
    The People of the State of New York ex rel. Waclark Realty Company, Respondent, v. Clark Williams, as Comptroller of the State of New York, Appellant.
    (Argued February 9, 1910;
    decided March 4, 1910.)
    Tax—when capital stock, invested in real estate, deemed to be employed within meaning of section 182 of Tax Law.
    The statute (L. 1896, ch. 908, § 183) providing that “Every corporation, joint stock corporation or association, incorporated, organized or formed under, by or pursuant to law in this state, shall pay to the state treasurer annually, an annual tax to be computed upon the basis of the amount of its capital stock employed within this state and upon each dollar of such amount,” as in force October 31, 1905, did not require that the capital stock of a corporation should be employed in business in order to render it liable to taxation. It was sufficient if the capital stock was employed at all, and when represented by real estate owned by the corporation with the structures thereon, such capital "stock mxist be deemed to have been employed within the meaning of that expression in the Tax Law as it then existed.
    
      People ex rel. Waclarh Realty Go. v. Gaas, 134 App. Div. 83, reversed.
    Appeal from an order of the Appellate Division of the Supreme Court in the third judicial department, entered January 11, 1910, which reversed a determination of the state comptroller refusing to revise a franchise tax assessed against the relator for the year ending October 31,1905, and canceled said tax.
    The facts, so far as material, are stated in the opinion.
    
      Edward R. O'Malley, Attorney-General (Edward H. Letchworth of counsel), for appellant.
    The capital stock of the relator was employed within the state during the year in question. (People ex rel. Steinway & Sons v. Kelsey, 108 App. Div. 138; People ex rel. H. A. Assn. v. Kelsey, 110 App. Div. 617; 184 N. Y. 573; People ex rel. F. S. R. Co. v. Kelsey, 110 App. Div. 797; People ex rel. W. & H. S. R. Co. v. Miller, 181 N. Y. 328; People ex rel. V. R. Co. v. Glynn, 194 N. Y. 387.)
    
      
      Edward L. Blackman for respondent.
    The mere act of receiving title to the properties and issuing its stock did not constitute carrying on a business. (People ex rel. F. G. R. Co. v. Miller, 179 N. Y. 49; People ex rel. N. R. H. Co. v. Roberts, 30 App. Div. 180; 157 N. Y. 676; People ex rel. Rees' Sons v. Miller, 90 App. Div. 591; People ex rel. M. T. Co. v. Miller, 177 N. Y. 51.) As relator has done no business it has, therefore, employed no capital within the state-and it is not subject to any franchise tax. (People ex rel. B. R. T. Co. v. Morgan, 57 App. Div. 335; 168 N. Y. 672; People ex rel. Rees' Sons v. Miller, 90 App. Div. 591; People ex rel. M. T. Co. v. Miller, 177 N. Y. 51.) The franchise tax is a tax upon business actually done and not upon the unexercised right to do business. (B. R. T. Co. v. Miller, 57 App. Div. 335; 168 N. Y. 672.)
   Willard Bartlett, J.

The Waclark Realty Company was incorporated on April 11th, 1904, under the Business Corporations Law. Its purposes as set forth in the articles of incorporation were to acquire, hold, improve, lease and sell real estate; to erect and repair buildings of all kinds; to carry on the business of builders, general contractors and dealers in building materials; to take, purchase and hold bonds and mortgages; to lend money on bond and mortgage; to lay out for public use roads, streets, avenues and highways through its lands, and if unable to agree with the owners of property required therefor to acquire title thereto by condemnation ; to manufacture, buy and sell bricks, stone, building materials and supplies; and, finally, to mine, quarry, buy and sell ores, minerals, oil and other valuable substances found in any of its lands.

