Case Name: PEOPLE ex rel. HATCH v. REARDON, Peace Officer
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1906-01-26
Citations: 97 N.Y.S. 535
Docket Number: 
Parties: PEOPLE ex rel. HATCH v. REARDON, Peace Officer.
Judges: 
Reporter: West's New York Supplement
Volume: 97
Pages: 535–550

Head Matter:
(110 App. Div. 821.)
PEOPLE ex rel. HATCH v. REARDON, Peace Officer.
(Supreme Court, Appellate Division, First Department.
January 26, 1906.)
1. Statutes—Formalities of Enactment—Distribution of Printed Bills.
Const, art. 3, § 15, providing that no bill shall be passed unless it shall have been printed and upon the desk of the members in its final form, at least three calendar legislative days prior to its final passage, is sufficiently complied with where a bill originating in one house is printed and placed on the desk of each member of both houses and every amendment made thereto, as printed and placed upon the desks of the members of the house in which the bill originated, is also printed and placed upon the desk of each member of the other house, so that the bill in its final form is upon the desk of each member of each house of the assembly for at least three legislative days prior to its final passage.
2. Same—Presumptions in Favor of Validity.
There is a presumption in favor of the validity of a statuté, and the courts may not declare it void unless, beyond a reasonable doubt, it has been enacted in violation of a controlling constitutional provision.
[Ed. Note.—For eases in point, see vol. 44, Cent. Dig. Statutes, § 56.]
3. Constitutional Law—Due Process of Law—Transfer Tax Acts.
Tax Law, Laws 1905, pp. 474-477, c. 241, §§ 315-324, imposing a tax on transfers of stock in domestic or foreign corporations, is not repugnant to Const, art. 1, § 6, providing that no person shall be deprived of property without due process of law.
4. Same—Equal Protection of Laws.
Tax Law, Laws 1905, pp. 474-477, c. 241, §§ 315-324, imposing a tax on transfers of stock in domestic or foreign corporations, does not deny to any person within the state the equal protection of the laws within the prohibition of Const. U. S. Amend. 14.
5. Taxation—Transfer Taxes—Constitutionality.
Tax Law, Laws 1905, pp. 474r477, c. 241, §§ 315-324, imposing a tax on transfers of stock in domestic or foreign corporations, is valid as a transfer tax conceding that it could not be sustained as a property tax, because not based on value, and because it affords the taxpayer no opportunity for a hearing on the valuation of his property and the amount of the tax.
6. Same.
Tax Law, Laws 1905, pp. 474-477, c. 241, §§ 315-324, imposing a tax on transfers of stock in domestic or foreign corporations, is uniform in its operation, moderate in its exactions, and its selection' of transfers of corporation stock as a subject of taxation is not arbitrary.
7. Commerce—Interstate Commerce—Interference by States—Taxation or Stock Transfers.
Tax Law, Laws 1905, pp. 474-477, c. 241, §§ 315-324, imposing a tax on transfers of stock in domestic or foreign corporations, applies only to transfers made within the state, and is not in conflict with Const. U. S. art. 1, § 8, empowering Congress to regulate interstate commerce.
8. Taxation—Transfer Taxes—Jurisdiction to Assess.
Tax Law, Laws 1905, pp. 474^477, c. 241, §§ 315-324, imposing a tax on transfers of stock in domestic or foreign corporations, does not, in that it imposes a tax on transfers of the stock of a foreign corporation owned by a nonresident, tax property without the jurisdiction of the state, but the transfer being made within the state confers jurisdiction to impose the tax thereon.
Ingraham, J., dissenting.
Appeal from Special Term, New York County.
Habeas corpus proceedings by the people, on the relation of Albert J. Hatch, against Edward Reardon, a peace officer of the county of New. York. From an order dismissing the writ, and remanding relator to custody, relator appeals.
Affirmed.
