*379

arising or accruing from all sources in the preceding calendar year to every citizen of the United States, whether residing at home or abroad, and to every person residing in the United States, though not a citizen thereof, a tax of 1 per centum per annum upon such income, except as hereinafter provided; and a like tax shall be assessed, levied, collected, and paid annually upon the entire net income from all property owned and of every business, trade, or profession carried on in the United States by persons residing elsewhere."

the proceeds, *also any other moneys to invest and reinvest in such securities as they may in their discretion deem safe and judicious to hold for my account; to collect and receipt for all interest and dividends, loans, stocks, or other securities now or hereafter belonging to me; to indorse checks payable to my order and to make or enter into any agreement or agreements they may deem necessary and best for my interest in the management of my business and affairs; also to represent me, and, in my behalf, to vote and act for me at all meetings connected with any company in which I may own stocks or bonds or be interested in any way whatever, with power also as attorney or attorneys under to do all lawful acts requisite for effecting the it for that purpose to make and substitute, and premises, hereby ratifying and confirming all that the said attorney or substitute or substitutes shall do therein by virtue of these presents."

[1-3] The question certified is:

"If an alien nonresident own stocks, bonds, and mortgages secured upon property in the United States or payable by persons or corporations there domiciled, and if the income therefrom is collected for and remitted to such nonresident by an agent domiciled in the United States, and if the agent has physical possession of the certificates of stock, the bonds and the mortgages, is such income subject to an income tax under the Act of October 3, 1913?"

Under this statutory provision a question arose as to the taxability of income from certain securities of Emily R. De Ganay, a citizen and resident of France. The District Court of the United States for the Eastern District of Pennsylvania held the income from the securities taxable. 239 Fed. 568. The case is here upon certificate from the Circuit Court of Appeals, from which it appears: That Emily R. De Ganay is a citizen of France, and re*sides in that country. That her father was an American citizen domiciled in Pennsylvania, and died in 1885, having devised one-fourth of his residuary estate, consisting of real property, to the Pennsylvania Company for Insurance on Lives and Granting Annuities, in trust to pay the net income thereof to her. She also inherited from her father a large amount of personal property in her own right free from any trust. This personal property is invested in stocks and bonds of corporations organized under laws of the United States and in bonds and mortgages secured upon property in Pennsylvania. Since 1885 the Pennsylvania Company has been acting as her agent under power of at-mortgages are not property, that they are but torney, and has invested and reinvested her property, and has collected and remitted to her the net income therefrom. The certificates of stocks, bonds and mortgages had been and were in 1913 in the company's possession in its offices in Philadelphia. The company made a return of the income collected for the plaintiff for the year 1913 both from her real estate, which is not in controversy here, and her net income from corporate stocks and bonds and the bonds and

mortgages held by her in her own right. The tax was paid under protest and recovery was sought by the proper action.

The question certified is limited to the net income collected by virtue of the power of attorney from the personal property owned by

the plaintiff in her own right.

The power of attorney, which is attached to the certificate, authorizes the agent:

"To sell, assign, transfer any stocks, bonds, loans, or other securities now standing or that may hereafter stand in my name on the books of any and all corporations, national, state, municipal or private; to enter satisfaction upon the record of any indenture or mortgage now or hereafter in my name, or to sell and assign the same and to transfer policies of insurance, and

the income from the stock, bonds, and mortThe question submitted comes to this: Is gages, held by the Pennsylvania Company, States? A learned argument is made to the derived from property owned in the United effect that the stock certificates, bonds, and

evidences of the ownership of interests which are property; that the property, in a legal sense, represented by the securities, would exist if the physical evidences thereof were refinements are not decisive of the congresdestroyed. But we are of opinion that these sional intent in using the term "property" in this statute. Unless the contrary appears, statutory words are presumed to be used in meaning commonly attributable to them. To their ordinary and usual sense, and with the the general understanding and with the com

mon meaning usually attached to such descriptive terms, bonds, mortgages, and certificates of stock are regarded as property. By state and federal statutes they are often treated as property, not as mere evidences of

the interest which they represent. In Blackstone v. Miller, 188 U S. 189, 206, 23 Sup. Ct. 277, 279 (47 L. Ed. 439), this court held that a deposit by a citizen of Illinois in a trust company in the city of New York was subject to the transfer tax of the state of New

York and said:

"There is no conflict between our views and the point decided in the case reported under the name of State Tax on Foreign Held Bonds, 15 Wall. 300 [21 L. Ed. 179]. The taxation

