Heerwagen v. Crosstown Street Railway Co.

Spring, J.:

This action was commenced to recover a tax for the fiscal year, 1900-1901, levied against the franchise of the defendant, the Crosstown Street Railway Company, in accordance with the Special Franchise Tax Law (Laws of 1899, chap. 712 as amd.) and which tax- it is claimed was due and unpaid to the city of Buffalo. The defendant had paid to the city within the year next preceding the maturity of the tax certain percentages which it contended should be deducted from the amount of the tax in compliance with section 46 of the Tax Law (Laws of 1896, chap. 908, added by Laws of 1899, chap. 712) which deduction the plaintiff declined to allow. The construction of that question is the central question to be.considered upon this appeal.

The defendant, the Crosstown Street Railway Company, is a «domestic street surface railroad corporation organized on the 5th day of February, 1890, pursuant to chapter 252 of the Laws of 1884, as amended, and is operated within the city of Buffalo, N. Y. By this act, which is ' entitled “ An act to provide for the construction, * * * of street surface railroads,” the consent of the local authorities of a city to the construction of such railroads along its «streets was provided for and a sale of the franchise at public auction Was permitted (§§ 3, 4, 7). By section 8 of the act every such corporation constructing or operating a railroad within any city of the State “ having a population of two hundred and fifty thousand or more,” which included the city of Buffalo, was obliged for five years to pay annually into the treasury of the city where its road was -'¡operated “ to the credit of the sinking fund thereof, three per cent «¡of its gross receipts,” and, after the expiration of five years, five per «'cent of such gross receipts. As to cities not containing 250,000 Tinhabitants the local authorities were permitted at their option to «"sell the franchise to the highest bidder (§ 1) or to require without a ‘..sale, as a condition of granting their consent, the annual payment of «a percentage of the gross receipts not exceeding three per cent, as ¡they might elect (§ 8). They could not order the sale and also -impose the percentage assessment. They had the election of the ttwo remedies, not the authority to impose both.

The Cantor act, so called (Laws of 1886, chap. 65, as amd. by Laws «of 1886, chap. 642, and Laws of 1889, chap. 564), was thereafter passed, -entitled “ An act to secure adequate compensation for the ¡right to -construct * * * street railroads in cities and villages.” By section 1 of the act, as amended by chapter 642 of the Laws of 3886-and chapter 564 of the Laws of 1889, it was required of the local authorities of a city as a condition of granting its consent to the construction or extension of a street railroad over any of its streets “ that the right, franchise and privilege of using the said street * * * shall be sold at public auction to the bidder who will agree to give the largest percentage per annum of the gross receipts of said company or corporation,” but the section expressly retained in force the percentages authorized by the act of 1884 above mentioned. Section 7 of the statute of 1884 was repealed by the statute of 1886.

The Railroad Law (Laws of 1890, chap. 565) was thereafter enacted, article 4 of which pertains to street surface railroads. So far as concerns any inquiry germane to the present discussion it made no essential change in the payment of percentages. The only method by which any city or village was enabled by that act to derive any revenues from the sale of its franchises was upon the percentage system. (§§ 93, 95.) By section 180 of this act all the acts above mentioned, viz., chapter 252 of the Laws of 1884, section 1 of chapter 65 and chapter 642 of the Laws of 1886, and chapter 564 of the Laws of 1889, were repealed. The act took effect May 1, 1891, and since that time the only sale of a franchise permitted by municipal authorities has been upon a percentage of its gross earnings. There has in fact been no time since the act of 1884, and prior to the sale of the franchise in question, when in the city of Buffalo the sale of a franchise to a street surface railroad company was permissible except upon payment by percentages and that system came into being by that act. The Railroad Law was enacted after the sale to the defendant and of course it is of no importance to the subject under review.

The necessity of obtaining the consent of the local authorities to the construction of a street railroad has long been required by the State Constitution (Const, of 1846, art. 3, § 18, added in 1874 and continued in the same article and section of the Constitution of 1894.)' The franchise, however, including the control of the streets, is in the State (Adamson v. Nassau Electric R. R. Company, 89 Hun, 261), but the tendency has been to commit to the municipal authorities the right to dispose of the same. (Skaneateles W. W. Co. v. Village of Skaneateles, 161 N. Y. 154, 165; Barhite v. Home Telephone Company, 50 App. Div. 25, 31.)

