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IN ERROR to the Circuit Court of the United States for the Southern District of New York. This action was brought in the District Court of the United States for the Southern District of New York, by the plaintiff in error, to recover certain taxes and penalties alleged to be due and unpaid.

The district court entered a judgment, on an agreed statement of facts, in favor of the plaintiff, for $3,467.43, being a less sum than the amount claimed by said plaintiff. This judgment having been affirmed, on error, by the court below, the plaintiff sued out this writ of

error.

Statement of the case by Mr. Justice Field: This was an action to recover taxes alleged to be due to the plaintiff on certain interest coupons paid by the defendant in the years 1866, 1867, 1868 and 1869, on bonds previously issued by it; and also certain penalties alleged to be due the plaintiff for failure of the defendant to make returns of the amount of the taxes. The action was founded on section 122 of the Act of June 30, 1864, 13 Stat. at L., 284, 285, as amended by section 9 of the Act of July 13, 1866, 14 Stat. at L., 138, 139.

default in making or rendering such list or return, with the declaration annexed, or of the payment of the tax as aforesaid, the company making such default shall forfeit as a penalty the sum of $1,000; and in case of any default in making or rendering said list or return, or of the payment of the tax or any part thereof, as aforesaid, the assessment and collection of the tax and penalty shall be made according to the provisions of law in other cases of neglect or refusal; Provided, That, whenever any of the companies mentioned in this section shall be unable to pay the interest on their indebtedness, and shall in fact fail to pay such interest, that in such cases the tax levied by this section shall not be paid to the United States until said companies resume the payment of interest on their indebtedness."

The case was tried in the District Court for the Southern District of New York upon an agreed statement of facts, of which the following are all that are deemed material to explain the question raised and decided. By this statement it was admitted that, prior to September 1, 1866, the defendant had issued sterling coupon bonds to the amount of £800,000, dated September 1, 1865, the principal of which was That section, as amended, provides as fol- payable two years after date, drawing interest lows: "That any railroad, canal, turnpike, ca- at 6 per cent per annum, payable semi-annually nal navigation or slack-water company, in- on the first days of March and September of debted for any money for which bonds or other each year; and the principal and interest of evidence of indebtedness have been issued, pay- which were payable in London, England, at the able in one or more years after date, upon which office of Junius S. Morgan & Co., bankers, of interest is stipulated to be paid, or coupons rep- London; that, after March 1, 1868, and prior to resenting the interest, or any such company that September 1, 1868, the defendant had issued may have declared any dividend in scrip or and sold bonds of the same class amounting to money due or payable to its stockholders, in- £200,000, the principal and interest of which cluding non-residents, whether citizens or aliens, were payable at the same place as the bonds as part of the earnings, profits, income or gains previously issued; that all the bonds, with couof such company, and all profits of such com-pons for interest attached, were sold directly to pany carried to the account of any fund, or used J. S. Morgan & Co., J. T. Mackenzie and Stern for construction, shall be subject to and pay a Brothers, all foreign bankers, having their tax of five per centum on the amount of all such places of business in London, and were by them interest or coupons, dividends or profits, when-sold to their customers in England and on the ever and wherever the same shall be payable, and to whatsoever party or person the same may be payable, including non-residents, whether citizens or aliens; and said companies are hereby authorized to deduct and withhold from all payments on account of any interest or coupons and dividends due and payable as aforesaid, the tax of five per centum; and the payment of the amount of said tax, so deducted from the interest or coupons or dividends and certified by the president or treasurer of said company, shall discharge said company from that amount of the dividend or interest, or coupon on the bonds or other evidences of their indebtedness, so held by any person or party whatever, except where said companies may have contracted otherwise; and a list or return shall be made and rendered to the assessor or assistant assessor, on or before the tenth day of the month following that in which said interest, coupons or dividends become due and payable, and as often as every six months; and said list or return shall contain a true and faithful account of the amount of tax, and there shall be annexed thereto a declaration of the president or treasurer of the company, under oath or affirmation, in form and manner as may be prescribed by the Commissioner of Internal Revenue, that the same contains a true and faithful account of said tax. And for any

