People ex rel. Manhattan Railway Co. v. Barker

The commissioners of taxes and assessments for the city of Hew York originally assessed the property of the relator for the purpose of taxation for the year 1894 at $17,860,712. Hpon review that assessment was vacated and set aside and a reassessment ordered by this court. ( 146 N. Y. 304 .) Thereupon the commissioners of taxes reassessed the property of the relator for that year at the sum of $15,526,800. The relator then instituted proceedings by cer

The chief controversy arises out of the claim of the relator that the items for open accounts, $6,217,939.79, and land damages, $8,814,423.33, should be stricken from the amount of its assets and that there should be added to the amounts allowed by the Special Term as deductions from the relator’s assets the following items:

New York first mortgage bonds........... $8,500,000.00

New York debenture bonds................ 1,000,000.00

And Manhattan bonds .................... 1,127,112.00

Making a total of................... $10,627,112.00

The first question which it becomes necessary to consider has reference to the power of the court upon this review. As we have seen, the case was referred to a referee, not to hear,

Considering the facts, therefore, to be as found by the Special Term, Ave proceed to inquire whether there were errors of

We will first consider the items which the relator claims should be deducted from the amount of the assets found to belong to it. The three items above referred to "may properly be considered together. The Special Term finds as follows :

“ 22nd. Prior to the second Monday of January, 1894, the Manhattan Bailway Company had paid for the franchise to operate an elevated railway in certain streets and avenues in the city of ¡New York, to the ¡New York Elevated Bailroad Company and to the Metropolitan Elevated Bailway Company, in addition to other sums agreed to be paid for the same purpose, the sum in cash of one million and fourteen thousand dollars (§1,014,000).”

27th. “ That of the said eleven million six hundred sixty-three thousand and thirty-five dollars ($11,663,035) of the mortgage bonds of the Manhattan Bailway Company, at least one million one hundred twenty-seven thousand one hundred and twelve dollars ($1,127,112) represented the payment specified in the foregoing 22nd paragraph of one million and fourteen thousand dollars ($1,014,000), by the said Manhattan Bailway Compan y for franchises to operate elevated railways in certain streets and avenues in the city of ¡N"ew York to the ¡New York Elevated Bailroad Company and to the Metropolitan Elevated Bailway Company, the bonds so representing said sum having been issued for cash at ninety per cent of their par value.”

29th. “ That the liability of the Manhattan Bailway Company, created by certain promises to pay the eight million five hundred thousand dollars ($8,500,000) of mortgage bonds of the ¡New York Elevated Bailroad Company and the one million dollars ($1,000,000) of debenture bonds of the same company contained in said leases and said merger agreement hereinbefore referred to, was directly incurred in tho purchase and acquisition of the frmichises of the said ¡New York Elevated Bail-

38th. “ That of its total indebtedness of $21,907,590.35, $9,500,000 was incurred by the relator in the, purchase of its franchises, as determined in the foregoing 29th paragraph, and $l,127,112/or a like purpose, as determined in the foregoing 27th paragraph.”

It will thus be seen that as to each of the three items of indebtedness, amounting in the aggregate, to $10,627,112, the finding is express that it was contracted by the relator in the purchase of franchises which are not taxable for town, county or municipal purposes, and, consequently, cannot be deducted from its assets under the express provision of 1 E. S. 391, sec. 9, subd. 4, as amended, Laws 1892, chap. 202, which prohibits the deduction of indebtedness incurred in the purchase of non-taxable property. (People ex rel. Cornell Steamboat Company v. Dederick, 161 N. Y. 195 .) It is contended that these findings are erroneous. It is true that they are at variance with the findings made by the referee, but, as we have seen, the findings of the referee as to these items have not been ratified by the Special Term, and, consequently, they constitute no part of the facts brought up for review in the Appellate Division. That court, as we have already shown, has reversed upon the law and not the facts. The facts, therefore, as found by the Special Term, are deemed to stand as the facts in the case, unless it can be held that there is no evidence in the case tending to support them. Upon that question we are required to take into consideration the history of the organization of the relator, its purpose, and • the contracts that were entered into by it, with the inferences of fact that may be drawn therefrom. Doing this, we think that it cannot be properly held that the findings are without support from the evidence. The question as to whether the indebtedness was contracted in the purchase of franchises is purely one of fact, and we find no question of law involved as to