The relator was arrested on the 8th day of June, 1905, on a warrant issued by a justice of the Court of Special Sessions, First Division, of the city of New York, charging him with having committed a misdemeanor the day before by selling and delivering certain shares of the capital stock of certain railroad companies in the county of New York without making a bill or memorandum of the sale or affixing thereto a stamp or in any manner paying the tax required by the provisions of article 15 of the tax law added by chapter 241, p. 474, of the Laws of 1905. The information upon which the warrant was issued was filed by the purchaser of the stocks who was a resident of Connecticut, but had an office for the transaction of business in the borough of Manhattan, N. Y. It showed that the relator also resided in the state of Connecticut; that on the 7tb day of June, 1905, the relator sold and delivered to the complainant in said borough of Manhattan a certificate, assigned in blank, of 100 shares of the capital stock of the Southern Railway Company, , a Virginia corporation, owning and operating a railway wholly without the state of New York, of the par value of $100 per share, at $30.75 per share, that being the market value thereof, and also a certificate, assigned in blank, of 100 shares of the capital stock of the Chicago, Milwaukee & St. Paul Railroad Company, a Wisconsin corporation, likewise owning and operating a railroad wholly without the state of New York, of the par value of $100 per share, at $172 per share, that being the par value thereof, without making or delivering to the purchaser a bill or memorandum of sale or affixing any stamp or stamps, and without paying any tax, although requested so to do. After the relator was arrested he sued out the writ of habeas corpus and demanded his discharge, upon the ground that the provisions of said article 15 of the tax law are unconstitutional, and void.
Argued before O’BRIEN, P. J., and McEAUGHEIN, INGRAHAM, EAUGHLIN, and HOUGHTON, JJ.
John G. Milburn (John F. Dillon,.on the brief), for relator.
William Travers Jerome, Dist. Atty. (E. Crosby Kindelberger and Howard S. Gans, on the brief), for respondent.
Julius F. Mayer, Atty. Gen. (John R. Dos Passos, on the brief), for the People.

Opinion:
EAUGHLIN, J.
The instructive arguments and excellent briefs of the learned counsel on this appeal have enabled the court to readily appreciate the present status of judicial decisions on the interesting questions presented, and the points on which the validity of the stock transfer stamp tax law, so called, hinges. The validity of the amendment to the tax law is challenged upon the ground, among others, that the bill had only been upon the desks of the members of Assembly one day prior to its passage in that body. This objection should be considered first, because, if the constitutional requirements for the enactment of statutory law have not been observed, it is needless to inquire whether it would be competent for the Legislature to enact such legislation, and the discussion of the question would be obiter. The bill as printed in the session laws shows that it was duly enacted. The original certificates annexed to the act and on file with the Secretary of State are not presented by the record. It is not contended that they are not in due form to show the proper enactment of the law. It is contended that the journals may not be consulted to impeach the law. I am of opinion, however, that they do not impeach it; and I prefer to put the decision upon that ground without deciding whether if they did, they would be competent for that purpose.
Section 15 of article 3 of the State Constitution provides that:
"No bill shall be passed or become a law unless it shall have been printed and upon the desk of the members, in its final form, at least three calendar legislative days prior to its final passage unless the Governor, or the acting Governor, shall have certified to the necessity of its immediate passage, under his hand and the seal of the state; nor shall any bill be passed or become a law, except by the assent of a majority of the members elected to each branch of the Legislature; and upon the last reading of a bill, no amendment thereof shall be allowed, and the question upon its final passage shall be taken immediately thereafter, and the yeas and nays entered on the journal."
