Court Opinion

ID: 3606636
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:51:53.054416+00
Date Added: 2024-06-11T14:23:55.108709
License: Public Domain

The relator is a foreign corporation, chartered by the state of Pennsylvania, and engaged in the transportation of freight, mails and passengers in the states of New York, New Jersey, Pennsylvania, Delaware and Maryland. Its rail terminus is in the state of New Jersey, at Jersey City, from which point it conveys passengers and their baggage by ferry boats operated by it to various points in the city of New York, including Twenty-third street and North river.
The sole business of the relator in the city of New York, with reference to passengers and their baggage, was taking them from and landing them on the New York shore of the North river, until the month of May, 1897, when it established *Page 365 
a cab stand at the Twenty-third street ferry, which it has since maintained, its sole object being to carry passengers and their baggage, arriving at and departing from the city of New York at this point, to and from their residences or hotels.
The facts are undisputed, and the statements contained in the petition for the writ of certiorari, and the affidavit of the officer of the relator subsequently submitted, are the foundation upon which the assessments involved herein rest.
The relator alleges that the cab service is incidental to and part of its business of interstate commerce, and is of no value whatever except as a part thereof, because it is, and always has been, separately considered, carried on at a loss.
It is further alleged that the charge for cabs is separate from the charge for the balance of the passenger's transportation, and that it is necessarily so from the nature of things, it being impossible to include in the railroad and ferry tickets the price of the cab service, as it varies in amount in every case, according to the distance the passenger is to be carried; and, also, for the reason that passengers buying railroad tickets to New York do not know whether they will employ a cab or not; and in respect to passengers starting from New York it would be impossible to supply the drivers of the cabs with tickets to distant destinations in other states.
The record discloses that the state comptroller did not assess a tax on this cab service until the autumn of the year 1900, when he applied to the relator for a statement of the gross receipts and gross expenses of the cab service to June 30th, 1900, and also for the value of personal property employed during that time, and the value of any real estate used by the relator in the city of New York in connection with such cab service.
The comptroller seeks to assess the relator under two distinct sections of the Tax Law (Laws of 1896, chap. 908) upon the business of the cab service thus conducted in connection with its interstate railway service.
Section 182 of the Tax Law imposes a franchise tax on domestic corporations. At the close of this section it is provided *Page 366 
as follows: "Every corporation, joint stock company or association organized, incorporated or formed under the laws of any other state or country, shall pay a like tax for the privilege of exercising its corporate franchise or carrying on its business in such corporate or organized capacity in this state, to be computed upon the basis of the capital employed by it within this state."
Section 184 of the Tax Law provides for an additional franchise tax on transportation and transmission corporations and associations, which reads as follows: "Every corporation and joint stock association formed for steam surface railroad, canal, steamboat, ferry, express, navigation, pipe-line, transfer, baggage express, telegraph, telephone, palace car or sleeping car purposes, and all other transportation corporations not liable to taxes under sections one hundred and eighty-five or one hundred and eighty-six of this chapter, shall pay for the privilege of exercising its corporate franchises of carrying on its business in such corporate or organized capacity in this state, an annual excise tax or license fee which shall be equal to five-tenths of one percentum upon its gross earnings within the state, which shall include its gross earnings from its transportation or transmission business originating and terminating within this state, but shall not include earnings derived from business of an interstate character."
The return called for was duly made to the comptroller, who assessed a tax under section 182 of $934.07, based on the gross earnings of the cab service for the four years ending October 31st, 1900; also, a tax was assessed under section 184 of $1,422.54, being equal to five-tenths of one percentum upon the gross earnings within this state.
It was stipulated before the comptroller, on the application to review this assessment, that it was made solely upon the ground that the relator's cab service in the city of New York is a part of and incidental to its interstate commerce business and, therefore, not taxable. The comptroller after a hearing duly had refused to make any revision or restatement of the assessment and tax. *Page 367 
The Appellate Division having affirmed the decision of the comptroller, this court is now called upon to review the order to that effect.
If the relator is legally taxable on its cab service, no question is made as to the manner in which the taxes were assessed.
The legislature has stated in express terms in section 184, in computing a tax thereunder, that earnings derived from a business of an interstate character should not be included.
