Thomas v. Virginia

PETITIONER:Thomas
RESPONDENT:Virginia
LOCATION:Circuit Court of Montgomery County

DOCKET NO.: 43
DECIDED BY: Warren Court (1958-1962)
LOWER COURT: State trial court

CITATION: 364 US 443 (1960)
ARGUED: Nov 10, 1960
DECIDED: Nov 10, 1960

Facts of the case

Question

Audio Transcription for Oral Argument – November 10, 1960 in Thomas v. Virginia

Earl Warren:

Number 43, Harry M. Thomas, Executor Petitioner, versus Virginia.

Mr. Doherty.

Cornelius H. Doherty:

Mr. Chief Justice, associate Justices.

Earl Warren:

— proceed with your argument.

Cornelius H. Doherty:

Certiorari has been granted in this case to the Circuit Court of Arlington County and is a state court and the appeal, but we do not have the appeal as a matter of right in Virginia and we had to apply it for an appeal, which was denied and certiorari was granted by this Court.

Now the facts in this matter are brief and very simple.

Crandal Mackey who was a member of this Court and had office in the District Columbia for a number of years and was domiciled in Virginia, Arlington County of Virginia, died in March of 1957 and at his death, they found that he had some $263,000 in cash currency, United States currency in a safe deposit box in the District of Columbia in his name.

Harry R. Thomas, who was the executor named in the will, was appointed his executor by the Circuit Court of Arlington County and thereafter and so the administration was taken out in the District of Columbia.

It was necessary to do that in order to take care of certain other properties in addition to the $263,000.

The taxing authorities in the District of Columbia ruled that this $263,000 among the other things that were in were a part of the estate of Crandal Mackey that it was tangible personal property and that it was taxable in the District of Columbia, relying entirely upon the Blodgett case which definitely made that statement and on the basis of that, the executor paid the tax that was due to the District of Columbia.

There after in making this return in the — in the Commonwealth of Virginia, they set forth these various facts that it had paid or they had paid the amount of money due on this $263,000 in the District of Columbia, on the ground that it was tangible personal property.

And Virginia ruled that this $263,000 was intangible personal property and not tangible personal property and therefore, they have to pay the tax on that amount of money in the — in the Commonwealth of Virginia.

An application was made by the executor to the Circuit Court of Arlington County on the basis of the law in Virginia which permits you to ask a relief from such an assessment and in that, it was set forth that the charging of this extra tax in Virginia was the taking of — of property without due process of law, for the simple reason that it was tangible personal property and that Virginia did not have the right to tax it.

Judge Medley, now in the Circuit Court of Arlington County, wrote a memorandum opinion and the judge (Inaudible) stating that it was intangible personal property and assessed the tax as against the estate.

Now, the only real question we have here is whether or not, this money is tangible personal property or whether it’s intangible personal property.

I don’t believe that there’s any question or whatever raised about the law as to where the tax should be paid, in the event that it’s intangible personal property.

But if its tangible personal property, it should be taxed at the situs, which in this particular case, would be the District of Columbia.

Intangible personal property as referred to in the McKinley’s case, the one of the cases cited in both our briefs, makes this statement, “The very different considerations both theoretically — theoretical and practical, applied in the taxation of intangibles, that is rights which are not related to physical things.

Such rights are but relationships between persons, natural or corporate, which the law recognizes by attaching to them certain sanctions enforceable in courts, like a certificate of stock.

No matter what happens to that certificate of stock, you may lose it, someone may steal it, anything may happen and you only — you have a right then to go to the corporation and say, “Well, that certificate was lost.

It was stolen or something.

I want a new one.”

Now, — and in the ordinary course of time, normal course of time, you will get another one and that’s true of anything that’s be — just an evidence of a debt.

You have the right to go into court and to ask the court under those circumstances to give you a judgment or whatever the particular facts may be.

Now in the question of tangible personal property, it’s contended of course and very definitely by the petitioner that currency, United States currency is a tangible — is tangible property.

I can’t conceive of anything that is more tangible than a $10 bill.

It maybe (Inaudible) certificate or gold certificate or maybe for the different bank or from any particular part of the country, once you get that, the normal person never looks at this certificate.

He doesn’t know whether the certificate or what it maybe.

He knows he can get two $5 bills of that $10 or he can get ten $1s for it, but it’s right there and present.

It’s something that can be felt.

Cornelius H. Doherty:

It’s a physical thing.

You can’t lose that or go out and spend it or gamble it away and then go down to the United States Treasury and say, “Well, this is just evidence of a certain obligation of the Treasury.

We want a new $10 bill or a $100 bill, whatever the thing maybe.”

The thing itself is just what it is.

The property or physical thing is the $100 or $10 bill that you have in your hand.

And when that’s gone, everything is gone.

You have no way in this world to show any evidence to anybody at any time.

Now the commonwealth contends rather definitely that this is intangible.

Now, we have this Blodgett case, which is referred to both by the Commonwealth and the petitioner and in that Blodgett case, there were a number of issues that came before this Court, that came out from the Supreme Court of — of Connecticut.

There was a question of whether or not, certain stocks and bonds that were in the — in the State of New York and in the name of the individual who is domiciled in Connecticut and also there was this $287.48 that was in the safe deposit box.

There’s nothing said in there by it was, other than it was a small amount of cash, $287.48. And the — it was contended in this Court by the State of Connecticut that that was intangible personal property, but the Court said and I’m bringing down on page 6 on my brief down near the end of the citation, but we think that money so definitely fixed and separated in its actual situs from the person of the owner as this was one is tangible property and cannot be distinguished from the paintings and furniture held on the Frick case to be taxable only the jurisdiction where they were.

Now this $263,000 isn’t like money in the bank.

It would — $263,000 which put in the bank, then it becomes intangible personal property because all you have then is a right to insist that that bank pay over some time $263,000, but this money was actually in the possession and under the control of Crandal Mackey until he died and the District of Columbia, with their assessor or the Register of Wills, went up there to open the safe deposit box and it was opened here in the District of Columbia.

