262 U.S.

91
43 S.Ct. 496
67 L.Ed. 881
In re FULLER et al. Submitted on Motion for Stay April 27, 1923. Decided April
30, 1923. Messrs. William J. Fallon, of White Plains, N. Y., and Eugene F.
McGee and Arthur Garfield Hays, both of New York City, for appellant. Messrs.
Francis L. Kohlman, Wm. M. Chadbourne, and Cyrus F. Smythe, all of New York
City, for appellee. Mr. John Caldwell Myers, of New York City, for Joab H.
Banton, as amicus curiae.

[92]
djQ Mr. Chief Justice TAFT delivered the opinion of the Court. On June 26, 1922, a
petition in involuntary bankruptcy was filed against Fuller and McGee, individually
and as partners, in the name of E. M. Fuller & Co., in the District Court for the
Southern District of New York. Thereafter Strasbourger was appointed receiver and
at once demanded of the bankrupts the books of accounts, records, and documents,
both of themselves individually and of the firm. The bankrupts claim that the books
would tend to incriminate them and refused to turn them over, unless the receiver
agreed that they were to be used in connection with the civil administration of
bankrupts' estate only. A stipulation of this kind was made between the receiver and
the attorneys for the bankrupts, with the further specific agreement that the books
and records would not be turned over to any district attorney or used before any
grand or petit jury. The district attorney, county of New York, then attempted to
bring the books and records into the state court by serving a subpoena upon the
receiver. Judge Augustus Hand, at the petition of the bankrupts, enjoined the
receiver from turning the books over. On April 6, 1923, the attorneys for the
bankrupts demanded of the receiver that he return the books and papers to them
because his receivership had terminated by the appointment of a trustee in
bankruptcy. The referee in bankruptcy directed the receiver to turn the books and
papers over to the trustee without condition or restriction. On review, this order was
affirmed by Circuit Judge Mack sitting in bankruptcy. April 21st last, all the books
and papers were then delivered over to the trustee, except certain books and papers
which had been redelivered by the receiver to the attorneys for the bankrupts on
their receipts, which were turned over to

[93]
the trustee. The bankrupts objected to turning over the books and papers
thus receipted for by their attorneys to the trustee. Thereupon on April 24,

1923, Judge Mack made a second order directing the attorneys for the
bankrupts and the bankrupts to turn over these records and papers so
withheld by them to the trustee. n April 21st the district attorney of New
York county had subpoenaed the trustee to produce the books and papers
of the bankrupts he them had in his custody and on the 24th of April
offered them in evidence in the Court of General Sessions of New York as
evidence against E. M. Fuller under an indictment arising out of the
business of the bankrupts. On the 25th of April Judge Mack granted an
application for a stay pending proceedings for appeal to this court and an
application for a stay here, and Judge Nott, presiding in the state court,
adjourned the trial there until April 30th. Proceedings for appeal to this
court have now been begun under the authority of Perlman
v.
United States, 247 U. S. 7, 38 Sup. Ct. 417, 62 L. Ed. 950, and the
application for a stay of Judge Mack's two orders has now been made. A
man who becomes a bankrupt, or who is brought into a bankruptcy court,
has no right to delay the legal transfer of the possession and title of any of
his property to the officers appointed by law for its custody or for its
disposition, on the ground that the transfer of such property will carry with
it incriminating evidence against him. His property and its possession pass
from him by operation and due proceedings of law, and when control and
possession have passed from him, he has no constitutional right to prevent
its use for any legitimate purpose. His privilege secured to him by the
Fourth and Fifth Amendments to the Constitution is that of refusing
himself to produce, as incriminating evidence against him, anything which
he owns or has in his possession and control; but his privilege in respect to
what was his and in his custody
[94]
ceases on a transfer of the control and possession which takes place by
legal proceedings and in pursuance of the rights of others, even though
such transfer may bring the property into the ownership or control of one
properly subject to subpoena duces tecum. These conclusions follow from
the principles announced by this court in the Matter of Harris, 221 U. S.
274. 279, 31 Sup. Ct. 557, 55 L. Ed. 732, and Johnson v. United States,
228 U. S. 457, 33 Sup. Ct. 572, 57 L. Ed. 919, 47 L. R. A. (N. S.) 263. In
considering the correctness of Judge Mack's orders, it is wholly
immaterial what stipulation had been entered into between the receiver
and the bankrupts in regard to the use to be made pending the receivership
of the books and papers or what sanction Judge Hand's action had given

