Source: https://supreme.justia.com/cases/federal/us/262/94/
Timestamp: 2019-04-20 08:20:13+00:00

Document:
1. Upon error to a state court, when a statute is alleged to impair the obligation of a contract, this Court must decide for itself whether there was a contract and what it was. P. 262 U. S. 96.
2. But where the contract claimed is one of tax exemption, involving the taxing system of the state, this Court will be slow to depart from a judgment of the state courts denying it if no real oppression or manifest wrong result. P. 262 U. S. 97.
3. The New York Mortgage Recording Tax Law, Art. XI, § 251, in providing that payment of the taxes therein provided on recording of mortgages should exempt them and the debts and obligations thereby secured from other taxation, and Art. XV of the Tax Law, as amended by c. 802, N.Y.Laws, 1911, in providing that, upon payment on other secured debt of a tax of 1/2 of 1% of their face value, and certification by the Comptroller, they should be exempt from all taxation, with specified exception, were not intended to establish contracts with those paying such taxes exempting them from taxation of their income from such debts and mortgages. Pp. 262 U. S. 97, 262 U. S. 99.
197 App.Div. 913, 232 N.Y. 550, affirmed.
Error to a judgment of the Supreme Court of New York (affirmed by the Court of Appeals) confirming, in a statutory proceeding, an assessment under the state income tax law.
Laws of 1911. An additional assessment was made under the Income Tax Law of 1919, c. 627, on account of the relator's income from these bonds and debts. The relator seems to have contended that, if the Income Tax Law imposed the additional assessment, it was unconstitutional as impairing the obligation of contracts made by the statutes laying the taxes first mentioned. The Comptroller held that the additional assessment was correct, and that no payment was unlawfully exacted. His determination was confirmed by the Appellate Division of the Supreme Court, and the order of the Appellate Division was affirmed by the Court of Appeals. No opinion was delivered by either court. The case was brought here by writ of error, and the defendant in error moved to dismiss on the ground that it does not appear that the judgment below necessarily decided a question that can be brought here in this way. Cuyahoga River Power Co. v. Northern Realty Co., 244 U. S. 300, 244 U. S. 304.
and what it was. Detroit United Ry. v. Michigan, 242 U. S. 238, 242 U. S. 2498; Columbia Water Power Co. v. Columbia Electric Street Railway, Light & Power Co., 172 U. S. 475, 172 U. S. 487. The relator, in her petition to the Supreme Court, failed to call attention in terms to the provision of the Constitution relied upon. Harding v. Illinois, 196 U. S. 78, 196 U. S. 88. But she set forth that the exemptions claimed were granted by the statutes under which the earlier taxes were fixed, that they were secured for a valuable consideration, the payment of those taxes, and that the subsequent tax upon the income of the bonds and securities violated the provisions of the Constitution of the United States. We shall assume in her favor that Article 1, Section 10, was sufficiently indicated as the clause upon which she relied.
Nevertheless we are not satisfied that the relator is entitled to prevail. It is apparent that the New York courts held that there was no contract of the kind that it alleged. It would be extravagant to suppose that they upheld a law admitted to impair the obligation of an admitted contract. The opinion of the Supreme Court shows clearly enough the general nature of the defense sustained. The relator contends, and must contend, that this is so. While it is true that we are not bound by the construction of the New York statutes by the New York courts in deciding the constitutional question, yet when we are dealing with a matter of local policy, like a system of taxation, we should be slow to depart from their judgment, if there was no real oppression or manifest wrong in the result. Troy Union R. Co. v. Mealy, 254 U. S. 47, 254 U. S. 50.
to induce mortgagees to record their deeds. Federal Land Bank of New Orleans v. Crosland, 261 U. S. 374.
The provision as to the tax on secured debts other than the foregoing is to the effect that any person may send them or a description of them to the Comptroller and may pay a tax of one-half of one percentum on the face value, and that thereupon the Comptroller, by indorsement or receipt, shall certify that they are exempt from taxation and that thereafter they shall be exempt from all taxation in the state or local divisions of the state with certain specified exceptions. Laws 1911, c. 802, § 331. This is an alternative to a tax at such rate as may be fixed on the fair market value of the security. Section 336. There is an argument that it relates only to the year for which payment is made, and, although for reasons indicated in Wisconsin & Michigan R. Co. v. Powers, supra, consideration seems to be of little importance except as bearing on interpretation, that the payment of an alternative tax is consideration for exemption from nothing except its alternative. On the other hand, the provision for an indorsement upon the security hardly is reconcilable with less than a permanent exemption; it is said that so the law generally has been understood, and the ground taken by the Appellate Division in the case that we have cited indicates that they were not prepared to deny that the exemption even of mortgages looked beyond the year. In the absence of further opinion, it seems fair to assume that the Appellate Division and the Court of Appeals decided against the exemption for the reasons stated in People ex rel. Central Union Trust Co. v. Wendell, 197 App.Div. 131, of which we have given a summary. As we said at the outset, we ought to be slow to depart from the judgment of the courts of the state in a case like this, and we accept their conclusion also with regard to secured debts. We are not prepared to say that the judgment was wrong, and therefore it is affirmed.

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 § 331
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