State County NyArchives Court.....People, Ex Rel Thomas Platt Vs. Edward Wemple 1889
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Source: Reports Of Cases - New York
Written: 1889

Third Department, May Term, 1889.

THE PEOPLE OF THE STATE OF NEW YORK ex rel. THOMAS C. PLATT, as President of the 
United States Express Company, v. EDWARD WEMPLE, Comptroller of the State of New 
York.

Tax on joint-stock company under chapter 542 of 1880, as amended by chapter 361 
of 1881 — powers of joint-stock, companies — statutes relative to, presumption 
that a company is organized thereunder — fact of incorporation, how determined.

The provisions of section 3 of chapter 542 of the Laws of 1880, as amended by 
section 3 of chapter 361 of the Laws of 1881, declaring that "every corporation, 
joint-stock company or association whatever, now or hereafter incorporated or 
organized under any law of this State, * * * shall be subject to and pay a tax 
as a tax upon its corporate franchise or business," includes an association 
organized as an express company by articles of agreement, signed by five or more 
persons, which provide for the issuing of stock, and for the assignment thereof, 
and for the assignee thereof becoming a member of the company, for the making of 
assessments on such stock by a board of directors designated therein; for a 
forfeiture of the stock, in case of their non-payment; for the election of 
directors by ballot by the stockholders entitled to a number of votes equal to 
the number of shares held by them, respectively; placing the power of management 
in the board of directors; providing that its real estate, bonds and mortgages 
are to be executed by the president and his successors, and that suits are to be 
brought in his name; that the death or legal incapacity of any associate shall 
not operate as a dissolution of the company; that the survivors may continue to 
prosecute the business of the company, and that on the death of a shareholder 
the survivors may purchase his shares, unless his heirs, being legally 
competent, elect to retain them.

The insertion of the words "or organized" by the amendment (chap. 361 of 1881) 
indicates that the legislature did not intend to confine the third section of 
the act to bodies which were in strictness incorporated, but intended to include 
also bodies which were organized under the laws of the State.

It would seem, in view of the provisions contained in section 3 of article 8 of 
the Constitution of the State of New York, that the word "corporation" may 
sometimes be used to include joint-stock companies.

The statutes of the State of New York, relating to joint-stock companies, 
conferring upon them the privileges,

First. To sue and be sued in the name of the president.

Second. Not to be dissolved by the death of a stockholder or by his assignment 
of his stock.

Third. To purchase, hold and convey property in the name of the president.

Fourth. To extend the term of their existence by the consent of two-thirds of 
their stockholders against the wish of the other third.

Fifth. That three-fourths of the directors may reduce the capital stock.

Sixth. That the stockholders are not liable for debts of the association, except 
after judgment and executions returned unsatisfied against it — distingush such 
joint-stock companies from mere partnerships.

Where an association is formed under articles of agreement which provide for the 
exercise of these privileges mentioned in the statute, although no reference is 
made in such articles to the statute conferring them, the association will be 
presumed to have been organized under such statutory provisions.

The decision of the question as to whether an association of individuals 
constitutes a corporation is not to be determined by the fact that the 
term, "corporation," is or is not used in its creation, but upon the question 
whether the body so created possesses the powers and faculties usually enjoyed 
by corporations; nor is the question one whether the business which is carried 
on might not be carried on by private persons, but whether the body, in the 
conduct of such business, exercises the privilege of corporate action.

Certiorari issued, directed to the comptroller of the State of New York, 
commanding him to certify and return to the Supreme Court all proceedings taken 
by him in reference to the assessment of a tax, under chapter 542 of the Laws of 
1880, as amended by chapter 361 of the Laws of 1881, upon the United States 
Express Company.

Edward Wemple, comptroller of the State of New York, in return to such writ, 
certified that prior to the 9th day of April, 1888, the United States Express 
Company was, on several occasions, called upon by the comptroller of the State 
of New York to present reports to him as to the amount of its capital stock 
employed within this State, for the purpose of enabling said comptroller to 
settle and adjust the taxes and penalties due from said United States Express 
Company to the State of New York, under the provisions of chapter 542 of the 
Laws of 1880, as amended by chapter 361 of the Laws of 1881, and chapter 501 of 
the Laws of 1885 ; that the United States Express Company refused to make such 
reports, and thereupon the comptroller proceeded to settle, fix and determine 
the amount of taxes and penalties due and unpaid from said company to the State 
of New York, the return setting forth the assessment so made for the years 
ending November first, from the year 1880 to the year 1887, both inclusive.

