16 N.E.2d 352 | NY | 1938
The State Tax Commission affirmed corporate franchise taxes assessed against petitioner, *327
which is a corporation engaged in the real estate business, for the years 1931, 1932 and 1933, and its determination has been confirmed by the Appellate Division. This determination is based upon the provisions of section
In December, 1925, petitioner entered into a trust agreement with the Central Union Trust Company, in which is recited the determination of petitioner to issue in the amount of $4,250,000 bonds to be known as "Secured Sinking Fund 5 1/2% Gold Bonds." By this agreement, petitioner assigned and pledged to the trustee specific rents from designated property owned by petitioner. The proceeds of the sale of these secured sinking fund bonds were used to acquire additional real estate now held by petitioner. Some of these bonds were purchased by stockholders of petitioner and interest was paid to them. If the bonds are debenture bonds, the assessment is valid, otherwise the order must be reversed. Among authors of legal text books and writers on finance, formidable opinion exists to the effect that debenture bonds are such as are issued without specific security. (Montgomery, Financial Handbook; Gerstenberg, Principles of Business; Dewing, Corporation Finance; Grange, *328
Corporation Law for Officers and Directors; Prentice-Hall, Corporation Service; McClelland Fisher, Law of Corporate Mortgage Bond Issues; Stetson, on Preparation of Corporate Bonds, Mortgages, Collateral Trusts and Debenture Indentures [Some Legal Phases of Corporate Financing, Reorganization Regulation].) These sinking fund bonds, being secured by assignment, transfer and pledge of rents payable from designated parcels of realty, ought not to be regarded as debentures within the meaning of section
The order of the Appellate Division should be reversed, and the determination of the State Tax Commission annulled, with costs in this court and in the Appellate Division.
LEHMAN, HUBBS, LOUGHRAN, FINCH and RIPPEY, JJ., concur; CRANE, Ch. J., taking no part.
Order reversed, etc.