City of New York v. McLean

The facts in this case are not in dispute. The defendant, in January, 1896, and always since that time, was and is a citizen and resident of the state of New Jersey, and is not a resident or citizen of the state of New York, nor did he ever, so far as appears, live within its boundaries. In January, 1896, however, he was the owner of shares of stock in the Standard National Bank, located and doing business in the First ward of the city of New York, and he was assessed in respect of those shares to a very considerable amount by the tax commissioners of this city. A tax of something over $292 was levied upon that assessment against these shares of stock. For some reason the bank did not pay the assessment, and it remained unpaid on the 15th of January, 1897, and afterwards; and on the 10th day of January, 1899, this action was brought by the city of New York against McLean to recover the amount of that tax. It was claimed that the action was brought under the authority of section 936 of the Greater New York charter. Upon the trial the above facts were conceded, and the court, after consideration, held that the defendant was personally liable for the tax, and directed a judgment against him for the amount of it, which judgment was entered, and from that judgment this appeal is taken.

So far as the cases in this state are concerned, we are not aided by authority in disposing of this controversy. Ho case is reported, so far as I can discover, in which the question has been presented or decided. The case of Citizens’ Sav. Bank of Stamford v. City of New York, 37 App. Div. 560 , 56 N. Y. Supp. 295 , which is relied upon by the learned justice below in support of his decision, does not in

In the case of McLean v. Myers, . 134 N. Y. 480 , 32 N. E. 63 , already referred to, a tax had been levied on the shares of the National Broadway Bank, located in the city of New York, owned by McLean, who was a resident of the county of Westchester. As that tax was not paid, Myers was sued by the authority of the same section under which this action was brought, which is now section 936 of the Greater New York charter, but which was then section 863 of the consolidation act. Myers claimed that he was not personally liable for" this tax, because he was not a resident of the city of New York; but the court held that the authority to bring an action to recover a tax imposed upon a person or corporation by the city of New York did not refer to the place of residence of the person or corporation, but referred to the place where the tax was imposed, and that Myers, although not a resident of the city of New York, was personally liable for the taxes under the provisions of that chapter. But that determination does not dispose of this question, because Myers was a resident of the state of New York, and subject to the laws of the state; and there is no reason why the state should not subject any of its citizens to a personal liability with respect to any tax levied within its territory. No one will claim that any law of this state can have any extraterritorial force, or affect in any way the status of a nonresident, or impose any personal liability upon him. So that, when this tax was assessed in the year 1896, it certainly put no personal duty upon the defendant to pay it. It was only effectual then as a lien upon the property taxed. This, it seems to me, cannot be disputed. If it had that effect, and no more, when the tax was levied, at what time, and under what circumstances, did any greater liability arise? There was no change in the status of the defendant, and no change whatever in his relation to the laws of the state of New York. He never became subject to the laws of that state. Those laws, therefore, did not impose any personal duty upon him. It is difficult to see what condition arose after the levy of this tax which changed in any degree the personal relation of the defendant towards the state of New York, or imposed upon him any duty which did not exist at the very minute at which the tax was levied. It is quite true that a section of the Greater New York char

The general rule in respect of the power of the state to establish a personal liability against a nonresident is found in the case of Pennoyer v. Neff, 95 U. S. 714 , 24 L. Ed. 565 . In that case an action had been begun against Neff in the state of Oregon, and service made upon him only by attaching certain of his property in that state, and he was not personally served with process. Judgment was entered in personam against him, and upon that judgment an execution was issued, and property of Neff, which had not been attached, was sold. Pennoyer became the purchaser, and Neff subsequently brought an action to recover the property, which Pennoyer defended, claiming that he was the owner by virtue of the execution. The question presented, therefore, was whether the courts of Oregon had authority to subject a citizen of another state to a personal liability within that state because of the ownership of property which had been attached in a suit against him in the courts of Oregon. The supreme court of the United States laid down the rule that a state having within its territory property of a nonresident may hold and appropriate it to satisfy the claims of her citizens against that person, but that, while it had authority to adjudicate as to the property, and to make valid judgment in that regard, it had no authority over the person of the nonresident, and could not establish any personal liability against him. In reaching this conclusion the court applied the well-settled principle that no state can extend the jurisdiction of its laws over persons not within its territory, and not subject to its allegiance, and that an attempt to do so is utterly without force. Story, Confl. Laws, §§ 539, 540, et seq.; Pennoyer v. Neff, 95 U. S. 722 , 24 L. Ed. 565 . In that particular case the rule was applied to an effort of the court to obtain jurisdiction in personam of a nonresident, but the principle established is not limited to the particular instance. It applies in all cases where it is attempted to extend the law of the state so as to operate upon one who is not within it.

