New Jersey v. Anderson
203 U.S. 483 (1906)

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U.S. Supreme Court

New Jersey v. Anderson, 203 U.S. 483 (1906)

New Jersey v. Anderson

No. 48

Argued October 19, 1906

Decided December 10, 1906

203 U.S. 483

Syllabus

The requirement of § 64a of the Bankruptcy Law of 1898 in regard to preference of taxes is a wide departure from the act of 1867, and prefers taxes due to any state, and not only those due to the state in which proceedings are instituted.

It is the province of the courts to enforce, not to make, laws, and if a law works inequality, the redress, if any, must be had from Congress, and arguments directed not to the construction of the act, but as to the justice of a method of distribution of assets under the Bankruptcy Law and the hardship resulting therefrom cannot influence judicial determination.

Generally speaking, a tax is a pecuniary burden laid upon individuals or property to support the government, and § 64a of the Bankruptcy Law is very broad, and covers all taxes, including yearly license fees imposed by the state on corporations organized under its laws for the privilege of doing business, whether such business is carried on in that or in other states.

A state creating a corporation may fix the terms of its existence and

Page 203 U. S. 484

provide that, for the continued existence of its franchise, it must yearly pay the state certain sums fixed by the amount of its outstanding stock. While the state court may construe a statute and define its meaning, it cannot conclusively determine that which is not a tax to be a tax within the meaning of a federal statute -- that is a federal question of ultimate decision in this Court.

In this case, this Court reaches independently the same conclusion as that reached by the state court.

Under the Bankruptcy Act, taxes assessed on returns made prior to the adjudication are legally due and owing, and entitled to the preference given by § 64a although not collectible until after the adjudication.

137 F. 858 reversed.

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. 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

Page 203 U. S. 485

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. 137 F. 858. The case was then brought here.

Page 203 U. S. 487

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