§ 486. What is tangible property: stock and bonds.

Commercial securities, though not formerly regarded as chattels, and bonds, which are common-law specialties, are so far now regarded as tangible property as to be treated like chattels for the purpose of taxation. Bonds, certificates of stock, and promissory notes, are then regarded as tangible property in the place where they are found. "There is in this country a document the existence of which vouches and is necessary for vouching the title of some one to the foreign shares, so that in the absence of that document no one at all could establish a title to the share. It is found by the case that the certificates are currently marketable here as securities for that share and the dividends payable on that share; it is found, in fact, that the delivery of the certificate in this country ipso facto affects the title in a sense that it entitles the transferee to all the transferror's rights. It follows that the certificate itself has some operative power here, and it seems to me not to be within the ancient rule that a simple contract debt or mere evidences of a simple contract debt are supposed to exist only at the place of the debtor's residence. It being a marketable security operative, though not completely operative, to pass the title, and having a marketable value here, I think that it is itself a document which is a document of value." 29 Any corporation, domestic or foreign, is therefore taxable in any State upon bonds, shares of stock, or other choses in action which are evidenced by mercantile securities actually within the State, including stocks, bonds, bank notes, promissory notes of individuals, etc.30 So where municipal bonds, issued by the city of St. Louis and owned by a person domiciled in that city were bona fide kept permanently in New York, where the interest was payable, they were held to be taxable in New York and not in St. Louis.31

29 Wright, J., in Stern v. Queen, [1896] 1 Q. B. 211.

30 New Orleans v. Stempel, 175 U. S. 309, 44 L. ed. 174; People v. Roberts, 25 App. Div. 16, 49 N. Y. Supp. 10.

31 Valle v. Ziegler, 84 Mo. 214.

But in California bonds of a foreign

So where by statute a foreign insurance company is required to deposit bonds with the State as a condition of doing business, the bonds may be taxed.32 "It is a physical fact that these bonds are within the State. They are payable to the bearer and the legal title is evidenced by possession, and the property right which they represent passes by delivery. They have a market value, and are bought and sold in the market, and have so many of the characteristics of tangible personal property that ordinarily they would have a situs for the purposes of taxation, independent of the domicil of the complainant, their beneficial owner. . . . By the deposit of these bonds the insurance company pledges them for the payment of losses incurred by policy holders, and their negotiable character enables them to be readily disposed of for that purpose. Their negotiability, therefore, is not suspended or destroyed, but is always available for the purpose of their deposit. Every element of value in the bonds is employed not only to enable the company to comply with the law permitting it to do business, but to meet the exigencies of that business." 33

Such securities are expressly included in taxable personal property by most States. "All . . . bonds or stocks and other investments;" 34 or shares of stock specially named, with a general clause covering all things of value.35 The most complete

corporation owned by a resident but permanently kept abroad were held taxable in California; and the court intimated that they could not appropriately be taxed elsewhere. In re Fair's Estate, 128 Cal. 607, 61 Pac. 184.

32 Western Assur. Co. v. Halliday, 110 Fed. 259, 127 Fed. 830; People v. Home Ins. Co., 29 Cal. 533; British C. L. I. Co. v. Comrs., 31 N. Y. 32; State v. Fidelity & Deposit Co., (Tex. Civ. App.) 80 S. W. 544.

33 Thompson, Dist. J., in Western Assur. Co. v. Halliday, 127 Fed. 830, 834, 835.

34 Ill. Rev. Stat. ch. 120, § 1; Neb. Stats. § 4282. To the same effect, Ark. Stat. § 6402; Cal. Const. Art. 13, § 1, Pol. Code, § 3617; La. 1898, No. 170, § 91; Mo. Rev. Stat. § 9123; Mont. Const. Art. 12, § 17, Pol. Code, § 3680; N. Y. Tax L. § 2; Oh. Rev. Stat. § 2731; S. Car. Rev. Stat. § 28; Texas Rev. Stat. Art. 5067; Wash. 1897 ch. 71, § 8.

35 Ala. Civ. Code, § 3911; Kan. Gen. Stat. ch. 158, § 3; Maine Rev. Stat. ch. 9, § 5; Md. Gen. L. Art. 81, § 2; Mich. Comp. L. § 3831; Minn. Gen. Stat. § 1510; N. H. Pub. Stat. ch. 55, § 7; N. Dak. 1897, ch. 126, § 4; Ore.

enumeration of such securities is made in Iowa. "Moneys, credits, and corporation shares of stock, except as otherwise provided, cash, circulating notes of national banking associations and United States legal tender notes and other notes and certificates of the United States payable on demand, and circulating or intended to circulate as currency, notes, including those secured by mortgage, accounts, contracts for cash or labor, bills of exchange, judgments, choses in action, liens of any kind, securities, debentures, bonds other than those of the United States, annuities, and corporation shares or stock not otherwise taxed in kind, shall be assessed as provided in this chapter."

