In re Transfer Tax of Tiffany

McLaughlin, J.:

On the 20tli of August, 1907, the decedent, a resident of the State of Connecticut, died owning certain promissory notes which then, and for some time prior thereto had been in a safe deposit box in the city of New York. With two exceptions the notes were made by.non-residents, and payment of all of them was secured by property outside of the State of New York. The question presented is whether they are subject to taxation under the Transfer Tax Act of this State. This act, as contained in the Tax Law (Gen. Laws, chap. 24 [Laws of 1896, chap. 908], § 220, as amd. by Laws of 1905, chap. 368 ; re enacted by Laws of 1908, chap. 310, and Consol, Laws, chap. 60 [Laws of 1909, chap. 62], § 220*), so far as material, provides that: “A tax shall be and is hereby imposed upon the transfer of any property, real or personal, of the *328value of five hundred dollars or over, or of any interest therein * * * in the following cases: * * *

2. When the transfer is by will or intestate law, of property within the State, and the decedent was a nonresident of the State at the time of his death.”

It is admitted that the transfer was by will and that the decedent, at the time of his death, was a non-resident, but it is urged that the notes, the subject-matter of the transfer, are at most mere evidences of debts and are not taxable property within the State. It cannot well be doubted that the Legislature of this State in enacting the Transfer Tax Act considered promissory notes property and intended to impose a tax upon their transfer. Personal property is defined in section 4 of the Statutory Construction Law (Gen. Laws, chap. 1; Laws of 1892, chap. 677), which was re-enacted by section 39 of the General Construction Law (Consol. Laws, chap. 22; Laws of 1909, chap. 27), as follows: “ The term personal property includes chattels, money, things in action, and all written instruments themselves, as distinguished from the rights or interests to which they relate, by which any right, interest, lien or incumbrance in, to or upon property, or any debt or financial obligation is created, acknowledged, evidenced, transferred, discharged or defeated, wholly or in part, and everything, except real property, which may be the subject of ownership.”

The definition of personal property as thus given is applicable to cases under the Transfer Tax Act. (Matter of Jones, 172 N. Y. 575.) But notwithstanding the fact that the Legislature intended by the Transfer Tax Act to make promissory notes owned by a non-resident, if located within this State at the time of the owner’s death, subject to a transfer tax, nevertheless it is claimed that it failed to accomplish that purpose for want of power.

In Matter of Whiting (150 N. Y. 27) it was decided that bonds of foreign as well as domestic corporations, and certificates of stock of domestic corporations owned by a non-resident decedent and deposited by him in a safe deposit box in this State, were, at the time of his death, taxable under the Transfer Tax Act. Judge Vann, who delivered the opinion of the court, said: The law clearly distinguishes 1 written instruments themselves ’ from the rights or interests to which they relate’ * * ■* and makes *329either taxable. * * * There is obvious propriety in subjecting the instrument of transfer to a transfer tax when it is left in this State for safe keeping. It is subject to the jurisdiction of our laws, and hence is within the intent of the Transfer Tax Act. When the design of the Legislature is to tax the transfer of everything that it has power to tax, there is no inconsistency in taxing in one form if another is not available. Indeed, perfect consistency is not always practicable in a scheme of taxation that is intended to let nothing escape that can be owned or transferred. Thus the Legislature intended, as I think, to repeal the maxim mobiliapersonam sequuntur, so far as it was an obstacle, and to leave it unchanged, so far as it was an aid, to the imposition of a transfer tax upon all property in any respect subject to the laws of this

So far as this court is concerned, the identical question here presented has already been passed upon. (Matter of Wall, 105 App. Div. 643.) There, promissory notes made by a non-resident to a non-resident were, at the time of the latter’s death, found in his safe deposit box in this State. A majority of the court held that such notes were property having a situs in this State and, therefore, liable to taxation. (See, also, Matter of Fearing, 200 N. Y. 340.)

