People ex rel. W. & J. Sloane v. Barker — 27 N.Y.S. 1082

Majority

p. 1082

PEOPLE ex rel. W. & J. SLOANE v. BARKER et al., Tax Commissioners.

(Supreme Court, General Term, First Department.

March 16, 1894.)

Headnote

Taxation—Assessment.

Where the tax commissioners make an assessment in reliance on a statement furnished by the person assessed, and there is no evidence to discredit such statement, or.in any way suggesting that it is erroneous, " they must take the statement as true.

Appeal from special term, Hew York county.

Certiorari by W. & J. Sloane, a corporation, to review the action of Edward P. Barker and others, as tax commissioners, in assessing relator’s personal property at $902,631.53. From an order vacating the assessment, defendants appeal. Affirmed.

The opinion of Mr. Justice LAWREHCE at special term is as follows:

It is evident that the commissioners, in making the assessment upon the capital stock of the relator, relied upon the statement with which they had been furnished by the relator. The evidence taken before the referee fails to establish that the commissioners were in possession, at the time of making the assessment, of any information from other sources which cast discredit upon the relator’s statement, or in any way suggested that that statement was erroneous. Under such circumstances, the statement of the relator must be accepted as true, and the commissioners properly accepted it as the basis for their assessment. People v. Barker, (N. Y. App.) 34 N. E. 722 . Conceding the facts to be as stated by the relator, the question is. whether the commissioners have erred in the assessment which they-have made. That-such

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an error was committed, is, I think, clear. The nontaxable assets of the relator, as shown by the statement, were as follows:

Imported goods in original packages......................§1,006,310 00

Amounts in stocks of other companies, taxed upon their

capital ................................................ 610,875 00

Amounts invested in U. S. securities..................... 400,000 00

§2,017,185 00

Beal estate.............................................. 635,000 00

Capital invested outside of state......................... 578,949 34

Surplus, less than 10$................................... 300,000 00

§3,531,134 34

The statement also showed that the total gross assets of the relator amounted to §7,974,698.87. Deducting from the gross assets the amount of the assets not subject to taxation, to wit, §3,531,134.34, the assets liable to taxation, exclusive of the indebtedness of the corporation, would be §4,443,-564.34. But the statement showed that the indebtedness of the corporation amounted at its date to the sum of §5,556,118, which exceeds the value of the assets of the company liable to taxation in the sum of §1,112,543^47. From this it would appear that the relator was not taxable in any sum. . In the recent case of People v. Barker, supra, Judge Peckham says: “The gross assets did not equal the amount of its indebtedness, saying nothing of the deductions to be made on account of the assessed value of its real estate. This indebtedness must, in the nature of things, be taken into consideration, in arriving at the value of the capital of the relator.” As it appears that in this case the indebtedness of the relator far exceeds its assets, after deducting its nontaxable assets, the relator was not, in my opinion, liable to be assessed in any sum whatever.

The respondents, however, contend that the assessment of §904,601.53 is correct, and they seek to support it in this wise: After deducting the assets not liable to taxation from the total assets, they find the assets of relator liable to taxation to be the sum of §4,443,564, as shown by the relator’s statement, but from the total indebtedness of the relator (§5,556,118,) they make a deduction of §2,017,185 on account of nontaxable property. Thus they reduce the indebtedness of the relator, which is to be deducted from the assets liable to taxation, to §3,538,933; or, in other words, while first deducting the §2,017,185 of nontaxable property from the assets liable to taxation, they make it taxable by wiping out a corresponding amount of the debts which the relator is entitled to have deducted in determining the amount of its taxable assets. This cannot be sustained. The assets in question were either taxable or nontaxable. If nontaxable, they cannot be, in effect, directly taxed, by deducting them from the debts of the relator. For these reasons, I am of the opinion that the decision of the respondents should be reversed, and the tax and assessment canceled.

Argued before VAN BRTJNT, P. J., and O’BRIEN and FOLLETO, JJ.

George S. Coleman, for appellants.

Henry H. Anderson, for respondents.

W. & J. Sloane is a business corporation organized in January, 1891, under the laws of New York, with a share capital of $3,000,000, all of which has been paid in, and all of the shares issued. The principal office or place for transacting the financial business of the corporation is and has been kept at Nos. 880 and 888 Broadway. In 1892 the deputy tax commissioner, whose duty it was to value the corporation’s capital for taxation, valued it at $3,000,000, which assessed valuation was entered in the books of the commissioners of taxes and assessments. Afterwards, and on the

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18th of February, 1892, the corporation, by its treasurer, made, verified, and filed with the commissioners the following statement: “Statement made and delivered to the commissioners of taxes and assessments of the city and county of New York, for and in behalf of the corporation of W. & J. Sloane, showing its condition for thé purpose of assessment on the second Monday of January, 1892:

“Total gross assets on January 1, $7,974,698.87; capital stock actually paid in, or secured to be paid in, $3,000,000.00; amount of surplus earnings, $300,-000.00; rate of dividend of last year, or last annual dividend, $2.00; indebtedness in detail, as follows: Bonds, loans, bills payable, and book accounts, $5,556,118.00.