the stipulations. With the appointment of the trustee both the title and the
right to possession of such books and papers passed to him and Judge
Mack's orders properly confirmed this result. The receiver, the bankrupts,
and their attorney must yield possession and title to the trustee. Neither
can accompany the delivery he is bound by law to make with any effective
conditions restricting use of the books, papers, or other property of the
bankrupts' estate as evidence against them. The application is denied.
People ex rel Clyde v. Gilchrist [43SCt501,262US94,67LEd883] 43 S.Ct.
501 262 U.S. 94 67 L.Ed. 883 PEOPLE ex rel. CLYDE v. GILCHRIST et
al., New York State Tax Commission.
No. 318.
Argued and Submitted April 17, 1923.
Decided April 30, 1923.
Mr. Arthur E. Goddard, of Brooklyn, N. Y., for plaintiff in error.
Messrs. Francis W. Cullen, James S. Y. Ivins, and Claude T. Dawes, all of
Albany N. Y., for defendants in error.
Mr. Justice HOLMES delivered the opinion of the Court.

This is a statutory proceeding to recover the amount of taxes for 1919 paid
under duress and protest. As the first step the relator, the plaintiff in error, filed
an application for a revision of the tax with the Comptroller of the State. His
determination presented the issue in a few words. The relator held bonds
secured by mortgages upon which latter the mortgage recording tax under
Article 11 of the Tax Law (Consol. Laws N. Y. c. 60) had been paid. She also
held secured debts upon which a tax had been paid under Article 14 of the Tax
Law as amended by Chapter 802 of the Laws of 1911. An additional
assessment was made under the Income Tax Law of 1919, c. 627, on account of
the relator's income from these bonds and debts. The relator seems to have
contended that if the Income Tax Law imposed the additional assessment it was
unconstitutional as impairing the obligation of contracts made by the statutes
laying the taxes first mentioned. The Comptroller held that the additional
assessment was correct and that no payment was unlawfully exacted. His
determination was confirmed by the Appellate Division of the Supreme Court,
and the order of the Appellate Division was affirmed by the Court of Appeals.
No opinion was delivered by either Court. The case was brought here by writ of
error and the defendant in error moved to dismiss on the ground that it does not

appear that the judgment below necessarily decided a question that can be
brought here in this way. Cuyahoga River Power Co. v. Northern Realty Co.,
244 U. S. 300, 304, 37 Sup. Ct. 643, 61 L. Ed. 1153.
2

he position of the relator is that where the ground of judgment does not appear
this Court will not assume that the Court below proceeded upon ground clearly
untenable, and that therefore if the only one that seems plausible opens a
constitutional question raised upon the record, this Court will proceed to deal
with it. Adams v. Russell, 229 U. S. 353, 358, 33 Sup. Ct. 846, 57 L. Ed. 1224.
The only ground suggested by the defendant in error as local is that the decision
of the Appellate Division at least is shown to have gone upon the construction
of the exempting statutes by an opinion rendered at the same time as the
present judgment, to the effect that the exemption of mortgages by the
Mortgage Recording Tax Law, if a contract, did not extend to the interest upon
the debt. People ex rel. Central Union Trust Co. v. Wendell, 197 App. Div.
131, 188 N. Y. Supp. 344. To this the relator rightly replies that when a statute
is alleged to impair the obligation of a contract this Court must decide for itself
whether there was a contract and what it was. Detroit United Ry. v. Michigan,
242 U. S. 238, 249, 37 Sup. Ct. 87, 61 L. Ed. 268; Columbia Water Power Co.
v. Columbia Electric Street Railway, Light & Power Co., 172 U. S. 475, 487,
19 Sup. Ct. 247, 43 L. Ed. 521. The relator in her petition to the Supreme Court
failed to call attention in terms to the provision of the Constitution relied upon.
Harding v. Illinois, 196 U. S. 78, 88, 25 Sup. Ct. 176, 49 L. Ed. 394. But she set
forth that the exemptions claimed were granted by the statutes under which the
earlier taxes were fixed, that they were secured for a valuable consideration, the
payment of those taxes, and that the subsequent tax upon the income of the
bonds and securities violated the provisions of the Constitution of the United
States. We shall assume in her favor that Article 1, Section 10, was sufficiently
indicated as the clause upon which she relied.