According to the report of the corporation made to the comptroller for the year ending October 31, 1905, the total authorized capital stock of the company was $1,500,000 represented by 15,000 shares, of which 14,000 had been issued for real estate situated in the borough of Manhattan in New York county, at Ravens wood in Queens county, and at Mount Vernon. The report further stated that the company was organized merely for the purpose of holding title to certain real estate and not with the object of transacting any business for profit. “ Since its organization it has received deed to and holds in its name title to seven plots of land, five being within the State of Hew York, transferred to it by Hon. William A. Clark, and stock has been issued to him for said properties.” In the application for the revision of the franchise tax made by the corporation to the comptroller it was stated that “said William A. Clark is the owner of nearly all of the shares of stock of said company, and that the same was organized for his personal convenience and to take over said properties owned by him individually, which for matters of convenience he preferred to have held by a corporation.” Among the lands thus held was a plot on the corner of Seventy-seventh street and Fifth avenue in the borough of Manhattan, with an unfinished dwelling house thereon, the assessed value of which is $2,200,000. The premises at Eavenswood in Queens county were used for the storage and preparation of materials for the house in course of erection upon this Fifth avenue plot. The secretary and treasurer of the corporation in his testimony before the second deputy comptroller stated that the object of the incorporation was to promote the personal convenience of Mr. W. A. Clark; that the company had no offices, employees, clerks or servants of any kind; that it paid no wages or salaries to anybody and was not in the receipt of any moneys of any kind; that it expended no moneys and had no bank account; and that the only connection with the real estate mentioned had been to hold the title to the property. Mr. Clark paid the taxes on the real estate owned by the company, and the witness repeated what appears over and over again in the papers in this proceeding that “ Senator Clark preferred to have these enormous properties owned by him in Hew York and elsewhere held by a corporation.”

The tax under review was levied for the year ending October 31, 1905. at which time the Tax Law provided as follows: “ Every corporation, joint stock company or association, incorporated, organized or formed under, by or pursuant to law in this state, shall pay to the.state treasurer annually, an annual tax to be computed upon the basis of the amount of its capital stock employed within this state and upon each dollar of such amount.” (Laws of 1896, ch. 908, § 182.)

It will be noted that the statute as then in force did not require that the capital stock of a corporation should be employed in business in order to render it liable to taxation. It was sufficient if the capital stock was employed at all. Under the circumstances disclosed by this record we think that the capital stock of the Waclark Realty Company, which was represented, as has been stated, by the several pieces of real estate belonging to the corporation with the structures thereon, must be deemed to have been employed within the meaning of that expression in the Tax Law as it then existed. The relator was really a holding corporation for Senator Clark. It employed its capital in the precise way contemplated by the incorporators, in holding the title to a large quantity of real property which it had acquired from its principal stockholder to promote the personal convenience of that gentleman. Where a corporation devotes its capital stock to the very purpose for which it was formed, it will hardly do to say that such stock is not employed. The cases in which a distinction has been made between capital employed and capital invested have no application here. If a corporation were formed for the sole purpose of the investment of capital such investment would clearly be an employment of its capital. It is only where the organization has been for a different purpose that the mere investment or passive use of capital has not been deemed an employment thereof.

It is argued that the statute should be construed so as to exempt the relator from this tax, because if we look behind the corporation to the owner, Senator Clark, he has received no advantage for which the tax might be said to be due. He has personally paid the tax upon the real estate and also the organization tax for the corporation, and it is contended- that it is inequitable and unjust to require him to pay any more, inasmuch as he lias received no equivalent from the state. The obvious answer to this argument is that he has chosen for some undisclosed reason which he denominates his personal convenience to transfer Ills property to a corporation which-appears to be employing that property just as lie would employ it if the title remained in himself; and that when capital is thus employed the legislature of the state has commanded that it shall be taxed in this manner. There is no apparent hardship in compelling a person to pay for employing his capital through the agency of a corporation if lie sees fit to organize one for his own convenience. Even if there were, this would be a matter for the consideration of the legislature and not for the courts.

The order of the Appellate Division should be reversed and the determination of the state comptroller confirmed, with costs to the appellant in both courts.

Cullen, Cli. J., Haight, Yann, Werner, Hiscock and Chase, JJ., concur.

Order reversed, etc.  