Source: https://caselaw.findlaw.com/us-supreme-court/221/346.html
Timestamp: 2019-04-26 01:12:42+00:00

Document:
[221 U.S. 346, 347] Messrs. Monte M. Lemann, Alex. C. King, J. Blanc Monroe, and Harry H. Hall for plaintiff in error.
[221 U.S. 346, 349] Messrs. Harry P. Sneed, George H. Terriberry, and H. Garland Dupre for defendants in error.
In construing this statute, the supreme court of Loui- [221 U.S. 346, 351] siana in Metropolitan L. Ins. Co. v. Board of Assessors, 115 La. p. 708, 9 L.R.A.(N.S.) 1240, 116 Am. St. Rep. 179, 39 So. 846, said: 'There can be no doubt that the 7th section of the act of 1898 . . . announced the policy of the state touching the taxation of credits and bills of exchange representing an amount of the property of nonresidents equivalent or corresponding to said bills or credits which was utilized by them in the prosecution of their business in the state of Louisiana. The evident object of the statute was to do away with the discrimination theretofore existing in favor of nonresidents as against residents, and place them on an equal footing.' Again, in General Electric Co. v. Board of Assessors, 121 La. 116, 46 So. 122, where open accounts arising on the sale of merchandise were the subject of the assessment, the court said: 'There can be no serious question but that the legislature has provided that credits due upon open accounts arising out of business done in this state by nonresidents shall be taxed. . . . The state imposes this tax because of her need of the revenue to be derived from it; she extends to the business the protection of her laws, and seeks to make the business bear its just proportion of the burden of taxation. The situation would be, we repeat, unfortunate, not to say deplorable, if the state were left no choice between having to forego his needed revenue, or else handicapping with this tax the business of her own citizens and home corporations in their competition with foreigners for the business to be done here.' And his decision was followed in the present case.
This court has had repeated occasion to consider the validity of taxes imposed under the Louisiana act. The case of New Orleans v. Stempel, 175 U.S. 309 , 44 L. ed. 174, 20 Sup. Ct. Rep. 110, arose under chapter 106 of the Statutes of 1890, but the pertinent features of the act were the same. There it appeared that the assessed credits were evidenced by notes secured by mortgages on real estate in New Orleans; that these [221 U.S. 346, 352] notes and mortgages were in that city, in the possession of an agent, who collected the proceeds and the interest as it became due, and deposited the same in a bank in New Orleans to the cridit of the plaintiff, the guardian of infant owners, who, like herself, were domiciled in the state of New York. The tax was sustained. In State Assessors v. Comptoir Nat. D'Escompte, 191 U.S. 388 , 48 L. ed. 232, 24 Sup. Ct. Rep. 109, the question arose under the statute of 1898. In that case, a foreign banking company did business in New Orleans and there made loans through a local agent. The loans were made upon collateral security, the customer drawing his check, which was treated as an overdraft and held as a memorandum of the indebtedness. The court decided that the credits so evidenced, created in the Louisiana business, were taxable in that state. In Metropolitan L. Ins. Co. v. New Orleans, 205 U.S. 395 , 51 L. ed. 853, 27 Sup. Ct. Rep. 499,-also arising under the act of 1898,-the validity of a similar tax was upheld. That case was one of loans made through the local agent of the insurance company, a New York corporation doing business in Louisiana, to its policy holders upon the security of their policies. The course of business was that, on the approval of a loan at the home office of the company, the company forwarded to the agent a check for the amount, with a note to be signed by the borrower. The agent procured the note to be signed, and forwarded both note and policy to the home office. The agent collected and transmitted the interest, and when the notes were paid, it was to the agent to whom they were sent to be delivered back to the makers. At all other times the notes and the policies securing them were kept at the home office in New York. In Board of Assessors v. New York L. Ins. Co. 216 U.S. 517 , 54 L. ed. 597, 30 Sup. Ct. Rep. 385, the so-called credit consisted, in fact, of a payment to the policy holder of a portion of the amount for which the company was bound by its policy. It was found that, despite that fact that notes were given, there was no per- [221 U.S. 346, 353] sonal liability but simply a deduction in account. As there was no loan, there was no credit to be taxed; and a decree in the circuit court restraining the collection of the tax was affirmed.
The asserted distinction cannot be maintained. When it is said that intangible property, such as credits on open account, have their situs at the creditor's domicil, the metaphor does not aid. Being incorporeal, they can have no actual situs. But they constitute property; as such they must be regarded as taxable, and the question is one of jurisdiction.
