278 N.Y. 293, Kesbec, Inc., v. McGoldrick

Citation:278 N.Y. 293
Party Name:Kesbec, Inc., v. McGoldrick
Case Date:July 07, 1938
Court:New York Court of Appeals

Page 293

278 N.Y. 293

In the Matter of KESBEC, INC., Respondent,


JOSEPH D. McGOLDRICK, as Comptroller of the City of New York, Appellant.

New York Court of Appeal

July 7, 1938

Argued April 11, 1938.


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William C. Chanler, Corporation Counsel (Paxton Blair, Sol Charles Levine and Bernard H. Sherris of counsel), for appellant. The petitioner, having collected the taxes from its customers as agent for the Comptroller, was under a duty to surrender to its principal all collections whether legal or illegal. Since the customers have a direct remedy against the Comptroller, remission to him fully protects the petitioner. (Matter of Atlas Television Co., 273 N.Y. 51; Matter of Merchants Refrigerating Co. v. Taylor, 275 N.Y. 113; Spencer v. Consumers Oil Co., 115 Conn. 554; Village of Olean v. King, 116 N.Y. 355; Ross v. Curtiss, 31 N.Y. 606; Wade v. State, 97 Col. 52; Tite v. State Tax Comm., 89 Utah, 404; State v. Matson Co., 182 Wash. 507; People ex rel. Martin v. Brown, 55 N.Y. 180; Chegaray v. Jenkins, 5 N.Y. 376; Woolsey v. Morris, 96 N.Y. 311; La Farge v. Kneeland, 7 Cow. 456; Carson v. Federal Reserve Bank, 254 N.Y. 218; Anniston Mfg. Co. v. Davis, 301 U.S. 337.)

Charles Pratt Healy and Robert H. Scholl for respondent. The Comptroller's determination should be annulled. (Socony-Vacuum Oil Co. v. City of New York, 247 A.D. 163; 272 N.Y. 668.) The Comptroller cannot base his claim to the fund on grounds of agency. (Matter of Atlas Television Co., 273 N.Y. 51; Matter of Merchants Refrigerating Co. v. Taylor, 275 N.Y. 113; Henry County v. Standard Oil Co., 167 Tenn. 485.) The Comptroller's claim to the fund is based solely on his own ukase which has been judicially declared to be a nullity. (Matter of Dodge Bros., 241 Mich. 665; People ex rel. Farrington v. Mensching, 187 N.Y. 8; Norton v. Shelby County, 118 U.S. 425; Van Antwerp v. State, 218 N.Y. 422; People ex rel. Ferguson v. Vroman, 101 Misc. 233; Matter of O'Berry, 179 N.Y. 285; Matter of Brenner, 170 N.Y. 185.) The respondent is liable to its customers for the return of the invalid tax collected. Denial of the Comptroller's claim to the fund gives rise to no

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'unjust enrichment' of the respondent. (Wayne County Produce Co. v. Duffy-Mott Co., 244 N.Y. 351; Friend v. Rosenwald, 124 A.D. 226; Solomon Tobacco Co. v. Cohen, 184 N.Y. 308; Van Antwerp v. State, 218 N.Y. 422.)


The petitioner, as vendor, collected from its vendees taxes upon sales of gasoline in accordance with Local Law No. 24 of 1934 (published as N0. 25) of the city of New York and supplementary regulations promulgated by the Comptroller of the city. One of these regulations attempted to say that the city sales tax base should include State excise taxes on gasoline. In Socony-Vacuum Oil Co. v. City of New York (247 A.D. 163; 272 N.Y. 668), that regulation was declared null and void. This is a certiorari proceeding to review an assessment against the petitioner of the illegal tax thereby prescribed. The amount thereof was deposited with the Comptroller before the order of certiorari was granted, as the local law validly required. (§ 7; Matter of Western Electric Co. v. Taylor, 276 N.Y. 309.) The city appeals from an order of the Appellate Division which annulled the determination of the Comptroller and directed refund to the petitioner of the deposit.

The local law was enacted under the authority of enabling State legislation designed to provide revenue for unemployment relief. (New York Steam Corp. v. City of New York, 268 N.Y. 137.) 'It was by virtue of these enabling acts that the local laws were adopted, and the source of the imposition of these taxes is not to be found in the local laws themselves. The enabling acts were passed by the Legislature for a State purpose, public health and welfare. Both opinions in the New York Steam Corp. case emphasize this fact and that the city acted merely as agent of the State, and the concurring opinion stresses the proposition that the Legislature did not delegate its taxing powers to the extent of abdicating its constitutional function.' (John Hancock Mut. Life Ins. Co. v. Pink, 276 N.Y. 421, 426.)

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While in that aspect this controversy is one between the petitioner and the State, the court below had full power to adjust the rights of the parties upon principles of equity. (Cf. People ex rel. Forest Commission v. Campbell, 156 N.Y. 64.)Accordingly the prayer of this petition is that 'any error committed in said determination and assessment may be reviewed and corrected according to law, and that your petitioner may have such other and further relief as to the court may seem just.'

The issue -- as the petitioner states it -- is...

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