The next question in controversy relates to the item of $6,217,939.79, denominated “open accounts.” The referee found the amount to be $2,023,487.57. The Special Term found that they amounted in the aggregate to the sum first named. The open accounts represent the relators expenditures upon the structure of the Metropolitan Elevated Bail-way, of the amount found by the referee, and the balance found by the Special Term was for expenditures on account of land damages paid for that company. The counsel for the relator now concedes that the amount of open accounts, as found by the Special Term, at the time stood upon the books of the company as a valid asset against the Metropolitan Bail-road Company, but as we understand its contention, it is that the Special Term erred in assessing this item at its face value, for the reason that its actual value did not exceed the sum of $166,667. Whether these open accounts were of the value of one dollar, one hundred thousand dollars, or six million dollars, was purely a question of fact for the determination of the trial court. The opinion of the Appellate Division approves of this item as found by the Special Term, and under the Constitution, which limits this court to the review of questions of law, we think we have no jurisdiction to review that determination.

The other and perhaps the most troublesome question presented for our consideration relates to the item of land damages, $8,814,423.33, of which ninety per cent, $7,932,980.99, was realized. Of this sum $4,451,993.49 was paid for land damages on the Metropolitan line, and is included in the item of open accounts. Of the balance, $3,480,987.50, $1,160,329.37 thereof was paid for rental damages of the Hew York line and $2,320,658.13 for the fee damages, so called, bn that line. It is contended on behalf of the relator that these damages do not constitute taxable assets. We are inclined to the view that this contention presents a question of law which it is the duty of this court to determine. We have presented two elements of damages: One consists of

The Special Term, as we have seen, found that the value of the relator’s assets, after making the proper deductions, was $14,440,641.58. Also that the relator had paid an annual dividend of six per cent upon its capital stock of $29,925,200, and had a surplus besides. And, finally, that the commissioners were justified in assuming that the capital stock of the relator remained unimpaired, and that the assessable value of its assets was $15,526,800, as determined by the commissioners, and that their assessment should be confirmed. In the case of People ex rel. Equitable Gas Light Company v. Barker ( 144 N. Y. 94 ), and also in this case on the former hearing ( 146 N. Y. 304 ), this co art held that such a presumption may be indulged in. Evidence, however, may be introduced showing that the capital stock of a company is' impaired by the existence of debts, which evidence, if believed, overcomes the presumption that might otherwise exist. In this case the indebtedness disclosed by the relator consisted of mortgages, bonds and judgments, about which there now appears to be no controversy

The Appellate Division appears to have found that the structure in the streets cost $9,823,057, instead of $8,770,587, as found hy the referee. It also found that the judgments unpaid of $744,555.35 . had been obtained for land damages, of which $248,185.11 was for rental damages and the rest was for fee damages. We fully agree with the learned Appellate Division with reference to its disposition of these items. Indeed, we do not understand them to be seriously questioned. We agree fully as to the assets, and only differ as to the deductions of the items first considered by us.

Assets as found by the Appellate Division :

Beal estate and other structures............. $5,120,216.00

Hew York equipment.................. 2,213,602.59

Suburban equipment..................... 142,175.13

Gash................... 1,382,838.00

Tools and machinery...................... 381,538.09

Structure in streets .................... 9,823,057.00

Open accounts.......................... 6,217,929.79

Land damages........................... 2,320,658.13

Total............... ............ $27,602,014.73

Deductions:

Manhattan bonds issued for

dividend scrip........... $1,488,035.00

land damages........... 8,814,423.33

Manhattan bonds not specifically appropriated........ 235,864.67

Judgments................. 248,185.11

Assessed value of real estate.. 7,323,200.00

Total deductions......................... 18,109,708.11

$9,492,306.62 Bemaining assets.

The order of the Appellate Division should be reversed and the order of the Special Term modified so as to reduce the assessment of the relator’s property to the sum of $9,192,306.62, and as so modified affirmed, with costs of this appeal to the appellants.