The question presented by the certiorari was whether the relator, the United 
States Express Company, was taxable under the third section of chapter 542 of 
the Laws of 1880, as amended by chapter 361 of the Laws of 1881.

Chapter 542, Laws of 1880, section 3, declares that "every corporation, joint-
stock company or association whatever, now or hereafter incorporated under any 
law of this State," except, etc., shall be subject to and pay a certain tax, 
which is estimated by a certain percentage on dividends; and if there are no 
dividends, by a certain percentage on the valuation of the capital stock made 
according to the provisions of section 1. Section 6 of the same act imposes, "in 
addition to the taxes above provided, that every corporation formed for 
railroad, * * * purposes, and every elevated railway company, and every other 
corporation, joint-stock company or association, * * * engaged in the business 
of transporting freight or passengers" shall pay a tax to the State. This is a 
tax on gross earnings for business transacted in this State. The said section 3 
was amended by chapter 361 Laws of 1881, so as to read in the clause above 
quoted "incorporated or organized." It was again amended by chapter 359, Laws of 
1885, but not so as to change this clause.

The United States Express Company is an association formed by articles of 
agreement dated April 22, 1854, signed by five or more persons. The agreement 
adopts the aforesaid name; provides that its capital stock shall be 5,000 shares 
of $100 each, which number may be increased or diminished by the board of 
directors; provides for certificates of stock and for the assignment thereof, 
and for the assignee being a member of the company; and that the assignor shall 
not be liable for subsequent liabilities of the company. The agreement further 
provides for the making of assessments by the directors to pay losses, and 
authorizes the directors to forfeit and sell stock when the holder does not pay 
his assessment; for the election of directors by ballot, each shareholder being 
entitled to votes equal to the number of his shares, and that the board of 
directors may fill vacancies. A meeting of shareholders for the election of 
directors is to be called at the request of two-thirds in amount. The full power 
of management in every respect is placed in the board of directors. Deeds of 
real estate, bonds and mortgages are to be made to the president and his 
successors. Suits to be brought in his name. The death or legal incapacity of an 
associate is not to operate as a dissolution. The survivors may prosecute the 
business, and on the death of a shareholder the survivors may purchase his 
shares, unless his "heirs," being legally competent, elect to retain them. Said 
company was extended to a further term of twenty years from May 1, 1864, and by 
a vote of the directors was extended twenty years from May 1, 1884. 

On the 9th of April, 1888, the comptroller assessed on the company a tax, under 
the aforesaid third section, for the years 1880 to 1887, and also assessed the 
penalties prescribed. On its refusal to pay the comptroller issued his warrant. 
This action is brought to review his proceedings and restrain the collection. It 
is agreed that the only question is whether, under the laws and the 
Constitution, the company is liable for those taxes, or any of them.

William W. MacFarland and Clarence A. Seward, for the relator.

William A. Poste, deputy attorney general, for the respondent.

Learned, P. J.:

The insertion of the words "or organized," by the amendment of 1881, indicates 
that the legislature did not intend to confine the third section to bodies which 
were, in strictness, incorporated, but intended to include also bodies which 
were organized under the laws of the State; so that the question is whether this 
company is a joint-stock company or association, organized under the laws of the 
State, and, perhaps, as to the tax of 1880, whether it is a corporation, though 
it would seem, by section 3 of article 8 of the Constitution. That the 
word "corporation" may sometimes be used to include joint-stock companies, so 
that it may not be inconsistent to speak of a joint-stock company as being also 
a corporation.

We may notice here that a peculiar rule exists as to what are called mining 
partnerships, which are formed when several tenants in common of a mine unite in 
working it. In these cases, partly because there are several interests in the 
land which any owner may transfer, and partly from the necessity of the case, 
one person may convey his interest without dissolving the partnership. (Kahn v. 
Smelting Co., 102 U. S., 641.) It is desirable to observe this, and not to 
reason in regard to other partnerships from the peculiarity of that class.

