People ex rel. Jamaica Water Supply Co. v. State Bd. of Tax Com'rs

• Decision Date: 19 October 1909
• Citation: 196 N.Y. 39,89 N.E. 581
• Parties: PEOPLE ex rel. JAMAICA WATER SUPPLY CO. v. STATE BOARD OF TAX COM'RS.
• Court: New York Court of Appeals Court of Appeals

196 N.Y. 39

89 N.E. 581

PEOPLE ex rel. JAMAICA WATER SUPPLY CO.

v.STATE BOARD OF TAX COM'RS.

Court of Appeals of New York.

Oct. 19, 1909.

Appeal from Supreme Court, Appellate Division, Third Department.

Certiorari by the People, on the relation of the Jamaica Water Supply Company, against the State Board of Tax Commissioners. From an order of the Appellate Division (128 App. Div. 13,112 N. Y. Supp. 392) reversing a Special Term order confirming an assessment of relator's special franchise, etc., the Board of Tax Commissioners and the City of New York appeal. Modified.

See, also, 193 N. Y. 649, 86 N. E. 1130.

This is a certiorari proceeding under the tax law to review the action of the State Board of Tax Commissioners in fixing the sum of $800,000 as the taxable value of the special franchise of the Jamaica Water Supply Company in the borough and county of Queens on the second Monday of January, 1907. The proceeding was instituted by a petition which alleged that said assessment of $800,000 was erroneous by reason of overvaluation in the sum of at least $250,000; and, further, that the assessment was unequal because other property in the county of Queens was assessed at 89 per cent. of its real value, whereas the State Board of Tax Commissioners, after valuing the special franchise of the petitioner, determined $800,000 to be the full value thereof. A writ of certiorari was granted upon this petition, reciting overvaluation and inequality as the basis of the petitioner's claim for a reduction in the assessment. In a return to the writ the State Board of Tax Commissioners alleged that, when they made the assessment, they had before them the report of the relator for the year 1906 filed by the relator at their request. This and all other reports, papers, and documents relative to the assessment were made a part of the return. The state board further returned that they also had before them certain facts and information other than those communicated on behalf of the relator; that they had made inquiry, examination, and investigation as to the value of the relator's special franchise through agents and employés who had obtained knowledge and information and formed opinion as to the value of the property of the relator, real and personal; and that from such inquiry, examination, and investigation, together with the papers and documents already mentioned, the board had decided the value of the special franchise of the relator to be the sum of $800,000. To further elucidate their method of procedure, the State Board of Tax Commissioners also made return that, in arriving at a valuation of the special franchise of the relator, they had considered the value of its real estate in the streets, the value of its right to use the streets, and the cost of the relator's property, the income derived therefrom and other facts going to show the value thereof. They further expressly alleged that they had not included in their valuation any property except such as was situated in, under, above, upon, or running through the public streets and public places of the borough of Queens, including the franchise, rights, authority, or permission to construct, operate, and maintain its foundations, roadbed, substructures, superstructures, wires, pipes, mains, and conduits, with their appliances, under, above, upon, or through said streets and public places; nor had they included the value of the right of the relator to be a corporation, or the value of the good will of the business carried on by the relator. Upon the filing of the return, it appearing to the court that testimony was necessary for the proper disposition of the matter, an order of reference was made to Thomas L. Feitner, Esq., to take evidence ‘as to whether the assessment of the relator's property liable to taxation as a special franchise is excessive, and, if so, in what amount, and also whether the said assessment is unequal, and if so, in what amount.’ The referee was directed to report such evidence to the court with his findings of fact and conclusions of law.

The evidence taken before the referee consisted wholly of testimony adduced in behalf of the relator. No evidence was offered for the State Board of Tax Commissioners. The referee reported as a matter of fact that the full value of the relator's special franchise on the second Monday of January, 1907, as defined by the tax law, was $906,053.75; and as a conclusion of law that the assessment made by the State Board of Tax Commissioners in the sum of $800,000 was not erroneous by reason of overvaluation or by reason of inequality, and should therefore be affirmed. The Supreme Court at Special Term adopted all the findings of the referee, and made an order declaring that the assessment of the special franchise of the relator in the borough of Queens in the sum of $800,000 was neither erroneous, illegal nor an overvaluation, and adjudging that the writ of certiorari be dismissed, with costs. This order has been reversed by the Appellate Division on the law and the facts; and the order of reversal adjudges that ‘the determination of the defendant, the State Board of Tax Commissioners, be and the same hereby is annulled, and the matter remitted to the State Board of Tax Commissioners for further consideration and a new assessment.’