The provision requiring that the printed bill in the form in which it is to be enacted shall be upon the desks of the members three calendar legislative days is new, having been first adopted in 1904. The petition upon which the writ was granted shows that this bill originated in the Senate and had been printed and upon the desks of the members •of that body in its final form the requisite time before its passage, which was on the 3d day of April, 1905; that on the next day, it was duly sent to the Assembly for concurrence and had its first reading in that body on that day and was duly referred to the Assembly committee on taxation and retrenchment, which committee reported the same day in favor of its passage without amendment; that this report was thereupon agreed to and the bill was placed upon the order of second reading and bad its second and third readings and passed on the 5th day of April by the requisite vote and in the presence of the quorum required by the Constitution; that pursuant to a practice adopted by the Senate and Assembly, without the enactment of a statute or rule requiring it, with a view to complying with the requirements of said section 15 of article 3 of the Constitution, a bill originating in one house was printed and placed on the desk of each member of the other, ' and every amendment made thereto as printed and placed upon the desks of the members of the house in which the bill originated, was likewise printed and placed upon the desk of each member of the other house; that pursuant to this practice the bill in question had been printed and upon the desk of each member of the Assembly in the final form in which it was passed for more than three days. This was clearly a literal compliance with the constitutional requirements; and I am of opinion that it was a compliance with the spirit and intent thereof. The abuses that led to the adoption of this provision of the Constitution are well known. In committee and on the final passage -of bills important amendments for ulterior purposes were sometimes surreptitiously made in writing or typewriting, and often allowed in that form without being thoroughly understood; and thus bills were passed not only without being understood, but yvithout either publicity or deliberation. Under the practice adopted by the Legislature for the purpose of complying with the Constitution none of the former abuses can be revived. When this bill came over from the Senate, every member of the Assembly had notice that it was the bill that was printed and upon his desk, and had been in the form in which it was passed by the Senate for the requisite time. This had given him ample opportunity to become familiar with the bill, and no deception could be practiced upon him Or upon his constituents. ' The publicity by its pendency in the Senate and remaining there in its final form' three days before its passage, was all the notice to the constituents-of members designed to be given. The debates in the Constitutional Convention indicate that this was the view of Senator Vedder, an experienced legislator and the author of this provision, as shown by the-following colloquy between Delegate Foote and himself immediately before the adoption of the amendment:
"Mr. Foote: Mr. President, I desire to enquire of the chairman of the-committee of the legislative powers and duties, whether his understanding of this amendment is that the bill must have been printed and upon the desks-of the members in each of the Houses three days before its passage in each House, or whether the provision means that three days before the final passage in the last House it must have been printed and upon the desks of all the members of the other House?
'"Mr. Vedder: Mr. President, the question of the gentleman suggests that, he may not be accustomed to the rules of legislative bodies. When a Senate-bill is printed it is put upon the Senate files of the Assembly, precisely the-same as it is in the Senate, and vice versa. This means that it must be upon the desks of the members of the House which votes upon it three legislative-days before that House votes upon it, so that they may read it and understand it. That is the object of the amendment. From necessity, it is also in the-other House at the same time, because they always go together."
Revised Records Cons. Conv. 1894, vol. 1, p. 916.
The learned counsel for appellant do not contend that the bill should' have been reprinted after coming over to the Assembly. They concede-that the printing was sufficient, but they maintain that three days-must in every instance elapse after the particular body has obtained jurisdiction of the bill, either by its having been introduced in its own-body, if the question be upon the passage of its own bill, three or more days before, or by its having been sent over from the other body three or more days before final passage. There is room for this contention and force in the arguments persuasively presented; and yet to so hold would probably invalidate a large part of the legislation-enacted during the last 11 years. I think the Constitution is susceptible of the construction that has been placed upon it by the Senate and Assembly. The abuses at which the provision was aimed cannot arise under the practice in vogue; and I think it should not be overthrown by the courts. It is well known that the members of each legislative body keep advised concerning the important measures pending in the other, its members often attending the hearings before the committees of the other house. After a bill like this has first received careful consideration by one body with public hearings of interested' parties before its committee and is then duly passed and has been in the final form of its passage printed and upon the desks of the members of the other body for three days or more, no harm can come from permitting it to be put upon final passage as soon as a majority so directs.. Often the members of one body are watching the hearings upon bills-pending in the other and ready to vote as soon as the bill comes over ; and it not infrequently happens that the early enactment of a bill after passing one body is required for the public interests. If this had been an Assembly bill and on the desks of the members the length-of time it was, concededly that body could have legally passed it at the time it passed the Senate bill. If so, why was it not competent for it to adopt the Senate bill ? Frequently the same bill is introduced in each house and is ready for final passage about the same time. The arguments of the learned counsel for the appellant lead logically to the position that in such case, although the bills are the same, and each house is ready to pass its own, it cannot, until the lapse of three days, concur in the one which originated in and passed the other body. To require a certificate of the Governor or acting Governor in such cases would not compel further deliberation; and would only add another cumbersome and technical requirement, upon the due compliance with which Would depend the validity of the law. Having, for these reasons, reached the conclusion that the procedure was sufficiently regular to validate the bill, provided it was competent for the Legislature to enact it, it becomes necessary to examine its provisions in the light of the objections to their constitutionality.
