
    The People of the State of New York ex rel. The Consolidated Telegraph and Electrical Subway Company, Appellant, v. Edward P. Barker and Others, Commissioners of Taxes and Assessments of the City and County of New York, Respondents.
    
      Taxation—method of ascertaining 'the taxable capital of a corporation — return to a writ of certiorari — subways improperly valued at their cost.
    
    The action of the commissioners of taxes and assessments must he based upon facts and upon evidence before them, and it must not be capricious, arbitrary or fanciful, and they must state in the return to a writ of certiorari the information or evidence upon which they acted.
    Where, in reply to a writ of certiorari issued to' review their action, nothing is returned beyond the. statements filed by the party aggrieved, these statements must be regarded as the basis of their action, and as containing the only facts upon which the assessment was -made.
    Statements which are not denied, or as to which the return is silent, must be regarded as true. «
    The personal property of every company liable to taxation must be assessed at its actual value, and the value to be ascertained is not that of the capital stock, but is that of the capital itself.
    To determine the capital thus subject to taxation requires a valuation of all the property of every nature owned by the corporation, whether real or personal, and that from this aggregate there be deducted the assessed value of the real estate, which leaves the capital subject to assessment, after deducting debts and any exemptions allowed by law.
    The franchises of a corporation are not a part of its taxable capital.
    
      Upon, the hearing on the return to a writ oí certiorari'granted to review the action, •of the commissioners of taxes and. assessments in the city and. county of New. York, in assessing the personal property of the, relator for the year 1895, it appeared that the relator was a domestic corporation which had constructed," maintained and operated subways in New York city to hold and contain- electrical wires and conductors. .While the hooks of the commissioners wore open for correction the relator submitted to the commissioners statements which showed a deficiency of taxable assets of over §3,500,000. The commissioners demanded a supplemental statement, and in this the relator stated that the real estate of the company consisted exclusively of its subways, which had cost about §5,433,717.94; that only about' forty per dent of the subways were occupied, and that over sixty per cent yielded no income whatever; that' in laying the subways the relator was governed. by- the hoard of electrical ■ control,, which compelled it to lay the subways where that hoard thought they would best, meet existing and future public requirements; that it was, by law, required to furnish space .gratis for the conductors of the city, which space would otherwise represent an annual income of §14,558.17; that it had never earned nor" declared any dividend, and had defaulted in the interest on its second mortgage bonds.
    In determining the property of the corporation liable to taxation, the commissioners acted solely on the statement of the relator. 1 They added to the cost of the subways .the miscellaneous assets, amounting to §153,057.60, and from this they deducted the debts, the assessed value of the real estate and the ' amounts invested in the stock of other corporations, taxable upon their capital, and fixed the taxable balance at §939,493,
    
      Meld, that although the commissioners had assessed the subways, which was the" only real estate owned by the relator, at a much less sum (§715,000), for the '. purposes of taxation .ns real estate they were not concluded by such assess-^ ments in determining the value of the capital of the corporation;
    That it was, however, upon the facts, clearly unjust for the commissioners to take the cost of the subways as a safe guide to follow in determining their value, and that their action should be set aside.
    Appeal by the relator. The Consolidated' Telegraph and Electrical Subway Company, from an order" of the Supreme, Court, made at the blew York Special Term and entered in the office of the clerk -of the county of blew York on the 7th day of Marcia, 1896, dismissing a writ of certiorari granted to review the action of the respondents in assessing the personal property of the relator for the purpose of taxation for the year 1895.
    • The appellant is a domestic corporation engaged in the business of constructing, maintaining and operating subways in the various streets and avenues of the city of blew York for the purpose of holding and containing electrical wires and conductors.
    
      While the books were open for correction, the appellant submitted to the commissioners a statement purporting to disclose its condition for purposes of taxation on the second Monday of January, 1895, verified on the 20th day of March] 1895, which exhibited its
    Miscellaneous assets......., ........ $153,057 60
    Cash............................ 39,900 00
    Capital stock actually paid in for patents and property................ 1,835,100 00
    -$2,028,057 60
    Its indebtedness and non-taxable assets and assessed value of its real estate, as follows:
    Bonds............................$3,599,000 00
    Outstanding obligations for unpaid vouchers, interest, etc............. 322,385 45
    Assessed value of real estate......... 715,000 00
    Amounts invested in the stock of other corporations taxed on their capital .. 1,348 00
    - 4,637,733 35
    Deficiency of taxable assets............. $2,609,676 75
    Dissatisfied with this, the commissioners demanded a supplemental statement, and the relator itemized what has been classified as miscellaneous assets, and stated .that the real estate of the company “consists exclusively of its subways laid in the city of blew York; * * * that the total cost of their construction has been about five million four hundred and twenty-three thousand seven hundred and seventeen and ,AA ($5,423,717.94) dollars * * * That only between thirty-nine and forty per cent, of the subways actually laid by this Company are occupied, and over sixty per cent, of said subways represent an actual loss to the Company and yield no income whatsoever.”
    In regard to the value of the subways, as distinguished from their cost, the report stated that “in laying the subways, the Company was not allowed to lay them in such streets and places, or to such an extent‘as to the company seemed best or most profitable, but was compelled by the Board of Electrical Control to lay them in such streets and places and to such an extent as, in the judgment of the said Board, would best meet the existing and future public requirements; ■ * * * That, under the. law, this Company ia required to furnish space in its subways for the accommodation of the conductors of the city, for which the city pays no rental what- . soever. That the space now occupied by the- city wires would, if rented to other users, represent an annual income to this company .of fourteen thousand five hundred and forty-eight and tW ($14,548.17) dollars.”
    The report then proceeded to state that,- under these circumstances, the cost of the subways to the Company bears no relation to their value as property or investment. . That the Department of Taxes and Assessments, in estimating .the value of the subways for 'the purposes of taxation as real estate, were fully informed óf these facts, and the entire subject, with reference-to'figures then produced, was discussed between the Commissioners and the officers of this Company and its counsel, and the value of said subways as real estate so fixed by said Commissioners for the purposes of taxation, was the amount which they then regarded the' subways Worth as property (namely, $175,000); * - * . * that this Company has never earned or declared any dividends, and is in default on the interest on its second mortgage bonds, which bonds amount to one million three hundred and eighty-six thousand (1,386,000) dollars. That the stock of the Company has never paid any dividend, and there is no indication that it can for’ years to come.”
    In determining the property- of the. corporation liable to taxation, the commissioners added, to the cost of the subways the miscellaneous assets, which gave a total of gross assets of $5,576,775.54. From this total they deducted the assessed value of real estate and amount invested- in stocks -of other corporations taxable upon their capital, and the debts, which fixed the taxable balance at $939 942.
    
      John C. Tomlinson, for the appellant.
    
      James M. Ward, for the respondents
    
      
      $715,000.—[Rep.
    
   O’Brien, J.:

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. Rone 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 filecl 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 yalue'bf 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 re'al 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 shin-of $iT5j000. 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 he 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 com pany, 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 he 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.  