The following facts, among others, were found by the referee and the Special Term: The actual value of the relator's tangible property in the streets of Queens county on the second Monday of January, 1907, was $396,244.90. This represented what it would cost to reproduce the property new, less 5 per cent. depreciation. The cost of all the land owned by the relator on that date was $25,162.01. The value of this land was $71,018.28. The cost to reproduce three standpipes owned by the relator would be $40,000. The cost to reproduce two pumping stations would be $205,000. The total gross earnings of the relator for Queens county in the year ending December 31, 1906, was $102,055.62. The relator's expenses in that year were $32,005.91, leaving as total net earnings in Queens county $70,049.71. The referee further found that the aforesaid total net earnings in Queens county amounting to $70,049.71 should be reduced to a final net return of $35,682.62. He arrived at that conclusion by aggregating the cost of reproducing the tangible real estate, the standpipes and the pumping stations already mentioned, calculating 5 per cent. thereon (which amounted to $34,363.09) and deducting such 5 per cent. from the total net earnings of $70,049.71. Capitalizing the final net return of $35,682.62 at the rate of 7 per cent. the referee found the value of the relator's intangible special franchises in the county of Queens to be $509,808.85. This added to the value of tangible property in the street, made the total value of the special franchise upwards of $900,000, a result far in excess of the assessment. The referee further found that the ratio of assessed value to the actual or full value of the real estate in the borough of Queens in the year 1907 was 89 per cent.

The Appellate Division held, in substance, in reversing the order of the Special Term based upon these conclusions of the referee, as follows: (1) That in determining the net earnings of the relator all taxes should be deducted from the gross earnings, including the amount of the special franchise tax to be assessed; (2) that a reasonable and proper fund to be ascertained upon a further hearing for keeping up and replacing the plant should also be deducted from the gross earnings; (3) that 6 per cent. instead of 5 per cent. should be allowed as a proper return on the tangible property and deducted in order to ascertain the net earnings and that this percentage should be calculated on the present value of the tangible property instead of upon its original cost; (1) that the surplus earnings should then be capitalized at 6 per cent. and the result would represent the fair value of the intangible rights in the streets, which, when added to the value of the tangible property in the streets, would represent the whole value of the special franchise; and (5) that the total value of the special franchise should be reduced by 11 per cent. in order to equalize the assessment with the assessed value of other property in the same locality.

The other facts, so far as material, are stated in the opinion.Edward R. O'Malley, Atty. Gen., for State Board of Tax commissioners.

Francis K. Pendleton, Corp. Counsel (David Rumsey, of counsel), for city of New York.

Charles A. Collin, for Brooklyn Rapid Transit System of railroad companies; George Zabriskie, for New York Mut. Gaslight Co.; Frank H. Platt, for Consolidated Gas Co. of New York; Henry J. Hemmens, for New York Edison Co.; Paul D. Cravath, for Receivers of Metropolitan Street Railway Co. and Third Avenue Railroad Co.; William H. Webb, Corp. Counsel, for City of Rochester-parties allowed to intervene and be heard upon the appeal by leave of the court.

F. H. Van Vechten and Walter D. Hines, for respondent.

WILLARD BARTLETT, J. (after stating the facts as above).

In the determination of this appeal it is essential at the outset to ascertain precisely what questions are presented for our consideration. These depend upon the scope and extent of the powers conferred upon the Supreme Court by the Legislature in so-called certiorari proceedings to review the action of the State Board of Tax Commissioners in valuing a special franchise for purposes of taxation. That power is wholly statutory; that is to say, it is derived from the provision of the tax law (Consol. Laws, c. 60). Ordinarily the writ of certiorari whereby the court reviews the judicial or quasi judicial determination of a board or body of officers brings up for consideration only the evidence on which such board or body of officers acted, and the court is called upon to decide whether any error of law or fact was committed in dealing...