federal government to carry out the powers vested in it by the Constitution. The supremacy of the national government over the states in this field was to be implied of necessity. It could not be denied, Marshall declared, that "the power to tax involves the power to destroy *** [and] there is a plain repugnance, in conferring on one government a power to control the constitutional measures of another, which other, with respect to those very measures, is declared to be supreme over that which exerts control."8 The court obviously made the subject taxed, and not the amount of the tax, the sole criterion of a wrongful interference with federal instrumentalities. In dictum, Marshall allowed that the states had the power to tax real property of the bank, as well as to levy a non-discriminatory tax on the shares of the bank held by the citizens of Maryland.

A knowledge of the history of the period in which the McCulloch case was decided seems vital to a proper understanding of the import of that case. It came in a day when the South was already working itself up to fever-pitch on the question of state sovereignty. Marshall's conviction that the power to destroy followed from the power to tax was far from a causal fear arguendo: he was dealing with the actual situation. Maryland's plea for confidence in the state legislature was scornfully brushed aside: where the preservation of the union was involved, it was not a case of confidence. In truth, a more appropriate name for the case would have been Nationalism v. Localism.10 It is difficult to quarrel with the result reached by the court. The state had sought to impose a discriminatory tax on a federal agency; there was a clear attempt to interfere with operations of the government by hindering its instruments. To have allowed the tax would have placed the federal government at the mercy of the states. But the case did not go off on the discriminatory feature, and the soundness of the broader rule laid down by the court appears more dubious. In the first place, the rule cannot be determinative of every tax on a federal instrumentality; otherwise, all state taxation is invalid, since it reduces by that much the property on which federal taxation can operate.10a Again, that a concession to a state of the power to tax at all carries with it ipso facto concession of the power to tax to destruction, seems extremely questionable. Certainly mere arbitrary discriminations and distinctions against any individual or class would, since the passage of the Fourteenth Amendment, appear to be directly violative of the equal protection clause of the Constitution. And it seems difficult to understand how an indiscriminate tax will have the negative effect of hindering the operation of governmental agencies. True, non-limitation of the states' power to tax would destroy the affirmative benefit which the federal government might derive from its instrumentality's receipt of a bonus or bounty conferred as an inducement for entering into relations with

8Id. 431.

'IV Beveridge, The Life of John Marshall, ch. VI.

10 Id. 304.

10a Railroad Co. v. Peniston, 18 Wall. (U. S.) 5, 30 (1873); State v. Wiles, 116 Wash. 387, 397 (1921).

the government. But the two situations are far from being the same.11 When it is remembered that the states were intended to be generally independent of federal control in the matter of taxation, and that the federal instrumentality is receiving protection from the state government, the collateral benefit to the national government, as the result of immunity from state taxation, would seem to provide an inadequate basis for a limitation on the states. Finally, Marshall's exception of real estate and bank shares from the operation of his rule would appear to be an unhappy qualification, itself casting a shadow on the rule. It is not easy to see why an arbitrary and destructive tax on this property may not be as much an interference with governmental operations as a tax on the bank itself.

The McCulloch case has formally, at least, been generally followed.12 It has been interpreted as laying down the rule that the operations of federal instrumentalities are exempt from state taxation, whereas their property is not.13 Unfortunately, there does not seem to have been a conscious application of any one test, in ascertaining whether a proposed tax was directed towards operations or property; and the results themselves may not seem altogether consistent. Irreconcilable decisions and dissenting opinions on the subject are not infrequent. State taxation has been disallowed in the following instances: all property of the United States;14 capital of national banks;15 United States certificates of indebtedness;16 interest on United States bonds;17 patent rights;18 incomes of federal officers;19 conveyance of United States mail:20 license tax on governmental agencies;21 corporate "Weston v. City Council of Charleston, supra, n. 4, at pp. 472, 478. "What Marshall's doctrine achieved was a protective tariff in favor of the infant industry of national credit."-Powell, Indirect Encroachment on Federal Authority by the Taxing Powers of the States, 32 Har. L. Rev. 902, 929.

