The principles thus broadly laid down in the State Tax on Foreign-Held Bonds had soon to be modified, and; in fact, the case has since been held down to the precise point decided. That public securities, consisting of state bonds and bonds of municipal. corporations and circulating notes of banking institutions are exempted from the principle mobilia sequuntur personam, is stated in the case itself. But in later. cases the same exemption is applied to shares of stock, mortgages, and, to a certain extent, to promissory notes and other credits. This will appear in the sections which follow.

§ 541. Taxation of Shares of Stock.

Shares of stock in incorporated companies may be viewed either as property in the hands of their holders or as representing the property of the company. Thus they are viewed in the latter light when their value is taken as measuring the value of the property of the company for the purposes of a property tax upon that company. In such cases, as we have seen, tangible property of the company permanently located outside of the State may not be as was justly observed by counsel, that the non-resident holder and owner of a bond secured by a mortgage in that State owns any real estate there. A mortgage being there a mere chose in action, it only confers upon the holder, or the party for whose benefit the mortgage is given, a right to proceed against the property mortgaged, upon a given contingency, to enforce, by its sale, the payment of his demand. This right has no locality independent of the party in whom it resides. It may undoubtedly be taxed by the State when held by a resident therein, but when held by a non-resident it is as much Beyond the jurisdiction of the State as the person of the owner.

“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 evidence of debt, are not separated from the possession of the owners."

included in the appraisement. The States may also levy a license tax upon a domestic corporation, that is, upon its right not simply to be, but to do business within the State, and this license tax it may measure by the value of the capital stock. Also a State may levy a similar tax upon a foreign corporation, unless engaged in interstate commerce, the payment of which is made a condition precedent to its right to enter the State and to do business therein, and measure this tax by the nominal or market value of the capital stock of the company. In both of these cases the tax is not, in reality, upon the capital stock, but is measured by it.* The present section will be concerned with the taxation of corporate stock as intangible personal property in the hands of its holders

or owners.

47

46

The declaration of the court in the State Tax on Foreign-Held Bonds would, if strictly pursued, have prevented the levying of such a tax upon non-resident holders of the stock of domestic corporations, upon the principle of mobilia sequuntur personam. In Tappan v. Merchants' National Bank, however, the court held that, as to shares of stock at least, this principle does not reasonably apply, and that, for purposes of taxation, these shares may be separated from the person of their owner and given a situs where the corporation has its situs, namely, at the place of its incorporation. The court in that case say:

"The question is then presented whether the General Assembly, having complete jurisdiction over the person and the property, could separate a bank share from the person of the owner for the purposes of taxation. It has never been doubted that it was a proper exercise of legislative power and discretion to separate the interest of a partner in partnership property from his person for that purpose, and to cause him to be taxed on its account at the place where the business of the partnership was carried on. And this, too, without reference to the character of the business or the property. The partnership may have been formed for the purpose

46 But see 74, and especially W. U. Tel. Co. v. Kansas, 216 U. S. 1; 30 Sup. Ct. Rep. 190, and The Pullman Co. v. Kansas, 216 U. S. 56; 30 Sup. Ct. Rep. 232.

47 19 Wall. 490; 22 L. ed. 189.

of carrying on mercantile, banking, brokerage or stock business. The property may be tangible or intangible, goods on the shelf or debts due for goods sold. The interest of the partner in all the property is made taxable at the place where the business is located.

"A share of bank stock may be in itself intangible, but it represents that which is tangible. It represents money or property invested in the capital stock of the bank. That capital is employed in business by the bank, and the business is very likely carried on at a place other than the residence of some of the shareholders. The shareholder is protected in his person by the government at the place where he resides; but his property in this stock is protected at the place where the bank transacts the business. If he were a partner in a private bank doing business at the same place, he might be taxed there on account of his interest in the partnership. It is not easy to see why, upon the same principle, he may not be taxed there on account of his stock in an incorporated bank. His business is there as much in the one case as in the other. He requires for it the protection of the government there, and it seems reasonable that he should be compelled to contribute there to the expenses of maintaining that government. It certainly cannot be an abuse of legislative discretion to require him to do so. If it is not, the General Assembly can rightfully locate his shares there for the purposes of taxation." 48

