People ex rel. Edison General Electric Co. v. Barker

PARKER, J.

The appellant, a Hew York corporation, with a capital stock actually paid in or secured to be paid in of $14,964,900, was assessed by respondents for the year 1892 at $15,000,000. The corporation, feeling aggrieved, made application, pursuant to section 820 of the consolidation act, to have the assessment corrected. It submitted a statement in writing and under oath, which it claimed demonstrated that the assesment complained of was wholly erroneous, and should be taken off. Thereupon respondents reduced the assessment from $15,000,000 to $2,670,700, but, the corporation being still dissatisfied, it became the relator in certiorari proceedings to review the assessment. The writ was dismissed at special term, and the relator, having appealed, insists that a recent decision of the court of appeals (People ex rel. Edison Electric Illuminating Co. v. Barker, 139 N. Y. —-, 34 N. E. 722,) commands a reversal. In that case it was determined: (1) That when the evidence of a corporation as to the value of its assets is so full and complete as to establish the basic facts upon which its claim for reduction rests, and they are not contradicted, and no good reason is made to appear for doubting their truth, a refusal of the taxing officers to decide in accordance with such evidence constitutes legal error. (2)- While the assessing officers are not bound by the sworn statements when they have fair reason or ground for disbelieving them, they must return the information inducing such disbelief, so that the court may understand what it was upon which they acted. This, of course, does not mean that if the facts which lead to the' conclusion that the contention of the aggrieved corporation is not founded in truth may be found in its statement to the taxing officers, and which forms a part of its petition, must also be set up in the return; but, if the assessors rely on facts not otherwise appearing in the proceeding, they must return them. How, the return in this proceeding is in the usual form, and does not set up any of the special facts, if such there were, which induced the determination made. Unless, then, the contention is well founded which is made in their behalf,—that they were supported in their decision by the evidence presented by the corporation,—the assessment made was erroneous. The statement furnished the tax commissioners showed the following matters: Capital stock actually paid in or secured to be paid in, $14,964,900. But its gross assets, exclusive of patent rights, value unknown, it alleged to be only $9,459,500; thus giving its gross assets a valuation of about $5,000,000 less than the sum of money actually paid in, or secured to be paid in for its stock. But according to the statement the gross assets were chargeable with the payment of an indebtedness of the corporation, amounting to $4,740,174, making the net value of its assets only $4,719,326, or less than one-third of the amount of money paid in or secured to be paid for its capital stock. The statement further alleges that other property of the corporation, amounting to $2,116,000, was permanently invested and taxable in other states; that the gross assets included real estate of the assessed value of $982,500,' while $3,526,800 of the gross assets were invested in the stocks of other corporations and otherwise taxed; making an aggregate of $11,365,474 to be offset, according to the contention of the relator, against gross assets amounting only to $9,459,400, necessarily leaving no basis for an assessment.

There are two grounds upon which the respondents challenge the statement of gross assets made by the relator: First. It expressly excluded the value of its patent rights, asserting that such value was unknown. If, then, it was proper for the tax commissioners to consider their value, the relator did not present any evidence to them which was controlling on the question; and it has not presented any evidence in this proceeding which will support a determination that they were not of such a value that, added to relator’s admitted valuation of its gross assets, their total value would not be equal to the sum which the tax commissioners found them to be worth. It is true that relator stated their cost to have been $326,000, but, having further said that their present value is unknown, it cannot be assumed, for the purposes of this proceeding, that the commissioners erred in their estimate. It must be proven that they did, if such is the fact.

Whether an assessment against a corporation for the value of its patents is legal was suggested, but not decided, by the court of appeals in the case above referred to, because not necessary for its decision. We shall not consider that question now, because the second ground on which the commissioners challenge the truth of relator’s representation as to the gross value of its assets, seems to us sufficient not only to have raised a doubt, but to have justified an inference of fact that they were of greater value than claimed by relator; and, if so, then relator could only succeed by showing in this proceeding that there was an overvaluation. Laws 1880, c. 269. This was not attempted. As has already been observed, the relator stated to the commissioners that, after deducting the amount of its indebtedness from the gross valuation Of its assets, the net value would be only $4,719,326; yet in the same statement the relator admitted that for the year just ended it had declared and paid a dividend of 8 per cent, on its capital stock of $15,000,000. A moment’s examination will disclose that the tax commissioners would naturally and properly attach considerable importance to this statement. The statute declares that it shall not be lawful for the directors or managers of any incorporated company in this state to make dividends except from the surplus profits arising from the business of the corporation. If the capital of the corporation was impaired (counting the patents at cost) to the extent that the affidavit presented to the commissioners was intended to assure them, it would follow that the directors acted in violation of law. The presumption, of course, is that they acted legally and properly. This presumption, which attached to each of the members of the board of directors participating in declaring a dividend, amounted to an assertion on their part, but shortly before the application to reduce the assessment, that the value of the corporate assets was $15,000,000. This evidence the relator placed before the tax commissioners, and they decided that the evidence furnished by an officer of the company for the purpose of securing a pecuniary advantage to it was overborne by the testimony furnished by the action of the directors and managers of the company while proceeding in the discharge of the trust committed to them. These facts so far distinguish this case from the one cited as to require a different determination. The order should be affirmed, with $50 costs and printing disbursements. All concur.