People ex rel. Second Avenue Railroad v. Barker — 56 N.Y. St. Rep. 834

Majority

p. 834

The People ex rel. The Second Avenue Railroad Company, Resp’t, v. Edward P. Barker, et al., as Commissioner of Taxes, etc., App’lt.^[1]

(Court of Appeals,

Filed February 6, 1894.)

Headnote

Taxes—Corporation.

A corporation, in the assessment of taxes, is entitled to have its indebtedness deducted from the value of its corporate assets.

Appeal from an order of the general term of the supreme court in the first judicial department, made June 9, 1893, which affirmed an order of special term setting aside an assessment for taxation upon the relator’s capital-stock.

The facts, so far as material, are set forth in the opinion.

David J. Dean, for app’lts; Charles E. Miller, for resp’t.

The relators were assessed for the purpose of taxation upon capital stock for the' year 1892, in the sum of $968,973. In July, 1892, they sued out- a writ of certiorari to review the proceedings of the tax" commissioners.

The special term of the supreme court reversed the adjudication of the tax commissioners, and vacated the assessment. The general term, in affirming this order, considered at length the question whether, as a matter of law, the debts of the relator were necessarily deductible from the value of the corporate assets. We are satisfied with its conclusions on that point, and will not consider the question at length on this appeal. ' We think the respondent company was entitled to have its indebtedness deducted from the value of its corporate assets, which constituted its capital stock, or capital, as distinguished from its actual share stock. The rule has been repeatedly recognized by this court. People ex rel. Union Trust Co. v. Coleman, 126 N. Y., 433 ; 38 St. Rep., 237 : People ex rel. Edison Electric Illuminating Co. v. Barker, 139 N. Y., 55 ; 54 St. Rep., 444 . In this last case Judge Peckham remarks, at page 68, after considering the indebtedness of the corporation, as follows, viz. :

“This indebtedness must, in the nature of things, be taken into

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consideration in arriving at the value of the capital of the relator. And when it is seen that the indebtedness of a corporation is double the amount of all its assets, it follows, upon the system adopted by the state for the assessment of corporations, that the actual value of the capital of such a coporation is zero.”

The case at bar presented a similar situation. According to the statement furnished by the relators to the commissioners, the following state of affairs was disclosed, viz.:

Real estate, assessed value.................... $531,027 00

Personal property ................. 590,269 12

Total................................. $1,121,296 12

Liabilities.................................. 1,938,873 65

Excess of liabilities..................... $817,577 52

The commissioners made up a statement as follows, viz.:

Personal property .......................... $1,500,000

Assessed value of realty..................... 531,027

Amount subject to tax.................. $968,973

There is no contention on the part of the commissioners that they deducted the indebtedness.

It is, therefore, of no importance which statement is taken as a basis of computation.

Taking the figures of the commissioners, by which they are certainly concluded, and deduct from the amount of $968,973, they find subject to taxation the indebtedness of the company of $1,938,873.65, and it is apparent that there is no capital subject to taxation, and the assessment in this case is illegal and must be set aside.

The orders of the special and general terms are, therefore, affirmed.

All concur.