years released the decrease to the claimant so that it could use it for 
 its general purposes, and therefore constituted free income for the 
 year 1913, in which the decrease occurred. 
 
 This theory of the Government was accepted by the Court of 
 Claims and the addition to the gross income was approved. 
 
 The statute does not in terms dispose of the question thus pre- 
 sented. 
 
 Eeserves, as we have seen, are funds set apart as a liability in the 
 accounts of a company to provide for the payment or reinsurance of 
 specific, contingent liabilities. They are held not only as security 
 for the payment of claims but also as funds from which pa^Tnents 
 are to be made. The amount " reserved " in any given year may be
 
 506 MARYLAND CASUALTY CO. V. UNITED STATES. [CHAP. VU. 
 
 greater than is necessary for the required purposes, or it may be less 
 than is necessary, but the fact that it is less in one year than in the 
 preceding year does not necessarily show either that too much or 
 too little was reserved for the former year — it simply shows that 
 the aggiegate reserve requirement for the second year is less than for 
 the first, and this may be due to various causes. If, in this case, 
 it were due to an overestimate of reserves for 1912, with a resulting 
 excessive deduction for that year from gross income and if such ex- 
 cess was released to the general uses of the company and increased 
 its free assets in 1913, to that extent it should very properly be 
 treated as income in the year in which it became so available, for the 
 reason that in that year, for the first time, it became free income, 
 under the system for determining net income provided by the stat- 
 ute, and the fact that it came into the possession of the company 
 in an earlier year in which it could be used only in a special manner, 
 which permitted it to become nontaxable, would not prevent its 
 being considered as received in 1913 for the purposes of taxation, 
 within the meaning of the act. 
 
 The findings of fact in this case, however, do not show that the 
 diminution in the amount of required reserves was due to excessive 
 reserves in prior years or to any other cause by which the free assets 
 of the company were increased in the year 1913, and the following 
 finding of fact makes strongly against such a conclusion : 
 
 "The decrease in employers' liability loss reserve for 1913, des- 
 ignated as ' released reserve,' did not in any respect afi^ect or change 
 claimant's gross income or disbursements, as shown by the State in- 
 surance reports." 
 
 It would not be difficult to suggest conditions under which the 
 statutory permit to deduct net additions to reserve funds would re- 
 sult in double deduction in favor of an insurance company, but 
 such deductions can be restored to income again only where it is 
 clearly shown that subsequent business conditions have released the 
 amount of them to the free beneficial use of the company in a real 
 and not in a mere bookkeeping sense. If this seemingly favorable 
 treatment of insurance companies is to be otherwise corrected or 
 changed, it is for Congress, and not for the courts, to amend the 
 law. 
 
 Since the findings of fact before us do not make the clear showing, 
 which must be required, that the statutory deduction of net reserves 
 in prior years was restored to the free use of the claimant in 1913, 
 it should not have been charged as income wnth the decrease in that 
 year, and, on the record before us, the holding of the Court of Claims 
 must be reversed. 
 
 There remains the question as to the statute of limitations. 
 
 The Government concedes that the case is in time with respect to 
 the amended returns, but claims that it is barred by Revised Statutes, 
 3226, 3227, and 3228, with respect to taxes paid on the original re- 
 turns for all of the years but 1913. The claimant made its original 
 returns without protest, except for the year 1909, and, without ap- 
 peal to the Commissioner of Internal Revenue, voluntarily paid the
 
 SECT. IV.] UNITED STATES V. SAN JUAN COUNTY. 507 
 
 taxes compjuted on them for eaeli of the years. Payment was made 
 for 1!)0!J in June, I'JIU; for 1L>10 in .June, 1911; for 1911 in June, 
 VJ12; for 1912 in June, 191.5. Nu claim U)r a refund of any of 
 these payments was made until April 30, 1915, and then the claim 
 was in general terms — 
 
 " For amounts paid hy it in tiixes which, through lack of informa- 
 tion as to requirements ol" law or hy error in computation, it may 
 have paid in excess of the amount legally due.'' 
 
 This claim was rejected suhsequent to the institution of this suit, 
 which was commenced on Fehruary H, 1910. 
 
