Laura Wheeler v. William Sohmer

• Decision Date: 20 April 1914
• Docket Number: No. 45,45
• Citation: 58 L.Ed. 1030,34 S.Ct. 607,233 U.S. 434
• Parties: LAURA WHEELER and Charles P. Howland, Executors of the Will of Charles C. Tiffany, Plffs. in Err., v. WILLIAM SOHMER, Comptroller of the State of New York
• Court: U.S. Supreme Court

233 U.S. 434

34 S.Ct. 607

58 L.Ed. 1030

LAURA WHEELER and Charles P. Howland, Executors of the Will of Charles C. Tiffany, Plffs. in Err.,

v WILLIAM SOHMER, Comptroller of the State of New York.

No. 45.

Argued November 5 and 6, 1913.

Decided April 20, 1914.

Mr. Charles P. Howland for plaintiffs in error.

[Argument of Counsel from pages 434-437 intentionally omitted] Mr. William Law Stout for defendant in error.

Mr. Justice Holmes delivered the judgment of the court:

This proceeding began with a petition by an executor, acting under ancillary letters, for the appointment of an appraiser to determine the amount, if any, of the transfer tax due from the estate of the deceased testator, Charles C. Tiffany. Tiffany was not a resident of New York at the time of his death, but left in a safe deposit box in New York four promissory notes made by Pottinger, a resident of Chicago, secured by mortgages of Chicago land to Illinois trustees, and promissory notes of the Southern Railway Company, a Virginia corporation. The appraiser held these notes taxable under the New York laws of 1905, chap. 368, § 1, amending § 220 of an earlier law, and imposing a tax 'when the transfer is by will or intestate law, of property within the state, and the decedent was a nonresident of the state at the time of his death.' The surro- gate confirmed the appraiser's report, and his order was affirmed by the appellate division and the court of appeals. 143 App. Div. 327, 128 N. Y. Supp. 106; 202 N. Y. 550, 95 N. E. 1140. The executors contend that the tax deprives them of their property without due process of law.

In support of this position it was argued that if bonds were subject to taxation simply because of their presence within the jurisdiction, it was due to the survival of primitive notions that identified the obligation with the parchment or paper upon which they were written; that bills and notes had a different history, and that there was no ground for extending the conceptions of the infancy of the race to them. It was pointed out that the power to tax simple contracts depends upon power over the person of one of the parties, and does not attach to documentary evidence of such contracts that may happen to be within the jurisdiction. Cases were cited in which this court has pronounced bills and notes to be only evidences of the simple contracts that they express (Pelham v. Way, 15 Wall. 196, 21 L. ed. 55; Wyman v. Halstead [Wyman v. United States] 109 U. S. 654, 656, 27 L. ed. 1068, 1069, 3 Sup. Ct. Rep. 417); and the precise issue was thought to be disposed of by Buck v. Beach, 206 U. S. 392, 51 L. ed. 1106, 27 Sup. Ct. Rep. 712, 11 Ann. Cas. 732. We shall discuss this case, but for the moment it is enough to say that for the purposes of argument we assume that bills and notes stand as mere evidences at common law.

But we are bound by the construction given to the New York statutes by the New York courts, and the question is whether a statute that we must read as purporting to give to bills and notes within the state the same standing as bonds for purposes of taxation goes beyond the constitutional power of the state. Again, for the purposes of argument we may assume that there are limits to this kind of power; that the presence of a deed would not warrant a tax measured by the value of the real estate that it had conveyed, or even that a memorandum of a contract required by the statute of frauds would not sup- port a tax on the value of the contract because it happened to be found in the testator's New York strong box. But it is plain that bills and notes, whatever they may be called, come very near to identification with the contract that they embody. An indorsement of the paper carries the contract to the indorser. An indorsement in blank passes the debt from hand to hand so that whoever has the paper has the debt. It is true that in some cases there may be a recovery without producing and surrendering the paper, but so may there be upon a bond in modern times. It is not primitive tradition alone that gives their peculiarities to bonds, but a tradition laid hold of, modified and adapted to the convenience and understanding of business men. The same convenience and understanding apply to bills and notes, as no one would doubt in the case of bank notes, which technically do not differ from others. It would be an extraordinary deduction from the 14th Amendment to deny the power of a state to adopt the usages and views of business men in a statute on the ground that it was depriving them of their property without due process of law. The necessity of caution in cutting down the power of taxation on the strength of the 14th Amendment often has been adverted to. Louisville & N. R. Co. v. Barber Asphalt Paving Co. 197 U. S. 430, 434, 49 L. ed. 819, 821, 25 Sup. Ct. Rep. 466. Unless we are bound by authority, we think the statute, so far as we now are concerned with it, plainly within the power of the state to pass.

