Neither the fiction that personal property follows the domicil
of the owner nor the doctrine that credits evidenced by notes have
the situs of the latter can be allowed to obscure the truth, and
personal property may be taxed at its permanent abiding place
although the domicil of the owner is elsewhere.
Where a nonresident enters into the business of loaning money
within a state and employs a local agent to conduct the business,
the state may tax the capital employed precisely as it taxes the
capital of its own citizens in like situation, and may assess the
credits arising out of the business, and the foreigner cannot
escape taxation upon his capital by temporarily removing from the
state the evidences of credits which, under such circumstances,
have a taxable situs in the their origin. Loans made by a New York
life insurance company on its own policies in Louisiana are taxable
in that state although the notes may be temporarily sent to the
home office.
115 La. 698 affirmed.
The facts are stated in the opinion.
Page 205 U. S. 397
MR. JUSTICE MOODY delivered the opinion of the Court.
This is a writ of error to review the judgment of the Supreme
Court of Louisiana which sustained a tax on the "credits, money
loaned, bills receivable," etc., of the plaintiff in error, a life
insurance company incorporated under the laws of New York, where it
had its home office and principal place of business. It issued
policies of life insurance in the State of Louisiana, and, for the
purpose of doing that and other business, had a resident agent,
called a superintendent, whose duty it was to superintend the
company's business generally in the state. The agent had a local
office in New Orleans. The company was engaged in the business of
lending money to the holders of its policies, which, when they had
reached a certain point of maturity, were regarded as furnishing
adequate security for loans. The money lending was conducted in the
following manner: the policyholders desiring to obtain loans on
their policies applied to the company's agent in New Orleans. If
the agent thought a loan a desirable one, he advised the company of
the application by communicating with the home office in New York,
and requested that the loan be granted. If the home office approved
the loan, 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, attached the policy to it, and
forwarded both note and policy to the home office in New York. He
then delivered to the borrower the amount of the loan. When
interest was due upon the notes, it was paid to the agent and by
him transmitted to the home office. It does not appear whether or
not the notes were returned to New Orleans for the indorsement of
the payments of interest. When the notes were paid it was to the
agent, to whom they were sent
Page 205 U. S. 398
to be delivered back to the makers. At all other times, the
notes and policies securing them were kept at the home office in
New York. The disputed tax was not
eo nomine on these
notes, but was expressed to be on "credits, money loaned, bills
receivable," etc. and its amount was ascertained by computing the
sum of the face value of all the notes held by the company at the
time of the assessment. The tax was assessed under a law, Act 170
of 1898, which provided for a levy of annual taxes on the assessed
value of all property situated within the State of Louisiana, and
in Section 7 provided as follows:
"That it is the duty of the tax assessors throughout the state
to place upon the assessment list all property subject to taxation,
including merchandise or stock in trade on hand at the date of
listing within their respective districts or parishes. . . .
And provided further, in assessing mercantile firms the
true intent and purpose of this act shall be held to mean the
placing of such value upon stock in trade, all cash, whether
borrowed or not, money at interest, open accounts, credits, etc.,
as will represent in their aggregate a fair average on the capital,
both cash and credits, employed in the business of the party or
parties to be assessed. And this shall apply with equal force to
any person or persons representing in this state business interests
that may claim domicil elsewhere, the intent and purpose being that
no nonresident, either by himself or through any agent, shall
transact business here without paying to the state a corresponding
tax with that exacted of its own citizens, and all bills
receivable, obligations, or credits arising from the business done
in this state are hereby declared as assessable within this state
and at the business domicil of said nonresident, his agent or
representative."
The evident purpose of this law is to lay the burden of taxation
equally upon those who do business within the state. It requires
that, in the valuation for the purposes of taxation of the property
of mercantile firms, the stock, goods, and credits shall be taken
into account to the end that the average
Page 205 U. S. 399
capital employed in the business shall be taxed. This method of
assessment is applied impartially to the citizens of the state and
to the citizens of other states or countries doing business,
personally or through agents, within the State of Louisiana. To
accomplish this result, the law expressly provides that all bills
receivable, obligations, or credits arising from the business done
in this state shall be assessable at the business domicil of the
resident. Thus, it is clear that the measure of the taxation
designed by the law is the fair average of the capital employed in
the business. Cash and credits and bills receivable are to be taken
into account merely because they represent the capital, and are to
be omitted because their owner happens to have a domicil in another
state. The law was so construed by the Supreme Court of Louisiana,
where, in sustaining the assessment, it was said:
"There can be doubt that the seventh section of the act of 1898,
quoted in the judgment of the district court, 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. The statute
was not arbitrary, but a legitimate exercise of legislative power
and discretion."
The tax was levied in obedience to the law of the state, and the
only question here is whether there is anything in the Constitution
of the United States which forbids it. The answer to that question
depends upon whether the property taxed was within the territorial
jurisdiction of the state. Property situated without that
jurisdiction is beyond the state's taxing power, and the exaction
of a tax upon it is in violation of the Fourteenth Amendment to the
Constitution.