 This statement shows the right of the claimant plaiidy harred by 
 its failure to appeal to the Commissioner of Internal iicvenue, Re- 
 vised Statutes, ;j'-i'^G, [this is fundamental, Kings County Savings 
 Institution v. Blair, IIG U. S. 200] and also by its failure to institute 
 suit within two years after the cause of action accrued. Revised 
 Statutes, 3227. 
 
 The claimant contends that the amended returns filed by the Com- 
 nissioner of Internal Revenue were not amendments or modifications 
 of the original returns, but were based upon a different principle 
 and, within the scope of Cheatham el al. v. United States, 92 U. S. 
 85, constituted new assessments from which appeals were taken in 
 time. 
 
 But they are denominated "amended returns," and, while in deal- 
 ing willi the same items the basis of computation was in some cases 
 varied, in each case the purpose and effect of them was to increase 
 the payment which the claimant was required to make under the 
 law, and the payments made on the original returns were credited 
 on the amount computed as due on the returns as amended. 
 
 The inapplicability of Cheatham et al. v. United States, 92 U. S. 
 85, is obvious, and the contention that the filing of the amended 
 returns constituted the beginning of new proceedings, which so su- 
 perseded the original returns as to release the claimant from its 
 entire failure to observe the statutory requirement for review of the 
 latter, is so unfounded that we cannot consent to enter upon a de- 
 tailed discussion of it. Tliis conclusion renders section 14 of the 
 act of Congress of September 8, 1916 (39 Stat. 772), inapplicable. 
 
 It results that the judgment of the Court of Claims is modified 
 and as so modified affirmed, and the case is remanded to that court 
 for proceedings in accordance with this opinion. 
 
 UNITED STATES v. SAN JUAX COUNTY. 
 District Court of the United States. 1922. 
 
 [Rrported 280 Fed. 120.] 
 
 Neterer. Uist. J. The San Juan Canning Company, an in- 
 solvent corporation, is indebted to the United States by reason 
 of income tax and penalties for year 1917. On the 28th of
 
 508 UNITED STATES I'. SAN JUAN COUNTY. [CHAP. VII. 
 
 ]\ray, 1921, after demand and refusal to pay, a warrant of distraint 
 was levied upon the personal property of the canning company, 
 located in San Juan County, and sale advertised for June 15, 1921. 
 Thereafter, the sheriff of San Juan County levied upon the property 
 to collect the State and county taxes for years 1918, 1919, 1920, 
 and advertised the property for sale June 10, 1921. On application 
 of plaintiff the restraining order was issued and served upon the 
 sheriff. 
 
 The issue now for determination is the priority of the claims. 
 The plaintiff claims that under section 3466, Revised Statutes 
 (6372 C. S., Act of March 3, 1797), the United States has priority. 
 The county contends the contrary and cites United States v. Nichols, 
 4 Yeates (Pa.), 251, where the court at page 259 says: 
 
 The rights of the General Government to priority of payment, and 
 the rights of individual States, are contemplated as subsisting at the 
 [same] time, and as perfectly compatible with each other. This 
 only can be effected by giving preference to each existing lien, ac- 
 cording to its due priority in point of time. I know of no other 
 mode whereby the several conflicting claims can with justice be pro- 
 tected and secured. 
 
 The Constitution of the United States, Article VI, provides: 
 
 This Constitution and laws made in pursuance thereof shall be the 
 supreme law of the land in every State, and the judges shall be 
 bound thereby. 
 
 Section 8, Article I, of the Constitution empowers the Congress 
 to list and collect taxes, duties, etc., which shall be uniform 
 throughout the United States. The Supreme Court in United 
 States V. Snyder, 149 U. S. 210, at 214, says: 
 
 The grant of the power and its limitation are wholly inconsistent 
 with the proposition that the States can by legislation interfere with 
 the assessment of Federal taxes. 
 
 In Murray s v. Hoboken Land & Improvement Company, 18 
 Howard, 281 : 
 
 The power to collect and disburse revenue, and to make all laws 
 which shall be necessary and proper for carrying that power into 
 . effect, includes all known and appropriate means of effectually col- 
 lecting and disbursing that revenue, unless some such means should 
 be forbidden in some other part of the Constitution. 
 