382

in that case was on the interest on bonds helder of attorney which gave authority to the out of the state. Bonds and negotiable instru- agent to sell, assign, or transfer any of them, ments are more than merely evidences of debt. and to invest and reinvest the proceeds of The debt is inseparable from the paper which declares and constitutes it, by a tradition which such sales as it might deem best in the mancomes down from more archaic conditions. Ba- agement of the business and affairs of the con v. Hooker, 177 Mass. 335, 337 [58 N. E. principal. It is difficult to conceive how prop1078, 83 Am. St. Rep. 279]." erty could be more completely localized in the United States. There can be no question of the power of Congress to tax the income from such securities. Thus situated and held, and with the authority given to the local agent over them, we think the income de rived is clearly from property *within the United States within the meaning of Congress as expressed in the statute under consideration. It follows that the question certified by the Circuit Court of Appeals must be answered in the affirmative.

The Court of Appeals of New York, recognizing the same principle, treated such instruments as property in People ex. rel. Jefferson v. Smith, 88 N. Y. 576, 585:

"It is clear from the statutes referred to and the authorities cited and from the understanding of business men in commercial transactions, as well as of jurists and legislators, that mortgages, bonds, bills and notes have for many purposes come to be regarded as property and not as the mere evidences of debts, and that they may thus have a situs at the place where they are found like other visible, tangible chattels."

So ordered.

Mr. Justice McREYNOLDS took no part in this case.

& GAS CO. et al.

(250 U. S. 394)

(Argued March 25, 1919. Decided June 9,

1919.) No. 281.

1. CONSTITUTIONAL LAW 135-IMPAIRMENT OF "CONTRACT" "MUNICIPAL CORPORATION"-POWER TO REGULATE GAS RATES.

We have no doubt that the securities, herein involved, are property. Are they property within the United States? It is insisted that CITY OF PAWHUSKA v. PAWHUSKA OIL the maxim "mobilia sequuntur personam" *applies in this instance, and that the situs of the property was at the domicile of the owner in France. But this court has frequently declared that the maxim, a fiction at most, must yield to the facts and circumstances of cases which require it, and that notes, bonds and mortgages may acquire a situs at a place other than the domicile of the owner, and be there reached by the taxing authority. It is only necessary to refer to some of the decisions of this court. New Orleans v. Stemple, 175 U. S. 309, 20 Sup. Ct. 110, 44 L. Ed. 174; Bristol v. Washington County, 177 U. S. 133, 20 Sup. Ct. 585, 44 L. Ed. 701; Blackstone v. Miller, supra; State Board of Assessors V. Comptoir National d'Escompte, 191 U. S. 388, 24 Sup. Ct. 109, 48 L. Ed. 232; Carstairs v. Cochran, 193 U. S. 10, 24 Sup. Ct. 318, 48 L. Ed. 596; Scottish Union & National Ins. Co. v. Bowland, 196 U. S. 611, 25 Sup. Ct. 345, 49 L. Ed. 619; Wheeler v. New York, 233 U. S. 434, 439, 34 Sup. Ct. 607, 58 L. Ed. 1030; Iowa v. Slimmer, 248 U. S. 115, 120, 39 Sup. Ct. 33, 63 L. Ed. 158. Shares of stock in national banks, this court has held, for the pur-2. pose of taxation may be separated from the domicile of the owner, and taxed at the place where held. Tappan v. Merchants' National Bank, 19 Wall. 490, 22 L. Ed. 189.

Municipal corporations are political subdivisions of the state, for the exercising of such governmental powers as may be intrusted to them, the nature and duration of which powers rest in the discretion of the state, and neither their charter nor any law conferring governmental powers constitutes a contract with the state within the meaning of the federal Constitution; therefore though an Oklahoma city gave a gas company a franchise to use the streets and alleys for its pipes, and, pursuant to Rev. Laws 1910, § 593, regulated charges, Laws 1913, c. 93, giving power to regulate rates the city of such authority, is not invalid as imto the Corporation Commission, and depriving pairing the obligation of a contract.

[Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Contract; Municipal Corporation.]

MUNICIPAL CORPORATIONS 64-POWERS

-LEGISLATIVE CONTROL.

A municipal corporation is a mere political division of the state, created as a convenient agency for exercising such governmental powers as may be intrusted to it, and the nature of such powers rests in the absolute discretion of the state.

In the case under consideration the stocks and bonds were those of corporations organized under the laws of the United States, and the bonds and mortgages were secured upon property in Pennsylvania. The certificates of stock, the bonds and mortgages were in the Pennsylvania Company's offices in Philadel- An order of the Oklahoma Corporation phia. Not only is this so, but the stocks, Commission made on petition of the Pawbonds and mortgages were held under a pow-huska Oil & Gas Company fixing the rates for

In Error to the Supreme Court of the State of Oklahoma.

