
    [S. F. No. 1870.
    Department Two.
    June 7, 1900.]
    JOHN W. MACKAY and R. V. DEY, Trustees, etc., Appellants, v. CITY AND COUNTY OF SAN FRANCISCO et al., Respondents.
    Taxation—Bonds of Foreign Railroads—Domicile of Trustee—Situs. Bonds of foreign railroads payable in the city of New York, which were the property of a deceased resident of this state, and were distributed by the superior court to trustees named in the will, are taxable at the domicile of the trustees; and where only one of the trustees is a resident of this state, and the nonresident trustee has the bonds on deposit in the city of New York, in the joint names of both of the trustees, are taxable in this state only as to the undivided half thereof legally owned by the resident trustee.
    Id.—Interest of Nonresident Trustee.—The interest of the nonresident trustee in the bonds is not “property in the state” within the meaning of the constitution of California, and cannot be taxed in this state.
    Id.—Interest of Resident Trustee—Identity of Bonds—Control of Local Agent for Investment.—The interest of the resident trustee in the same identical bonds which had been the property of the estate of the deceased owner, and which are on deposit in New York in the name of both trustees, is taxable in this state, and does not fall within the rule that where credits are in the possession and control of a local agent in another state, who holds them for the purpose of transacting a permanent business of investment and reinvestment therein, such credits have a local situs in that state.
    
      Id.—Payment Under Protest—Recovery of Taxes Assessed to Ron-resident Trustee.—Where the entire legal interest in such bonds was assessed in this state, and the taxes were paid under protest, the taxes on the half interest in the bonds legally owned by the nonresident trustee may be recovered back at suit of both trustees.
    Id.—Protest Against Entire Tax—Sufficiency to Sustain—Recovery of Part.—Where the protest specified that the bonds were bonds of foreign corporations held in New York by a trustee who was a nonresident of this state, it sufficiently showed that' the whole assessment was void as to such trustee; and the fact that the protest was against the entire tax, and not against the interest of the nonresident trustee therein does not preclude the recovery back of his undivided interest. The greater protest in-. eluded the less; and the protest was a substantial compliance with the statute.
    APPEAL from a judgment of the Superior Court of the City and County of San Francisco and from an order denying a new trial. William E. Daingerfield, Judge.
    The facts are stated in the opinion.
    Lloyd & Wood, for Appellants.
    Though taxation of the bonds was proper during administration (Mackay v. San Francisco, 113 Cal. 392), yet after distribution of the estate to the trustees, while they are in the custody and control of a nonresident trustee, they are not taxable in this state. They are not "property in the state” within the meaning of the constitution. (Const., art. XIII, sec. 1.) Whenever the state loses sovereignty, it loses the power of taxation. (McCulloch v. Maryland, 4 Wheat. 429; Johnson v. Oregon City, 3 Or. 13; People ex rel. Jefferson v. Smith, 88 N. Y. 576; Goldgart v. People, 106 Ill. 25, 29; People v. Ogdensburgh, 48 N. Y. 310; People v. Gardner, 51 Barb. 352; Herron v. Keeran, 59 Ind. 472; 26 Am. Rep. 87; Burroughs on Taxation, sec. 45; Catlin v. Hull, 21 Vt. 158; Fstate of Romaine, 127 N. Y. 80.) The interest of Mackay is certainly not "property in the state.” (Trustees etc. v. City Council of Augusta, 90 Ga. 634, 648; State v. Matthews, 10 Ohio St. 431; Latrobe v. Baltimore, 19 Md. 13; Baltimore v. ‘Stirling, 29 Md. 48; Foreign-held Bond Cases, 15 Wall. 300.)
    Franklin K. Lane, City and County Attorney, and W. I. Brobeek, for Bespondents.
    
