Case Name: WHEELER v. SOHMER, COMPTROLLER OF THE STATE OF NEW YORK
Court: Supreme Court of the United States
Jurisdiction: United States
Decision Date: 1914-04-20
Citations: 233 U.S. 434
Docket Number: No. 45
Parties: WHEELER v. SOHMER, COMPTROLLER OF THE STATE OF NEW YORK.
Judges: I am authorized to say that Mr. Justice Pitney concurs in this opinion.
Reporter: United States Reports
Volume: 233
Pages: 434–447

Head Matter:
WHEELER v. SOHMER, COMPTROLLER OF THE STATE OF NEW YORK.
ERROR TO THE SURROGATES’ COURT OF NEW YORK COUNTY, STATE OF NEW YORK.
No. 45.
Argued November 5, 6, 1913.
Decided April 20, 1914.
The provision in the New York Inheritance Tax Statute, imposing a transfer tax on property within the State belonging to a non-resident at the time of his death, is not unconstitutional under the due process clause of the Fourteenth Amendment as applied to promissory notes the makers of which are non-residents of that State. Buck v. Beach, 206 U. S. 392, distinguished.
202 N. Y. 550, affirmed.
The facts, which involve the power of a State to tax promissory notes located in the. State although neither the owner nor the maker are residents thereof, are stated in the opinion.
Mr. Charles P. Howland for plaintiffs in error:
The taxation of the full value of the debts represented by these promissory notes deprived the executors and beneficiaries of the estate of their property without due process of law, and was in contravention of the Fourteenth Amendment.
Jurisdiction of a State for purposes of transfer or in heritance taxation is limited to property within the State, in the senses in which that phrase has been recognized. Metropolitan Life Ins. Co. v. New Orleans, 205 U. S. 395.
Promissory notes are only evidences of debt and not the debts themselves. Their situs, therefore, is not the situs of the debts; the situs of the debts is at the residence of one or the other of the parties to the relation. Buck v. Beach, 206 U. S. 392; Pelham v. Way, 15 Wall. 196.
As to the distinction between a debt and the evidence establishing it, see Wyman v. Halstead, 109 U. S. 654; Attorney General v. Bouwens, 4 M. & W. 171, 191; Hunter v. Supervisors, 33 Iowa, 376; Hanson’s Death Duties (4th ed.), p. 239.
A note is the representative of a debt as a warehouse receipt is the representative of personal property, but such a receipt cannot be taxed at the value of the goods on the theory that in some way it represents them. Selliger v. Kentucky, 213 U. S. 200.
The special factors which warrant inheritance taxation upon choses in action belonging to the estates of nonresident decedents — control over the person of the debtor or over the means of enforcement of the obligation — do not exist here. Blackstone v. Miller, 188 U. S. 189 (semble).'
In the case of choses in action the State of the owner’s domicile levies one tax, Matter of Swift, 137 N. Y. 77, while the State of the debtor’s domicile levies a tax “not because of any theoretical speculation concerning the whereabouts of the debt, but because of the practical fact of its power over the person of the debtor” — in. other words, because it grants a practical privilege by providing means for the collection of the debt. Blackstone v. Miller, 188 U. S. 189; Matter of Houdayer, 150 N. Y. 37.
In this case the State of the decedent had no control over the persons of the debtors. That control was in the States of the debtors, Buck v. Beach, 206 U. S. 392, 407; Chicago, R. I. & P. R’y v. Sturm, 174 U. S. 710, 715, and as neither the universal succession nor the control over the means of enforcement was granted or could be regulated by the former State, that State had no power to tax.
The situs of bonds appears to determine the situs of the debts they symbolize, but bonds have always been sharply distinguished from promissory notes in that regard.
For certain purposes bonds have a peculiar recognition in the common law, and for purposes of taxation, annual or inheritance, are often treated as having a situs dependent upon their physical whereabouts. Matter of Bronson, 150 N. Y. 1; Matter of Fearing, 200 N. Y. 340; State Tax on Foreign Held Bonds, 15 Wall. 300.
But the rule does not embrace promissory notes. Buck v. Beach, 206 U. S. 392, 403.
This distinction between bonds and promissory notes has a historical basis. Selliger v. Kentucky, 213 U. S. 200, 204.
A promissory note may be the subject of larceny. People v. Ogdensburgh, 48 N. Y. 390, 397; Buck v. Beach, 206 U. S. 407.
At common law a promissory note was not within the •law of larceny, Regina v. Watts, 6 Cox, C. C. 304, but certificates of stock, warehouse receipts and policies of insurance are unquestionably the subjects of larceny (Penal Law of New York, 1909, e. 88), although none of them is the property whose situs determines the power of annual or of inheritance taxation. Matter of James, 144 N. Y. 6; Selliger v. Kentucky, 213 U. S. 200; Matter of Horn, 39 Misc. (N. Y.) 133.
Taxation rests upon protection as a correlative, and when no protection is either practically or theoretically possible, taxation shoúld not be laid: this is the broad basis for the rules limiting taxation. Union Transit Co. v. Kentucky, 199 U. S. 194; Matter of Bronson, 150 N. Y. 1; Cooley on Taxation (3d ed.), p. 3.
In this case the State of testator’s domicile may tax, arid indeed does so (Public Laws of Connecticut, 1903, c. 63), because it protects the universal succession.
The States of the debtors may tax, because they protect the debts by affording recourse to their respective courts. Matter of Daly, 100 App. Div. (N. Y.) 373; S. C., 182 N. Y. 524; Matter of Clinch, 180 N. Y. 300.
But New York has projected nothing.
If such taxation is allowed, triple taxation on many kinds of choses in action is possible; in the case of a bill of exchange issued in multiplicate, the domiciliary States of the owner and of the primary obligor would be able to tax, and also each State within which one of the multiplicate bills happened to be found at the owner’s death.
Mr. William Law Stout for defendant in error.

Opinion:
Me. Justice Holmes
delivered the judgment of the court.
This proceeding began with a petition by an executor, actitig 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, c. 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 Sur rogate confirmed the appraiser's report, and his order was affirmed by the Appellate Division and the Court of Appeals. 143 App. Div. 327. 202 N. Y. 550. 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 obligations 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; Wyman v. Halstead, 109 U. S. 654, 656, and the precise issue was thought to be disposed of by Buck v. Beach, 206 U. S. 392. 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 endorsee.- 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 modem 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 Fourteenth 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 Fourteenth Amendment often has been adverted to. Louisville & Nashville R. R. Co. v. Barber Asphalt Paving Co., 197 U. S. 430, 434. 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. Bristol v. Washington County, 177 U. S. 133, 141. State Board of Assessors v. Comptoir National d'Escompte, 191 U. S. 388, 403, 404. Metropolitan Life Insurance Co. v. New Orleans, 205 U. S. 395, 400, 402. This is the established law unless it has been overthrown by the decision in Buck v. Beach, 206 U. S. 392.
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, ibid., 395, and sending them to- Indiana was spoken of by Mr. Justice Peckham as improper and unjustifiable. Ibid. 402. Their absence from Ohio evidently was regarded as a temporary absence from home. Ibid. 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 Central & Hudson River R. R. Co. v. Miller, 202 U. S. 584, 597. 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 author-, ities to which we have referred.
In the case at bar it must bé 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.