Harry Plummer v. Bird Coler

• Decision Date: 14 May 1900
• Docket Number: No. 489,489
• Citation: 178 U.S. 115,20 S.Ct. 829,44 L.Ed. 998
• Parties: HARRY PLUMMER, as Executor of the Last Will and Testament of Joseph Plummer, Plff. in Err. , v. BIRD S. COLER, Comptroller of the City of New York
• Court: U.S. Supreme Court

178 U.S. 115

20 S.Ct. 829

44 L.Ed. 998

HARRY PLUMMER, as Executor of the Last Will and Testament of Joseph Plummer, Plff. in Err.,

v BIRD S. COLER, Comptroller of the City of New York.

No. 489.

Argued February 27, 28, 1900.

Decided May 14, 1900.

Joseph Plummer, a citizen and resident of New York, died October 28, 1898, leaving a last will whereby he bequeathed to Harry Plummer, his executor, $40,000 in United States bonds, issued under the funding act of 1870, in trust, to hold the same during the lifetime of Ella Plummer Brown, daughter of the testator, and to pay the income thereof to her during her life, and at her death to divide the same between and amongst her issue then living.

The value of this life interest was computed by the appraisers at the sum of $16,120, and a tax of $161.20 was imposed thereon by the surrogate of the county of New York. From this appraisal and the order imposing the tax an appeal was taken to the surrogate's court of the county and state of New York, where the following stipulation was filed:

'It is stipulated and agreed by and between the attorneys for the respective parties to the above-entitled proceedings that the $40,000 in amount at par of bonds of the United States of America, of which the said Joseph Plummer died possessed, and upon the interest in which of Ella Plummer Brown a tax of $161.20 was fixed, assessed, and determined by the order appealed from consist of 4 per cent bonds issued in the year 1877 and due in the year 1907, under and by virtue of and pursuant to the statute of the United States, passed July 14, 1870, entitled 'An Act to Authorize the Refunding of the National Debt,' which authorized the Secretary of the Treasury, among other things, to issue various classes of bonds in the sums therein mentioned, including 'a sum or sums not exceeding in the aggregate one thousand million dollars of like bonds, . . . payable at the pleasure of the United States after thirty years from the date of their issue, and bearing interest at the rate of four per cent per annum; all of which said several classes of bonds and the interest thereon shall be exempt from the payment of all taxes or duties of the United States, as well as from taxation in any form by or under state, municipal, or local authority; and the said bonds shall have set forth and expressed upon their face the above-specified conditions;' and that pursuant to said statute there is set forth on the face of each of said bonds the following clause, that is to say: 'The principal and interest are exempt from the payment of all taxes or duties of the United States, as well as from taxation in any form by or under state, municipal, or local authority."

On December 22, 1899, the surrogate's court affirmed the appraisal and the order imposing a tax. Thereupon Harry Plummer, executor, appealed to the appellate division of the supreme court of the state of New York, which court on January 5, 1900, affirmed the order of the surrogate and the decree of the surrogate's court. From this decree of the appellate division of the supreme court an appeal was taken to the courtof appeals of the state of New York, where, on January 8, 1900, the proceedings and order of the surrogate and the decree of the appellate division were affirmed.

In the notice of appeal to the surrogate's court and in that of the appeal to the court of appeals the grounds of appeal were stated to be the invalidity of the statute of New York purporting to impose a tax upon a transfer by legacy of bonds of the United States, and the invalidity of the statute of the state of New York and of the authority exercised thereunder by the appraiser and the surrogate, in so far as United States bonds were concerned. And the appellant specially set up and claimed a title, right, privilege, and immunity under the Constitution of the United States, and under the statute of the United States in respect to the exemption of said bonds from state taxation in any form.

On January 9, 1900, a writ of error was sued out from this court. sued out from this court.

Messrs. William V. Rowe, Treadwell Cieveland, Horace Russell, and Evarts, Choate, & Beaman for plaintiff in error.

Messrs. Jabish Holmes, Jr., and Edgar J. Levey for defendant in error.

Mr. justice Shiras delivered the opinion of the court:

In this case we are called upon to consider the question whether, under the inheritance tax laws of a state, a tax may be validly imposed on a legacy consisting of United States bonds issued under a statute declaring them to be exempt from state taxation in any form.