The Legislature in its delegation of authority may place restrictioBs upon its exercise, and as the agent must keep within his restricted authority so the municipality must keep within the compass of the grant conferred. The sale of the franchise could, therefore, only be had upon percentages, for the sovereign power so decreed. The defendant or any other railroad company desiring to construct and operate a railroad within the city of Buffalo must pay for that privilege. That payment must be to the city and by annual charge at a fixed rate.

On the 6th of February, 1890, the Crosstown Railway Company was-the highest bidder at a public sale made by the comptroller of the city of the privilege or license to use certain streets set out at large in the notice of sale for the purpose of constructing and operating a street surface railway. Its bid was eleven and three-fourths per cent of its gross earnings, and it entered into the agreemént stipulated for in the notice of sale. The said company was thus obliged for five years to pay the three per cent of its gross receipts and thereafter five per cent thereof conformably to section 8 of chapter 252 of the Laws of 1884, and in. addition the percentage assumed by its bid in the open market and its consequent agreement.

. In 1892 there were two other street surface railroad companies in the city of Buffalo, and the three were operating independently of each other.. The Buffalo Railway Company charged a transfer fare of three cents for every passenger passing from one of its cars to one operated by either of the other companes. The defendant company charged five cents for a continuous trip to a passenger over its line. One of these companies was paying thirty-six per cent of its gross receipts into the treasury of the city. A petition was presented by the Buffalo Railway Company to the common council for authority to make a traffic arrangement with the defendant company whereby each might use the line of the other. Various propositions were made to the council by the several companies pending these negotiations, and differences arose and the whole matter was relegated to a committee of three prominent citizens to examine into the propositions of the several companies and resulted in a report and agreément. eoriformably thereto -known as the Milburn agreement, which was entered into as of January 1, 1892. By this agreement transfer charges and double fares were abolished. A new system, of percentages was adopted as- a substitute for those theretofore assumed by the companies, and each agreed to pay annually two per cent of its gross receipts when the same were less than $1,500,000, two and one-half per cent when such receipts were less than $2,000,000 and over the first sum stated, and three per cent when such receipts were over $2,000,000. This' agreement subsequently received' the sanction of the Legislature (Laws of 1892, chap. 151), and the percentages have since been paid in compliance therewith. The approving act expressly, relieves the railway companies from the payment of percentages except those provided for and reserved in and by such contract.

In 1899 (Chap. 712) the Legislature enacted the Special Franchise Tax Law, which amended several sections of the Tax Law (Laws of 1896, chap. 908) and also added certain sections thereto and brought within the general definition of “ land ” or “ real estate ” the right, privilege or franchise to construct or operate street surface railroads. (Tax Law, § 2, subd. 3 as amd. by Laws of 1899, chap. 712.) Upon the valuation fixed by the State Board of Tax Commissioners of such a franchise within a given city the local authorities of such city levy its tax. (Id. § 42, added by Laws of 1899, chap. 712 and amd. by Laws of 1900, chap. 254.) The taxes so levied, however, are payable to the localities and are subject to certain specific deductions prescribed in section 46 of the Tax Law (added by Laws of 1899, chap. 712) which, so far as material, reads as follows: “ If, when the tax assessed on any special franchise is due and payable under the provisions of law applicable to the city, town or village in which the tangible property is located, it shall appear that the person, co-partnership, association or corporation affected has paid to such city, town or village for its exclusive use within the next preceding year, under any agreement therefor, or under any statute requiring the same, any sum based upon a percentage of gross earnings, or any other income, or any license fee, or any sum of money on account of such special franchise, granted to or possessed by such person, co-partnership, association or corporation, which payment was in the nature of a tax, all amounts so paid for the exclusive use of such city, town or village except money paid or expended for paving or repairing of pavement of any street, highway or public place, shall be deducted from any tax based on the assessment made by the State Board of Tax Commissioners for city, town or village purposes, but not otherwise; and the remain'der shall be the tax oh such special franchise payable for city, town or village purposes.” The act was a new contribution to our State taxing law. It put life into a privilege or license or franchise unquestionably often of great value and brought it within the dominion of the tax gatherer as taxable property. (People ex rel. Met. St. Ry. Co. v. Tax Comrs., 174 N. Y. 417; Kronsbein v. City of Rochester, 76 App. Div. 494, 499 et seq.) It placed the power of determining the valuation in a State board, but required this valuation to be spread upon the local assessment roll by the assessors. In order to avoid any double payment of taxes to the localities, it provided for deduction of moneys paid to them pursuant to statute or agreement of “ any sum based upon a percentage of gross earnings, or any other income, or any license fee or any sum of money on account of such special franchise,” providing only that such payment partake Of the characteristics of a tax. The municipalities were already benefiting from the use of the streets by railroads by reason of sums paid into their treasuries and applied toward the expenses of the municipalities, thus ameliorating the tax burden which would otherwise be borne by other property owners. To the extent of these payments, in so far as they were in the nature of a tax, they were to be allowed to the person or company assessed for a special franchise.

