People ex rel. Manila Elec. R.R. & Lighting Corp. v. Knapp

• Decision Date: 16 November 1920
• Citation: 229 N.Y. 502,128 N.E. 892
• Parties: PEOPLE ex rel. MANILA ELECTRIC R. R. & LIGHTING CORPORATION v. KNAPP et al.
• Court: New York Court of Appeals Court of Appeals

229 N.Y. 502

128 N.E. 892

PEOPLE ex rel. MANILA ELECTRIC R. R. & LIGHTING CORPORATION

v.KNAPP et al.

Court of Appeals of New York.

Nov. 16, 1920.

Certiorari by the People of the State of New York, on the relation of the Manila Electric Railroad & Lighting Corporation, against Walter H. Knapp and others, as members of and constituting the State Tax Commission, to review determination of the State Tax Commission, imposing upon the relator a license fee under Tax Law, § 181, and a franchise tax under section 182, based on business done and capital employed within the state for the year ending October 31, 1916. From order confirming determination (191 App. Div. 132,180 N. Y. Supp. 775), relator appeals.

Reversed, and determination annulled.

Chase, J., dissenting.

Appeal from Supreme Court, Appellate Division, Third Department.

John Freeman Day, of New York City, for appellant.

Charles D. Newton, Atty. Gen. (C. T. Dawes, of Albany, of counsel), for respondents.

COLLIN, J.

The relator, the Manila Electric Railroad & Lighting Corporation, a foreigncorporation, seeks in this certiorari proceeding (Tax Law, § 199 [Consol. Laws, c. 60]) to annul the determination of the state tax commission, imposing upon it a license fee under the provisions of section 181 and a franchise tax under the provisions of section 182 of the Tax Law, based on business for the year ending October 31, 1916. The Appellate Division, upon the appeal of the relator, confirmed by a nonunanimous decision the determination.

[1] There is not contradiction concerning the facts. In virtue of them and the provisions of the statute we are to determine whether or not the relator during the year ending October 31, 1916, did business and employed capital within this state. Unless those two conditions existed concurrently the tax commission had not the power to exact the fee or to assess and tax the relator under the sections. This conclusion applies to each section, and arises from the statutory language. People ex rel. Chicago Junction Railways & Union Stockyards Co. v. Roberts, 154 N. Y. 1, 47 N. E. 974;People ex rel. Vandervoort Realty Co. v. Glynn, 194 N. Y. 387, 87 N. E. 434.Section 181, in so far as relevant to the issues here, provides:

‘Every foreign corporation, * * * doing business in this state, shall pay to the state treasurer, for the use of the state, a license fee of one-eighth of one per centum for the privilege of exercising its corporate franchises or carrying on its business in such corporate or organized capacity in this state, to be computed upon the basis of the capital stock employed by it within this state, during the first year of carrying on its business in this state; which first payment shall not be less than ten dollars; and if any year thereafter any such corporation shall employ more than eight thousand dollars of its capital stock within this state on which a license fee has not been paid then a license fee at the rate of one-eighth of one per centum shall be due and payable upon any such increase. The measure of the amount of capital stock employed in this state shall be such a portion of the issued capital stock as the gross assets employed in any business within this state bear to the gross assets wherever employed in business. For purposes of taxation, the capital of a corporation invested in the stock of another corporation shall be deemed to be assets located where the physical property represented by such stock is located. * * *’

Section 182, in so far as relevant, provides:

‘* * * For the purpose of doing business in this state, every foreign corporation * * * shall pay to the state treasurer annually, in advance, an annual tax to be computed upon the basis of the amount of its capital stock, employed during the preceding year within this state, and upon each dollar of such amount. * * *’