Article 15, added to the tax law by the amendment, contains 10 sections, 315 to 334 inclusive. Laws 1905, pp. 474-477, c. 341. Section 315, so far as material to a decision of the questions presented, imposes a tax "on all sales, or agreements to sell, or memoranda of sales or deliveries or transfer of shares or certificates of stock in any domestic or foreign association, company or corporation, made after the first day of June, 1905, whether made upon or shown by the books of the association, company or corporation, or by any assignment in blank, or by any delivery, or by any proper agreement or memorandum or other evidence of transfer or sale whether entitling the holder in any manner to the benefit of such stock; or to secure the future payment of money or the future transfer of any stock, on each $100 of face value or fraction thereof, 3 cents. It is not intended by this act to impose a tax upon an agreement evidencing the deposit of stock certificates as collateral security for money loaned thereon which stock certificates are not actually sold, nor upon such stock certificates so' deposited." The section then prescribes how the payment of the tax shall be denoted; and with respect to sales of certificates assigned in blank and delivered, as these were, it provides that the seller shall make and deliver to the buyer a memorandum or bill of sale, showing the date and amount of the sale and the name of the seller, to which an adhesive stamp or stamps prescribed in the act shall be affixed showing the payment of the tax. Sections 316 and 319 authorize and require the Comptroller of the state to prepare the stamps, and put them on sale at convenient places. Section 317 provides in substance that a person who shall make a sale without paying the tax, or who shall deliver any stock or evidence of the sale thereof without affixing the stamps as required by the state shall be guilty of a misdemeanor and upon conviction thereof shall pay a fine of not less than $500 nor more than $1,000, or be imprisoned for not more than six months or shall be subjected to "both such fine and imprisonment at the discretion of the court." Section 333 prescribes an additional civil penalty to the state of $500 for each violation of the act to be collected by the comptroller. Section 318 requires the seller to cancel the stamps as therein prescribed and makes a failure to comply therewith a misdemeanor. Section 330 makes an illegal use or interference with the stamps a misdemeanor. Section 321 confers authority upon the comptroller to inquire into the payment of such tax and to enforce payment thereof by action. Section 323 provides, in substance, that no transfer of stock in violation of the provisions' of the article "shall be made (he basis of any action or 'legal proceeding nor shall proof thereof be offered or received in evidence in any court of the state." Section 324 provides that these taxes when collected by the comptroller shall be paid "into the state treasury and be applicable to the general fund, and to the payment of all claims and demands which are a lawful charge thereon."
