Case Name: In the Matter of a Proceeding for Taxation of the Estate of Augustus Whiting, Deceased
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1896-03-20
Citations: 73 N.Y. St. Rep. 814
Docket Number: 
Parties: In the Matter of a Proceeding for Taxation of the Estate of Augustus Whiting, Deceased.
Judges: 
Reporter: New York State Reporter
Volume: 73
Pages: 814–826

Head Matter:
In the Matter of a Proceeding for Taxation of the Estate of Augustus Whiting, Deceased.
(Supreme Court, Appellate Division, First Department,
Filed March, 20, 1896.)
1. Transfer tax—Bonds of foreign corporation.
’ • The bonds of a foreign corporation kept with a safe deposit company in Mew York at the death of the nonresident owner, are subject to a transfer: tax.
3. Same—United states bonds.
, Such tax is properly imposed on United States bonds.
Appeal from an order of the surrogate, affirming an order fixing' an assessment.
Geo. L. Rives, for app’lts; Jabish Holmes, Jr., for resp’t.

Opinion:
PATTERSON, J.
This is an appeal from an order of the surrogate of the city and county of New York affirming an order fixing an assessment upon certain personal property and interests-' which, under the will of Augustus Whiting, a resident of RhodeIsland, passed to his executors in trust for his daughter and her issue Among the assets of Mr. Whiting's estate, were certain-corporate bonds which, before and at time of his death, were kept, oh deposit in a safe-deposit company in the city of New York. Mr. Whiting was domiciled at Newport, in the state of RhodeIsland, and the bonds referred to were issued by corporations-foreign to the state of New York. The order from which this, appeal is taken sustained an assessment for the purposes of a succession tax; the surrogate holding that, although they were bonds-of foreign corporations, they were nevertheless property within this state subject to assessment for this species of taxation.
The learned counsel for the appellants, in an instructive and forcible argument, has properly confined the discussion to the-single question of the nature of the securities taxed. Are bonds-of foreign corporations, belonging to a nonresident, and which are-actually within this state at the time of his death, property within-this state, within the meaning of subdivision 2 of section 1, c. 399*. of the Laws of 1892 ? The power to tax all assets of the estate-of the nonresident testator situated in this state that may be rightly-described as " property within the state " is fully conceded ; and ¡that such assets may, for the purposes of state taxation, have a situs separate from the domicile of the decedent is also undisputed, ¡But the argument is that bonds of a corporation, being merely 'evidences of an indebtedness of that corporation; they cannot 'have a situs independent of the domicile of the debtor or creditor, 'because the indebtedness, and not the evidence of it, is the essential thing owned, and is that which constitutes property, in a legal sense. When considered in connection with the imposition of taxes, and as between a debtor and a nonresident creditor, it has been decided, on very high authority, that the situs of corporate bonds, such as those involved here, is the domicile of the latter, and they cannot be taxed in the state under the laws of which the corporation is organized and exists. Case of State Tax on Foreign Held Bonds, 15 Wall. 300. In that case, it was said by the court that:
"All the property there can be, in the nature of things, in debts of corporations, belongs to the creditors to whom they are payable, and follows their domicile, wherever that may be. Their debts can have no locality separate from the parties to whom they are-due. This principle might be stated in many different ways, and. supported by citations from numerous adjudications, but no number of authorities, and no forms of expression, can add anj'thing, to its truth, which is recognized upon this simple statement."
From the language of the court just quoted, there can be no-room to doubt what it regarded as the subject of property, viz., the indebtedness of the corporation, and not merely the bonds, the evidence of that indebtedness. There are decisions of the-courts of this and of other states which hold or tend to hold the-same rule. In Re Will of Enston, 113 N. Y. 174; 22 St. Rep. 569, Judge Andrews, in writing for the court, argues that the-bonds of foreign corporations in the hands of the agent of the decedent in this state or not, in a legal sense, property within this-state, and are not, under the general rules or policy of the state,, ¡taxable here. It is true that this remark was not made concerning the particular property involved in that case, but was used as an illustration to enfore the decision which was reached concerning the nontaxability of the shares of stock that were the subjects-of that particular action. So, in Orcutt's Appeal, 97 Pa. St. 179, it was held, under an act of the legislature of Pennsylvania substantially to the same effect as the inheritance tax law of this state, that bonds of a nonresident of the state of Pennsylvania, left on deposit in a trust company of the city of Philadelphia for safe-keeping, were not .to be regarded as property m the state of Pennsylvania, because they were simply evidences of indebtedness, and could have no situs different from the domicile of the-owner.
