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The Green Bag

G. J., said, "The son of the defendant A contract that stock purchased would was a minor and not liable to any be worth par in three years was said to action by the plaintiff for the money be not a guaranty but an independent paid on his account on a joint and contract,28 and likewise a "guaranty" of several note signed by the plaintiff in dividends.29 Such contracts have been pursuance of the defendant's request. held not guarantees within the statute The undertaking and promise of the of frauds.10 defendant, therefore, was not collateral Chapter 490 of the Acts of 1909 is the to any promise of the son, but was most recent codification of the tax laws separate, independent and original."26 of Massachusetts. Section 2 of Part 1 Similarly the so-called guaranty of provides that all property, real and per the Railroad Company is an independent sonal, situated with the Commonwealth, obligation which happens to be on the and all personal property of the inhabit same paper on which the stock certifi ants of the Commonwealth wherever cate is printed, and incorporates by situated, unless expressly exempted by reference some of the terms of that law, shall be subject to taxation. Sec certificate. In other words, it is a bond tion 4 provides that "Personal estate of the Railroad Company. The fact for the purpose of taxation shall in that this obligation of the Railroad clude . . .third, public stocks and se Company is conditional, or contingent, curities . . . bonds of railroads and does not properly exclude it from the street railways . . .," etc. It will be seen, therefore, that the class of obligations known as railroad bonds. A familiar class of conditional evident purpose of the framers of this railroad bonds sometimes used in a legislation was to issue a bond which They have reorganization to replace former fixed should be non-taxable. charges is the income bond.26 Indeed, issued two securities in one document. the so-called stock certificate of the One of these, though called stock, is Holding Company, as has been previ deprived of the essential features of ously noted, is a good example of the stock, and has conferred upon it the typical income bond. In the only case most essential features of a bond. The that has been found of a guaranty by other obligation bears all the ear marks one corporation of dividends of another of a railroad bond, and is, in fact, the most important part of the document. the Court said : — "But as bearing on the question whether these prior negotiations can be resorted to for the purpose of controlling the contract in the pres ent case, it is proper further to add that the Standard Company, although referred to a guarantor, in this one feature of the plan of adjustment, the endorsement of the certificates really occupied the position of an independent contractor, when the entire scope of the nego tiation is considered. "a "See ante, note 26. "Examples of these are the second mortgage bonds of the New York. Philadelphia & Norfolk Railroad Company (part of the Pennsylvania system), and the Kansas City, Memphis & Birmingham .Vs. >7A parent company guaranteed dividends on preferred stock of a subsidiary company as part of a purchase price. The parent company through

ownership of a majority of the stock of the sub sidiary company dissolved it and thus sought to wipe out its liability on the guaranty. The issue was whether extrinsic evidence could be admitted to explain the so-called guaranty. Bijur v. Standard Co., 70 At. 934, 938 (N. Y., 1908). See also to the same effect a decision relating to the same guaranty. Windmuller v. Standard Co., 94 N. Y. S. 52. affd. 186 N. Y. 572. The so-called guaranty in Rotch v. French. 176 Mass., was not endorsed on the certificate and no claim was made that it was not an independent contract. aHill v. Smith, 21 How. 283, 286. "Ktrnochan v. Murray. I11 N. Y. 306, 309. wMoorhouse v. Crangle. 36 Ohio St. 130. 133. Green v. Brookins. 23 Mich. 74. Kilbride v. Moss 113 Cal. 432. 435.