The Commonwealth says this in its brief on page 7, “The language of this Court, speaking about the Blodgett case, quoted immediately above, constitutes the sole support of the petitioner’s position in the case at bar.

Were it not for this language, the instant case would not have arisen.

It would therefore, seem appropriate who analyzes isolated paragraph in as much detail as it its mere contents will permit.

Now, there was no — any reason to say anything more than that and it set forth this fact.

It was one issue that would be for this Court and the question was, was this money in the safe deposit box?

This cash whatever it maybe, in the safe deposit box tangible personal property or intangible personal property?

They just say its money.

That’s the way we always look at it, it’s money.

There’s nothing else there — as a — it’s the same as a diamond ring or a watch and under those circumstances, it cannot be conceived to be as the Commonwealth contents, intangible personal property.

Charles E. Whittaker:

May I ask you that the (Inaudible) that the (Inaudible) certificate is more or less, the thing itself than they still (Inaudible)?

Cornelius H. Doherty:

I — I would say, they’re both the same thing as the Court — as this Court said in the Norwich case which I referred to on page 12 of my brief.

It says, gold certificates, this is a case where this man had some $106,000 when the United States went off the gold standard and he asked for a $106,000 in gold pieces which they refused to give it to him.

They gave him a $106,000 in just ordinary bills and he filed a suit in the Court of Claims the balance with $60,000 or $70,000 which was the increased value of that gold from the time that he’d originally gotten it or from the time that the — this particular certificate was issued.

And the Court said this — this Court, “Gold certificates under this legislation were required to be issued in denominations of dollars and called to the payment of dollars.”

These gold certificates were currency.

They were not less sold because the specified numbers of dollars were payable in gold coin or the coinage of the United States.

The in currency and constitute legal tender, it is entirely inadmissible to regard the gold certificates as warehouse receipt.

Cornelius H. Doherty:

They were not contracts where a shortened of — of gold as a commodity.

They called for dollars not bullion.

So that — the main thing when you — to show that they’re intangible, you must go back to same old theory and that is, is it evidence of anything?

The only thing is it’s evidence of just what it is, it’s a physical thing itself.

It isn’t any evidence of anything else rather than the fact that you can take that $10 or $100 and go out and do whatever you want with it, but when it’s gone, it’s gone.

You lose it, it’s gone.

If it’s stolen, it’s gone, unless you’re able to find it.

There’s no way of identifying that thing.

Now, the Commonwealth relies greatly upon Justice Stone’s concurring opinion in the –

Felix Frankfurter:

Pearson?

Cornelius H. Doherty:

Pearson case, yes, sir and thank you, Justice Clark.

In that case, I don’t see why Justice Stone was so perturbed about this situation.

He had a different point of view I’m certain, than some of the other justices that sat in that particular case.

Now, Justice Stone was in the Blodgett case and that — there was a dissenting opinion in the Blodgett case which said very definitely that this money in the safe deposit box was tangible personal property and was taxable in New York and not in Connecticut.

Now, in this particular case, in Pearson case, this was the — where a man in Oregon had a deal of some kind for the purpose of making a trust for his certain members of his family, was dealing with Illinois Trust Company and that Illinois Trust Company was a — a large bank in the city of Chicago.

And he had turned over — over a period of time and certain moneys and certain stock and all these various things that were to be used by them or to be invested as they saw fit, for certain purposes.

He had a certain amount of money on him $68,000, as I remember, this $450,000 in — on deposit in the bank.

And he directed among other things that this trust company was to sell all his stocks of various parts also that he would have eventually get $450,000 in cash and that he was to — they would’ve put those into ordinary dollars, gold certificates or currency, whatever it might be.

Now, whether that bank was supposed to hold that money or not, there’s nothing to indicate that, whether it was to be taken in as a part of their assets in the bank and held there.

It was — as I look at, there was nothing very definitive to — to say that that $450,000 should be kept that way.

But nevertheless, he went on, the bank went on then and bought various other stocks and investments on that $450,000 and thereafter he died.

Now, we have the case where this money is — is away from the individual, He’s — he’s divested his — any right that he has to it — that is from a physical right.

He can’t go there and just say I want this.

The only thing he can do is say, Well, I — I’m going to change my mind, if he could, before this trust was really formed and I want my money back and they’ll send him a check for the amount of money that was due.

Under those circumstances, he had just the right, he has something to show that this money is there in this bank in Chicago and he can demand it and then get it back at a certain time or up to — he divests himself of that, but here we don’t have that.

We have certainly the money actually, in the possession of the individual.

It’s just the same as a man who puts money in the bank, it commingles with something else, you have a right to that, you can sign a check and do whatever you want and if you lose your bank, well, you can call upon them immediately and they’ll send you another one.

Now, in this statement of Justice Stone, the Court didn’t go along with him.

Justice Frankfurter did go along to a certain extent with what Justice Stone did say, but he must have had an entirely different view about dollars and I don’t think he was talking about dollars because he certainly would have said something in the Blodgett case if he wasn’t in concurrence with the statement that was in there that this was tangible personal property and taxable where it was in the safe deposit box, but in this Pearson versus McGraw, the court — this Court said that, “Therefore, we need not consider the nature of the Federal Reserve notes for in that posture of the case, their taxability as such and an isolation from the whole transaction is not an issue.

There was no issue as to that particular thing where there was a very definite issue in the Blodgett case and they passed upon it.

Cornelius H. Doherty:

Surely, it’s in a small paragraph, but you don’t have to say an awful lot to mean those things.

They say, the Commonwealth contends that we didn’t — that the Court didn’t say just what those notes meant or what kind of notes they were and all that.

They said it was money, they said it was coins and they said it was dollars or whatever it may be.

And that was there and there’s nothing to indicate anything other than that.

I submit that these facts are so claimed that this money and we’ve got to be practical about the thing there.

There isn’t anything in this world that is more physical and more subject to be lost or stolen or gambled or anything else but nevertheless, once it’s gone, it’s gone and its —

Felix Frankfurter:

Mr. Doherty, when you say it’s physical, what about a — a note of an individual, if I hold them in a safe deposit box, notes of JP Morgan, whether it’s —

Cornelius H. Doherty:

It would be very good, I’d say.

