
    The People ex rel. United States Trust Company, Resp’t, v. Edward P. Barker et al., as Commissioners, etc. App'lts.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed April 11, 1895.)
    
    Taxes — Assessment—Oospora tian.
    A dividend, declared by a corporation before, but not payable until after, the date fixed for the assessment of property for taxation, is not part of its surplus funds, but a debt, which it is entitled to have deducted from its taxable assets.
    Appeal from an order reducing the assessment.
    
      David J. Dean, for app’lts; Hdward W. Sheldon, for resp’t.
   O'Brien, J.

The facts upon which the propositions of law were to be argued upon this appeal, stipulated in the court below are as follows: (1) That the relator is a trust company, duly created and. existing under and by virtue of the laws of the state of Mew York, and transacts its business at 45 Wall street, in said city. (2) That at a regular meeting of the board of trustees of the relator held on the 7th day of December, 1893, the following action was taken : “The question being on the adoption and recommendation of the examining committee, it was resolved and carried that the report be adopted as read, and a dividend of sixteen per cent, was declared, payable January 10, 1894.” (3) That on the said 7th day of December, 1893, there was set apart on the books of the relator to the credit of the “eightieth dividend” account, and charged to “profit and loss” out of the net profits of the preceeding six months, the sum of $320,000 ; that said sum was paid out as such dividend on the 10th day of January, 1894. (4) That during the period from December 7,1893, to January, 10, 1894, there was continuously on deposit at the bank of the Manhatten Company, to the credit of the relator, a sum in cash exceeding $320,000, but that sum was not separated on the books of said bank from the general cash held to the credit of the relator, nor in any way indicated as a special deposit until said 10th day of January, 1894. (5) That, in each statement rendered by the relator to the commissioners prior to that for the year 1894, the amount of the semiannual dividend declared by the relator in the preceeding December, and payable the January 10th thereafter, has been deducted from the taxable value of the relator’s capital stock, and such deduction has been allowed by the commissioners.

It will be noticed that the dividend was declared on the 7th day of December, 1893, payable January 10, 1894, and 'the date fixed for ascertaing what should be assessable as the capital stock of the corporation liable to taxation was the second Monday of January, which was intermediate between the date of the declaration and the payment of the dividend. The relator claimed that this dividend was not one of the assets, nor subject to taxation on ttie second Monday of January, 1894; and it is from the conclusion of the judge at special term sustaining this view that the appeal is taken.

Section 3, chap. 456, Laws 1857, under which the relator was taxed, is as follows :

“The capital stock of every company liable to taxation, except such part of it as shall have been excepted in the assessment roll, or as shall have been exempted by law, together with its surplus profits or reserved funds, exceeding ten per cent, of its capital, after deducting the assessed value of its real estate, and all shares of stock in other corporations actually owned by such company, which are taxable upon their capital stock, under the laws of this state, shall be assessed at its actual value, and taxed in the same manner as the other personal and real estate in the county.” '

The question' presented, therefore, is, was the amount of such dividend one of the assets of the relator, constituting a part of its “surplus profits or. reserved funds,” or was it a debt, which the relator was entitled to have deducted from the taxable assets of the company? In Re Kernochan, 104 N. Y. 618, at page 624 ; 6 St. Rep. 439, it is said:

“As soon as the profits on shares of stock are ascertained and declared, they cease to be the property of the company, and the owner of the shares becomes entitled to the dividend. It at once forms part of his estate. The fact that they are made payable at a future time is immaterial.”

In Hopper v. Sage, 112 N. Y. 530; 21 St. Rep. 491, it is said :

“This is so in regard to dividends declared, but which are payable at a future time, and such dividends belong to the owner of the stock when declared. The declaration of the dividend is in legal contemplation a separation of the amount thereof from the assets of the corporation, which holds such amount thereafter as the trustee of the stockholder at the time of the declaration of the dividend.”

And in Jermain v. Railroad Co., 91 N. Y. 483, 492, it is said :

“When a dividend has once been declared out of net earnings, the amount of such dividend is no longer a part of the assets of the company, but is appropriated or set apart for the shareholders. They receive credit for the dividends, and the corporation simply holds them as their trustee.”

These authorities would seemingly be conclusive, but their force is sought to be avoided — First, by the language of the statute under which the relator was taxed; second, by the claim that the question disposed of in the cases cited was one between individuals ; and, third, that the effect of permitting the deduction would be to enable the amount of the dividend altogether to escape taxation. Even though it be assumed that the relator would have had the right to rescind the resolution under which the dividend was declared, and thus leave its surplus profits or reserved funds unimpaired, this cannot be regarded as conclusive upon the question as to whether the amount of such dividend constituted a part of the relator’s assets or a part of either of the funds mentioned in the statute. Nor do we think it is to be determined by a consideration of whether, strictly speaking, the amount is to be regarded as a debt, and thus deductible from taxable assets, the question really being whether it is a portion of the surplus profits or reserved funds; and the authorities cited favor the view urged by the respondent, that the sum dedicated to a specific use, and no longer available for corporate purposes, as long as the dividend resolution stands (which it did upon the second Monday of January), can no longer be regarded as surplus or reserve than could the balances due depositors; and it having been held that the effect of a declaration of a dividend is to place the corporation in the position of trustee for those in whose favor the dividend was declared, and for the recovery of which they might sue, it cannot be regarded as part of the surplus profits or reserved funds of the corporation.

The second distinction sought to be made between the cases cited and the one at bar, that the questions there involved were between private individuals, while here it is between the municipality and a corporation, seems to us without force, because the legal principles controlling the disposition of the question would be the same. The third reason urged by appellants, that this would permit the amount of the dividend to escape taxation altogether, is equally without force, because, if it is property which belongs to the persons in whose favor the dividend was declared, it should not be'taxed as part of the assets of the corporation. Nor to the end that the tax might be collected should one not liable be obliged to pay it. We think the order appealed from was right, and should be affirmed, with costs.

All concur.  