It is true, as suggested by counsel, that the precise point presented by this appeal has never been considered by the court. It is, however, equally true that the controlling principles involved in this case were carefully considered by the court inPeople ex rel. Pennsylvania Railroad Company v. Wemple,Comptroller (138 N.Y. 1). The opinion in the case cited was written by Chief Judge ANDREWS, wherein is elaborately discussed the constitutional question now presented for decision. The learned judge thus states the facts in the case before him: "The relator is a Pennsylvania corporation, operating a line of railroad for the transportation of freight and passengers, extending through the state of New Jersey into other states of the Union. No part of its road is within the state of New York. But it operates in connection with its road a ferry from the New Jersey shore across the Hudson river to the city of New York, where it has terminal facilities, consisting of wharves, piers, docks and buildings connected therewith, used in the prosecution of the business of delivering freight and passengers carried over its line to that city, and of receiving freight and passengers to be carried from the city into New Jersey and other states reached by its system of roads. The only transportation over New York territory, carried on by the relator, is over that part of the Hudson river within the territorial boundaries of the State by means of its ferry boats. It collects in the city of New York money due for transportation to that point and for transportation from that city and there makes contracts for transportation of freight and passengers over its lines and issues and sells passenger *Page 368 
tickets. It employs in the city of New York a large number of agents, clerks and laborers in the prosecution of its business. It is engaged in no business in that city except such as relates to the transportation of freight and passengers over its lines."
It was claimed on behalf of the relator in the case cited that the tax imposed was upon interstate commerce in violation of the so-called "Commerce Clause" of the Federal Constitution. (Article 1, § 8, clause 3.)
The learned judge further stated in his opinion as follows: "In determining the question now presented, two propositions must be deemed established. One is that the business in which the relator was engaged in this state was exclusively that of interstate commerce. Whatever it did here was incident to and in aid of the business of interstate transportation. Interstate transportation was not a part of its business only in this state. * * * The second point which must be deemed to be established is that the tax imposed upon corporations * * * is a tax upon the `corporate franchise or business,' and is not a tax upon property. * * * We come, therefore, to the crucial question in the case — can the state of New York tax the relator, a foreign corporation, upon its business carried on in this state, which is exclusively the business of interstate commerce. The question stated in another form is, may a state tax a foreign corporation whose business in such state is exclusively that of interstate commerce for the privilege of transacting that business here because, as we have held, this is the essential nature of the tax under the act of 1880. (People ex rel. S.C.O. Co. v. Wemple, 131 N.Y. 68.) The state may subject to a property tax, in common with other property, every description of property, real and personal, having its situs there, although used or employed exclusively in the business of foreign or interstate commerce. Ships or vessels engaged in foreign or coastwise commerce may be taxed at their home port and the products of one state carried into another and there held for sale by the original purchaser, and may be taxed even before *Page 369 
sale in the state to which they have been taken. * * * If the tax imposed upon corporations by the act of 1880, and the subsequent statutes amending the same had been a property tax instead of a tax on franchise or business, it would not, as we interpret the decisions of the United States Supreme Court, have been subject to the objection now made in behalf of the relator, nor could the relator have lawfully resisted its payment. * * * The tax against the Pennsylvania Railroad Company, involved in this case, was distinctly a tax on its business, and that business in this state, as we have said, was exclusively interstate commerce. * * * The relator is lawfully here, and being here it cannot, we think, under the authorities be lawfully subjected by the state to a tax upon its business of interstate commerce, or for the privilege of conducting its business here."
I have thus indicated the precise points upon which the decision in the case cited rests. In that case, as in this, the relator was the Pennsylvania Railroad Company. The question in that case was whether the transportation of passengers from its railway terminus in Jersey City, over certain territory of the state of New York, in ferry boats, was a continuation of its interstate commerce. In this case the question is, that if the same relator continues the transportation of its passengers still further into the territory of the state of New York by cab, whether it is a continuation of its interstate business.
The only point raised by the relator in this appeal is based upon the proposition that the transportation of passengers from the New York side of the ferry to and from their residences or hotels is as much a part of its interstate business as was the transportation of its passengers by ferry boat, which was approved by this court and held to be exclusively interstate commerce.
It is uncontroverted in this record that the relator does not seek to do, and does not carry on a general cab business in the city of New York. It further appears that these cabs are *Page 370 
solely used for the purpose of the transportation of passengers coming from or going to the line of the relator's road.
The argument on behalf of the state comptroller is that this cab service is to be regarded, necessarily, as an independent business; that it is no part of the transportation of a passenger (by way of illustration) traveling from Washington to the Fifth Avenue Hotel in the city of New York.
We are unable to see any distinction between the right of the relator to transport its passengers by ferry, or by cab, to or from points in the city of New York. It can be said of the relator in this case, as it was said of it in the case cited, that "it is engaged in no business in that city except such as relates to the transportation of passengers * * * over its lines."
It is insisted on behalf of the state comptroller that the cab service is to be regarded as starting and terminating within the state of New York. Even if this were so, that fact alone does not characterize the cab service exclusively as a domestic business.
While we are to be controlled by the decisions of the Supreme Court of the United States, when applicable to a case involving a Federal question, I am of opinion that to extend the rule, as laid down in the case involving the rights of this relator and already cited, to the new facts now presented is not in conflict with any decision of that court, but, on the contrary, is in harmony with a number of well-considered authorities.
