NEW YORK EX REL. CLYDE V. GILCHRIST
| Decision Date | 30 April 1923 |
| Citation | 262 U. S. 94 |
| Court | U.S. Supreme Court |
ERROR TO THE SUPREME COURT
OF THE STATE OF NEW YORK
1. Upon error to a state court, when a statute is alleged to impair the obligation of a contract, this Court must decide for itself whether there was a contract and what it was. P. 96.
2. But where the contract claimed is one of tax exemption, involving the taxing system of the state, this Court will be slow to depart from a judgment of the state courts denying it if no real oppression or manifest wrong result. P. 97.
3. The New York Mortgage Recording Tax Law, Art. XI, § 251, in providing that payment of the taxes therein provided on recording of mortgages should exempt them and the debts and obligations thereby secured from other taxation, and Art. XV of the Tax Law, c. 802, N.Y.Laws, 1911, in providing that, upon payment on other secured debt of a tax of 1/2 of 1% of their face value, and certification by the Comptroller, they should be exempt from all taxation, with specified exception, were not intended to establish contracts with those paying such taxes exempting them from taxation of their income from such debts and mortgages. P P. 97, 262 U. S. 99.
197 App.Div. 913, 232 N.Y. 550, affirmed.
Error to a judgment of the Supreme Court of New York (affirmed by the Court of Appeals) confirming, in a statutory proceeding, an assessment under the state income tax law.
This is a statutory proceeding to recover the amount of taxes for 1919 paid under duress and protest. As the first step the relator, the plaintiff in error, filed an application for a revision of the tax with the comptroller of the state. His determination presented the issue in a few words. The relator held bonds secured by mortgages upon which latter the mortgage recording tax under Article 11 of the Tax Law had been paid. She also held secured debts upon which a tax had been paid under Article 14 of the Tax Law Chapter 802 of the
Laws of 1911. An additional assessment was made under the Income Tax Law of 1919, c. 627, on account of the relator's income from these bonds and debts. The relator seems to have contended that, if the Income Tax Law imposed the additional assessment, it was unconstitutional as impairing the obligation of contracts made by the statutes laying the taxes first mentioned. The Comptroller held that the additional assessment was correct, and that no payment was unlawfully exacted. His determination was confirmed by the Appellate Division of the Supreme Court, and the order of the Appellate Division was affirmed by the Court of Appeals. No opinion was delivered by either court. The case was brought here by writ of error, and the defendant in error moved to dismiss on the ground that it does not appear that the judgment below necessarily decided a question that can be brought here in this way. Cuyahoga River Power Co. v. Northern Realty Co., 244 U. S. 300, 304.
The position of the relator is that, where the ground of judgment does not appear, this Court will not assume that the Court below proceeded upon ground clearly untenable, and that therefore if the only one that seems plausible opens a constitutional question raised upon the record, this Court will proceed to deal with it. Adams v. Russell, 229 U. S. 353, 358. The only ground suggested by the defendant in error as local is that the decision of the Appellate Division at least is shown to have gone upon the construction of the exempting statutes by an opinion rendered at the same time as the present judgment, to the effect that the exemption of mortgages by the Mortgage Recording Tax Law, if a contract, did not extend to the interest upon the debt. People ex rel. Central Union Trust Co. v. Wendell, 197 App.Div. 131. To this the relator rightly replies that, when a statute is alleged to impair the obligation of a contract, this Court must decide for itself whether there was a contract
and what it was. Detroit United Ry. v. Michigan, 242 U. S. 238, 2498; Columbia Water Power Co. v. Columbia Electric Street Railway, Light & Power Co., 172 U. S. 475, 487. The relator, in her petition to the Supreme Court, failed to call attention in terms to the provision of the Constitution relied upon. Harding v. Illinois, 196 U. S. 78, 88. But she set forth that the exemptions claimed were granted by the statutes under which the earlier taxes were fixed, that they were secured for a valuable consideration, the payment of those taxes, and that the subsequent tax upon the income of the bonds and securities violated the provisions of the Constitution of the United States. We shall assume in her favor that Article 1, Section 10, was sufficiently indicated as the clause upon which she relied.
Nevertheless we are not satisfied that the relator is entitled to prevail. It is apparent that the New York courts held that there was no contract of the kind that it alleged. It would be extravagant to suppose that they upheld a law admitted to impair the obligation of an admitted contract. The opinion of the Supreme Court shows clearly enough the general nature of the defense sustained. The relator contends, and must contend, that this is so. While it is true that we are not bound by the construction of the New York statutes by the New York courts in deciding the constitutional question, yet when we are dealing with a matter of local policy, like a system of taxation, we should be slow to depart from their judgment, if there was no real oppression or manifest wrong in the result. Troy Union R. Co. v. Mealy, 254 U. S. 47, 50.
The Mortgage Recording Tax Law, Article 11, § 251, provides that all mortgages of real property situated within the state that are taxed by that article, and the debts and obligations that they secure, shall be exempt
from other taxation...
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