Continent of Europe; that during the years 1866, 1867, 1868, 1869, the bonds and coupons were all held by non-resident aliens, and not by citizens of the United States, except bonds to the amount of £20,000, and the coupons attached, which were held and owned by citizen or citizens of the United States residing in Europe; that the amount of interest on all the bonds was provided for, and sent forward by the defendant, in one sum or block, to J. S. Morgan & Co., before the dates at which it fell due, and as it fell due was paid by J.S. Morgan & Co., at their banking house in London, to the holders of the bonds and coupons; that the amount of interest paid in the years mentioned on the above described bonds was £186,000, of which £4,200 were paid on the £20,000 held by a citizen or citizens of the United States; that the defendant made no returns to the assessor, or to any other officer of the internal revenue of the United States, of the payment of the interest or any part thereof, nor did it ever pay to the United States, or to anyone on their behalf, 5 per cent tax, or any tax on the interest or any part thereof; nor did the defendant withhold the tax, or any part thereof, from the amount of the interest, but paid the full amount to the holders of the bonds; and that no assessment was ever made by the

The district court held that the defendant was not liable for a tax on the £181,800 sterling paid for interest upon coupons and bonds owned and held by non-resident aliens, but was liable for the tax on £4,200 sterling paid for interest on coupons and bonds owned and held by citizens of the United States; and, also, that the defendant was liable for only one penalty for failure to make return to the revenue officer of the amount paid. Judgment was rendered accordingly. From this judgment the plaintiff carried the case to the circuit court, which affirmed the judgment of the district court. To review this latter judgment a writ of error was taken from this court.

Two questions were presented for determination:

plaintiffs, or by any officer of the plaintiffs, on | L., 284], was laid upon the interest payable on the defendant for any portion of the tax, nor the bonds and upon the dividends declared on was any demand ever made on the defendant the stock, of railroad and other corporations, as for the payment of the same to the United States a tax on the incomes pro tanto of the holders of until December 31, 1872. such bonds and stock. [Stockdale v. Ins. Co.], 20 Wall., 333 [87 U. S., XXII., 351]; R. R. Co. v. Rose, 95 U. S., 78 [XXIV., 376]. As to the interest payable on bonds, it was not a tax upon the companies in respect of a debt owed by them, nor upon the property represented thereby. The property obtained by the proceeds of the loans represented by the bonds was taxable (if not taxed) in another form. That property consisted of the railroad tracks, or canal, and other specific property of the companies respectively. If this property was not taxed directly, it was taxed indirectly by means of the duty of 24 per cent which was laid on their gross earnings. The tax laid upon their bonds was intended to affect the owners of the bonds, and whilst the companies were directed to pay it, they were authorized to retain the amount from the installments due to the bondholders, whether citizens or aliens. The objection that Congress had no power to tax non-resident aliens, is met by the fact that the tax was not assessed against them personally, but against the rem, the credit, the debt due to them. Congress has the right to tax all property within the jurisdiction of the United States, with certain exceptions not necessary to be noted. The money due to non-resident bondholders in this case was in the United States-in the hands of the Company-before it could be transmitted to London, or other place where the bondholders resided. Whilst here it was liable to taxation. Congress, by the internal revenue law, by way of tax, stopped a part of the money before its transmission, namely: 5 per cent of it. Plausible grounds for levying such a tax might be assigned. It might be said that the creditor is protected by our laws in the enjoyment of the debt; that the whole machinery of our courts and the physical power of the government are placed at his disposal for its security and collection.

First. Whether the court below erred in holding that the defendant was not liable to pay the alleged tax on the £181,800 sterling interest which defendant paid to non-resident alien owners and holders of coupons and bonds. No question was made as to the liability of the defendant to recover the tax on the £4,200 interest paid to American citizens, as adjudged by the court below; and,

Second. Whether the court below erred in holding that the defendant was liable for one penalty only out of the seven which the plaintiff claimed in its complaint.

Messrs. E. B. Smith, Asst. Atty-Gen., and S. F.Phillips, Solicitor-Gen., forplaintiff in error. Mr. Wm. D. Shipman, for defendant in

error.