12 Infra, notes 14 to 30. That the case is law today: Johnson v. Maryland, 254 U. S. 51 (1920).

13Railroad Co. v. Peniston, supra, n. 10a, at p. 35; Large Oil Co. v. Howard, 163 Pac. (Okl.) 537 (1917); Mid-Northern Oil Co. v. Walker, 211 Pac. (Mont.) 353, 355 (1922).

14People v. United States, 93 Ill. 30 (1879); People ex rel. Donner-Union Coke Corp. v. Burke, 204 App. Div. (N. Y.) 557 (1923). So, too, where United States owns all shares in corporation: U. S. v. Clallam County, 283 Fed. 645 (1922); U. S. Housing Corp. v. Watertown, 113 Misc. (N. Y.) 679 (1920). Although United States holds fee, after sale of its land, vendee's equity may be taxed: Maish v. Arizona, 164 U. S. 599 (1896).

15Horne v. Green, 52 Miss. 452 (1876); 97 Cent. L. J. 56. Contra, Lilly v. Commissioners, 69 N. C. 300 (1873).

16The Banks v. Mayor, 7 Wall. (U. S.) 16 (1868), reversing People ex rel. Nat. Bway. Bank v. Hoffman, 37 N. Y. 9 (1867).

17Bank of Ky. v. Commonwealth, 72 Ky. 46 (1872).

18People ex rel. Edison El. Il. Co. v. Assessors, 156 N. Y. 417 (1898), in effect overruling People v. Campbell, 138 N. Y. 543 (1893). Contra, Crown Cork & Seal Co. v. State, 87 Md. 687 (1898).

19Dobbins v. Commissioners of Erie County, 16 Pet. (U. S.) 435 (1842). Incomes of state officers enjoy reciprocal privilege: Collector v. Day, supra, n. 4. 20Searight v. Stokes, 3 How. (U. S.) 151 (1845), two judges dissenting. Contra, Dickey v. M., W., P., & L. Turnpike Co., 7 Dana (Ky.) 113 (1838).

21 Brown v. Maryland, 12 Wheat. (U. S.) 419 (1827); Johnson v. Maryland, supra, n. 12. Contra, State v. Wiles, supra, n. 10a. But governmental agent may be criminally prosecuted by state for misfeasance: Commonwealth v. Closson, 229 Mass. 329 (1918).

franchises granted by the federal government.22 In the following cases, the states' right to tax has been recognized: tangible property of patentees;23 tangible property of corporations, even though their franchises were granted by the federal government:24 franchises of domestic corporations whose services to the government are incidental to their main business;25 private deposits in national banks;26 inheritance tax on United States bonds;27 salaries of federal officers already paid 28 salaries of clerks or contractors to carry or deliver mail;29 premiums collected by sureties for bonding federal officers.30 Surprisingly enough, the courts have made a distinction between the case where a natural person holds United States bonds, and where the bonds are held by a corporation. In the latter case, the bonds have been considered taxable by the state with the other capital stock of the corporation.31 By statute, shares in a national bank are taxable in common with other bank shares;32 also, United States notes and certificates payable on demand.33 "Stocks, bonds, treasury notes and other obligations of the United States" are exempted from state taxation.34 Government checks, warrants and legal tender notes are not covered by the words "and other obligations."35 Often a stricter limitation of the states' taxing power is argued for during war times than at other periods.30

36

From the cases, it seems apparent that the line between "operations" exempt from state taxation, and "property" not so privileged, is but shadowy and ill-defined. More especially is the fact evident when the statutes are added to the cases.37 And yet, it is believed,

22 Cal. v. Cent. Pac. R. R. Co., 127 U. S. 1 (1888).

23 Webber v. Virginia, 103 U. S. 344 (1880).

24 Thomson v. Union Pac. R. R. Co., 9 Wall. (U. S.) 579 (1869); Railroad Co. v. Peniston, supra, n. 10a, the court being divided 5 to 3; Choctaw, O. & G. R. R. Co. v. Mackey, 256 U. S. 531 (1920).

