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CHAPTER IV.

LIMITATIONS ON TAXING POWER ARISING OUT OF THE SITUS OF THE PROPERTY TAXED.

§ 40. Chattels. It would seem to be an axiom that a State has no right to impose taxes upon persons or property beyond the limits of the State; its sovereignty extends no farther. As to real estate, it has never been claimed that such property could be taxed by any State other than that in which it is situated. And the same rule seems to be applied to personal property; but the difficulties arise in the application of the principle. Where the owner resides in one State and the property consists of goods and chattels which have an actual situs in another State, it is well settled that the owner is not to be taxed at his residence or domicile for property situated in another State. Generally the owner of property is taxed at the place of his residence for all his personal property, but where the property has a visible and tangible existence, not at the domicile of the owner, and is permanently situated at another place, it is liable to taxation at the place of its situation.'

It has been thought that the statute of Massachusetts, which defines personal estate for the purposes of taxation, to include "goods, chattels, money and effects, wherever they are, ships, public stocks and securities, stocks in turnpikes, bridges and moneyed corporations within or without the State," asserts the principle that all personal property may be taxed with reference solely to the domicile of the owner, and without reference to the situs of the property. But this view is not sustained by the courts of Massachusetts. A., residing in Manchester, in the State of New Hampshire, owned a building in Lawrence, Massachusetts, standing by consent on the ground of another. In the discretion of assessors, under statute in Massachu

1 Hoyt v. Com'rs of Taxes, 23 N. Y. 224; State v. Ross, 3 Zabr. 517; Mills v. Thornton, 26 ill. 300; Carrier v. Gordon, 21 Ohio, N. S. 605; Blood v. Sayre, 11 Vt. 609; Davenport v. Mississippi Railroad Co. 12 Iowa, 539.

Field, J., in State Tax on Foreign-held Bonds, 15 Wall. 323, 324; Sangamon & M. Railroad Co. v. Morgau County, 14 III. 163.

ร Report of Commissioner Wells et al. to the New York Legislature on Taxation (1871),

It was taxed as per

setts, it might be taxed as real or personal estate. sonal estate, and sold for default in payment of the tax. The purchaser was held a trespasser in entering without A.'s consent. "If it was personal estate, it was not taxable in L., any more than a ship touching at the wharf, owned by a resident of New York city."

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But, in construing a statute making personal property liable to taxation"in the town where the owners hire or occupy manufactories, stores, shops or wharves," it was held to apply to non-resident owners of such property situate in the State of Massachusetts, whether they be individuals or corporations.2 Dewey, J., in the latter case, says: "We are aware of the distinction between real and personal estate in respect to the loci rei sito, and that the general rule as to the latter is that it follows the person of the owner, and in most cases in reference to taxes would be taxed in the place of the inhabiting owner. But as to goods, wares and merchandise, or any stock in trade, or any stock employed in manufacturing or the mechanical arts, where the business of selling or manufacturing is carried on in this commonwealth, it has not been thought a violation of comity to a sister State to tax such goods or stock in the town where they were thus made the subject of sale or manufacture."

The rule is clear and well settled as to chattels having an actual permanent situs in a State different from the owner, that they may be taxed at their situs, without reference to the residence of the owner. But there is some conflict of authority in reference to debts, where the evidence of debt or the property on which it is secured has a situs different from the owner, as in cases of collateral inheritance tax, of stocks of corporations owned by non-residents, bonds or stocks of State and municipal corporations, negotiable paper held by non-residents, steamboats, goods consigned for sale, and goods in transitu through a State. 41. Debts.-Chattels are taxed where they are situated, but where is a debt situated? The creditor and the security for the debt may be in one State, the evidence of the debt in another, and the debtor in still another. Where the debt is not evidenced by negotiable paper, there are two views taken of the subject: one that the debt should be taxed at the residence of the debtor, the other that it should be taxed at the residence of the creditor or owner. The weight

of authority is with the latter view, that the situs of the debt is that of its owner; that it is not property in the State of the debtor, but is

Flanders v. Cross, 10 Cush. 514.

Blackstone Manufacturing Co. v. Inhab. of B., 13 Gray, 488; Leonard v. New Bedford, 16 Gray, 292.

property only where the owner resides. In the case first cited, the legislature of Pennsylvania enacted a law requiring that the president, treasurer, or cashier of every company incorporated under the laws of the State, doing business in the State, and paying interest to its bondholders, should, before paying the same, retain from the bondholders or creditors a tax of five per centum, and pay over the same to the State treasurer semi-annually. It was held not to be a valid exercise of the taxing power, and that it violated the obligation of the contract between the corporation and the bondholder who was not a resident of Pennsylvania. As to the bondholders resident in the State, it was a valid exercise of the taxing power, the bonds as to residents being property within the State. Field, J., says: "Debts owing by corporations, like debts owing by individuals, are not property of the debtor in any sense; they are the obligations of the debtors, and only possess value in the hands of the creditors. With them they are property, and in their hands they may be taxed. To call debts property of the debtors is a misuser of terms. All the property there can be in the nature of things in debts of corporations, belongs to the creditors to whom they are payable, and follows their domicile, wherever that may be. Their debts can have no locality separate from the parties to whom they are due. This principle might be stated in many different ways, and supported by citations from numerous adjudications, but no number of authorities, and no forms of expression could add anything to its obvious truth, which is recognized upon its simple statement. The bonds of the railroad company in this case are undoubtedly property, but property in the hands of the holders, and not property of the obligors. So far as they are held by nonresidents of the State, they are property beyond the jurisdiction of the State."

