Court Opinion

ID: 8059254
Source: CourtListenerOpinion
Date Created: 2022-09-09 04:36:16.151266+00
Date Added: 2024-06-11T16:37:59.335955
License: Public Domain

The opinion of the court was delivered by
Depue, J.
The New Jersey Southern Railroad Company. was organized as a corporation under the act of March 5th, 1858. On the 14th of September, 1869, it executed a mortgage to trustees, to secure the payment of bonds issued in the-amount of $2,000,000. The mortgage included all the property and franchises of the company then possessed, or after-wards to be acquired. In 1870 this company acquired nearly ail the stock of the Long Branch and Sea Shore Railroad Company. In the same year it organized the Pemberton and New York Railroad Company — being the owner of all the stock of that company — and constructed its railroad. ■ In the same year the New Jersey Southern company took possession of the railroads of the Long Branch and Sea Shore company and of the Pemberton and New York company, together with their equipments and appendages, and has operated and maintained the same exclusively as an integral part of its railroad from that time until possession was taken by the mortgagees.
In November, 1873, the trustees, as mortgagees, commenced foreclosure proceedings, and in January, 1874, the directors' of the New Jersey Southern company surrendered to them the original railroad of that company, and its after-acquired railroads originally constructed by the Long Branch and Sea Shore company and the Pemberton and New York company, together with their equipments and appendages. Since January, 1874, the trustees named in the mortgage have operated these several railroads, and used their equipments and appendages for that purpose as mortgagees in possession. In February, 1874, on a bill filed by a creditor of the New Jersey *245.Southern company against it as an insolvent corporation, Robert E. Stockton was appointed receiver.
The Vineland Railway Company was organized in 1873. In February, 1874, a petition was filed in the Court of Chancery, by a creditor, to have the company declared insolvent, and Mr. Stockton was appointed receiver. The receiver immediately took possession of the railroad equipments and appendages of the latter company, and has ever since been, by himself or his lessee, in possession of and in the use and occupancy of the same.
In 1877 a state tax was laid on each of these corporations by the board of railroad commissioners, pursuant to the provisions of the act entitled “An act providing for state taxes on railroads, and the more efficient collection thereof,” approved April 13th, 1876. Rev., p. 1168. The assessment was made ■against the corporations severally, and upon the valuation of the railroad and equipment and appendages of each.
These writs of certiorari were sued out to review the legality ■of such assessments, and the single question submitted by ■counsel is whether these several corporations, who are the prosecutors of these writs, are such corporations as are taxable under the provisions of the above-mentioned act.
The position assumed by counsel that the tax authorized by the statute is a tax in personam, and not in rem ; that the corporation is the person taxed, and that the property, with respect to which the tax is laid, enters into the assessment only .as a means of determining the quantum of the tax imposed upon the person of the owner on account of the ownership of the property, is conceded to the full extent. Such was plainly the intent of the legislature, as expressed in this act, and the act of April 2d, 1873. Rev., p. 1166. The act of 1876 deals ■exclusively with taxation for state purposes. The title expresses the object of the act to be to provide “for state taxes on railroads.” It applies to two classes of corporations — ■ “ railroad corporations and companies occupying or using railroads in this state as lessees or otherwise.” The subsequent ■sections show that the legislature aimed exclusively at cor*246porations. The machinery for laying and collecting the taxes shows that to have been the object. The second section requires. a return to be made annually to the comptroller of the-state by the president, secretary or treasurer “ of every railroad corporation or company ” of the true value of said road,, and of the equipment and appendages of said railroad “ used by Or belonging to said corporations or companies in this-state,” and thereupon the state tax to be paid by said railroad corporation or company under said act shall be immediately due and payable. By section three, in case any of the said railroad corporations or companies shall fail to make returns,, or shall make a return that the comptroller shall have reason to believe is untrue or insufficient, the railroad commissioners-are required “ forthwith to estimate the true value of the railroad of such defaulting corporation or company, and the true-value of such equipment and appendages used by or belonging to said corporation in this state,” and to ascertain and state the amount of state tax thereon, and to certify the same against the defaulting corporation or company. By section four, appeal is given to “any railroad corporation or com-' pany which shall be aggrieved by the action of the railroad commissioners;” and by section five, if the tax assessed be-unpaid for ten days, judgment shall be entered for the same in the name of the State of New Jersey as plaintiff, and against such corporation or company as defendant, on which execution shall issue for the sale of all the franchises, and all the property, real, personal and mixed, of said corporation or company.
But while conceding the premise on which the argument of counsel is founded, the conclusion sought to be deduced therefrom is not adopted.