 Section 3186, R. S. (5908 C. S.), provides: 
 
 If any person liable to pay any tax neglects or refuses to pay 
 same after demand, the amount shall be a lien in favor of the United 
 States from the time it was due until paid, with the interest, pen- 
 alties, . . . that may accrue in addition thereto upon all property 
 and rights to property belonging to such person. 
 
 The lien, however, is not valid against the judgment creditors, 
 mortgagees, etc., unless notice is filed in the clerk's office of such
 
 SECT. IV.] UUEST V. LEDEEEK. 509 
 
 county. Neither the State nor co'unty arc- judgment creditors, mort- 
 gagees, or purchasers, lience are not affected by the provisions of 
 section (5908 C. S.) 318G R. S. 
 
 The power of taxation is an indispensable incident to sovereignty, 
 and by 'the provisions oi' the Constitution and laws, a grant in favor 
 of the United States is paramount in the event of the insolvency of 
 the debtor. Section (G372 C. S.) 3-iGG R. S. : 
 
 Whenever any person indebted to the United States is insolvent, 
 or whenever the estate of any deceased debtor, in the liands of the ex- 
 ecutors or administrators, is insufficient to pay all the debts due 
 from the deceased, the debts due to the United States shall be first 
 satisfied; and the priority hereby established shall extend as well 
 to cases in which a debtor, not having sufficient property to pay all 
 his debts, makes a voluntary assignment thereof, or in which the 
 estate and effects of an absconding, concealed, or absent debtor are 
 attached by process of law, as to cases in which an act of bankruptcy 
 is committed. 
 
 The Supreme Court in United States r. Fisher, 2 Cranch (GU. S.) 
 358, Justice Marshall for the court, said: 
 
 This claim of priority on the part of the United States will, it has 
 been said, interfere with the right of the State sovereignties re- 
 specting the dignity of debts, and will defeat the measures they have 
 a right to adopt to secure themselves against delinquencies on the 
 part of their own revenue officers. But this is an objection to the 
 Constitution itself. The mischief suggested, so far as it can really 
 happen, is the necessary consequence of the supremacy of the laws 
 of the United States on all subjects to which the legislative power of 
 Congress extends. 
 
 The United States is entitled to a decree. 
 
 HURST V. LEDERER. 
 Circuit Court op Appeals. 1921. 
 
 [Reported 273 Fed. 174.] 
 
 BuFFixGTOX, Circ. J. In this case, Marriott Ilurst. a taxpayer, 
 sued Ephraim Lederer, collector of internal revenue, to recover 
 back some $2,000 of taxes, alleged to have been illegally collected 
 from him under protest and by duress of a warrant, distraint, 
 and threat of sale. The alleged "illegality consisted in the fact as- 
 serted bv Hurst that he had already paid the tax to the collector by 
 a payment thereof made to one Wright, a deputy collector of Lederer, 
 the collector. 
 
 On the trinl. the court directed a verdict and jud.ffment in favor 
 of Eederer and thereupon Hurst sued out this writ and assigned as 
 error the direction of a perempton- verdict. Accordingly, the ques- 
 tions involved are, first, whether there was proof to go to the jury
 
 510 HURST V. LEDEKER. [CHAP. VII. 
 
 on the issue of whether Hurst did actually pay the money to Wright, 
 the deputy collector; and, second, whether the latter had authority 
 to collect the money. 
 
 Assuming, for present purposes, that there was evidence of actual 
 pavment to the deputy collector and that that question should have 
 been submitted to the jury, there yet remains the underlying and 
 decisive question of the authority of the deputy collector to receive 
 it and thereby bind Lederer, who, in point of fact, never did receive it. 
 
