Case of the State Tax on Foreign-Held Bonds/Dissent Davis

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Case Syllabus
Opinion of the Court
Dissenting Opinion

United States Supreme Court

82 U.S. 300

Case of the State Tax on Foreign-Held Bonds

Mr. Justice DAVIS, with whom concurred Justices CLIFFORD, MILLER, and HUNT, dissenting. [22]

At the same time with the adjudication as to the tax in the preceding case was adjudged the validity of the tax in the cases of two other railroad companies, to wit: The Pittsburg, Fort Wayne, and Chicago; and the Delaware, Lackawanna, and Western, both writs of error against the State of Pennsylvania, and to judgments of the Supreme Court of that State. The tax levied in these last two cases upon the bonds of non-residents of the State was three mills on the dollar of capital, to be paid out of the interest; and the law laying the tax, a law of 1844, was in existence when the bonds were issued. In the previous case it will be remembered that the tax levied was five per cent. upon the interest of the bonds, and the law levying it was not in such existence. The last two cases, therefore, resembled the case of Maltby v. Reading and Columbia Railroad, the particulars of which are stated supra. [*]

Mr. Justice FIELD, who delivered the judgment of the court, in the additional two cases now mentioned, as in the first one, said that the cases involved the same questions that had been considered and decided in the previous case, that of the Cleveland, Painesville, and Ashtabula Railroad; and that 'the difference in the mode of the assessment of the tax did not affect the principle decided.'

Upon the authority of the case cited, the judgments in these two cases, now mentioned, were accordingly REVERSED, and the causes remanded for further proceedings, Justices CLIFFORD, MILLER, DAVIS, and HUNT dissenting; and Mr. Justice DAVIS saying, for himself and them, in all the cases, as follows:

'I cannot agree to the opinion of a majority of my brethren in these cases. That the tax in question is valid and binding, both on the corporation and its creditor, is clearly settled in Maltby v. The Philadelphia and Reading Railroad Company, and that, too, whether the creditor resides in Pennsylvania or elsewhere. As the highest court of the State has decided that the act of 1844 authorized the imposition of the tax in controversy, and as that act was in force when the bonds and mortgages were issued, I cannot see how any principle of the Federal Constitution is violated, nor can I see how this court can reach the conclusion it does in these cases without denying to the State government the right to construe its own local laws. This right has been recognized so often and in such a variety of ways, that it is no longer an open question. Indeed this court in Railroad Company v. Jackson has expressly recognized the binding force of the construction which the Supreme Court in Pennsylvania has put on the act of 1844. Mr. Justice Nelson, delivering the opinion of the court, said:

"It has been argued for the plaintiff, that the acts of the legislature of Pennsylvania, when properly interpreted, do not embrace the bonds or coupons in question; but it is not important to examine the subject, for it is not to be denied, as the courts of the State have expounded these laws, that they authorized the deduction, and, if no other objection existed against the tax, the defence would fail.' 'I am also of opinion, that a State legislature is not restrained by anything in the Federal Constitution nor by any principle which this court can enforce against the State court, from taxing the property of persons which it can reach and lay its hands on, whether these persons reside within or without the State.'


^22  See their opinion, infra, note following, pp. 327-8.

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).