“Assessed value of real estate (describing particularly by ward and ward map numbers):

“Amounts invested in the stocks of other corporations, which are taxed upon their capital, $610,875.00; amount invested in U. S. securities, $400,-000.00; imported goods in unbroken packages, $1,006,310.00; portion of capital invested in foreign countries and in other states, $378,949.34.

“(If the stock of the company is worth less than par, state the actual value, and give the facts, under oath, which will justify such estimate of its value.) The stock of the company has no market value, as no sales have been made in open market, and it depends largely upon the personal skill and capacity of the managers. The principal office or the place of transacting the financial business of the said corporation is situated in the Eighteenth ward of the city of New York, at Nos. 880 to 888 Broadway.”

After this statement was filed, and in February or March, 1892, the treasurer of the corporation was examined before the commissioners, pursuant to section 820 of the consolidation act, who thereafter made an assessment upon the following basis:

Corporation’s gross assets................................ $7,974,698 87

Deductions allowed by commissioners:

Corporation had' invested in shares of other

corporations taxed on their capital........$ 610,875 00

Corporation had invested in U. S. securities.. 400,000 00

Value of goods imported by the corporation,

and on hand in unbroken packages........ 1,006,310 00

—- 2,017,185 00

$5,957,513 87

Indebtedness of corporation................$5,556,118 00

Less nontaxable assets, as above........... 2,017,185 00

-:- 3,538,933 00

$2,418,580 87

Assessed value of corporation’s real estate... $ 635,000 00 Corporation’s property outside of this state.. 578,949 34

Surplus 10ji on $3,000,000................... 300,000 00

- 1,513,949 34

Value of assessable personalty

$ 904,631 53

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The assessment was made for $902,631, an error of $2,000 having been made by the commissioners.

Upon what theory the commissioners deducted the sum of $2,-017,185, denominated by them “Nontaxable Assets,” from the indebtedness of the corporation, is not apparent. This, in effect, was what was attempted to be done in People v. Byan, 88 ZEST. Y. 142, and was held to be illegal. The commissioners should have made up their statement as follows:

Gross assets of corporation, real and. personal $7,974,698 87

Investments in taxable shares of other corporations. Not assessable (chap. 456, Jj.

1857, #3) ...-............................. $ 610,875 00

Investments in U. S. securities. Not assessable (U. S. B. ■it 3701; People v. Commis-

sioners, 90 N._ Y. 63)...................... 400,000 00

Goods imported by corporation, and held in unbroken packages. Not assessable (Brown v. Maryland, 12 Wheat. 419 ; Bur. Tax. 86;

Cool. Tax. 61 et seq.).................... 1,006,310 00

Property outside of the state. Not assessable (People v. Commissioners, 23 N. Y. 224 ;

Graham v. First Nat’l Bank, 84 Id. 303 )---- 578,949 34

Surplus on capital stock. Not assessable

(chap. 456, L. 1857, #3)................... 300,000 00

Assessed value of real estate to be deducted

from gross assets (chap. 456, L. 1857, ¡(£3).. 635,000 00

3,531,134 34

$4,443,564 53

Indebtedness of corporation to be deducted from taxable assets (People v. Barker, 141 N. Y. 146 )................. '5,556,118 00'

$1,112,553 47

After deducting the nonassessable property of the corporation and its assessed real estate from its gross assets, real and personal, its. indebtedness exceeds the remainder by $1,112,553.47, as appears by the foregoing statement. The commissioners now seek to justify their action on the ground that the treasurer of the corporation,, when examined before them, declined to answer questions put by them to him. The difficulty with this position is that the record does not disclose the questions which the treasurer refused to answer, nor the subject to which they related. It does not appear-that the questions related to the indebtedness of the corporation, and, for aught that appears, they may have related solely to the amount invested in United States securities; and, further, the commissioners did not disallow any of the items of the statement made- and filed, but found it to be true, and made their assessment on the basis of the truth of the Statement. If, for example, the treasurer had refused to answer proper questions put by the commissioners in respect to the corporation’s indebtedness, or had given evasive or unsatisfactory answers, and the commissioners had found that the indebtedness was less than the amount stated, a different question would have been presented. The order of the special term should be affirmed, without costs. All concur.

Cases cited

Brown v. Maryland 12 Wheat. 419 SCOTUS 1827-03-12 p. 1085