In re Jones' Estate

Decision Date09 December 1902
Citation65 N.E. 570,172 N.Y. 575
PartiesIn re JONES' ESTATE.
CourtNew York Court of Appeals Court of Appeals

OPINION TEXT STARTS HERE

Appeal from supreme court, appellate division, First department.

In the matter of the appraisal under the transfer tax act of the estate of George Jones, deceased. From an order of the appellate division (74 N. Y. Supp. 702) modifying and affirming an order of the surrogate's court imposing a tax on the estate of George Jones, deceased, of which Gilbert E. Jones and others were executors, the comptroller of the city of New York appeals. Reversed.

John R. Dos Passos and Edmund F. Harding, for appellants.

G. B. Townsend, for respondents.

BARTLETT, J.

The single question involved in this appeal is one of law upon undisputed facts. The late George Jones was a member of a joint-stock association known as ‘The New York Times.’ The property of this association was represented by the issue of 100 shares of stock, of which the deceased owned 46. This association was formed in January, 1872, its articles being executed by seven associates, and provided in detail for the management of the business. The eighth subdivision thereof reads as follows: ‘All the property, real and personal, and all the goods and chattels, choses and rights in action, and credits of every name and nature, with the evidence thereof, including the good will of its business of the association heretofore existing, known as ‘The New York Times Establishment,’ are put in by the undersigned, who are the owners thereof, and constitute the value of the shares of the association.' The ninth subdivision reads: ‘The shares of the association shall represent all the rights and property mentioned in the foregoing article together with all said property, goods and chattels, rights and credits, as shall from time to time be required, and shall always be divided into one hundred equal shares.’ The articles further provided that each of the associates had the power to sell his shares subject to certain conditions not important to be considered at this time; also that the title to the real estate should vest in the president of the association and be held by him for its use and benefit, subject to the control and disposition of the board of directors, who were clothed with ample powers to conduct the business. Mr. Jones died on the 12th of August, 1891, leaving a last will and testament, which was duly proved. Certain provisions of this will were read in evidence, and disclose the fact that the testator, in disposing of his interests in the association known as ‘The New York Times,’ divided it among his legatees, by giving to each a certain number of shares of the stock held by him. He bequeathed some of these shares absolutely, and created separate trusts as to certain other shares. It thus appears that the associates, constituting this joint-stock association, treated their property, real and personal, as represented by shares of stock; and Mr. Jones in his will saw fit to distribute his interest by adopting the same mode of representation. It was claimed by the comptroller that these shares were personal property, and taxable as shares of stock in an ordinary corporation. The executors contended that, as the joint-stock association owned this realty, the interest therein of the shareholder was realty also, and, as it passed under his will in the direct line, was exempt, the statute taxing transfers of realty only when passing to collaterals or strangers. Laws 1891, c. 215. The views of the comptroller were adopted by the appraiser, and by both surrogates of New York county, but the appellate division reversed with a divided court.

