Appeal Tax Court of Baltimore City v. Patterson

• Decision Date: 31 January 1879
• Parties: APPEAL TAX COURT of Baltimore City v. ELIZABETH PATTERSON.
• Court: Maryland Court of Appeals

50 Md. 354

APPEAL TAX COURT of Baltimore City v. ELIZABETH PATTERSON.

Court of Appeals of Maryland

January 31, 1879

Appeal from the Baltimore City Court.

This is an appeal from a pro forma order of the court below passed on the 26th of June, 1878, on the petition of the appellee, in proceedings under the Act of 1876, ch. 260, sec 28, whereby the Appeal Tax Court was directed to strike from the list of property valued and assessed to the appellee as not subject to taxation, certain bonds and certificates of indebtedness of the States of New York, Pennsylvania and Ohio, and of the Cities of New York and Philadelphia, and of the County of New York, due to the appellee, a resident of this State. From this order the Appeal Tax Court appealed. The case is further stated in the opinion of the court.

The cause was argued before BARTOL, C.J., BOWIE, ALVEY and ROBINSON, JJ.

A Leo Knott, State's Attorney for Baltimore City, and Charles J. M. Gwinn, Attorney General, for the appellant.

Are bonds or obligations of other States, and of municipal corporations incorporated by other States, commonly called the stock or debt of such States and municipalities, subject to valuation and assessment by this State under the Act of 1876, ch. 260, when the holder of such bonds or obligations resides in the City of Baltimore?

The basis of our system of State taxation is the fundamental rule that every person in the State, or person holding property therein, ought to contribute his proportion of public taxes for the support of the government, according to his actual worth in real and personal property. Declaration of Rights Art. 15.

The principle, which must be deduced from this Article, is, that immovable properties within this State are subject to valuation and assessment in this State, whether such property be owned by residents or non-residents; and that movable properties, owned by residents of this State, follow the persons of their respective owners, and must be accounted part of the property by which the actual worth of such owners shall be measured.

This principle is a rule of public law: 2 Domat's Civil Law 330; Story Confl. Laws, secs. 379-381; Sill v. Worswick, 1 H. Bl. 690; Freke v. Carberry, L. R. 16 Eq. Cas. 466.

The words "movable properties," used by the continental writers, are now recognized as the fitting term by which to distinguish those properties which follow the person, and are, therefore, "movable" from those properties, which though treated by a local law as personal estate, are yet, as matter of fact, immovable, because, being an interest in lands, "they savour of the realty." Freke v. Carberry, L. R. 16 Eq. Cas. 466, 467.

It certainly cannot be reasonably doubted that State and municipal bonds, bearing interest, belong to the class of movable properties. "States and cities when they borrow money and contract to repay it with interest, are not acting as sovereignties. They come down to the level of ordinary individuals. Their contracts have the same meaning as that of similar contracts between private persons." Murray v. Charleston, 96 U.S. 445. See also U.S. Bank v. Planters Bank, 9 Wheat. 907. Their obligations are simply evidences of debt, due from such States and cities to the holders of such obligations. Such bonds are, undoubtedly, property in the hands of those who hold and own them: State Tax on Foreign-held Bonds, 15 Wall. 320. If they are property in the hands of those who hold and own them, they have, as property, no other situs than the residence of such holders and owners. State Tax on Foreignheld Bonds, 15 Wall. 323.

Such securities show the right of the persons owning them to demand payment of the interest thereon, as it may accrue and become payable, and of the principal, when it shall become due according to the terms of the respective contracts: Williams on Pers. Prop. 4. These rights are properties belonging to the owners of such securities. State Tax on Foreign-held Bonds, 15 Wall. 320; Murray v. Charleston, 96 U.S. 445. They are properties, having a value in the market while the interest is maturing and before the debts are due. They are properties, which, because they consist of the right of their respective owners to demand such interest and principal, as they may respectively become due, are personal to such owners; and have, as such rights, no taxable situs, except the residences of their respective owners; Cooley on Taxation, 65; Burroughs on Taxation, secs. 41, 134, 432; Latrobe v. Baltimore, 19 Md. 22; Baltimore v. Sterling, 29 Md. 49; Bank v. Smith, 7 Ohio, 52, 54; Hall v. Commissioners of Middlesex, 10 Allen, 102; Webb v. Burlington, 28 Vt. 198; Kirkland v. Hotchkiss, 42 Conn. 426, 435.

It does not matter that by the terms of the contracts the owner of such securities is obliged to demand payment in a State other than that in which he may reside. It does not matter that he is required, by the terms of the contracts, to assign these securities in a particular manner, or that the registry of such assignment is required to be made or kept in a particular place. Such conditions do not alter the situs of the right of property, or separate such properties from the person of the owner of them. They are only precautions, intended for the greater safety of the debtor; Black v. Zacharie, 3 How. 513; Bank v. Iglehart, 6 Gill, 56; Balt. City Pass. R. R. Co. v. Sewell, 35 Md. 252, 253.

Such bonds may be securities, which are of record as the property of the owner thereof, in the proper offices of the States and corporations by which such bonds were executed; but the title to the bonds does not depend upon the register only. Each of such owners has actual possession of his bonds. Each of said owners is competent to sell, bequeath, or give them away as part of his estate. They are not subject, in any wise, to the taxing jurisdiction of the States under whose authority they were issued, as the property of such owners; because such owners are not within the jurisdiction of those States: Murray v. Charleston, 96 U.S. 445. They are taxable only under the laws of the State in which their owner may reside.

It is true that the Supreme Court, in State Tax on Foreignheld Bonds, 15 Wall. 323, 324, said: "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; 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."

We do not understand what is meant by the words that State bonds, and bonds of municipal bodies, 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."

It will be observed that the Supreme Court does not say that such bonds are not to be treated as property, at the domicile of their owner, when they are found at such domicile. It certainly did not mean to say that they could be treated as property only in the State or municipality by which such bonds were issued; for while in Murray v. Charleston, 96 U.S. 445, it decided that the promise of a State or municipality was property, it held on page 440, that a non-resident holder of such State or municipal promises was not a holder of property within such State or City. If such non-resident holder of State or City bonds is not a holder of property in the State or city issuing such bonds, he must certainly be accounted the holder of such property at his domicile in the State in which he resides. And, as the Supreme Court, in its opinion in Murray v. Charleston, supra, expressly limits the taxing power of a State or city over debts due by such State or city, to creditors within their respective jurisdictions, it must certainly be understood to have meant that the taxing power of other States, and of municipalities in other States, extended to such properties, when owned by creditors residing within their respective jurisdictions. In such cases the property is found at the domiciles of the owners of the particular properties.

As a question of strict law, it is immaterial whether bonds, issued by another State, or by a municipality incorporated by another State, and owned by a resident of this State, were or were not exempted from taxation by the State which authorized the issue of such bonds. Such exemption can have no extraterritorial operation, except by general usage, or by a comity, which has attained the force of general usage.

There is, of course, no need of any argument to show that the bonds of other States, or of municipal or other corporations incorporated by other States, owned by residents of this State, are not exempted from taxation by this State, because such bonds are not taxed by the States which authorize their issue, when owned by residents of such States. Each State is free, in the absence of a constitutional provision to the contrary, to exempt from taxation any class of property belonging to residents of such State to which it may see proper to grant such immunity. The power thus exercised can never operate beyond the jurisdiction of the State exercising it. No State can protect from taxation, property within the jurisdiction of another State, owned by a resident of such other State.

Charles J. Bonaparte and I. Nevett...