25Osborn v. U. S. Bank, 9 Wheat. (U. S.) 738 (1824); Baltimore Shipbuilding & Dry Dock Co. v. Baltimore, 195 U. S. 375 (1904); Ex parte Marshall, 75 Fla. 97 (1918), there being a dissent.

26Clement Nat. Bank v. Vermont, 231 U. S. 120 (1913); 26 R. C. L. 119. 27 Plummer v. Coler, 178 U. S. 115 (1900).

28 Dyer v. City of Melrose, 215 U. S. 594 (1909).

29Melcher v. Boston, 9 Metc. (Mass.) 73 (1845); Whitehouse v. Langdon, 10 N. H. 331 (1839).

30Fidelity & Deposit Co. v. Penn., 240 U. S. 319 (1916).

31Soc. for Savings v. Coite, 6 Wall. (U. S.) 594 (1867); Provident Savings Inst. v. Mass., id. 611; Hamilton Mfg. Co. v. Mass., id. 632. Contra, People ex rel. Bank of Commerce v. City of New York, 2 Black. (U. S.) 620 (1862).

82U. S. Rev. Stat. 5219; Nat. Bank v. Commonwealth, 9 Wall. (U. S.) 353 (1869); 24 Col. L. Rev. 181; 6 Minn. L. Rev. 219.

3328 Stat. L. 278.

34U. S. Rev. Stat. 3701. Same result in absence of statute: Weston v. City Council of Charleston, supra, n. 4.

35 Hibernia Savings & Loan Soc. v. San Francisco, 200 U. S. 310 (1906); People ex rel. Bank of New York v. Supervisors, 37 N. Y. 21 (1867).

36Weston v. City Council of Charleston, supra, n. 4, at p. 465; dissenting opinion in Ex parte Marshall, supra, n. 25, at pp. 124-125.

37The two may be considered together; for the statutes on the question can only be declaratory of the common law, the validity of the exemption depending on the Constitution and not on legislative enactment: People ex rel. Nat. Bway. Bank v. Hoffman, supra, n. 16, at p. 16; People ex rel. Bank of New York v.

the results can be generally harmonized. It is submitted that the period when the conflict between the states and the general government made the question of limitation on state taxation purely a political one, necessitating an exact and severe test, has given way to times when the political consideration, if it exists at all, is but subsidiary to the economic one. The question then is primarily one of degree, consideration being given both to the amount of the tax and the subject thereof. This practical test, it is believed, has been the one actually applied in the cases, while the courts were nominally using Marshall's rule.38

Where Congress has expressly designated which property is to be exempt, and which is not, the legislative enactment ought ordinarily to be regarded as the proper application of the economic and political test. Where Congress is silent as to the status of any property, it is not to be denied that the test is open to the objection of uncertainty. But the same objection might have been pressed when the test was solely whether the state was wrongfully seeking to tax a federal instrumentality. The courts, moreover, have never considered the objection of uncertainty fatal, if justice demands the application. of a principle or rule. And justice would seem to require it here. The state of uncertainty can only affect the states and their constituents; but the states have an inherent right to tax, while their constituents have no inherent right to be free from taxation. A closely related field may throw some light on the situation. The Constitution provides that the Congress shall "regulate commerce *** among the several states."39 Following the principles in the McCulloch case, it might be argued that the states were excluded from any control over such commerce through taxation; yet such has not been the interpretation of the courts. The ultimate test there seems to be, whether the states are seeking to place an unusual and discriminatory tax on interstate commerce.3 It has been held that there may be state taxation of the net income derived from interstate commerce;40 of property engaged in interstate commerce;41 and of gross receipts derived from interstate commerce.42

39a

With respect to the principal case, the tax was sought to be imposed on a debt of the United States not evidenced in writing. The exact situation appears not to have arisen before. The court granted that the obligation was not exempt by force of the statute withdrawing "stocks, bonds, treasury notes and other obligations of the

Supervisors, supra, n. 35. Semble, contra, Thompson v. Union Pac. Ry. Co., supra, n. 24, at p. 590.

