Case ID: ad_124/html/0818-01.html
Source: Caselaw Access Project
Author: {"author": "Scott, J.: McLaughlin, J.\"(concurring):", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The People of the State of New York ex rel. John S. Ferguson, Appellant, v. Edward Reardon, a Peace Officer of the County of New York, Respondent.
    First Department,
    March 20, 1908.
    Constitutional law — Tax Law, § 321—refusal to permit inspection of books and. papers — habeas corpus.
    Section 321'of the Tax Law making it a misdemeanor for any person to refuse to permit the Comptroller or his representative to inspect any book, memoranda or record relating to a sale or delivery of stock is unconstitutional, being in violation of section 6' of article 1 of the Constitution of the State of New York, which provides that “no person shall be compelled in any criminal ease to be a witness against himself.”
    A person imprisoned for such a refusal will be released on habeas corpus, although no criminal prosecution had been set on foot against him under section 317 of the Tax Law for a failure to pay the tax on stock transfers, for his constitutional immunity extends to any preliminary investigation or even collateral or independent proceeding in which it is sought to elicit evidence which may result in a prosecution.
    Appeal by the relator, John S. Ferguson, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 27th day of Hovember, 1907..
    
      John G. Milburn,. for the relator.
    
      Timothy I. Dillon, for the respondent;.
   Scott, J.:

The relator appeals from an order dismissing a writ of habeas corpus and remanding him' to tl.ie custody of a peace officer. The relator is a stockbroker engaged in the business of buying and selling stocks in the city of Rew York. On June 17, 1907, one Richard J. Malloy appeared at relator’s office and presented a paper, signed by the State Comptroller, authorizing him, the said Malloy, as a duly authorized representative of said Comptroller, to “ inspect and examine the books, memoranda, records and papers of any per- son, firm, company,, association or corporation who has made sale, agreement to sell,- delivery or transfer of shares or certificates of stock, or who is conducting or transacting a brokerage business, to ascertain whether the tax ’imposed by law has been paid.” Upon the relator’s refusal to permit his books and papers to be examined, an information was laid before a city magistrate/cliarging him with a misdemeanor under chapter 241 of the Laws of 1905, as amended by chapter 324 of the Laws of 1907. The relator was arraigned upon said charge and held to answer, whereupon a writ of habeas corpus was sued out and, after hearing, dismissed.

By this appeal the relator calls in question the constitutionality and validity of the act under which he was held. The act which the relator- is charged with violating is known as section 321 of the Tax Law, and as it now stands reads as follows: § 321. Power of State Comptroller.— Every person, firm, conxpany, association or corporation making a sale, agreement to sell, delivery, or transfer, of shares or certificates of stock, or conducting or transacting a brokerage business shall keep or cause to be kept a just and true book of account wherein shall be plainly and legibly recorded the date of making every sale, agreement ■ to sell, delivery or transfer of shares or certificates of stock, and every transaction in relation to any stock: the number of shares, the total amount covered by each such sale, agreement to sell, delivery, transfer or transaction and the name of the other party thereto, and such book shall at all times be subject to the inspection of the Comptroller or any of his representatives, between the hours of ten o’clock in the forenoon and three o’clock in the afternoon, except on Saturdays, Sundays and legal holidays. The State Comptroller may, at any time after transfers of stock which by the provisions of this article are subject -to'a State stamp tax, inquire into and ascertain whether the tax imposed by the provisions of this article has been paid. For'the purpose of ascertaining such fact, the Comptroller shall have the right and it shall be liis duty to examine the hooks and papers of any person, firm, company, association or corporation, and memoranda of transfers shall remain accessible for snch. inspection for three months from their respective dates. The State Comptroller may enforce his right to examine the books and papers of any person, firm, compány, association or corporation by mandamus. If. from such examination the Comptroller ascertains that the tax provided for in this article has not been paid, he shall bring an action . in his name as such Comptroller in any court of competent jurisdiction for the recovery of such tax and 'for any penalty incurred ' by any person under the provisions of this article. Every person, firm, company, association or corporation who shall refuse to permit the Comptroller or any of his representatives to inspect snch books or any memorandum or record relating to such sale, agreement to sell, delivery, or transfer, or transaction at any time as above provided, or who shall fail to keep such book of account, or who shall in any other respect violate any of the provisions of this section shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall for each and every such offense pay a fine of not less than five hundred dollars nor. more than five thousand dollars, or be imprisonéd not less than three months nor more than two years, or both, at the discretion of the court.”