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

383

(39 Sup.Ct.)

gas was, on appeal by the City of Pawhuska, | so contends here-that at the time the franaffirmed by the Supreme Court of Oklahoma chise was granted it alone was authorized to (166 Pac. 1058), and the City of Pawhuska brings error. Writ dismissed.

*Mr. Preston A. Shinn, of Pawhuska, Okl., for plaintiff in error.

Mr. T. J. Leahy, of Pawhuska, Okl., for

defendant in error.

Mr. Justice VAN DEVANTER delivered the opinion of the Court.

A city in Oklahoma is complaining here of an order of the corporation commission of the state, made in 1917, regulating the rates and service of a gas company engaged in supplying natural gas to the city and its inhabitants. The company has a franchise, granted by the city in 1909, which entitles it to have its pipe lines in the streets and alleys of the city and provides that the gas shall be supplied at flat or meter rates, at the option of the consumer, and that the rates shall not be in excess of fixed stand

ards.

When the franchise was granted there was a provision in the state Constitution (article 18, § 7) reading:

regulate such charges and service within its municipal limits, that the Legislature could not transfer that authority to the Corporation Commission consistently with the Constitution of the state, and that in consequence the act under which the commission proceeded and the order made by it effected an impairment of the franchise contract between the city and the gas company in viola tion of the contract clause of the Constitution of the United States. Or, stating it in another way, the contention of the city was and is that the authority to regulate the rates and service, which concededly was reserved at the time the franchise was granted, was irrevocably delegated to the city by the Constitution and laws of the state, and therefore that the exertion of that authority by any other state agency, even though in conformity with a later enactment of the Legislature, operated as an impairment of the franchise contract.

Dealing with this contention the state court, while fully conceding that the earlier statute delegated to the city the authority claimed by it, held that this delegation was "No grant, extension, or renewal of any fran-to endure only "until such time as the state chise or other use of the streets, alleys, or other public grounds or ways of any municipality, shall divest the state, or any of its subordinate subdivisions, of their control and regulation of such use and enjoyment. Nor shall the power to regulate the charges for public services be surrendered; and no exclusive franchise shall ever be granted."

And there also was a statutory provision (Rev. Stat. 1903, § 398; Rev. Laws 1910, § 593) declaring:

"All such grants shall be subject at all times to reasonable regulations by ordinance as to the use of streets and prices to be paid for gas or light."

saw fit to exercise its paramount authority," that under the state Constitution the Legislature could withdraw that authority from the city whenever in its judgment the public interest would be subserved thereby, and that it was effectively withdrawn from the city and confided to the corporation commission by the act of 1913. The claim that this impaired the franchise contract was

overruled.

[1, 2] It is not contended, nor could it well be, that any private right of the city was infringed, but only that a power to regulate in the public interest theretofore confided to it was taken away and lodged in another agency of the state-one created by the

versy is as to which of two existing agencies or arms of the state government is authorized for the time being to exercise in the public interest a particular power, obviously governmental, subject to which the franchise confessedly was granted. In this no question under the contract clause of the Constitution of the United States is involved, but only a question of local law, the decision of which by the Supreme Court of the state is final.

In 1913 the state Legislature adopted an act providing that the corporation commis-state Constitution. Thus the whole controsion "shall have general supervision over all public utilities, with power to fix and establish rates and to prescribe rules, requirements and regulations, affecting their services." Laws 1913, c. 93, § 2. It was under this act, and after a full hearing on a petition presented by the gas company, that the order in question was made. The order abrogates all flat rates, increases the meter rates, requires that the gas be sold through meters to be supplied and installed at the company's expense, and recites that the evidence produced at the hearing disclosed that the franchise rates had become inadequate and unremunerative and that supplying gas at flat rates was productive of wasteful use. On an appeal by the city the Supreme Court of the state affirmed the order. 166 Pac. 1058.

"Municipal corporations are political subdivisions of the state, created as convenient agencies for exercising such of the governmental powers of the state as may be intrusted to them. For the purpose of executing these powers properly and efficiently they usually are given the power to acquire, hold, and manage personal and real property. The number, nature, and duration of the powers conferred upon these corporations and the territory over which they shall be exerThe city contended in that court-and it cised rests in the absolute discretion of the state.

