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eighth section of the act to which this is a supplement.

(Supplement of April 10, 1902; P. L. 1902, p. 700.)

It is held in Colgate v. United States Leather Co., 73 N. J. Eq., 72; 75 Id., 229, that the directors, under this section, are bound to propose an agreement which does not unfairly impair the legal or equitable right of a preferred stockholder, and that such stockholder cannot be required to exercise any option of surrendering his stock on compensation until he has had an opportunity of joining in the consolidation "under terms and conditions" which, as to him, are legal and equitable.

In New York it has been held, that the provisions of a statute conferring upon corporations the right to merge, notwithstanding the dissent of a portion of the stockholders, are not unconstitutional as depriving the dissenting stockholders of their property without due process of law. Colby v. Equitable Trust Co., 192 N. Y., 535.

109. Consolidated corporation authorized to issue bonds and mortgage property.

When two or more corporations are merged or consolidated the consolidated corporation shall have power and authority to issue bonds or other obligations, negotiable or otherwise, and with or without coupons or interest certificates thereto attached, to an amount sufficient with its capital stock to provide for all the payments it will be required to make or obligations it will be required to assume, in order to effect such merger or consolidation; to secure the payment of which bonds or obligations it shall be lawful to mortgage its corporate franchises, rights, privileges and property, real, personal and mixed; provided, such bonds shall not bear a greater rate of interest than six per centum per annum; the consolidated corporation may purchase, acquire, hold and dispose of the stocks of other corporations of this state or elsewhere and exercise in respect thereto all the powers of stockholders thereof, and may issue capital stock, either

common or preferred, or both, to such an amount as may be necessary, to the stockholders of such merging or consolidating corporations in exchange or payment for their original shares, in the manner and on the terms specified in the agreement of merger or consolidation; which may fix the amount and provide for the issue of preferred stock based on the property or stock of the merging or consolidating corporations conveyed to the consolidated corporation, as well as upon money capital paid in.

P. L. 1883, p. 242; P. L. 1888, p. 441; P. L. 1893, p. 121.

The issue of stock in a corporation is subject to the rules of good faith and true value as provided in Sections 48-49; and this section does not authorize the issue of stock without regard to the basic provisions found in those sections of this Act.

Where an agreement for the merger of corporations provides for the exchange of the whole of an outstanding issue of bonds for new bonds of the consolidated corporation by depositing them with a trustee, and the deposited bonds are held by the trustee uncancelled, and the agreement is not consummated owing to the failure of some of the old bondholders to assent, the question whether the bonds actually deposited are to be held as additional security for the benefit of those depositing them and taking new bonds in exchange, or for the benefit of all holders of the new bonds, depends upon the intention of the parties and the facts of the case. Burlington City L. & T. Co. v. Princeton Lighting Co., 72 N. J. Eq., 891.

Corporations in New Jersey are not restricted in their power to issue bonds whether secured by mortgage or otherwise. See note under Section 1, at p. 4.

In Beling v. American Tobacco Co., 72 N. J. Eq., 32, it was held that 6 per cent. bonds are a fair equivalent for 8 per cent. preferred stock in the proportion of one and a third face value of bonds to one of stock.

XII.-Taxation.

110. Real and personal property; how taxed.

All real and personal property of every corporation shall be taxed the same as the real and personal property of an individual; provided, that this *action shall

*So in original. Error for "section."

not apply to railway, turnpike, insurance, canal or banking corporations, or to savings banks,† or to cemeteries, church property, or purely charitable or educational associations.

Act of 1875, $105; P. L. 1878, p. 61; P. L. 1879, p. 348; P. L. 1886, p. 345.

Real property must be assessed at its true value. P. L. 1901, pp. 209, 210.

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At one time corporations were taxed on the full amount of their capital stock paid in and on accumulated surplus. The Tax Act of 1866, P. L. 1866, p. 1078, provides "that all private corporations of this state, except banking institutions and those which, by virtue of any contract" (for an instance of such contract see Singer Mfg. Co. v. Heppenheimer, 58 N. J. Law, 633) "in their charters or other contracts with this state, are expressly exempted from taxation, and except mutual life insurance companies specially taxed, shall be assessed at the full amount of their capital stock paid in and accumulated surplus; and that the person holding the stock shall not be assessed therefor. The Act of 1866 sometimes worked injustice to corporations by subjecting them to a tax on the full amount of their stock paid in, making no allowance for impairment of capital, and the design of the Laws of 1875 and 1878 (Section 105 of the Corporation Act of 1875 and the amendment thereof, corresponding to Section 110 of the present act), was to relieve against that hardship by establishing a fairer and better method of taxation by making the property of the corporation the subject of taxation instead of the capital stock or stock and surplus. The intention was merely to substitute the one method for the other in taxing the corporation." Jersey City Gas Light Co. v. Jersey City, 46 N. J. Law, 194.