(dissenting). This is a controversy of long standing between the relator and the commissioners of taxes. It involves only one general question, and that is the actual value of the relator’s capital stock for the purpose of taxation, under the act of 1857. On the first Monday of January, 1891, the defendants assessed the stock at $30,000,000, that being the nominal or par value. At the same time they assessed the relator’s real estate and railroad structure at $7,323,200. The latter assessment has never been questioned, and there is no controversy here about it. The defendants, on relator’s application, reduced the assessment on the capital stock to something less than $18,000,000 and the relator then sued out a writ of certiorari, to which the defendants made a return of all of their proceedings. After a hearing upon the writ and return, the court at Special Term set aside and vacated the assessment entirely. The court at General Term reversed the order and restored the assessment, and the relator then appealed to this court. This court reversed the General Term and ordered a new assessment. ( 146 N. Y. 301 .) The defendants proceeded to make a new assessment, in which they valued the capital stock at something less than $17,000,000. Upon a rehearing they reduced it to $15,526,800, and the relator sued out another writ of certiorari, to which a return was made. The court appointed a referee to take proof and report the facts and his opinion on the law, and he reported that the assessment should be vacated. The court at Special Term, however, overruled the report, and confirmed the assessment, and the relator appealed to the Appellate Division, and

The case comes here upon a series of facts as to which there is no dispute, though there is much dispute about the legal effect of those facts and other matters of law. There is no dispute with respect to the several items of property, real or personal, which the relator owned at the time of the assessment, and which represent the value of its capital stock. Nor is there any dispute with respect to the relator’s indebtedness. Every item of it has been fully disclosed and found. The controversy is limited to the contention of the defendants that certain items of expenditure which appear upon the relator’s hooks represent taxable property, and that certain debts which are conceded to he existing outstanding obliga tions for which the relator is liable are not deductible under the statute. These are questions of law. The amount, origin and history of these several items appear from findings in the record without dispute or conflict, and in such a case the form of the order of reversal is not material. (O'Brien v. East River Bridge Co., 161 N. Y. 539 ; Benedict v. Arnoux, 154 N. Y. 715 ; Griggs v. Day, 158 N. Y. 1 ; Hirshfeld v. Fitzgerald, 157 N. Y. 166 .)

This court, therefore, has power to review all the questions that were passed upon in the court below, for the reason that the facts that underlie these questions are not the subject of dispute. It is true that the Special Term found that certain items in the relator’s statement represented taxable assets which had been rejected as such by the referee, and that certain debts which the referee had allowed as deductible should not be allowed, since they were contracted by the relator in the purchase of non-taxahle property. But the Special Term differed from the referee with respect to the law, and not as to the facts. No one claims that the relator had any more property than is detailed in the findings of the referee, or that any of the debts there stated are not existing outstanding obligations of the relator.

The effect of these facts when known and found, as they are in this case, cannot be modified by market quotations, or dividends declared. It may be safely asserted that very few street railroad corporations can show any tangible property to represent the capital stock after deducting debts and the value of real estate, and what is true of these corporations is equally true of many others, and yet the capital stock may sell for a high price in the market and produce a large income for the owners, due entirely to the fact that the corporation has a valuable franchise, or right to collect money from the public in perpetuity for service that costs but a nominal amount when compared with the receipts of the business.

The case contains another distracting element unless reduced to its true value. The defendants rely upon the annual report made by the relator to the railroad commissioners upon blanks furnished by that department which called for a statement from the relator concerning the cost of its property. The present system of elevated railroads in Hew York was originally constructed by two other corporations, namely, the Hew York Elevated' and the Metropolitan railroads. The roads were built largely, if not entirely, by bonds of these corporations issued and sold at a ruinous discount. The relator was incorporated about the year 1879 for the purpose of leasing and operating these railroads. On the 20th of May of that year, it leased the property of both of the original corporations for 999 years. It became bound by the leases to pay the principal and interest on the bonded debt of the two leasing roads, a dividend rental to the stockholders of both roads of ten per cent on their holdings of stock, a cash rental of $10,000 per year to each road, and to keep the property in good condition and thorough repair and to pay all taxes. When the relator entered into these obligations it did not own any property whatever and had no money. It was authorized to issue stock to the amount of $13,000,000, but none of it had yet been issued. The whole

The lease of the two roads proved to be a ruinous bargain, since it appears that in 1884 the relator was unable to pay the rent reserved and was forced into the hands of a receiver. Then there came a readjustment and modification of the leases by reducing the dividend rental from 10 to 6 per cent, and in some other particulars. Before the relator could regain possession of the property it was obliged to pay out over $1,000,000 more, making in all over $14,000,000 in stock and money that it paid out without receiving any property in return. Then followed a tripartite agreement between the relator and the other two corporations, providing for a merger of the latter in the former under the statute (Laws 1867, chap. 255). Thus it appears that the relator’s capital was impaired to the extent of $14,000,000 from the very beginning of its career, and if we add to this impairment the large discounts upon bonds and the enormous sums paid for damages to land that followed the decision in the Story case, all of which are included in the cost of the railroad as reported to the railroad commissioners, it will be seen how delusive that report must be as evidence of the actual value of the stock based upon tangible property. The report was substantially a transcript from the relator’s books of the cost of the road in stock and bonds subsequently increased by the payment of large sums in damages to abutting property owners. But the question is, not what this property cost in stock, bonds and damages, but its actual value at the date of the assessment.