Felix Frankfurter:

What would you say to that?

That’s said to be physical — if it’s — if it has to —

Cornelius H. Doherty:

It’s — it’s physical.

Felix Frankfurter:

The technicality of loan in the past.

Cornelius H. Doherty:

It’s physical only in this respect.

You have a piece of paper but it is evidence only of some right, in some corporation.

Felix Frankfurter:

But so is a Federal Reserve note.

Cornelius H. Doherty:

No it doesn’t say that.

The notes —

Felix Frankfurter:

Everybody, if passes for currency because everybody thinks (Inaudible) — that you can get hard coins for this unique thing.

Cornelius H. Doherty:

Well, that’s true, now that’s what — that —

Felix Frankfurter:

What — what I want to know is, if a note of — of Morgan is a — is — shows in action, why didn’t the Federal Reserve know that shows in action?

Cornelius H. Doherty:

Well to the only —

Felix Frankfurter:

One lawyer to another –

Cornelius H. Doherty:

Because the contention of the petitioner is this, that a note of any kind, where I promise to pay you $10,000 at such and such a time and for some reason or other, you lose that note.

You can always prove that you gave me $10,000 or you did something in somewhere or other and you could go into court and the court has jurisdiction to pass upon.

And as I said, “And the intangible thing that was in the (Inaudible) case, that such rise are but relationships between persons, natural or corporate, which the law recognizes by attaching to them certain sanctions enforceable in court.

Felix Frankfurter:

What is the highest denominations of a Federal Reserve note?

Cornelius H. Doherty:

I think it is $10,000, if not —

Felix Frankfurter:

That is what I thought.

Now, suppose I — I have a — a $10,000 Federal Reserve note and by mistake, I throw it into the fire?

Is there no means by which I can get from the United States the restoration of that amount?

Cornelius H. Doherty:

If Your Honor please, if there was any way to —

Felix Frankfurter:

The way the postal order?

What about that?

Cornelius H. Doherty:

A postal order is an entirely different thing, a postal order you mean, the —

Felix Frankfurter:

That the past is current, that’s the only difference, isn’t it?

Cornelius H. Doherty:

Well yes, but you — when you get that order on the Western Union or the postal telegraph, what you do in that case —

Felix Frankfurter:

Well, I’m talking about at the Uncle Sam, not the Western Union.

Suppose I have a — can’t I get a postal order?

Cornelius H. Doherty:

Postal money order?

Felix Frankfurter:

Postal money order.

Cornelius H. Doherty:

Oh yes, you can always go back to Uncle Sam and get that and show that it was lost and give them the number and everything else, you have one part —

Felix Frankfurter:

Silver note, how about a silver note?

Cornelius H. Doherty:

A silver note?

You can current —

Felix Frankfurter:

Or it be always a gold note?

Cornelius H. Doherty:

Well —

Felix Frankfurter:

That would be different?

Cornelius H. Doherty:

Well, that the only thing I can say about that is what this Court has said about it.

They said there’s not a warehouse receipt, it just calls for dollars and that’s what they gave him in that case $106,000 and just ordinary dollars.

Felix Frankfurter:

Do you — do we (Inaudible) a note for Morgan’s and just get dollars to it?

Cornelius H. Doherty:

That’s all you get for it.

And because — now, I have a case before this Court, going back to Civil War I think was a — the Willard Hotel case, I haven’t read it in a long, long time, but there was something there that they insisted that they were — should pay off this obligation in gold and the Court said, “No, the dollars.”

This was legal tender.

This money and any of these dollars could be taken to pay off any obligation that’s due private or public.

It had to be taken by that but this $10,000 certificate of gold or bill or just an ordinary bill like as I say, I never thought about them as gold certificates or anything like that.

It was something that I could take out and buy something with and I knew that the minute it was lost, it was gone.

Felix Frankfurter:

Will it — I — I asked you whether it — I carelessly lose a $5000 or $10,000 Federal Reserve note, it isn’t gone if I can make the appropriate proof to the Secretary of Treasury, I’ll get another one instead.

Cornelius H. Doherty:

The only thing I can say to you, Justice Frankfurter, is this, that if that it could be done, there’d be such a line out there in front of that Treasury, day in and day out that —

Felix Frankfurter:

People just sold $10,000 note to —

Cornelius H. Doherty:

Well, that they wouldn’t show him.

Cornelius H. Doherty:

They (Inaudible) forget about them.

They pass, go out and gamble it or spend it or something, but they’d be down there.

There are plenty of people to be down there — down before that —

Felix Frankfurter:

(Inaudible)

Cornelius H. Doherty:

Secretary —

Felix Frankfurter:

I — I thought I would be in no worse financial condition (Inaudible) the last, he loses in gambling, could it to get it back from the Secretary of Treasury.

Cornelius H. Doherty:

Well — well, he could say —

Felix Frankfurter:

That is profitable.

Cornelius H. Doherty:

He could prove that, but the other thing is something that — that goes to show that thing is just — that itself and nothing else.

It isn’t there.

Charles E. Whittaker:

Mr. Doherty.

Cornelius H. Doherty:

Yes, Your Honor.

Charles E. Whittaker:

Hasn’t common acceptance understanding in the treatment by the people got something to do with his question?

Cornelius H. Doherty:

Well I — I would think so.

And that’s thing of course that we’re up against.

People that — just as I say, I didn’t think anything about this thing other — until this case came up and I thought just money was money and that was it.

I’ve lost a pocketbook or something like that, there was no way I could to anybody and say, “Well, I lost $300.”

Charles E. Whittaker:

If it’s a note and nothing’s more, it’s a different kind of a note than any other isn’t it?

Cornelius H. Doherty:

Definitely, there’s no question about that.

That — that’s a —

Charles E. Whittaker:

But people regard it as the thing, don’t we?

Cornelius H. Doherty:

That — that’s right.

