Woodruff v. Oswego Starch Factory

• Decision Date: 08 December 1903
• Citation: 68 N.E. 994,177 N.Y. 23
• Parties: WOODRUFF et al. v. OSWEGO STARCH FACTORY.
• Court: New York Court of Appeals Court of Appeals

177 N.Y. 23

68 N.E. 994

WOODRUFF et al.

v.OSWEGO STARCH FACTORY.

Court of Appeals of New York.

Dec. 8, 1903.

Appeal from Supreme Court, Appellate Division, Fourth Department.

Action by Caroline B. Woodruff and others, executors of Nelson Beardsley, against the Oswego Starch Factory. From a judgment of the Appellate Division (74 N. Y. Supp. 961) entered in favor of defendant on the submission of controversy, plaintiffs appeal. Affirmed.

Bartlett, J., dissenting.

Frederic E. Storke, for appellants.

H. L. Howe, for respondent.

GRAY, J.

The parties to this proceeding agreed to submit the controversy between them to the court below in the following language: ‘Judgment may be rendered for or against either party, determining which party is liable to pay the taxes described in the case and submission, and awarding a money judgment in accordance with such determination, with costs.’ The statement of facts upon which the parties agreed to the submission shows that the plaintiffs represent one-half of all the right, title, and interest of the grantors in certain conveyances in fee, which reserved to them a perpetual rent; while the defendant owns the right, title, and interest of the several grantees named in those conveyances, subject to the same rents reserved therein. These conveyances were executed between the years 1847 and 1867, and they granted certain lands and water power situate on the Oswego river within the city of Oswego. Each of the conveyances contained, in substantially the same language, the covenant to pay, in addition to a yearly rent in cash, ‘all taxes, charges, and assessments, ordinary and extraordinary, which shall be taxed, charged, imposed, or assessed on the hereby demised premises and privileges, or any part thereof, or on the said parties of the first part, their heirs and assigns, in respect thereof.’ In 1898 the assessors of the city of Oswego made an assessment upon the interest of the plaintiffs in the leases, as personal estate, at a gross valuation, and levied thereon a city tax. Thereafter, in the years 1899 and 1900, the said assessors made assessments, in the same form and at the same amount, and levied state, city, and county taxes thereon for the city and county of Oswego. Prior to the year 1898 no assessment had ever been made up on the interest of the plaintiffs in these rents or that of their predecessors in title for purposes of taxation. The plaintiffs failed and refused to pay the taxes so levied, as did the defendant, and, so far as they have been paid, they were collected by the enforced levy from and sale of defendant's property, and under its protest. To the extent to which the payment of these taxes had been enforced by the taxing officers, the defendant has deducted, and has claimed the right to deduct, from installments of rents maturing under the leases, the amount of such enforced collections; and by reason, in one instance, of the amount collected exceeding the amount of rents due, a counterclaim for the excess is made by the defendant. Similar taxes were also outstanding and unpaid at the time of the submission of the controversy, the liability for the payment of which was to be determined by the judgment.

It further appears from the agreed statement of facts that prior to the completion of the assessment rolls of 1898 the plaintiffs notified the defendant of the proposed assessment and of their claim, ‘that defendant was bound to pay all taxes levied thereon by virtue of the provisions of the tax clause contained in each of said conveyances,’ and the statement further contains the language that ‘the defendant refused to pay said tax, or any part thereof, claiming that it was not liable for such tax under said tax clause; but that the plaintiffs were liable to pay the same and so advised the plaintiffs.’

The Appellate Division in the Fourth Department decided the controversy against the plaintiffs and adjudged that they were liable to pay the taxes in question ‘under a construction of the covenant in said leases, and that the defendant had a legal right under the statute to charge the amount of said taxes collected of and from it to the plaintiffs, and to deduct the same from the rent due or to become due from it to the plaintiffs.’ Upon the appeal which the plaintiffs have taken to this court they insist, in the first place, that the tax is unconstitutional and void, and that it should be so adjudged by the court. In the second place, they insist that under the tax covenant of the leases the defendant is bound to pay the taxes upon the rent. The act under which the taxes were assessed and levied upon the rents reserved in the leases was originally passed by the Legislature on May 13, 1846 (Laws 1846, p. 466, c. 327), prior to the execution of the leases, and its provisions have been, substantially, re-enacted in the present Tax Law (Laws 1896, p. 795, c. 908). Section 8 (Laws 1896, p. 800, c. 908) of the tax law provides that ‘rents reserved in any lease in fee, * * * and chargeable upon real property within the state, shall be taxable to the person entitled to receive the same as personal property in the tax district where such real property is situated.’ Section 21, subd. 5 (Laws 1896, p. 804, c. 908), provides that the value of taxable rents reserved and chargeable upon lands within the tax district, estimated at a principal sum, the interest of which at the legal rate per annum would produce a sum equal to such annual rents, shall be set down in the fifth column of the assessment roll. Section 75 provides with respect to the collection of such taxes, in the event of a failure to pay them, that the collector, if no sufficient personal property belonging to the person against whom the tax is levied can be found in the county, shall collect of the tenant or lessee in possession of the premises on which the rent is reserved in the same manner as though such taxes had been assessed against such tenant or lessee. It further provides that in such event the tenant or lessee shall be entitled to have the amount of the tax deducted from the amount of rent reserved which may be or become due, or may maintain an action to recover the same.

I very much doubt that the question of the constitutionality of the law has been raised in this case. The terms of the submission do not seem to present it, and the city of Oswego was not made a party. The only judgment asked for is as to ‘which party is liable to pay the taxes described in the case,’ and in the agreed statement of facts no claim of illegality or invalidity is made with respect to the law. But it may be important, in the interest of a termination of the litigation, that we should briefly declare our judgment to be in favor of the constitutionality of the statute. The argument of the appellants, or so much as we need consider, is that it offends the rule of equality in the imposition of taxes, and permits of double taxation. It is not pretended that the validity of this law, which had existed for over 50 years upon the statute books, has...