The counsel for the relator insists that the Court of Appeals has decided that 
this third section embraces only corporations. The decisions supposed to 
establish this are: People v. Home Insurance Company (92 N. Y., 329); People v. 
Equitable Trust Company (96 id., 393); People v. Gold and Stock Tel. Company (98 
id., 67). Now, the question in the first case (aside from that of 
constitutionality) was whether the fact that the dividends were derived in part 
from exempt securities invalidated the law. The court held that it did not, 
because the tax was not on property but on franchise or business. No question 
was made as to whether joint-stock associations were included or whether they 
were not corporations.

The court was only defining the nature of the tax as distinguished from one on 
property. The very section in question used the words "corporate franchise or 
business," after naming the bodies subject to the tax; and if anything is to be 
drawn from that opinion it is that these joint-stock associations are 
corporations, for the court says, at page 340, that the aforesaid act of 1881, 
after "describing the corporations subject to its provisions, continues as 
follows:" thus, including joint-stock companies and associations under that name 
of corporation. But, as we have had occasion to remark before, decisions of 
courts are authoritative on the matters necessarily decided, not upon every 
expression in an opinion.

The next case held that, as to foreign corporations, the tax was upon business. 
In the third case the counsel for the relator insist that the court declared 
that the act "deals, as its title declares, with the subject of taxation of 
corporations, and no other matter." The  court immediately after these words 
cited the title itself, which mentions joint-stock companies and associations, 
thus implying that the title declared that such associations were corporations. 
But there was really no question presented as to joint-stock associations; and 
no decision made. It may be noticed, also, that in the cases in the Supreme 
Court of the United States, viz.: Society for Savings v. Coite (73 U. S. [6 
Wall.], 594) and Provident Institution v. Massachusetts (Id., 611), no 
distinction is suggested between corporations strictly so-called and joint-stock 
associations. Thus it is said in the last case "That private corporations and 
all trades and avocations by which the citizens acquire a livelihood may be 
taxed."

The counsel for the relator insist that this express company is simply a 
partnership, with no privileges of corporate action under the laws of this 
State. The decisions of other States that, in those States, such associations 
are partnerships, or even that they are partnerships in New York, have no 
binding force here. (Taft v. Ward, 106 Mass., 518; Boston and Albany R. R. Co. 
v. Pearson, 128 id., 445.) We must determine the question under our own laws and 
decisions. Chapter 258, Laws of 1849, provides that any joint-stock company or 
association, consisting of seven or more shareholders, may sue or be sued in the 
name of the president. Chapter 153 of the Laws of 1853, provided that, after 
judgment thus recovered and execution returned unsatisfied, suits might be 
brought against shareholders or associates with some further provisions in this 
respect. This statute seems to be substantially re-enacted in the Code of Civil 
Procedure, sections 1919 and 1923, inclusive. Chapter 245 of the Laws of 1854, 
authorizes these associations to provide that the death of a stockholder or the 
assignment of his stock shall not work a dissolution; also, that they may 
devolve on three or more of the partners the sole management of the business. 
Chapter 289 of the Laws of 1867 authorizes these associations to purchase, hold 
and convey real estate, and provides that conveyances shall be made to and by 
the president. Chapter 987 of the Laws of 1867 authorizes these associations, by 
consent of stockholders owning two-thirds in amount of the capital stock, to 
extend the time of existence. Chapter 290 of the Laws of 1868 authorizes the 
directors, by consent of three-fourths of their number, to reduce the capital 
stock. Chapter 599 of the Laws of 1881, authorizes a majority of the 
stockholders at a meeting to reduce the number of trustees. Chapter 505 of the 
Laws of 1885, requires every such association to file a statement annually of 
its name, date of organization, law under which it is organized, etc.