It is not open to question that a state cannot, in the exercise of the power of taxation, tax obligations of the United States. Weston v. Charleston, 2 Pet. 449, 7 L. ed. 481; New York ex rel. Bank of Commerce v. Commissioners of Taxes, 2 Black, 620, 17 L. ed. 451; Home Ins. Co. v. New York, 134 U. S. 598, 33 L. ed. 1029, 10 Sup. Ct. Rep. 593.

So, likewise, it is settled law that bonds issued by a state, or under its authority by its public municipal bodies, are not taxable by the United States. Mercantile Bank v. New York, 121 U. S. 138, 30 L. ed. 895, 7 Sup. Ct. Rep. 826; Pollock v. Farmers' Loan & T. Co. 157 U. S. 429, 583, 39 L. ed. 759, 820, 15 Sup. Ct. Rep. 673.

The reasoning upon which these two lines of decision proceed is the same, namely, as was said by Mr. Justice Nelson, in The Collector v. Day, 11 Wall. 113, 124, sub nom. Buffington v. Day, 20 L. ed. 122, 126: 'The general government and the states, although both exist within the same territorial limits, are separate and distinct sovereignties, 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 their powers not granted, or, in the language of the Tenth Amendment, 'reserved,' are as independent of the general government as that government within its sphere is independent of the states;' and, as was said by Mr. Chief Justice Fuller, in Pollock v. Farmers' Loan & T. Co. 157 U. S. 537, 39 L. ed. 763, 15 Sup. Ct. Rep. 673: 'As the states cannot tax the powers, the operations, or the property of the United States, nor the means which they employ to carry their powers into execution, so it has been held that the United States have no power under the Constitution to tax either the instrumentalities or the property of a state.'

As, then, for the reasons advanced and applied in the previous cases, it is not within the power of a state to tax Federal securities, it was not necessary for Congress, in order to secure such immunity, to declare in terms, in the act of July 14, 1870, and on the face of the bonds issued thereunder, that the principal and interest were exempt from taxation in any form by or under state, municipal, or local authority. Such a declaration did not operate to withdraw from the states any power or right previously possessed, nor to create, as between the states and the holders of the bonds, any contractual relation. It doubtless may be regarded as a legitimate mode of advising purchasers of such bonds of their immunity from state taxation, and of manifesting that Congress did not intend to waive this immunity, as it had done in the case of naio nal banks, which are admittedly governmental instrumentalities.

With these concessions made, we are brought to the pivotal question in the case, and that question is thus presented in the second point discussed in the brief filed for the plaintiff in error. 'If the question of the right of the state to impose the tax now in question be considered merely with reference to the inherent lack of power of the state to impose such a tax, because of the provisions of the Constitution of the United States bearing upon that question, without any aid from the statute of the United States under which these bonds were issued, or the exemption clause contained in the bonds, we conceive it to be entirely clear that the tax in question is unconstitutional, because impairing and burdening the borrowing power of the United States.' Or, as stated elsewhere in the brief: 'The states have no power to impose any tax or other burden which would have the effect to prevent or hinder the government of the United States from borrowing such amounts of money as it may require for its purposes, on terms as beneficial and favorable to itself, in all respects, as it could do if no such tax were imposed by the state.'

It will be observed that these propositions concede that the tax law of the state of New York in question does not expressly, or by necessary implication, propose to tax Federal securities. It is only when and if, in applying that law to the estates of decedents, such estates are found to consist wholly or partly of United States bonds, that the reasoning of the plaintiff in error, assailing the validity of the statute, can have any application. And the contention is that individuals, in forming or creating their estates, will or may be deterred from offering terms, in the purchasing of such bonds, as favorable as they otherwise might do, if they are bound to know that such portion of their estates as consists of such bonds is to be included, equally with other property, in the assessment of an inheritance tax.

Before addressing ourselves directly to the discussion of these propositions we shall briefly review the decisions in whose light they must be determined.

And, first, what is the voice of the state courts?

A detailed examination of the state decisions is unnecessary, because it is admitted in the brief of the plaintiff in error that in many, if not in most, of the states of the Union inheritance or succession tax laws, similar to the New York statute in question, are and have been long in operation, and that the question of their validity, in cases like the present, has always heretofore been determined by the state courts against the United States. We cannot, however,...