Opinion — Selliger v. Kentucky

SELLIGER v. COMMONWEALTH OF KENTUCKY, BY

ALEXANDER, REVENUE AGENT.

ERROR TO THE COURT OF APPEALS OF THE STATE OF KENTUCKY.

No. 115. Argued March 16, 17, 1909.—Decided April 5, 1909.

Where there is nothing in the record on which to base them this court

cannot indulge in presumptions as to which of several possible forms

a transaction may have taken.

Where goods are exempt from the taxing power of the State under the

Constitution of the United States because not within the State, the

protection of the Constitution extends to warehouse receipts for those

goods locally present within the State; and this rule applied to whis-

key in a foreign country, warehouse receipts for which were held by

a person in Kentucky and sought to be taxed as personal property

at owner’s domicil.

A tax upon warehouse receipts for goods amounts in substance and

effect to a tax upon the goods themselves. Fairbank v. United States,

181 U.S. 283.

The facts are stated in the opinion.

Mr. Alexander Pope Humphrey and Mr. John L. Dodd, with

whom Mr. Joseph C. Dodd was on the brief, for plaintiff in error:

The tax in question violates § 10, Art. I, of the Constitution

of the United States prohibiting a State from laying any tax

upon exports. Brown v. Maryland, 12 Wheat. 419; The

License Cases, 5 How. 575; Almy v. California, 24 How. 169;

Low v. Austin, 13 Wall. 29; May v. New Orleans, 178 U. S.

504, distinguished.

SELLIGER v. KENTUCKY. 201

213 U.S. Argument for Defendant in Error.

The tax here attempted to be levied is in violation of the Four-

teenth Amendment to the Constitution of the United States.

Personal property having an actual situs beyond the territorial

boundary of a State cannot be taxed by that State. Louisville

& Jeffersonville Ferry Co. v. Kentucky, 188 U.S. 385; Delaware

R. R. Co. v. Pennsylvania, 198 U. S. 341; Union Refrigerator

Transit Co. v. Kentucky, 199 U. S. 194; Ayer & Lord Tie Co.

v. Kentucky, 202 U.S. 409.

A warehouse receipt is nothing more or less than a document

of title, and has always been so treated. One of its uses is as

a means by which delivery can be made of an article of per-

sonal property which has been sold. 2 Benj. on Sales, 1043;

10 A. & E. Ency. of Law, 1; Gibson v. Stevens, 8 How. 399,

400; Leonard v. Davis, 1 Black, 482, 483; Holliday v. Hamil-

ton, 11 Wall. 564, 565; The Thames, 14 Wall. 106; Crapo v.

Kelly, 16 Wall. 640; Insurance Co. v. Kiger, 103 U. S. 556;

Union Trust Co. v. Wilson, 198 U. 8. 538, 539.

The German warehouse receipts are merely evidence that a

given amount of whiskey has been stored there. It is the whis-

key, which the receipts are given as evidence of, that has actual

value, and the receipts cannot be taxed because to do so would

be in effect to tax the whiskey, which, confessedly, is beyond

the reach of the taxing power of Kentucky. See Almy v. Cali-

fornia, 24 How. 169; Tremlett v. Adams, 13 How. 303; Pollock

v. Farmers’ Loan & Trust Co., 157 U. 8.581; Postal Tel. Co. v.

Adams, 155 U. S. 698; Dobbins v. Commissioners, 16 Pet. 435;

Railroad Co. v. Jackson, 7 Wall. 262; Cook v. Pennsylvania, 97

U. S. 566; Steamship Co. v. Pennsylvania, 122 U.S. 326; Le-

loup v. Mobile, 127 U. S. 640.