Nevertheless we are not satisfied that the relator is entitled to prevail. It is

apparent that the New York Courts held that there was no contract of the kind
that it alleged. It would be extravagant to suppose that they upheld a law
admitted to impair the obligation of an admitted contract. The opinion of the
Supreme Court shows clearly enough the general nature of the defense
sustained. The relator contends and must contend that this is so. While it is true
that we are not bound by the construction of the New York statutes by the New
York Courts in deciding the constitutional question, yet when we are dealing
with a matter of local policy, like a system of taxation, we should be slow to
depart from their judgment, if there was no real oppression or manifest wrong
in the result. Troy Union R. Co. v. Mealy, 254 U. S. 47, 50, 41 Sup. Ct. 17, 65
L. Ed. 123.

The Mortgage Recording Tax Law, Article 11, 251, provides that all
mortgages of real property situated within the State that are taxed by that article
and the debts and obligations that they secure shall be exempt from other
taxation by the State and local subdivisions. The caution that should be used
before interpreting such declarations of legislative policy as promises, even
when they manifestly tend and are expected to induce voluntary action, is
illustrated in Wisconsin & Michigan R. Co. v. Powers, 191 U. S. 379, 386, 24
Sup. Ct. 107, 48 L. Ed. 229; Troy Union R. R. Co. v. Mealy, 254 U. S. 47, 50,
41 Sup. Ct. 17, 65 L. Ed. 123. But the Appellate Division, in the case that we
have cited, while having this caution in mind, preferred to assume without
deciding that there was a contract of exemption, but held that it did not extend
to this income tax. The Court recognized that for many purposes a tax upon the
interest received from a mortgage debt is a tax upon the mortgage; but for the
purpose of construing the words of a statute it rightly recognized that a
distinction might be taken. That a distinction was intended, or rather that the
Legislature had in mind only a tax upon the principal debt or obligation i
deduced from a nice consideration of the words of the statute, which led it to
the conclusion that 'the dominant idea in the mind of the Legislature was to
render mortgagees independent of the action, capricious or otherwise, of local
tax officials.' Considering that only the principal of mortgages was taxed when
the law was passed and that in those days no one thought of an income tax; that
any contract of exemption must be shown to have been indisputably within the
intention of the Legislature; that it is difficult to believe that the Legislature
meant to barter away all its powers to meet future exigencies for the mrer
payment of a mortgage recording tax; and that a tax upon the individual
measured by net income might be regarded as one step removed from a tax on
the capital from which the income was derived, Peck & Co. v. Lowe, 247 U. S.
165, 175, 38 Sup. Ct. 432, 62 L. Ed. 1049; it held that there was no promise
that the present tax should not be imposed. With regard to the mortgages the
conclusion does not seem to us very difficult to reach. The State did not need to
offer a bar gain to induce mortgagees to record their deeds. Federal Land Bank
of New Orleans v. Crosland (March 19, 1923) 261 U. S. 374, 43 Sup. Ct. 385,
67 L. Ed. .
The provision as to the tax on secured debts other than the foregoing is to the
effect that any person may send them or a description of them to the
Comptroller and may pay a tax of one-half of one per centum on the face value
and that thereupon the Comptroller by indorsement or receipt shall certify that
they are exempt from taxation and that thereafter they shall be exempt from all
taxation in the State or local divisions of the State with certain specified
exceptions. Laws 1911, c. 802, 331. This is an alternative to a tax, at such rate
as may be fixed, on the fair market value of the security. Section 336. There is

an argument that it relates only to the year for which payment is made, and,
although for reasons indicated in Wisconsin & Michigan R. Co. v. Powers,
supra, consideration seems to be of little importance except as bearing on
interpretation, that the payment of an alternative tax is consideration for
exemption from nothing except its alternative. On the other hand the provision
for an indorsement upon the security hardly is reconcilable with less than a
permanent exemption; it is said that so the law generally has been understood;
and the ground taken by the Appellate Division in the case that we have cited
indicates that they were not prepared to deny that the exemption even of
mortgages looked beyond the year. In the absence of further opinion it seems
fair to assume that the Appellate Division and the Court of Appeals decided
against the exemption for the reasons stated in People ex rel. Central Union
Trust Co. v. Wendell, 197 App. Div. 131, 188 N. Y. Supp. 344, of which we
have given a summary. As we said at the outset we ought to be slow to depart
from the judgment of the Courts of the State in a case like this and we accept
their conclusion also with regard to secured debts. We are not prepared to say
that the judgment was wrong and therefore it is affirmed.
6

Judgment affirmed.