New Jersey v. Anderson

This is an appeal from the judgment of the circuit court of appeals for the seventh circuit, affirming the order of the district court, which affirmed the finding of the referee in bankruptcy, denying to the state of New Jersey a preference for alleged franchise taxes from the estate of a bankrupt, the Cosmopolitan Power Company.

On December 21, 1903, the claim for the state was filed, under the provisions of § 64a of the bankrupt law. [30 Stat. at L. 563, chap. 541, U.S.C.omp. Stat. 1901, p. 3447.] The claim is set forth as follows: Tax—1902..................... $5,750 00

Interest to October 15, 1903............................ 891 25

Costs on injunction proceedings, because of nonpayment of taxes............. 26 15

Tax—1903...................... 2,500 00

Interest to October 15, 1903............................. 87 50 - $9,254 90

The Cosmopolitan Power Company is a corporation organized under the laws of the state of New Jersey on April 30, 1900, for the purpose of dealing in engines, machines, etc. By its charter it had power to do business in any state or territory of the United States. While it had its principal office in the state of New Jersey, located under the terms of its certificate of incorporation, it had no property in that state, and conducted its business in the state of Illinois.

The capital stock of the corporation on January 1, 1902, was forty millions of dollars, of which there was ten millions outstanding. On May 13, 1902, its capital stock, pursuant to the laws of New Jersey, was reduced to $2,500,000. The company was adjudicated a bankrupt on April 23, 1903, upon an involuntary petition filed in the district court for the northern district of Illinois.

On November 7, 1902, the state board of assessors of New Jersey, the company having failed to make return, levied an assessment for the license or franchise tax in question for the year 1902 in the sum of $5,750.00. On June 1, 1903, there was assessed against the company for the year beginning January 1, 1903, a similar tax on outstanding capital stock in the sum of $2,500.00, in accordance with the return of the company filed on May 1, 1903.

On February 12, 1904, the state of New Jersey filed its motion before the referee for the payment of said taxes as a preferential debt. The referee disallowed the 1903 tax altogether, and allowed the 1902 tax as a general claim against the estate for the sum of $4,949.08. This reduction was made from the assessment for the year 1902, because the state board had made the assessment upon the basis of $40,000,000 of outstanding capital stock, whereas, in fact, only $10,000,000 was then issued and outstanding, upon which basis the referee made the allowance. The district court affirmed the order of the referee. Upon appeal to the circuit court of appeals that court modified the judgment of the district court so as to allow the taxes claimed for the year 1903, as a general debt, and in other respects affirmed the district court. 70 C. C. A. 388, 137 Fed. 858. The case was then brought here.

Messrs. Edward D. Duffield, Robert H. McCarter, and Levy Mayer for appellant.

[Argument of Counsel from page 485 intentionally omitted]

Messrs. Frederick D. Silber and Horace Kent Tenney for appellee.

[Argument of Counsel from page 486 intentionally omitted]

Mr. Justice Day delivered the opinion of the court: