Western Assur. Co. of Toronto v. Halliday

Citation126 F. 257
Decision Date03 November 1903
Docket Number1,189.
PartiesWESTERN ASSUR. CO. OF TORONTO v. HALLIDAY et al.
CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)

J. H Cabell, for appellant.

David Davis and E. L. Taylor, Jr., for appellees.

Before LURTON, SEVERENS, and RICHARDS, Circuit Judges.

LURTON Circuit Judge.

This is a bill to restrain an alleged illegal and wrongful assessment of property owned by the complainant, a fire insurance company incorporated under the laws of the Dominion of Canada. Under section 3660, Rev. St. Ohio 1890-92, as amended in 1894 (91 Ohio Laws, p. 40), the company, in 1895 deposited with the superintendent of insurance of the state of Ohio, $100,000, par value, of Ohio municipal bonds, which have been registered under sections 2711-2720, Rev. St. Ohio 1890-92, in the name of the said superintendent. These bonds were delivered to him at his office in Franklin county, Ohio and were by him deposited in the safe of the State Treasurer in the same county, and have so remained on deposit until withdrawn in 1902. The defendant Halliday, as auditor of Franklin county, Ohio, has caused these bonds to be assessed to the said complainant for the years 1895 to 1900, both inclusive. The only object of this bill is to restrain the collection of the tax so assessed.

To this bill, the defendants demurred. The demurrer was sustained, and the bill dismissed.

The bonds sought to be taxed as having a situs in Ohio were deposited under section 3660, Rev. St. 1890-92, which provides that every foreign fire insurance company shall 'deposit with the superintendent of insurance, for the benefit and security of the policy-holders residing in this state, a sum not less than $100,000.00 in stocks or bonds of the United States, or the state of Ohio, or any municipality or county thereof, which shall not be received by the superintendent at any rate above their par value; the stock and securities so deposited may be exchanged from time to time for other like securities; so long as the company so depositing continues solvent and complies with the laws of this state, it shall be permitted by the superintendent to collect interest or dividends on such deposits. ' The trust is not different from that in reference to domestic life insurance companies required by Rev. St. 1890-92, Secs. 3593-3595, to make a like deposit with the same official. After the rights of policy holders under the law referred to were satisfied, it was held that the bonds were subject to the claims of the company and of the makers of the securities, so deposited, against the company. Falkenbach v. Patterson, 43 Ohio St. 360, i N.E. 757. The trust in behalf of the policy holders is one to be administered by the superintendent, hence the bonds cannot be recovered from him by an assignee under the insolvent laws 'without first showing that such company is no longer liable to any of its policy holders. ' State ex rel. v. Matthews, 64 Ohio St. 419, 60 N.E. 605. Subject to the claims of Ohio policy holders, bonds so deposited constitute a part of the capital of the depositing company, invested in bonds, and by the express terms of section 3660 'may be exchanged from time to time for other like securities,' and, 'so long as the company continues solvent, and complies with the laws of this state, it shall be permitted by the superintendent to collect interest or dividends on the deposit.'

Are municipal bonds so owned by a foreign insurance company doing business in Ohio and so held on deposit subject to taxation under the laws of Ohio? That the jurisdiction of Ohio for taxing purposes does not extend to subjects outside of the state is indisputable. There must be jurisdiction of either the property taxed or of its owner. The complainant as a corporation organized under the laws of the Dominion of Canada, according to the familiar fiction of the law, can dwell only in the place of its creation. Its legal domicile is therefore the Dominion of Canada. According to another fiction of the law, having its origin mainly in the necessity of uniformity in the law of succession to or distribution of personal estates of decedents, personal property is regarded as having only the domicile of the owner. But this, like most other fictions of the law, is never permitted to stand in the face of the facts of an actual situation which requires a different policy under the law of the actual situs. It is therefore a well-recognized exception to the maxim of 'mobilia sequuntur personam' that for purposes of taxation it is entirely competent for the local law to disregard the domicile of the owner, and subject to taxation all movables according to their situs. Neither has the sovereign taxing power been content to confine itself to the taxation of things having an actual situs within the state, for it is not an unusual spectacle to find laws which are based upon the doctrine 'mobilia sequuntur personam' subjecting to taxation such property as negotiable public securities, corporate stocks, etc., which have an actual situs outside of the state, upon the ground that the owner is a resident of the state, and his domicile the situs of such obligations, while at the same time disregarding the fiction in respect to like securities actually within the state which are owned by residents of other states. This exercise of the power of taxation according to both the actual fact of the situs and according to the fiction of the domicile of the owner, though inconsistent and seemingly unjust, does not infringe the constitutional authority of the state, for in the one case it attains its end through its power over the property itself and in the other through its authority over the owner. The books are full of cases sustaining such laws, a few of which now suffice for reference. State Tax on Foreign Held Bonds, 15 Wall, 300, 21 L.Ed. 179; Grant v. Jones, 39 Ohio, 506; Walker v. Jack, 88 F. 576, 31 C.C.A. 462; Street Rd. Co. v. Morrow, 87 Tenn. 407, 11 S.W. 348; Judson on Taxation, Secs. 393, 394; Savings Society v. Multnomah County, 169 U.S. 421, 428, 18 Sup.Ct. 392, 42 L.Ed. 803; New Orleans v. Stempel, 175 U.S. 309, 20 Sup.Ct. 110, 44 L.Ed. 174; In re Blackstone's Estate, 171 N.Y. 682, 64 N.E. 1118; Blackstone v. Miller, 188 U.S. 189, 206, 23 Sup.Ct. 277, 47 L.Ed. 439; Grundy County v. Tenn. Coal Co., 94 Tenn. 296, 9 S.W. 116; People v. Insurance Co., 29 Cal. 534; State v. Board of Assessors, 47 La.Ann. 1544, 18 So. 519; Matter of Whiting, 150 N.Y. 27, 44 N.E. 715, 34 L.R.A. 232, 55 Am.St.Rep. 640; Hubbard v. Brush, 61 Ohio St. 252, 55 N.E. 829. A distinction has sometimes been regarded both in legislation and judicial opinion between such intangibles as mere debts and the interest upon bonds held and owned outside the state and such securities as public bonds and other negotiable instruments. 'Bonds and negotiable instruments,' said Justice Holmes speaking for the court in Blackstone v. Miller, cited heretofore, 'are more than mere evidence 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 v. Hooker, 177 Mass. 335, 337, N.E. 1078, 83 Am.St.Rep. 279. Therefore, considering only the place of the property, it was held that bonds held out of the state could not be reached. ' Referring to the Foreign Bonds Case, cited above, the justice added, 'The decision has been cut down to its precise point by later cases.'

It is unnecessary to concern ourselves about the power of the state to subject to taxation such intangibles as mere debts, or its power to reach such tangible properties as public securities having an actual situs outside the state, for the only question arising here is as to the power of the state to subject to taxation bonds actually in the state owned by a corporation created by the laws of a foreign country which is doing business in the state by virtue of its compliance with the law requiring that it shall, as a condition, protect the contracts it shall make with residents of Ohio by the deposit of securities in the hands of a statutory trustee. Such bonds may well be regarded as personal property, tangible rather than intangible securities, capable of having an actual situs like money or goods.

In State Tax on Foreign Held Bonds, cited above, the court stated a well-grounded distinction between municipal bonds, bank notes, and ordinary evidences of debt, such as mortgage notes or other like obligations, saying:

'It is undoubtedly 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 banking institutions. The former, by general usage, have acquired the character of, and are treated as, property in the place where they are found, though removed from the domicile of the owner; and the latter are treated and pass as money wherever they are. But other personal property, consisting of bonds, mortgages, and debts generally, has no situs independent of the domicile of the owner, and certainly can have none where the instruments, as in the present case, constituting the evidences of debt, are not separated from the possession of the owners.'

In New Orleans v. Stempel, 175 U.S. 309, 322, 20 Sup.Ct. 110, 115, 44 L.Ed. 174, the court again recognized this distinction, saying:

'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 seizure and delivery upon replevin; and
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