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November 30, 1903



Fuller, Harlan, Brewer, Brown, White, Peckham, McKenna, Holmes, Day

Author: Day

[ 191 U.S. Page 399]

 MR. JUSTICE DAY, after making the foregoing statement, delivered the opinion of the court.

The constitution of the State of Louisiana of 1898, article 225, declares that all property shall be assessed in proportion to its value. Section 1 of the act of 1898, passed by the general assembly of the State, defines "property" to include "all personal property, . . . all rights, credits, bonds and securities of all kinds, promissory notes, open accounts and other obligations, all cash. . . . all money loaned at interest, . . . and all movable and immovable, corporeal and incorporeal articles or things of value, owned and held and controlled within the State of Louisiana by any person in any capacity whatsoever." Section 7 of the act provides that it shall be the duty of the assessor to place upon the tax roll all property subject to taxation. "This shall apply with equal force to any person or persons representing in this State business interests that may claim a domicile elsewhere, the intent and purpose being that no non-resident, 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

[ 191 U.S. Page 400]

     from business done in this State are hereby declared assessable within this State, and at the business domicile of said non-resident, his agent or representative." This act undertakes to give to the State the right and authority to assess and collect taxes upon all bills receivable, obligations and credits within the State.

This legislation was before this court in the case of New Orleans v. Stempel, 175 U.S. 309, in which it was sought to tax certain notes secured by mortgage on real estate in the city of New Orleans. The notes were owned in New York, but were in the hands of an agent of the owner in New Orleans, who collected the proceeds thereof and the interest as it became due and deposited the same in a bank at New Orleans. In that case, the decisions of the Supreme Court of Louisiana, construing its constitution and laws, particularly the act in question, were exhaustively reviewed by Mr. Justice Brewer, and the conclusion reached that the act, as interpreted by the Supreme Court of the State, permitted the taxing of the notes in the hands of the agent, and that such action did not impair any right secured by the Federal Constitution. Since the decisions which were in review in the Stempel case, the Supreme Court of Louisiana, in a suit brought by the present complainant against the board of assessors, has had before it a case involving the right to tax credits and moneys of the complainant under a state of facts in most respects identical with that now before the court, the difference being that when the Comptoir loaned money upon bills of lading or other collateral security, it took the non-negotiable note of its customer, which note was cancelled either by the payment of the amount due or the exhaustion of the collateral. Comptoir National d'Escompte de Paris v. Board of Assessors, 52 La. Ann. 1319. In the method of doing business shown in the present case, instead of giving a non-negotiable note, the customer gives to the Comptoir his check, which check is not returned but held as an evidence of the indebtedness, and is later sent to the office of the Comptoir at Paris. While called "checks," and so referred to in the

[ 191 U.S. Page 401]

     record and by the parties in their dealings, the instrument delivered to the Comptoir, in form an ordinary check as though drawn for payment on presentation from moneys deposited, had no such function. The money was paid to the customer upon the security of the collateral, and the so-called check taken and held as a memorandum of the indebtedness to the Comptoir.

The exact question is whether these checks, secured by collateral held by the agent, are evidence of credits for money loaned upon interest having a local situs in New Orleans and constitutionally taxable within the meaning of the Louisiana statutes.

In this case we are not dealing with that branch of the business of the Comptoir which relates to bills of exchange sold to its customers, but the assessment is sought to be made upon those credits which arise when money is loaned and advanced or paid in the State to the customer upon collateral security and the latter's check is taken therefor. The transaction from which the alleged credits arise is briefly this: The customer applies for a loan of money and offers as security a bill of lading or other collateral and the money is paid to him. Instead of a note the Comptoir takes the check of the customer, which is regarded as an overdraft, upon which the customer can make payment from time to time and upon which he is charged interest, and upon the non-payment of the check the collateral is subject to sale.

Is this a credit, for money lent on interest, taxable under the laws of Louisiana as interpreted by the Supreme Court of that State?

The real transaction between the parties was intended to create and did create a debt held for the Comptoir by its agent in the State of Louisiana and evidenced by the check and secured by the collateral, which debt, when paid, created a fund in the hands of the agent subject to loan and reinvestment by him without consultation with the ...

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