Charles E. Whittaker:

Not evidence of it.

Cornelius H. Doherty:

Not evidence of it.

Yes, Your Honor.

I submit, if Your Honor please, that this is —

Potter Stewart:

This folding money, it’s generally called, folding money.

Cornelius H. Doherty:

Folding money.

Yes — there’s a lot of names for it, but it all adds up the same thing.

And I —

Felix Frankfurter:

(Inaudible)

Cornelius H. Doherty:

No, Your Honor.

There is — that this —

Felix Frankfurter:

Is there a statute on that subject, Mr. Doherty?

Cornelius H. Doherty:

No, but the only thing that have a regulation, I believe, at the Treasury where if you bring a note that’s been partially destroyed in some way or other and there’s enough of it there that they can figure out that it couldn’t spend the other part of it, they’ll give you a new note for that.

They have in fires and things or they have in boxes where they char.

But they have somewhere getting at it and they can get a number and something like that and they’ll give you something for that.

But if it’s tossed in the wastebasket and the maid gets it or some other person gets it, that’s the end of it, in so far as the owner.

Felix Frankfurter:

Is that the (Inaudible) to protect them from some except difficulties of proof?

Cornelius H. Doherty:

Well —

Felix Frankfurter:

But you think, the nature of the thing is —

Cornelius H. Doherty:

The nature —

Felix Frankfurter:

What currencies — I mean, will you use this as legal tender and all the rest of it?

Cornelius H. Doherty:

It’s just the same.

As I look at it if you have a — a ring, it’s worth a certain amount of money.

If you lose it, it’s gone and there’s no way you can do it.

You haven’t — it is an evidence of anything.

The thing itself is the bill or that particular part of the money that you have in your pocket or wherever you have it.

Felix Frankfurter:

Where the real — the real nub of this case, if you agree was wether, we should assimilate reserve notes of — to paintings and furnishing a brief case or —

Cornelius H. Doherty:

Yes, sir.

Felix Frankfurter:

More like — more like he chose in that — to that (Inaudible)

Cornelius H. Doherty:

Yes, that’s the whole question —

Potter Stewart:

Well, isn’t it — isn’t there (Inaudible) closer (Inaudible) as I gather, there’ll be no question if this — if these were coins, if this fellow for some eccentric reason had this 2 — 300 in that — 50,000, whatever it was —

Cornelius H. Doherty:

In pennies —

Potter Stewart:

In pennies or quarters or half dollars or silver dollars, I gather that the — that the Commonwealth of Virginia wouldn’t question it.

Cornelius H. Doherty:

No, that’s true.

But — and, and in the — the Blodgett case, they didn’t question the fact that — this Court didn’t question of fact, that it was — some of it was paper money and I assume is a paper money, was just very same thing as we’re using here today.

Felix Frankfurter:

Of course, the quick doctrine as Mr. Justice Holmes, pointed out in Union Transit Company, was — that the (Inaudible) wasn’t — I’m not suggesting we shouldn’t — that I don’t accept it wholeheartedly, All I’m saying is that was a real deviation for what the (Inaudible) was supposed to do.

Cornelius H. Doherty:

But that’s true and I would —

Felix Frankfurter:

(Inaudible) to be the relation of the domiciliary state to be a state of executor.

R. D. McIlwaine, III:

But they said it was such expansion of different things — in the last say, 50, 75, 100 years that — where people move into one jurisdiction and they have their place of business and they kept certain things and they perhaps as today have a plane and I’ll be in New York, one minute and down to Florida and some other place, very shortly thereafter.

And they have a business there and they move him back and forth and in one of those circumstances, they have to take that which is at the situs of the obligation whatever it maybe.

John M. Harlan II:

Suppose you lose this case, when you collect back in the district?

Cornelius H. Doherty:

I would hope that we couldn’t gone to the police but I, I don’t know.

They feel and felt that rather definitely at the time that we paid this money, sincerely believing that it was tangible personal property and that they thought it was in the basis of the decision of this Court and everybody that you talked to says, well, it is money and that’s it, it’s tangible.

I — I can answer that (Inaudible) to say that I hope, if we didn’t — or the two lose it here, that we could get it back.

Felix Frankfurter:

I should think there might be a difference between — on Justice Harlan’s assumption, there might be a difference in the ruling of this Court as to the nature — as to the legal nature of the reserve note, when this action was made, would that (Inaudible) with the United States by something that this is part of the United States.

It makes it — I was thinking, difference might be made as between two states and the District of Columbia.

Cornelius H. Doherty:

Well I don’t know the —

Felix Frankfurter:

(Inaudible)

Cornelius H. Doherty:

That, if Your Honor please, I think it’s something for this Court to decide.

I — I —

Felix Frankfurter:

You prefer to have it — do you prefer to have travel a different route?

Cornelius H. Doherty:

Yes I prefer to see that we did the proper thing and that we — the Blodgett case, which is the law so far up to this particular time, should be retained as the law of the land that people rely on these various things, time and time —

Felix Frankfurter:

Without an eccentric situation isn’t it?

Cornelius H. Doherty:

No, I — I don’t go —

Felix Frankfurter:

I mean, I don’t mean a legal question, but the fact —

Cornelius H. Doherty:

Well it’s a —

Felix Frankfurter:

Even you — you don’t have one — whatever it was.

Cornelius H. Doherty:

Oh, I — a lot of people do it just like this manner in Pearson case, he had $450,000.

I don’t know if he want to keep those in dollars or what I don t know.

A lot of people do that as —

Felix Frankfurter:

(Inaudible)

Cornelius H. Doherty:

Well, there are a lot of them who has done it.

And for some reason or other, they don’t want to trust the banks time and time again the — or they bury it in the ground or something like that which would be similar to that.

Hugo L. Black:

Which tax was a lot —

Cornelius H. Doherty:

They were both about the same.

I think the — the district was a little bit larger.

I submit that if it please the Court that this case should be reversed that that is the action of the Circuit Court of Arlington County should be reversed and that we —

Hugo L. Black:

On your argument as I — did Virginia tax money which was in a deposit box on the —

Cornelius H. Doherty:

If it were in fact —

Hugo L. Black:

It becomes due in another state?

