Luitwieler v. Luitwieler Pumping Engine Co.

This appeal presents the question of the appellant's right to have the Luitwieler Pumping Engine Company transfer upon the books of the company stock assigned to him by his daughter, a stockholder, although at the time of presentation for transfer stamps required by the Tax Law were not affixed. Adelaide B. Luitwieler, a resident of Los Angeles, California, owned six hundred and ten shares of the company represented by stock certificates Nos. 132 and 144. In January of 1919, by proper indorsement she assigned the stock certificates to her father and mailed them at Los Angeles addressed to him at Rochester, New York. He took them to the office of the company and requested a transfer of the stock to him on the books of the corporation, tendering payment for any and all revenue stamps that were necessary to complete the transfer. The secretary, Mr. Tuttle, refused to make the transfer for the reason that a Mr. Miller held the stock under a trust agreement. Other stock, however, presented at the same time — two Schroeder certificates — were received and the transfers made, although no stamps were affixed, the company receiving later by mail the amount of the tax, affixing and canceling the stamps. Thereupon the plaintiff brought this action to compel the company, among other things, to make the transfer as demanded upon payment of the tax or upon presentation of the certificates with stamps duly canceled. The action was brought against the company, the officers and a majority of the board of directors. The various defenses pleaded are immaterial, the principal one being that the stock did not belong to Adelaide B. Luitwieler but to Henry L. Miller by assignment from her under a trust agreement, dated November 2d 1917. The answers of all the defendants were alike and can be treated as one. There was no defense set up alleging the failure to have the canceled stamps annexed to the certificates when presented for transfer or that the defendants had refused to make the transfer for any such reason. At the trial a motion was made to amend the answer by pleading such defense, but it was subsequently withdrawn. When the certificates numbered 132 and 144 were offered in evidence with the indorsed transfer objection was made to their reception and an exception taken to their admission, but later counsel said he would withdraw his motion to strike out such evidence provided the complaint was dismissed, thus apparently acquiescing in their remaining in as part of the plaintiff's case. The court dismissed the complaint for the reason that stamps were not affixed at the time of the transfer of the certificates from Adelaide B. Luitwieler to her father, holding it to be part of the plaintiff's proof to show the certificates with the canceled stamps. This ruling has been affirmed by the Appellate Division, two of the justices dissenting.

We held in Bean v. Flint (204 N.Y. 153) that the payment of the stamp tax required by sections 270-278 of the Tax Law does not create a condition precedent and that the failure to pay the tax is a matter to be pleaded as a defense. Nothing can be added to what HISCOCK, J., said in that case. We think the rulings below are contrary to the rule there laid down. As stated no such defense was pleaded, a motion to amend the answer so as to set up such a defense was withdrawn and the certificates of stock and transfer to the plaintiff were kept in the evidence by the statement of counsel that he withdrew his motion to strike them out.

Under such circumstances we think upon the proof as offered the court should have granted judgment for the plaintiff directing a transfer upon the books of the company when the certificates were presented properly stamped or upon payment of the tax. (Phelps-Stokes Estates v. Nixon, 222 N.Y. 93; Waddle v.Cabana, 220 N.Y. 18-27.)

The object of all these tax provisions is to get money for the state. When the only question presented is the right to have stock transferred upon the books of a corporation, the state is fully protected, if the stamps are annexed or the tax paid at or before the time the transfer is made.

The judgments should be reversed and a new trial ordered, with costs to abide event.