The legal fiction expressed in the maxim mobilia sequuntur personam yields to the fact of actual control elsewhere. And in the case of credits, though intangible, arising as did those in the present instance, the control adequate to confer jurisdiction may be found in the sovereignty of the debtor's domicil. The debt, of course, is not property in the hands of the debtor; but it is an obligation of the debtor, and is of value to the creditor, because he may be compelled to pay; and power over the debtor at his domicil is control of the ordinary means of enforcement. Blackstone v. Miller, 188 U. S. pp. 205, 206, 47 L. ed. 444, 445, 23 Sup. Ct. Rep. 277. Tested by the criteria afforded by the authorities we have cited, Louisiana must be deemed to have had jurisdiction to impose the tax. The credits would have had no exist- [221 U.S. 346, 355] ence save for the permission of Louisiana; they issued from the business transacted under her sanction within her borders; the sums were payable by persons domiciled within the state, and there the rights of the creditor were to be enforced. If locality, in the sense of subjection to sovereign power, could be attributed to these credits, they could be localized there. If, as property, they could be deemed to be taxable at all, they could be taxed there.
In Kirtland v. Hotchkiss, 100 U.S. 491 , 25 L. ed. 558, it was held that the Federal Constitution does not prohibit a state from taxing her own citizens upon bonds belonging to them, although they were made by debtors resident in other states and secured by mortgage on real estate there situated. The sole inquiry was with respect to the validity of the statute of Connecticut, where the creditor was domiciled. As the court said in New Orleans v. Stempel, supra (p. 321), in referring to the Kirtland Case: 'It was assumed that the situs of such intangible property as a debt evidenced by bond was at the domicil of the owner. There was no legislation attempting to set aside that ordinary rule in respect to the matter of situs. On the contrary, the legislature of the state of Connecticut, [221 U.S. 346, 356] from which the case came, plainly reaffirmed the rule, and the court in its opinion summed up the case in these words (p. 499): 'Whether the state of Connecticut shall measure the contribution which persons resident within its jurisdiction shall make by way of taxes, in return for the protection it affords them, by the value of the credits, choses in action, bonds, or stocks which they may own (other than such as are exempted or protected from taxation under the Constitution and laws of the United States), is a matter which concerns only the people of that state, with which the Federal government cannot rightfully interfere." See also Kidd v. Alabama, 188 U.S. 730 , 47 L. ed. 669, 23 Sup. Ct. Rep. 401.
But, as we have seen, the jurisdiction of the state of his domicil, over the creditor's person, does not exclude the power of another state in which he transacts his business, to lay a tax upon the credits there accruing to him against resident debtors, and thus to enforce contribution for the support of the government under whose protection his affairs are conducted. And that the jurisdiction of the latter state rests upon considerations which are more fundamental than that notes have been given, or that the credits are evidenced in any particular manner, was clearly brought out in the concluding statement of the opinion in the case of the Metropolitan L. Ins. Co. v. New Orleans, 205 U.S. 402 , 51 L. ed. 856, 27 Sup. Ct. Rep. 499. There the court said: 'Moreover, neither the fiction that personal property follows the domicil of its owner, nor the doctrine that credits evidenced by bonds or notes may have the situs of the latter, can be allowed to obscure the truth. Blackstone v. Miller, 188 U.S. 189 , 47 L. ed. 439, 23 Sup. Ct. Rep. 277. We are not dealing here merely with a single credit or a series of separate credits, but with a business. The insurance company chose to enter into the business of lending money within the state of Louisiana, and employed a local agent to conduct that business. It was conducted under the laws of the state. The state undertook to tax the capital employed in the business [221 U.S. 346, 357] precisely as it taxed the capital of its own citizens in like situation. For the purpose of arriving at the amount of capital actually employed, its caused the credits arising out of the business to be assessed. We think the state had the power to do this, and that the foreigner doing business cannot escape taxation upon his capital by removing temporarily from the state evidences of credits in the form of notes. Under such circumstances, they have a taxable situs in the state of their origin.' Equally, then, had the state the power to tax the premium accounts here involved. They were not withdrawn from its constitutional authority, either by reason of the fact that they were payable in consideration of insurance, instead of loans or goods sold, or by the circumstance that the credits were not evidenced by written instruments. They were none the less enforceable credits arising in the local business.
It is also urged that the assessment was excessive. This question was not suitably presented in the state court, for the suit was brought for the cancelation of the entire assessment upon the ground that, as a whole, it was without warrant of law, or, it within the statute, was beyond the power of the legislature to authorize. It is said that, so far as the assessment was in excess of the actual credits, it was a nullity, as one of property not in existence. The subject of the assessment, however, was a class of credits which was within the taxing power, and the question is one of amount. Proper opportunity was afforded for its correction if it was too great; and if the plaintiff in error had seasonably sought a reduction, availing itself of the remedy that was open to it under the state law, it could have obtained appropriate relief. Orient Ins. Co. v. Board of Assessors, 124 La. 872, 50 So. 778. In no aspect of the case can it be said that there was want of due process of law.

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