Walker v. Jack

• Decision Date: 07 July 1898
• Docket Number: 534.
• Citation: 88 F. 576
• Parties: WALKER et al. v. JACK.
• Court: U.S. Court of Appeals — Sixth Circuit

88 F. 576

WALKER et al. v. JACK.

No. 534.

United States Court of Appeals, Sixth Circuit.

July 7, 1898

George A. Burr, for appellants.

Thomas B. Paxton and W. F. Eltzroth, for appellee.

Before TAFT and LURTON, Circuit Judges, and SEVERENS, District Judge.

TAFT Circuit Judge.

This is an appeal from a decree enjoining the taxing officers of Warren county, Ohio, from levying and collecting taxes on certain moneys and credits, evidenced by promissory notes and secured by mortgage upon land in that county, which are owned by John V. Jack, the complainant below, a nonresident of Ohio and a citizen of the state of New York. The answer admitted all the averments of the bill as to the ownership of the moneys and credits, the residence of Jack, and the intention of the defendants to levy and collect the taxes unless enjoined, but averred that the moneys and credits during the years for which the taxes were to be collected were invested loaned, and controlled by one George W. Carey, 'who was during all of said years the agent of the complainant in so investing, loaning, and controlling said moneys and credits and was during all of said years a resident of the said county of Warren, and state of Ohio'; 'that said moneys and credits should have been listed in said county of Warren for taxation therein, by the said George W. Carey, as such agent of complainant, in each and all of the aforesaid years, but that neither the said George W. Carey nor any one listed said moneys and credits for taxation in said county in and for any of said years.' The complainant excepted to the answer for insufficiency; the court sustained the exception; and, the defendants declining to plead further the court entered a decree perpetually enjoining the defendants as prayed in the bill. The court seems to have treated the exception as if equivalent to a demurrer testing the sufficiency of the averments of the answer as a defense to the bill upon its merits. This was not according to proper equity practice. There is no such thing as a demurrer to an answer in equity. Grether v. Cornell's Ex'rs, 43 U.S.App. 770, 23 C.C.A. 498, and 75 F 742. The only way by which the sufficiency of an answer on its merits as a defense to the case made in bill can be tested is by setting the case for hearing on bill and answer. The office of an exception is to raise the question whether the averments and denials of the answer are sufficiently responsive to the allegations of the bill. In this case the averments of the answer were in every way responsive to the allegations of the bill, and left nothing to be desired in defining the sharpness of the real issue between the parties. It was therefore an error to sustain the exceptions. We might be content to reverse the cause on this ground; but in order to shorten the further proceedings for which the case must be remanded, and because the parties have argued the case on its merits as presented by bill and answer, we proceed to consider it in that aspect.

The question is whether, by the laws of Ohio, the moneys and credits of a nonresident of Ohio are subject to taxation under the laws of that state, when such moneys or credits have been invested, loaned, and are under the control of the owner's agent resident in Ohio. Counsel for complainant below contend that such moneys and credits are not taxable in Ohio for two reasons: First, because they are not within the jurisdiction of the state, and the state has no power to tax them; and, second, because the statutes of Ohio, properly construed, do not provide for their taxation.

The general rule for determining the situs of personal property is that it follows the person of the owner, and has its situs at his residence. With respect to tangible personal property, however, it is well settled that it may be taxed by the sovereignty having jurisdiction over the place which is its actual situs, though the owner live in another jurisdiction. Intangible personal property, however, like choses in action and credits, can, as a general rule, only be taxed at the residence of the owner. State Tax on Foreign-Held Bonds, 15 Wall. 300; Kirtland v. Hotchkiss, 100 U.S. 498. The language of the former of these cases has been modified somewhat in Savings & Loan Soc. v. Multnomah Co., 169 U.S. 421, 428, 18 Sup.Ct. 392, where it was held to be within the power of a state to tax the interest of a nonresident mortgagee in the mortgaged property. But the earlier case is still authority for the general rule that a credit is taxable only at the residence of the creditor. Certain exceptions to this rule are recognized. One is where the chose in action is represented by a negotiable bond, property in which passes by delivery. In such a case the evidence of title is in such form, and is so important an element of the value of what it represents as to make it closely analogous to tangible property, and to give it a situs for taxation where the negotiable evidence of its existence actually is, even though the owner may live elsewhere. This exception is commented on by Mr. Justice Field in delivering the opinion of the court in the case of State Tax on Foreign-held Bonds. Another exception is where, though the beneficial interest in the debt is owned by a nonresident, yet the money is invested, the debt is contracted, and the investment is controlled, by a resident agent of the owner. In such a case it is held that the money and the credit in which it is invested are within the state, where the agent receives the money for his principal, and makes the loan, having authority to collect it and to reinvest it. Finch v. York Co., 19 Neb. 50, 26 N.W. 589; Billinghurst v. Spink Co., 5 S.D. 84, 58 N.W. 272; In re Jefferson, 35 Minn. 215, 28 N.W. 256; Redmond v. Commissioners, 87 N.C. 122; People v. Trustees of Village of Ogdensburg, 48 N.Y. 390; Catlin v. Hull, 21 Vt. 152; People v. Smith, 88 N.Y. 576; Hutchinson v. Board, 66 Iowa, 35, 23 N.W. 249; People v. Davis, 112 Ill. 272; People v. Insurance Co., 29 Cal. 534; Herron v. Keeran, 59 Ind. 472. In such cases the circumstance that the agent has in his possession the evidence of the indebtedness is regarded as of importance. The authorities above cited leave no doubt of the power of the state of Ohio to tax any moneys and credits owned by nonresidents, the custody of which has really been intrusted by their owners to resident agents.

The next question is whether the law of Ohio taxes such moneys and credits.

Section 2731, Rev. St. Ohio, is as follows:

'All property, whether real or personal, in this state, and whether belonging to individuals or corporations; and all moneys, credits, investments in bonds, stocks or otherwise, of persons residing in this state, shall be subject to taxation, except only such as may be expressly exempted therefrom; and such property, moneys, credits and investments shall be entered on the list of taxable property, as prescribed in this title.'

Section 2734, Rev. St. Ohio, is as follows:

'Every person of full age and sound mind shall list the personal property of which he is the owner, and all moneys in his possession, all moneys invested, loaned or otherwise controlled by him, as agent or attorney, or on account of any other person or persons, company or corporation whatsoever, and all moneys deposited subject to his order, check or draft, and all credits due or owing from any person or persons, body corporate or politic, whether in or out of such county.'

Section 2735, Rev. St. Ohio,...