
    The People of the State of New York ex rel. New York and Queens Gas and Electric Company, Appellant, v. Thomas L. Feitner and Others, as Commissioners of Taxes and Assessments of the City of New York, Respondents.
    
      Tax — the good will of a corporation is taxable with its franchise — burden of proof as to the value of the franchise—valuation of real properly not binding.
    
    The good will of a corporation is taxable with its franchise as forming a part of the value of its capital stock.
    A corporation which claims that the value of its franchise was included in the assessment of its personal property for the purpose of taxation, must prove the value of such franchise before it can claim a deduction therefor.
    In fixing the value of the personal property of a corporation, the assessors are not bound by the previous assessed value of the corporation’s real estate for the purposes of local taxation, but may legally disregard it and estimate the real estate at its actual value, although this exceeds the assessed, valuation.
    Appeal by the relator, the New York and Queens Gas and Electric Company, from an order of the Supreme Court, made at the Queens County Special Term and entered ip the office of the clerk of the county of Queens on the 30th day of July, 1900, quashing á writ of .certiorari issued to review an assessment on the relator’s capital stock.
    
      Charles F. Mathewson, for the appellant.
    
      George S. Coleman, for the respondents.
   Goodrich, P. J.:

The relator (hereinafter called the gas company), as successor to- and owner of the New York and Queens Light and Power Company (hereinafter called the light company), brings certiorari to review the assessment of its personal property. The assessors originally assessed such personal property at $250,000. Application was made to the commissioners for the correction of the assessment, and, after taking testimony, the amount was reduced to $112,400. This result was reached as follows :

Real property.................................. $270,045 00
Personal property.............. 1'9,539 00
$289,584 00
Bonds.................. $135,000 00
Outstanding accounts..... 7)141 00
Deductions — indebtedness....... $142,141 00
Assessed value real estate... .■........ ' 35,000 00-
177,141 00
$112,443 00

The gas company’s claim is stated in the report which it made to-the commissioners, on the application for correction, as follows :

Total gross assets, including real estate. ........ $82,310 33
Of above, real estate............................. $62,770 45
Of above, property.......................... ... 19,539 88
Capital stock actually paid in or secured to be paid in.. 150,000 00
Amount of surplus earnings.. .■.................... 557 15

The gas company claims that the assessment is erroneous in two items: First, that there are outstanding ■ $135,000 of mortgage bonds,- and, second, that no allowance is made-for $7,141.15, accounts payable of the light company.

On the application to the commissioners for reduction, the treasurer of the gas company was examined au a witness, and testified that he included in the item real estate, $62,770.45,” all the land, poles, wires, engines, etc., of the company; that he did not know the cost of the plant, as it was not erected hy the gas company ; that the land cost $4,500; that the buildings thereon cost .$8,976.32, and that the cost of poles, wires and so forth was approximately $22,382.82. “ Q. At how much is that property carried on your books as an asset? A. The cost of the plant on our books is carried in a total amount, representing stocks and bonds paid for construction. Q. How does it represent stocks and bonds? A. We undertook to enter into a contract to build a plant, and we paid in stocks and bonds the face value of the cost of the plant. Q. What is the cost of that property figured in stocks and bonds, if it was paid for in that way ? A. I cannot determine the ratio. Q. What is the amount at which it is carried on your books as an asset? A. The cost of the plant? Q. Yes, sir. A. $270,045. Q. What is the amount at which the poles, wires and so forth, situated in the streets, is carried on your books as an asset? A. They are included in that. These figures I am giving you now are included in the cost of the plant. Q. At what amount ? A. As I stated before, $22,382.82. Q. Then the book value, the amount at which all your real property is carried on your books as an asset, is $270,045 ? A. Hot only the real property, but poles, land and everything in connection with the cost of the plant up to January 15th.”

He also testified that the company had issued $135,000 of bonds. “ Q. How were these bonds paid for ? A. They were paid for in return for labor and so forth, furnished, and construction of the plant. Q. Were these the bonds which were given in payment of the real estate ? A. Hot for the real property, but for the construction of the whole plant. Q. It is by reasons of such payment they are carried on your books for real property? A. Hot only real property, but the total cost of the plant, is in that $270,'000. The total cost to place us in business, and to furnish electric current.”

The counsel for the gas company stated in his brief that the $270,045 includes not only the real estate but all the tools, machinery and other personal property of the company and its franchises,, the good will of the business and every other expenditure to “ place the company in business and furnish electric current.” The difficulty is that the gas company did not furnish to the commissioners any evidence which would enable them to ascertain the value of the franchises or the good will, or the amount, if- any, paid for them.

