Sun Mutual Insurance v. Mayor of New York — 7 N.Y. Super. Ct. 10

Majority

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The Sun Mutual Ins. Co., Appellants v. The Mayor, Aldermen, and Commonalty of the City of New York, Harvey Hart, and Joseph Jenkins, Respondents.

Headnote

The accumulated profits of a Mutual Insurance Company, which are retained as a fund for the’payment of losses, are a capital stock, upon which the company is liable to taxation as a monied corporation.

An act of the Legislature, directing a sum certain, arising from the proceeds of .a local tax, otherwise legally imposed, to he applied to the payment of contingent expenses, is not in conflict with the provisions of the constitution.

(Before Oakley, Ch. J., Doer and Paine, J. J.)

May 10, 1851.

This was an appeal from a judgment at special term .dismissing the complaint. " The question to he determined arose entirely upon the pleadings.

The complaint set forth inter alia that the plaintiffs (the appellants) are a corporation, incorporated and existing under and by virtue of three successive acts of the Legislature, passed respectively May 22,1841 ; April 6,1842 ; and March 19,1844; and prayed that those acts might be taken as part of -the complaint. That the Company transacts and has always transacted its whole business with a fund created and arising out of the moneys paid or agreed to be paid to it for premiums of insurance against fire and marine risks, and that all its property, assets, and effects consisted of moneys invested and uninvested, so paid or agreed to be paid for premiums, of interest upon portions of such moneys as were temporarily invested, and of articles of office furniture of small value. That the net profits of the Company, that is the. surplus annually

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remaining- after the payment of losses and expenses, have always been invested in the manner directed by the several acts above mentioned, and certificates annually issued therefor to the several persons or parties entitled, and averred that such net profits were the personal property of the persons to whom such certificates Avere issued, and Avere liable to taxation in their hands. That the Company had not and nev-er had any capital stock, and that all the property it held, belonged, subject to the payment of losses and expenses, to those who had effected insurance with the Company or their representatives or assigns.

That the defendant Jenkins, a constable of the city, had lately demanded from the Company the sum of $10,806.25, with interest, as due for a corporation ta.x for the year 1850, and that in making such demand, he acted under color of an authority purporting to be derived from a warrant or Avarrants, issued by the defendant, Hart, as Receiver of taxes for the city. That in issuing such Avarrant or warrants, the said Receiver acted under an authority purporting to be conferred upon him by a warrant in due form under the hands and seals of five of the Supervisors of the city, including the Mayor, and Recorder ■ that this last mentioned warrant Avas annexed to the Assessment Roll of the first Avard of the city for 1850, and in substance commanded the Receiver to collect, from each of the persons or parties named on the roll, the sums of money set opposite his, her, or their name in the last column of the roll. That the name of the plaintiffs was contained in the roll as that of a taxable person or persons, and that on‘the last có’lumn of the roll, opposite their name, Avas set down the sum of money, the payment of which had been demanded from the company in the manner above stated.

The complaint then averred that the only authority under which the Supervisors claimed the power of raising and collecting a tax within the city and county of Nbav York, was derived from an act of the Legislature, passed March 28, 1850, entitled “ an Act to enable the Supervisors of the city and county of New York to raise money by tax,” and that this act, as contravening several provisions in the constitution of the state, Avas ■null and void.; that admitting the constitutionality of the act, the Company was not liable to. assessment or taxation, and that

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all the proceedings by which the sum demanded had been assessed and directed to be levied were illegal and void, and it concluded with a prayer, in the usual form, for a perpetual injunction.

The- answer admitted the principal facts set forth in the complaint, but insisted upon the legality of the tax demanded from the Company, and of the proceedings to enforce its application, and averred that the accumulated profits of the Company were a capital within the meaning of the Revised Statutes, upon which it was liable to be taxed, and that it appeared from a statement published by the Company, that their profits amounted to more ' than $950,000, the sum upon which, as a capital, the tax demanded had been assessed.

The questions of daw arising upon the pleadings were,

First, Whether the surplus profits of the Company, which were accumulated and invested according to the provisions of the Acts constituting its charter, were a capital upon which it was liable to be taxed as a monied Corporation ? and

Second, Whether the Act of March 23, 1850, was repugnant to any provisions in the Constitution of the S tctte ?^[1]

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These questions were now very fully and ably argued by H. Ketchum and S. Jones for Appellants, and H. E. Davies for Respondents—who insisted that upon the first question the judgment of the Court of Appeals, in the case of the Mutual Insurance Company of Buffalo, and the Board of Supervisors of the County of Erie, was a controlling authority (now reported, 4 Comst.). He also cited upon the same question, Deraismes v. Mutual Insurance Company, 1 Comst. 371; Howland & Aspinwall v. Myer, 3 Comst. 290; and the Sun Mutual Insurance Company v. the Mayor, &c., 8 Barb. S. C. R. 450.