Cornelius H. Doherty:

I would think so from the — there is something — put in the — in the Commonwealth’s brief.

Hugo L. Black:

I believe they did it, I’m not sure.

Cornelius H. Doherty:

There’s something in there in which they referred to a — a statute or — of Virginia which says that money, no matter where it is, is intangible or money that is — may I read that —

Hugo L. Black:

Then they draw the business distinction between bank deposits, did they —

Cornelius H. Doherty:

Well no, they don’t.

No that they say money, no matter where it’s — it says on page — appellant’s brief — appellee’s brief, on page 2.

“Money in the possession or under the control of the owner, whether such money be actually in or out of the State and belonging to a resident of this State, is considered to be taxable in Virginia.

Hugo L. Black:

That is rather simply on an ordinary deposit in a bank in another state or whether it’s in a safe deposit box?

Cornelius H. Doherty:

That — that’s the assumption I gather from the Commonwealth’s brief in this case.

They say all these things are intangible personal property.

They’re declaring something and of course, in the Frick case and — and a couple of the other cases that’s been cited in the brief, they say very definitely that it is the situs in there — that no state has a right to go out and declare that certain sums of money or anything outside of their jurisdiction, a place where they — their courts can’t control it, where they — they can’t go out and levy on this particular money or whatever it maybe.

Under those circumstances, they have no right to it.

That is the situs of that particular piece of property that has the right to tax and only that state.

Hugo L. Black:

They can’t tax on your argument that they cannot tax the situs from Virginia on the tax date, on the basis of how much property he owns from (Inaudible) in the State of Virginia.

Cornelius H. Doherty:

That’s right, if Your Honor please.

Thank you, sir.

Earl Warren:

Mr. McIlwaine.

R. D. McIlwaine, III:

Mr. Chief Justice and may it please the Court.

As indicated in the brief on behalf of respondent, the Commonwealth of Virginia also relies to a significant degree upon this Court’s decision in Blodgett versus Silberman, for the support of the Commonwealth’s position that there is nothing in the Constitution of the United States which prohibits Virginia from imposing an inheritance tax upon paper money owned by a Virginia citizen who was domiciled in Virginia at the time of his death, but which was kept in a safe deposit box in a bank in the District of Columbia.

Naturally, we would prefer that the terminal paragraph of this Court’s decision — decision in Blodgett, had not been written.

Nevertheless, we feel that so much of the language which this Court used in disposing of the principal question in that case, is appropriate to the specific situation presented in this case that we have stressed it in the opening pages of our brief particularly pages 5 and 6.

In the Blodgett case, this Court reaffirmed the firmly precedented constitutional principle that intangible personal property belonging to a decedent domiciled in a particular state, could be taxed by that state even though the evidences of that intangible property were located outside of the state.

The court then proceeded to consider whether or not, two elements of the Hershey State, under consideration in that case, constituted tangible personal property subject to the Frick rule or intangible personal property subject to the rule which it had just annunciated or which had just reaffirmed.

Insofar as the Hershey’s interest in a partnership in New York was concerned, both the Supreme Court of Errors of Connecticut and this Court, held that that was intangible personal property subject to taxation by Connecticut, the state in which Mr. Hershey was domiciled at the time of his death.

However, the Supreme Court of Errors of Connecticut had held that United States Government bonds and treasury certificates of indebtedness constituted tangible personal property and since there was United States bonds and treasury certificates of indebtedness were situated in a safe deposit box in a bank in New York and had never been in the State of Connecticut, they were taxable only in New York.

The Supreme Court of Errors of Connecticut admitted in its decision that essentially the bonds and treasury certificates of indebtedness were choses in action.

However, as stated on page 5 of our brief, the Supreme Court of Errors of Connecticut said that since these bonds are negotiable, since they pass from hand to hand and since under the laws of some states, they can be the subject of attachment and they maybe the subject of a jurisdiction of certain state courts.

They should be held to fall under the Frick rule and not to be different from the furniture, the paintings, the rugs and the firm implements under consideration in the Frick case.

John M. Harlan II:

Had this been silver dollars, would you have claim the right to taxing?

R. D. McIlwaine, III:

No, Your Honor, we would not.

John M. Harlan II:

What distinction do you draw between a piece of paper, a certificate, solely certificate to silver dollar?

R. D. McIlwaine, III:

The silver certificate has no intrinsic value, but it’s merely representative or evidence of value.

I can take the silver certificate to the bank and get a silver dollar for it.

And the silver has value all around the world, but I can — if I take a silver certificate which represents an obligation of a Government to pay in silver dollar, if the Government should repudiate that obligation, the paper is worthless.

It has no intrinsic value.

I cannot take money which the United States Government has repudiated and put it in the markets of the world as having value.

Potter Stewart:

How much value?

John M. Harlan II:

But put a silver dollar in the markets of the world, (Inaudible)

R. D. McIlwaine, III:

I beg your pardon.

John M. Harlan II:

You couldn’t put silver dollar.

I might go around the (Inaudible)

R. D. McIlwaine, III:

I understand that I could Your Honor, that if I had silver dollars or gold bullion, I could also that it would have value.

Charles E. Whittaker:

Aren’t you really talking about a difference in degree Mr. McIlwaine, the paper, as paper was worth very little, but the silver in the silver dollar isn’t worth a dollar either is it?

R. D. McIlwaine, III:

No, sir.

Charles E. Whittaker:

So aren’t you really just talking about a difference in degree here and doesn’t each have its real worth because it’s a recognized medium of exchange of our Government, if it’s the thing itself?

R. D. McIlwaine, III:

But the paper that is to recognize medium of exchange of the Government is so because of the obligation on the part of the Government to pay a silver dollar or the silver certificate or to redeem the paper.

It is by statute, an evidence of indebtedness on the part of the Government to the holder, the statute so makes it.

And we have set those statutes out on page 12 and 13 of our brief.