48 In criticism of this argument, Professor J. H. Beale, Jr., in the Harvard Law Review (XVII, 254), says: "But it is submitted that the supposed distinction between bonds and stocks in this respect does not exist. It is true, as has been seen, that the owner is taxable upon the capital and proceeds of a business where that business is carried on, and that a partner in a firm is therefore taxable on the value of a firm business where the firm acts; and that in many ways the shareholder in a private corporation is like a partner. But the very difference in their legal position should lead to a difference in taxation. The partner is taxed on the business of the firm because he is the legal representative of the business; there is no one else to tax. The tax paid by the partners is the tax and the only tax on the firm. But the corporation, being a legal entity, is itself, as has been seen, taxed upon the business done; to tax the stockholders also upon it is to tax the very same thing twice. The legal interest of the partner in the business is that of the owner; the legal interest of the stockholder is not that of the owner but of the creditor; to him is due from the corporation

The doctrine declared in Tappan v. National Bank, though difficult to harmonize with prior decisions, is declared in Corry v. Baltimore to be conclusively established.50

§ 542. Taxation of Mortgages.

In Savings and Loan Society v. Multnomah51 the broad dicta of the court in the State Tax on Foreign-Held Bonds cases were again modified, this time with reference to the taxation of mortgages. In this case the court held that mortgages, whether held by residents or non-residents, may be taxed at their full value by the State in which the mortgaged property is located, and that this may be done either by taxing the whole value of the property to the mortgagor or by taxing to the mortgagee the interest represented by the mortgage and the remainder to the mortgagor. The court say:

a share of the net profits. His claim is a personal one against the corporation; like the bondholder he has only a chose in action, and no direct legal interest in the business."

49 196 U. S. 466; 25 Sup. Ct. Rep. 297; 49 L. ed. 556.

50" That it was rightly determined that it was within the power of the state to fix, for the purposes of taxation, the situs of stock in a domestic corporation, whether held by residents or non-residents, is so conclusively settled by the prior adjudications of this court that the subject is not open for discussion. Indeed, it was conceded in the argument at bar that no question was made on this subject. The whole contention is that, albeit the situs of the stock was in the State of Maryland for the purposes of taxation, it was nevertheless beyond the power of the State to personally tax the non-resident owner for and on account of the ownership of the stock, and to compel the corporation to pay, and confer upon it the right to proceed by a personal action against the stockholder in case the corporation did pay. Reiterated in various forms of expression, the argument is this: that as the situs of the stock within the state was the sole source of the jurisdiction of the State to tax, the taxation must be confined to an assessment in rem against the stock, with a remedy for enforcement confined to the sale of the thing taxed, and hence without the right to compel the corporation to pay, or to give it when it did pay, a personal action against

the owner.

"But these contentions are also in effect long since foreclosed by decisions of this court." First National Bank v. Kentucky, 9 Wall. 353; 19 L. ed. 701; Tappan v. Merchants' National Bank, 19 Wall. 490; 22 L. ed. 189."

61 169 U. S. 421; 18 Sup. Ct. Rep. 392; 42 L. ed. 803,

66

"The declaration of the court in the State Tax on ForeignHeld Bonds (15 Wall. 300; 21 L. ed. 179) that a mortgage, being a mere security for the debt, confers no interest in the land, and, where held by a non-resident, is as much beyond the jurisdiction of the State as the person of its owner, 'went beyond what was required for the decision of the case and cannot be reconciled with other decisions of this court.'" Concluding, the court say: The statute of Oregon, the constitutionality of which is now drawn in question, expressly forbids any taxation of the promissory note, or other instrument of writing, which is the evidence of the debt secured by the mortgage; and, with equal distinctness, provides for the taxation, as real estate, of the mortgage interest in the land. Although the right which the mortgage transfers in the land covered thereby is not the legal title, but only an equitable interest and by way of security for the debt, it appears to us to be clear upon principle, and in accordance with the weight of authority, that this interest, like any other interest, legal or equitable, may be taxed to its owner (whether resident or non-resident) in the state where the land is situated, without contravening any provision of the Constitution of the United States."

§ 543. Taxation of Credits.

In the preceding paragraphs we have seen that mortgages and shares of stock have been taken out of the broad doctrine declared in the State Tax on Foreign-Held Bonds cases, .and placed under the rule of mobilia sequuntur personam. To a very considerable extent the same rule has been applied to promissory notes and similar evidences of indebtedness. The rule has, however, not been followed when the notes have been placed in the hands of an agent for receipt of the interest or for the collection of the capital sums. In such cases the situs of the notes has in some cases been held to be that of the agent; in others, where there has been apparent a scheme to avoid the payment of taxes, the situs has been held to be at the domicile of their owner. A statement of some of the leading cases will illustrate these doctrines.