Cent. Trust Co. v. New York City & N.R. Co.
| Decision Date | 02 October 1888 |
| Citation | 18 N.E. 92,110 N.Y. 250 |
| Court | New York Court of Appeals Court of Appeals |
| Parties | CENTRAL TRUST CO. v. NEW YORK CITY & N. R. CO., (ATTORNEY GENERAL, Intervenor.) |
OPINION TEXT STARTS HERE
Appeal from supreme court, general term, First department.
On the petition of the attorney general the supreme court, at special term, in New York county, made an order directing Joel B. Erhardt, the receiver appointed in the action of the Central Trust Company against the New York City. & Northern Railroad Company, to make provision for the payment of the taxes levied on the corporate franchise of the railroad company. From this order the receiver appealed, and the general term (DANIELS, J., delivering the opinion, VAN BRUNT, P. J., and BRADY, J., concurring) reversed the order. From the order of reversal the attorney general takes this appeal.
Charles F. Tabor, Atty. Gen., for appellant.
Artemas H. Holmes, for respondents.
The railroad company above named was incorporated under the laws of this state, and had its principal business offece in the city of New York. In May, 1882, a receiver thereof was appinted in proceedings taken to sequestrate its property by a judgment creditor whose execution had been returned unsatisfied. Such receiver operated the road from the time of his appointment to February 3, 1885, when another receiver was appointed in the action above entitled, which is brought to foreclose certain mortgages executed by the company upon its property. The first receiver turned over the property and the possession of the road to the receiver appointed in the foreclosure proceedings, and from the time of the appointment of the latter up to a time subsequent to the year ending June 30, 1886, he has operated the road by virtue of such appointment. Taxes became due and payable under the corporation tax act of 1880, as amended by chapter 361 of the Laws of 1881, which amounted at the time of the filing of his petition by the attorney general, in February, 1887, to about the sum of $8,000; being for taxes on the gross earnings of the road as thus operated for the years ending June 30, 1883, 1884, 1885, and 1886, respectively. No question is made as to the amount of the tax in each year, or that there is a sum in the hands of the receiver which may be applicable to their payment; but the counsel for the receiver insists that the corporation is alone answerable for the taxes, and that recourse must be had to it for the payment of the same, or to such funds as may remain in the receiver's hands after the claims of the mortgagees have been satisfied; which in this case is but another manner of stating that there is no way of collecting these taxes, for, it their payment is to be postponed to the payment of the whole amount of the mortgage debt of the company, all of its property will have been wholly exhausted long before payment in full of its mortgage indebtedness could be made. Various other objections were taken to the granting of the petition of the attorney general.
The taxes in question, having been levied by virtue of the above-mentioned corporation tax law, were taxes upon the franchise, as distinguished from the property, of the corporation. People v. Insurance Co., 92 N. Y. 328. Upon this assumption the counsel for the receiver claims that the taxes are not made a lien upon property by the act creating them, and cannot, therefore, be held to be a prior or paramount charge upon the funds in the receiver's hands, on the ground that they are debts due to the state, or on the ground of public policy. The manner of proceeding to collect these taxes has been designated in the act which imposes them, and is to be found in sections 7 and 9 of such act. By section 7 the tax ‘shall be collected for the use of the state as other taxes are recoverable by law from such corporation,’ etc.; and by section 9 the taxes ‘may be sued for in the name of the people of the state, and recovered in any court of competent jurisdiction in an action to be brought by the attorney general at the instance of the comptroller.’ Under section 7, the proceedings to collect the taxes being the same as other taxes are recovered by law, (not relating to those imposed on real estate,) those proceedings would be regulated by the Revised Statutes, chapter 456 of the Laws of 1857. It is argued that, as proceedings to enforce the collection of taxes thus imposed are provided for in the very act which imposes them, such proceedings must in all cases be taken, and that all other remedies are absolutely excluded. It is upon this ground that the learned judge who wrote the opinion at the general term proceeded, the result of which was to reverse these proceedings, because not undertaken pursuant to the provision of the statute in question. Generally speaking, the rule as thus laid down is to be followed, and the remedy is confined in the manner stated. But in such a case as this we think the rule is not to be applied. When the property of a corporation is already sequestrated, and a receiver appointed, and where in addition thereto foreclosure proceedings are pending against it to foreclose mortgages to an amount in excess of all its property, and a receiver has also been appointed under such proceedings, and where the corporation is largely and hopelessly insolvent, and all of its property in the hands of the receiver appointed by the court, and where the money to pay the taxes has arisen from the gross earnings, and an amount sufficient to pay them is in the hands of the receiver, we are of opinion that the proceedings to obtain payment of those taxes thus in the receiver's hands are not confined to those provided for by the act cited, but that a direct application for an order on the receiver for their payment may be made to the court by petition, as in this case, having made the corporation and the receiver a party thereto. If there are any disputed questions of fact to be determined, the court may direct an action to be brought, or may determine it in some other and more summary way.
We feel more certain in regard to this question by looking at the proceedings which are provided to be taken under the general laws. They are to be instituted by petition upon which the court may sequestrate such part of the property of the company as shall be necessary for the purpose of satisfying the taxes in arrear with the costs, etc.; and in its discretion the court may proceed further, and enjoin the company and its officers from any...
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