 The proofs in the case show that on the last day the taxes were 
 payable, Hurst telephoned to Lynch, a friend of his in the Post 
 Office Department, which was in the same building with the col- 
 lector's office, and inquired about the number of people who were 
 then crowding that office to pay their delayed taxes. Lynch told 
 him it was large, but that if he would come down, he (Lynch) 
 would get him inside the railings. Hurst came down, and instead 
 of taking a place with the people going up to the cashier's window 
 and paying the cashier, Lynch and Hurst went inside, where the 
 public was not admitted, and went to the desk of Wright, a deputy 
 collector. There was a conflict in the testimony at this point as to 
 whether Hurst counted out his money to Wright and the latter took 
 it and carried it away, or whether Hurst counted it out to Lynch, 
 the post-office messenger, who carried it over and put it in the desk 
 drawer of Belts, another deputy, who was a field deputy in the 
 district where Hurst lived. Hurst testified he had not known and 
 never saw Wright before that day. Wright, who was called by Hurst 
 as a witness, testified he was a deputy collector ; that he did not take 
 Hurst's money, and had no authority to take it. He said he was 
 taking affidavits and took Hurst's; that he saw some money; that 
 Lynch took it and put it in an envelope ; that Lynch asked for Betts, 
 who was the deputy "in charge of the district where Hurst's place 
 was; " that he walked toward Betts' desk when told where it was, and 
 that he started toward it with the envelope in his hand. Lynch's 
 testimony was substantially to the same effect. He said he himself 
 took the money and left it in Betts' desk drawer. No receipt was 
 given by any one to Hurst for the money. No testimony was adduced 
 by Hurst as to the authority of Wright to receive the money, and the 
 only statutory authority cited to the court was the act of March 1, 
 1879 (ch. 125, sec. 2), printed in the margin.^ 
 
 On the part of the defendant, the collector, I^ederer, testified that 
 Betts, the district deputy, "had the northeast section of the city, 
 in which Mr. Hurst's saloon was located." He testified the general 
 
 * That each collector of internal revenue shall he authorized to appoint, 
 hy an instrument in writing under his hand, as many deputies as he may 
 think proper. . . . 
 
 Provided, however, . . . 
 
 Each such deputy shall have the like authority in every respect to collect 
 the taxes levied or assessed vnthin the portion of the district assigned to 
 him which is hy law vested in the collector himself, hut each collector shall, 
 in every respect, he responsible, hoth to the United States and to individuals, 
 as the case may be, for all moneys collected, and for every act done or 
 neglected to be done, by any of his deputies while acting as such.
 
 SECT. IV.] IIUE.ST V. LEDEIIEE. 511 
 
 Tule of the ofTice was that "money paid in must be paid to the 
 cashier"; that on the previous week tlie ca-shier had called his at- 
 tention to the fact that parties were cuniiug U) ihe ollice and trying 
 to have the deputies deviate from tlie order and he had made a posi- 
 tive order realllrniing the rule. 
 
 This suit being to recover taxes illegally collected, the burden of 
 showing a previous payment rested on the plainliir, and ina.-niuch 
 as the proof was that Lederer had never received the money and had 
 never autliorized Wright to receive it for iiim, it is apparent llurst 
 has not made out a case against Lederer, unless the law itself makes 
 Lederer's aj)pointment of Wright deputy collector carry with it the 
 right and authority to collect money. And it is liere that, in light 
 of the proofs, the plaintiff's case fails, for he cannot justify his 
 alleged payment to Wright hy the terms of the statute. That 
 statute provides: " Each such deputy shall have the like authority in 
 every respect to collect taxes levied or assessed within the portion 
 of the district assigned to hi in which is by law vested in the collector 
 himself." 
 
 But the proofs show that Bctts was the deputy to whom alone 
 it could be contended this language applied, and that Betts was 
 the man Lynch and Hurst meant to reach. Unfortunately, they 
 did not find Betts, and in his absence the cashier was the only per- 
 son to whom Hurst could pay his money, so as to bind Lederer. 
 
 Taking the most favorable view of the plaintiff's proofs as to 
 what followed, it is apparent tliat Lederer was not in fault in any 
 way, and that the loss that resulted to Hurst arose, not from any- 
 thing Lederer did, or failed to do, but wholly from what Hurst did, 
 or failed to do, and, where one of two innocent men suffer wrong, 
 he must suffer whose acts or omissions caused the injury. 
 
 \Vc are of opinion the record shows no error in giving binding 
 instructions for the defendant.
 
 LAW LiBRARt 
 
 UNIVERSITY OF CALIFORNIA 
 
 LOS ANGELES
 
 AA 000 594 046 5