There is another fact in the case that has been given an importance that it does not deserve. In the month of May, 1893, or a year before the assessment in question was made, the relator’s counsel addressed a letter to the tax commis

Passing to that question, it should be observed that the legal rules for its solution are not involved in any doubt or uncertainty. They have all been deliberately considered and passed upon by this court. The value of the capital stock of a corporation must be ascertained for the purpose of taxation from the actual value of its tangible assets after deducting debts, the assessed value of real estate and the shares of stock held in other corporations subject to taxation as part of the capital stock of the corporation issuing 'it. (People ex rel. Union Trust Co. v. Coleman, 126 N. Y. 433 ; People ex rel. Manh Ry. Co. v. Barker, 146 N. Y. 304 .) Proof of these facts cannot be arbitrarily rejected by the assessors or the court, and the assessment cannot be supported upon the assumption that they are undisclosed assets, in the absence of evidence tending to show the nature and value of the property supposed to be omitted. (People ex rel. Edison El. Il. Co. v. Barker, 139 N. Y. 55 ; People ex rel. Edison Gen. El. Co. v. Barker, 141 N. Y. 251 .) The real estate of a railroad must be valued for the purpose of taxation at not to exceed what it would cost to produce it in the condition at the date of the assessment, which, of course, does not mean

1. On the first Monday of January, 1894, the relator had paid to abutting property owners on the line of the road as damages for injury to their real estate the sum of $8,814,423.33. These damages were recovered in actions based upon the authority of the Story case and other cases which followed it. The principles upon which these actions have been sustained are quite familiar, and no reference need be made to the long line of cases that subjected the relator to a liability, not foreseen or anticipated -when the elevated roads were built. The defendants, in making the assessment, included this large item of land damages as part of the relator’s tangible taxable assets, upon the theory that having paid the money it must have received in return an equivalent by accession to its real estate and structures. The mind does not readily comprehend such a method of creating or acquiring wealth. It looks very much like an attempt to “ coin a vacuum,” if it is permissible to use the very apt expression of a thoughtful man. If an individual should injure his neighbor in person or property, and was cast in damages by the courts as a compensation for the injury, the sum paid ■would, to that extent, deplete the estate of the wrongdoer, and no one would suppose that by the payment of the judgment he acquired any property. That rule would hold good

The relator by the construction and operation of its railroad in the public streets was held to have invaded the rights of the abutting property owners, and to have diminished the value of the use of their real estate. For this injury to the property rights of others, it was condemned to pay damages and did pay the sum above mentioned. The contention of the defendants is that after paying this vast sum of money the relator was just as well off as it was before it paid anything, since it received an equivalent in property. It may be safely asserted that such a proposition has never before received the sanction of any court. The damages which a party is obliged to pay as compensation for an injury to the property of another are, as to the wrongdoer, a total loss. Tie is compelled to pay, not because he has purchased or acquired any property, but for the reason that he has destroyed that of another. The referee in his report rejected this item entirely as representing no tangible property, but the Special Term restored it and the Appellate Division reduced the item to $2,320,658.11. The question now is whether it should be included in the relator’s assets for any sum whatever. The learned court below reached the result stated by making a distinction between past damages or injuries to rental yalues and fee damages, so called. It rejected the former, but allowed the latter. There is no real distinction between damages sustained in the past and that which is to accrue in the future. In both cases the damages result from the same wrongful act. The right of the property owner was to bring successive actions for the injury, and recover, in every case, such damages as ■ had been sustained up to the commencement of the action. But a court of equity, in the exercise of its extensive powers, in order to prevent a multiplicity of suits, compelled him to commute the damages to accrue in the future for a gross sum. This gross sum represented just what the rental damages did. namely, the injury to the use of the abutting property. The

