January 11, 1907.
David Rumsey, for the appellant.
Curtis A. Peters, for the respondents.
The relator is a banking corporation, organized under the laws of the State of Connecticut, where it maintains a statutory office. It has a place of business at No. 60 Wall street, in the city of New York, with an office staff of fifty or more persons. It maintains branches in the cities of Washington and San Francisco and at many of the commercial centers of foreign countries. Its business is the purchasing and selling of foreign bills of exchange to travelers and for commercial purposes and the paying of such drafts as may be drawn on it at the city of New York by its various branches and agents and the collecting of such as may be transmitted by them to it for that purpose with an occasional loaning temporarily of surplus moneys. The average amount of moneys on hand does not appear, but at one period of the year for which the tax was levied the sum was $3,000,000. The relator has no certificate permitting it to do business in this State, but it has been conducting its business substantially as it now does since 1902, and all of its commercial affairs are managed by its directors and officers at the New York office.
After a hearing the respondent commissioners determined that the relator was employing capital to the extent of at least $69,500 in its business in this State and fixed assessment against it at that sum. A writ of certiorari was obtained which was dismissed, and from the order of dismissal this appeal is taken.
The relator urges that it is not doing business in this State within the meaning of section 7 of the Tax Law (Laws of 1896, chap. 908), and that if it is the capital which is invested in such business is not within this State nor under its jurisdiction, but must be deemed to be held in the State of Connecticut, the legal situs of the corporation, and further, that whatever capital is employed here is exempt from taxation under subdivision 13 of section 4 of the Tax Law.
We think none of these contentions can be upheld. Manifestly the relator is doing business within this State. It maintains here an office and has for some years. Its business affairs and branches and agencies are managed by and from that office, which is one of magnitude; and apparently it is doing the business that any international banking house would do with extensive and assured connections. Notwithstanding the corporation is a foreign one, and hence a non-resident to the extent of the capital which is invested in its business conducted in this State, it is taxable under the express provisions of section 7 of the Tax Law. But the relator insists that the $123,000, which was the basis of the assessment, less the deduction for debts, consisted wholly, except the $6,000 of bank deposit, of bills, notes and drafts receivable which were not investments in business, but were simply debts due to it and in no sense an investment in business.
It is evident that the relator must employ some capital to carry on the business which it does. The business which it carries on is the selling of its own drafts on its own branches and agents. Not only to reimburse themselves do these branches and agents draw upon the relator, but they draw upon it to pay such drafts as they have sold. In this way it may be assumed such branches and agents become indebted to the main office in the city of New York. In turn this indebtedness is used for the payment of such further drafts as may be drawn and sold by the home office. These credits and evidences of indebtedness, therefore, constitute relator's stock in trade. They were physically in the city of New York and held there, and were not in transit to the State of Connecticut, and we think such use of moneys and credits is the employment and investment of capital within the State which subjects it to taxation.
A foreign corporation doing business within this State is taxable upon credits and bills receivable due the corporation from such business. ( People ex rel. Burke v. Wells, 184 N.Y. 275; People ex rel. Yellow Pine Co. v. Barker, 23 App. Div. 524; affd., 155 N.Y. 665, on opinion below; People ex rel. Armstrong Cork Co. v. Barker, 157 id. 159.)
The case of People ex rel. New England Loan Co. v. Roberts ( 25 App. Div. 16; affd., 156 N.Y. 688, on opinion below), although arising under the franchise provisions of section 182 of the Tax Law, is instructive and closely resembles the case under consideration. The relator in that case was a foreign corporation whose business consisted of loaning money on bonds and mortgages upon property in Western States. It had a place of business in the State of New York and kept on hand a certain number of Western securities which were sold and replenished in the course of its business, the proceeds of which sales were temporarily deposited and subsequently sent for reinvestment. It was held that to the extent of the moneys temporarily on hand and the securities through which it transacted its business it employed capital within this State and was, therefore, subject to a license tax.
Finally it is urged that even if these demands and evidences of debt can be deemed within the State they were sent here for collection, or are moneys of a non-resident under the control or in the possession of his agent transmitted here for the purpose of investment or otherwise and that they are exempt from taxation by the provisions of subdivision 13 of section 4 of the Tax Law, and that the decision in People ex rel. Bank of Montreal v. Comrs., etc., ( 59 N.Y. 40) compels us to so hold.
One answer to this contention is that they are not in the hands of an agent of the relator, but are held by the relator itself. Another answer is that they have not been transmitted here by the relator for collection, but have been sent here to the relator, because they belong to it and because it desires to use them here in its business. The case of People ex rel. Bank of Montreal v. Comrs., etc. ( supra) apparently turned upon the fact that the foreign corporation was employing an agent to transact its business in this State, and was not itself doing business here. In construing the act of 1855 (Chap. 37) in connection with the act of 1851 (Chap. 176, § 2) — (which two laws contained substantially the provisions found in section 7 and subdivision 13 of section 4 of the present Tax Law), Judge RAPALLO, in the course of his opinion, says: "As the law stood at the time of the passage of the act of 1855, there was no authority for taxing a non-resident in respect to his personal property. If such property was in the hands of a resident trustee or agent, the agent or trustee and no other person could be assessed therefor. But if the non-resident owner controlled and managed his own business in New York, without the intervention of a resident agent, there was no method provided for taxing his assets here. Hence the peculiar language of the act of 1855 which subjects to assessment and taxation non-resident persons, etc., doing business in this State as principals or partners, special or otherwise." It was finally concluded that so long as the foreign principal retained the control of its funds, and the transactions of the agent in this State were confined to the mere loaning of the money in single investment or in many, such act was not the carrying on of business and that no tax could be imposed.
This strict interpretation of the statute does not seem to have found great favor with the courts, for, so far as we have been able to discover, the case has never been cited in any of the numerous tax decisions, except in People ex rel. New England Loan Co. v. Roberts ( supra), where it was held not controlling, as it manifestly was not. Whether the decision is to be deemed a correct interpretation of the statute or not, it does not apply to the present case, for such funds as the relator employed in this State were not in the hands of an agent, but of itself.
Our conclusion is that the relator was properly assessed, and that the writ was properly dismissed, and that the order should be affirmed, with costs.
PATTERSON, P.J., INGRAHAM, McLAUGHLIN and CLARKE, JJ., concurred.
Order affirmed, with costs. Order filed.