Opinion
June Term, 1896.
John C. Tomlinson, for the appellant.
James M. Ward, for the respondents
The return to the writ shows that the commissioners in making the assessment acted upon no other information than that contained in the statements filed by the company. None of the allegations of the petition were denied, and no explanation is given as to how or why the assessment was made, beyond that furnished by the return, which states that the commissioners having before them the statement in writing filed by the relator upon such application for a cancellation of the assessment against it for the year 1895, examined into * * * and considered such application and statement, and fixed the amount of such assessment at the sum of $939,942, which they believe to be just. This assessment, therefore, to be sustained, must be warranted by the statements filed by the relator, and the question presented is as to whether on such statements the amount fixed could lawfully have been made on the capital of the relator.
In defining the powers and duties of the department of taxes, the Court of Appeals has established certain principles: (1) The action of the commissioners must be based upon facts and evidence before them, and must not be capricious, arbitrary or fanciful. (2) The commissioners must return the information and evidence upon which they acted. (3) Where nothing is returned beyond the statements filed by the relator, these statements must be regarded as the basis of their action, and as containing the only facts upon which the assessment was made. (4) Statements which are not denied, or as to which the return is silent, must be reguarded as true. The law is equally well settled as to what is the subject of assessment, and in what way the value of a corporation's capital is to be ascertained for the purposes of taxation. (1) The capital stock of every company liable to taxation shall be assessed at its actual value. (2) It is not the value of the capital stock, but the value of the capital that is to be ascertained. (3) To ascertain the capital subject to taxation requires the valuation of the whole property owned by the corporation, whether real or personal or both, and from the aggregate is to be deducted the assessed value of the real estate, and the balance is the capital subject to assessment, after deducting debts and any exemptions allowed by law. (4) The franchises of the corporation are not part of its taxable capital.
Applying these rules, we are to determine whether the commissioners were justified in fixing the value of the subways, which concededly was all the real estate owned by the relator, at its cost. Although they had assessed the same at a much less sum for purposes of taxation as real estate, they were not concluded, in determining the value of the corporation's capital, by such assessment. If the value of the real estate was found to be in excess of such assessed valuation then the latter was to be deducted. This is clearly expressed in the opinion of the learned judge at Special Term: "It is undisputed, however, that such real estate, which is wholly situated within this city, was assessed for purposes of taxation by the respondents at the sum of $715,000. If this should be taken as the actual value, it is evident upon the face of the record that the relator should not have been assessed at all in respect to its personal property, but it seems to have been held that such assessed value is not conclusive upon the respondents. They may, notwithstanding such assessment, consider the question as still open when they come to determine the amount which should be assessed for personal taxes, and estimate and determine the value of the real estate to be something very much larger. While consistency and good administration, to say the least, should forbid such a result, it can no longer be said that the prior assessment of value is conclusive under the decisions of the Court of Appeals."
Upon the showing made then were the commissioners justified in fixing as the value of the subways the amount that they had cost? Ordinarily the cost of property would be a safe guide to follow in determining the value, but the exceptional character of this property, its uses, and the company's inability to rent more than forty per cent of its subways, the poor returns upon the amount invested, and the present insolvent condition of the company, are considerations which cannot be eliminated in determining the value of these subways as real estate. It is shown that the relator was subject to the control of the city, both as to where it should build and the extent, and it is further shown that as the result sixty per cent of its subways are unoccupied and represent an actual loss. And that its business has not been profitable appears by the fact that its stock had never paid any dividends, and that it is in default in the interest on its bonds. Thus it has neither earned nor is it earning any return upon its actual investment. It would be disregarding all the elements which usually go to make up value to say that such property was worth what it cost. Considering, therefore, the peculiar character of such property, the cost of construction is not a fair test of its value. The commissioners, however, disregarding these considerations, have treated these subways, which are in the ground and restricted to a specific use, in the same way as they would the real estate ordinarily owned by a corporation which is unrestricted in its use and available for all suitable purposes, and with reference to which no injustice could be claimed if assessed at its actual cost.
We think it clearly appears that the action of the commissioners was arbitrary and unjust. Prior to 1895, the capital of the company, exclusive of its real estate, for the purposes of taxation had never been valued at over $75,000, and as there was no change in the condition of the company or in the character or the value of its property in the year 1895 which would justify an increased assessment, the action of the commissioners in increasing it to $939,942 should be set aside, and the order appealed from which dismissed the writ should be accordingly reversed, with costs, and the amount of the capital assessed at the same sum as in the years prior to 1895.
VAN BRUNT, P.J., BARRETT, RUMSEY and INGRAHAM, JJ., concurred.
Order reversed, with costs.