The effect of the decision above quoted was that so much of the Act of 1866 as required the assessment of the full amount of capital paid in and accumulated surplus was repealed by implication, but that the provision exempting stock from taxation in the hands of the holders was still in full force and effect. Jersey City Gas Light Co. v. Jersey City, 46 N. J. Law, 194.

The constitutionality of this provision has been sustained. State, Trenton Iron Co. v. Yard, 42 N. J. Law, 357.

The visible personal property of a corporation is assessed and taxed in the township or ward where such property is found. (P. L. 1891, p. 192, §6), and other personal property where its principal office is located (Gen. Stat., p. 3294, §67), and its real estate is assessed in the township or ward where it is situated. P. L. 1901, p. 199.

Or to trust companies. P. L. 1899, p. 467.

The taxation which this section comprehends should not be confused with the franchise tax or license fee which corporations are required to pay under the Act of 1884 ($150 et seq., post.). That is a tax or fee which the state exacts as a condition to the grant of a corporate franchise and is not a property tax. Nor, on the other hand, can the franchise be taxed as property by virtue of this section or the Tax Act of 1866. Passaic Water Co. v. Paterson, 56 N. J. Law, 471. Under this section and also the Act of 1866, only such property as is actually within the state can be taxed. The franchise tax is based upon the amount of capital stock issued and outstanding at par, without regard to its actual value. Singer Mfg. Co. v. Heppenheimer, 58 N. J. Law, 633. The franchise tax is a state tax; that under the Act of 1866 is a local tax. Pipe Line Co. v. Berry, 52 N. J. Law, 308; aff'd 53 Id., 212.

For a discussion of the limitation on the taxing power of a state contained in the provision in the Constitution which gives to the federal government the regulation of interstate commerce, see Harvard Law Review, Vol. 21, page 618, June, 1908.

Shares of stock are personal property and their location is governed by the place of residence of the stockholder or the place of deposit of the certificates. Such property does not follow the location of the corporation. Certificates of stock of a New Jersey corporation are not "property within this state" because the corporation is organized under the laws of New Jersey. If the certificates of stock are without the state of New Jersey then they are property without and not within the state. Neilson v. Russell, 71 Atl. Rep., 286. See also Astor v. State, 72 Id., 78.

Under the Tax Act of 1903, P. L. 1903, p. 394, stocks and bonds of corporations organized under the laws of foreign states held by citizens of New Jersey are exempt from taxation when taxes have been actually assessed and paid on the corporation's property in the state of its organization within twelve months. Trenton v. Standard Fire Ins. Co., 73 Atl. Rep., 606.

Property deposited for an indeterminate period and mingled with other movable property acquires a situs in this state and becomes subject to local taxation. Lehigh & Wilkesbarre Coal Co. v. Borough of Junction, 75 N. J. Law, 922.

See also Trenton Iron Co. v. Yard, 42 N. J. Law, 357; Jersey City Gaslight Co. v. Jersey City, 46 Id., 194; N. J. Hedge Co. v. Craig, 51 Id., 437.

As to charitable institutions, see Sisters of Charity v. Cory, 73 N. J. Law, 699; educational institutions, see Stevens Institute v. Bowes, 70 Atl. Rep., 730.

Taxation by New York City of a New Jersey corporation.

Section 936 of the Charter of the City of New York relates to taxes imposed for personal property upon any person or corporation in

the City of New York. The words "any person or corporation in the City of New York" include only such persons or corporations as are residents of that city. The City of New York has no authority by virtue of any statute of the United States or of the State of New York, to enforce a tax as a personal liability against a non-resident person or corporation of New York, although such person or corporation had personal property within it and was subject to assessment and taxation. The remedy of the City of New York is in rem and not in personam. It can seize the specific property against which the tax is levied, if it can find it, but it cannot sue a foreign corporation and obtain a judgment against it to the amount of the tax assessment. City of New York v. McLean, 170 N. Y., 374, at p. 381.

Inheritance tax.

Although shares of stock in a New Jersey corporation have a situs and succession thereto may be taxed by the Legislature, still the act, May 15th, 1894 (P. L., p. 318), does not apply to stock in a New Jersey corporation belonging to a testator domiciled in a foreign state. Neilson v. Russell, 71 Atl. Rep., 286. This was the ruling of the Court of Errors and Appeals, but the law of 1894 was amended by the Laws of 1909 to include stock in a domestic corporation owned by a nonresident. See Sec. 20, ante.

110a.* Corporations entitled to same tax exemptions as natural persons.

All mortgages which, under the laws of this state, are exempt from taxation when owned by natural persons, shall be and are hereby declared to be, to the same extent, exempt from taxation when owned by corporations of this state, and the value thereof shall be deducted from the value of the capital stock and property of such corporations in ascertaining the net amount of capital stock and property thereof subject to taxation; provided, however, that nothing in this act shall be construed as in any wise affecting or reducing any franchise tax.

"An act concerning the taxation of corporate property and pro

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erence,

Arbitrary number; inserted here merely for convenience of ref

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