Federal Reserve notes by law constitute obligations of the United States Government.

United States notes by statute also constitute obligations of the United States in the amount of them outstanding, must be included in the statement of the public debt issued monthly under Section 31 U.S.C.A. 402.

The amount of all United States notes outstanding must be included in the statement.

The United States notes are limited number of paper currency Your Honor, which are issued as I understand it, by other Government under a — a statute which was in existence before the Federal Reserve Act.

The Federal Reserve Act established various banks to issue money under the control of the Board of Governors, on behalf of the United States and its notes — the Federal Reserve notes constitute obligations of the United States and firstly and upon the assets of the bank.

There is as a matter of fact, a gold reserve maintained behind United States notes and the gold reserve maintained behind the Federal Reserve notes.

There is a statutory reserve behind the United States notes of $150 million in gold bullion.

Felix Frankfurter:

When you say Government notes, you mean treasury notes issued for a short period in anticipation of revenue?

R. D. McIlwaine, III:

I meant in this connection, Mr. Justice Frankfurter, United States notes and Federal Reserve notes.

Currency.

R. D. McIlwaine, III:

Currency, yes, sir.

There are —

Felix Frankfurter:

Not the treasury notes?

R. D. McIlwaine, III:

No, sir.

I think they would just represent obligations of the United States Government under which it itself, borrows money.

(Inaudible)

R. D. McIlwaine, III:

Yes, sir.

There are United States notes presently in circulation but only a very small portion of the —

(Inaudible)

R. D. McIlwaine, III:

They — United States notes are in denominations of $5, $10 up to $100, I believe.

They do not have any $1 or $2 United States notes or any of the larger.

Felix Frankfurter:

Are treasury notes negotiable?

R. D. McIlwaine, III:

I — I mean, I’m not sure exactly what you mean.

I’ve always understood the treasury notes and treasury bills, all of the Government paper of that type, 60-day bills were — were negotiable including various issues of the United States bonds.

Felix Frankfurter:

Have you — are you suggesting that differentiation should be made with reference to the Frick doctrine as to whether their notes, that the all gold notes, a Federal Reserve notes?

R. D. McIlwaine, III:

No, Your Honor, I’m not.

Felix Frankfurter:

Because they’re all are choses in action.

R. D. McIlwaine, III:

They are choses in action.

They all represent something of value.

They all represent a promise of the United States Government and if the promise behind the paper is withdrawn, if the promise behind the paper is abnegated, if the Government of United States should fail so that that obligation cannot be met by the United States Government, the paper which is taxed in this case, is utterly worthless.

I think that nothing can more clearly establish the representative intangible character of paper money than the idiom which everyone has heard of before, confederate money.

Now, up until (Inaudible) that money —

Felix Frankfurter:

Where is the continental?

R. D. McIlwaine, III:

Where is the continental?

Confederate money could used to pay taxes.

It could be used in the confederacy during the war to purchase land and the things necessary to — for existence, so long as the Federal Government was — I mean the Confederate government was in existence and there was an honor or an honorable obligation by the confederacy to redeem the money in silver or gold after the war.

Now, with the collapse of the confederacy, the rags on the floor, the land, the building, the silver still had value in every confederate home, but the paper money was worthless.

Felix Frankfurter:

But you have another historic illustration to that point, if that was valid, namely if sanctioned by the national government of the state or state issues, (Inaudible) a great historic (Inaudible)

R. D. McIlwaine, III:

I must confess ignorance to that particular matter, Mr. Justice Frankfurter.

But I do feel that any contention that paper money is something real and tangible because it is kept in a locked box misconceives the Blodgett doctrine entirely because the bonds and treasury certificates of indebtedness in Blodgett were also kept in a locked box in New York and had never been in Connecticut.

R. D. McIlwaine, III:

Notwithstanding, the Court held that they were intangible personal property and that they were subject to taxation by Connecticut.

So the fact that this paper money was in a locked box is not going to change its character of intangible personal property to tangible personal property and if paper money is something real and tangible like a ring or a piece of jewelry as suggested by the petitioner, the question arises is why the United States Government does not print up several tons of it and deposit it in the vaults at Fort Knox and then cease to worry about the current drainage on the gold in the United States.

If it is something real and tangible like a piece of jewelry, I would assume that it’s something real and tangible like a gold ingot or a bar of gold, but of course, it isn’t real and tangible like that.

Charles E. Whittaker:

Sometimes I lose a note and that’s the (Inaudible)

R. D. McIlwaine, III:

Yes, sir.

Charles E. Whittaker:

You would want gold while you still have it tangibly but wouldn’t that be the same (Inaudible)?

R. D. McIlwaine, III:

If they were any gold at all behind the original issue than to stop the printing presses would have the effect of deluding the value of the paper currency that —

Charles E. Whittaker:

It will tangible.

R. D. McIlwaine, III:

What —

Charles E. Whittaker:

Therefore what?

R. D. McIlwaine, III:

But the gold would be tangible and the paper would not be, Your Honor.

If the paper were tangible, it would do service for gold.

If there is any validity in the petitioner’s position that the paper money in this locked box was something real and tangible like a piece of jewelry or a diamond, that the value was associated with the thing itself, then why would it not do service for something that is tangible or something that the common law admits would be tangible, that is gold.

We also of course, rely upon the observations of Mr. Justice Stone in Pearson versus McGraw.

We think that there was really no consideration of the nature of bank notes in Blodgett versus Silberman.

The Court said, only that the money, the $287.48 under consideration in that case, was comprised of bank notes and coin.

Thereafter, it noted the arguments which had been made by Connecticut in which it was argued that — that the money on the consideration there was not like coin or treasure in the vault, but was like loose change, so to speak.

And then the Court said, “We think that money so definitely fixed and separated in its actual situs from the person, the owner is tangible personal property.”

There was no mention made of bank notes after initially saying that the small amount of money under consideration in that case, was comprised of bank notes and coin.

Thereafter, we submit, the Court considered it all as money without giving consideration to the statutory character of paper money.