Mr. M. J. Holt, with whom Mr. B. F. Washer was on the

brief, for defendant in error:

If the 7,000 barrels of whiskey were exported temporarily,

that is, to await a better market and to be re-imported when the

price justified, or to evade for the time being the revenue tax

of ninety cents per gallon, the taxable situs is in Kentucky, the

202 OCTOBER TERM, 1908.

Argument for Defendant in Error. 213 U.S.

place of residence of the owner. Union Transit Co. v. Ken-

tucky, 199 U.S. 194; Board &c. v. Fidelity Trust Co., 111 Ken-

tucky, 667; May v. New Orleans, 178 U. S. 507; Kentucky

Const., §§ 172, 174; Kentucky Stat., § 4020.

If the whiskey, by reason of its exportation and actual situs

in Germany, is exempt from a state ad valorem tax, then the

warehouse receipts are taxable.

Whiskey warehouse receipts are intangible property, the

situs of which is at the domicil of the owner. They are property

in and of themselves, and are not mere indicia of title.

By the common and civil law, by the law merchant, and by

express statutory provision (Ky. Stats., §4770) they are nego-

tiable instruments. Commonwealth v. Selliger, 30 Ky. L. Rep.

452, 453; Farmer v. Ethridge, 24 Ky. L. Rep. 653; Cochran &c.

v. Ripy, 13 Bush (Ky.), 505; Greenbaum v. Meggilen, 10 Bush

(Ky.), 420; Purdy’s Beach on Priv. Corp., §§ 271, 272, 509a,

350, 510; Board &c. v. Fidelity Trust Co., 111 Kentucky, 677;

30 A. & E. Ency. Law, pp. 69-77; Winslow v. Fletcher, 52 Am.

Rep. 122; Wilkesbarre &c. v. Wilkesbarre, 148 Pa. St. 601;

Whitaker v. Brooks, 90 Kentucky, 76; Knox v. Eden, 148 N. Y.

441; Columbus &c. v. Wright, 151 U.S. 470.

The provision of the Federal Constitution, Art. I, § 10, Subs.

2, ‘that no State shall lay an impost or duties on imports or

exports,” does not apply to the levy of an ad valorem tax on this

whiskey or the warehouse receipts as the property of plaintiff

in error, because: It is a tax levied upon the property of all

citizens of this State, wherever situated. It is not an impost

or duty.

The whiskey has lost the character of an export, the original

shipment has been broken, four-fifths of it have been sold, the

consignor and consignee are one and the same, and the residue

is on the market and for sale. May v. New Orleans, 178 U.S.

501, 509 (import case) ; Coe v. Errol, 116 U.S. 517 (export case) ;

Turpin v. Burgess, 117 U. S. 506, 507 (export case); American

Steel Co. v. Speed, 114 U.S. 510, 519.

No Federal question is involved. McCullough v. Maryland,

nnn

SELLIGER v. KENTUCKY. 203

213 U.S. Opinion of the Court.

4 Wheat. 316, 418, 428, 429; Burke v. Wells, 208 U. S. 22-25;

Union Pac. Ry. Co. v. Peniston, 18 Wall. 5; Lewis v. Monson,

151 U.S. 549; Home Ins. Co. v. New York, 134 U. S. 600;

Delaware R. R. Tax Case, 18 Wall. 206, 231; Coe v. Errol, 116

U.S. 524; Saving Society v. Multnomah County, 169 U.S. 426,

427, 431; Kirtland v. Hotchkiss, 105 U. 8. 498; Bank U. S. v.

Huth, 4 B. Mon. (Ky.) 443; New Orleans v. Stempel, 105 U. S.

320.

Mr. Justice Houmes delivered the opinion of the court.

This is a proceeding to recover back-taxes on personal prop-

erty of the plaintiff in error, hereafter called the defendant.

He pleaded that he did own certain barrels of whiskey which

he did not list for the years in question, but that he had ex-

ported them to Bremen and Hamburg, in Germany, for sale

abroad, and that the State was forbidden to tax them, both

because they were exports, U. S. Const., Art. I, § 10, and

because their permanent situs was outside the State. Four-

teenth Amendment. Delaware, Lackawanna & Western R. R.

