In re Bronson

• Decision Date: 06 October 1896
• Citation: 150 N.Y. 1,44 N.E. 707
• Parties: In re BRONSON.
• Court: New York Court of Appeals Court of Appeals

150 N.Y. 1

44 N.E. 707

In re BRONSON.

Court of Appeals of New York.

Oct. 6, 1896.

Appeal from supreme court, appellate division, First department.

Proceeding to compel payment of transfer tax under Laws 1892, c. 399, on property bequeathed by Henry Bronson, deceased. From an order of the appellate division reversing an order of the surrogate approving the appraisement and determination of a transfer tax (37 N. Y. Supp. 476), the executors and legatees appeal. Reversed.

Emmet R. Olcott, for appellants.

Howard Mansfield, for respondents.

GRAY, J.

The decedent was domiciled in the state of Connecticut, where he died in 1893; leaving, by his will, his residuary estate to his two sons, also residents of that state. A part of the residuary estate consisted in shares of the capital stock and in the bonds of corporations incorporated under the laws of this state, and which were in the testator's possession at his domicile. They had been handed over to the residuary legatees, prior to the institution by the comptroller of the city of New York of this proceeding to appraise them for the purposes of taxation under the transfer tax act (chapter 399, Laws 1892). It was held by the appellate division of the supreme court, reversing the decree of the surrogate's court in the county of New York, that the executors were not liable to pay a transfer tax upon the basis of the stocks and bonds in question. The claim of the comptroller is that, both by the terms of that act and by force of the statutory construction law of the state, and upon the theory that these bonds and shares represent interests in corporations incorporated under the laws of this state, they were, although not physically within the state, properly assessed for the purposes of such taxation. The act under which this tax was sought to be collected was passed in 1892 (chapter 399, Sess. Laws), and is known as the ‘Transfer Tax Act.’ By section 1, a tax is imposed upon the transfer of any real or personal property of the value of $500 or over, in the following cases, viz.: ‘When the transfer is by will or by the intestate laws of this state from a resident decedent; or when the transfer is by will or intestate law of property within the state and the decedent was a nonresident at the time of his death.’ The important words to be noticed in this section, which imposes the tax, are, in the case of a nonresident decedent, ‘property within the state.’ Their importance is evident, inasmuch as the attempt of the state to collect a tax, where the decedent was not subject to its jurisdiction, is limited to that which possesses the legal attributes and characteristics of property here. In that connection, reference may be made to section 22 of the act, which defines the word ‘property,’ as used in the act, as meaning all property,or interest therein, ‘over which this state has any jurisdiction for the purposes of taxation.’ In the endeavor to ascertain the intention of the legislature with respect to what should be assessable for the purposes of taxation as property under this act, we need go no further than the act itself, which, in imposing the tax, undertakes, in addition, to give a definition to property the transfer of which by will, or by the intestate laws of the state, creates the liability to taxation. It seems unimportant important to consider that section of the statutory construction law which gives a definition to the term ‘personal property’ (Laws 1892, c. 677, § 4), if, indeed, applicable. The act contains within itself a complete system for the taxation of transfers of property in cases of testacy and of intestacy, and also controlling definitions for such words used in its sections as, in the judgment of the legislature, might seem to require definition. The section of the statutory construction act, in terms, is only applicable, as I think, to a statute where its general object, or the context of the language construed, or other provisions of law, do not indicate that a different meaning is intended.