The Legislature evidently had in mind existing conditions and legislated with reference to them. While putting a new class of property upon the assessment roll it still appreciated that by certain statutes the right of the sovereign power in. the streets had been transmitted to the localities. That accompanying the delegation of the power was the authority to dispose of the street franchise for defined purposes and in a specific manner to the end that the public was to be benefited by the operation of street railroads and the local body politic by an annual enhancement of its revenues which indirectly was tantamount to or partook of the nature of a tax.

“ A tax is a forced contribution from a citizen to’ the State to be applied to governmental purposes.” (Davies System of Taxation, 1.)

It is the involuntary proportional payment by a property owner toward the expenses of the municipality or State. The tax is imposed without his consent. A payment “in the nature of a tax” must in its general aspects partake of these characteristics.

The original statute (Laws of 1884, chap. 252, §§ 7, 8) fixing the percentages and requiring their payment into the treasury “ to the credit of the sinking fund ” levied the amount which the corporation operating the railroad in the streets of a city must contribute. The corporation paying had no voice in fixing the sum to be paid. It was an annually recurring charge which savored of a tax. It was fixed by statute and was an exaction of money upon the earning capacity of the property and the defendant contributed it toward the expenses of the municipality. We think these percentages were clearly within the exemption prescribed by section 46 of the Tax Law (supra). Chapter 65 of the Laws of 1886 and the subsequent amendments are each entitled, “An act to secure adequate compensation for the right to construct * * * street railroads in cities.” Each act in terms provides for a sale to the highest bidder, so the element of compensation does enter into the transaction, but the defendant in order to operate its railroad in the streets of Buffalo was obliged to acquire the right in the manner prescribed by the statute. While it was a free bidder in the sense that it was not required to bid, yet if it constructed its railroad at all it must pay an annual charge to the city for so doing. To that extent the payment was a “ forced contribution.” Again the purchase price for the license to use the streets could not be paid in a gross sum. (Beekman v. Third Avenue R. R. Co., 153 N. Y. 144, 158.) It must be by annual payments and graded by the receipts or earning power of the company. These payments went into the city treasury, where all money of the city must be paid (Charter of the City of Buffalo [Laws of 1891, chap. 105], §§ 59, 64) and applied to reduce tax levies.

The fact that the money paid is remuneration for something acquired is not incompatible with the proposition that it also may be “ in the nature of a tax.” So far as it is the purchase price denuded of any of the other attributes which the statute imports into it we may say it is not in the nature of a tax. When, however, we come to consider that the payments must be made to enable the defendant to do business, that it must be paid in yearly percentages of its revenues and goes to swell the annual budget of the city, we conclude that it has the indicia of a tax, even though it be also a compensation for property acquired. The tax which a stock corporation pays for the privilege of doing business is based upon its capital stock and is the compensation which it pays for that privilege. It has the attribute of a t?x as well as that of compensation. Whatever may be the condition imposed for the privilege of doing business — whether designated a bonus, compensation, a license fee or in name a tax — it is in effect a tax. (Burroughs Tax. § 131; Gordon v. Appeal Tax Court, 3 How. [U. S.] 133; Home Ins. Co. v. New York State, 134 U. S. 594; Chicago General Railway Co. v. City of Chicago, 176 Ill. 253.)

