Hancock v. The Singer Manufacturing Co.

• Court: New Jersey Supreme Court
• Writing for the Court: VAN SYCKEL, J.
• Citation: Hancock v. State, 42 L.R.A. 852, 41 A. 846, 62 N.J.L. 289 (N.J. 1898)
• Decision Date: 14 November 1898
• Parties: WILLIAM S. HANCOCK, COMPTROLLER, ET AL., PLAINTIFFS IN ERROR v. THE SINGER MANUFACTURING COMPANY, DEFENDANT IN ERROR

41 A. 846

62 N.J.L. 289

HANCOCK, Comptroller, et al.

v. STATE (SINGER MFG. CO., Prosecutor).

Court of Errors and Appeals of New Jersey.

Nov. 17, 1898.

(Syllabus by the Court.)

Error to supreme court

Action by the state, on the prosecution of the Singer Manufacturing Company, against William S. Hancock, comptroller, and others. From a judgment for prosecutor, defendants bring error. Affirmed.

John P. Stockton, for plaintiffs in error.

R. V. Lindabury and Joseph H. Choate, for defendant in error.

VAN SYCKEL, J. This controversy relates to the imposition of an assessment amounting to the sum of $4,209.30, levied by the state board of assessors for the year 1897, upon the Singer Manufacturing Company, under the corporation tax act of 1884, as amended in 1892 (3 Gen. St. p. 3337, § 260). It is called a "franchise tax," and is laid upon the entire capital of the company, less $814,000, the assessed value of its real and personal property in this state. The defendant company is a manufacturing corporation, chartered by special act of the legislature of this state in 1873 (P. L. 1873, p. 971), with a capital stock of $10,000,000. The exemption of the company from liability to this tax rests upon the provisions contained in the sixth section of its charter, which reads as follows: "That whenever five hundred thousand dollars shall have been paid in, said corporation may organize and proceed to business under this act, and shall immediately thereafter file with the secretary of state of this state a certificate of such payment and organization, whereupon, and not until then shall this act take effect; and if and so long as the said corporation shall invest and keep invested in real estate within this state the sum of five hundred thousand dollars, the real and personal property of the said corporation not actually in fact within the state of New Jersey, and the stock of the said corporation held or owned by any of its stockholders, shall not be liable to any tax or impost whatsoever." Previous to its incorporation in this state, the company was incorporated under the laws of the state of New York, where it had a large factory. It also had a factory in Glasgow, Scotland, one in Austria, and another in the state of Indiana. Upon the grant of its charter by this state, the New York factory was abandoned, and the business removed to Elizabeth, N. J., where a large factory was erected, giving employment to over 4,000 men. The property of the company invested.in manufacturing in this state, more than one-half of which is real estate, exceeded in value $1,000,000.

The question to be solved is whether the sixth section of the charter of this company constitutes an irrepealable contract with the state, and, if it does, whether the imposition of this tax violates the contract. The sixth section contains all the elements of a contract. There are present a subject-matter, parties, and a consideration. On the one side is a complete performance, and on the other acceptance. That it must be regarded as a contract under our adjudications, there can be no question. Pish v. Branin, 23 N. J. Law, 492; State v. Berry, 17 N. J. Law, 80; Railroad Co. v. Hillegas, 18 N. J. Law, 11; Proprietors of Bridges v. Hoboken Land & Improvement Co., 13 N. J. Eq. 81; Mt. Pleasant Cemetery Co. v. City of Newark, 52 N. J. Law, 539, 20 Atl. 832. The stringency with which this rule is applied is illustrated in the opinion of the late chief Justice in the case last cited.