The mind is easily misled by the fact that under the form of the judgment the payment of the future, or so-called fee damages, entitled the wrongdoer to a conveyance by the property owner as a condition of granting equitable relief against the continuance of the wrongful act. But this conveyance, so called, conveyed no land or other property. It was a mere matter of practice which the courts had invented for the purpose of executing their judgments, and which the relator accepted for the purpose of record, and in order to show that the litigation was ended and the injury complained of satisfied. The payment and satisfaction of the judgment, which represented the entire claim for damages, past and future, would have accomplished the same purpose. The instrument which the property owner delivered to the relator upon payment of the judgment may for convenience be called a conveyance, or deed, but the name given to it cannot change its real character or its legal effect. It operated simply to release the right of the property owner to bring successive actions in the future against the relator for the continuing injury. It seems to me, therefore, to be utterly impossible to state any sound distinction between damages in the past and damages for the future, commuted at a gross sum by the powers of a court of equity. In both cases the money paid by the relator was a loss, and it acquired no property in return.

This court, as it seems to me, has set the question at rest in a very recent case. In People ex rel. N. Y. C. & H. R. R. R. Co. v. Hilts, ( 27 Misc. Rep. 290 ), a similar contention was made by the assessors in assessing the real estate of a railroad. It was admitted that the rule of valuation was the sum that it would cost to produce the property at the date of the assessment, There was a referee in that case as in this and he reported that it would cost, in addition to the value of the land

The defendants’ contention cannot, in my opinion, be reconciled with that decision, or sustained upon any legal principle that I am aware of, and so I conclude that no part of the item for land damages should have been included as property in the assessment in this case.

2. At the date of the assessment the relator had upon its books what appeared to be an open account against the Metropolitan Railway Company for $6,217,939.79. The defendants included the amount of this item in the relator’s taxable assets. The referee was of opinion that it did not represent a debt and rejected it, except to the extent of $2,023,487.57, which he allowed against his own judgment, but on the affidavit of one of the relator’s officers. The Special Term allowed it in full, and the Appellate Division affirmed that action. There is no dispute about the facts bearing upon this item. It is an open account on relator’s

The only basis for this account as a legal obligation is the lease and merger agi'eement. But these instruments contemplated the extinction of the lessor company as a legal entity by merger in the relator. That result was not complete at

The character of this account is governed entirely by the provisions of the lease and merger agreement. It does not represent a debt unless these instruments so provide. There was no promise to pay, express or implied, and but for the clause providing that the relator should be entitled to so much of the property of the leased company as should equal the amount of the obligations assumed no one would claim that this piece of bookkeeping represented a debt. But these same instruments provided for the utter extinction of the lessor and so-called debtor company just as soon as the statute was complied with by the surrender of the stock. It is inconceivable that under such circumstances the parties to the instruments intended to create a debt absolutely. It was a

But if it be assumed that the parties intended to and did create a debt, there are other questions that must be answered. What was the value of the account on the day of the assessment % Could it have been enforced or collected by the relator on that day, or afterwards, and if so, how % Of course, this open account could not have been taxed otherwise than for its actual value. All the property of the debtor on the book account was held by the creditor under a lease in perpetuity. This amounted substantially to an absolute transfer. When the creditor became the owner of all the property that the debtor had or ever could have, it would seem to follow that this open account could not represent anything of much value. The reversion in a lease of a railroad for 999 years was not shown or found to be of any value, and certainly this court cannot say as matter of law that it has. The lessor company was in receipt of a fixed rental of $10,000 annually. If we grant that the relator could have applied this rent on the open account, then the value of the account would be represented by a sum which would produce an income of $10,000 annually, and at the current legal rate of interest that sum would be less than $170,000. But the reversion in the lease was liable to be cut off and extinguished at any time by the pending arrangement for merging the lessor in the lessee, when the obligation to pay the rent was to cease also. Both the reversion and the right to receive rent were actually extinguished by the complete merger which took place and became operative in a few months after the assessment. It is inconceivable that this open account, under any fair process of reasoning, could have had any substantial value at the date of the assessment, but to hold that it could lawfully be valued and taxed for more than $6,000,000 would seem to be impossible, except by the exercise of arbitrary power.