136

Shares of stock are frequently exempted from taxation where the capital of the corporation is taxed.37

§ 487. What is tangible property: money.

The doctrine that commercial securities have a situs has been carried so far that money deposited in a bank by the corporation or its agent, not for transmission to the home office but for use within the State, may, it is held, be taxed as property within the State.38 This doctrine has been vigorously expressed by Judge Vann: 39 "What were his rights, or those of his successors, as against the state of New York, in view

Misc. L. § 2731; R. I. Gen. L. ch. 45, § 10; S. Dak. Const. Art. 11, § 4. See also Conn. Gen. Stat. §§ 2323, 2325; Del. 1898, ch. 25, § 2; Fla. 1898, ch. 4322, § 3; Ga. 1900, p. 21, § 8; Ida. Code, § 1313; Ky. 1902, ch. 128, Art. 2, § 16; Miss. Code, § 3751; Ut. Rev. Stat. §§ 2517, 2518; Vt. Stat. §§ 399, 400; Va. 1900, ch. 906; W. Va. Code, ch. 29, §§ 46, 47; Wis. Stat. §§ 1036, 1050, 11; Wyo. Rev. Stat. § 1763.

36 Ia. Code of 1897, § 310.

37 See the question of taxation of corporate securities considered in general later, Chap. XXIX.

38 New Orleans v. Stempel, 175 U. S. 309, 44 L. ed. 174; Blackstone v. Miller, 188 U. S. 189, 47 L. ed. 439; State Board of Assessors v. Comptoir Nat. d'Escompte, 191 U. S. 388; Bluefields Banana Co. v. Assessors, 49 La. Ann. 43, 21 So. 627; Re North of Scotland Can. Mtg. Co., 31 Up. Can. C. P. 552.

39 Matter of Houdayer, 150 N. Y. 37, 44 N. E. 718, 55 A. S. R. 642, 34 L. R. A. 235.

of the command of its legislature that all property, or interest in property, within the state, susceptible of ownership, should be subject to a transfer tax upon the death of its owner whether he was a resident or non-resident? What was the real thing, the essence of the transaction, that gives rise to this controversy? The decedent brought his money into this state, deposited it in a bank here, and left it here until it should suit his convenience to come back and get it. While the commingling of funds may complicate administration, it does not change the facts as thus stated. If he had deposited in specie, to be returned in specie, there can be no doubt that the money would be property in this state subject to taxation. But, instead, he did as business men generally do, deposited his money in the usual way, knowing that, not the same, but the equivalent, would be returned to him upon demand. While the relation of debtor and creditor technically existed, practically he had his money in the bank, and could come and get it when he wanted it. It was an investment in this state subject to attachment by creditors. If not voluntarily repaid, he could compel payment through the courts of this state. The depositary was a resident corporation, and the receiving and retaining of the money were corporate acts in this state. Its repayment would be a corporate act in this state. Every right springing from the deposit was created by the laws of this state. Every act out of which those rights arose was done in this state. In order to enforce those rights, it was necessary for him to come into this state. Conceding that the deposit was a debt; conceding that it was intangible, still it was property in this state for all practical purposes, and in every reasonable sense within the meaning of the Transfer Tax Act." 40

"The fund has a situs here, because it is subject to our laws. A reasonable test in all cases, as it seems to me, is this: Where the right, whatever it may be, has a money value and can be

40 In re Romaine, 127 N. Y. 80, 89, 27 N. E. 759, 12 L. R. A. 901.

owned and transferred, but cannot be enforced or converted into money against the will of the person owing the right without coming into this state, it is property within this state for the purposes of a succession tax. Thus the right in question is property, because it is capable of being owned and transferred. It is within this state, because the owner must come here to get it. It is subject to taxation, because it is under the control of our laws. It has a money value, because it is virtually money, or can be converted into money upon demand. It is subject to a transfer tax, because the passing, by gift or inheritance, of 'all property, or interest therein, whether within or without this state, over which this state has any jurisdiction for the purposes of taxation,' comes within the expressed intention of the legislature."

While this is undoubtedly the prevailing view, and represents an apparently irresistible tendency in the courts, it is technically open to grave objection. As Judge Gray, dissenting, said in the same case: "When the deceased made deposits with the trust company, they became the property of the depositary and the relation which sprang up between them was that of debtor and creditor. The right of the decedent as a depositor was a mere chose in action. . . . To say that that constituted 'property' within the meaning of the act, would be to carry the doctrine of the inheritance laws too far for support in law or in reason."

When, however, the money is temporarily deposited subject to the check of a non-resident, it would seem not to be taxable under such a statute; 41 and in some States it has been expressly provided by statute that such property should not be taxed. But in general money is taxable whether on hand or on deposit, though in the latter case it is commonly included under credits.

$488. What is tangible property: credits.

That money is a chattel is clear; but it is a long extension 41 Clason v. New Orleans, 46 La. Ann. 1, 14 So. 306.