      The honda in question are subject to the taxing power of this state. (Mackay v. San Francisco, 113 Cal. 392; People v. Park, 23 Cal. 139; Desty on Taxation, 326-28, 355, 356; Burroughs on Taxation, secs. 41, 43, 50; Cooley on Taxation, 22, 23, 79, 271; Kirtland v. Hotchkiss, 100 U. S. 491, 498; Delaware R. R. Tax Case, 18 Wall. 206-28; Farrington v. Tennessee, 95 U. S. 679; Murray v. Charleston, 96 U. S. 432; Hartman v. Greenhow, 102 U. S. 672; Matter of James,. 144 N. Y. 6; Seward v. Rising Sun, 79 Ind. 351; Bradley v. Bauder, 36 Ohio St. 28; 38 Am. Rep. 547; People v. Bradley, 39 Ill. 144; Commonwealth v. Gloucester etc. Co., 98 Pa. St. 105; Finch v. York Co., 19 Neb. 52; 56 Am. Rep. 741; Johnson v. Oregon City, 2 Or. 327; 3 Or. 13; Arapahoe County Commissioners v. Cutter, 3 Colo. 349; State ex rel. etc. v. Gaylord, 73 Wis. 317; Hunter v. Board of Supervisors, 33 Iowa, 376; 11 Am. Rep. 132; Lewis v. County of Chester, 60 Pa. St. 325.) The title and possession of a joint trustee extends to the entire property held jointly, and the possession of one trustee is the possession of the other; and the trust must be jointly executed. (Civ. Code, sec. 2268; Perry on Trusts, secs. 343, 415, 416; Saunders v. Schmaelzle, 49 Cal. 59; Learned v. Welton, 40 Cal. 349; People ex rel. Day v. Barker, 135 N. C. 656; People v. Coleman, 42 Hun, 585; Sloo v. Law, 3 Blatchf. 459; Green v. Miller, 6 Johns. 39; 5 Am. Dec. 184; Fuller v. O'Neil, 69 Tex. 349; 5 Am. St. Rep. 591; Taylor v. Hopkins, 40 Ill. 442; Berger v. Duff, 4 Johns. Ch. 368; Crewe v. Dicken, 4 Ves. 97.)
   COOPER, C.

This is an appeal from .a judgment in favor of defendants and from an order denying the plaintiffs’ motion for a new trial. The action was brought to recover twenty-eight thousand four hundred .and forty-five dollars taxes paid by plaintiff under protest and claimed to have been illegally assessed. Theresa Fair died testate in September, 1891, being at said time a resident of the city and county of San Francisco, and leaving a will in which plaintiffs were named as executors and trustees. In October, 1891, the will was admitted to probate in the city and county of San Francisco, and plaintiffs appointed executors thereof. Among the assets of the estate were certain bonds of the Southern Pacific Bailroad Company of Arizona, and certain other bonds of the West Shore Bailroad Company of Hew York, of the aggregate value of one million two hundred and eighty-two thousand dollars. In August, 1894, .the administration of the estate was closed and a decree of final distribution entered, whereby the said bonds, with certain other real and personal property, were distributed to plaintiffs as trustees, under and in pursuance to the terms of the will. At the time the decree of distribution was made Mackay was and has continued to be .a resident of the state of Hevada, but has lived and transacted business during the greater part of the time in Hew York City, while Dey was and is a resident of the city and county of San Francisco. The bonds were, at the time they were assessed, and have since been kept in Hew York City, in the American Exchange Bank, deposited in the joint names of plaintiffs as trustees. The trust estate consists of other real and personal property situate and kept in California. The beneficiaries under the trust reside in Hew York, and the interest upon the bonds, as well as the principal, is payable in that city.

The assessor of the city and county of San Francisco assessed the bonds as being property owned by and in the possession of plaintiffs, as trustees, on the first Monday in March, 1895. The question to be here determined is the situs of the bonds for the purposes of taxation.

The bonds are evidences of indebtedness due or to become due from the Arizona corporation and the Hew York corporation to the plaintiffs as trustees and as the legal owners thereof. The weight of authority is that a debt so due or to become due should be taxed at the place of residence of the creditor or owner, and that the situs of the debt is that of its owner, and that it is not property in the state of the debtor. (Burroughs on Taxation, sec. 41; San Francisco v. Lux, 64 Cal. 484; State Tax on Foreign-held Bonds, 15 Wall. 320.) The ruléis well stated by Mr. Justice Field with his usual clearness in the latter case, and is thus, given: “But debts owing by corporations, like debts owing by individuals, are not property of the debtors in any sense; they are obligations of the debtors, and only possess value in the hands of the creditors. With them they are property, and in their hands they may be taxed. To call debts property of the debtors is simply to misuse terms. All the .property there can be in the nature of things in debts of corporations belongs to the creditors to whom they are payable, and follows their domicile, wherever that may be. The debts have no locality separate from the parties to whom they are due.”