3. The discussion thus far involves only the question what is and what is not tangible taxable property. The remaining questions are of a very different character. They arise upon

It is admitted that at the date of the assessment there were outstanding bonds of the Hew York Elevated Bailroad Company to the amount of $9,500,000, including $1,000,000 of debenture bonds, so called. These bonds were issued and sold by that company to construct the railroad. They were assumed by the relator in the lease of 1879, and in the modified lease and merger agreement of 1881, so that it became primarily and directly liable for their payment. Even without the assumption clauses in these various instruments the relator would, as we have seen, become directly chargeable for the payment of these bonds under general rules of law, upon the completion of the merger and extinction of the Hew York company, which was effected long before the assessment as to that company. "When the relator absorbed the lessee under the-statute providing for a merger, the former became bound for the debts of the latter. The referee held that these bonds should be deducted, the Special Term held otherwise, but the Appellate Division sustained the referee. The contention of the defendants is that these bonds should not be deducted, for the reason that they represent a debt contracted in the purchase of non-taxable property, to wit, franchises. I am unable to discover the slightest foundation for this argument. The railroad got all of its franchises from the state, and no one claims that it paid anything for them. If the defendants’ contention be correct, it would follow that the great railroads of the state that have leased other roads and assumed their bonded debt cannot be allowed to deduct such debts in ascertaining the value of capital stock, since the obligation to pay them was a purchase of franchises or non-taxable property. Such a rule would swell the nominal or paper value of the capital stock of many railroads enormously, but could not, of course, affect the real or actual value. It seems to me that the statute which forbids the

4. The remaining item cf indebtedness which the learned counsel for the defendants insists should not be deducted arc the relator’s own bonds, amounting to $10,302,458.33. They are part of an issue of nearly $12,000,000. It is argued that in ascertaining the value of the capital stock this item should not be deducted from the assets, for the reason that $8,814,423.33 of the amount was used to pay land damages, and, therefore, the debt was contracted in the purchase of

The regulations for the assessment of the capital stock of corporations are to be found in title 4 of the same chapter, and are entirely distinct from the general law. In ascertaining the actual value of the capital of a corporation, the necessity of deducting all debts and liabilities from the gross assets, arises not upon any specific statute, but from the very nature of the problem itself, since the actual capital can never represent anything more than what is left of the assets after discharging all the obligations due to creditors. Of what consequence is it, for instance, whether the- bonds issued to replace the scrip dividends were sold to realize money for the discharge of an imperfect obligation, or for some other purpose % The bonds were put in circulation by the relator, and they

That this statute applies to individuals only and has nothing to do with the process of valuing capital stock is plain from the reason of the thing. Except for its enactment, he would not be entitled to have debts deducted from the assessed value of specific personal property any more than he is to have mortgages or other liens deducted from the assessed value of his real estate. But the value of the personal property being ascertained, the owner is permitted, to offset debts or not according to their nature and character. In the case of corporations the thing' that must be valued is the capital stock, an arbitrary term which represents nothing but the excess of aggregated assets over aggregated liabilities, and that process necessarily requires the assessor to determine the value of all assets, and the amount of all liabilities. If either assets or liabilities are ignored, the result will not express the truth, but a falsehood, the magnitude of-which may be measured by the value of the assets and the amount of the liabilities omitted from the calculation. It is, therefore, inconceivable that the law requires or permits assessors, acting under oath, to omit any corporate debt from the process of valuing capital stock for taxation, when in plain language they are commanded to determine the actv,al value. What public officer or honest man could swear that he had fairly and conscientiously valued the relator’s capital stock after excluding '$20,000,000 of its admitted liabilities for any cause whatever ?

I am aware that the discussion of these questions in the courts below proceeded upon somewhat different lines, and so

Finally, it has been suggested that the non-taxable property which the relator acquired by the payment of this vast sum as damages was light and air, but the relator had as much of both before it paid the damages as it had after. Moreover, it would be difficult to state how light or air may be capitalized and converted into property, or, if property at all, why it is not taxable. Much might be said in answer to this suggestion, but since I am convinced that upon mature reflection it will not be seriously entertained, it would not be profitable to

The purpose for which a corporate debt was created is, as we have seen, immaterial in any inquiry as to the value of capital so long as it is a legal liability chargeable upon the assets. I have referred to the argument of the learned counsel for the defendants that the bonds in question cannot be deducted because they represent a debt created for the purchase of non-taxable property, not .because it is considered material, but in order to see whether the argument had any basis of fact or law upon which to rest. That inquiry has suggested what -would seem to be a glaring inconsistency in which the argument has involved both the assessors and the Special Term. There was no non-taxable property found among the relator’s assets. Even the land damages, to pay which, it is said, this very item of debt was created, is treated as taxable property, and as we have seen, is included in the statement of relator’s taxable assets. It is difficult to see how it can be held that these bonds represent a debt created for the purchase of non-taxable property, and in the same breath that the land damages, to pay which the debt, it is said, was created, represents taxable assets. It would seem to be plain that either one or the other of these propositions must be founded in error; I think that both are, and for reasons that I have attempted to state.