This principle was applied by the supreme court of the United States in the case of Dewey v. City of Des Moines, 173 U. S. 193 , 19 Sup. Ct. 379 , 43 L. Ed. 665 , where the precise questioñ presented here was determined by that court. In that case Dewey was a resident of the state of Illinois, but was the owner of certain lots of land in the city of Des Moines, in the state of Iowa. An assessment for local purposes was levied upon those lots under a statute of Iowa which not only made the assessment a lien on the land, but made the owner of the land personally liable for any deficiency that might arise upon the sale of the land. Proceedings were had to sell the property, and thereupon Dewey brought an action in the state of Iowa, setting out his nonresidence, and the fact of the assessment, and asked for a judgment setting aside the proceedings which had

It is said, however, that the supreme court of the United States has held in the subsequent case of Bristol v. Washington Co., 177 U. S. 133 , 20 Sup. Ct. 585 , 44 L. Ed. 701 , that a nonresident of a state, assessed with respect of personal property in that state, is personally liable for the tax. In that case one Jefferson had been in the habit for many years of investing in mortgages upon property in Minnesota. Upon his death, Mrs. Bristol succeeded to his interest in these debts. Taxes were levied against them during Mrs. Bristol’s lifetime. They were not paid. After her death, her executor, having proved the will of his testatrix in this state, applied to the proper county in the state of Minnesota for the issuance of letters testamentary to him, which was done. Thereupon a claim was made by the county of Washington, in that state, against the "estate of Mrs. Bristol in the hands of her executor in that state, with respect of the property which was then in the hands of the executor there. The court held that that claim was valid, and that, as the state had the right to levy a tax against the property of Mrs. Bristol which was therein situated, that assessment became .a valid claim against the property, and for all purposes of administration was a debt which might be collected out of that property by a proper proceeding in that state. But it is to be noticed that the question there was not as to the personal liability of Mrs. Bristol, but as to the lia

The true rule to be deduced, in my judgment, from all the cases, is that, although a state has the power to levy a tax upon personal property of a nonresident situated within its boundaries, and subject to its jurisdiction, and for that purpose may separate the situs of the owner from the actual situs of the property within the state, and subject it to taxation because it is within the state, yet it can only enforce payment of that tax by virtue of its jurisdiction over the property, and it has not, by virtue of that jurisdiction, any power to subject the owner of it to a personal liability for the tax. I do not think that a fair construction of the tax laws of this state shows that there is any intention to enforce any such liability against a nonresident owner of bank shares located in this state. Those shares are .assessable under the provisions of section 13 of the tax law. The same statute (section 72) requires that the bank shall pay the amount of the tax out of any dividends in its hands, and shall retain such dividends until the delivery to the collector of the tax roll and warrant for the current year, and shall, within 10 days of such delivery, pay out of the dividends so much as may be necessary to pay the taxes assessed against the stock. It then provides that, if the owner of. the stock resides in a place other than where the bank is located, the same power may be exercised in collecting the tax as is given in a case where a person has removed from a tax district. It also provides that the tax shall be a lien on the stock until the tax is paid. By section 258 of the tax law it is provided that, if a person against whom a personal tax has been assessed has removed from the county where the assessment was made, the tax may be collected in a proceeding in the county court of the county to which he has removed. But that can apply only to a resident who is subject to the jurisdiction of the courts. By the Greater New York charter it is provided that a tax may be collected by distress and sale of the property situated within the state of New York, and this gives ample authority for a distress against bank shares and their sale. It is quite true that section 72 provides that, in addition to the remedy thereinbefore provided, the same remedy may be had for the collection of a tax on bank shares as is now provided by law for enforcing payment of personal taxes against residents. That portion of the section evidently refers tq, sections 258 and 259 of the tax law, and, so far as the state at large is concerned, does not attempt to authorize a personal action. If it may be said to have that effect in the city of New York, the question still recurs whether it is in the power of the legislature so to do. Upon the whole case, it seems to me that the necessary effect of the provisions of law which are applicable requires a determination that the defendant is not personally liable for this tax, and that for that reason the judgment should

McLAUGHLIN and HATCH, JJ., concur.

The right to tax would not be of much value if there were no power to collect. The tax bears the same relation to a nonresident as to a resident; and, as a tax is a debt due from a resident, and is collectible by suit, it would seem to follow that a tax against a nonresident would be collectible in the same manner when the court can get jurisdiction of the nonresident by service of process. In opposition to this view it has been urged that the tax is collectible, because it is made by statute a lien upon the personal property taxed. But it is difficult to see how such a lien could be enforced against bank shares, or the shares of any corporation, the owner of which is a nonresident, and holds the certificates for the shares which he owns; which certificates are, in their nature, semi-negotiable securities, and to which a purchaser without notice gets a perfect title by delivery of the same with a proper power of transfer. McNeil v. Bank, 46 N. Y. 325 ; Knox v. American Co., 148 N. Y. 441 -454, 42 N. E. 988 , 31 L. R. A. 779 .

O’BRIEN, J., concurs.