Whatever may be argued in support of the right to subject the bonds of domestic corporations to appraisement for taxation purposes under this act, when physically within the state, upon some theory that they are something more than the evidences of a debt, and constitute a peculiar and appreciable species of property, within the recognition of the law as well as of the business community, such argument is certainly unavailing in this case, where the bonds themselves were at their owner's foreign domicile. They did not represent ‘property within the state’ in any conceivable sense. What property they represented consisted in the debt of their maker, and that species of property, unquestionably, must be considered to be, as a chose in action, the holder's and owner's, and to be inseparable from his personalty. The supreme court of the United States held in the Foreign Bond Case, 15 Wall. 300, where the state of Pennsylvania assumed to tax the interest payable upon bonds issued by a Pennsylvania corporation, secured by a mortgage upon its property, and held by a nonresident, that the tax was invalid. It will be profitable to quote some of the language of the opinion in that case, the soundness of which has never been questioned: ‘But debts owing by corporations, like debts owing by individuals, are not property of the debtors in any sense. They are obligations of the debtors, and only possess value in the hands of the creditors. With them they are property, and in their hands they may be taxed. To call debts property of the debtors is simply to misuse terms. 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. The 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 could add anything to its obvious truth, which is recognized upon its simple statement.’ It seems difficult to furnish an argument in support of the view that the debt owing to a creditor is the property, which follows him everywhere, and not the written or printed obligation expressing the indebtedness, that is not presumed in the foregoing opinion. In our consideration of the question, we should not lose sight of the fact that the state, through the transfer tax act, is exerting its taxing power only over that as to which it had jurisdiction for the purposes of taxation; and we should not be confused, in that consideration, by statutes or decisions which bear upon the exercise of that power over residents within its territorial limits.

The ‘Inheritance Tax Act,’ or, as it is known to-day, the ‘Transfer Tax Act,’ imposes a tax upon the right of succession. In re Swift, 137 N. Y. 77, 32 N. E. 1096;In re Merriam's Estate, 141 N. Y. 479, 36 N. E. 505;In re Hoffman's man's Estate, 143 N. Y. 329, 38 N. E. 311. It was said of it by Judge Andrews, in the Enston Case, 113 N. Y. 181, 21 N. E. 87: ‘It is not a general, but a special, tax, reachingonly to special cases, and affecting only a special class of persons.’ And, as he also observed, in substance, there must be a clear warrant in the law for the imposition of the tax. In the Swift Case, 137 N. Y. 77, 32 N. E. 1096, it was decided that the personal property of a resident decedent, wheresoever situate, within or without the state, is subject to the tax. The act of 1885 was under discussion, and the general theory of the inheritance tax law was considered; and it was held to be a fundamental requirement that there should be jurisdiction over the subject taxed, or an actual dominion over the subject of taxation at the time the tax is imposed. In the Phipps Case, 77 Hun, 325, 28 N. Y. Supp. 330, which was affirmed here upon the opinion of the general term (143 N. Y. 641,28 N. Y. Supp. 330), the question was whether the right to an unpaid legacy left to a nonresident decedent in the will of a resident decedent was property within this state, and, as such, assessable for purposes of taxation under the act of 1887. It was held that it was not such property, upon the principle that the residence of the debtor does not fix the situs of the debt, but the domicile of the creditor. It was there observed that ‘a mere chose in action, a right to recover a sum of money, has never, as yet, been given the attribute of tangibility.’ By the act of 1887 (chapter 713), the legislature had amended the inheritance tax law, as it existed under the act of 1885, so as to impose a succession tax with respect to the property of nonresident decedents, which should be within this state. In the James Case, 144 N. Y. 6, 38 N. E. 961, we had occasion to consider the operation of that act. An Englishman, who died abroad, left property deposited within this state, consisting in stocks and bonds of corporations of this and of other states. The question was considered whether, in view of these words in the act ‘which property shall be within this state,’ it was its intendment to reach, for purposes of taxation, any personal property that was not within the state, either in fact or because of the domicile here of its owner. We though not, and that it would be highly improper to impute to the legislature an intention to tax that over which there was no jurisdiction. It is obvious that the state has no jurisdiction over a right of succession which accrues under the laws of the foreign state. That is something in which this state has no interest, and with which it is not concerned. The legal title to these bonds, or the debts they represent, vested in the personal representatives of the decedent by force of foreign laws. The decedent was a creditor, to whom the obligors in the various bonds were indebted, the extent and terms of whose obligation were...