And we feel that this Court’s observations in Blodgett versus Silberman concerning US bonds and treasury certificates of indebtedness are precisely on point with United States paper money.

At the bottom of page 5 of our brief, we set out what this Court said about U.S. bonds and the treasury certificates of indebtedness, beginning with italicized language at the bottom of that page.

The Court said, “We think bonds are not thus distinguishable from other choses in action,” that is simply because they passed them from hand to hand.

It is not enough to show that the written or printed evidence of ownership, made by the law of the state in which they are physically present, be permitted to be taken in execution or dealt with as reaching that of in which they are evidenced even without the presence of the owner.

While bonds often are so treated, they are nevertheless in their essence only evidences of debt.

Then it went on the discussion of Union Refrigerator Transit Company case, shows what this Court meant in the Frick case, in holding that personal property in the form of paintings and furniture, having an actual situs in one state, could not be subjected to the transfer tax in another state and emphasizes the inference that it did not apply to anything having as its essence and indebtedness or a chose in action and could not apply to property in the form of specialties or bonds or other written evidences of indebtedness whether governmental or otherwise, even though they pass from hand to hand.

The analogy between furniture and bonds cannot be complete, because bonds are representative only and are not the thing represented.

They are at most choses in action and intangibles.

We think that is equally true in view of the statutory provisions set out on pages 12 and 13, showing the character of silver certificates, United States notes and Federal Reserve notes that every observation made by the Court in Blodgett versus Silberman with respect to United States Government bonds and treasury certificates of indebtedness, is equally applicable to paper money.

There is no question, I might point out that the $450,000 worth of Federal Reserve notes under consideration in Pearson versus McGraw was nothing but paper money.

R. D. McIlwaine, III:

It does not appeal from this Court’s opinion that that is true, but in the case as it was heard in the Supreme Court of Oregon, the opinion in that case used this language in discussing of whether or not, Oregon protects the $450,000 worth of Federal Reserve notes.

It said in 86 Pacific 2nd at 427, “The layman’s word for Federal Reserve notes is paper money.”

So in Pearson versus McGraw, this Court had on the consideration whether or not, $450,000 worth of paper money which had never been in Oregon could be taxed by Oregon and this Court held but it could.

The basis of the decision in that case was that the $450,000 in paper money was brought an indistinguishable step in a series of steps amounting to a transfer of intangibles in contemplation of debt.

Mr. Justice Stone in an opinion in which Mr. Justice Frankfurter concurred, took the view that there was nothing in the Constitution which forbad Oregon to impose an inheritance tax upon the gift of paper money even though the paper money was in Illinois.

And Mr. Justice Stone has also pointed out that no reason had been given even in Blodgett versus Silberman for any different result.

And I think that that is definitely an unarguable statement.

All that was said in Blodgett versus Silberman was that money was tangible personal property.

There was no consideration given to the nature of bank notes nor was there any reason supportive of the Court’s holding that the money under consideration was tangible personal property.

The |Court in Blodgett said, “We think that money so definitely fixed and separate from the domicile of decedent should be considered tangible personal property like the paintings and furniture like in Frick case.

” And in his opinion in Pearson versus McGraw, Mr. Justice Stone said and we have set it out on pages 10 and 11 — in the middle of page 11, “As I am of the opinion that there is nothing in the Constitution to compel a state, to treat Federal Reserve notes for tax purposes as chattels were treated in Frick versus Pennsylvania and as no reason has been advanced even in Blodgett versus Silberman for a different view, the judgment should I think, be reversed rest upon this ground.

I think — and so that the Commonwealth has stated in his brief that perhaps the nub of this case is a manner of degree into which category shall paper money fall.

Shall it be deemed to be more similar to United States bonds, treasury certificates of indebtedness and other choses in action or intangibles or shall it be classified for purposes of constitutional inheritance taxation as rugs or furniture or automobiles as what’s under consideration in Frick case.

Potter Stewart:

How about the other kind of money, silver, copper, nickel money?

Am I right in attributing to you the concession that that would be tangible?

R. D. McIlwaine, III:

Yes, sir.

We think it would because we think, that would have had value itself, silver and gold will have value itself.

We think that paper money has no value, but is merely an evidence of an obligation on — on behalf of the United States Government.

Charles E. Whittaker:

(Inaudible) value or some value (Inaudible)

R. D. McIlwaine, III:

It has —

Charles E. Whittaker:

Taxable value that we tax it or something?

R. D. McIlwaine, III:

It has some value, Your Honor.

It does not have the value which the United States Government attributes to it, but it does have value and silver itself has value in the world markets, but the paper — that will be, what is the cost of a — of the value of a dollar bill, intrinsically?

You say, “It has no intrinsic value” and that is the definition of intangible personal property.

That property which has no intrinsic value but is merely representative or evidence of value and we think that the paper money under consideration in this case, is definitely intangible and that there is the — there is nothing which requires a state, in this case, Virginia, to treat paper money as rugs, furniture and paintings were treated under the Frick rule — will it be treated then?

John M. Harlan II:

Are you saying that it would be — so far as the Constitution is concerned, it’s constitutionally permissible for Virginia to treat these as intangible?

R. D. McIlwaine, III:

Yes, Your Honor.

John M. Harlan II:

That is intangible but at New York, at the same time treats the same money in its jurisdiction, but Virginia (Inaudible) as intangible personal property.

R. D. McIlwaine, III:

No, Your Honor.

I’m saying that if — as I understand it, if these were considered to be tangible personal property, then under the Frick rule it could only be taxed where it is.

R. D. McIlwaine, III:

If it’s intangible personal property it can definitely be taxed at the domicile of the decedent and it maybe taxed elsewhere if it has acquired a business situs elsewhere or something of that nature, which would not be true in this case because it was in safe deposit box.

Felix Frankfurter:

Mr. McIlwaine, now, I’d like to ask you about the Blodgett, (Inaudible) that Chief Justice Taft a paragraph that you regarded not helpful to the (Inaudible).

There was a small amount of cash $287.48, that’s what the choosing was about wasn’t it?

R. D. McIlwaine, III:

Yes, sir.

