
    The People ex rel. The New York Mutual Gas Light Co., Relator, v. James L. Wells et al., as Commissioners of Taxes and Assessments for the City of New York, Respondents.
    (Supreme Court, New York Special Term,
    February, 1904.)
    Tax — Application to tax commissioners to correct an assessment of a corporation — Its statement of its financial condition how far conclusive upon them — Evidence to be returned by them — Market value of stock, and earnings, as bases of assessment — Exemption of realty already taxed by the Franchise Tax Law — Franchise not taxable as capital.
    Where a corporation applies to tax commissioners for correction of an assessment made by them upon its capital and presents to them a sworn statement of its liabilities and assets and of the value of the latter, they must accept the statement as true where there is nothing to contradict it.
    Whenever their acts are challenged they must beside setting forth the conclusion reached by them also state the evidence on which it is based, to the end that the court may determine whether the conclusion was fairly drawn from the facts established or whether they acted arbitrarily in the matter.
    The market value of the stock of a corporation, as evidence of the actual value of its assets, is a deceptive and treacherous test and is particularly unsafe where the commissioners do not return how they ascertained the market value.
    The earnings of a corporation, as ascertained by the commissioners so far as appears only from the dividend declared and paid during the year, are not a proper basis of assessment unless it appears that the dividend was paid from the earnings of that particular year.
    Gas pipes and mains of a corporation laid in streets and which have been included in the State assessment under the Franchise Tax Law are not taxable by the local authorities as real estate.
    The franchise of a corporation is not a part of its taxable capital.
    Oebtioeabi to review an assessment.
    Guthrie, Oravath & Henderson, for relator.
    John J. Delany, Corporation Counsel (David Rumsey, of counsel), for respondents.
   Scott, J.

In my opinion this proceeding cannot he distinguished from People ex rel. Consolidated Gas Co. v. Feitner, 78 App. Div. 313. In this case, as in that, the commissioners were presented with a sworn statement of the assets and liabilities of the relator, and of the value of such assets. As to such a statement, the Appellate Division said: “ If there was nothing to contradict the statement filed by the relator and the testimony of its president, then the commissioners were bound to accept such statement and testimony as true.” Neither in that case nor in this did the commissioners accept the statement as true, and in that case it was held that their action was not justified by the statements contained in their return as the reasons leading to the result arrived at by them. In that case they stated that they determined the value of the gross assets “ upon the earnings of the company, supported by the market rate of the share stock at $190, including the fixed charges of interest upon their bonds and the dividends of five and a half per cent, upon their stock.” This was held to be insufficient, because it amounted only to a statement of the conclusions at which the commissioners arrived, without disclosing the evidence, if any, upon which they acted, and it was laid down as a rule to be observed whenever the act of the assessors is challenged that they must, in addition to setting forth the conclusion reached by them, also set forth the evidence upon which the conclusion is based, to the end that the court may determine whether the conclusion was fairly drawn from the facts established, or whether they acted arbitrarily in the matter. The commissioners’ return in the present case shows that they adopted two methods of determining the value of the relator’s given assets. By the first method they took the capital at par as $3,500,000, and “ on account of the market value of the stock of the relator being $210 per share, we determined that this indicated an added value of $3,850,000,” thus making the total value of the relator’s estate $7,350,000. The reliance upon market value of the share stock of a corporation as evidence of the actual value of its assets has been repeatedly condemned by the courts, and has been declared by the Court of Appeals to be the most deceptive and treacherous test,” to be resorted to only in those rare cases in which a better means or truer test of valuation is not obtainable. People ex rel. Union Trust Co. v. Coleman, 126 N. T. 433. Furthermore, the commissioners do not return how they ascertained the market value of the share stock, and in this aspect the present case presents one of the same features commented upon in the Consolidated Gas Company case. The second method of ascertaining the value of the total assets is thus stated by the commissioners: “ We ascertained that the company had earned during the year preceding the second Monday of January, 1902, nine per cent, upon its capital stock, being the sum of $315,000, and we were informed and believe that the said company was capable of earning the said sum annually. From our general knowledge of the value of properties of this kind, and of the sums for which such properties, under ordinary circumstances, would sell, we believe that the entire plant or estate of said corporation would, under ordinary circumstances, sell for a sum which would produce four per cent, per annum upon the investjnent, and, therefore, by capitalizing the actual earnings of said company at four per cent., it appeared that the fair market value of the entire estate of this corporation, including franchises, was $7,875,000.” This statement differs only in elaboration from the statement in the return of the Consolidated Gas Company case, that the commissioners had determined the value of the gross assets “ upon the earnings of the company.” The same difficulty presents itself in this case, as was pointed out in that, to wit: that the commissioners did not show how they ascertained the amount of the gross earnings unless from the company’s statement as to the amount of dividend paid during the year, and it may be taken as well settled that the mere declaration and payment of a given sum by way of dividend does not, by itself, raise a presumption that the corporation had earned, in the year for which the dividend was so declared and paid, the amount of the dividend, for, as suggested in the Consolidated Gas Company case, the dividend may have been paid from a surplus accumulated in prior years, and there may not have been any dividend at all earned in the particular year for which it is paid. The commissioners’ statement that they were “ informed and believe ” that the company was capable of earning the amount of the dividend every year goes for nothing in the absence of any disclosure of the sources and nature of their information. For the reasons above stated, and following the decision of the Appellate Division of this department in the case above cited, which finds support in the many cases referred to in its opinion, I am constrained to hold that the commissioners’ assessment was erroneous. Upon the trial the relator moved upon the petition and return for relief. The defendants upon the same papers moved for the dismissal of the writ. Heither side moved for the taking of testimony or the appointment of a referee, and no suggestion was made by either side that a reference back to the commissioners would result in the presentation of any further facts than those presented by the papers. It becomes the duty of the court, therefore, to determine, upon these papers, the amount by which the assessment should be reduced. The relator’s statement filed with the tax commissioners showed that the value of its total gross assets was $4,511,666, which was made up of real estate of the value of $2,721,750, and “personal property” of the value of $1,789,916. It appeared, however, from a supplementary statement, also filed with the commissioners, that the value of the real estate as given in the first statement included mains and pipes in the streets valued at $768,290, which had been included in the State assessment under the Franchise Tax Law, and was, therefore, not taxable by the local authorities. This would leave the total value of the assests liable to assessment, excluding the franchise and property included in the assessment of the franchise, $3,743,376. It is conceded on all hands that this amount is subject to the deduction of $3,125,011.27 for the assessed value of its real estate, debts, investment in city bonds and ten per cent, of the capital stock. This leaves the sum of $618,364.73 as the amount at which the relator’s assessment should have been fixed. The assessment must, therefore, be reduced to that sum.

Ordered accordingly.  