The provisions of the amendment to the tax law clearly show that the stamp tax on the transfer of stocks was intended as a substantial source of general revenue. The language employed embraces every actual sale and delivery of stock anywhere within the state. Yet it is well known that the sale of such securities elsewhere than on the exchanges or on the "curb" is only a very small percentage. The extent of the transactions in stocks on the exchanges is a matter of record ; and the legislators could estimate approximately the revenue that might be derived from this stamp tax. It is a matter of current history that it was expected that about $5,000,000 per annum would flow into the state treasury from the imposition of the tax, and that the amount of such taxes thus far collected indicates that the total for the year will approximate the amount anticipated. In approaching the momentous questions presented, it must be borne in mind that the power of taxation is an essential attribute of government, that subject to constitutional restraints it is for the Legislature, representing the people, to determine the subjects and objects of taxation; that the Legislature is vested with all the power reserved to the people and, except as it may be expressly or impliedly restrained by the state or federal Constitution has unlimited power in the premises. Judges, therefore, may neither substitute their own judgment for that of the Legislature as to the wishes or justice of a particular law, nor be influenced .by those or like considerations in deciding its constitutionality. The sole enquiry is, therefore, has the Legislature exceeded its jurisdiction and enacted a tax measure in contravention of the state or national Constitution? The presumption is in favor of the validity of the statute and we may not declare it void unless beyond a reasonable doubt it has been enacted in violation of a controlling constitutional provision. There is no express limitation in our state Constitution on the taxing power of the Legislature. Section 15 of article 3 prescribes the vote essential to the passage of a bill; and section 25 of the same article prescribes that the presence of three-fifths of all the members elected to each house shall be essential to constitute a quorum for the passage of bills, among others, imposing a tax. These provisions were complied with. The only provision of the state Constitution relied on by the relator is section 6 of article 1 which provides that:
"No person shall be deprived of life, liberty, or property without due process of law, nor shall private property be taken for public use without just compensation."
The appellant also relies on the fourteenth article of amendment to the federal Constitution which provides, among other things, that:
\ "No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property without due process of law, nor deny to any person within its jurisdiction the equal protection of the laws."
This provision was undoubtedly designed to restrain legislation by the states and not by Congress; but a similar provision, excepting the clause with respect to the equal protection of the laws, is contained in the fifth article of amendment as a restraint upon the legislative power of Congress. This law does not deprive people within the state of New York of equal protection of the laws. It operates on all who sell stock in any part of the state alike regardless of creed, color, or nativity; and the amount of the tax depends upon the magnitude of the transaction. It is imposed on the transfers of a distinct class of property most extensively bought and sold on the exchanges. It does not, therefore, I think deny to any person within the state the equal protection of the laws; and is not within the prohibition of the clause of the federal constitution relating to equal protection of laws. It cannot be successfully maintained that the federal government has any greater power of taxation, except with respect to imports, which the states are prohibited from taxing (article 1, § 8-10, Const. U. S.), than the state. It. was never intended that Congress should have power to enact a tax measure depriving any person of the equal protection of the laws in the sense in which the states are inhibited from making laws depriving him of such protection. It follows, therefore, I think, logically that if Congress could impose such a tax, the state may likewise. This tax measure follows in all material respects section 6 of the United States revenue tax law of 1898 (Act July 13, 1898, c. 448, 30 Stat. 451 [U. S. Comp. St. 1901, p. 2291]), and was doubtless founded thereon. In United States v. Thomas (C. C.) 115 Fed. 207, affirmed 192 U. S. 363, 24 Sup. Ct. 305, 48 L. Ed. 481, all of the objections now urged against the state law, at least, with the exception of the equal protection clause of the fourteenth amendment, appear to have been presented against the validity of the federal law; and they were fully and ably answered and it was sustained as a tax, not upon property, but upon the transfer of this particular species of property. If it was competent for Congress to enact that law, it was competent for the Legislature of New York to enact this statute. It may be that under the decisions of our own courts as a tax on property this statute- could not be sustained owing to the fact that it is not based on value and that no opportunity is afforded the person upon whom the tax is imposed for a hearing on the valuation of his property or the amount of the tax, objections forcibly presented by Mr. Justice Ingraham. I disagree with him, however, as to the nature of this tax. The learned Attorney General and his associate do not seek to sustain the law as a tax upon property. They contend that it is an excise tax or stamp duty upon the transaction or-transfer of certificates of stock, the amount of the tax depending upon the extent of the business; and such literally it appears to be.