Mr. Chief Justice Waite delivered the opin

ion of the court:

This judgment is reversed on the authority of Railroad Company v. Collector, 100 U. S., 595 [XXV., 647], and the cause is remanded, with instructions to enter a judgment in favor of the United States, for the equivalent in lawful money of the United States of the tax of £9,300 sterling, with interest at the rate of 6 per cent per annum from the several times when the same became due and payable according to the agreed datement of facts on which the submission was made below. As no claim was made on the argument in this court, either for a penalty or for the currency value of the pounds sterling when the taxes fell due, we have not considered the questions which would have arisen if such a demand had been made. For these reasons the judgment will be without penalties and for the present value of the pounds sterling in lawful money.

True copy. Test:

James H. McKenney, Clerk, Sup. Court, U. S. Mr. Justice Bradley, with whom Mr. Justice Harlan, concurred:

I concur in the judgment of the court in this case, but not for the reasons given in the case of the R. R. Co. v. Collector, 100 U. S., 595 [XXV., 647]. I concurred in the judgment in that case, as in this, on grounds essentially different from those given by the court. I always regarded the tax which, by the 122d section of the Internal Revenue Act of 1864 [13 Stat. at

Whether taxation thus imposed would be respected by foreign governments if the creditor could bring before their courts the debtor Company or its property, does not concern us in considering the question now presented. There is nothing in the Constitution which authorizes this court, or any other court, to disaffirm the power of Congress to lay the tax. Congress is its own judge of the propriety or expediency of laying it.

Indeed, so far as the power of Congress is concerned, regarded in reference to any power the courts have to limit or restrain it, I see no reason why Congress may not lay a tax upon any property on which the government can lay its hands, whether within or without the jurisdiction of the United States. If, in imitation of the dues levied by Denmark upon vessels passing through the Cattegat Sound, Congress should levy a duty upon all vessels passing through the Strait of Florida, I do not know of any power which the courts possess to prevent it. It might create complications with foreign governments, it is true, and involve the country in war; but Congress has the power, if it chooses to take the responsibility, of creating, or giving occasion to such complications. The responsibility rests upon it alone.

So if, in taxing money due from citizens of the United States to foreign citizens, any complications arise with the governments to which the latter are subject, Congress alone has the responsibility, and is the only department of our government which has a right to take such a responsibility. In the Foreign-Held Bonds Cases, 15 Wall. [82 U. S., XXI., 146, 164, 179], the State Legislature had laid a tax on the interest payable upon the bonds of all corporations doing business in the State; and authorized the companies to retain the amount out of the interest payable to the bondholders without regard to their residence or nationality. I concurred in the judgment rendered in that case on the ground that the State, in passing such a law, applicable to pre-existing contracts, exceeded its just powers under our form of government, and that the law, in its effect upon non-resident bondholders, impaired the obligation of the contract.

government, it by law withholds from the creditor. If no tax exists, it pays seven per cent, or whatever be its rate of interest, to its creditor in one unbroken sum. If there be a tax, it pays exactly the same sum to its creditor, less five per cent thereof, and this five per cent it pays to the government. The receivers may be two, or the receiver may be one, but the payer pays the same amount in either event. It is no pecuniary burden upon the corporation, and no taxation of the corporation. The burden falls on the creditor. He is the party taxed. In the case before us, this question controls its decision. if the tax were upon the railroad, there is no defense; it must be paid. But we hold that the tax imposed by the 122d section is, in substance and in law, a tax upon the income of the creditor or stockholder, and not a tax upon the corpora tion." See, also, Haight v. R. R. Co., 6 Wall., 15 [73 U. S., XVIII., 818], and R. R. Co. v. Jackson, 7 Id., 262, 269 [74 U. S., XIX., 88, 90]. The bonds, upon the interest of which the principally in England; they were negotiated there; the principal and interest are payable there; they are held by aliens there, and the interest on them has always been paid there. The James H. McKenney, Clerk, Sup. Court, U. S. money which paid the interest was, until paid,

Considering, therefore, that if Congress chooses to take the responsibility of levying such a tax as the one in question, the courts have no pow-tax in this case was laid, are held in Europe, er to control its action, or to give any relief to parties affected by it, I concur in the judgment of reversal.