*397

*398

Neither their charters, nor any law conferring | mere agent of the state, stands in its governgovernmental powers, or vesting in them prop- mental or public character in no contract relaerty to be used for governmental purposes, or tion with its sovereign, at whose pleasure its authorizing them to hold or manage such prop-charter may be amended, changed, or revoked, erty, or exempting them from taxation upon it. without the impairment of any constitutional constitutes a contract with the state within the obligation, while with respect to its private or meaning of the federal Constitution." Hunter proprietary rights and interests it may be env. Pittsburg, 207 U. S. 161, 178, 28 Sup. Ct. titled to the constitutional protection. In this 40, 46 (52 L. Ed. 151). case the city has no more right to claim an immunity for its contract with the Waterworks Company than it would have had if such contract had been made directly with the state. The state, having authorized such contract, might revoke or modify it at its pleasure."

In Dartmouth College v. Woodward, 4 Wheat. 518, 629-630, 659-664, 668, 694, 4 L. Ed. 629, it was distinctly recognized that as respects grants of political or governmental authority to cities, towns, counties, and the like the legislative power of the states is not restrained by the contract clause of the Constitution; and in East Hartford v. Hartford Bridge Co., 10 How. 511, p. 533 (13 L. Ed. 518), where was involved the validity of a state statute recalling a grant to a city, theretofore made and long in use, of power to operate and maintain a ferry over a river, it was said, that the parties to the grant did not stand

"in the attitude towards each other of making a contract by it, such as is contemplated in the Constitution, and as could not be modified by subsequent legislation. The Legislature was acting here on the one part, and public municipal and political corporations on the other.

The principles announced and applied in these cases have been reiterated and enforced so often that the matter is no longer debatable. Covington v. Kentucky, 173 U. S. 231, 241, 19 Sup. Ct. 383, 43 L. Ed. 679; Worcester v. Worcester Street Ry. Co., 196 U. S. 539, 548, 25 Sup. Ct. 327, 49 L. Ed. 591; Braxton County Court v. West Virginia, 208 U. S. 192, 28 Sup. Ct. 275, 52 L. Ed. 450; Englewood v. Denver & South Platte Ry. Co., 248 U. S. 294, 296, 39 Sup. Ct. 100, 63 L. Ed. 253.

Writ of error dismissed.

(250 U. S. 454)

They were acting, too, in relation to a public HANCOCK et al. v. CITY OF MUSKOGEE, object, being virtually a highway across the river, over another highway up and down the

OKL., et al.

Decided June 9,

1919.)

No. 360.

CON

river. From this standing and relation of these (Submitted April 30, 1919. parties, and from the subject-matter of their action, we think that the doings of the Legislature as to this ferry must be considered rather as a public law than as contracts. They related to public interests. They changed as those 1. COURTS 366(5) PRECEDENTS interests demanded. The grantees likewise, the STRUCTION OF LOCAL STATUTES. towns being mere organizations for public purDecisions of the highest state court construposes, were liable to have their public powers, ing local statutes are conclusive on the federal rights, and duties modified or abolished at any moment by the Legislature. * *Hence, generally, the doings between them and the Legislature are in the nature of legislation rather than compact, and subject to all the legislative conditions just named, and therefore to be considered as not violated by subsequent legislative changes."

*

courts.

2. CONSTITUTIONAL LAW 290(3)—MUNICIPAL CORPORATIONS 407(1) DUE PROCESS OF LAW-ASSESSMENTS FOR MUNICIPAL

IMPROVEMENTS-NOTICE.

Comp. Laws Okl. 1909, §§ 984-993, authorizing the mayor and councilmen in any municipality of not less than 1,000 inhabitants to esIn New Orleans v. New Orleans Water-tablish a general sewer system, etc., having delworks Co., 142 U. S. 79, p. 91, 12 Sup. Ct.egated the entire legislative power of the state 142, p. 147 (35 L. Ed. 943), where a city, rely- with respect to the establishmnt of local sewer ing on the contract clause, sought a review systems and the exercise of the taxing power by this court of a *judgment of a state court in aid thereof to the municipalities, a municisustaining a statute so modifying the fran-pal ordinance creating a sewer district and aschise of a waterworks company as to require the city to pay for water used for municipal purposes, to which it theretofore was entitled without charge, the writ of error was dismissed on the ground that no question of impairment within the meaning of the contract clause was involved. Some of the earlier cases were reviewed, and it was said: "But further citations of authorities upon this Where the Oklahoma statutes relating to point are unnecessary; they are full and conclu- the establishment of sewer districts required sive to the point that the municipality, being a the cost of the sewer to be distributed among

trict is not invalid, as depriving property ownsessing the cost against property within the disers of their property without due process, in violation of Const. Amend. 14, because giving no notice to property owners or provision for hearing.

3. CONSTITUTIONAL LAW 290(3)—DUE PRO

CESS OF LAW
ASSESSMENTS.