It is contended that inasmuch as the prosecutors were not themselves in the occupation and use of their railroads, and did not derive any benefit or profit therefrom except as the earnings of the same were received by mortgagees and creditors, the prosecutors were not taxable for such property. This contention is based on the idea that the legislature intended that corporations of the designated class should be *247taxable only in cases where the corporation is in the-actual use of its railroad, and is deriving a profit to itself from the exercise of the franchise granted by the state. The argument is founded on the words of the first section of the act, “ railroad corporations and companies occupying or using railroads in this state.” It was assumed that the words “ occupying or using railroads in this state,” apply to and qualify all that preceded them, and were intended to describe the circumstances under which a liability to taxation should arise. This assumption is unwarranted. The language quoted was adopted to meet a condition of affairs well understood in this state. Under legislative sanction, foreign and domestic corporations were authorized to lease and operate railroads constructed under powers granted to other corporations. It was to meet the circumstances of such cases that the legislature added to the words, “railroad corporations,” the additional description of “ companies using or occupying railroads in this state, whether as lessees or otherwise.” The superadded words were designed to enlarge the scope of the taxation provided for, by including among the subjects of taxation such companies as well as railroad corporations proper, such as were created by our laws for railroad purposes. It was never intended by the expression used to restrict the limits of taxation. On the contrary, this comprehensive language was resorted to solely for the purpose of embracing not only corporations specially created for the constructioh of railroads, but also all companies, whether railroad corporations or not, which should be in the use or occupancy of any railroad in this state. That no such condition as is contended for was contemplated is apparent from the sections of the act which specially designate the property with respect to which the tax should be laid. In that connection the language employed is railroad equipment and appendages “ used by or belonging to said corporations or companies,” showing that the legislature intended to apply the power of taxation to all railroad property, either against the company which uses or occupies it by lease or otherwise, or against the corporation in which the *248ownership is vested. . When the railroad and its equipments and appendages are in the occupancy and use of the corporation which was empowered to construct and operate the railroad, the assessment must be made against it. If such property be in the possession and use of another company, the assessment may be made against either. Inasmuch as a sale under execution for the tax will pass the absolute title to all the franchises, and all the property, real, personal and mixed, of the corporation or company against which the assessment is made, free and clear of all encumbrances of every nature, the better course in all cases is to make the assessment against the company originally invested with the franchises, and in which the ultimate title to the road, its equipment and appendages is vested, without regard to the possession and use of the road by another.
From what has already been said, it is quite manifest that possession of the road, and its equipment and appendages, by mortgagees, will not defeat the statutory mode of taxation, or exonerate the company from liability to taxation upon its property. As has already been shown, the liability to this taxation is personal to the corporation itself. The property mortgaged belongs to the corporation, only subject to the mortgage, and the possession of the mortgagees is the possession of the company, by whose act they have entered. A corporation cannot avoid the performance of any duty cr obligation imposed upon it by its charter, or by the general laws of the state, by surrendering its property and franchises to others, whether as lessees or mortgagees. Railroad Co. v. Brown, 17 Wall. 450; 1 Redf. on Railways, § 142. The statute makes no deductions or allowance for mortgage indebtedness. On the contrary, it overrides the title of mortgagees by placing the tax in priority over encumbrances, and specially provides for redemption from the lien of the tax by mortgagees, by subrogation to the rights of the state, on the payment by them of the taxes. No embarrassment can arise from the inability of the corporation to pay, because of its property being in the hands of its creditors. The statute *249provides for that contingency. It takes the franchises and all property, real, personal and mixed, of the company, dis-charged from all other liens and encumbrances, to satisfy the taxes that may be imposed.
Nor will the fact that these corporations are also under a receivership interdict the imposition of these taxes. Receivers may be appointed in a great variety of cases. Illustrations of the instances in which receivers may be appointed, rather than indications of the limits of the jurisdiction, will, be found in the following enumeration: Receivers may be appointed for the protection of estates of lunatics and infants; the preservation of trust estates ; pending litigation for the probate of wills, or the settlement of disputes between partners, tenants in common, tenants for life and remaindermen, vendors and purchasers, covenantors and covenantees, mortgagees of common property, and as a means of enforcing the claims of creditors against their debtors. Indeed, there can scarcely be a case of trust, disability or indebtedness, or of a common ownership of property, or of disputed rights therein, in which chancery may not resort to-a receivership, where it is necessary for the preservation of property pending a litigation, or essential to the administration of justice. If, in all these cases, the power of the state to tax property in the care of receivers is superseded, the consequences would be highly prejudicial to the public interests.
The appointment of a receiver is a mere mode of procedure for the administration of justice. He is a mere custodian of the property, holding for the common benefit of all interested therein. Placing the property of a corporation in charge of a receiver does not work'its dissolution, nor is the title of the property changed: a power only is delegated to the receiver to take charge of it, and sell it. Willink v. Morris Canal Co., 3 Green 377; Kincaid v. Dwinelle, 59 N. Y. 548. He takes the property of the corporation, including its franchises, in the same condition and subject to all the duties, obligations and liabilities that rested upon the corporation itself, and in the administration of his office is under obligation for the per*250formance of every duty and obligation imposed upon the corporation by its charter, or by the general laws of the state.
The appointment of a receiver as the means of protecting the private rights of individuals, cannot affect the rights of the state. The state is still sovereign. Its sovereignty can only be secured by maintaining its powers of taxation, and there is neither any sound principle nor authority upon which the property of a person, or a corporation, which is placed in the hands of a receiver for the purposes of a litigation, can be regarded as thereby rendered exempt from the operation of the tax laws of the government within whose jurisdiction such property is situated. Stevens et al. v. N. Y. & Oswego M. R. Co., 13 Blatch. 104.
The assessments were properly made against the prosecutors, and should be affirmed. ■