The history of joint-stock associations both in England and this country is interesting. Mr. Lindley, in his Law of Companies (5th Ed.), at page 2, says: ‘When unincorporated companies, with a joint stock divided into numerous transferable shares, began to assume importance and to force themselves upon the attention of the legislative and judicial departments of the state, the reception they met with was by no means encouraging. Owing to the then established rules relating to parties to actions at law and suits in equity, a joint-stock company could not practically sue its own debtors, nor could disputes between its members be readily, if at all, adjusted. At the same time the doctrine that each member was answerable for the whole of the debts of the company was studiously promulgated and rigorously enforced.’ The learned author discusses at length the growth of joint-stock associations in England from an early time until the present day. He has, however, summed up the situation in the quotation already made, to the effect that, with all the rights and powers conferred upon them, in the face of vigorous opposition, the doctrine of individual liability has been maintained. In People v. Coleman, 133 N. Y. 279, 31 N. E. 96,16 L. R. A. 183, Judge Finch pointed out the many respects in which joint-stock associations resemble corporations, but emphasized the fact that the one derives its existence from the contract of individuals, the other from the sovereignty of the state. He said: ‘The two are alike, but not the same. More or less they crowd upon and overlap each other, but without losing their identity, and so, while we cannot say that a joint-stock company is a corporation, we can say, as we did say in Van Aernam v. Bleistein, 102 N. Y. 360,7 N. E. 538, that a joint-stock company is a partnership with some of the powers of a corporation.’ This quotation states in a brief manner the law relating to these associations as it exists in this state. A joint-stock company has never appealed to the sovereignty of the state for the right to exist, but by articles of association, which take the place of the charter of a corporation, the associates have been content to do business subject to the individual liabilities of partners. In 1854 (chapter 245) the legislature made it lawful for such associations to provide by their articles that the death of any stockholder, or the assignment of his stock, should not work a dissolution, but they should continue as before, and could only be would up by the judgment of a court. This law continued in force until the enactment of the Joint Stock Association Law,’ passed in 1894, when it was repealed. 2 Rev. St. (Banks' 9th Ed.) p. 1471. The Code of Civil Procedure has also provided for actions by or against an unincorporated association, preserving in part previous legislation, and adding thereto new and liberal features. Sections 1919 to 1924, both inclusive. Mr. Beach, in his work on Private Corporations (volume 1, § 167), in speaking of joint-stock associations, says: ‘The powers conferred upon them by these enactments are such that for many purposes they are held to be corporations, even though they have nowhere been designated as such, and though the statutes relating to joint-stock companies did not so designate them, or have expressly declared that they shall not be so considered. But with respect to the personal liability of members to creditors of the company they are still subject to the common-law rule applicable to partnerships.’ The principal feature of the joint-stock association is the right of perpetual succession. In this respect it is like a corporation, and enjoys all the advantages flowing from such a privielge. It has frequently been held in this state that, where a tax has been imposed upon all moneyed or stock associations, it could not be collected from a joint-stock association, for the reason that technically it could not be regarded as a corporation. People v. Coleman, 133 N. Y. 279, 31 N. E. 96,16 L. R. A. 183, reported below 59 Hun, 624,13 N. Y. Supp. 833. In these cases the question was whether a joint-stock association was taxable upon its capital under the provisions of the Revised Statutes (1 Rev. St. 414, § 1) subjecting ‘all moneyed or stock corporations deriving an income or profit from their capital or otherwise’ to such a tax. The opinions of Mr. Justice Barrett at special term, Mr. Justice Van Brunt at general term, and Judge Finch in this court, all considered the question whether a joint-stock association was a corporation, and whether the acts creating for it certain privileges intended to confer a corporate franchise. It was held that, while a joint-stock association possessed certain corporate powers, nevertheless it was not a corporation within the meaning of the statute to which reference has been made. The fact that a joint-stock association is not in legal contemplation a corporation, and not liable to taxation under acts seeking to reach corporations, in no way militates against the position assumed by the comptroller in this case. It is competent for private individuals to create a joint-stock association, issue shares of stock, and in that form dispose of property by last will and testament. The associates by contract have created the same situation as to shares of stock that a corporation secures by charter. In the case at bar the appraiser fixed the value of the interest of the estate of the personal property of ‘The New York Times' at $15,640, the real estate at $575,000, and the good will of the newspaper, less the existing debts, at $184,000.

It is contended on behalf of the executors that this large amount of real estate, which is of greater value than appraised, is not subject to the tax, for the reason that it would descend to the testator's children, and was not taxable under the transfer tax law in force at the time of testator's death. The fact is that at the time of Mr. Jones' death the title to the real estate of ‘The New York Times' was vested in its president for the benefit of the association, and this situation was not changed by that event. It is not possible that the real estate of ‘The New York Times' could, after Mr. Jones'...

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