Jenkins v. Neff

• Citation: 163 N.Y. 320,57 N.E. 408
• Parties: JENKINS et al. v. NEFF et al.
• Decision Date: 05 June 1900
• Court: New York Court of Appeals

163 N.Y. 320

57 N.E. 408

JENKINS et al.

v.NEFF et al.

Court of Appeals of New York.

June 5, 1900.

Appeal from supreme court, appellate division, Second department.

Application by John G. Jenkins and others, stockholders of the First National Bank of Brooklyn, for a writ of certiorari against Barzillai G. Neff and others, constituting the board of assessors of the city of Brooklyn. From an order of the appellate division, Second department (62 N. Y. Supp. 321), affirming an order of the special term (60 N. Y. Supp. 582) affirming the assessment, plaintiffs appeal. Affirmed.

Seymour D. Thompson, for appellants.

William J. Carr, Asst. Corp. Counsel, for respondents.

BARTLETT, J.

This is a proceeding by certiorari, brought by John G. Jenkins and 140 other stockholders of the First National Bank of Brooklyn against the defendants, constituting the board of assessors of the city of Brooklyn, to review and correct an assessment for the year 1897. There are but two principal questions presented which need be considered. The first relates to the assessment on the shares of stock under section 24 of the tax law. This section provides, among other things, that in making an assessment there shall be deducted from the value of the shares a sum which bears the same proportion to such value as the assessed value of the real estate of such bank or banking association bears to the capital stock thereof. After the return to the writ herein, the case was sent to a referee to take evidence and report to the court with his findings of fact and conclusions of law. The referee found as a conclusion of law that the board of assessors failed to deduct from the gross assets or value of the capital of the bank the sum of $93,000, the actual value of its real estate as carried on the books, and deducted only the sum of $50,000; that the remaining $43,000 should be deducted, which will reduce the assessment $14.33 a share. The special term disagreed with the referee on this point, and held that the assessment as imposed by the defendants was in compliance with the terms of the statute. The appellate division affirmed the special term on this point without discussion. The reasoning of the learned judge who wrote the opinion at special term is, in substance, that section 12 of the tax law requires that the capital stock shall be assessed at its actual value after deducting the assessed value of the real estate; and section 24 of the same law provides that in assessing shares of bank stock there shall be deducted from the value such a proportionate sum as the assessed value of the real estate bears to the value of the shares. It is undisputed that the real estate was assessed at $50,000, and that sum was deducted from the actual value of the shares. It is, however, urged that the actual value of the shares was ascertained by putting in the real estate at its full value of $93,000, as carried on the books of the bank. The argument of the appellants' counsel is that this results in a double taxation. We agree with the court below that such is not the fact. In order to reach the actual value of the shares, it was necessary to ascertain the total value of the assets of the bank, and from that was to be deducted the assessed value of the real estate, which was done. In People v. Barker, 144 N. Y. 94, 39 N. E. 13, it was held that under the provisions of law governing the taxation of corporations (chapter 456, Laws 1857), which required, in order to ascertain the capital subject to taxation, that all the property owned by a corporation, both real and personal, shall be valued, and that from the aggregate the assessed value of the real estate be deducted, in determiningthe value of the real estate, the assessors are not bound by the assessed valuation. This does not necessarily show the full value, and the assessors may legally disregard it, and estimate the real estate at its actual value, although this exceeds the assessed valuation. While this was a case reviewing the provisions of law governing the taxation of corporations, yet it involves a principle similar to the one now presented, where a tax is imposed upon the stockholders of a corporation. In the case cited Chief Judge Andrews (at page 100, 144 N. Y., and page 15, 39 N. E.) said: ‘In case of corporations it may happen that an undervaluation in the assessment of the real estate as such will be corrected in its valuation as part of the capital, and so the undervaluation may be remedied, and the whole property be subjected to taxation at its real value. The fact, therefore, that the assessed value of the relator's real estate was $1,515,400 does not necessarily show that it was its full value; nor did it, we think, preclude the commissioners from estimating its value for the purpose of ascertaining the capital subject to taxation at its actual value, although it exceeded the assessed value. The act of the commissioners in undervaluing the real estate in its assessment as such did not estop the public, nor relieve them of the duty, in ascertaining the value of the capital, to estimate the real estate at its full value. We are not here concerned with any question of inequality of assessment as between the relator and other taxpayers. We hold that the commissioners could legally disregard the assessed value of the real estate in estimating the value of the capital, and the question of legality is the only point now in question.’ The fallacy of the argument of double taxation is very apparent. The bank carried its real estate on the books at a valuation of $93,000; the assessors of Brooklyn have placed it on the rolls at $50,000. Section 24 of the tax law provides that a stockholder is entitled to have deducted from the actual value of the stock this assessed value. There is no double taxation, for the reason that the tax law contemplates that a tax shall be imposed upon the actual value of the stock less the value of the real estate appearing upon the assessment roll. It is clear that the stockholders have received the benefit of this deduction.

The second question is raised by the contention of the appellants that the assessment upon the shares of stock of the First National Bank of Brooklyn was at a greater rate than on other moneyed capital in the hands of individual citizens of the state, namely, in the hands of the trust companies of Brooklyn. We have thus presented the question whether the manner in which trust companies are assessed in this state is in violation of section 5219 of the Revised Statutes of the United States, the material portion of which provides ‘that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state.’ The power of a state to tax a national bank and its stockholders has been considered and construed many times by the supreme court of the United States, and it is unnecessary to consider all the cases.

In the Bank Tax Case, 2 Wall. 200, 17 L. Ed. 793, it was held that a tax laid by a state on banks, based upon a valuation equal to the amount of capital stock paid in or secured to be paid in, is a tax upon the property of the institution, and, when that property consists of stock of the federal government, the law imposing the tax is void.

In Van Allen v. Assessors, 70 U. S. 573, 18 L. Ed. 229, the question of taxing the shares of national banks came up from the state of New York under a statute held to be defective because it did not contain the limitation in the national banking act that the tax should not exceed the rate imposed upon the shares of any of the banks organized under the authority of the state where the association is located. This omission was afterwards remedied by amendment. The main question decided, however, was whether the state possessed the power to authorize the taxation on the shares of these national banks in the hands of stockholders whose capitalis wholly invested in stocks and bonds of the United States, and it was held that this power was possessed by the state. The distinction was pointed out between a direct tax imposed on the capital stock of a bank and a tax laid upon the owners of its shares. In the first case the...