People of the State of New York New York Central Hudson River Railroad Company v. Nathan Miller Nos 81, 82 Same v. Otto Kelsey Nos 586, 587 588

Decision Date28 May 1906
Docket Number586,588,82,Nos. 81,587,s. 81
Citation26 S.Ct. 714,50 L.Ed. 1155,202 U.S. 584
PartiesPEOPLE OF THE STATE OF NEW YORK upon the Relation of the NEW YORK CENTRAL & HUDSON RIVER RAILROAD COMPANY, Plff. in Err. , v. NATHAN L. MILLER, as Comptroller of the State of New York. NOS 81, 82. SAME v. OTTO KELSEY, as Comptroller of the State of New York. NOS 586, 587, 588
CourtU.S. Supreme Court

Messrs. Albert H. Harris, Ira A. Place, and Thomas Emery for plaintiff in error.

[Argument of Counsel from pages 585-590 intentionally omitted] Messrs. Julius M. Mayer and Horace McGuire for defendant in error.

[Argument of Counsel from Pages 590-592 intentionally omitted] Mr. Justice Holmes delivered the opinion of the court:

These cases arise upon writs of certiorari, issued under the state law and addressed to the state comptroller for the time being, to revise taxes imposed upon the relator for the years 1900, 1901, 1902, 1903, and 1904, respectively. The tax was levied under New York Laws of 1896, chap. 908, § 182, which, so far as material, is as follows: 'Franchise Tax on Corporations.—Every Every corporation . . . incorporated . . . under . . . law in this state, shall pay to the state treasurer annually, an annual tax, to be computed upon the basis of the amount of its capital stock employed within this state and upon each dollar of such amount,' at a certain rate, if the dividends amount to 6 per cent or more upon the par value of such capital stock. 'If such dividend or dividends amount to less than 6 per centum on the par value of the capital stock [as was the case with the relator], the tax shall be at the rate of 1 1/2 mills upon such portion of the capital stock at par as the amount of capital employed within this state bears to the entire capital of the corporation.' It is provided further by the same section that every foreign corporation, etc., 'shall pay a like tax for the privilege of exercising its corporate franchises or carrying on its business in such corporate or organized capacity in this state, to be computed upon the basis of the capital employed by it within this state.'

The relator is a New York corporation, owning or hiring lines without as well as within the state, having arrangements with other carriers for through transportation, routing, and rating, and sending its cars to points without as well as within the state, and over other lines as well as its own. The cars are often out of the relator's possession for some time, and may be transferred to many roads successively, and even may be used by other roads for their own independent business, before they return to the relator or the state. In short, by the familiar course of railroad business a considerable portion of the relator's cars constantly is out of the state, and on this ground the relator contended that that proportion should be deducted from its entire capital, in order to find the capital stock employed within the state. This contention the comptroller disallowed.

The writ of certiorari in the earliest case, No. 81, with the return setting forth the proceedings of the comptroller, Knight, and the evidence given before him, was heard by the appellate division of the supreme court, and a reduction of the amount of the tax was ordered. 75 App. Div. 169, 77 N. Y. Supp. 401. On appeal, the court of appeals ordered the proceedings to be remitted to the comptroller, to the end that further evidence might be taken upon the question whether any of the relator's rolling stock was used exclusively outside of the state, with directions that, if it should be found that such was the fact, the amount of the rolling stock so used should be deducted. 173 N. Y. 255, 65 N. E. 1102. On rehearing of No. 81, and, with it, No. 82, before the comptroller, now Miller, no evidence was offered to prove that any of the relator's cars or engines were used continuously and exclusively outside of the state during the whole tax year. In the later cases it was admitted that no substantial amount of the equipment was so used during the similar period. But, in all of them, evidence was offered of the movements of particular cars, to illustrate the transfers which they went through before they returned, as has been stated, evidence of the relator's road mileage outside and inside of the state, and also evidence of the car mileage outside and inside of the state, in order to show, on one footing or the other, that a certain proportion of cars, although not the same cars, was continuously without the state during the whole tax year. The comptroller refused to make any reduction of the tax, and, the case being taken up again, his refusal was affirmed by the appellate division of the supreme court and by the court of appeals on the authority of the former dicision. 89 App. Div. 127, 85 N. Y. Supp. 1088, 177 N. Y. 584, 69 N. E. 1129. The later cases took substantially the same course. The relator saved the questions whether the statute, as construed, was not contrary to article 1, § 8, of the Constitution of the United States, as to commerce among the states; article 1, § 10, against impairing the obligation of contracts; article 4, § 1, as to giving full faith and credit to the public acts of other states; and the 14th Amendment. It took out writs of error and brought the cases here.

The argument for the relator had woven through it suggestions which only tended to show that the construction of the New York statute by the court of appeals was wrong. Of course, if the statute, as construed, is valid under the Constitution, we are bound by the construction given to it by the state court. In this case we are to assume that the statute purports and intends to allow no deduction from the capital stock taken as the basis of the tax, unless some specific portion of the corporate property is outside of the state during the whole tax year. We...

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