residents of Pennsylvania, citizens of other States, and being held by them, the act in question, in authorizing the tax upon the interest stipulated in the bonds, so far as it applied to the bonds thus issued and held, impaired the obligation of the contracts between the bondholders and the company, and was therefore repugnant to the Constitution of the United States and void."
The several State courts of Pennsylvania, however, affirmed the validity of the tax; but the case having then been carried on writ of error to the Supreme Court of the United States, the latter in December, 1873, reversed the judgment of the State courts, and decided in favor of the plaintiff; the opinions of the court, as expressed by Mr. Justice Field, being substantially as follows:
I.The power of taxation of a State is limited to persons, property, and business within her jurisdiction; all taxation must relate to one of these subjects.
II.The tax laws of a State can have no extra-territorial operation; nor can any law of a State inconsistent with the terms of a contract made with and payable to parties out of the State have any effect upon the contract while it is in the hands of such parties or other non-residents of the State.
III.Bonds issued by a railroad company are property in the hands of the holders, and when held by nonresidents of the State in which the company was incorporated are property beyond the jurisdiction of the State.
It will be observed under the third head (the language above quoted being the official prefatory syllabus of the decision) that the court lays down the rule that negotiable bonds are property, not in the place where issued, as was claimed by the authorities of Pennsylvania, and not at the domicile of the owner irrespective of actual presence, as was generally claimed by the State tax officials, but in the hands of the holders at the place where the bonds are actually situated, whether the holders be actual, bona fide owners or otherwise. And the following is the exact language in which the decision was expressed:
"It is undoubtedly true that the actual situs of personal property which has a visible, tangible existence, and not the domicile of its owner, will in many cases determine the State in which it may be taxed. The same theory (i. e., the actual situs determinative) 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; and the latter are treated and pass as money wherever they are.