In the case of The Daniel Ball (10 Wall. [77 U.S.] 557) the question was whether the steamboat named, which was engaged in navigating Grand river, Michigan, wholly within the limits of that state, should be licensed under the United States statute. It appeared that some of the goods carried by it were destined to and marked for points beyond the state of Michigan. The court said (p. 565), referring to the question of interstate commerce: "She was employed as an instrument of that commerce; for, whenever a commodity has begun to move as an article of trade from one state to another, commerce *Page 371 
in that commodity between the states has commenced. The fact that several different and independent agencies are employed in transporting the commodity, some acting entirely in one state
and some acting through two or more states, does in no respect affect the character of the transaction. To the extent in which each agency acts in that transportation, it is subject to the regulation of Congress."
The relator, by its cab service, simply extended its care of passengers at a loss to itself and provided an additional means of transportation which conveyed them for a reasonable compensation to their destinations in the city of New York. These passengers, when in the cabs of the relator, were in the process of transportation precisely as were the goods carried by the vessel Daniel Ball marked for points beyond the state of Michigan. (Lord v. Steamboat Co., 102 U.S. 541; Foster v.Davenport, 63 U.S. [22 How.] 244; Cutting v. Florida Railwayand Navigation Co., 46 Fed. Repr. 641; Leloup v. Port ofMobile, 127 U.S. 640.)
In the Leloup case BRADLEY, J. (at page 647), said: "But it is urged that a portion of the telegraph company's business isinternal to the State of Alabama, and, therefore, taxable by the State. But that fact does not remove the difficulty. The tax affects the whole business without discrimination. There are sufficient modes in which the internal business, if not already taxed in some other way, may be subjected to taxation without the imposition of a tax which covers the entire operations of the company."
The case of Cratcher v. Kentucky (141 U.S. 47) has a very strong bearing in principle upon the question we are now considering. That case involved the transaction of certain business in the state of Kentucky by the plaintiff as the agent of the United States Express Company. Mr. Justice BRADLEY (at page 59) said: "We do not think that the difficulty is at all obviated by the fact that the express company, as incidental to its main business (which is to carry goods between different states), does also some local business by carrying goods fromone point to another within the State of Kentucky. This is *Page 372 
probably quite as much for the accommodation of the people of that state as for the advantage of the company. But whether so or not, it does not obviate the objection that the regulations as to license and capital stock are imposed as conditions on the company's carrying on the business of interstate commerce, which was manifestly the principal object of its organization. These regulations are clearly a burden and a restriction upon that commerce. Whether intended as such or not they operate as such. But taxes or license fees in good faith imposed exclusively on express business carried on wholly within the state would be open to no such objection."
The case of Maine v. Grand Trunk Railway Co. (142 U.S. 217) has no application to the case at bar. The defendant operated a portion of its line in the state of Maine and a franchise tax was imposed thereon. The payment was resisted on the ground that it was a tax imposed upon interstate commerce. The Supreme Court of the United States sustained this tax on the ground that the defendant enjoyed a franchise granted by the state of Maine, and it was competent for the legislature to require the payment of taxes as a condition to issuing the grant. These facts clearly distinguish the case from the one now under consideration. It may be, however, remarked that the Supreme Court decided this case on a vote of five to four, and the opinion of the dissenting justices contains cogent reasoning in support of the proposition that the tax is imposed on the business of interstate commerce.
The case of Coe v. Errol (116 U.S. 517), cited by the respondent, has no application to the case at bar. That case involved the taxation of a raft of logs which had been cut in the state of New Hampshire, and were destined for shipment to the state of Maine. Prior to the time when they were to be started on their interstate journey, a tax was imposed by the state of New Hampshire, which was sustained by the Supreme Court of the United States, on the ground that until the transportation was actually begun these logs were like all other personal property in the state of New Hampshire and liable to taxation; that the mere intention of the *Page 373 
owner when he cut these logs, to ship them into the state of Maine, would not be considered in determining the right of the state to tax the property.
The case of People ex rel. N.Y.C.  H.R.R.R. Co. v. Morgan,Comptroller (168 N.Y. 1) has no bearing upon this controversy. In that case the comptroller sought to collect from the relator a tax under section 184 of the Tax Law, for the transportation of domestic mail matter within this state. It appeared, however, that it was impossible to ascertain the proportion of mail which originated and terminated within this state, as distinguished from interstate and foreign mail matter, for the reason that the mail bags could not be inspected for any such purpose. It was held that this state of affairs prevented the assessment of any tax for the transportation of domestic mail matter.
I am of opinion that the taxes imposed upon the relator by the state comptroller are an interference with interstate commerce, and were unconstitutionally levied and void.
The determination of the Comptroller and the order of the Appellate Division should be reversed, with costs.
PARKER, Ch. J., GRAY, O'BRIEN, HAIGHT and WERNER, JJ., concur with CULLEN, J; BARTLETT, J., dissents.
Order affirmed.