The views expressed in the authorities cited above accord with those in which it is maintained that the tax is upon the person, and not upon property, except in the cases of non-resident real estate and local assessments, the tax being a contribution levied by government upon

1 State Tax on Foreign-held Bonds, 15 Wall. 300; Johnson v. Oregon City, 3 Oregon, 13; Com. v. Hays, 8 B. Mon. 1; Railroad Co. v. Jackson, 7 Wall. 262. This case is criticised in 15 Wall. 318, 319; reasoning disapproved, results affirmed; the fact that the mortgage securing the bonds was on property out of the State was unimportant; the important fact was that the creditor was out of the State. Collins v. Miller, 43 Ga. 336; Hunter v. Supervisors of Page County, 33 Iowa, 376; Johnson v. City of Lexington, 15 B. Mon. 648; City Council of Augusta v. Dunbar, 50 Ga. 387.

Davis and Hunt, JJ., dissented from the opinion of
Davenport v. The Mississippi & Missouri Railroad,
Mortgages on real estate in Iowa, were held not to
holders. Tappan v. Merchants' National Bank, 19

2 15 Wall. 302. Clifford, Miller, the court delivered by Judge Field. 12 Iowa, 539, fully sustains 15 Wall. be taxable in the hands of non-resident Wall. 499, s. p.

its citizens, for its support, and that the property of the citizen was looked to merely as a measure of the contribution which it was just that he should make for that purpose. A resident of Iowa deposited for safe keeping in Illinois promissory notes for $7,000, that were never brought into Iowa. They were held liable to be taxed in Iowa.1 Miller, J., says, "It is not the notes as such that are taxed, it is the debt; notes are mere evidences of the debt; the right to money due being in the resident in Iowa, the property must of necessity be at the place where he resides, irrespective of the situs of the evidence." The same principle is contained in another large class of cases, where the question is, in what county or town a person shall be taxed for debts due from solvent debtors, where the creditor and the debtor reside in different counties, or where the creditor is in one county and the mortgage or other security is in another. In California, the statute requires all property to be taxed in the county where it is situated. A., residing in San Francisco, held a mortgage on property in Mariposa county; it was foreclosed and recorded in that county. It was held not liable to taxation in that county; the court saying: "The mortgage has no existence independent of the thing secured by it; a payment of the debt discharges the mortgage. The thing secured is intangible, and has no situs distinct and apart from the residence of the holder. It pertains to and follows the person." So, the cash capital of a mercantile firm is taxed as personal estate, at the domicile of the owners. The residence of a banker is the place in which his capital as a banker is taxed. Davis, J.: "In such cases the maxim mobilia personam sequuntur would apply, and by fiction of law the situs of the property would be the personal residence of the owner." 4 What constitutes the domicile of a party, is a question sometimes of much uncertainty; for purposes of taxation the residence of a party liable to assessment for personal property will be deemed to continue where it has been until a change is affirmatively shown. And a change cannot be effected by intention alone, without actual removal. But where an inhabitant of a town removes to another town in the commonwealth, not intending to remain permanently, but with intention of not returning to his former home, and does not so return,

' Hunter v. Supervisors of Page Co. 33 Iowa, 376, 379. People v. Eastman, 25 Cal. 603.

3 St. John v. Mobile, 21 Ala. 224.

Miner v. Village of Fredonia, 27 N. Y. 155, 156; People v. Supervisors of Chenango, 11 N. Y. 563. The same principle is decided in many other cases. People v. Whartenby, 38 Cal. 461; People v. McCreery, 34 Cal. 459; State v. Manchester, 1 Dutch. 531; St. Paul v. Merrill, 7 Minn. 258.

In the Matter of Nichols, 54 N. Y. 66.

Stoddard v. Ward, 31 Md. 562.

he loses his domicile in the former town.1 In case of death, the personal property of the decedent is taxed where he resided; it must have a situs somewhere, and none so appropriate during the settlement of the estate as the domicile of the late owner; but so soon as it is paid over to the heir, legatee, or trustee under the will, then it is taxed at the domicile of the person to whom it is paid. A distinction is taken between domicile and residence: a person may have a domicile in one State and a residence in another; inhabitant implies a more permanent and fixed abode than resident, and frequently imports many privileges and duties which a mere resident could not claim or be subject to.3

§ 42. The Opposite View and a Modification of the Rule.—Where N., a resident of New York, owned certain property, consisting of debts due from solvent debtors resident in Vermont, evidenced by promissory notes, and appointed an agent, residing in Vermont, to control and manage the property, and collect and reloan from time to time, as he should think proper, and allowed him a specified salary for so doing, it was held the legislature had power to enact a law subjecting property so situated to taxation. It was claimed that the maxim mobilia personam sequuntur was a legal fiction; adopted from considerations of general convenience and policy, for the benefit of commerce, and to enable persons to dispose of their property, at their decease, agreeably to their wishes, without being embarrassed by their want of knowledge in relation to the laws of the country where the same is situated, and did not at all conflict with the authority of the State where property is actually situate, to make it bear its share of the burden of the government by taxation. The court say, "It is entirely just and equitable, that if persons residing abroad bring their property and invest it in this State for the purpose of deriving profit from its use and employment here, and thus avail themselves of the benefit and advantages of our laws for the protection of their property, it should yield its due proportion towards the support of the government which thus protects it."

The agents of George Parrish, a resident of Bohemia, had in their possession, in the village of Ogdensburgh, N. Y., a large amount of household furniture in the mansion of their principal in the village, consisting of silver and plated ware, mirrors, books, pictures and wines, $6,000 in bank, contracts for the sale of land in the village amounting

1 Mead v. Roxborough, 11 Cush. (Mass.) 362.

Cornwall v. Todd, 38 Conn. 443.

3 Supervisors of Tazewell Co. v. Davenport, 40 Ill. 197, 204, 205.

4 Catlin v. Hall, 21 Vt. 152.

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