Judge Cooley, in his work on Taxation, second edition, page 372, says: “The general rule that personalty is to be assessed to the owner where he has. his domicile has been mentioned. This .rule is applicable to bonds and other choses in action, though the debtor resides out of the state, and though they are secured by mortgage on lands out of the state.”

In Mackay v. San Francisco, 113 Cal. 397, these plaintiffs, as executors of the will of Theresa Fair, deceased, contended that the bonds upon which the taxes were levied in this case, or a portion of them, were not property within the state, and not taxable to the estate of Theresa Fair, deceased. But it was held that the bonds had their situs in San Francisco, and were there taxable. The court said: “The bonds in question were held here. Their situs was the city and county of San Francisco. They could not be taxed in Arizona, where the property mortgaged to secure them is situated.” In that case the court followed the general rule sustained by the weight of authority. The rule is, that the personal property of decedents is taxed at the domicile of the decedent. As said by law-writers: “During the settlement of the estate it must have a situs somewhere, and none so appropriate as where the decedent lived.” In fact, the appellants seem to agree with what has thus far been said, for in their brief they use this language: “When Theresa Fair died these bonds had their situs within the state, because she had been a resident, and it is not now questioned that they continued to be liable to taxation in the state during the administration of the estate.”

The discussion is, therefore, narrowed to the proposition as to whether the same rule applies to plaintiffs as trustees after the estate had been closed and the property distributed to them as such trustees. If the property had been distributed directly to the heirs and possession given to them, they being nonresidents of the state and the bonds being out of the state, there would be no doubt but that the state of California could no longer tax it. But here we have the property which during the lifetime of Mrs. Fair had its situs in San Francisco. After her death its situs continued here during administration until August, 1894. Did its situs then change? It is conceded that plaintiffs were appointed trustees under the will of Mrs. Fair, and the decree distributed the property to them as such trustees. The plaintiffs therefore, as trustees, were the owners of the legal title to the .property at the time of the assessment.

The general rule is, that personal property in the hands of a trustee is to be assessed to him. at his place of domicile. (Cooley on Taxation, 3d ed., 375; Burroughs on Taxation, 224.)

The reason given is that the trustees are the representatives of the .fund, and the fund contributes to the support of the state through the trustees. The property under this rule could not be assessed to the plaintiffs in San Francisco, because that is the place of domicile of only one of them. It could not be assessed to them in Nevada, because that is the place of domicile of only one of them. The property is not in California nor in Nevada, but, being intangible personal property, is said by defendants to follow the person of the owner. If it follows the person of the owner, it could not, as matter of law, be said to follow the person of the plaintiff who resides in California and to forsake and refuse to follow the person of the plaintiff who resides in Nevada. It follows one as much as the other, and its situs is that of the place of domicile of its owners. Therefore, on the first Monday of .March, 1895, the plaintiff Mackay was a resident of Nevada and was the owner of an undivided one-half of the bonds, and, neither the property nor the owner being within the jurisdiction of the state, the assessment, as to ’Mackay’s interest, was void. The language of the constitution is: “All property in the state .... shall be taxed in proportion to its value.”

The interest of Mackay in this property was not "property in the state” within the meaning of the constitution. It was-said by Chief Justice Marshall in McCulloch, v. Maryland, 4 Wheat. 439: “All subjects over which the sovereign power off a state extends are objects of taxation, .but those over which it does not extend are upon the soundest principles exempt from taxation. This proposition may almost be presumed .self-evident.”

It was held hy the court of appeals of Maryland in Mayor etc. of Baltimore v. Stirling, 29 Md. 48, that where property was held by trustees who resided one in Baltimore city and one in Baltimore county that the property should be taxed in equal proportions as of the place of residence of each trustee. In the opinion the court said: “The tax laws of this state .do not expressly provide for such a case, and our decision must be made to rest upon what we regard to be equity and right.' The property is certainly not liable to double tax.....We .think it should be taxed one-half as of the place of residence of each trustee—that is, one-half should be taxed to the trustee residing in Baltimore city and the other half to the trustee residing in Baltimore county.”

