
    The People of the State of New York ex rel. E. I. dePont deNemours Powder Company, Relator, v. The State Board of Tax Commissioners of the State of New York, Respondent.
    Third Department,
    November 16, 1910.
    Tax on trust mortgage — when debentures not to be considered foreign property.
    Where a foreign corporation executes a trust mortgage of lands lying partly in this State and partly in a foreign State to secure debenture bonds "and, by the terms of the mortgage, the trustee, a domestic corporation, is entitled to ■•immediate possession of the debentures and is the only proper custodian thereof, "the debentures, whether tangible or intangible property, cannot be considered as property without the State so as to be added to the value of the foreign real estate and diminish the portion of the mortgage property situate within this State for the purpose of apportioning the mortgage tax under section 260 of the Tax Law, even though the trustee wrongfully allowed the mortgagor to retain possession of the debentures in the foreign jurisdiction.
    Certiorari issued out of the Supreme Court and attested on the 14th day of February, 1910, directed to The State Board of Tax Commissioners, of the State of New York, directing said board to certify and return to the office of the'clerk of the county'of Albany all and singular their proceedings had in determining the amount of a mortgage tax to be apportioned under section 260 of the Tax Law (Consol. Laws, chap. 60; Laws of 1909, chap. 62) on account of the mortgaged property being partly within and partly without the State.
    
      John G. Van Etten, J. P. Laffey, G. H. Rheuby and Howard Chipp, for the relator.
    
      Edward P. O'Malley, Attorney-General [William S. MacDonald, Deputy, of counsel], for the respondent.
   Kellogg, J.:

The relator, a New Jersey corporation, claims that $2,000,000 of its debentures, covered by the mortgage in question, are tangible property outside of the State and must be added to the value of the other property outside of the State in determining the amount of the tax. The mortgage was executed to the Metropolitan Trust Company of the City of New York, as trustee,'and by its terms the mortgage transfers to the trustee certain real estate outside of this State and certain real estate in this State, all particularly described in the mortgage, and also 2,000 debentures of the powder company, and secured under a certain debenture dated the 1st day of June, 1909, made by and between said powder company and the Guaranty Trust Company of New York as trustee. ' The said $2,000,000 of debentures were part of a series of $16,000,000 of debentures which had been issued, the $2,000,000 having been purchased back by the powder company and held as treasury assets.

The mortgage to be recorded recited that until default shall occur in its terms the powder company shall have possession of all of the property (except the debentures upon deposit with the trustee, as aforesaid) and further provided that until default the trustees shall deliver to the powder company all coupons of the debenture bonds so deposited as the same shall become due from time to time..

From the terms of the mortgage it is clear that the trust company is entitled to the immediate possession of the debentures and is tte enly pt'oper eustedittti thereof» The petition says that .at the time the mortgage was executed, June 15, 1909, “the said bonds were, and ever since have been, the property of your petitioner, and the same were at said last-mentioned date, and ever since have been and now are, actually and physically held and located without the State of Hew York.” In an affidavit filed in behalf of the relator, its treasurer says: “ That all of said debenture bonds was on the 15th day of June, 1909, and still is situated without the State of Hew York.” It does not appear by whom the bonds are held outside of the State, or for what purpose, and the'affidavits in that respect are vague and unsatisfactory. It does not appear that the trust company has an office or place of business outside the State of Hew York, and we may fairly assume its only authorized place of business is in the State of Hew York. If the trust company has suffered these debentures to remain in the hands of the mortgagor, it was a clear violation of its duty as trustee and in violation of the true intent and spirit of the mortgage. If it lias sent the debentures out of the State, or delayed taking possession of them awaiting the apportionment of this tax, that fact entitles it to no consideration. It is difficult to see any proper purpose for which the trust company can keep these debentures outside the State of Hew York.

The Tax’Board has determined that of the mortgaged real estate $531,790 in value is situated within this State and $2,073,155 outside of the State, and omitted entirely from consideration the $2,000,000 of debentures. The relator contends that these debentures are tangible property outside of the State of Hew York and must be added to the value of the real estate outside of the State, and thereby diminish the proportion of the property which the Commissioners have found to be situated within the State.

This appeal only brings up for review the omission to treat the debentures as tangible property outside of the State. The question is not raised that their value should be added to the value of the property within the State and thereby increase the proportion of property in the State, and, therefore, need not be considered.

The decision is sufficiently favorable to the relator, and it is unnecessary to determine whether the debentures are tangible or intangible property, for whatever their nature may be the mortgagor cannot be heard to claim that the neglect of the trustee to perforin its duty in talcing possession of the debentures will require a deduction from the tax which would be payable if the mortgagee and the mortgagor had recognized and performed their clear duties under the mortgage. The mortgage is not fully effectual as a mortgage as to the debentures until the trustee acquires possession of them. I think, in contemplation of law, for the purpose of this proceeding, the debentures are deemed to be property within the State of New York to such an extent at least that it cannot be urged that they are tangible property outside of the State to diminish the tax which the State would be entitled to if the parties to the mortgage were performing their known duties under it. The determination is, therefore, confirmed, with fifty dollars costs and disbursements, to be paid by the relator.

Determination imanimously confirmed, with fifty dollars costs and disbursements.  