True copy. Test:

Mr. Justice Field, dissenting:

the property of the company; when it became the property of the bondholders it was outside of the jurisdiction of the United States.

I am not able to agree with the majority of the court in the decision of this case. The tax Where is the authority for this tax? It was which is sustained is, in my judgment, a tax said by counsel on the argument of the case, upon the income of non-resident aliens and somewhat facetiously, I thought at the time, nothing else. The 122d section of the Revenue that Congress might impose a tax upon propAct of 1864, as amended by that of 1866, sub-erty anywhere in the world, and this court jects the interest on the bonds of the Company to a tax of 5 per cent, and authorizes the Company to deduct it from the amount payable to the coupon holder, whether he be a non-resident alien or a citizen of the United States. The Company is thus made the agent of the Government for the collection of the tax. It pays nothing itself; the tax is exacted from the creditor, the party who holds the coupons for interest. No collocation of words can change this fact. And so it was expressly adjudged with reference to a similar tax in the case of U. S. v. R. R. Co., reported in the 17th Wall., [84 U. S., XXI., 597]. There a tax, under the same statute, was claimed upon the interest of bonds held by the City of Baltimore. And it was decided that the tax was upon the bondholder, and not upon the corporation which had issued the bonds; that the corporation was only a convenient means of collecting it; and that no pecuniary burden was cast upon the corporation. This was the precise question upon which the decision of that case turned.

A paragraph from the opinion of the court will show this, beyond controversy. "It is not taxation," said the court," that government should take from one the profits and gains of another. That is taxation which compels one to pay for the support of the government from his own gains and of his own property. In the cases we are considering, the corporation parts not with a farthing of its own property. What ever sum it pays to the government is the property of another. Whether the tax is five per cent on the dividend or interest, or whether it be fifty per cent, the corporation is neither richer nor poorer. Whatever it thus pays to the

could not question the validity of the law, though the collection of the tax might be impossible, unless, perchance, the owner of the property should at some time visit this country or have means in it which could be reached. This court will, of course, never, in terms, announce or accept any such doctrine as this. And yet it is not perceived wherein the substantial difference lies between that doctrine and the one which asserts a power to tax, in any case, aliens who are beyond the limits of the country. The debts of the Company, owing for interest, are not property of the Company, although counsel contended they were, and would thus make the wealth of the country increase by the augmentation of the debts of its corporations. Debts, being obligations of the debtors, are the property of the creditors, so far as they have any commercial value, and it is a misuse of terms to call them anything else; they accompany the creditors wherever the latter go; their situs is with the latter. I have supposed heretofore that this was common learning, requiring no argument for its support, being, in fact, a self-evident truth, a recognition of which followed its statement. Nor is this the less so because the interest may be called in the statute a part of the gains and profits of the Company. Words cannot change the fact, though they may mislead and bewilder. The thing remains through all disguises of terms. If the Company makes no gains or profits on its business and borrows the money to meet its interest, though it be in the markets abroad, it is still required under the statute to withhold from it the amount of the taxes. If it pays the interest, though it be with funds which were never in the United

States, it must deduct the taxes. The Govern- | them, and the generality of any terms employed ment thus lays a tax, through the instrumental- in an Act of Parliament must be narrowed in ity of the Company, upon the income of a non-construction by a religious adherence thereto." resident alien over whom it cannot justly exer- Le Louis, 2 Dod., 239. cise any control, nor upon whom it can justly lay any burden,

exercise of their taxing power, why may not a similar tax be levied upon the interest on bonds of the same corporations by the States within their respective jurisdictions in the rightful exercise of their taxing power? What is sound law for one sovereignty ought to be sound law for another.

and is held to be laid, not on the bondholder who receives the interest, but upon the earnings of the corporations which pay it. How can a tax on the interest to be paid be called a tax on the earnings of the corporation if it earns nothing if it borrows the money to pay the interest? How can it be said not to be a tax upon the income of the bondholder when out of his interest the tax is deducted?