Louisville Ferry Co. v. Kentucky,
188 U. S. 385;
Delaware
&c.
Page 205 U. S. 400
Railroad Co. v. Pennsylvania, 198 U.
S. 341;
Union Refrigerator Transit Co. v.
Kentucky, 199 U. S. 194. But
personal property may be taxed in its permanent abiding place,
although the domicil of the owner is elsewhere. It is usually easy
to determine the taxable situs of tangible personal property. But
where personal property is intangible, and consists, as in this
case, of credits reduced to the concrete form of promissory notes,
the inquiry is complicated not only by the fiction that the domicil
of personal property follows that of its owner, but also by the
doctrine, based upon historical reasons, that, where debts have
assumed the form of bonds or other specialties, they are regarded
for some purposes as being the property itself, and not the mere
representative of it, and may have a taxable situs of their own.
How far promissory notes are assimilated to specialties in respect
of this doctrine need not now be considered.
The question in this case is controlled by the authority of the
previous decisions of this Court. Taxes under this law of Louisiana
have been twice considered here, and assessments upon credits
arising out of investments in the state have been sustained. A tax
on credits evidenced by notes secured by mortgages was sustained
where the owner, a nonresident, who had inherited them, left them
in Louisiana in the possession of an agent, who collected the
principal and interest as they became due.
New Orleans v.
Stempel, 175 U. S. 309.
Again, it was held that, where a foreign banking company did
business in New Orleans, and through an agent lent money which was
evidenced by checks drawn upon the agent, treated as overdrafts and
secured by collateral, the checks and collateral remaining in the
hands of the agent until the transactions were closed, the credits
thus evidenced were taxable in Louisiana.
Board of Assessors v.
Comptoir National, 191 U. S. 388. In
both of these cases, the written evidences of the credits were
continuously present in the state, and their presence was clearly
the dominant factor in the decisions. Here, the notes, though
present in the state at all times when
Page 205 U. S. 401
they were needed, were not continuously present, and, during the
greater part of their lifetime, were absent and at their owner's
domicil. Between these two decisions came the case of
Bristol
v. Washington County, 177 U. S. 133. It
appeared in that case that a resident of New York was engaged,
through an agent, in the business of lending money in Minnesota,
secured by mortgages on real property. The notes were made to the
order of the nonresident, though payable in Minnesota, and the
mortgages ran to her. The agent made the loans, took and kept the
notes and securities, collected the interest, and received payment.
The property thus invested continued to be taxed without protest in
Minnesota until finally the course of business was changed by
sending the notes to the domicil of the owner in New York, where
they were kept by her. The mortgages were, however, retained by the
agent in Minnesota, though his power to discharge them was revoked.
The interest was paid to the agent and the notes forwarded to him
for collection when due. Taxes levied after this change in the
business were in dispute in the case. In delivering the opinion of
the Court, MR. CHIEF JUSTICE FULLER said:
"Nevertheless, the business of loaning money through the agency
in Minnesota was continued during all these years, just as it had
been carried on before, and we agree with the circuit court that
the fact that the notes were sent to Mrs. Bristol in New York, and
the fact of the revocation of the power of attorney, did not exempt
these investments from taxation under the statutes, as expounded in
the decision to which we have referred."
Referring to the case of
New Orleans v. Stempel, the
CHIEF JUSTICE said:
"There, the money, notes, and evidences of credits were in fact
in Louisiana, though their owners resided elsewhere. Still, under
the circumstances of the case before us, we think, as we have said,
that the mere sending of the notes to New York and the revocation
of the power of attorney did not take these investments out of the
rule. "
Page 205 U. S. 402
"Persons are not permitted to avail themselves, for their own
benefit, of the laws of a state in the conduct of business within
its limits, and then to escape their due contribution to the public
need through action of this sort, whether taken for convenience or
by design."
Accordingly, it was held that the tax was not forbidden by the
federal Constitution.
In this case, the controlling consideration was the presence in
the state of the capital employed in the business of lending money,
and the fact that the notes were not continuously present was
regarded as immaterial. It is impossible to distinguish the case
now before us from the
Bristol case. Here, the loans were
negotiated, the notes signed, the security taken, the interest
collected, and the debts paid within the state. The notes and
securities were in Louisiana whenever the business exigencies
required them to be there. Their removal with the intent that they
shall return whenever needed, their long continued, though not
permanent, absence cannot have the effect of releasing them as the
representatives of investments in business in the state from its
taxing power. The law may well regard the place of their origin, to
which they intend to return, as their true home, and leave out of
account temporary absences, however long continued. 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. 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 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, it caused the credits arising
Page 205 U. S. 403
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.
The judgment of the Supreme Court of Louisiana is
Affirmed.