The provisions in the Constitution, which the counsel for the appellants contended were violated by the Act of March 23, 1850, are § 16 Art. 3 and § 13 Art. 7. The first of which declares that, “ no private or local bill which may be passed by the Legislature shall embrace more than one subject, and that shall be expressed in the title"—and the second, that, “ Every law which imposes, continues, or revives a tax, shall distinctly state the tax, and the object to which it is to be applied ; and it shall not be sufficient to refer to any other law to fix such tax or object.”

By the Court.

It is not to be denied that there is much force in the arguments that have been addressed to us by the learned counsel for the appellants, upon the principal question in the cause, viz. the liability of the Company to be taxed, under the Revised Statutes, as a monied corporation, deriving an income or profit from its capital (1 R. S. Part 1, Chap. 13, Tit. iv.); and were we at liberty to consider that question as still open, we should, perhaps, find it difficult to escape from the conclusion that was pressed upon our adop

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tion ; but we cannot regard the question as now open. We are unable to distinguish this case from that which the Court of Appeals has recently decided. The difference between them is merely circumstantial; in principle, there is none whatever ; and the judgment of the court of ultimate jurisdiction must therefore control our own. We are thus constrained to say that the annual profits of the Company, which are retained and invested as a fund for the payment of its debts, and yielding an income to its members, are a capital, within the meaning of the Revised Statutes, and upon which, as such, the disputed tax has been legally assessed.

Nor can wo exempt the appellants from the payment of this tax, upon the ground that the Act of the Legislature under the authority of whicn. it was imposed, is unconstitutional and void. The power of courts of justice to declare the nullity of Legislative Acts, which violate the provisions either of the Constitution of tlie United States or of the State, is undoubted ; but the power, for manifest reasons, is to be exercised in all cases, with extreme caution, and never, where a serious doubt exists as to the true interpretation of the provisions that are alleged to be repugnant. In the present case, we think, it may be seriously doubted, whether the clause in the Constitution upon which the appellants’ counsel mainly relied (Cons. § 13, Art. 7), ought not to be construed as relating, exclusively, to the imposition of a general tax for State purposes, and not, at all, to the imposition of a local tax for local objects, and the doubts we feel would alone preclude our positive adoption of a different construction.

Were we satisfied, however, that tlie clause in question must necessarily be construed as embracing every law by which a tax, local or general, is imposed, or an authority to impose such a tax, is given, we should still be unable to say that the intent of the provision is violated by the act of 1850, under which our Board of Supervisors has acted. Had the act failed to state the amount of the tax that the Supervisors are empowered to raise, or to direct the application of the money when raised, it would have been liable to the objections that have been urged ; but it is not thus defective, and neither of these sins of omission can be justly imputed. That the tax itself (that is, the amount to be raised, and the

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property upon which it is to be levied) is distinctly stated, is not denied, and we think that the object to which it is to be applied, is stated as distinctly as, from, the nature of the object, could be justly required, or, perhaps, was practicable. It is true, that a very large proportion of the whole amount of the tax is directed to be applied towards defraying the contingent expenses of the city, without any distribution ot those expenses, under different heads or branches of expenditure, and the appropriation to each of a definite sum. But if the expenses thus provided for were, as we are bound to "suppose, in reality contingent, that is casual, uncertain, and fluctuating, such a division and special appropriation were impracticable. Expenses are contingent, because it is not and cannot be known, under what head of expenditure they will fall, nor consequently what sum must be appropriated, under each head, in order to meet them. It is only their total amount that can be anticipated by an estimate approaching to certainty, and hence it is only by the appropriation of a sum, in gross, that the requisite provision for their payment can be made.

The Constitution of the United States contains a clause which bears a very exact analogy to that we are considering. It is that which declares that “ no money shall be' drawn from the treasury but in consequence of appropriations made by law ” (Const. U. S., Art. 1, Sec. 9, No. 6). The appropriation of money to a particular purpose means exactly the same, as the designation of the object to which the money is to be applied. The difference is only in the form of expression. We believe that every Act of Congress, providing for the annual expenses of an executive department of the government, appropriates a sum, in gross, as a provision for miscellaneous or contingent expenses, but, we apprehend, it has never been thought that upon this ground the validity of such a law, or appropriation, was liable to be questioned.

The objection to the validity of the Act of 1850, founded upon § 16 in Art. 3 of the Constitution, is still more untenable than that we have considered. The raising of a tax, and its collection and application, may, most reasonably, be considered as one subject, and this subject is therefore sufficiently expressed in the title of the act. This is emphatically true, if the clause in the

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Constitution which relates to the imposition of a tax, is applicable to a local act, since upon this supposition the law, which imposes the tax, must embrace its application.

It is not a light thing to set aside an Act of the Legislature, even when the objections to its validity are grave and weighty, but when they touch not the substance of the law, or of the authority of the Legislature to pass it, but are merely criticisms upon its form or phraseology, the exercise of such a power by the judiciary of the state would be prolific of evil, and would soon be universally condemned. We think the condemnation would be just, and are not at all disposed to incur it.

The judgment at special term is affirmed with costs.