From these statutes it may be seen that these associations have these 
privileges: 1. To sue and be sued in the name of their president. 2. Not to be 
dissolved by the death of a stockholder or by his assignment of stock, which is 
really to have perpetual succession during their term. 3. To purchase, hold and 
convey property in the name of the president, thus making an exception to 1 
Revised Statutes (m. p. 728, § 49). 4. To extend the term of existence by 
consent of two-thirds against the wish of the other third. 5. That three-fourths 
of the directors may reduce the capital stock. 6. That the stockholders, under 
the act of 1853, should not be liable for debts of the 'association, except 
after judgment and execution unsatisfied against the association. This may be 
modified by the first sentence of section 1923 of the Code.

This express company has, in its articles of agreement, accepted these 
privileges by assuming nearly all of them specifically. The right to sue by its 
president is assumed by this present litigation. Now, these are not privileges 
which a simple partnership, as such, possesses. It is true that by the Code (§ 
1919) the right to bring an action in the name of the president is extended to 
some partnerships. Still, that is a special statutory right, and its extension 
to partnerships is no indication that this express company obtains such right by 
its own agreement and not by statutory law. If an association, by the language 
of its articles of agreement, assumes the privileges which are given by the 
statutes of the State, it certainly cannot say that, because the articles make 
no reference to these statutes, therefore the association is not organized under 
them. The counsel for the relator insists that the capital stock has none of the 
legal characteristics of the capital stock of a corporation. In fact, it has all 
those characteristics. The articles of agreement speak of the capital stock, of 
its shares, of certificates or scrip, of the absolute right of assignment 
thereof, "in the usual form," and of the record of the same. In short, there is 
no difference whatever.

The counsel for the relator also drew an argument from section 5 of the above-
cited act of 1849, which act is not superseded by the Code. That section was to 
the effect that nothing in the act contained should be construed to confer on 
such associations "any of the rights and privileges of corporation, except as 
herein specially provided." But if that section had any meaning, it implied that 
some rights and privileges of corporation were conferred by the act; as they 
certainly were.

It cannot be justly said by the relator that all these privileges arise from its 
own agreement, and are such as any partnership might acquire at common law. Two, 
especially, are of great value, and do not spring from its agreement merely: The 
right to hold property in the name of its president, and the right to sue and be 
sued in his name even against and by its own members. At common law, as held in 
the above cited Massachusetts cases, such suits could not be maintained. We 
think, then, for the reasons above given, that this company is a joint-stock 
association organized under a law of this State.

We must further consider whether, within the meaning of this statute, it is a 
corporation. We have already noticed that, under the Constitution, the word 
corporation may embrace what is usually known as a joint-stock association, and, 
therefore, our conclusion that this company is a joint-stock association is not 
necessarily conclusive on the question whether it is a corporation under the 
statute in question. In Thomas v. Dakin (22 Wend., 9, at page 70) it was said 
that "a corporate body is known to the law by the powers and faculties bestowed 
upon it." "The use of the term corporation in its creation is of itself 
unimportant, except as it will imply the possession of these." The court 
proceeded in that case to mention the powers and faculties. They are such as 
have been above mentioned, with the exception of the right to have a common 
seal, which the court say may be dispensed with altogether. For it had long 
since been held that corporations may contract without seal, and as conveyances 
were to be made by the president, his seal was sufficient to a deed. The court 
was of the opinion that associations having these powers were corporations. It 
is only necessary to refer to the very full and exhaustive opinions then 
delivered. Nor need we refer to all of the subsequent decisions. The correctness 
of that decision on this point is settled. (Supervisors of Niagara v. People, 7 
Hill, 504.) It rested, as will be seen, on this principle, that a body which 
possesses the powers and faculties of a corporation is a corporation.

A similar question arose in Liverpool Insurance Company v. Massachusetts (77 U. 
S. [10 Wall.], 566). The plaintiff was a joint-stock association organized in 
England. Acts of parliament had expressly provided that the company should not 
be a corporation. A law of Massachusetts imposed a tax. The Supreme Court 
examined the question whether the plaintiff was a foreign corporation, and the 
court held that it was, because it possessed the attributes deemed essential to 
corporate character. These were: 1. An artificial name. 2. The right to sue and 
be sued in the name of an officer. 3. Perpetual succession by transfer of stock. 
4. Existence apart from the stockholders, which enabled it to sue and be sued by 
them. All these, and more, this express company has.

