Case Name: The People of the State of New York ex rel. American Surety Company of New York, Relator, v. Frank Campbell, Comptroller of the State of New York, Respondent
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1893-12
Citations: 81 N.Y. Sup. Ct. 101
Docket Number: 
Parties: The People of the State of New York ex rel. American Surety Company of New York, Relator, v. Frank Campbell, Comptroller of the State of New York, Respondent.
Judges: Herrick, J., concurred.
Reporter: Supreme Court Reports (Hun)
Volume: 81
Pages: 101–111

Head Matter:
The People of the State of New York ex rel. American Surety Company of New York, Relator, v. Frank Campbell, Comptroller of the State of New York, Respondent.
Corporation tax —capital stock employed in tlus State — -real estate owned, and United States bonds deposited in other States, by a surety company.
Portions of tlie capital of a domestic corporation of the State of New York organized for the purpose o f guaranteeing the fidelity of persons holding places of trust, and of guaranteeing honda and undertakings by joining as surety therein, invested in real estate in another State and in United States bonds deposited under a deed of trust in a third State and with tlie Minister of Finance in Canada, to enable the corporation to do business in sncli Slates and Canada, and to give it credit and to secure its bond or policyholders, generally, are not to he deemed “ capital stock employed within this State” for purposes of taxation, although the investments are subject to the claims of all creditors of the corporation, and the income therefrom is received by the corporation at its homo office in the State of New York, and is there used in its business. (May-ham, P. J., dissenting.)
Certiorari to review tbe determination of tbe Comptroller of tbe State of New York in tbe assessment of taxes made by liim against tbe relator, American Surety Company of New York, under tbe corporation tax laws for tbe year ending November 1,1891.
Tbe relator is a domestic corporation incorporated under tbe laws of tbe State of New York, for tbe purpose of guaranteeing tbe fidelity of persons bolding places of public or private trust, and also of guaranteeing bonds and undertakings required by law, by joining as surety therein or otherwise.
John J. Crawford, for the relator.
S. W. Rosendale, Attorney-General, for the respondent.

Opinion:
Putnam, J.:
The question to be determined is, what part of relator's capital was used or employed within the State during the time in question. The total amount of the capital stock of relator was $1,000,000, and the Comptroller assumed that it was all employed within the State. During the year for which the tax was so assessed, it was shown that relator had $200,000 of its capital invested in real estate in-Chicago; $121,187.50 in United States bonds, deposited under a deed of trust in Pennsylvania; and $60,500 of such bonds deposited with the Minister of Finance in Canada. These bonds it was shown were so deposited, and the real estate investment made, to enable relator to carry on its business in Pennsylvania, Illinois and Canada. Were the bonds so deposited in Pennsylvania and Canada, and the $200,000 invested in real estate in Chicago, being a part of the capital of relator, employed within this State ? I think not. The $200,000 invested in real estate in Chicago was located out of this State, taxable in Illinois, and a part of the capital of relator placed in that State to enable it to there carry on business. It seems to me that such real estate may properly be deemed employed in Illinois. The way relator employs its capital is to keep it invested as a security for the benefit of those doing business with it. This $200,000 was invested in real estate in Illinois where those having claims against the corporation in that State could reach it. I think relator employed this portion of its capital in Illinois and certainly did not employ if in New York.
So the bonds deposited in Pennsylvania and Canada were a part of relator's capital not employed in this State. In the deed of trust to the Fidelity Insurance and Safe Deposit Company is the following provision, viz.: " And whereas, it is deemed expedient, and the said surety company is desirous of establishing and creating a trust fund in said Commonwealth of Pennsylvania, by the conveyance in trust of certain securities hereinafter named, for the protection and benefit of all of its bond or policyholders, wherever situated, subject, however, to the reservation named hereafter and to the trust and powers hereinafter provided."
These United States bonds, a part of the capital stock of relator, were deposited in Pennsylvania and Canada for the protection and benefit of its policyholders in Pennsylvania, Canada or elsewhere. The capital of relator to the extent of said deposit w'as represented by United States bonds, and these bonds were placed as above. A creditor of relator in Pennsylvania or Canada could reach them in those places. The capital of relator to the extent of the bonds was located out of the State. The bonds in Pennsylvania were actually conveyed to the trustees, and those in Canada were delivered to the Minister of Finance.
I think the papers show that the bonds in Pennsylvania and Canada were employed in those places. They were there to enable the corporation to do business, to give it credit, and secure its policyholders and creditors, and hence cannot be deemed to have been employed in this State.
I think these views are sustained by the case of People ex rel. The Edison Electric Light Co. v. Campbell (138 N. Y. 543). In that case the relator's capital was originally invested in patent rights. It sold patent rights to various local corporations outside of the State, taking the stock of such corporations in payment, and the principal question in the case was, whether the stock of such local corporations held by the relator was capital of the relator employed within the State. This General Term held that such stock was a mere investment. That, presumably, the certificates were held by the corporation at its office in this State. That such stock was not eynployed by the corporation out of the State, and hence should be deemed employed within the State.
This doctrine, however, was overruled by the Court of Appeals. The court held (page 546) : " The stocks which relator took in companies organized outside of this State stood for so much of the relator's capital invested outside of the State. It took a portion of its capital, to wit, a portion of its patent rights, and employed it outside of the State to purchase those stocks. Its property in those corporations, represented by its shares of stock, was outside of this State, and was in no sense employed here. Those stocks had no situs here, and were not taxable here under any system of taxation which has ever existed in this State. As to a domestic corporation, it is sufficient to subject it to taxation under the act that its capital was employed, within the State, mid it is employed where it is hept cmd used for- the purposes of the corporation."
It seems quite clear that the real estate in Illinois and the bonds transferred in trust in Pennsylvania, as well as those deposited with the Minister of Finance in Canada, cannot be said to have been képt or used within this State. Such property was required and used out of the State. In the case last cited the company held bonds of foreign corporations received in payment of patent rights, and such bonds were held to be taxable.' The court used the following language in reference to them (page 547): " Those bonds were presumably held at its office in this State, and such bonds, as well as all choses in action, unless kept, employed or used outside of the State, have their situs at the domicile of the owner." In the case under consideration the bonds are shown to have been kept outside of the State, and there used to enable relator to carry on its business.
In the case referred to it was held that, to entitle the corporation to exemption on account of that part of its capital stock invested in the stocks of foreign' corporations, it was not necessary that such portion of its capital stock should be employed in business outside of the State. All that was necessary to entitle the corporation to exemption was that such portion was not employed within the State.
It is suggested by the learned Attorney-General that the bonds of relator in question and the real estate in Illinois were subject to the claims of all creditors of the corporation, and that the income arising therefrom was received by the relator at its office in New York. The same, however, could be said in reference to the stocks of the foreign corporation referred to in People ex rel. Edison Electric Light Co. v. Campbell (supra). The stock referred to in that case was subject to all claims against the company, and presumably the income thereon was received by the corporation at its office in New York. It was also presumably received at that office and there used in the business of the corporation. It is to be inferred that all the business of the corporation was conducted at the New York office, and in carrying on the same the corporation used the income received from said stocks.
I think the determination of the Comptroller should be reversed, with costs to the relator.
Herrick, J., concurred.