The imposition of a percentage charge for the privilege of doing business has been treated as • the levying of a tax contribution.. In Maine v. Grand Trunk Railway Company (142 U. S. 217) the State of Maine had imposed upon railroad companies what it denominated “ an annual excise tax for. the privilege of exercising its franchises in this State.” The tax was based upon the “ gross transportation receipts ” and- was in lieu of all other taxes. The court in commenting upon the authority to make this exaction say (at p. 228): “It (the State) may require the payment into its treasury, each year, of. a specific sum, or may apportion the amqunt exacted according to the value of the business permitted, as dis- - closed by its gains or receipts of the present or past years. The character of the tax or its validity is not determined by the mode adopted in fixing its amount for any specific period or the times of its payment. The whole field of inquiry into- the extent of revenue from sources at the command of the corporation, is open to the consideration of the State in determining what may be justly exacted for the privilege. The rule of apportioning the charge to the receipts of the business would seem to be eminently reasonable, and likely to produce the most satisfactory results, both to the State and the corporation taxed.” It is of no significance to say that in the case cited this -is ' designated a tax. The essence of the charge is that it was an annual impost which the railroad company was called upon to pay in the way of percentages for the privilege of doing business. That is the characteristic feature of every percentage imposition. Judge Cooley, in his Constitutional Limitations (6th ed. p. 611), uses this language: “ Every burden which the State imposes upon its citizens with a view to a revenue, either for itself or for any of the municipal governments, or for the support of the governmental machinery in any of the political divisions, is levied under the power of taxation, whether imposed under the name of tax, or under some other designation. * * * It is not uncommon, as we have already stated, to require that corporations shall pay a certain sum annually, assessed according to the amount or value of their capital stock or some other standard; this mode being regarded by the State as most convenient and suitable for the taxation of such organizations.”

Nor do We think the Milburn agreement so changed the relations of the defendant toward the city in its payment of the percentages which it provided for as to affect the question under consideration. The report of the committee is pervaded with the understanding that the agreement which it recommended was to be a substitute for the existing relations of the companies and the city. This same understanding is embodied in the agreement itself. One sentence which is in harmony with the whole text of the agreement reads: “ The intention of the parties is to substitute for the percentages of their gross receipts agreed to be paid as aforesaid by the Crosstown and West Side Companies the percentages herein fixed of the gross receipts of all three companies, and thereby insure the operation of the entire system of street railroads without any preference of any part thereof over any other part.”

When we turn to the language of section 46 of the Tax Law (supra), considered in conjunction with existing conditions, we find it expressive of an intent to allow deductions of this kind. The payment is to be abated if paid to the city : 1. “ Under any agreement therefor.” Since 1892 the authority for the payments has been the Milburn agreement. 2. “ Under any statute requiring the. same.” The original warrant of authority was the mandate of the Legislature, and the agreement itself has been ratified by that body. 3. “ Any sum based upon a percentage of gross earnings, or any other income.” The foundation of these payments is by percentages upon gross earnings. The Legislature, however, in its care to avoid any burden savoring of a double tax, extended the deduction to be made to a percentage upon any income. 4. “ Or any license fee.” It may be as suggested in the brief of the counsel for the appellants that some companies paid certain fees for the use of cars and hence this exemption. The franchise granted is of the character of a license, and this expression is used interchangeably with “consent” in section 1 of chapter 65 of the Laws of 1886 (as amd. by Laws of 1886, chap. 642 and 'Laws of 1889, chap. 564.) 5. “ Or any sum of money on account of such special franchise.” Following the specific enumerations of the various payments on account of which deductions are to be made is this omnium gatherum clause, indicating the breadth of purpose of the Legislature to include within the category every conceivable payment of the general quality to which the section relates. The payment must, however, have been “ in the nature of a tax.” Eot genérically or sub nomine a tax, but embodying the characteristics which inhere in every tax payment. The language of the whole section is designedly comprehensive to cover every possible payment for a street franchise accruing to a city and'which partakes of the characteristics of a tax. As already suggested, the crucial attributes of a tax are that it is a toll upon property without the consent of the owner, and the money secured is to be applied toward governmental expenses of the body politic for whose benefit the imposition is to be made. These two characteristics are manifestly paramount in the percentage payments which the defendant has made to the city as well under the statutes as under the Milburn agreement.

The various acts delegating to the municipality the right to dispose of the privilege of using the streets for the operation of street railroads contained as one of the chief constituents the furnishing of a revenue to the city. In Beekman v. Third Avenue R. R. Co. (supra), after reciting succinctly the fact that the statute requires the franchise to be sold to the bidder agreeing to pay the largest yearly percentage, the court add, at page 153 : “ The purpose evidently was to secure to the city the largest revenue that would be consistent with the public convenience and the public interest.”