Felix Frankfurter:

There’s a small amount of cash $287.48, now from hereon, I get — I’m not clear — I do like — in bank notes and coins and later on, it was on towards end, but we think that money — the words, bank notes, the phrase, bank notes, drops out in the rest of the talk is about money.

R. D. McIlwaine, III:

Yes, sir.

Felix Frankfurter:

And when I go to the record and look at the computation of the Tax Commission of Connecticut at Exhibit C, aother miscellaneous property of New York, the National City Bank of New York savings account, with accrued interest of $108.56, the life insurance policy, cash on hand at New York $287.48.

What I’d like to have you elucidate for me (Inaudible) when the Chief Justice got the introduction of his (Inaudible) in bank notes and coins, what’s the bank notes mean?

What does that describe?

He talks about money and the — the inventory cost with cash on hand.

Now, you wouldn’t describe a bank note as cash ordinarily to the Tax commissioner, would you, cash on hand?

R. D. McIlwaine, III:

I — I would think that you would.

Yes, Your Honor.

Felix Frankfurter:

But what — what bank notes are there?

I mean —

R. D. McIlwaine, III:

I — I do not know.

Felix Frankfurter:

The (Inaudible) another bank or the (Inaudible) Trust Company or bank in (Voice Overlap).

R. D. McIlwaine, III:

Well under the — I — I don’t know what the law was at that time, but under — today as you were having of course, no circulating state notes, just U.S. Government currency.

Felix Frankfurter:

Well, I must say that (Voice Overlap) I’ve got the bank notes from?

R. D. McIlwaine, III:

The word, bank notes drops out of that portion of the court’s opinion with its initial mention in the first line.

(Voice Overlap)

Thereafter, the Court talks about coin —

Felix Frankfurter:

Money — I don’t think you call a bank note, money.

In order — from a technical speaking and certainly, the tax commissioner didn’t just draw the cash on hand.

R. D. McIlwaine, III:

It’s possible.

I’m not —

Felix Frankfurter:

I don’t think or do we call the —

R. D. McIlwaine, III:

I’m not just familiar with the precise language —

Felix Frankfurter:

Any issuing agency or cash?

Potter Stewart:

They go to a cash register don’t they?

R. D. McIlwaine, III:

I would think that only, only that money which is used as a circulating medium of exchange would constitute cash under the ordinary acceptation of word, Mr. Justice Frankfurter.

Felix Frankfurter:

(Voice Overlap) controversies here, in cash.

R. D. McIlwaine, III:

It’s definitely cash in controversy here in —

Felix Frankfurter:

Cash and the cash —

R. D. McIlwaine, III:

Into this no — in the records.

Felix Frankfurter:

I think, I can’t find any, any other appearance of this bank note.

R. D. McIlwaine, III:

The only suggestion I can make is that the opinion in that case, the opinion of the state court, Supreme Court of Errors of Connecticut, may have said that the money was in bank notes and coins and that the (Inaudible)

Felix Frankfurter:

(Inaudible)

R. D. McIlwaine, III:

I have but I’m not clear on that particular point, Your Honor.

I can’t say (Voice Overlap).

Earl Warren:

Mr. McIlwaine, this — this situation was reasoned in numerable times.

In fact, in ever state of the Union, you know what the practices in other states.

I don’t —

R. D. McIlwaine, III:

We would have thought so, Mr. Chief Justice.

We could not find in the tax services any indication that it had been passed upon.

The reason for it apparently is this.

Broad statutes relating to inheritance taxes generally say that the property of the decedent within the jurisdiction of this state is taxable.

And then they go to say, if it — if it is tangible personal property and is outside of the jurisdiction of the state, then it’s not taxable, but if it’s intangible personal property, then it is taxable here.

Now, unless a specific case arises in which someone challenges a determination by a state tax commission, that money is intangible personal property, there would not be any specific provision of law to which I could cite you to say that the law of Oklahoma or Texas or Oregon holds, that money is intangible personal property, because such a situation would be similar to that under consideration here, an administrative ruling would be made.

Now, we have made some inquiry.

This — the doctrine here that resulted in the imposition of tax in this case, has been the only doctrine in Virginia.

It’s always been viewed to be intangible personal property and we made inquiry of North Carolina and find that they are of a view of the taxability of money under these circumstances, the (Inaudible) Virginia has been for number of years.

We also have additional inquiries out to which we had not received responses as of yesterday when I left Richmond.

But that would be the only way we could establish what the practice was in — in the other states because the statutes themselves would simply say intangible personal property in this jurisdiction is taxable, without any specific statute saying whether or not, money, paper money was to be deemed intangible personal property.

Potter Stewart:

Of course your statute, it would probably make both paper money and coins taxable is tangible personal property, would it not?

R. D. McIlwaine, III:

Other than the administrative interpretation —

Potter Stewart:

It talks about money, money isn’t that it?

R. D. McIlwaine, III:

It – it says money, yes, sir.

Now —

Potter Stewart:

The duty statute not another regular —

R. D. McIlwaine, III:

I think that that — that would be interpreted in light of the — I mean, I’m sure it would, in light of the constitutional requirements that it was tangible personal property, Virginia could not tax it, if it were located beyond the jurisdiction of the Commonwealth.

So that the money in that case, would be limited to paper money which we had deemed intangible personal property.

Earl Warren:

Your court — courts have not made the distinction known, is that right?

R. D. McIlwaine, III:

No, sir.

Earl Warren:

Just administrate.

R. D. McIlwaine, III:

Just administrate issues.

I have nothing further, if Your Honor please, unless you have some —

Felix Frankfurter:

Have either of you — the reference to the Connecticut decision and the Blodgett?

What is that?

Felix Frankfurter:

Do you happen to have that?

R. D. McIlwaine, III:

Yes, Your Honor.

It is known, now.

In the Blodgett case was I think about silver money, 134 A. 778.

Felix Frankfurter:

Alright, 778.

R. D. McIlwaine, III:

Yes, sir.

Felix Frankfurter:

Thank you very much.