This case was followed and approved in the late case of Appeal Tax Court etc. v. Gill, 50 Md. 396, in which it was held that where two of the trustees resided in Maryland and one in Hew York that two-thirds of the property should be assessed to the Maryland trustees and one-third .to the Hew York trustee. It was held in Hardy v. Yarmouth, 88 Mass. 277, that where trustees of trust property reside .in different towns the property should be taxed in proportion, and the interest of each trustee taxed in the town in which he resides. The following authorities support the views expressed in the Maryland cases: Cooley on Taxation, 2d ed., 375, note 3; 1 Desty on Taxation, 61; Trustees etc. v. City Council of Augusta, 90 Ga. 634; Davis v. Macy, 124 Mass. 193; Stinson v. Boston, 125 Mass. 348.

We are therefore of the opinion, both upon principle and-authority, that the assessment as to plaintiff Mackay was void. Defendants claim that the property is still within the jurisdiction of California and in charge of the superior court of the city and county of San Francisco by virtue of the Code of Civil Procedure, section 1699, which provides: “Where any trust has been created by or under any will, to continue after distribution, the superior court shall not lose jurisdiction of the estate by final distribution, but shall retain jurisdiction thereof for the purpose of the settlement of accounts under the trust.”

W¿ do not think under the section that the court retained any jurisdiction except for the one purpose of .settling the accounts of the trustees. It was no doubt intended hy the legis-

lature that the trustees, .without any independent proceeding or without being called upon by the beneficiaries, might file their accounts in the court in which the estate was administered and have it settled as a matter of convenience. It could not have been intended that the court should retain jurisdiction as to the property of the trust, or that its jurisdiction should be exclusive. The administration was closed, the accounts of the executors allowed, and the property distributed to them in a different capacity. By their discharge as executors they were as completely separated from the business of the estate as if they had been dead. (Willis v. Farley, 24 Cal. 502.) The rule that the executors were succeeded by trustees whose duties were entirely different is well stated in Wheatley v. Badger, 7 Pa. St. 462, where it is said: “It would be as absurd for a trustee to attempt the duties of an executor as for an executor to attempt the duties of a trustee, and it is therefore the business of the court to separate the two offices, in a question like the present, reddendo singula singulis. As executor he was to pay the legacies; as trustee he was the devisee and depositary of the legal title for the accomplishment of confidential purposes, with which the office of an executor has no necessary connection. Had not the creation of the two offices in the same person been coupled also in the same clause, there would not have been a doubt of their severance in the contemplation of the testator; the will would have presented the union of distinct rights in the same person which are always treated as if they existed in different persons.”

Suppose that in this case the plaintiff Dey immediately after the decree of distribution had removed to and continued to live in Hew York; how could the trustees have been held hy the courts of San Francisco within their exclusive jurisdiction? If the beneficiaries and the trustees, after the decree of distribution, had all become residents of Hew York, the property also being there, how could section 1699 prevent the courts of Hew York from exercising jurisdiction or give the San Francisco courts jurisdiction? Oounsel for defendants rely upon Lewis v. County of Chester, 60 Pa. St. 328, and a sentence used by Judge Cooley, in his work on Taxation, page 376, in which he says: “If the fund is in charge of a court it is taxable in the jurisdiction having control of it.” The sentence from the text-book refers as authority to the single case of Lewis v. County of Chester, supra. In the latter case the estate had not been distributed, and the same rule was followed as in Mackay v. San Francisco, supra. It is true the court had settled the accounts of the executrix as such, and the decree provided: "That said executrix keep said balance invested, and that she retain the same on trust to apply the income thereof pursuant to the trusts and limitations of the said last will and testament until the further order of this court, and it is ordered that the said executrix be hereafter entitled to expend the sum of fifteen hundred dollars annually out of the income of said estate for the support and maintenance of each of said infants.” And the court in its opinion said: "And distribution yet remains to be decreed upon the further order of the surrogate.”