The relator was incorporated in 1903 under the statutes of Connecticut. Its chartered purposes are various and broad. In general effect they are: To own or lease and operate in the Philippine Islands or elsewhere (except within the state of Connecticut), railroads of any description; to own or lease and operate power and electric plants and vessels of any kind and engaged in any transportation business, and all franchises, concessions, or rights for those purposes; to acquire, hold, or dispose of any obligations or shares of stock of any corporation of any state or country, and to aid in any manner any corporation, obligations, or shares of stock of which are held by it, or do any acts designed to protect or enhance the value of the obligations or shares; to acquire, hold, and dispose of all property and carry on the operations necessary or convenient for the accomplishment of those purposes; to guarantee the payment of the obligations or stock dividends of other corporations, and to carry out those chartered purposes in the United States or foreign countries. Its chartered principal office or place of business is Hartford, Conn. In 1903 the relator issued the entire of the shares of its stock, which were outstanding in 1916, and issued, also, bonds in the face amount of $3,250,000. Those shares and those bonds were issued and delivered to the Manila Construction Company, a foreign corporation, in exchange for the bonds of the face value of $3,000,000 and shares of stock of the face value of $1,000,000 and other stock or assets of certain foreign corporations of which were, or became through succession, Manila Electric Railroad & Light Company, a New Jersey corporation, and Manila Suburban Railways Company, a Connecticut corporation. In 1903 under a trust indenture it deposited with the Equitable Trust Company of the city of New York, as trustee, the $3,000,000 face value of bonds as security for the payment of the bonds issued by it, and in 1906 it deposited with that company for that purpose the promissory note of Manila Electric Railroad & Light Company in the sum of $594,000 owned by it. These deposits remained and existed through 1916. Each of the Manila Electric Railroad & Light Company (the New Jersey corporation) and Manila Suburban Railways Company (the Connecticut corporation) owned and operated a street surface railway in or near Manila, Philippine Islands. They possessed and operated exclusively their properties, and their properties and business are located exclusively in the Philippine Islands. Through 1916 the relator's average bank and cash balance in New York was $33,257.11, derived from interest on the bonds and dividends on the stocks of the companies operating in the Philippine Islands. The relator did not have a bank account elsewhere. The relator did not have within that year in the state of New York any property or assets other than the bonds and note deposited with the Equitable Trust Company as trustee and the bank and cash balance. It owned no real estate or tangible property. It did not own any stock of a corporation organized under the laws of New York. It had never obtained authority under the General Corporation Law to do business in the state of New York. The Manila Electric Railroad & Light Company and Manila Suburban Railways Company and the relator, prior to 1916, entered into an arrangement with the J. G. White Management Corporation of New York City in virtue of which the office of the management corporation was the office in New York at which the relator held the meetings of its board of directors, paid the interest on its bonds, and declared and paid dividends on its stock. The management corporation were the general managers and purchasing agents in New York of the two companies operating in the Philippine Islands. The relator loaned or advanced moneys to those companies under the direction of the management corporation. The evidence does not disclose any specific loan, and our last statement is based upon the testimony of the secretary and treasurer of the relator to the effect: The relator controls and finances those companies; the bills receivable of the relator in the sum of $126,071.68 were either for moneys advanced or interest due or dividends declared and not paid, and the officers of the relator act under the direction of the management corporationin New York City. The president of the relator was a resident of Connecticut, the vice president, the secretary and treasurer, and the assistant secretary and treasurer were located in New York City. The meetings of the stockholders were held at the chartered office of Hartford, Conn. Such were the acts of the relator as disclosed by the record. From them we must determine the questions involved. People v. American Bell Telephone Co., 117 N. Y. 241, 22 N. E. 1057.

[2][3] The relator was not doing business in this state within the legislative and statutory intendment. The condition of doing business in this state, within that intendment, implies that the foreign corporation is accomplishing acts and activities within the state which the state might reasonably and with ordinary interstate comity interdict or prevent, and the doing of which was a privilege which required governmental consent, supervision, and control, and which necessitated or sought governmental opportunity and protection to be compensated or balanced by contributions, through taxation, to the burden of government. Hovey v. De Long Hook & Eye Co., 211 N. Y. 420, 105 N. E. 667;Penn Collieries Co. v. McKeever, 183 N. Y. 98, 75 N. E. 935,2 L. R. A. (N. S.) 127;People ex rel. Lehigh & New York Railroad Co. v. Sohmer, 217 N. Y. 443, 112 N. E. 181;Von Baumbach v. Sargent Land Co., 242 U. S. 503, 37 Sup. Ct. 201, 61 L. Ed. 460. The license fee is the charge made...