reinvestment or other use, they remained still subject to taxation, according to the decision in 49 La Ann. 43. With regard to the notes and mortgages, it may be conceded that there is no express decision of the Supreme Court to the effect that they were taxable under the law of 1890; yet the reasoning of that court in several cases and its declarations, although perhaps only dicta, show that clearly in its judgment they had a local situs within the State, and were by the statute of 1890 subject to taxation.

When the question is whether property is exempt from taxation, and that exemption depends alone on a true construction of a statute of the State, the Federal courts should be slow to declare an exemption in advance of any decision by the courts of the State. The rule in such a case is that the Federal courts follow the construction placed upon the statute by the State courts, and in advance of such construction they should not declare property beyond the scope of the statute and exempt from taxation unless it is clear that such is the fact. In other words, they should not release any property within the State from its liability to State taxation unless it is obvious that the statutes of the State warrant such exemption, or unless the mandates of the Federal Constitution compel it.

If we look to the decisions of other States, we find the frequent ruling that when an indebtedness has taken a concrete form and become evidenced by note, bill, mortgage, or other written instrument, and that written instrument evidencing the indebtedness is left within the State in the hands of an agent of the non-resident owner, to be by him used for the purposes of collection and deposit or reinvestment within the State, its taxable situs is in the State. See Catlin v. Hull, 21 Vt. 152, in which the rule was thus announced (pages 159, 161):

"It is undoubtedly true that, by the generally acknowledged principles of public law, personal chattels follow the person of the owner, and that upon his death they are to be distributed according to the law of his domicile; and, in general, any conveyance of chattels good by the law of his own domicile will be good elsewhere. But this rule is merely 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. But even this doctrine is to be received and understood with this limitation, that there is no positive law of the country where the property is in fact which contravenes the law of his domicile; for if there is, the law of the owner's domicile must yield to the law of the State where the property is in fact situate."

"We are not only satisfied that this method of taxation is well founded in principle and upon authority, but we think it 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 benefits and advantages of our laws for the protection of their property, their property should yield its due proportion towards the support of the government which thus protects it."

In Goldgart v. People, 106 Ill. 25, 28, the court said:

"If the owner is absent, but the credits are in fact here, in the hands of an agent, for renewal or collection, with the view of reloaning the money by the agent as a permanent business, they have a situs here for the purpose of taxation, and there is jurisdiction over the thing."

In Wilcox v. Ellis, 14 Kan. 588, the power of the State to tax a citizen and resident of Kansas, on money due him in Illinois, evidenced by a note which was left in Illinois for collection, was denied, the court saying (p. 603), after referring to the maxim, mobilia sequuntur personam:

“This maxim is at most only a legal fiction; and Blackstone, speaking of legal fictions, says: This maxim is invariably observed, that no fiction shall extend to work an injury, its proper operation being to prevent a mischief, or remedy an inconvenience, that might result from the general rule of law.' 3 Blackstone Com. 43. Now, as the State of Iliinois, and not Kansas, must furnish the plaintiff with all the remedies that he may have for the enforcement of all his rights connected with said notes, debts, etc., it would seem more just, if said debt is to be taxed at all, that the State of Illinois, and not Kansas, should tax it, and that we should not resort to legal fictions to give the State of Kansas the right to tax it."

The same doctrine was affirmed in Fisher v. Commissioners of Rush County, 19 Kan. 414, and again in Blain v. Irby, 25 Kan. 499, 501, in which the court said, referring to promissory notes: "They have such an independent situs that they may be taxed where they are situated."