The good will of a corporation, though of an intangible nature,, is taxable with the franchise, as forming a part of the value of the share stock. (People ex rel. A. J. Johnson Co. v. Roberts, 159 N. Y. 70 ; People ex rel. Cornell Steamboat Co. v. Dederick, 161 id. 195.)

• The burden was upon the gas company to establish conclusively that there was error in the method by which the assessors arrived at their original valuation and that the assessment did not represent the fair value of the property assessed.

On the other hand, it is to be presumed that the assessors properly performed their duty in the original assessment. (People ex rel. Westchester Fire Ins. Co. v. Davenport, 91 N. Y. 574.)

Section 12 of the Tax Law (Laws of 1896, chap. 908) distinctly states the method of assessing the capital stock of a corporation, viz., that such stock, “ except such part of it as shall have been excepted in the assessment-roll or shall be exempt by law, together with its surplus profits or reserye funds exceeding ten per centum of its capital,, after deducting the assessed value of its real estate, * * * shall be assessed at its actual value.”

In People ex rel. Clearing House v. Barker (31 App. Div. 315 ; affd., without opinion, 158 N. Y. 709, and by the United States Supreme Court, sub. nom. New York State v. Barker, 179 U. S. 279) it was held that this law requires the valuation of the whole property owned by the corporation, whether real or personal, in order to ascertain the capital, which is subject' to taxation, and that after the assessed value of the real estate is deducted therefrom the balance is the capital subject to assessment after deducting debts and legal exemptions.

It would seem to be easy to provide a formula for arriving at the actual value of corporation stock, viz., to ascertain the value of all the corporate rqal and personal property, and from the aggregate deduct the value of the real estate and the corporate indebtedness. But the ascertainment of the value is cumbered with the necessity of fixing the value of the franchises of the corporation. It was incumbent on the gas company to prove the value of its franchises before it could claim a deduction therefor. No such evidence was presented to the commissioners-. On the contrary, the treasurer, Mr. Morrow, stated that the cost of the plant was carried on the books at $270,045, and that the outstanding bonds, amounting.to $135,000, were given, not for the real property, but were paid for in return for labor and so forth furnished, and construction of the plant,” not for the real property, but. for the construction of the whole plant; ” “ not only real property, but the total cost of the plant is in that $270,000. The total cost to place us in business and to furnish electric current.”

It is impossible to deduce from such evidence that any cost of franchises is included in this amount, or that anything was paid for franchises. On the contrary, it does not appear that the franchises have any large value. Any three or more persons, upon complying with article 6 of the Transportation Corporations Law (Laws of 1890, chap. 566), may become a corporation for lighting streets of cities with gas or electricity. It does not appear when the light company was incorporated, but the gas company was incorporated in June, 1899. We may assume that both corporations were organized for the purpose of supplying gas or electric lighting within the city of New York, as the petition states that to. be the principal place of business and as all the property of the gas company is situated therein.. The city, through its .proper department, is authorized by chapter 10, title 8, of the Greater New York charter (Laws of 1897, chap. 378) to make contracts fór gas or electric lighting. We cannot assume that any improper influences were used or illegal fees paid for any contract between the city and the corporation for the use of gas or electricity; and even if there were it could hardly be deemed a legal basis for the valuation of franchises. It is difficult to see that there was any " cost ” to the company for obtaining its franchises beyond the legal fees of incorporation. Therefore, as Mr. Morrow testified that the cost of the plant was $270,045, we must assume that that sum was the actual cost of the plant, and. in the absence-of other evidence this furnishes a basis for valuation. At any rate the gas company has failed to show anything to prove error in the assessment, and has furnished to. the court nothing upon which we can arrive at any other conclusion than that the cost of the plant as carried on the books was the actual cost without relation, to the value of any franchises.

I find nothing in the record which shows that the assessors’ valuation of the real and personal .'property of the corporation was erroneous or unjust.

Neither are assessors bound by the previous assessed valuation of the real estate, and they may legally disregard it and estimate the real estate at its .actual value, although this exceeds the assessed valuation. (People ex rel. Equitable Gas L. Co. v. Barker, 144 N. Y. 94.)

As to the gas company’s first contention, that the amount of the mortgage bonds should be deducted, the return and the Schedule above set out show that such deduction was' actually rnade.i It also, appears that the outstanding accounts payable, amounting to $7,141.15, have been deducted.

The order, therefore, should be affirmed, with costs.

All concurred.

Order affirmed, with ten dollars costs and disbursements.  