N. Y. Rep.] Dissenting opinion, per VANN, J. the property of the corporation is held by the corporation in trust for the stockholders." (Bridgman v. City of Keokuk, 72 Iowa, 42.) Shares of stock should be distinguished from certificates of stock, which are merely evidence as to the number of shares to which the holder of the certificate is entitled. (Jermain v. Lake Shore & M. S. R. Co., 91 N. Y. 483, 492.) The same rights exist whether any certificate is issued as evidence of those rights or not. Formerly no certificates were issued, and the only evidence of the existence of the right was upon the books of the corporation. (23 Am. and Eng. Ency. of Law, 484; Cook on Stock and Stockholders, sec. 1.) What was the nature of the investment made by the decedent when he became the owner of stocks in various corporations organized and doing business in this state? Necessarily he was either an original investor of capital when the corporation was organized, or he acquired the rights of one who was such investor at that time. In either event his rights were the same and the nature of his investment was the same. For instance, he owned stock in a bank doing business in the city of New York. That stock represented an investment of money, either paid in by him when the bank was organized, or by some one else, whose rights, or a part of them, he subsequently purchased. Whether he was an original proprietor or acquired the rights of an original proprietor, he made an investment in a banking business in this state at the moment that he became the owner of the stock. Was that investment property "within this state," under the comprehensive statute now before us? It was capital invested in a corporation organized here, doing business here, having its principal office here, and earning money here with which to pay dividends to the decedent and others. He was one of the owners of the franchise, and had an equitable interest in all the property of the corporation. He assisted, or had the right to assist, in the management of the business, through his power to vote for directors. That right he could exercise only by coming here, in person, or by sending some one with Dissenting opinion, per VANN, J. [Vol. 150. authority to act for him here. He placed his money physically within the state of New York when he invested it in a New York enterprise, and he left it here under the protection of our laws, and thereby gave it a local habitation here. Under these circumstances should a fictitious situs prevail over the actual situs, located by himself? If he had invested money in his own name, in tangible personal property in this state, it would have been subject to a succession tax upon his death, although he resided in another state. (In re Swift, 137 N. Y. 77.) If, on the other hand, he had invested the same money in the name of a corporation owning the same property, would the investment be free from such tax? If so, by virtue of what provision of the statute would it escape? While there is a difference in form, I see no difference in the substance of the two investments. If a transfer tax can be imposed on the tangible property of a non-resident decedent in this state, why not on the intangible? There is nothing to prevent it except a fiction that has never prevailed against creditors, and why should it against taxation? That fiction is as foreign to questions of revenue as it is to the collection of debts, and it should not be allowed, under the sweeping provisions of the statute, to create a constructive presence in another state, and enable it to prevail over an actual presence, for all practical purposes, within this state. This accords with the position of the court, as declared in the Enston case, decided under the act of 1885, where it was said that "the situs of the property owned by a shareholder in a corporation is either where the corporation exists, or at the domicile of the shareholder." (In re Enston, 113 N. Y. 174, 181). The same thing was said in the James case, decided under the act of 1887. (In re James, 144 N. Y. 6, 12). The fiction prevails until changed by statute, and that it was repealed as to money invested in this state was expressly held in the Romaine case (127 N. Y. 80, 88). Since then the statute has been radically changed in furtherance of the principle that prevailed when that decision was made. Moreover, the state has the right to regulate all transfers of property N. Y. Rep.] Dissenting opinion, per VANN, J. made within its limits. The name of the decedent as a shareholder and the number of shares to which he was entitled were recorded on the stock books of the corporations in which he held stock in this state. No effective transfer of his stock could be made except by changing the record upon the books in this state. That transfer is a corporate act, involving a change upon the records of the corporation, and ordinarily the issue of a new certificate, and it must be performed by the corporation in order to vest the title in the foreign executor or legatee. The old certificate must be brought here and surrendered, or, if lost, the loss must be accounted for here. If the transfer is not made voluntarily, resort must be had to the courts of this state in order to compel it. So, the owner must come here to get his dividends, as well as to get his final share of the surplus upon the dissolution of the corporation. The capital was not only invested here, but it still remains here, represented by property here, and the owner must come here to get it. If his rights are withheld, the courts of no state but this can restore them. The decedent