Is this contract irrepealable? If the sixth section of the charter of the company contains the entire contract, it is unassailable by state legislation. Both the federal and state constitutions inhibit the passage of any law by the state impairing the obligation of a contract. The state attempts to justify this tax by reading into the charter of the Singer Company the sixth section of the act of 1846 (P. L 1846, p. 17), which is as follows: "The charter of every corporation which shall hereafter be granted by or created under any of the acts of the legislature, shall be subject to alteration, suspension and repeal in the discretion of the legislature." For many years after the passage of this act, it was uniformly held by the courts of this state that the sixth section of the act of 1816 was to be literally read into every charter thereafter granted by the legislature, thereby rendering every such charter subject to repeal or alteration at legislative discretion. Such was the judgment of this court in Morris & E. R. Co. v. Commissioners of Railroad Tax'n, decided in 1875, and reported in 38 N. J. Law, 472. That case was removed to the supreme court of the United States, and the decision of this court was reversed. New Jersey v. Yard, 95 U. S. 104. The federal court, in reversing, declared that a legislature could not bind its successors; that, notwithstanding the act of 1846, it was still competent for any legislature to make an irrepealable contract if it elected to do so; and that it was therefore a question, in every case of a contract made by the legislature, whether that body intended that the right to change or repeal it should inhere in it, or whether, like other contracts, it was perfect, and without the power of the legislature to impair its obligations. The federal court held the contract under consideration in that case to be irrepealable, because it could not be believed that it was the Intent of either party to it that one should be held forever, and the other merely at will, and it refused to read the act of 1846 into the contract, because the contract was inconsistent with it. The rule thus so explicitly laid down by the federal court has since been accepted as the law of this court. State Board of Assessors v. Morris & E. R. Co., 49 N. J. Law, 193, 7 Atl. 826. Unless, therefore, an intention can fairly be drawn from the terms of this contract, as agreed upon by the parties, to reserve to the state the right to repeal the contract at will without the consent of the company, there can be no departure from it.

There is nothing in the language of this contract which gives the slightest foundation for the suggestion that the state reserved the right to deprive the company at will of the benefit it was to receive under the agreement, after it had fully performed on its part. The undertaking is express that if, and so long as, the company shall invest, and keep invested, $500,000 in real estate in this state, the exemption shall continue. There is no uncertainty in that respect. It excludes most clearly the idea that the act of 1846 was to be deemed a part of the Singer charter. It cannot be conceived that either the state or the company deliberately entered into a contract by which it was understood and intended that the state should be at liberty to deprive the company of the benefit to be derived from it as soon as the company had performed on its part Such a proposition could not have been seriously made by the state, nor for a moment entertained by the company. The terms of the contract, and the circumstances attending it, repel the assumption that the entire engagement is not expressed in the sixth section of the charter. When a contract is made, the good faith of the state must be preserved, and the contract performed according to a reasonable and just interpretation of it. The company was induced to remove its works from the state of New York, and to erect a large and expensive factory in this state, by this agreement to limit the power of the state to subject it to taxation; _and it will be derogatory to the state to resort to any subterfuge, or narrow and sharp construction, in order to evade the effect of the contract.

It may be well to observe here that it could not have been supposed by those who voted for the constitutional amendments of 1875 that it was intended to bestow upon the legislative branch of the state government the power to disregard and violate the contracts into which the state had previously entered. It would be a reflection upon the integrity of those who framed the amendments to infer such a power from any language contained in them. That no such power resides in the lawmaking power by force or the constitutional amendments of 1875 was manifestly the opinion of this court In Mt. Pleasant Cemetery Co. v. City of Newark, 52 N. J. Law, 539, 20 Atl. 832. So free from doubt was this question regarded that the distinguished chief justice who delivered the opinion of the court in that case did not even suggest that it was a question worthy to be considered.

The contract must be regarded as irrepealable. The real question in the cause is, what is its true meaning and its just construction? The exemption is "that the real and personal property of the company not actually and in fact within the state of New Jersey, and the stock of the said corporation held or owned by any of its stockholders, shall not be liable to any tax or impost whatsoever." It has been the accepted law of this state since 1852 that an enactment which exempts a corporation or its property from taxation also exempts the shares of its stock held by its stockholders. Fish v. Branin, 23 N. J. Law, 484; Vail v. Bentley, Id. 532; Colt v. rowers. 24 N. J. Law, 400. In the case last cited. Chief Justice Green declared that this principle must be considered as clearly settled. It was the conceded law of the state at the time the contract with the Singer Company was concluded, and has not been challenged until the present controversy arose. It had the sanction of the federal courts, and was pronounced to be the law by the highest legal tribunals in many of the states. Gordon v. Appeal Tax Court, 3 How. 133; Farrlngton v. Tennessee, 95 U. S. 679; Bank v. Tennessee, 104 U. S. 493. Conceding this to be the law, it must logically result that an express exemption of the shires of a corporation from taxation will also exempt the company, unless it can be maintained that a burden cast...