Therefore, the case is not authority in support of the proposition that the superior court of San Francisco has .control of the bonds distributed to plaintiffs. It is claimed by defendants that plaintiffs cannot recover any less than the whole tax, for the reason that the protest, instead of specifying that one-half the tax upon the bonds is void, is directed to the whole tax. We think the protest was sufficient. It specified that Mackay is not a resident of the state, that the bonds are in Yew York and are bonds of foreign corporations. The protest, while it specified and pointed out that the .whole assessment was void, did not for that reason fail to point out and show that the assessment of all the property owned by Mackay was void. The greater includes the less, and, although the whole assessment was claimed to be void, the protest showed that the whole assessment as to Mackay was void. The notice was a substantial compliance with the statute. (Mackay v. San Francisco, supra; People v. Assessors of Albany, 40 N. Y. 163.)

It is claimed by plaintiffs that the bonds were in the exclusive control and possession of plaintiff Mackay and were in Yew York for the purposes of sale and reinvestment, and had thus acquired what is termed in some of the cases a "¡business situs” in Yew York.

The authorities generally agree that where the owner is not a resident of the state in which the credits are situated, and the credits are in the possession and control of a local agent, who holds them for the purpose of transacting a permanent business, and of investing and reinvesting the proceeds from the principal or interest in such manner that the property or credits comes in competition with the capital of the citizens of the state in which the agent resides, that the credits have a situs for the purposes of taxation in the place of residence of .the local agent. (New Orleans v. Stempel, 175 U. S. 318, and cases cited.)

768 Ordinance, OFFICE AND OFFICERS (Continued). county and township officers to be adjusted in accordance with their respective duties, under a classification of counties by population made for that purpose. (Knight v. Martin, 245.) See Oaths. ORDINANCE. See Municipal Corporations; Negligence, 13; Nuisance, 6. PARTIES. 1. Action to Quiet Title—Transfer op Interest After Judgment— Substitution of Parties—Construction of Code.—After the rights of the parties in an action to quiet title have been finally ascertained and determined, and judgment thereon entered, a transferee of the interest of the successful party takes the same subject to the judgment and with all of its protection; and the provision of section 385 of the Code of Civil Procedure, allowing the transferee of a cause of action to be substituted in the action, is inapplicable. That section relates to a transfer of interest made before the entry of judgment in the action. (Emerson v. McWhirter, 2G8.) 2. Permissive Statute—Discretion.—The provision of section 385 of the Code of Civil Procedure that “the court may allow the person to whom the transfer is made to be substituted in the action or proceeding” is permissive; and the discretion of the court in making the order is to be exercised in view of all the circumstances attending the application. (Id.) 3. Substitution upon Appeal — Identity of Attorney—Denial of Motion.—Where the assignee of the successful party, who had purchased his interest after judgment, moved to be substituted in his stead upon appeal, and the motion showed that the attorney for the respondent was the attorney both for the original party and for the party moving for the substitution, there is no occasion for making the order, and the motion should be denied. (Id.) See Attorney and Client, 9; Estates of Deceased Persons, 8, 9; Specific Performance. PARTITION. See Insolvency, 16. PARTNERSHIP. See Pleading, 8. PARTY-WALL. See Coterminous Owners, 3. PLACE OF TRIAL. 1. Change of Place of Trial—Disqualification of Judge—Transfer to “Nearest” or “Most Accessible” Court.—In case of the disqualification of a judge by reason of his interest in the subject matter of the action, he is in duty bound to transfer the cause

We do not think the facts of this case bring the bonds as to the interest of plaintiff Dey within the rule. As trustee he is the legal owner of an undivided one-half of them. They are the same identical bonds owned by Mrs. Fair at her death. They have not lost their identity .simply by being on deposit in a bank in Hew York City. They have not been sold and the proceeds reinvested in Hew York or elsewhere. We advise that the judgment be reversed and the court below directed to enter judgment on the findings in favor of plaintiffs for the sum of fourteen thousand two hundred and twenty-two dollars and fifty cents, and interest thereon at the legal rate since the nineteenth day of November, 1895.

Chipman, C., and Gray, C., concurred.

For the reasons given in the foregoing opinion the judgment is reversed, and the court below directed to enter judgment on the findings in favor of plaintiffs for the sum of fourteen thousand two hundred and twenty-two dollars and fifty cents, and interest thereon at the legal rate since the nineteenth day of Hovember, 1895.

McFarland, J., Temple, J., Henshaw, J.

Hearing in Bank denied.  