38Powell, id. op. supra, n. II, at p. 903.

39 Art. I, sec. 8 (3).

39a Weston v. City Council of Charleston, supra, n. 4, at p. 917; Pullman Co. v. Kansas, 216 U. S. 56, 76 (1910); Lumberville Del. Bridge Co. v. Assessors, 55 N. J. L. 529 (1893). A direct tax regulating commerce with foreign nations is, of course, invalid: Henderson v. Mayor, 92 U. S. 259 (1875).

40U. S. Glue Co. v. Oak Creek, 247 U. S. 321 (1918).

"Pullman's Palace Parlor Car Co. v. Penn., 141 U. S. 18 (1891); Adams Express Co. v. Ohio, 165 U. S. 194 (1897).

→Ficklen v. Shelby County Taxing Dist., 145 U. S. 1 (1892).

43

United States" from state taxation. This seems undoubtedly correct. The statute clearly contemplates "other obligations" of a like nature with the obligations specifically set out, viz., written evidences of indebtedness. But whether or not the obligation in question came within the statute; certainly there would seem to be the same economic and political considerations requiring its exemption, as there would be ot justify the exemption of the obligations specified in the statute.44

Jacob Lewis Gold.

Torts: Inducement to Breach of Contract: Doctrine of Lumley v. Gye. All doubt as to the extent to which New York will apply the doctrine of allowing an action for the inducment of a breach of contract, whether for personal services or otherwise, is removed by the recent decision of the Court of Appeals in the case of Campbell v. Gates, 236 N. Y. 457 (1923), which holds that where A has a legal contract with B, either for the rendition of services or for any other purpose and C, having knowledge of the existence thereof, intentionally and knowingly and without reasonable justification or excuse induces B to break the contract by reason of which A sustains damage, an action will lie against C by A to recover for it.

The contract, the breach of which was induced by the defendant in the instant case, was for cooperation in the organizing, establishing and publishing of a magazine and defendant possessed knowledge of the existence of the contractual relation between the plaintiff and the third party who breached the contract. Judge McLaughlin, in a very concise opinion, highly commendable for its directness and clear cut statement of the legal principles involved, gives with the utmost clarity New York's view of the subject and explains an earlier opinion by him in Lamb v. Cheney" in the following words: "It was not the intention of the writer of that opinion to limit what was said simply to contracts relating to services; on the contrary, the intention was to state a general rule applicable to all contracts." The rule given by the former decision was defined as follows: “Such rule is that if one maliciously interferes with a contract between two parties and induces one of them to break that contract to the injury of the other, the party injured can maintain an action against the wrongdoer." Any doubt as to the scope of the application of the doctrine which was occasioned by the earlier decision undoubtedly was due to the fact that the contract involved was one calling for personal services.

The doctrine allowing recovery for the inducement of a breach of contract first received prominence in 1853 as a result of the decision

"Hibernia Savings & Loan Soc. v. San Francisco, supra, n. 35; principal case at Special Term: 114 Misc. (N. Y.) 419, 421 (1921).

"For strong dictum to contrary, see People ex rel. Nat. Bway. Bank v Hoffman, supra, n. 16, at p. 20; also, Mr. Justice Bradley, dissentiente, in Railroad Co. v. Peniston, supra, 10a, at p. 41. And that, in applying the economic and political test to the instant case, it was "impossible to be dogmatic in urging that the tax in question is unconstitutional," see 35 Har. L. Rev. 93.

1227 N. Y. 418 (1920).