But it is said that since the decision in Matter of Wall (supra) the Supreme Court of the United States has decided (Buck v. Beach, 206 U. S. 392) that promissory notes, situated as the notes here in question, are not taxable. I do not think that decision is applicable to the question here presented, and if so, is distinguishable. The Buah case simply held that the State of Indiana did not have the power to impose a general tax upon promissory notes made by a non-resident, payable to a non-resident, simply because they were present in the State. There, the attempt was to levy a tax upon property, while here it is to impose a tax upon the transfer or right of succession. Mr. Justice Peckham, who delivered the opinion, was careful to point out the distinction. He said: “ Cases arising under collateral inheritance tax or succession tax acts have been cited as affording foundation- for the right to tax as herein asserted. The foundation upon which such acts rest is different from that which exists where the assessment is levied upon property. The succession *330or inheritance tax is not a tax on property, as has been frequently held by this Court, Knowlton v. Moore, 178 U. S. 41, and Blackstone v. Miller, 188 U. 8. 189, and, therefore, the decisions arising under such inheritance tax cases are not in point.”

In Blackstone v. Miller, referred to by Mr. Justice Peckham, the question was whether a deposit in a Hew York bank, belonging to a non-resident decedent, was subject to tax under the Hew York Transfer Tax Act, and the claim was there made that such deposit was a mere credit and that the situs of the property was not in the State. Mr. Justice Holmes, in disposing of the question, said: “We perceive no better reason for denying the right of Hew York to impose a succession tax on debts owed by its citizens than upon tangible chattels found within the State at the time of the death. The maxim mobilia sequuntur personam has no more truth in the one case than in the other. When logic and the policy of a State conflict with a fiction due to historical .tradition, the fiction must give way. * * * Bonds and negotiable instruments are more than merely evidences of debt. The debt is inseparable from the paper which declares and constitutes it * * *.” ' In New Orleans v. Stempel (175 U. S. 309) it was held that promissory notes had an independent situs of their own and were properly taxed where located. Mr. Justice Brewer, who delivered the opinion of the court, said: “ The same doctrine was affirmed in Fisher v. Commissioners of Rush County (19 Kansas, 414), and again in Blain v. Irby (25 Kansas, 499, 501), in which the court said, referring to promissory notes : ‘ They have such an independent situs that they may be taxed where they are situated.’ The decisions of the highest courts of Hew York, in which State these plaintiffs reside, are to the same effect. In People v. Trustees (48 N. Y. 390, 397) the court said : ‘ * * * Notes, bonds and other contracts for the payment of money have always been regarded and treated in the law as personal property. They represent the debts secured by them. They are the subject of larceny, and a transfer of them transfers the debt. * * * And while, for some purposes in the law, by legal fiction, it follows the person of the creditor and exists where he may be, yet it has been settled that, for the purpose of taxation, this legal fiction does not, to the full extent, apply and that such property belonging to a non-resident creditor may be taxed in *331the place where the obligations are held by his agent. * * *’ * * * It is well settled tha,t bank bills and municipal bonds are in such a concrete tangible form that they are subject to taxation where found, irrespective of the domicile of the owner; are subject to levy and sale on execution, and to seizure and delivery under replevin ; and yet they are but promises to pay — evidences of existing indebtedness. Notes and mortgages are of the same nature, and while they may not have become so generally recognized as tangible personal property, yet they have such a concrete form that we see no reason why a State may not declare that if found within its limits they shall be subject to taxation.”

In Selliger v. Kentucky (213 U. S. 200) Mr. Justice Holmes, who wrote the opinion in the Blackstone case, referred to Buck v. Beach {supra) and in such a way that I cannot believe he considered the decisions theretofore made with reference to promissory notes being taxable under the Transfer Tax Act had been overruled. He said : “ Bonds can be taxed where they are permanently kept, because by a notion going back to very early law the obligation is, or originally .was, inseparable from the paper or parchment which expressed it. (Buck v. Beach, 206 U. S. 392, 403, 413.) That case and the authorities cited by it show how far a similar notion has been applied to negotiable bills and notes.”

In the foregoing discussion I have treated all of the notes alike, but it is to be noted that two of them, aggregating, with principal and interest upwards of $20,000, are made by a resident of the State of New York. It is possible they should be treated differently, but it does not seem to me that the residence of the debtor can change the character of property or determine whether it is liable to an inheritance tax.

In view of the foregoing I am of the opinion that the order appealed from is right and should be affirmed, with ten dollars costs and disbursements.

Clarice and Dowling, JJ., concurred; Scott and Miller, JJ., dissented.

Since amd. by Laws of 1910, chap. 706. — [Rep.