People ex rel. Panama R. Co. v. Comm'rs of Taxes of New York
| Decision Date | 01 February 1887 |
| Parties | PEOPLE ex rel. PANAMA R. CO. v. COMMISSIONERS OF TAXES OF CITY AND COUNTY OF NEW YORK. |
| Court | New York Court of Appeals Court of Appeals |
Appeal from general term supreme court, First department.
Writ of certiorari directed to the commissioners of taxes of the city of New York, under the provisions of Laws N. Y. 1880, c. 269, to review the assessment made by the commissioners of the capital stock of the relator for the year 1882 as excessive.
William G. Choate, for appellant.
James C. Carter, for respondents.
The general rule for the taxation of corporations liable to taxation on their capital is prescribed in section 3, c. 456, of he Laws of 1857, as follows: ‘The capital stock of every corporation liable to taxation, except such part as shall have been excepted in the assessment roll, or as shall have been exempted by law, together with its surplus profits or reserved funds exceeding ten per cent. of its capital, after deducting the assessed value of its real estate, and all shares of stock in other corporations actually owned by such company, which are taxable upon their capital stock under the laws of this state, shall be assessed at its actual value, and taxed in the same manner as the other personal and real estate of the county.’ The words in this section, ‘except such part of it as shall have been excepted in the assessment roll,’ are taken from section 10, tit. 4, c. 13, Rev. St., entitled, ‘Of the assessment and collection of taxes,’ and probably refer to stock of the corporation taxed belonging to the state or incorporated literary or charitable institutions, which the assessors, by section 6, were required to specify in the fourth column of the assessment roll, and deduct from the amount of the capital stock. See COMSTOCK, J., in People v. Commissioners of Taxes, 23 N. Y. 223.
The further exception in the act of 1857 of such part of the capital stock ‘as shall have been exempted by law,’ refers to the general exemptions in section 4, tit. 1, of the same chapter of the Revised Statutes. See DENIO, J., in People v. Commissioners of Taxes, 23 N. Y. 195.
Under the act of 1857, as now construed, the capital stock of a corporation, less the part thereof owned by the state, or by literary or charitable institutions, or exempted from taxation by the Revised Statutes, is to be assessed at its actual value, whether more or less than its nominal amount, deducting, however, from such actual value, the assessed value of its real estate and shares owned by it in other taxable corporations, and also from its surplus or reserved funds, if any, an amount not exceeding 10 per cent. of its capital. Oswego Starch Factory v. Dolloway, 21 N. Y. 449;People v. commissioners of Taxes, 95 N. Y. 554.
We understand it to be conceded by the learned counsel for the relator that the Panama Railroad Company is subject to taxation under the act of 1857. It is a New York corporation, operating a railroad across the isthmus of Panama under its charter, and as assignee of a grant or concession to certain individuals of an exclusive right to construct and operate a railroad across the isthmus, granted by the republic of New Granada, and has its principal office and place of business in the city of New York. The question raised relates to the assessment of the corporation in the city of New York for the year 1882, and the specific and sole controversy upon the merits is whether, upon the return of the certiorari, and the evidence taken in the proceedings under the order of the court, the commissioners of taxes, in making the assessment, deducted from the actual value of the capital stock of the relator the full value of its real estate. The nominal capital stock of the corporation is $7,000,000. The commissioners fixed its actual value at the rate of 104 per cent. above its par value, making, in the aggregate, $14,280,000. From this aggregate they deducted $700,000, being an amount equal to 10 per cent. of the capital. They made a further deduction of $8,922,870, the amount which the relator had paid out for its real estate on the isthmus. There remained, after making these deductions, the sum of $4,657,130, which sum was fixed by the commissioners as the amount of the assessment.
There was no error in the mode adopted by the commissioners of taxes in ascertaining the amount of the capital stock of the relator liable to assessment. It is true that the deduction on account of the real estate is not, in terms, of the assessed value. The legislature, in directing a deduction of the assessed value of the real estate, doubtless had primarily in view strictly domestic corporations, carrying on business in this state, and whose real estate was located therein, and therefore subject to our assessment laws. But the assessed value of real estate is in theory its actual value; and where a corporation, liable to taxation under the laws of 1857, has real estate in another state or country, the just construction of the statute, as applied to a corporation so situated, requires that the deduction shall be measured by its actual value; and the price paid for the real estate, in the absence of other and better evidence, may be taken as representing such value. EARL, J., in People v. Commissioners of Taxes, 95 N. Y. 562.
It is insisted, however, that it was proved by uncontradicted evidence that the relator's real estate on the isthmus was worth at least the sum of $15,000,000,-a sum more than sufficient to offset the value of the capital stock of the company as ascertained by the commissioners, and which, if allowed, would have prevented any assessment whatever. This contention proceeds, we think, upon a false theory adopted by the relator for ascertaining the value of its real estate. The real estate consisted of a road-bed across the isthmus, 100 feet wide, of real estate used for terminal facilities at Aspinwall and Panama, with the structures thereon, and of alternate sections of land on the line of the relator's road, granted by the local government. The cost of all the real estate purchased by the relator was comparatively trifling, and the land granted by the government was, as appeared, of very little value. The sum of $8,972,879, deducted by the commissioners of taxes as the amount paid for real estate, represented in most part the sums expended by the relator in the construction of its road. There was no evidence given of the market value of the real estate at the time of the assessment. The sole proof upon which the relator rested its case was this: The relator proved the net income of the company from its traffic and business in 1880, 1881, and 1882. This was followed by showing that the average income of those years, capitalized, would produce a sum exceeding $15,000,000. The actual value of the locomotives, cars, equipment, and other personal property of the company was shown, in round numbers, to be $1,000,000. It is assumed, from these premises, that the sum of $15,000,000 represents the actual value of the real and personal property of the railroad company, and that the value of the real estate separately is ascertained by deducting from the aggregate value the sum of $1,000,000, the value of the personal property.
The evidence above referred to is supplemented by proof that in 1881 a contract was entered into by the relator and its stockholders for the sale to the Interoceanic Canal Company of a large part of the shares of the relator's company, at the price of $250 a share, reserving to the old stockholders the money, personal securities, and surplus belonging to the relator. It is also to be mentioned that the president of the relator testified, in general terms, that the real estate of the company was worth $15,000,000; but this estimate, as subsequently explained, was based on the theory of capitalization of the income, to which we have referred. We are of opinion that the evidence given afforded no legal basis upon which the court could change or reduce the assessment, or upon which it could find, as matter of fact, that the actual value of the real estate exceeded the sum allowed by the commissioners of taxes. It is unquestionable that the value of the real estate of a railroad corporation, its roadway, tracks, structures, lands, and whatever is known as realty, enters into and forms a constituent element in the aggregate value of the capital stock. This is true of every species of property having a value, and owned by the corporation, whether real, personal, or mixed. But it is equally true that the value of the franchise of the corporation is an important element in determining the value of a railroad as a whole, or the value of its capital stock. This is especially true when the franchise is an exclusive one, covering an important and necessary line of communication.
It is impossible to doubt that the exclusive franchise of the ...
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