App. Div.]

Third Department, March, 1908.

iana, where its investment amounts to $951,281. The relator maintains an office at 82 Beaver street, New York, for the purpose of soliciting orders and selling products and looking after its business generally.

During the year ending October 31, 1905, the company declared dividends amounting to $190,000, being ninety-five per cent on the issued capital stock of $200,000. It paid the running expenses of the office maintained in New York approximating $40,000, and maintained during the year in question in this State an average bank balance of $437,840.47, from which it paid its current expenses.

The Comptroller found the capital employed in this State to be at least $200,000, and assessed a franchise tax of twenty-three and three-quarter mills, being a rate of one-fourth of a mill on each one per cent of the dividends declared, and fixed a license fee of $250, being at the rate of one-eighth of one per cent of the capital employed.

Cornelius C. Beekman, for the relator.

William S. Jackson, Attorney-General, and Timothy 1. Dillon, Deputy Attorney-General, for the respondent.

SMITH, P. J.:

The relator contends first that it is not doing business in this State; but this is its only business office. All of the products of the mills are sold from this office and moneys collected. It seems to me undoubted that the entire negotiation of the sale of the product of defendant's mine is the doing of business within the meaning of the statute.

The relator further contends that the capital of this corporation cannot be taxed, because it is wholly engaged in interstate commerce. The products sold must all be transported from Louisiana into this State and other States where a purchaser is found. It would seem, therefore, that the business of the corporation was purely an interstate business, and that its capital is so employed.

There is much confusion in the books as to the right of a State to levy taxes upon corporations engaged in interstate commerce. This confusion has in part arisen from a misuse of terms. The statute imposes this tax "for the privilege of exercising its corpo

Third Department, March, 1908.

[Vol. 125. rate franchises or carrying on its business in such corporate or organized capacity in this State." It has been held that this tax upon a foreign corporation is a tax upon its business, and it is argued that to tax the business of a foreign corporation engaged in interstate commerce places a burden upon interstate commerce. By whatever name this tax may be described, it is as stated in the statute a tax "for the privilege of exercising its corporate franchises" within our State, and it is based upon the amount of capital stock which is employed within this State, and as such I think is taxable, notwithstanding that capital stock is used in a business which in its nature constitutes commerce between the States.

In Old Dominion Steamship Co. v. Virginia (198 U. S. 305) the question arose as to the right to tax vessels which were engaged in interstate commerce. Mr. Justice BREWER, in speaking for the court, says: "The facts being settled, the only question is one of law. Can Virginia legally subject these vessels to State taxation? The general rule is that tangible personal property is subject to taxation by the State in which it is, no matter where the domicil of the owner may be. This rule is not affected by the fact that the property is employed in interstate transportation. Pullman's Palace Car Company v. Pennsylvania (141 U. S. 18), in which Mr. Justice GRAY speaking for the court said (p. 23): 'It is equally well settled that there is nothing in the Constitution or laws of the United States which prevents a State from taxing personal property, employed in interstate or foreign commerce, like other personal property within its jurisdiction."" In Postal Telegraph Cable Co. v. Adams (155 U. S. 695) Mr. Chief Justice FULLER, in writing for the court, says: "It is settled that where by way of duties laid on the transportation of the subjects of interstate commerce, or on the receipts derived therefrom, or on the occupation or business of carrying it on, a tax is levied by a State on interstate commerce, such taxation amounts to a regulation of such commerce and cannot be sustained. But property in a State belonging to a corporation, whether foreign or domestic, engaged in foreign or interstate commerce, may be taxed, or a tax may be imposed on the corporation m account of its property within a State, and may take the form of a tax for the privilege of exercising its franchises within the State, if the ascertainment of the amount is made dependent in fact on the value

App. Div.]

Third Department, March, 1908.

of its property situated within the State (the exaction, therefore, not being susceptible of exceeding the sum which might be leviable directly thereon), and if payment be not made a condition precedent to the right to carry on the business, but its enforcement left to the ordinary means devised for the collection of taxes. The corporation is thus made to bear its proper proportion of the burdens of the goverment under whose protection it conducts its operations, while interstate cominerce is not in itself subjected to restraint or impediment." In People ex rel. Seth Thomas Clock Co. v. Wemple (133 N. Y. 323), where the relator's manufactory was out of the State from which all the goods came, nevertheless the capital of the corporation was held taxable. In People ex rel. Southern Cotton Oil Co. v. Wemple (131 N. Y. 64) the capital of a foreign corporation employed within the State was held taxable under similar circumstances. At page 71, O'BRIEN, J., in writing for the court, says: "The property of a foreign corporation engaged in foreign or interstate commerce may be taxed equally with like property of a domestic corporation engaged in the same business, but a tax or other burden imposed upon the property of either corporation because it is used to carry on that commerce, or upon the transportation of persons or property, or for the navigation of the public waters over which the transportation is made, is invalid and void, as interference with and obstruction of the power of Congress in the regulation of commerce. (Gloucester Ferry Co. v. Penn., 114 U. S. 211.)"