As to authority, it has been asserted or implied, again and again, that the states had the power to deal with negotiable paper on the 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 domicil 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 v. Stempel, 175 U. S. 309, 322, 323, 44 L. ed. 174, 181, 20 Sup. Ct. Rep. 110; Bristol v. Washington County, 177 U. S. 133, 141, 44 L. ed. 701, 705, 20 Sup. Ct. Rep. 585; State Assessors v. Comptoir National d'Escompte, 191 U. S. 388, 403, 404, 48 L. ed. 232, 238, 239, 24 Sup. Ct. Rep. 109; Metropolitan L. Ins. Co. v. New Orleans, 205 U. S. 395, 400, 402, 51 L. ed. 853, 855, 856, 27 Sup. Ct. Rep. 499. This is the established law unless it has been overthrown by the decision in Buck v. Beach, supra.

No such effect should be attributed to that case. The Ohio notes in Buck's hands that were held not to be taxable 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 (id. 395), and sending them to Indiana was spoken of by Mr. Justice Peckham as improper and unjustifiable, Id. 402. Their absence from Ohio evidently was regarded as a temporary absence from home. Id. 404. And the conclusion 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 between the presence sufficient for a succession tax like that in this case, and that required 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 property tax. See New York ex rel. New York C. & H. R. R. Co. v. Miller, 202 U. S. 584, 597, 50 L. ed. 1155, 1160, 26 Sup. Ct. Rep. 714. If Buck v. Beach is not to be distinguished on one of the foregoing grounds, as some of us think that it can be, we are of opinion that it must yield to the current of authorities to which we have referred.

In the case at bar it must be taken that the safe deposit box in which the notes were found was their permanent resting place, and therefore that the power of the state so repeatedly asserted in our decisions could come into play.

Judgment affirmed.

Mr. Justice McKenna, concurring:

I concur in the result, but cannot concur in the reasoning of the opinion, or rather, its controlling proposition, unmodified. I might pass it by in silence if it did not have larger consequence than the decision of the pending case. The opinion is rested on the proposition, said to be based on authority, that the states have power to deal 'with negotiable paper on the footing of situs;' that is, to regard such paper so far concrete and tangible as to be of itself a subject of taxation, irrespective of the domicil of its owner, or, I add, the locality of the debt which it represents. For the proposition announced, Mr. Justice Brewer, in New Orleans v. Stempel, 175 U. S. 309, 44 L. ed. 174, 20 Sup. Ct. Rep. 110, is quoted from. Other cases are cited and it is said to be established law unless it has been overthrown by the decision in Buck v. Beach, 206 U. S. 392, 51 L. ed. 1106, 27 Sup. Ct. Rep. 712, 11 Ann. Cas. 732. I refrain from meeting the judgment of my brethren by simply opposing assertion, and I feel constrained to review the cases, including Buck v. Beach. I will do so in the order of their decision.

Commencing with the Stempel Case I may immediately say of it that its facts did not call for the broad and general declaration it is adduced to sustain. The statute passed on did not attempt to tax negotiable paper simply because of its presence in the state. It regarded the origin and use of such paper, and declared its (the statute's) purpose to be that no nonresident, by himself or through an agent, should transact business in the state 'without paying to the state a corresponding tax with that exacted of its own citizens;' and, to execute the purpose, declared: 'All bills receivable, obligations or credits arising from the business done in the state, are hereby declared assessable within this state, and at the business domicil of said nonresident, his agent or representative.'

The property assessed was inherited by Stempel's wards, they and she being residents of the state of New York. It was assessed to the estate of the grandfather of the wards, and was $15,000, 'money in possession, on depoit, or in hand,' and $8,000, 'money loaned or advanced, or for goods sold; and all credits of every description.' The contention was that 'the situs of the loans and credits was in New York, the place of...