Bailey v. New York Cent
| Decision Date | 06 November 1882 |
| Citation | 1 S.Ct. 62,27 L.Ed. 81,106 U.S. 109 |
| Parties | BAILEY v. NEW YORK CENT. & H. R. R. Co |
| Court | U.S. Supreme Court |
Richard Crowley and S. F. Phillips, Sol. Gen., for plaintiff in error.
Joseph H. Choate and Sidney T. Fairchild, for defendant in error.
On December 19, 1868, the New York Central Railroad Company, afterwards merged by consolidation into a new corporation, the defendant in error, adopted a preamble, resolutions, and sertificate, of which the following is a copy:
'Whereas, this company has hitherto expended of its earnings for the purpose of constructing and equipping its road, and in the purchase of read estate and other properties, with a view to the increase of its traffic, moneys equal in amount to 80 per cent. of the capital stock of the company; and whereas, the several stockholders of the company are entitled to evidence of such expenditure, and to reimbursement of the same at some convenient future period; now, therefore,——
'Resolved, that a certificate, signed by the president and treasurer of this company, be issued to the stockholders, severally, de- claring that such stockholder is entitled to 80 per cent. of the amount of the capital stock held by him, payable ratably with the other certificates issued under this resolution, at the option of the company, out of its future earnings, with dividends thereon at the same rates and times as dividends shall be paid on the shares of the capital stock of the company, and that such certificates may be, at the option of the company, convertible into stock of the company whenever the company shall be authorized to increase its capital stock to an amount sufficient for such conversion.
'Resolved, that such certificates be delivered to the stockholders of this company at the Union Trust Company, in the city of New York, on the presentation of their several certificates of stock, and that the receipt of the certificate provided for in these resolutions shall be indorsed on the stock certificate.'
The certificate issued under this authority reads as follows:
'Under a resolution of the board of directors of this company, passed December 19, 1868, of which the above is a copy, the New York Central Railroad Company hereby certifies that ___, being the holder of ___ shares of the capital stock of said company, is entitled to ___ dollars, payable ratably with the other certificates issued under said resolution, at the pleasure of the company, out of its future earnings, with dividends thereon at the same rates and times as dividends shall be paid upon the shares of the capital stock of said company.
'This certificate may be transferred on the books of the company on the surrender of this certificate.
'In witness whereof the said company has caused this certificate to be signed by its president and treasurer, this nineteenth day of December, 1868.'
The resolution was carried into effect by an issue of the contemplated certificates to the amount of $23,036,000, being 80 per cent. of its authorized capital of $28,795,000. Dividends were regularly paid to the holders of these certificates, equal to those declared and paid upon the capital stock, until the certificates were redeemed at par in the stock of the consolidated corporation, as then authorized by law. This consolidation took place in 1872. On March 3, 1870, an assessment was made by the proper officer of the internal revenue of a tax of 5 per cent. upon the amount of these certifi- cates, being $1,151,800, with a penalty of $1,000 added, under section 122 of the internal-revenue act of 1864. 13 St. at Large, 284. From this assessment the railroad company appealed successively to the commissioner of internal revenue and the secretary of the treasury, upon which appeal a decision was rendered reducing the assessment to the sum of $460,720. This decision was based upon the ground that the issue of the certificates was a scrip dividend within the meaning of the 122d section of the internal-revenue act of 1864; but that as it had been made to appear that the earnings stated in the resolution to have been expended, accrued during the entire period of 15 years, from 1853 to 1868, of which only six years were covered by the income-tax law, which first took effect in September, 1862, the tax should be apportioned pro rata, by remitting nine-fifteenths, and assessing the tax upon the sum of $9,214,400, the amount of earnings assumed to have accrued during the period when they were subject to the tax. The assessment upon this sum being $460,720, with a penalty of 5 per cent., being $23,036, and interest at the rate of 1 per cent. per month, amounting to $64,153.48, were exacted by the collector, and paid under protest. To recover back these sums as illegally exacted, the defendant in error brought this action against the collector of internal revenue who had collected them.
