People ex rel. Journeay & Burnham Co. v. Roberts

Putnam, J.: By the provisions of the act of 1896, above quoted, a distinction is made between a domestic and a foreign corporation. The former, when it has two‘kinds of stock, on one of which a dividend of more than six per cent is paid, and on the other a dividend of less than six per cent, must pay one-quarter of a mill for each one per centum of the dividends over six per cent on the par value of such stock, and a tax of one and one-lialf mills on the dollar on the valuation of the stock on which dividends less than six per cent, or no dividends, have been declared. But the act provides that a foreign corporation shall pay a like tax to .be computed upon the basis of the capital stock by it employed in this State. Thus, in People ex rel. N. E. D. Meat Co. v. Roberts (155 N. Y. 408) it appeared that the capital stock of the relator was originally $400,000, which was after4 . wards increased to $800,000. The Comptroller determined that the capital employed by the corporation in this State during the two-years ending October 31, 1895, was $45,900, and during the year ending October 31, 1896, $30,600. The corporation had made dividends during the years in question of over six per centum. The Comptroller settled the tax against the corporation at the rate of one-quarter of a mill for each one per centum of dividends declared during said years, computed on the basis of the capital he had thus determined was employed in this State. This manner of computation was not disapproved by the Court of Appeals in the case cited. The question is, therefore, presented as to the amount of the capital / of the relator employed in this State in the year ending October 31,, 1896. The Comptroller determined that the full amount of its original capital, $1,000,000, was thus employed; and deducting the $75,000 thereof'used in the business of manufacturing, settled the sum on which the relator was liable to pay a tax at $925,000. In the proceedings before the Comptroller, with a view of showing the actual amount and value of the capital of the relator in this State in 1896, a balance sheet prepared by its officers on January 1,, 1897, conceded to show the situation of the company as well during the year 1896 as of the time it was used, was introduced at the instance of the Comptroller, and is as follows: “ Balance Sheet, January 1, 1897. u Assets. Book Value. Actual Value, “ Cash......................... $4,096 05 $4,096 05 “ Accounts receivable.......... 224,940 82 100,000 00 “ Bills receivable................ “Furniture, fixtures, horses and 10,820 42 2,500 00 wagons, machinery and tools... 25,882 90 16,067 13: “ .Merchandise................. 408,310 89 250,000 00 “ “ mfg'.............. 67,000 00 “ Expense...................... 3,886 13 1,000 00 “ P. & L., 1891................. 16,766 35 “ Journeay & Burnham business... 381,529 13 “Total assets............... $1,076,232 69 $440,663 18” The second column of figures was not upon the balance sheet when made, but was afterwards placed thereon by the direction of the [5] ■officers of the relator, as it is claimed, with a view of showing the "true value of the assets of the corporation. On the hearing before the Comptroller, one Conklin, an employee of the relator, testified in regard to the item “ Accounts receivable, $224,940.82,” in the balance sheet, that such accounts were not in fact worth over $100,000; that many of the accounts were worthless and against irresponsible parties, or barred by the Statute of Limitations ; that the item embraced a quantity of uncollectible accounts acquired from the firm of Journeay & Burnham, and also accrued since the incorporation of the relator, which had been accumulating for years, and in value did not exceed $100,000. The witness also testified that the item “ Bills receivable,” valued at $10,820.42 on the balance sheet, did not exceed in value $2,500 ; that the merchandise on such statement called worth $408,310.89 was not in fact worth over $250,000. The witness was not contradicted. His statement was not improbable, and he fully explains the facts upon which his judgment is based. He had been in the •employ of the relator and of the firm who had conducted the same business before it was purchased by the former. He was, therefore, fully competent to testify as to the value of the stock and accounts owned by the relator. We think that, in the absence of any conflicting testimony, the Comptroller was not authorized to discredit the probable statement of the witness as to the true value of the property in question. The Comptroller, if he doubted the statement, might have required an inventory of the accounts and bills and of the merchandise, and called other witnesses as to the value thereof. Failing to do so, we think he could not arbitrarily reject the testimony of the witness, who, from the return, appears to be fully competent, and whose statement was not improbable. In People ex rel. Edison General Electric Co. v. Barker (141 N. Y. 251-255) an officer of the corporation having made, under oath, a valuation of assets to the commissioners of taxes, it was said in regard to the commissioners : “ If they were dissatisfied with his valuation •of assets in gross they could have required them to be given in detail, ■and so been enabled to judge of the fairness or unfairness of the valuation; but they were not justified in assuming that the treasurer, for the purpose of evading taxation, had falsely underestimated the assets because of a recent dividend, the declaration of [6] which did not necessarily involve the fact of an unimpaired capital.” Those remarks can be properly applied to this case. It was shown at the hearing that the relator was indebted in the sum of $93,253.24. This sum should have been deducted from the amount determined by the Comptroller as the capital employed by the relator in this State. (People ex rel. Wiebusch & H. Co. v. Roberts, 154 N. Y. 101.) It is claimed by the relator that the item in the balance sheet, “Journeay & Burnham business, $381,529.13,” should have been deducted from the amount charged against it. The witness Conklin testified that this item represented the value of the good wil} and name. We are unable to concur with the contention of the relator in this regard. All its property and business is in this State. The object of its incorporation was to acquire and continue the business of the firm of Journeay & Burnham, of the city of Brooklyn, N. Y. Under the circumstances, the value of the good will and name of the business was part of relator’s capital stock employed in this State. The balance sheet showed that the value of the good will and name was $381,529.13, and there was-no satisfactory evidence to contradict the admission of the relator contained in said paper. All that the witness Conklin testified to on the subject was, “We couldn’t put a price on it; we couldn’t get anything for it.” Such testimony is far from showing that the good will was of no value, or what its value was. On the rehearing, the burden was upon the relator to show error, if any there was, on the part of the Comptroller in estimating the value of its property employed in this State. We think the relator failed to show such error in regard to this item. The Comptroller, therefore, was justified in taking the statement of the balance sheet as to the value of the good will and name. Our conclusion is that certain reductions should be made from the sum which the Comptroller determined represented the value of the capital employed by the relator in this State, as follows: Amount of assets, as stated in balance sheet...... $1, 076, 232 69 Deduct property employed in manu-. factoring.........,....•........ $75, 000 00 Debts....................'...... 93,253 24 [7] Difference between value of accounts and bills, as stated in ‘‘"real value ”. $133, 261 24 Difference between value of goods on statement and real value......... 158, 310 89 --$459,825 37 Balance............................... $616,407 32 The determination of the Comptroller should be modified accordingly ; the amount of the capital employed in this State settled at the sum above mentioned, on one-half of which the relator should pay a tax at the rate of two mills, and on the other at the rate of one and one-half mills. The determination of the Comptroller is - modified accordingly, without costs to either party. All concurred. Decision of Comptroller modified as specified in opinion, and as modified confirmed, without costs.