
    Anderson v. Durr, Auditor, et al.
    
      Taxation' — Membership in New York Stock Exchange — Owned by resident of Ohio — Taxable in Ohio, when — Sections ¡325 and 5328, General Code — Situs-of property, where.
    
    (No. 16234
    Decided July 8, 1919.)
    Error to the Court of Appeals of Hamilton county.
    Anderson brought suit against the defendants to enjoin the listing for taxation and the collection of taxes on the plaintiff’s membership in the New York Stock Exchange for certain years.
    The petition alleges that the plaintiff had been a member of that exchange for five years last past; that it is an unincorporated association of persons whose object is to furnish exchange rooms and other facilities' in New York City for the convenient transaction of their business by its members as brokers; to maintain high standards of commercial honor and integrity among its members; to promote and inculcate just and equitable principles of trade and business; that in substance the privilege conferred by membership is to trade at the exchange in New York City and not elsewhere in certain securities listed on the exchange; that the government of the exchange is vested in a governing committee, composed of the president and the treasurer of the exchange and of forty members; that no person can be admitted to membership unless elected by the entire vote of two-thirds of the fifteen members comprising the committee on admission; that a person elected to membership must pay an initiation fee and must sign the constitution and pledge himself to abide by the same; that the dues of members are $50, semiannually, exclusive of fines and assessments for the gratuity fund, which is a plan and fund providing for the families of deceased members; that a transfer of membérship may be made upon the submission of the name of the candidate to the committee on admissions, with the approval of the transfer by two-thirds of the entire committee, subject to certain conditions; that there is no general or other right to transfer or pledge membership in the exchange and no right or privilege in connection therewith which may be exercised in the state of Ohio; that any member may be suspended from the membership and made ineligible for readmission or may be expelled from membership by the vote of two-thirds of the existing members of the governing committee, for certain stated causes; that dealing upon any other exchange in the city of New York, or publicly, outside of the exchange, either directly or indirectly, in securities listed or quoted on the exchange, is forbidden; that no member has any certificate or share of membership or interest in the assets, and the plaintiff has not in Ohio or elsewhere any such certificate or share which can be sold, transferred, assigned or encumbered or used; that the only evidence of plaintiff’s membership is a letter to him from the secretary notifying him of his election; that the exchange owns no assets in Ohio, and any property of any kind belonging to it is wholly and permanently in New York; that the plaintiff is a copartner with Walter B. Powell, under the name of Anderson & Powell, a firm formed for the purpose of dealing in investment securities, with an office in Cincinnati, and plaintiff and his copartner, as aforesaid, have paid and will pay when due all taxes properly assessed against them; that the defendants will, unless enjoined, list the plaintiff’s franchise in said exchange for taxation; that the New York Stock Exchange has been in existence for almost a hundred years and membership therein has been declared not to be property within the general property tax laws of New York, and no attempt has been made so far as plaintiff knows to tax it in Ohio or elsewhere; and that the levying of taxes on the plaintiff’s privilege, if regarded as property, is an attempt to levy and collect taxes on property wholly outside of the state of Ohio and amounts to taking property without due process of law .in violation of the Constitution of the State of Ohio and of the United States.
    The answer of the defendants admits the membership of the plaintiff in the New York Stock Exchange and his residence in Hamilton county, Ohio; .that the exchange is an unincorporated association of persons whose object is as stated in the petition; and that the membership therein is secured as stated in the petition, and dues and assessments for the gratuity fund paid as therein stated.
    Defendants admit that a transfer of membership may be made by submission of the name of the candidate to the committee on admissions, upon approval, as the averments of the petition set forth; fhat the secretary keeps the ledger referred- to with the names of all the members of the exchange and that the only evidence of the plaintiff’s membership is to be found on the books of the exchange and in the letter from the secretary, as stated.
    Defendants further admit that the plaintiff is a copartner with Walter B. Powell, under the name of Anderson & Powell, and that the partnership was formed for the purpose of, and said partners are now engaged in, dealing in investment securities listed on the New York Stock Exchange, with an office in the city of Cincinnati; and that the defendant Durr intends to list said membership for taxation in Hamilton county, Ohio; and defendants deny every other allegation in the petition.
    Further answering the defendants say that for many years the plaintiff has been engaged in the business of broker and dealer in stocks, etc., and has a large business and clientele for the purchase and.sale of stocks, bonds, and securities listed and dealt in on the New York Stock Exchange, and that plaintiff has held himself out and represented himself to said clientele and the public at large as furnishing proper, convenient and ample facilities for the transaction of all kinds of investment business and the purchase of all kinds of stocks and bonds; that prior to April, 1911, plaintiff purchased a seat on the New York Stock Exchange, believing and intending that he would obtain additional facilities for the transaction of his business, increase his ability to serve his clients, and by virtue of the ownership of s.uch seat on the New York Stock Exchange would increase and extend such business; that the ownership of such seat on the New York Stock Exchange has' in fact materially increased said facilities and ability to serve the plaintiff’s clients and has. served to increase his business, establish his position in the business world and increase the profits arising from said business; that defendants are informed, and so allege the fact to be, that plaintiff paid for said seat, in addition to an initiation fee of $2,000 and annual dues, the sum of $60,000, which was the recognized market value for such seats, and that such sum was so paid that plaintiff might secure the business advantages arising from such membership on the exchange; that in addition to the ordinary business advantage connected with membership there is an insurance feature known as the “Gratuity Fund Plan,” whereby approximately $10,000 is contributed to the family of any member who dies in good standing; that there is a further security for the fulfilment of contracts made with stock exchange members in that the value of the membership of each member is first liable to the settlement of contracts made with other members, thus insuring to 'the extent of the value of such membership the financial responsibility of the members in their- mutual dealings; that subject to the acceptability of the transferee by the members of the membership committee all memberships are transferable by the voluntary act of transfer, or by will, and that in case of transfer by a member voluntarily, by death, or by the governing committee, the net proceeds are turned over and go to the member or his estate; that such mem-. bership has a well-recognized market value which is ascertainable from current quotations; and that subject to the condition that each applicant must be at least twenty-one years of age, a citizen of the United States, and pay an initiation fee of $2,000 and be acceptable to two-thirds of the entire membership committee, s.uch seats are transferable for a consideration at the will of the member.
    Defendants further aver that in the transaction of the business of brokers in stocks and bonds a differentiation is made between members and nonmembers in that business is transacted by members on account of other members' at a commission of not less than 1/32 of 1%, while a commission of not less than £ of 1% is charged to nonmembers; that firms or copartnerships in which one member owns a seat are entitled to have business transacted at rates prescribed for members; and that by reason of the transferability and market value of said seat and the manifest business advantages arising from such membership, and the additional facilities for the convenient and more profitable transaction of the business of the members, the ownership of such seat constitutes personal property within the definition of Section 5325, General Code, and an investment within the provisions of Sections 5328 and 5372, General Code.
    For reply plaintiff denies that memberships are transferable by will and says that such memberships are a personal privilege or license to buy and sell in meetings of the exchange in New York City and not elsewhere; that such membership is not subject to execution and cannot be pledged or used as collateral and cannot be willed; and denies that it is personal property within the definition of the sections of the General Code referred to.
    On the trial of the cause the constitution of the New York Stock Exchange was offered in evidence, and a stipulation as to facts. The court of common pleas entered a decree and judgment for the plaintiff. On appeal the court of appeals found in favor of the defendants and dismissed the petition.
    This proceeding is brought to reverse the judgment of the court of appeals.
    
