People ex rel. Best & Co. v. Graves

• Decision Date: 20 November 1934
• Citation: 193 N.E. 259,265 N.Y. 431
• Parties: PEOPLE ex rel. BEST & CO., Inc., v. GRAVES et al., State Tax Commission.
• Court: New York Court of Appeals Court of Appeals

265 N.Y. 431

193 N.E. 259

PEOPLE ex rel. BEST & CO., Inc.,

v.GRAVES et al., State Tax Commission.

Court of Appeals of New York.

Nov. 20, 1934.

Proceedings by the People, on the relation of Best & Co., Inc., against Mark Graves and others, constituting the State Tax Commission, to annul a franchise tax assessment against the relator. From an order of the Appellate Division (241 App. Div. 896, 271 N. Y. S. 1031), confirming a determination of the State Tax Commission sustaining the tax, the relator appeals.

Order affirmed.

Appeal from Supreme Court, Appellate Division, Third Department.

Lorenz Reich, Jr., and M. James Spitzer, both of New York City, for appellant.

John J. Bennett, Jr., Atty. Gen. (Wendell P. Brown, of Albany, of counsel), for respondents.

LEHMAN, Judge.

The relator was incorporated on July 29, 1924. It acquired the assets and franchises of Best & Co., Inc., hereinafter referred to as the ‘old company.’ It assumed the same name as the old company which was thereupon dissolved.

‘For the privilege of exercising its franchise in this state in a corporate or organized capacity every domestic corporation * * * shall annually pay in advance for the year beginning November first next succeeding the first day of July in each and every year an annual franchise tax, to be computed * * * upon the basis of its entire net income * * * for its fiscal * * * year next preceding.’ Tax Law, § 209, Consol. Laws, c. 60. Every corporation subject to the tax is required to file a report on or before July 1st of its net income for its next preceding fiscal year. Section 211. The old company, before July 1, 1924, filed, as it was required to do, a report showing a net income of over $700,000 during its next preceding fiscal year which ended on January 31, 1924. A franchise tax computed upon the basis of that income was assessed against it for the privilege of doing business for the year beginning November 1, 1924. The old company was dissolved prior to that date. It neither asked nor acquired the privilege of exercising any franchise during that year, and no tax could be imposed upon it. For that reason the state tax commission annulled the tax assessed against the old company, though it failed to take such action for several years and until after the relator complied under protest with a demand of the commission for the filing of a report of the income of both the old and the new corporations for the period from February 1, 1923, to January 31, 1925. In January, 1933, the relator received notice that a franchise tax was assessed against it for the year beginning November 1, 1924, based on the net income of the old corporation during the fiscal year ending January 31, 1924. Subsequently that assessment was modified but the modification is not material here. In the proceedings here under review the relator seeks the annulment of that assessment.

Since the relator was organized after July 1, 1924, the statute then in force did not require the relator to file any return or report until July 1, 1925, nor was it required to pay in advance any tax for the privilege of exercising its franchise during the year beginning November 1, 1924. The statute was amended in 1925. Then the statute required that a business corporation which acquired ‘either directly, indirectly or by merger or consolidation the major portion of the actively employed assets or the franchises of another corporation or of corporations exercising any franchise or doing any business in this state * * * shall on or before the first day of July, or within thirty days after such acquisition, merger or consolidation, if consummated between the thirtieth day of June and the first day of November, file a report and include therein a statement showing its own and the consolidated entire net income of all such corporations for preceding calendar or fiscal years to the extent that all such income has not been used or included in measuring a franchise tax to this state. It shall, in any event, be liable for and pay all taxes that would have been due and payable by the corporation, or corporations, on or before the first day of January next succeeding had the corporation or corporations whose assets or franchises were acquired, or which were merged or consolidated, continued in business and as though there had been no interruption or change of the business thereof nor discontinuance of the privilege of exercising a franchise.’ Section 214-a, as amended by Laws 1925, c. 323. In express terms the Legislature declared that this section as amended should be given retroactive effect. The omission of that declaration in a recodification of the statute made several years later by the Legislature does not change the force of the original declaration. The intention of the Legislature to make the amendment retroactive stands unquestioned, and that intention must be given effect unless it transcends the constitutional powers of the Legislature.

‘A statute purporting to lay a tax may be so arbitrary and capricious that its enforcement would amount to deprivation of property without due process of law.’ Blodgett v. Holden, 275 U. S. 142, 147, 276 U. S. 594, 48 S. Ct. 105, 106, 72 L. Ed. 206, citing Nichols v. Coolidge, 274 U. S. 531, 47 S. Ct. 710, 71 L. Ed. 1184, 52 A. L. R. 1081. An act of the Legislature attempting to revoke an exemption from taxation in respect to past transactions may be a denial of due process. Matter of Pell's Estate, 171 N. Y. 48, 63 N. E. 789,57 L. R. A. 540, 89 Am. St. Rep. 791;City Bank Farmers' Trust Co. v. New York Cent. R. Co., 253 N. Y. 49, 170 N. E. 489, 69 A. L. R. 940. Cf. Blodgett v. Holden, 275 U. S. 142, 276 U. S. 594, 48 S. Ct. 105, 72 L. Ed. 206;Untermyer v. Anderson, 276 U. S. 440, 48 S. Ct. 353, 72 L. Ed. 645. Nevertheless, ‘a tax is not necessarily and certainly arbitrary and therefore invalid because retroactively applied, and taxing acts having retroactive features have been upheld in view of the particular circumstances disclosed and considered by the Court. [Citing cases.]’ Milliken v. United States, 283 U. S. 15, 21, 51 S. Ct. 324, 326, 75 L. Ed. 809. In his dissenting opinion in Untermyer v. Anderson, supra, Mr. Justice Brandeis has analyzed such cases. They leave no doubt that the rule is that no limitation upon the legislative power to impose a...