It must therefore be admitted that the contention of the learned counsel for the appellants, so far as we have considered it, has the support of authority ; but, looking at and giving effect to recent -legislation concerning the imposition of an inheritance tax upon. property within this state, and decisions of the court of appeals, we! are compelled to hold that, as the law now'stands, the assessment! for the tax upon the bonds in question was lawfully imposed.By chapter 399 of the Laws of 1892, the tax may be levied "when! the transfer is by will or intestate law of property within the state,, and the decedent was a nonresident of the state at the time of hi'si death." The word "property," as used in that act, is defined, generally, as all property " over which this state has any jurisdiction' for the purposes of taxation." By section 4 of chapter 677 of the: Laws of 1892, personal property is defined as including "all written instruments themselves, as distinguished from the rights or interests to which they relate, by which . any debt on financial obligation is created, acknowledged, evidenced, *' wholly or in part." If these statutory provisions and definitions are to be given operation according to their obvious meaning, but one conclusion can be drawn from them, namely, that bonds of' corporations that are actually—physically—within the jurisdiction of this state constitute property, in a legal sense, and are, therefore, subject to taxation by the state. The effect of these enact-) ments is to give to securities of the character of those involved) here the same qualities of property that are recognized to exist in any other species of tangible personal property. A bond for the' payment of money becomes something more than a mere evidence' of an intangible indebtedness, and is placed by the statutes in the category of chattels generally. !
Moreover, the course and tendency of decision in the Courts of this state has" been, irrespective of the statute (chapter 677 of the Laws of 1892); to regard corporate bonds as property dissociated from the indebtedness represented by them. Thus, in People v. Smith, 88 N. Y. 576, Earl, J., says:
" It is clear, from an 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 evidence of) debts; and they may thus have a situs at the place where they arej found, like other visible tangible assets." 1
And so, in Re Romaine, 127 N. Y. 80; 38 St. Rep. 76, it wasi held that securities, consisting of stocks and bonds of different corporations (although it did not appear whether the stocks and bonds were issued by foreign or domestic corporations), owned by a nonresident intestate at the time of his death, but which were; habitually kept in the state of New York, were Subject to taxation1, under the collateral inheritance act of the state of New York. In1 the opinion of the court in that case the authorities are collated) and commented upon respecting the taxation of personal property! of nonresidents of the state, and it was held that, where such! property is habitually kept, even for safety, the statute applied both in the letter and spirit, and the bonds were held to be proper subjects of taxation.
In view of the statutes referred to, and of the condition of the precedents in this state respecting what constitutes property im securities such as the bonds involved here, we feel constrained to affirm the decree of the surrogate, notwithstanding the cogent reasons which, were the question a new one, might induce a contrary conclusion. We recognize the difficulty existing in the case by reason of the possibility of this property being included in a double inheritance tax, viz., both here and in Rhode Island, and also that the collateral inheritance tax is a succession tax and one which may be differently imposed in this state and in the state of Rhode Island; but we cannot escape the conclusion that the effect of the legislation of 1892 upon this subject is such as authorized the imposition of the tax complained of in this case. With the policy or propriety of the law we have nothing to do, but are obliged to' apply it as we fiud it enacted.
It has been suggested, but not seriously argued, by counsel for the appellants, that the United States bonds are not to be included in the property of Mr. Whiting in the appraisal made in this matter ; and that suggestion is regarded by some of the members of this court as controlling. Bonds or obligations of the United States cannot be taxed by a state, either directly or indirectly. Mo form or mode of taxation can be resorted to to evade 'the prohibition. Home Ins. Co. v. New York State, 134 U. S. 594. But that principle has no application to this case. The charge is not upon property. It is purely and exclusively something required to be paid out of an estate of a deceased person for the privilege enjoyed of succeeding to it. The precise question was considered in the supreme court of Pennsylvania. In Strode v. Com., 52 Pa. St. 181, the court said:
"The mistake of the counsel for the plaintiff in error consists, we conceive, in treating this as a tax upon government bonds, when it is really a tax upon the estate of a decedent dying without lineal heirs. And it does not help the argument that the bulk of the estate is made up of these [United States] bonds; for that estate passed into the hands of the executor for administration, and is taxed in his hands as an estate. The law takes every decedent's estate into custody, and administers it for the benefit of, creditors, legatees, devisees and heirs, and delivers the residue that remains, after discharging all obligations, to the distributees entitled to receive it. One of the legal obligations to which every estate .that is to go to collateral kindred is subject is this duty to the commonwealth. And it is not until this work of administration is performed that the right of succession attaches."
The nature of a succession tax is well described in the extract quoted, The tax in this case is in no proper sense on the United-States bonds owned by Mr. Whiting and on deposit here at the' time of his death. Mor is it at all material, now, that the succession is such as is prescribed or ordained by the laws of Rhode Island. So much of the estate as consisted of these bonds, and some other personal property passing to the executor, was within this state, and the Romaine Case clearly applied to that other property, as counsel for the appellants concedes; and we must hold that the United States bonds are also within the principle of that case.
We are therefore of the opinion that the order appealed from, should be affirmed, with costs.
WILLIAMS and O'BEIEN, JJ., concur.