On the first trial of the case, the circuit court charged the jury that the assessment was wholly illegal and void, the certificates not being a scrip dividend within the meaning of the law, and furnishing no basis for the assessment of any tax whatever, and that consequently their verdict must be for the plaintiff. There was a verdict accordingly, and the judgment thereon was reversed, and a new trial awarded, upon a writ of error, by this court, in a decision reported in 22 Wall. 604. The second trial, in the circuit court, resulted in a verdict and judgment for the plaintiff below for $499,432.68. To reverse that judgment is the object of the present writ of error.
The principal questions presented arise upon exceptions of the plaintiff in error to the charge of the circuit judge to the jury, and to his refusal to give certain instructions as requested. The substance of of the charge upon the main point was that while the certificates constituted a scrip dividend, which justified the assessment and constituted a complete prima facie defense to the action, nevertheless it was competent for the plaintiff to show what amount of the earnings of the company, accruing from September 1, 1862, to December 19, 1868, was represented by and included in the certificates; and that this amount alone being subject to the tax, the plaintiff was entitled to recover all in excess of that which had been exacted and paid. The opposing proposition of the defendant below, the request to give which as a charge to the jury was refused, was that the certificates were conclusive upon the railroad company of the amount of a scrip dividend subject to taxation without deduction.
The counsel for the plaintiff in error now contend that their position is established by the former decision of this court in this cause, already referred to, as reported in 22 Wall. 604. The actual and precise judgment of the court upon the former writ of error is, however, completely satisfied by the charge of the circuit court now in question; for the ruling on the first trial, held to be erroneous, was that the certificates constituted no basis whatever for taxation as a scrip dividend, and were not to be admitted or considered even as a prima facie defense to the action. The...
To continue reading
Request your trial
-
Helvering v. Midland Mut Life Ins Co
...U.S.C.A. § 23 note). 7 See, also, Kentucky Improvement Co. v. Slack, 100 U.S. 648, 658, 659, 25 L.Ed. 609; Bailey v. Railroad Co., 106 U.S. 109, 115, 116, 1 S.Ct. 62, 27 L.Ed. 81; compare Cary v. Savings Union, 22 Wall. 38, 41, 22 L.Ed. 8 Compare Bell's Gap R.R. Co. v. Pennsylvania, 134 U.S......
-
Trefry v. Putnam
...questions might arise as to the validity of such an act. See Gray v. Darlington, 15 Wall. 63, 21 L. Ed. 45;Bailey v. Railroad Co., 106 U. S. 109, 114, 1 Sup. Ct. 62, 27 L. Ed. 81;McCoach v. Minehill Ry. Co., 228 U. S. 295, 300, 33 Sup. Ct. 419, 57 L. Ed. 842. That would be an attempt to tax......
-
Douglas v. Edwards
...cases were Collector v. Hubbard, 12 Wall. 1, 20 L.Ed. 272; Bailey v. Railroad Co., 22 Wall. 604, 22 L.Ed. 840, and also 106 U.S. 109, 1 Sup.Ct. 62, 27 L.Ed. 81; Gray v. Darlington, 15 Wall. 63, 21 L.Ed. Merchants' L. & T. Co. v. Smietanka, 255 U.S. 509, 41 Sup.Ct. 386, 65 L.Ed. 751, 15 A.L.......
-
Boston & P.R. Corp. v. Old Colony R. Co.
...v. Philadelphia & R. R. Co., 17 Wall. 294, 21 L. Ed. 544;Railroad Co. v. Collector, 100 U. S. 595, 25 L. Ed. 647;Bailey v. Railroad Co., 106 U. S. 109, 1 S. Ct. 62, 27 L. Ed. 81. It must be presumed that the lease in question was drafted in view of the general fund of knowledge of the time.......