The decisions of the highest courts of New York, in which State these plaintiff's reside, are to the same effect. In People v. Trustees, 48 N. Y. 390, 397, the court said:

"That the furniture in the mansion and the money in the bank were, under these provisions, properly assessable to the relators is not seriously disputed. And I am unable to see why the money due upon the land contracts must not be assessed in the same way. The debts due upon these contracts are personal estate, the same as if they were due upon notes or bonds; and such personal estate may be said to exist where the obligations for payment are held. Notes, bonds, and other contracts for the payment of money have always been regarded and treated in the law as personal property. They represent the debts secured by them. They are the subject of larceny, and a transfer of them transfers the debt. If this kind of property does not exist where the obligation is held, where does it exist? It certainly does not exist where the debtor may be and follow his person. And while, for some purposes in the law, by legal fiction, it follows the person of the cred

itor and exists where he may be, yet it has been settled that, for the purpose of taxation, this legal fiction does not, to the full extent, apply, and that such property belonging to a non-resident creditor may be taxed in the place where the obligations are held by his agent. Hoyt v. Commissioners of Taxes, 23 N. Y. 238; The People v. Gardner, 51 Barb. 352; Catlin v. Hull, 21 Vt. 152."

This proposition was reaffirmed in People ex rel. v. Smith, 88 N. Y. 576, in which the Court of Appeals of that State held that a resident of New York was not liable to taxation on moneys loaned in the States of Wisconsin and Minnesota on notes and mortgages, which notes and mortgages were held in those States for collection of principal and interest and reinvestment of the funds, it appearing that property so situated within the limits of those States was there subject to taxation. See also Missouri v. St. Louis County Court, 47 Mo. 594, 600; People v. Home Insurance Company, 28 Cal. 533; Billinghurst v. Spink County, 5 S. Dak. 84, 98; In re Jefferson, 35 Minn. 215; Poppleton v. Yamhill County, 18 Ore. 377; Redmond v. Commissioners, 87 N. C. 122; Finch v. York County, 19 Neb. 50.

With reference to the decisions of this court, it may be said that there has never been any denial of the power of a State to tax securities situated as these are, while there have been frequent recognitions of its power to separate for purposes of taxation the situs of personal property from the domicile of the owner. In State Tax on Foreignheld Bonds, 15 Wall. 300, it was held that while the taxing power of the State may extend to property within its territorial limits, it cannot to that which is outside those limits; and, therefore, that bonds issued by a railroad company, although secured by a mortgage on property within the State, were not subject to taxation while in the possession of their owners who were non-residents, the court saying: "We are clear that the tax cannot be sustained; that the bonds, being held by non-residents of the State, are only property in their hands, and that they are thus beyond the jurisdiction of the taxing power of the State." But in the same case, on page 323, the court declared: "It is undoubtedly true that the actual situs of personal property which has a visible and tangible existence, and not the domicile of its owner, will, in many cases, determine the State in which it may be taxed. The same thing is true of public securities consisting of State bonds and bonds of municipal bodies, and circulating notes of banking institutions. The former, by general usage, have acquired the character of, and are treated as, property in the place where they are found, though removed from the domicile of the owner; the latter are treated and

pass as money wherever they are. But other personal property, consisting of bonds, mortgages, and debts generally, has no situs independent of the domicile of the owner, and certainly can have none where the instruments, as in the present case, constituting the evidences of debt, are not separated from the possession of the owners."