MUNICIPAL IMPROVEMENT

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

#455

(39 Sup.Ct.)

the different properties in the district in proportion to area, and the matter became one of mere computation, the fact an ordinance establishing a sewer district did not give property owners an opportunity to be heard as to the deprive property owners of their property with out due process, in violation of the Fourteenth Amendment.

distribution of the costs of the sewer did not

4. MUNICIPAL CORPORATIONS 495-ASSESS MENTS FOR IMPROVEMENTS-APPORTIONMENT -JUDICIAL SUPERVISION.

Whether the entire amount, or a part only, of the cost of a local improvement, shall be imposed as a special tax upon the property benefited, and whether the tax shall be distributed upon a consideration of the particular benefit to particular lots, apportioned according to frontage, value, or area, is a matter of legislative discretion, subject to judicial relief in cases of actual abuse of power or substantial error in executing it.

also to cause district sewers to be constructed within districts having limits prescribed by ordinance; the cost of district sewers to be apportioned against all lots and pieces of ground in the district in proportion to area, disregarding improvements and excluding the public highways.

It is contended that the statute is void because it gives no notice to property owners and makes no provision for hearing them as to the formation of the district or its bound

aries, the proposed plan or method of building the sewer, or the amount to be assessed upon property in the district. While it is conceded to have been established by previ ous decisions of this court that, where the Legislature *fixes by law the area of a sewer district or the property which is to be assessed, no advance notice to the property owner of such legislative action is necessary in order to constitute due process of law, it is insisted that in the present case the Legis

In Error to the Supreme Court of the State lature has not done this, and hence it is es

of Oklahoma.

Suit by W. A. Hancock and others against the City of Muskogee, Okl., and others. A judgment for defendants was affirmed by the Oklahoma Supreme Court (168 Pac. 445), and complainants bring error. Affirmed.

Messrs. B. B. Blakeney and James H. Maxey, both of Tulsa, Okl., and Grant Foreman and James D. Simms, both of Muskogee, Okl., for plaintiffs in error.

Messrs. Nathan A. Gibson and Joseph L. Hull, both of Muskogee, Okl., for defendants

in error.

sential to the protection of the fundamental rights of the property owner that at some stage of the proceeding he have notice and an opportunity to be heard upon the question whether his property is erroneously included in the sewer district because it cannot be

benefited by the sewer, or for any other reason is improperly subjected to assessment. cisions of the Supreme Court of Oklahoma, [1, 2] But we find it to be settled by dewhich as to this are conclusive upon us, that

in respect to the establishment and construction of local sewer systems and the exercise of the power of taxation in aid of this purpose, the entire legislative power of the

* Mr. Justice PITNEY delivered the opinion state has been delegated to the municipaliof the Court.

Plaintiffs in error, owners of real estate in the city of Muskogee, brought suit in an Oklahoma state court seeking an injunction to restrain the city and its officials from encumbering their lands with a special assessment to pay for the construction of a sewer in sewer district No. 12 of that city, contending that the statutes of the state and the ordinances of the city under which the district was created and the cost of the sewers therein assessed against the property within the district were in violation of the Fourteenth Amendment, in that they deprived plaintiffs of their property without due process of law. The trial court refused relief, the Supreme Court of Oklahoma affirmed its judgment (168 Pac. 445), and the case comes here by writ of error.

The statutes, as they existed at the time the proceedings in question were had, are to be found in Snyder's Comp. Laws Okl. 1909, §§ 984-993. They authorize the mayor and councilmen in any municipal corporation having a population of not less than 1,000 to establish a general sewer system composed of public, district, and private sewers, and

ties. In City of Perry v. Davis, 18 Okl. 427, p. 445, 90 Pac. 865, p. 870, referring to this same legislation the court held:

"When the Legislature delegated the power to the mayor and councilmen of municipal corporations in this territory, having a bona fide population of not less than 1,000 persons, to establish a general sewer system, that delegation of power carried with it all the incidental powers necessary to carry its object into effect within the law. Of what utility would such a grant of power be if unaccompanied with sufficient power to carry it into effect? Under our sively in the legislative branch of the governsystem the power of taxation is vested exclument but it is a power that may be delegated by the Legislature to municipal corporations, which are mere instrumentalities of the state for the better administration of public affairs. When such a corporation is created it becomes vested with the power of taxation to sustain itself with all necessary public improvements, unless the exercise of that *power be expressly prohibited. That the mayor and council of the city of Perry was authorized to establish and construct a necessary sewer system for the city, in the absence of prohibitive statutes, should not be questioned. The power to establish and construct a sewer system carried

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes 39 SUP.CT.-34

*457