Co. v. Pennsylvania, 198 U. 8. 341. Union Refrigerator Transit

Co. v. Kentucky, 199 U. 8. 194. The plaintiff replied, denying

that the export was for sale and that the situs of the whiskey

was abroad. It alleged that the defendant was a citizen and

resident of Kentucky, engaged there in the wholesale whiskey

business, and that he shipped the whiskey to Germany merely

to evade revenue and ad valorem taxes on the same. Ii alleged

further that the defendant remained the owner and in posses-

sion of the whiskey, except such portion as he reshipped to

himself or to purchasers in the United States, that while the

whiskey remained in the German warehouses he held the ware-

house receipts, used them as collaterals and traded in them,

and that the barrels of whiskey sold by him were mostly re-

turned to the State of Kentucky, and all to the United States.

The court of first instance held that the whiskey was exempt

on both the grounds taken by the defendant. On appeal to the

state circuit court for the county, the judgment was affirmed

204 OCTOBER TERM, 1908.

Opinion of the Court. 213 U.S.

on the ground that the situs of the whiskey was outside the

State. A further appeal was taken to the Court of Appeals,

and that court, accepting the fact that the whiskey was beyond

the taxing power of Kentucky, nevertheless sustained the tax

as a tax on the warehouse receipts. The case then was brought

by writ of error to this court.

We think that we have stated the effect of the pleadings

fairly, and it will be observed that the plaintiff's claim was of a

right to tax the whiskey, the warehouse receipts being men-

tioned only to corroborate the plaintiff’s contention as to the

true domicil of the goods. After the decision, the amount of

whiskey for which the defendant held German warehouse re-

ceipts at the material times and the value of the whiskey were

agreed, and thereupon the court, reciting the agreement, di-

rected a judgment for taxes due upon the warehouse receipts,

valuing them at the agreed value ‘‘per barrel of whiskey em-

braced in them.”’ So that it wiil be seen that the effect is the

same as if the whiskey itself had been taxed, and the question

is whether, by such a dislocation of the documents from the

things they represent, a second property of equal value is cre-

ated for taxing purposes, which can be reached although the

first could not. Possibilities similar in economic principle some-

times have to be, or at least have been, recognized, but of course,

economically speaking, they are absurd.

We are dealing with German receipts, and therefore we are

not called upon to consider the effect of statutes purporting

to make such instruments negotiable. Bonds can be taxed

where they are permanently kept, because by a notion going

back to very early law the obligation is, or originally was, in-

separable from the paper or parchment which expressed it.

Buck v. Beach, 206 U. 8S. 392, 403, 413. That case and the

authorities cited by it, show how far a similar notion has been

applied to negotiable bills and notes. But a warehouse receipt

does not depend up n any peculiar doctrine for its effect. A

simple receipt merely imports that goods are in the hands of a

certain kind of bailee. But if a bailee assents to becoming

——__——

SELLIGER v. KENTUCKY. 205

213 U.S. Opinion of the Court.

bailee for another to whom the owner has sold or pledged the

goods, the change satisfies the requirement of a change of pos-

session so far as to validate the sale or pledge. Therefore it is

common for certain classes of bailees to give receipts to the

order of the bailor, and so to assent in advance to becoming

bailee for any one who is brought within the terms of the re-

ceipt by an endorsement of the same. But this does not give

the instrument the character of a symbol, it simply makes it

the means of bringing about what is somewhat inaccurately

termed a change of possession, upon ordinary legal principles,

just as if the goods had been transported to another warehouse.

Union Trust Co. v. Wilson, 198 U. 8. 530, 536. If the receipt

contains no clause of assent to a transfer, it has been held that

an endorsement goes no further than a transfer and unaccepted

order on any other piece of paper. Hallgarten v. Oldham, 135

Massachusetts 1.

The form of the receipts given in Germany does not appear.