It is said, in answer to these views, that the governments of Europe-or at least some of them, where a tax is laid on incomes-deduct That case was not treated as one, the disposifrom the interest on their public debts the tax tion of which was considered important, as setdue on the amount as income, whether payable tling a rule of action. The opening language to a non-resident alien or a subject of the coun- of the opinion is: "As the sum in this suit is try. This is true in some instances, and it has small and the law under which the tax in quesbeen suggested in justification of it that the in- tion has long since been repealed, the case is of terest, being payable at their treasuries, is un- little consequence as regards any principle inder their control, the money designated for it volved in it as a rule of future action." But being within their jurisdiction when set apart now it is invoked in a case of great magnitude, for the debtor, who must in person or by agent and many other similar cases, as we are inenter the country to receive it. That presents formed, are likely soon to be before us; and, a case different from the one before us in this though it overrules repeated and solemn adjudi-that here the interest is payable abroad, and cations rendered after full argument and mathe money never becomes the property of the ture deliberation; though it is opposed to one of debtor until actually paid to him there. So, the most important and salutary principles of whether we speak of the obligation of the com- public law, it is to be received as conclusive, and pany to the holder of the coupons, or the money no further word from the court, either in expaid in its fulfillment, it is held abroad, not be-planation or justification of it, is to be heard. I ing, in either case, within the jurisdiction of the cannot believe that a principle so important as United States. And with reference to the tax- the one announced here, and so injurious in its ation of the interest on public debts, Mr. Philli- tendencies, so well calculated to elicit unfavor more, in his treatise on International Laws, able comment from the enlightened sentiment says: of the civilized world, will be allowed to pass unchallenged, though the court is silent upon it. I think the judgment should be affirmed. True copy. Test:

"It may be quite right that a person having an income accruing from money lent to a foreign State should be taxed by his own country on his income derived from this source; and if his own country impose an income tax, it is, of course, a convenience to all parties that the government which is to receive the tax should deduct it from the debt which, in this instance, that government owes to the payer of the tax, and thus avoid a double process; but a foreigner, not resident in the State, is not liable to be taxed by the State; and it seems unjust to a foreign creditor to make use of the machinery which, on the ground of convenience, is applied in the cases of domestic creditors, in order to subject him to a tax to which he is not on principle liable.” 2d Vol., 14, 15.

Here, also, is a further difference: the tax here is laid upon the interest due on private contracts. As observed by counsel, no other government has ever undertaken to tax the income of subjects of another Nation accruing to them at their own domicil upon property held there, and arising out of ordinary business, or contracts between individuals.

This case is decided upon the authority of R. R. Co. v. Collector, reported in 100 U. S., 595 [XXV.,647], and the doctrines from which I dissent necessarily flow from that decision. When that decision was announced I was apprehensive that the conclusions would follow which I now see to be inevitable. It matters not what the interest may be called, whether classed among gains and profits, or covered up by other forms of expression, the fact remains, the tax is laid on it, and that is a tax which comes from the party entitled to the interest-here, a non-resident alien in England, who is not and never has been subject to the jurisdiction of this country. In that case the tax is called an excise on the business of the class of corporations mentioned

up

James H. McKenney, Clerk, Sup. Court, U. S. Cited-108 U. S., 234.

EDWARD SCHWED ET AL., Appts.,

v.

WILLIAM SMITH ET AL.

(See S. C., 16 Otto, 188-190.)
Jurisdictional amount.

Although the effect of a decree is to deprive dehas been done at the suit of several parties on sevfendant, in the aggregate, of more than $5,000, if it eral claims, who might have sued separately but whose suits have been joined in one for convenience ly recovered $5,000, the amount is not sufficient to and to save expense, neither one of whom separategive defendant the right of appeal to this court. [No. 1067.]

Motion submitted Nov. 13, 1882. Decided Nov. 27, 1882.

APPEAL from the Circuit Court of the United

States for the Western District of Missouri. The history and facts of the case appear in the opinion of the court.

On motion to dismiss.

Messrs. Enoch Totten and James S. Botsford, for appellees, in support of motion.

Messrs. Mayer Sulzberger and Bryant, Holmes & Waddill, for appellants, contra.

NOTE.-Jurisdiction of U. S. Supreme Court depends on amount; interest cannot be added to give jurisdiction: how value of thing demanded may be in controversy. See, note to Gordon v. Ogden, 28 U. shown; what cases reviewable without regard to sum S. (3 Pet.), 33.