I have not omitted to examine the case of People ex rel. Cornell S. Co. v. Dederick ( 161 N. Y. 195 ), but it has no application to any of the questions discussed here. That case arose under, the new Tax Law (Chap. 908, Laws of 1896), whereas the case at bar arose under the law in force in 1894, which was the Revised Statutes with their amendments. The Statutory Construction Law has no application in the construction of the Revised Statutes. It is said that the result in the court below amounts to a finding that the relator is insolvent, and that it escapes taxation. That argument lias very little to do with the questions in this case,, but it is not quite true in point of fact. It is still assessed upon its real estate, and all property that pertains to the nature of realty. Including the Metropolitan, this amounts to over $14,000,000. The special franchises for the purposes of taxation, under chapter 712 of the Laws of 1899, are valued for the present year at over $46,000,000. If they are worth that now they must have been worth substantially the same in 1894, and these facts furnish as good a basis for the relator’s perfect solvency, the market value of the stock .and the ability to pay dividends, as can probably be shown by any other street railroad in the country. They show the enormous value of the relator’s franchises which could not have been included in the assessment in question, but account for the market value of the stock and the dividends.

The judgment should be affirmed, with costs.

Parker, Ch. J., Bartlett, Martin and Vann, JJ., concur with Haight, J., for reversal; Landon, J., concurs with O’Brien, J., for affirmance, except as to the two items of land damages and open account treated of by the Appellate Division, as to which Landon, J., expresses no opinion.

Order reversed, etc.

The following opinion was handed doxvn upon the decision of a motion by the relator for a reargument:

It is now claimed that the relator is entitled to a deduction of $2,992,520 from the amount of its assessable assets, as approved by this court, on account of its surplus profits. This question was not considered by us in our review of the case, and we, therefore, think the question should now be determined. Section 3 of chapter 456 of the Laws of 1857 provides that “ the capital stock of every company liable to taxation, except such part of it 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, * * * shall be assessed at its actual value, and taxed in the same manner as the other personal and real estate of the county.” As we understand this statute, the surplus profits or reserved funds mean the accumulations of the company of moneys or property in excess of the par value of the stock issued by it; that its real estate and personal property is to be assessed at its actual value in the same manner as the other personal and real estate of the county is assessed, up to the amount of the par value of the stock issued, and then the surplus profits or reserved funds that have been accumulated in addition which exceed ten per cent of its capital stock shall also be assessed at its

In this case the relator’s capital stock issued amounts to $29,925,200. The amount of its assessable assets, as determined by us in our modification of the order of the Appellate Division, is real estate $7,323,200; personal estate $9,492,306.62, thus showing an impairment of the capital of the relator of upwards of thirteen millions of dollars. There consequently could be no surplus from which a ten per cent deduction could be made. It is true that the books of the corporation show a surplus of $5,326.433 of earnings over and above interest and dividends paid, but it was claimed by the relator that the greater portion of this had been paid out in repairs and in the ordinary expenses of the company, and that the fund no longer was in existence as a surplus, and the findings of the referee, as adopted by the Special Term, -support this contention, thus leaving no basis upon which a deduction for surplus, can be made.

When this case was up for a review in this court upon a former assessment (146 N. Y". 304) the contention was that the assessors had adopted an improper basis in determining the assessable value of the relator’s property. This contention we sustained and a reassessment was ordered. In sending the case back we made some suggestions upon the assumption that the capital stock remained unimpaired, and that there was a surplus, and stated that there should be a deduction of ten per cent of the capital. At the time it did not occur to us that the apparent surplus did not equal the ten per cent of the capital, and this oversight makes the statement then made erroneous in that particular.

We have carefully examined the brief of the relator’s counsel upon the other questions involved in the case which have already been considered by us in the prevailing opinion. We

The motion for a reargument should be denied, without costs.

Parker, Ch. J., Bartlett, Martin, Vann and Landon, JJ., concur; O’Brien, J., absent.

Motion denied.