People ex rel. New York Cent. & H.R.R. Co. v. Knight

• Decision Date: 13 January 1903
• Citation: 65 N.E. 1102,173 N.Y. 255
• Court: New York Court of Appeals Court of Appeals
• Parties: PEOPLE ex rel. NEW YORK CENT. & H. R. R. CO. v. KNIGHT, Comptroller.

173 N.Y. 255

65 N.E. 1102

PEOPLE ex rel. NEW YORK CENT. & H. R. R. CO.

v.KNIGHT, Comptroller.

Court of Appeals of New York.

Jan. 13, 1903.

Appeal from supreme court, appellate division, Third department.

Proceedings by the people, on the relation of the New York Central & Hudson River Railroad Company, against Erastus C. Knight, comptroller of the city of New York. From an order of the appellate division (77 N. Y. Supp. 401) modifying, and affirming as modified, an assessment of a franchise tax against the relator for the year ending October 31, 1900, both parties appeal. Modified.

Ira A. Place, for relator.

John C. Davies, Atty. Gen. (Henry B. Coman, of counsel), for defendant.

HAIGHT, J.

I concur in the conclusions reached by O'BRIEN, J., except as to that part thereof which holds that the item of $15,230,186.06 is not taxable. The court below found that this item represented the rolling stock employed outside of the state, it ‘being such proportion of all of relator's rolling stock as the mileage thereof without the state bears to the entire mileage of said rolling stock.’ As I understand this finding, it is to the effect that the rolling stock of the relator is used in this state and outside of the state; that is, cars are loaded at some point in the state (as, for instance, in the city of New York), and run over the relator's road to some other point (say, the city of Buffalo). They then are transferred onto other roads, and are run to points outside of the state, where they are unloaded, and then reloaded and returned to this state. The entire mileage includes that traveled in this state, as well as that out of the state. This, with the distance traveled outside of the state, and the total value of the stock, furnishes the proportion upon which the computation is made.

The question is as to whether this stock is taxable under the statute. The relator is a domestic corporation. It owns the rolling stock. It is used upon its lines of railroad in this state. True, the cars are transferred onto other roads, and are run outside of the state, for the purpose of facilitating the transportation of persons and freight without change of cars or of breaking bulk; but the use of the cars outside of the state is but temporary, for they are returned as soon as reloaded, and are again used in the transportation of persons and property within this state. It seems to me, therefore, that, under a fair and reasonable construction of the statute, this item should have been included as capital employed within this state.

Under the findings of the court below, as we understand them, the average amount of the relator's capital stock during the year was $108,750,000; the average price was $129.8125; making the average cash value of the relator's capital stock for the year $141,171,093.75. The entire amount of the relator's total assets was $337,760,785.52, and the portion of such assets as used in this state $205,029,380.45, to which sum should be added the relator's rolling stock, $15,230,186.06; making the total assets used within the state $220,259,566.51. The statement would thus be:

x:141,171,093.75:220,259,566.51:337,760,785.52.

Under this statement, x=$92,060,076.91, the amount to be assessed at one and one-half mills, which amounts to $138,090.11.

In view of the fact that there is no express finding by the comptroller that none of the relator's rolling stock was used exclusively outside of the state, I think it advisable that the proceedings should be remitted to the comptroller, to the end that further evidence may be taken upon that subject in case it should be claimed that some portion of the relator's rolling stock was used continuously outside of the state; and, if it should be found that such was the fact, the amount thereof should be deducted, and the order of the appellate division and that of the comptroller should be modified accordingly, without costs to either party.

O'BRIEN, J.

This appeal presents a controversy between the relator and the state concerning the amount of the annual franchise tax for the year ending October 31, 1900. The statute prescribes that this tax must be computed upon the basis of the amount of the relator's capital stock employed within this state. The main contention of the learned counsel for the relator is that the computation should be made upon the stock so employed at its par, and not its actual, value, and hence the determination now here for review is erroneous, since the computation was made upon the latter principle. The language of section 182 of the tax law (Laws 1896, c. 908) would seem to support the relator's contention; but this court has recently held that this section must be read with section 190, and, when so read, the basis for the tax is the actual, and not the par, value of the stock. People v. Roberts, 168 N. Y. 14, 60 N. E. 1043. In the present case it would doubtless be to the advantage of the relator to have the tax based upon the par value of the stock, since that value is much less than the actual value, and the dividends are only 5 per cent.; but in case of a corporation that had paid even a smaller dividend, and whose stock was much below par, it would be decidedly to its disadvantage. By reading the two sections together, absurd and unequal results are avoided. The two sections are apparently conflicting. In such cases it is the duty of courts to reconcile contradictory or conflicting provisions when possible, and the case cited is a precise authority for the principle that the tax should be based upon the actual value. This permits the statute to operate in a way that is reasonable and just, while the other view would render it even more confusing than it now is. Courts cannot always follow logical reasons when dealing with a complicated statute, constructed without much method or system in the arrangement of its different parts, and lacking in clearness and precision of language.

Passing from this question of construction, there is nothing left of the controversy on either side, save the proper application of the rule, and the principles upon which the actual value of the relator's capital in this state is to be ascertained. With respect to this question it should be noted at the outset that the writ of certiorari was made returnable at the appellate division, and the issues were there tried and heard upon the relator's petition, the writ, and the return of the comptroller, including the papers attached thereto. The general and primary question that the court had before it for decision was one of fact, and that was the actual value of that part of the relator's capital employed within this state, and upon that question the learned court made findings upon which its general conclusion is based. In the main, we think these findings are correct. There is one item of property which the court found, as matter of fact, to be employed outside the state, which nevertheless it felt constrained, for some reason that does not distinctly appear, to include as part of the property or capital stock employed in this state. It may be that this is an inadvertence or oversight, but it will be referred to more fully hereafter. The learned court, in stating the account, excluded certain items of property which the learned attorney general contended, and still insists, should be included; and the ground upon which they were excluded from the calculation was that they either represented property employed outside the state, or did not in any legal sense constitute capital at all. A very brief reference to these items will show that the action of the court below was correct:

1. The relator held $90,578,400 of the stock of the Lake Shore & Michigan Southern Railway Company, and $18,900,825 in the Michigan Central Railroad Company. This stock was part of the relator's capital or general assets. Both companies are foreign corporations; the former being partly within and partly without the state, and the latter entirely without the state. This stock was purchased by the relator by the issue of bonds, and the stock was pledged to a trust company as collateral security for the payment of the bonds. The relator being the owner of these stocks, they constituted part of its capital; but that part of its capital was not employed within this state, and so this court has held. People v. Campbell, 138 N. Y. 543...