placed his property in this state, and thereby impliedly committed it to the jurisdiction of our laws, then in force and such as might be enacted thereafter, and property subject in any respect to the laws of a state, even if only as regards the transfer thereof, must, if required, pay its share toward the enforcement of those laws. Look for a moment at the consequences of holding otherwise. Business corporations might be organized in this state wholly upon foreign capital, a few shares being held in the name of resident directors to make the organization regular, and yet none of the stock, however valuable, be subject to a succession tax. This would tend to drive business corporations into foreign ownership. If the stock of a corporation belonged one-half to residents and one-half to non-residents, the former would be taxable but the latter not, and thus an unfair discrimination would be made against inhabitants of this state. It is a matter of common knowledge that stocks in domestic corporations are owned to a vast amount by Dissenting opinion, per VANN, J. [Vol. 150. persons doing business in this state and having their business residence here, but their actual residence in an adjoining state. Did the legislature intend to offer a premium to non residents, by exempting them from burdens that our own citizens have to bear? Did it intend to encourage men of wealth to move out of the state? It is possible that substantially all the stock representing a great property like that of the New York Central Railroad Company, or the Western Union Telegraph Company, in both of which the decedent was a large shareholder, might be owned outside of the state. Should such investments, which are under the exclusive protection of the laws of this state, escape the payment of a tax upon the privi lege of succession? Considering its emphatic language, is it reasonable to believe that the legislature intended such a result ? It is urged that the stocks in question may be taxed in the state of Connecticut, and thus be subjected to double taxation. As it happens, this cannot be the result, for the "Inheritance Tax Act" of that state does not apply to lineal descendants, although it covers in terms all property within the jurisdiction. of the state passing to collateral relatives, "whether belonging to inhabitants" there "or not, and whether tangible or intangible." (Statutes of Conn. for 1889, ch. 180.) Even if it were otherwise, while double taxation is admitted to be an evil, still it is better that the same property should, at long intervals, be twice taxed than to open such an avenue of escape from taxation as would release millions of foreign capital enjoying the protection of our laws. The great object of the statute is to cause all property, and especially all personal property, subject in any degree to the laws of this state, to pay a reasonable tax, once during every generation, under such circumstances as to make the burden as light as taxation ever can be, because it is paid for the privilege of succeeding to property, without earning it or paying for it. The bonds of which the decedent died the owner present a different, but not a difficult question, provided the proper conclusion has been reached in relation to stocks owned by him. An investment in corporate bonds, being practically a loan of capital N. Y. Rep.] Dissenting opinion, per VANN, J. to the corporation, differs from an investment in stocks, which represent capital employed by its owners in the business of the corporation. In the latter case there is an interest in the corporation itself, as well as indirectly in its property, while in the former there is the relation of debtor and creditor. Where the bonds are registered, however, as it was asserted on the argument by the appellant and not denied by the respondent, that these bonds were, the transfer can only be effected at an office designated by the corporation. (Cook on Stockholders, § 15.) It would be necessary, upon this assumption, for the person entitled to succession to these bonds to come into the state of New York, directly or indirectly, to complete his title. The transaction, by virtue of the contract itself, would become localized, for the transfer would require a corporate act in this state done under the sanction of our laws and possibly by virtue of an appeal to our courts. As an examination of the record, however, does not disclose the fact that the bonds were registered, we must proceed upon the basis that they were not. The bald question is, therefore, presented whether money lent by a non-resident to a resident corporation, or a bond given as evidence of the debt thus created, is subject to a transfer tax. While such a bond can be transferred without the state, it cannot be collected against the will of the corporation without coming into this state. Even if collected through the Federal courts, it must be within this state. The fact that property of the corporation found in another state may be attached there does not change the general rule that the bond represents money lent in this state and that the holder thereof must come here to get it. If secured by a mortgage, the recording act of this state controls. If not paid when the corporation is dissolved, the statutes of this state apply. The power of the corporation to borrow or pay depends on our laws, and hence there is an obvious distinction between corporate and private debts. While an individual can contract a debt without the aid of legislation, a corporation cannot borrow nor give a valid bond except under the authority of some statute, general or special. |