Court Opinion

ID: 8076922
Source: CourtListenerOpinion
Date Created: 2022-09-09 12:43:38.070768+00
Date Added: 2024-06-11T16:38:16.535986
License: Public Domain

INGRAHAM, J.
The question presented is whether 500 bonds of the Pratt Consolidated Coal Company, a foreign corporation, was property of the decedent within this .state at the time of his death. The decedent died on the 4th of August, 1905, a resident of Birmingham, Ala. Prior to his death, a contract had been entered into between two foreign corporations, the Pratt Consolidated Coal Company and the Pratt Coal Company, wherein the consolidated company agreed to purchase the properly of the coal company, and in consideration therefor agreed to deliver to the coal company 22,000 shares of its capital stock, and its bonds, secured by a mortgage, amounting to $2,200,000 ; and tile coal company agreed to accept said, stock and bonds in payment for said property. The consolidated company agreed that it would “execute and deliver to the respective parties, or to whomsoever they may direct, an acknowledgment upon the part of the party of the first part (the consolidated company) to the respective parties of the amount of negotiable bonds to which the respective parties are entitled, and the promise and agreement on the part of the party of the first part to execute and deliver its negotiable bonds to the respective parties or to whomsoever they may direct, in the amount to which *641they are respectively entitled under the terms hereof; provided however that the party of the first part is to retain 15% of the bonds going to the respective parties until the title to the properties conveyed by the respective parties has been examined by the party of the first part, the said bonds retained to be held as security to make good any deficiency in the amount of land agreed to be conveyed by the respective parties, caused by defective titles or otherwise”; and it was further provided that the party of the first part “further agrees that when said permanent certificates of stock and said bonds are prepared, it will execute, issue and deliver permanent certificates of stock and bonds to the respective parties hereto, or to whomsoever they may direct in. the amount to which they are respectively entitled, upon the surrender to the party of the first part of the temporary certificate of stock and the promise in regard to bonds executed.” Upon the day that this contract was executed, February 27, 1905, there was a meeting of the stockholders of the coal company, at which the stockholders resolved that the president and vice president of the coal company be authorized and empowered, for and in the name of and in behalf of the company, to contract to sell, and to sell and convey, to the Pratt Consolidated Coal Company, all of the property of every kind and description owned by the Pratt Coal Company; and they were authorized to accept in' payment for said property 22,000 shares of the capital stock of the consolidated company, and first mortgage bonds of the Pratt Consolidated Company in an amount aggregating $2,200,000; that the said stock and bonds were to be delivered to the president and vice president and treasurer of the coal company, and, after paying all indebtedness of the company, the board of directors were authorized and directed to make a distribution of the remaining stocks and bonds received from the consolidated company among the stockholders pro rata in proportion of the number of shares held by each. The board of directors of the coal company met at the office of the company on the same day, and passed the same resolution that was passed by the stockholders. The directors of the coal company again met on the 25th day of November, after the death of the decedent, at which meeting a resolution was adopted ratifying the action of the officers of the company in distributing the bonds received from the consolidated company among the stockholders, and directing the officers of the company to distribute the stock of the consolidated company, and any other bonds received from the consolidated company, among the stockholders pro rata. It further appeared that the decedent was a stockholder of the coal company; that after the meeting of February 27, 1905, there was no meeting of either the stockholders or the directors of the coal company until after the death of the decedent, and the board of directors of the coal' company never authorized any distribution of the stock or bonds received from the consolidated company until the 25th day of November, 1905, and never authorized any officers or representatives of the corporation to make any distribution of the stock or bonds prior to that date.
At the time that the deed of the property of the coal company was delivered, the consolidated company executed and delivered to the coal *642company a temporary certificate for 22,000 shares of stock,, and an acknowledgment that it was obligated to deliver to the coal company its bonds, amounting in the aggregate to $2,200,000, when the same was ready for delivery, less 15 per cent. The decedent was then elected president of the consolidated company, and that company executed a deed of trust to the Central Trust Company of New York, trustee, conveying their property to secure the bond issue of $5,000,000. The deed of trust was executed on the 1st of April, 1905, and the bonds were dated on that date, but the bonds were not then ready for execution. The decedent, as president of the consolidated company, commenced to sign these bonds at Birmingham, Ala., but they were never all signed by him, and he died on the 4th day of August, 1905. The decedent never received any certificate from the Central Trust Company, or anybody else, that he was entitled to any of these bonds. A receipt of the trust company, while made out to the decedent, was delivered to his executrix after his death. The indebtedness to the coal company was not finally adjusted until the 25th day of November, after the decedent’s death, when the remaining indebtedness' of the coal company was assumed by the consolidated company. The liquidation of the affairs of the coal company continued from the time that the consolidated company took the property of the coal company up to the 25th day of November, and even then were not entirely adjusted. It further appeared that the decedent had no right or interest in any of the stock or bonds of the consolidated company up to the time of his death, except so far as he was a stockholder of the coal company, and as such stockholder, when the coal company distributed its property, would be entitled to a distributive share. The real owner of the bonds when they should be executed was the coal company, to whom they were issued under the contract by the consolidated company. At the time of the death of the decedent they had not been delivered to any one, for the bonds had not been executed by the obligor, the consolidated company. The coal company was entitled to receive these bonds under the contract, but, before there could be any actual distribution of the assets of the coal company among its stockholders, some action by the directors of the company was necessary. The undisputed evidence is that, after the execution of this contract on the 27th of February, there was no meeting of the directors or stockholders of the coal company, and no actual distribution of its assets among its stockholders. Its debts were not liquidated. No distribution of its property had been attempted, and neither the act of its officers, or of the Central Trust Company, the trustee under the bonds, could divest, the coal company of its title to the bonds. It is certainly a novel proposition that property of a foreign corporation in this state is to be considered, for the purposes of taxation, as the property of the corporation’s stockholders. The direction of the vice president of the consolidated company to the trust company to deliver to the decedent 500,000 of the bonds of the consolidated company, and directing that such bonds be deposited with the trust company for safe keeping in his name, and the receipt therefor sent to the consolidated company at Birmingham, Ala., cannot be considered as a legal disposition of the bonds which belonged to the coal *643company so that they thereby became the property of the decedent. The decedent being the president of both companies, if he received these bonds, it would be as president of the coal company. The evidence is undisputed that the bonds were never actually executed during the decedent’s lifetime. The instruments themselves were never in this state during the decedent’s lifetime, and the decedent himself was not here at the time of his death. Upon these facts it seems to me that it is impossible to say that this right to receive these bonds of a foreign corporation, which were never executed during the decedent’s lifetime, and which the decedent, a nonresident of this state, was entitled to receive because he was a stockholder of another foreign corporation, was property within this state, or was subject to taxation.
I think, therefore, that the order appealed from should be reversed, and the case remitted to the surrogate with direction to enter an order in conformity with this opinion. All concur.