It has so-long been the practice in this state to tax property only that the validity - of any legislation departing from that practice is vigorously • contested. The fact that the power" has' not been here tofore exercised" is no evidence that it does not exist. Of late years the Legislature has imposed a tax in certain instances on the transfer of property by will and under the intestacy laws; and its authority in this regard has been sustained both by the state and federal courts, although the tax was not imposed on all such transfers and varied with the valuation of the property transferred. The Legislature has also inaugurated a policy of taxing special franchises, a species of intangible property not theretofore reached under the tax laws. The validity of these laws has also been sustained by the Court of Appeals and by the Supreme Court of the United States. From these two sources and from the liquor tax most of the revenues essential to maintain the state are now derived. Our courts and the federal courts have frequently given expression to the view that it is competent for the Legislature to single out any species of property or business or the transfer of property, as the object of taxation. People v. Home Ins. Co., 92 N. Y. 337; Matter of McPherson, 104 N. Y. 317, 10 N. E. 685, 58 Am. Rep. 502; Matter of Whiting's Estate, 150 N. Y. 29, 44 N. E. 715, 34 L. R. A. 232, 55 Am. St. Rep. 640; Cook v. Marshall County, 196 U. S. 261, 25 Sup. Ct. 233, 49 L. Ed. 471; Matter of Gould's Estate, 156 N. Y. 427, 51 N. E. 287; Magoun v. Illinois Trust & Savings Bank, 170 U. S. 293, 18 Sup. Ct. 594, 42 L. Ed. 1037; Nicol v. Ames, 173 U. S. 509, 19 Sup. Ct. 522, 43 L. Ed. 786. The contention of the relator carried to its logical effect would confine the Legislature in exercising the power of taxation to an ad valorem tax on all personal property or all real property or both. It is not so confined by any constitutional provision or by the decisions of the courts rendered heretofore. There are doubtless implied limitations on the exercise of this taxing power. If the Legislature should capriciously single out a particular species of property or even the" transfer thereof for taxation, without any reasonable ground for the classification, or hostilely discriminate against particular persons or classes, and impose a tax thereon which would practically constitute confiscation or be oppressive, the legislation might be declared void. Matter of Pell's Estate, 171 N. Y. 48, 63 N. E. 789, 57 L. R. A. 540, 89 Am. St. Rep. 791; People v. Eq. Trust Co., 96 N. Y. 387; Connolly v. Union Sewer Pipe Co., 184 U. S. 540, 22 Sup. Ct. 431, 46 L. Ed. 679; Nicol v. Ames, supra. The statute under consideration, however, cannot fairly be condemned on this ground. It is uniform, it is moderate, and the transactions singled out embrace in the value of the property and the number of 'transfers by far the most important sales of property within the state. The measure is practicable of, enforcement and will produce a great revenue without being ever burdensome on the sellers or oppressive. The classification is not arbitrary. The property upon the transfer of which the tax is levied is the product of legislation. It stands out by itself as a distinct class of property.
Whether under the reserved power to altér, amend and repeal charters of corporations'the Legislattire could impose this tax on the transfer of stock of domestic corporations theretofore incorporated need not be decided; but it is very clear that' as to new corporations it could impose it even though it could not on the transfer of notes, bonds, and mortgages of individuals. Since the Legislature determined to in augúrate the policy which clearly it was competent for it to inaugurate as to some property of the class, is it not equitable that the transfer-of stock in foreign corporations on the exchanges in this state should be put on a par with stock in a domestic corporation? The decisions holding that the right to sell is an essential attribute of property are not in point. This statute merely regulates and taxes but does not prohibit the sale. The right to hold property is also an essential attribute of ownership, and yet it is subject to the power of taxation under which the state may take the property if the tax be not paid.
The statute is not in conflict with the commerce clause of the federal Constitution (article 1, § 8). The tax is imposed only on transfers made within this state, and it operates alike on transfers made by residents, and by nonresidents without discrimination. Woodruff v. Parham, 8 Wall. 140, 19 L. Ed. 382; King v. Mullins, 171 U. S. 436, 18 Sup. Ct. 925, 43 L. Ed. 214.
What has been said disposes of the contention that the act, in imposing a tax on sales of the shares of a foreign corporation owned by a nonresident, taxes property without the jurisdiction of the state. The sale and delivery within the state confer jurisdiction to impose the tax on the transfer.
It follows that the order should be affirmed.
O'BRIEN, P. J" and McLAUGHLIN and HOUGHTON, JJ., concur.