      Mr. Murray Seasongood, for plaintiff in error.
    
      Mr. Louis H. Capelle and Mr. S. C. Roettinger, for defendants in error.
   By the Court.

Is the membership in the New York Stock Exchange property? If so, is the situs of the property at the domicile of the owner? If these questions are answered in the affirmative, Do the statutes of Ohio provide for its taxation ?

The record shows that the membership is a valuable right. The privileges of a member are not only valuable in their use, but the membership has a market value. Plaintiff paid more than $60,000 for his seat. The stock exchange owns the entire 'capital stock of the Exchange Building Company, which owns the real estate in which the business is conducted. Facilities are furnished for the conduct of brokerage business by members of the exchange.

The right of a member is to trade at the exchange in New York, and not elsewhere, in securities listed on the exchange. Admissions to membership are made on the vote of the committee on admissions. Membership may be transferred on the approval of the transfer by the committee.’ .On the death of a member his seat is sold and the net proceeds of the sale after payment of claims of members are paid to his estate.

When one has become a member of the New York Stock Exchange he has a contractual right to have the association conducted in accordance with its rules and regulations.

All of these things are essential incidents of property. The restrictions which the mutual agreements of the membership place upon the use and the ownership may possibly decrease its market value. On the other hand these very restrictions may increase its value. They do not affect its status as property any more than restrictions on the lots in a subdivision of real estate.

In Rogers v. Hennepin County, 240 U. S., 184, it is held that memberships in exchanges, such as involved in this case, are property, notwithstanding restrictions upon their use, and nothing in the Federal Constitution prevents their being taxed; that whether such memberships are taxable under State statutes is a matter of local law; that the memberships are. distinct from the assets of the corporation, and taxing members on their membership and the corporation on its assets does not amount to double taxation.

In the case we have here the membership is personal property, and the fact that the assets of the association consist in very large part of the capital stock of the realty corporation in New York City, and that the privilege is to do business in the building there, does not give the membership the quality or character of real property.

The shares of stock in a realty company are personalty. The things that the company owns, whether real or personal, do not affect the character of the shares of stock in the company.

Where is the situs of the property or membership owned by the member?

It is well settled that a state has no power to tax personal property permanently gituated in another state. Southern Pacific Co. v. Kentucky, 222 U. S., 63, 74.

As we have seen, the rights of a member are contractual. There are mutual covenants and. agreements between the exchange and the members as well as the obligations assumed by the members toward each other. These contractual rights are enforceable, like other contract rights. They are choses in action.

