1. Railroad equipment certificates issued by a trust company as
security for money advanced by a syndicate to purchase equipment
leased by the trust company to a railroad under contract for
periodical payments, as rentals, and ultimate acquisition of title
by the latter, and which are payable with interest to bearer or
registered holder from the rentals thus to be paid by the railroad,
held subject to stamp tax under Title XI, § 1100 and
schedule A(1) of the Act of February 24, 1919, c. 18, as in the
category of "instruments . . . issued by any corporation . . .
known generally as corporate securities." P.
267 U. S.
20.
28 F. 1009 reversed.
Page 267 U. S. 18
Certiorari to a judgment of the circuit court of appeals which
reversed a judgment of the district court in favor of the
petitioner in an action brought by the respondent to recover the
amount of a stamp tax paid under protest.
Page 267 U. S. 20
MR. JUSTICE HOLMES delivered the opinion of the Court.
This is a suit by the Fidelity Trust Company to recover $450 and
interest paid by it under protest for internal revenue stamps which
the Collector, Lederer, required it to attach to railroad equipment
certificates drawn in a form set forth. The parties agree that the
only question is whether these certificates are subject to a stamp
tax under the Act of February 24, 1919, c. 18, Tit. 11, § 1100, and
Schedule A(1), 40 Stat. 1057, 1133, 1135. The section imposes a tax
according to the schedule, and the material part of the schedule is
a follows:
"1. Bonds of indebtedness: on all bonds, debentures, or
certificates of indebtedness issued by any person, and all
instruments, however termed, issued by any corporation with
interest coupons or in registered form, known generally as
corporate securities, on each $100 of face value or fraction
thereof, 5 cents."
The question more narrowly stated is whether the certificates
are instruments issued, etc., known generally as corporate
securities. The circuit court of appeals, reversing the judgment of
the district court, held that they were not within the schedule,
that
"no indebtedness is involved or obligation incurred by the
trustee to the holder, but it is simply a certificate of the
holder's right to proportionate participation in a rental when
paid."
Fidelity Trust Co. v. Lederer, 289 F. 1009, 1012. A
writ of certiorari was granted by this Court.
Using a familiar device, the Fidelity Trust Company agreed to
furnish and let to the Interstate Railroad Company
Page 267 U. S. 21
500 specified cars, and the lessee agreed to pay $90,000, being
one-tenth of the cost of the cars, annually at certain dates, and
three percent half-yearly on the part then unpaid. When the whole
amount should be paid, the trustee agreed to sell the cars to the
railroad company for one dollar. As part of the same transaction by
an instrument reciting that subscriptions had been secured through
certain bankers to a fund, to be known as Interstate Railroad
Equipment Trust, Series "C," for the payment of the price of the
railroad equipment described in the lease, and that the trustee
proposed "to secure to the parties subscribing" to the fund the
payment thereof in ten annual installments with interest at six
percent, the trustee covenanted with the railroad on receipt of the
money subscribed to issue to the bankers the certificates in
question here. The essential features are that the bearer or
registered holder is entitled to one share of $1,000 in Interstate
Railroad Equipment Trust, Series "C," in accordance with the above
agreement, referred to; that the principal shall be payable at the
dates of the payments by the railroad, one-tenth of the
certificates, identified by number, each year, and in the meantime
dividends will be payable as evidenced by dividend warrants
attached, principal and interest payable in gold, etc., "but only
from and out of the deferred rentals as provided in" the lease
referred to.
The petitioner asks us to look through the form of the
arrangement and give it a somewhat different meaning. The
respondent, on the other hand, says, in the language of
United States v.
Isham, 17 Wall. 496, "whatever, upon its face, [the
instrument] purports to be, that it is for the purpose of
ascertaining the stamp duty." We are content to adopt the
respondent's rule for this case as, upon any rule, the result seems
to us clear.
As a matter of common speech, to which the statute refers, we
have no doubt that these instruments would be
Page 267 U. S. 22
known as corporate securities. They would be called so more
accurately than some other documents which we believe also would be
known generally by that name. Their purpose, as stated in the
agreement of the trustee with the railroad, is to secure payment to
the holder with interest. They do nothing else. We do not regard
the precise limits of the trust company's undertaking as important.
If it were only to collect and pay money received by the company
under the secured contract of the railroad, it would be a security
for money payment. But the counsel for the company seemed not
prepared to argue that the company could not put the money received
from the railroad into its general account without a breach of
trust, and give the certificate holder cash or a check for his
interest or principal. But, be the undertaking greater or less, the
security better or worse, we cannot regard these certificates as
anything but corporate securities by general understanding and in
fact.
Judgment reversed.