In re Detroit Int'l Bridge Co.

• Decision Date: 04 January 1932
• Docket Number: No. 142.,142.
• Parties: In re DETROIT INTERNATIONAL BRIDGE CO.
• Court: Michigan Supreme Court

257 Mich. 52

240 N.W. 68

In re DETROIT INTERNATIONAL BRIDGE CO.

No. 142.

Supreme Court of Michigan.

Jan. 4, 1932.

Appeal from Corporation Tax Appeal Board.

Proceeding in re the Detroit International Bridge Company. From orders of the Corporation Tax Appeal Board fixing its annual privilege fees for the years 1929 and 1930, the Detroit International Bridge Company appeals.

Orders set aside and remanded conditionally.

Argued before CLARK, C. J., and McDONALD, POTTER, SHARPE, NORTH, FEAD, WIEST, and BUTZEL, JJ.Stevenson, Butzel, Eaman & Long, of Detroit (Victor W. Klein, of Detroit, of counsel), for appellant.

Paul W. Voorhies, Atty. Gen., and Paul G. Eger, Asst. Atty. Gen. (Alice E. Alexander, of Lansing, of counsel), for appellee Corporation Tax Appeal Board.

SHARPE, J.

This case involves appeals by the Detroit International Bridge Company, a Michigan corporation, with its principal office in the city of Detroit, from the determination of the Corporation Tax Appeal Board fixing its annual privilege fees for the years 1929 and 1930.

The purposes for which the bridge company was organized are:

‘To construct, own and/or operate a highway bridge across the Detroit River from Detroit, Michigan, to Sandwich, Province of Ontario, Canada, and the approaches thereto;

‘To maintain and operate such bridge and the approaches thereto for the use of vehicular and pedestrian traffic, and to charge and collect tolls for such use.’

The bridge is used for vehicular and pedestrian traffic across the Detroit river from Detroit to Canada. Permission and authority for its construction were granted to the bridge company by act of Congress, and to the Canadian Transit Company, which is now a subsidiary of the bridge company, by an act of Parliament of the Dominion of Canada.

The applicable sections of Act No. 85 (sections 4, 5), Pub. Acts 1921, as amended by Act No. 175, Pub. Acts 1929, requiring the payment of an annual privilege fee by corporations, appear in the margin.¹

1. In 1929 the bridge company reported under the heading ‘Cash, Including Cash on Special Deposit, in Michigan, $1,069.65; without Michigan, $5,673,155.71,’ and in its 1930 report, under a similar heading, cash ‘In Michigan, $6,271.64,’ and ‘Without Michigan, $44,124.15.’ In the latter report also appeared an item, ‘Special Deposits, $1,768,920.81.’

It is the claim of the company that the amount of the items ‘Special Deposits' had become localized and had acquired a business situs in the state of New York. The appeal board held otherwise. Included in the item $5,673,155.71 was $52,041.60, money of the company on deposit in a New York bank. It is conceded that this sum should be included in the computation. It appears from the affidavit of the president of the company, annexed to the 1929 report, that the balance of this item was held by the New York Trust Company as trustee under a joint first mortgage of the bridge company and the Canadian Transit Company, securing bonds of these companies in the sum of $12,000,000, and also as trustee under a trust agreement of the bridge company, securing debentures of that company in the amount of $8,000,000; that these bonds and debentures were issued to bankers for cash in August, 1927; that the proceeds thereof came into the hands of the trustee and the sum then in its hands was the balance thereof after such payments as had been made by it on the construction cost of the bridge; that a part of it had been loaned on call to individuals and corporations located and doing business in New York, and that the trustee was authorized so to do by the provisions in the mortgage and trust agreement; that the bridge company was entitled to it only as needed to pay the cost of construction of the bridge; and that a substantial part of it was to be used during the period of construction in payment of interest due upon the mortgage bonds and debentures.

The item of ‘Special Deposits' in the 1930 report is explained in a similar manner, the amount in the hands of the trustee having been reduced to that amount.

The fee here sought to be collected is imposed upon the ‘paid-up capital and surplus' of the corporation ‘for the privilege of exercising its franchise and of transacting its business within this state,’ and the computation thereof in the ratio prescribed ‘shall be made upon the corporation's property, both tangible and intangible, owned or used in Michigan,’ and as provided in the amendment (Act No. 175, Pub. Acts 1929): ‘In determining the amount or value of intangible property, including capital investments, owned or used in this state by either a domestic or foreign corporation, such property shall be considered to be located, owned or used in this state for the purposes hereof, if used in or acquired from the conduct of its business in this state, irrespective of the domicile of the corporation.’

It seems clear that the moneys in the hands of the trustee in New York is the property of the corporation, and was properly included in the computation.

The contention of counsel for the bridge company that this money ‘had become localized and had acquired a business situs in the State of New York,’ if a subject for consideration in the construction to be placed upon our statute, is answered by the holding of the court in that state that the ‘activities' of the trustee in a similar case ‘are merely incidental to the corporate organization and the ownership of corporate assets and are not exercised for the purpose of continued efforts in the pursuit of profit and gain which is the test of the ‘doing of business.” People ex rel. v. Knapp, 229 N. Y. 502, 128 N. E. 892 (syllabus).

The bonds and debentures were issued by the bridge company to secure the money with which to erect the bridge. These instruments do not appear in the record, although counsel on both sides quote from them. It will be assumed that under their provisions it was, and is, the duty of the trustee to protect the purchasers by seeing to it that the money is expended for the purpose for which the securities were issued. But, until so expended, it belongs to the bridge company, although not subject to withdrawal from the hands of the trustee until the conditions of the trust agreement have been complied with. The purpose of its retention by the trustee was not for reinvestment. Neither could it be appropriated or set aside by the trustee for the payment of interest on the bonds or securities until such interest became due.

2. Under the heading ‘Investments,’ the 1929 report showed $1,304,630.70, and that for 1930 $2,471,610.63. These items included stock in the Canadian Transit Company of the value of $1,280.000. Over objection these sums were included in the computation by the appeal board. This company was organized under the laws of the Dominion of Canada. While the title to that part of the bridge situated in Canada is held by it, all of the shares of...