A state has power to tax intangible property, choses in action, at the domicile of the owner, and such domicile is the situs of that class, of personal property. 1 Cooley on Taxation (3 ed.), 89; Southern Pac. Co. v. Kentucky, supra, 63, 76, and Union Refrigerator Transit Co. v. Kentucky, 199 U. S., 194.

In the recent case of Fidelity & Columbia Trust Co. v. Louisville, 245 U. S., 54, it was held that liability to taxation in one state does not necessarily exclude liability in another.

Now, in this case the right secured to a member to go to the stock exchange in New York and there conduct his business in stocks in the manner prescribed' is doubtles,s the most valuable right of membership. But as incident to his membership he is also granted the right to deal with and through other members on certain fixed percentages and methods of division of commissions. This right'to secure the services of other members at a lower rate and to split commissions is a very valuable right. By it the plaintiff in Cincinnati is enabled to properly hold himself out to the world as a member entitled to all the privileges and able to secure all of the advantages of the New York Stock Exchange. All of/ which advantages are denied to nonmembers. He is thus enabled to conduct from and in his, Cincinnati office a large business through other members in New York. All of which is regularly and properly done.

The situs of the valuable contractual property right of plaintiff is at the domicile of plaintiff in Cincinnati, and the state of Ohio has the right to tax it here.

In deciding that shares of stock constitute property) different from the capital or property of the company, Judge Spear, in Lee, Treas., v. Sturges, 46 Ohio St., 153, says at page 161: “The capital or property of the company may be largely real estate, while the shares are, in their nature, personalty. They can have no locality, and must, therefore, of necessity, follow the person of the owner, unless other provision is made by statute. The corporation is the legal owner of all the property of the company, real and personal, and within the powers conferred upon it by its charter, and for the purposes for which it was created, can deal with the corporate property as absolutely as a private individual can deal with his own. * * * The shares of stock may be worth much more than the property of the corporation; that is, the franchise may be very valuable while the visible capital may be of but little value.”

The Constitution, Section 2, Article XII, enjoins the legislature to enact laws taxing by a uniform rule all property at its true value in money, with right to exempt certain property. It is well determined that this section is a limitation on the general power to tax conferred by the first section of Article II of the Constitution, and unless tax laws have been enacted which include the property here in question it is not taxed.

It is of course conceded that taxing statutes are to be construed strictly in favor of the citizen and against the taxing authority.

Section .5328, General Code, reads as follows: “All real or personal property in this! state, belonging to individuals or corporations, and all moneys, credits, investments in bonds, stocks, or otherwise, of persons residing in this state, shall be subject to taxation, except only such property as may be expressly exempted therefrom. Such property, moneys, credits, and investments shall be entered on the list of taxable property as prescribed in this title.”

Section 5325, General Code, contains the following: “The term ‘personal property’ as so used, includes first, every tangible thing being the subject of ownership, whether animate or inanimate, other than money, and not forming part of a parcel of real property, as hereinbefore defined; second, the capital stock, undivided profits., and all other means not forming part of the capital stock of every company, whether incorporated or unincorporated, and every share, portion, or interest in such stocks.”

In Lee v. Sturges, supra, it is said at page 159: “For every presumption is in favor of that construction of the law which gives effect to the requirement of the section of the» constitution referred to, and we are forced to the conclusion that the general assembly, in enacting this law, intended, so far as the complex nature of human business affairs should make it practicable, to include within the taxing provisions all property within the state, and not to exceed in its exemptions the limit prescribed, as to persons, of ‘personal property not exceeding in value two hundred dollars for each individual.’ And, further, that where an exception or exemption is claimed, the intention of the general assembly to except must be expressed in clear and unambiguous terms. ‘The exemption must be shown indubitably to exist. At the outset every presumption is against it. A well-founded doubt is fatal to the claim. It is only where the terms of the concession are too explicit to admit fairly of any other construction that the proposition can be supported.’ Railway Co. v. Supervisors, 93 U. S. 595; Tucker v. Fergueson, 22 Wall., 527. Intent to confer immunity from taxation must be clear beyond a reasonable doubt, for, as in case of a claim of grant, nothing can be taken against the state by presumption or inference.”

The provisions of Section 5328, General Code, are comprehensive and provide for the taxation of all real or personal property, and that includes the property here in question.

Section 5325, General Code, does not exclude any property or thing from the term personal property, but out of abundant caution provides that the term shall include the.things named. It cannot be construed as if it read the term shall only include.

As pointed out in Ohio Electric Ry. Co. v. Village of Ottawa, 85 Ohio St., 229, 236, the maxim expressio unius exclusio alterius is to be applied only as an aid to discover intention, and not to defeat clear intention.

In view of the plain provision of the constitution enjoining the taxation' of all property real and personal, and of the equally plain provision of Section 5328, General Code, passed in obedience to that constitutional injunction, there can be no doubt that when it is once determined that the membership in question is personal property, and that its situs is the domicile of the plaintiff in Hamilton county, it is taxable there.

Judgment affirmed.

Jones, Matthias, Johnson, Wanamaker and Robinson, JJ., concur.

Donahue, J., not participating.  