The preceding sections of the Tax Law (Laws of 1896, chap. 908), added thereto by chapter 241 of the Laws of 1905, and amended by chapter 414 of the Laws of 1906, provide for the payment of a tax upon all sales or transfers of stock, to be paid by affixing stamps to the bill of sale, instrument of transfer or other memorandum or evidence of the sale. • Section 317 of the Tax Law, as amended by chapter 414 of the Laws of 1906, makes it a misdemeanor, punishable by fine or imprisonment or both, to sell or transfer or deliver in pursuance of such sale any stock, without paying the tax therefor as prescribed by the act. The purpose of giving the Comptroller authority to examine the books and papers of persons or corporations dealing in stocks is to ascertain whether the tax imposed by the act has teen paid, and thus the result of such examination may be to procure evidence to convict .the persons whose books and papers are so examined of a crime. At least, whether snch be the avowed purpose or not, the evidence obtained by such exaininatipn cgpjcl jised in a prosecution for the crime

established, by the statute. (People v. Adams, 176 N. Y. 357; S. C., sub nom. Adams v. New York, 192 U. S. 585.) The bald question, therefore, is (among others suggested and argued) whether the Legislature can compel a citizen, against his will, to submit to a search of his private books and papers in order that evidence may be thereby obtained whereby he may be convicted of a crime or subjected to a penalty. The answer is to be found in section 6 of article 1 of the Constitution of this State which provides that “ no person shall * * * be compelled in any criminal caseto be a witness against himself,” and the noted case of Boyd v. United States (116 U. S. 616) which construed, applied and vitalized a like provision in the Constitution of the United States. In that case, which arose under a Federal revenue act, the United States had instituted a quasi-criminal action against Boyd for the forfeiture of certain goods and had recovered judgment. The appeal turned upon the constitutionality of an act of Congress (Act of June 22,1874, § 5), which did not in terms require a defendant in such an action to permit his books and papers to be used against himself, although such was the practical effect of the act. It was held by a unanimous court that such an act, even when applied to a civil action involving only forfeiture of goods, was violative of that portion of the fifth amendment of the Constitution of the United States, which provides in language identical with that used in our Státe Constitution, that a man may not in a criminal case be compelled to be a witness against himself. If thus objectionable when sought to be applied to a civil action for the forfeiture of goods, such an act is even more clearly objectionable when its purpose is to obtain evidence for use in a criminal proceeding, and it is to be noted that the section of the Tax Law under which the relator has been held to answer is essentially one providing the penalties to be imposed for failure to pay a tax, and that its validity is not controlled by the same considerations *that have led the courts in many jurisdictions to uphold so-called “ listing ” acts which require the taxpayer to furnish to the taxing authorities information upon which the amount of the tax to be levied may be determined. In his- opinion in the Boyd case Mr. Justice Bradley dwells at considerable length upon the fourth amendment to the Federal Constitution which forbids unreasonable sea -ches and seizures, and which as he points ont’has been regarded, ever since Lord Camden’s memorable judgment in Entick v. Carrington in 1765 (19 Howell’s State Trials, 1029), both in England and in this country, as one of the permanent foundations of personal ■liberty. For some reason this provision has never been incorporated into our State Constitution, although it has, from an early day, been a part of our statutory law (1 R. S. 93, § 11); and it may, therefore, be claimed,- as it is now by the respondent, that it is not restrictive upon the power of the Legislature. YVhetlier such a claim can be sustained admits of grave doubt, but it requires no consideration here, because as pointed out in the concurring opinion of Mr. Justice Miller and the chief justice in the Boyd case, the invalidity of an act requiring any person to furnish evidence to' be used against himself in a criminal case is amply established by the. fifth amendment of the Federal Constitution, the language of which is incorporated into our own Constitution.. It is not of consequence that no criminal prosecution has been set on foot against the relator, for his constitutional immunity extends to any preliminary investigation, or even collateral or independent proceeding in which it is sought to elicit evidence which may result in prosecution. (Counselman v. Hitchcock, 142 U. S. 547; People ex rel. Taylor v. Forbes, 143 N. Y. 219; People ex rel. Lewisohn v. O'Brien, 176 id. 253; Emery's Case, 107 Mass. 172.) It extends, says Professor Wigmore, “ to all manner of proceedings in which testimony is to ■ be taken, whether litigious or not, and whether ex parte . or otherwise.” (3 Wigm. Ev. 3105.) It is undoubtedly true that without the right of search it will be difficult to discover and punish violations of the act taxing stock sales, but that consideration will not serve to uphold an act plainly violative of the Constitution and of the right of individual liberty and immunity which constitutes the very corner stone of bur political structure. “It is the duty of courts to be watchful for the constitutional rights of the citizen, and against any stealthy encroachments thereon. Their motto should be obsta prineipiis.". (Boyd v. United States, supra.)' “The individual may stand upon his constitutional rights as a citizen. He is entitled to carry on his private business in his own way. Flis power to contract is. unlimited. He owes no duty to the State, or to his neighbors to divulge his business, or to open his doors to an investigation, so far as it may tend to incriininate him.” (Hale v. Henkel, 201 U. S. 43, 74.) It has been said by our own Court of Appeals that when a proper case arises, the provisions quoted from our own and the Federal Constitution, “ should be applied in a broad and liberal spirit in order to secure to the citizen that immunity from every species of self-accusation implied in the brief but comprehensive language in which they are expressed.” (People ex rel. Taylor v. Forbes, supra.) We entertain no doubt that the section of the Tax Law under which it is sought to punish the relator for his refusal to open for examination by the- appointee of the State Comptroller all his books, papers and private memoranda relating to his business, violated section 6 of article 1 of the Constitution, and is, therefore, invalid and insufficient to support a prosecution.