This last sentence, properly construed, is not to be taken as a denial

of the power of the legislature to establish an independent situs for bonds and mortgages when those properties are not in the possession of the owner, but simply that the fiction of law, so often referred to, declares their situs to be that of the domicile of the owner, a declaration which the legislature has no power to disturb when in fact they are in his possession. It was held in that case that a statute requiring the railroad company, the obligor in such bonds, to pay the State tax, and authorizing it to deduct the amount of such taxation from the interest due by the terms of the bond, was, as to non-residents, a law impairing the obligation of contracts. The same proposition was affirmed in Murray v. Charleston, 96 U. S. 432, where the city of Charleston attempted to tax its obligations held by non-residents of the State. In Tappan v. Merchants' National Bank, 19 Wall. 490, the ruling was, that although shares of stock in national banks were in a certain sense intangible and incorporeal personal property, the law might separate them from the persons of their owners for purposes of taxation, and give them a situs of their own. See also Pullman's Car Company v. Pennsylvania, 141 U. S. 18, 22, where the question of the separation of personal property from the person of the owner for purposes of taxation was discussed at length; as also the case of Savings Society v. Multnomah County, 169 U. S. 421, 427, in which a statute of Oregon taxing the interest of a mortgagee in real estate was adjudged valid, although the owner of the mortgage was a non-resident. Nor is there anything in the case of Kirtland v. Hotchkiss, 100 U. S. 491, conflicting with these decisions. It was there held that a State might tax one of its citizens on bonds belonging to him, although such bonds were secured by mortgage on real estate situated in another State. It was assumed that the situs of such intangible property as a debt evidenced by bond was at the domicile 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, 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."

This matter of situs may be regarded in another aspect. In the absence of statute, bills and notes are treated as choses in action, and are not subject to levy and sale on execution; but by the statutes of many States they are made so subject to seizure and sale as any tangible personal property. 1 Freeman on Executions, s. 112; 4 Am. & Eng. E. of L., 2d ed., 282; 11 Am. & Eng. E. of L., 2d ed., 623.

Among the States referred to in these authorities as having statutes warranting such levy and sale are California, Indiana, Kentucky, New York, Tennessee, Iowa, and Louisiana. Brown v. Anderson, 4 Martin (N. S.), 416, affirmed the rightfulness of such a levy and sale. In Fluker v. Bullard, 2 La. Ann. 338, it was held that if a note was not taken into the actual possession of the sheriff, a sale by him on an execution conveyed no title on the purchaser, the court saying: "In the case of Simpson v. Allain, it was held that, in order to make a valid seizure of tangible property, it is necessary that the sheriff should take the property levied upon into actual possession. 7 Rob. 504. In the case of Gobeau v. The New Orleans & Nashville Railroad Company, the same doctrine is still more distinctly announced. The court there says: From all the different provisions of our laws above referred to, can it be controverted that, in order to have them carried into effect, the sheriff must necessarily take the property seized into his possession? This is the essence of the seizure. It cannot exist without such possession.' 6 Rob. 348. It is clear, under these authorities, that the sheriff effected no seizure of the note in controversy, and consequently his subsequent adjudication of it conferred no title on Bailey."

6

The same doctrine was reaffirmed in Stockton v. Stanbrough, 3 La. Ann. 390. Now, if property can have such a situs within the State as to be subject to seizure and sale on execution, it would seem to follow that the State has power to establish a like situs within the State for purposes of taxation.

It has also been held that a note may be made the subject of seizure and delivery in a replevin suit. Graff v. Shannon, 7 Iowa, 508; Smith v. Eals, 81 Iowa, 235; Pritchard v. Norwood, 155 Mass. 539.

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 domicile of the owner; are subject to levy and sale on execution, and to seizure and delivery under replevin; and yet they are but promises to pay, evidences of existing indebtedness. Notes and mortgages are of the same nature; and while they may not have become so generally recognized as tangible personal property, yet they have such a concrete form that we see no reason why a State may not declare that if found within its limits they shall be subject to taxation. It follows from these considerations that

The decree of the Circuit Court must be reversed and the case
remanded for further proceedings.1

HARLAN and WHITE, JJ., dissenting.

1 Acc. Bristol v. Washington County, 177 U. S. 133; Walker v. Jack, 88 Fed. 576; P. v. Home Ins. Co., 29 Cal. 533; In re Jefferson, 35 Minn. 217; S. v. Bentley, 23 N. J. L. 532. See Herron v. Keeran, 59 Ind. 472.- ED.

Grevent Blackston
1884.5. 189

Müller [1903]

199 4.5.194 [1905" 202 U.S. 584 [1906] 2054.5. 395 [Py

Mst. Fife Eas. Co. v. New Orleans