It does not appear that they contained any assent to transfer,

unless by conjecture from the defendant’s testimony that he

pledged them for loans. Even that conjecture is made more

doubtful, if not excluded, by the findings of the lower courts.

It does not appear that the Court of Appeals made a different

finding if it had the power todo so. This court can make none.

There is no presumption that we know of that the transactions

took one form or had one effect rather than another.

We can think of but two ways in which the receipts could

amount to more than a mere convenience for getting quasi-

possession of the goods. In the first place, they might express

or imply a promise to be answerable, or carry a statutory lia-

bility, for a corresponding amount in case the property referred

to was delivered to another without a surrender of the receipts.

See Mechanics’ & Traders’ Ins. Co. v. Kiger, 103 U. S. 352.

Such a promise might have a distinct value if the promisor had

credit. But it cannot be assumed on this record that the re-

ceipts contained it, and if they did, even then the value of the

instrument would be due rather to the assumption that the

206 ' OCTOBER TERM, 1908.

Opinion of the Court. 213 U.S.

bailee would not give up the goods without a return of it than to

the promise. The value of the promise would vary with the

promisor. As a key to the goods a receipt no more can be called

a second property of equal value than could a key to an ada-

mantine safe that could not be opened without it be called a

second property of a value distinct from but equal to that of

the money that the safe contained. The receipt, like the key,

would be property of some small value distinct from that to

which it gave access. But it would not be a counterpart, dou-

bling the riches of the owner of the goods.

In the second place, the receipt might be made the represen-

tative of the goods in a practical sense. A statute might ordain

that a sale and delivery of the goods to a purchaser without

notice should be invalid as against a subsequent bona fide pur-

chaser of the receipt. We need not speculate as to how the law

would deal with it in that event, as we have no warrant for as-

suming that the German law gives it such effect. On the facts

before us, and on any facts that the Court of Appeals can have

had before it, the receipts cannot be taken to have been more

than one of several keys to the goods. It cannot be assumed

that a good title to the whiskey could not have been given

while the receipts were outstanding. We assume that they

made it very unlikely that it would be, but the practical proba-

bility does not make the instrument the legal equivalent of the

goods. We take it to be almost undisputed that if the ware-

houses were in Kentucky the State would not and could not

tax both the whiskey and the receipts, even when issued in

Kentucky form, and that it would recognize that the only tax-

able object was the whiskey. The relation of the paper to the

goods is not changed by their being abroad, and the only ques-

tion in the case is whether the paper can be treated as property

equivalent in value to the goods, because in some way it repre-

sents them.

We state the question as we have stated it because that is

the one that is raised by the decision under review. It would

be a mere quibble to say that the receipts, as paper, had an in-

CHESAPEAKE & OHIO RY. CO. v. MCCABE. = 207

213 U.S. Syllabus.

finitesimal value, that they acquired a substantial one, although

much less than that of the whiskey, because of their practical

use, and that this court is not concerned with a mere overvai-

uation. The tax is imposed on the theory that the receipts are

the equivalents of the goods and are taxable on that footing, al-

though the goods cannot be taxed. Assuming, as the Court of

Appeals assumed, that the whiskey is exempt under the Con-

stitution of the United States, we are of opinion that the pro-

tection of the Constitution extends to warehouse receipts lo-

cally present within the State. What was said by Chief Justice

Taney about bills of lading applies to them, mutatis mutandis:

“A duty upon that is, in substance and effect, a duty on the ar-

ticle exported.” Almy v. California, 24 How. 169; Fairbank

v. United States, 181 U.S. 283, 294. We discuss the case on

the facts assumed by the Court of Appeals. Whether a finding

would have been warranted that the whiskey still was domi-

ciled in Kentucky, or for any otlier reason was not exempt, is a

matter upon which we do not pass. See New York Central &

Hudson River R. R. Co. v. Miller, 202 U. 8. 584, 597.

Judgment reversed.

RPE IEE IRE

SES EN REA MN