The People of the State of New York ex rel. The Jerome Park Villa Site and Improvement Company, Relator, v. James A. Roberts, as Comptroller of the State of New York, Respondent

The People of the State of New York ex rel. The Jerome Park Villa Site and Improvement Company, Relator, v. James A. Roberts, as Comptroller of the State of New York, Respondent. Franchise tax — condemnation of corporate property and distribution of the award, among its stockholders — the amount distributed in excess of its capital stock is not a dividend. Where a corporation, after the condemnation and appropriation of its property under the right of eminent domain, makes no use of the property and does no business except such as is incident to its corporate organization and to the condemnation proceedings, and subsequently distributes the greater portion of the award made to it among its stockholders, the Comptroller, in assessing the franchise tax for the year during which the distribution was made, is not justified in treating the amount so distributed in excess of the capital stock as a dividend. Certiorari issued out of the Supreme Court and attested on the 9th day of July, 1898, directed to James A. Roberts, as Comptroller of the State of New York, requiring him to certify and return to the office of the clerk of the county of Albany all and singular his proceedings had in assessing a franchise tax against the relator, a domestic corporation, for the year ending October 31, 1897, in the sum of $3,281.25. Robert E. Deyo, for the relator. G. D. B. Hasbrouck, Deputy Attorney-General, for the respondent. [MAJORITY — Landon, J.:] Landon, J.: The capital stock of the relator, $750,000, was issued for real estate purchased by it between September, 1867, and February, 1873. The relator held this real estate, mainly leasing it for racing purposes, until June, 1895, when it was condemned and appropriated by the city of New York for aqueduct purposes. Thereafter the relator made no use of the property and did no business except such as was incidental to its corporate organization and to the condemnation proceedings. These proceedings resulted in an award made July 17,1896, of $1,011,083.50, which, with interest, was paid December 31, 1896, in the sum of $1,106,630.89. Prior to November 1, 1897, it had made its annual reports to the Comptroller under the Franchise Tax Act of 1880 (Chap. 542) and its amendments, and had paid the taxes as annually settled and adjusted by the Comptroller, the last being upon its report for the year ending October 31, 1896. It never declared any dividends. On January 3, 1897, the relator, out of the money awarded and paid it for its real estate, paid its debts, $197,391.65, and distributed among its stockholders $881,250, and retained the balance, $27,989.35, and reduced its capital stock from 7,500 shares to 250 shares, and on December 9, 1897, took proceedings which resulted in the dissolution of the corporation. In November, 1897, the relator made its annual report to the Comptroller, stating its capital- stock at 250 shares of the actual value of $170 per share, or $43,500. The Comptroller caused an investigation to be made which disclosed the above facts, and thereupon he assumed that the amount distributed among the stockholders in excess of $750,000 was a dividend, and he settled and adjusted the tax for the year ending November 1, 1897, upon a dividend of seventeen and one-half per centum upon the capital stock of $750,000 at the rate of one-quarter mill for each per centum of such assumed dividend, making the tax $3,281.25. The Comptroller refusing to revise and reduce it, the relator brings this certiorari. It is clear that the relator did no corporate business within the meaning of the Franchise Tax Act during the year ending November 1, 1897. If we assume that the tax is levied for the exercise of its franchise of doing business for the year prior to that date, it did not exercise it. It continued to exist but not to exercise its franchise or do business. It had no real estate, and was simply waiting for its money until the award was paid, and when payment was made it paid its debts and distributed the greater part of its money among its stockholders. What it did was in the nature of discontinuing business instead of “ doing business ” within the meaning of the act. It did not employ its capital in business. The nature of the situation did not permit it to do so. (People ex rel. Niagara River Hydraulic Co. v. Roberts, 30 App. Div. 180; affd., 157 N. Y. 676.) The relator’s surplus above the par value of its capital stock was not in the nature of a dividend “ made or declared.” It obviously resulted from the increment in the value of its real estate between 1873 and June, 1895, increased by the interest upon the award after June, 1895. Included in this increment are the interest of the original investment, the general and franchise taxes, and local assessments paid, less the income from the property, as well as the increase in the value of the property. What margin of profit remains is not stated. Some of the increment may have accrued during the years before the Franchise Tax Act became a law. As the relator never declared any dividends, and annually paid its franchise tax after 1880 upon the basis of the actual “ value in cash ” of its capital stock, we may assume that whatever increment there was above the par value of the capital stock entered into the basis upon which the franchise tax was annually levied. It cannot be assumed under the circumstances that the relator omitted to declare annual dividends or to declare this surplus as a dividend earned in order to evade taxes under this act within thé hypothetical case supposed in People v. The Albany Insurance Co. (92 N. Y. 458). We think the Comptroller erred in assuming the surplus distributed above the authorized capital stock to be a dividend made or declared. The relator consents to a tax upon the basis of the actual cash value of its 250 shares of stock as reported by it. The tax upon that basis would be §63.75. All concurred. Determination of the Comptroller modified by reducing tax to $63.75, and as so modified' confirmed, with costs to relator.