In Fargo v. McVicker (55 Barb., 437) it was held, on the question of removal to 
a Federal court, that an express company like the present was a corporation. To 
the same effect, Fargo v. Lowville and C. R. W. Co. (6 Fed. Rep., 787). Neither 
the case of National Bank v. Vanderwerker (74 N. Y., 234), nor that of Bray, 
President v. Farwell (81 id., 608) decide anything upon this point.

An unreported case of Bell v. Streeler is cited by counsel for relator where it 
was held that a certain company was not taxable as a corporation. The opinion 
says that none of the privileges of the company were of the essence of a 
corporation. See, on the other hand, Bank of Watertown v. Assessors (25 Wend. 
686) and Sandford, President, v. Supervisors (15 Hun, 172), where the court held 
such an express company to be a corporation, and as such liable to taxation. 
See, also, People v. Assessors (1 Hill, 622), where the court held again that 
associations under the general banking law were corporations, and taxable as 
such, and remarked: "It may be true, as has been argued, that the legislature 
intended to make a legal being and give it all the essentials of a corporate 
body, and yet that it should not be a corporation. That the legislature could 
not do. * * * Human powers are not equal to the task of changing a thing by 
merely changing its name." It seems to us that such is the task the relator 
undertakes. Having all the essentials of a corporation, it claims that it is not 
a corporation, because it has not been so named, and because of the negative 
effect of section 3 of the act of 1854, to which the above-quoted remarks of the 
court are forcibly applicable.

It must be observed that the question is not as to the privilege of conducting 
the business of a common carrier. The relator has urged that because it is the 
common-law right of any person to be a common carrier, therefore, the relator 
has derived no privilege from the State. But this is not sound. We have in this 
State a multitude of corporations which carry on business of a kind which any 
private person might carry on. For instance, manufacturing companies. What they 
derive from the State is only the privilege of corporate action, not the 
privilege of manufacturing. Any individual may manufacture; but if several 
individuals, desirous of manufacturing, wish to do this with the convenience of 
action possessed by a corporation, then they must obtain from the State that 
privilege. On the other hand, there are certain, things which neither 
individuals nor corporations may do without authority from the State: For 
instance, issue notes as a circulating medium. But the privilege which this 
relator has obtained from the State is that of a corporate action, not that of 
exercising that action in any special business. The individual members might 
carry express packages all their lives, or they might form a partnership and do 
the same thing till a partner died; and in each case they would be exercising 
common law rights simply. But when, by virtue of statute law, they assume 
perpetual succession, the right to hold real estate in the name of their 
president, and the other privileges which have been above noticed, they then 
have organized themselves into a corporate body, a corporation. The 
constitutionality of the act under the State Constitution we supposed to be 
settled. As to the United States Constitution, it is to be observed that by 
stipulation the only question to be argued is whether the relator is taxable for 
the tax.

The mode of computation, therefore, is not in question. (See, also, Western 
Union Telegraph Company v. Massachusetts, 125 U. S., 530.) The case of the Home 
Insurance Company v. New York (119 U. S., 129) affirmed the same case in this 
State, holding this tax to be on franchise. (See, also, Hamilton Company v. 
Massachusetts, 73 U. S., 633.) The question is suggested whether this tax 
interferes with inter-state commerce. This subject has been so fully discussed 
in the Supreme Court of the United States that it cannot be profitable for us to 
do more than to state the conclusion that we think this tax does not so 
interfere with commerce between the States as to be unconstitutional. (Delaware 
Railroad Tax, 85 U. S. [18 Wall.], 206.)

The application of the relator to set aside the proceedings of the comptroller 
is denied, and his proceedings and determination affirmed, with fifty dollars 
costs and disbursements.

Landon, J., concurred; Ingalls, J., dissented.

Application to set aside proceedings of comptroller denied and proceedings and 
determination affirmed, with fifty dollars costs and disbursements.

Additional Comments:
Reports of Cases Heard and Determined in the Supreme Court of the State of New 
York. Marcus T. Hun, Reporter. Volume LIX, 1889, HUN 52. Banks & Company, 
Albany, NY. 1901.

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