Within these authorities we think this relator is clearly taxable within this State. The amount of the tax is regulated by the capital employed within the State, and does not exceed its personal property therein for which the corporation might itself be directly taxed. By the terms of the statute it is subject to no other tax for personal property. The payment of the tax is not made a condition precedent to the carrying on of this interstate business, nor is it levied upon interstate traffic as such, but it is a tax levied upon domestic and foreign corporations alike, whether engaged in intrastate or interstate commerce. In State of New York ex rel. Pennsyl vania R. R. Co. v. Knight (192 U. S. 21)* the court was reviewing a

*See, also, People ex rel. Pennsylvania R. R. Co. v. Knight (67 App. Div. 398. affd., 171 N. Y. 354).— [REP.

Third Department, March, 1908.

[Vol. 125. tax placed upon the relator measured by the gross earnings of a cab service, which was attached to an interstate service from the State of New Jersey into the State of New York. It was there held that as the cab service was separate and independent from the train service, and was wholly performed within the State, it was taxable It is strongly intimated that if that service were a part of the through service, and tickets were bought which would include transportation upon the cabs and upon the trains, such taxation would be a regulation of interstate commerce. It will be borne in mind, however, that the tax there imposed was under a different section of the statute. That tax was imposed under section 184 of the Tax Law,* and was indirectly imposed upon the gross earnings of the relator within the State. A tax upon gross earnings is more nearly a regulation of traffic than a tax upon capital employed within the State. In the opinion of Mr. Chief Justice FULLER, above cited, a tax" on the receipts derived" from interstate commerce is held to be a regulation of interstate commerce. So that even if this case can be held to be an authority for the invalidity of a tax upon the gross earnings of a corporation engaged in interstate commerce, it is no authority against the validity of a tax based upon the amount of capital stock employed within the State.

The capital stock originally issued was only $200,000. It appears that this $200,000 was invested in Louisiana in the mines. In that State there was invested in addition, however, $700,000 and $500,000 was invested in this State. The $500,000 invested in this State, although not part of the original capital stock, is deemed capital stock for the purposes of taxation. If the capital actually invested be deemed capital stock for the purposes of taxation it should then be deemed capital stock for the purpose of determining the percentage of taxation. To reach a just proportion, therefore, the percentage should be reckoned upon five-fourteenths of $200,000 as the amount of relator's capital stock employed within this State. This is the rule which is now prescribed by the statute. Although the statute has so prescribed since this tax was levied it is a fair basis upon which this tax should be estimated.

The determination of the Comptroller is, therefore, reversed and

*Since amd. by Laws of 1907, chap. 734.— [REP.

App. Div.]

Third Department, March, 1908.

the matter remitted to the Comptroller for determination upon the principles stated in this opinion.

All concurred.

Determination of the Comptroller reversed, with fifty dollars costs and disbursements to the relator, and matter remitted to the Comptroller for determination upon the principles stated in the opinion.

SARANAC LAND AND TIMBER COMPANY, Respondent, v. JAMES A. ROBERTS, as Comptroller of the State of New York, Appellant.

Third Department, March 19, 1908.

Tax-sale of lands for non-payment of taxes - effect of invalidity of portion of assessment evidence presumption as to notice of assessment - title of State not perfected by subsequent tax sales - Statute of Limitations- period postponed until plaintiff can sue- partyejectment to recover lands purchased by State - Comptroller proper defendant-champerty - conveyance of lands held adversely — when State not in actual possession — when possession of part not possession of whole — statutory construction - when State not a "person."

Where trustees of a school district have levied a tax on forest lands outside the district without notice to the non-resident owner, the defect is jurisdictional and invalidates a sale made by the Comptroller although it was also made to satisfy unpaid State, county, town and highway taxes, the assessment of which was valid.

Where the State sells lands for unpaid taxes levied at different times, some of which are valid and others invalid, the title of one against whom the sale is made is not thereby divested. By mingling good and bad together the State cannot give a valid title to the property thus assessed.

Where the trustees of a school district instead of ascertaining the value of property taxed and giving notice to the owner as required by sections 68 and 74 of title 7 of chapter 555 of the Laws of 1864, have merely taken the valuation on the last assessment roll of the town which included lands outside the school district, it will be presumed that they gave no notice to the owner, for no notice was required by the statute where the valuation was so obtained. The title of the State to lands bid in on such invalid sale is not perfected by a title acquired on subsequent tax sales, where they were bid off to the State as required by section 5 of chapter 402 of the Laws of 1881 without an opportunity for competition.