It follows that the order appealed from must be reversed, and the relator discharged from custody.

Patterson, P. J., Ingraham and Clarke, JJ., concurred.

McLaughlin, J."(concurring):

The Legislature had the power to impose a tax upon the delivery or. transfer of shares or certificates of stock. (People ex rel. Hatch v. Reardon, 184 N. Y. 431.) Having the power to impose the tax, it could also jiro vide the method of collection (Genet v. City of Brooklyn, 99 N. Y. 296); and, to aid in the collection, it could require that a book or memorandum should be kept by the person making the transfers, which should be open to the inspection of the jiroper authorities. (Boyd v. United States, 116 U. S. 616.) TSTor can the inspection be refused on the ground that it might furnish criminating evidence against the jierson required to keeji the book .or memorandum. ' (St. John v. New York, 201 U. S. 633.) As was said in the Boyd case: The supervision authorized to be exercised by officers of the revenue over the manufacture or custody' of excisable articles, and the entries thereof in books required by law to be kept for their inspection, are necessarily excepted out of the category of unreasonable searches and seizures.”

The trouble with the statute, as I read it, is that it goes much further than this. It purports to give the Comptroller and his representatives power to inspect not only the book or memorandum required by law to be kept, but the books and papers generally of persons liable for the tax. • It was the relator's refusal to comply ' with the demand for leave to inspect all his private books and papers generally for which he was held.

/The case, therefore, falls within the principle laid down in the Boyd Case {supra), and for that reason I concur in the conclusion reached by Mr. Justice Scott.

.Order reversed and relator discharged. Settle order on notice. 
      
       See 18 U. S. Stat. at Large (pt. 3), 187, § 5.—[Rep.