Hackensack Trust Co. v. City of Hackensack

• Decision Date: 23 April 1936
• Docket Number: Nos. 234-237.,s. 234-237.
• Citation: 184 A. 408
• Parties: HACKENSACK TRUST CO. v. CITY OF HACKENSACK et al., and three other cases.
• Court: New Jersey Supreme Court

184 A. 408

HACKENSACK TRUST CO.

v. CITY OF HACKENSACK et al., and three other cases.

Nos. 234-237.

Supreme Court of New Jersey.

April 23, 1936.

Certiorari proceedings by the Hackensack Trust Company and by the City National Bank & Trust Company against the City of Hackensack and others, and by the Westwood Trust Company against the Borough of Westwood and others, and by the Peoples Trust Company of Bergen County against the City of Hackensack and others, to review judgments of the Bergen County Board of Taxation and the State Board of Tax Appeals affirming valuations placed by the assessors on prosecutors' capital stock.

Judgments affirmed.

Argued January term, 1936, before CASE and BODINE, JJ.

Morrison, Lloyd & Morrison and William J. Morrison, Jr., all of Hackensack, for prosecutors.

Donald M. Waesche, of Hackensack, for city of Hackensack and Teaneck township.

Walter G. Winne, of Hackensack, for Bergen County Board of Taxation.

Harry Randall, of Westwood, and Forster W. Freeman, Jr., of Paterson, for borough of Westwood.

CASE, Justice.

The question common to all of the above-entitled cases, which were argued together both here and below, is this: Did the statute applicable to the 1934 taxing of the capital stock of banks and trust companies permit, in the computation of the assessable value of such stock, a deduction of the assessed value of real estate owned by another corporation all of the capital stock of which was owned by the respective bank or trust company? Each of the prosecutor banking institutions owned all of the capital stock of another corporation, and the latter corporation, in each instance, owned, by record title, the real estate whereon the respective banking business was conducted. The capital stock of each of the prosecutor banks was valued by the assessors without an allowance for the assessed value of such real estate. On appeal, the Bergen county board of taxation and the state board of tax appeals, each in turn, affirmed that procedure. The question is brought before us by writs of certiorari.

The statute on taxation of bank stock, chapter 265, P.L.1918, 2 Comp.St.Supp. 1924, p. 3559, § 208—500a(l) et seq. as amended by chapter 2, P.L.1934 (N.J.St. Annual 1934, § 208—500a(1) et seq.) provided in section 1 (N.J.St.Annual 1934, § 208—500a(l) that the shares of common corporate stock of banks and banking associations, including trust companies, shall be assessed and taxed according to their true value; in section 2 (section 208—500 a(2) that the value of each share of common stock "shall be ascertained and determined by adding together the amount of the capital, surplus and undivided profits of such bank, banking association or trust company, and deducting therefrom the assessed value of the real property of such bank, banking association or trust company"; in section 7 (section 208— 500a(7) that "it shall be the duty of said bank, banking association and trust company to pay said tax assessed against such shareholders on demand, and said bank, banking association or trust company shall have a lien upon the shares of common stock for such payment and may retain the amount so paid out of the dividends that may be declared on such shares"; and in section 8 (section 208—500a(8) that, "If any bank, banking association or trust company shall * * * request the county board of taxation" to make the assessment against it and shall promise to pay the tax then the levy "shall be assessed to and in the name of the bank, banking association or trust company, and no list of shareholders shall be required; * * * provided, that nothing herein contained shall be construed as a taxation of property as distinguished from capital stock."

It is the contention of the prosecutors that a wholly-owned subsidiary which holds record title to the bank building and site is a mere agency or instrumentality of the bank, that such bank building and site are in fact "the real property of such bank," and that consequently the assessed value thereof should be deducted in determining the value of the bank shares for taxation. It is true that equity will reach through a corporate structure to prevent or undo a fraud. National Newark & Essex Banking Company v. Work, 109 N.J.Eq. 468, 158 A. 109. The law courts have held a dominant corporation liable for the tort of a wholly-owned subsidiary. Ross v. Pennsylvania R. R. Co., 106 N.J.Law, 536, 148 A. 741. Support for some aspects of the argument may be found in Commonwealth v. Westinghouse Air-Brake Co., 251 Pa. 12, 95 A. 807, and McCornick & Co. v. Bassett, 49 Utah, 444, 164 P. 852. Nevertheless, we are brought to the opposite conclusion and for the reasons following:

Proceedings to prevent an act of incorporation from accomplishing wrong against third persons are not precedents herein. The corporate person which effected the second incorporation is the aggressor in seeking to establish as a right that which does not logically flow from its own act. Two things are at once clear upon the reading of the statute: The tax is upon capital stock as distinguished from physical property; and, except as the bank voluntarily assumes the assessment, the tax is chargeable against the holder of the assessed...