With these revenues accruing tin fact based upon percentages or agreements inuring to the monetary benefit of the city, the Legislature passed the Special Franchise Tax Law as another revenue producer to the city. The act is akin to the previous legislation in that it imposed a burden upon the privilege of constructing or operating railroads in the streets. In the previous acts the payment of revenues to the city must have been upon the assumption that the right possessed value and earning power, the usual concomitants of property. In the Special Franchise Tax Law it was made taxable property by fiat of the Legislature and was classified as real estate and directed to be placed upon the assessment roll like other taxable property. The mandate of the Legislature did not create this property, it merely required it to be placed upon the assessment roll. It took property then contributing to the revenues of the city and comprehensively provided a system for its assessment. It, however, was careful to provide for giving credit to the property owner for payments made to the treasury of the city. When we consider the course of this legislation relative to the gradual growth of the sentiment that a street franchise is properly amenable in some way to taxation and culminating in the Special Franchise Tax Law, the meaning of the language, allowing for deductions, must lead to the conclusion that it embraces the percentage payments made by the defendant. Language so carefully chosen, and so obviously with reference to existing situations, was not used by accident. It should receive a fairly liberal construction, and the intention of the Legislature be followed as far as it can be ascertained.

It is a matter of current history that the act was passed at an extraordinary session of the Legislature convened for the sole purpose of reconsidering a similar effort which had been passed at a regular session but had not received the approval of Governor Roosevelt. In the message convening the Legislature the Governor expressly advised amending the proposed legislation by allowing for deductions by reason of percentages on the gross earnings of the companies about to be taxed. The Legislature gave heed to this suggestion and passed the act so as to add section 46 to the Tax Law in the way it now appears. While not in any sense conclusive upon the legislative intent, yet, taken in connection with the trend of the entire legislation upon the subject, it tends to clarify the legislative purpose if any elucidation were necessary.

The counsel for the respondent contends that the Milburn agreement is founded on a good consideration and that the payments of the percentages pursuant thereto were voluntarily made and accordingly were no.t in any sense a tax. > The essence of every agreement is a good consideration and that it expresses the engagement of the contracting parties freely assumed. Yet section 46 of the Tax.Law {supra), in terms allows deductions to be made for any sum paid “under any agreement therefor,” implying that even though the percentages may be paid conformably to an agreement they may still be in the nature of a tax. In all the acts providing for a sale of the consent of the local authorities for the use of the street privilege an agreement was essential. The unique language “in the nature of a tax ” was probably adopted so that it could not be claimed that because the payments made may not have contained all the attributes of a tax, still they would come within the purview of the exemption allowed.

The important distinction to be kept in mind in this case is that the city of Buffalo had no franchises to sell except as it was derived from the sovereign power. (Beekman v. Third, Avenue R. R. Co., 153 N. Y. 144, 152.) The salable or merchantable value was imparted to it by the Legislature. In prescribing the limited authority to sell the Legislature required that payment for the privilege must be by a percentage of the gross earnings of the company purchasing. • Subsequently the State in the exercise of its dominant authority and for the benefit of the localities characterized this franchise as taxable property. In order to obviate the payment of a double tax it required the municipal authorities to give credit to the corporation for whatever it was already liable to contribute annually by its percentages toward the expenses of the city. Before the right to sell the consent of the municipal authorities to a street surface railroad company had been conferred many companies had acquired the privilege gratuitously. One company enjoying the privilege was taxed a yearly sum therefor while its competitor suffered no diminution of its earnings for that license. One was paying a large rate, another a minimum percentage. The-system of deductions was designed in a measure to equalize this disparity. If any company had paid a gross sum for the franchise it was not practical to Carry the process of equalization to an allowance or return of any part of the purchase price so paid. The Legislature, realizing that payments by percentages were generally prevalent throughout the State, and for years had been the one system permissible, adopted the only feasible method of adjusting the inequalities which had grown out of the legislation on the subject. To equalize the tax burden is the pith of any tax law. (Cooley Const. Lim. [6th ed.] 607.)

Very naturally much ingenuity has been manifested to discover what deductions Were intended by said section 46 unless the interpretation here given is to prevail, The proposition is confidently asserted that it is entirely consistent to hold that the Legislature intended that a lamp tax, license fees and taxes for the maintenance of the police and health departments were intended to be covered by this language providing for percentage deductions. The lamp tax of the city of Buffalo is levied pursuant to section 414 of chapter 105. of the Laws of 1891, which is the city charter. One-half of this charge is payable out of the general fund. The other half is apportioned upon the taxable property of the taxing district, and goes upon the assessment roll in a separate column headed “lamp-tax.” There is no provision in the Special Franchise Tax Law permitting the deduction of this tax. The taxes for thé support' of the city departments are in name, as well as in fact taxes, The license fee is specifically enumerated in section 46. Not one of these tax items is a payment by percentages either by virtue of any agreement or pursuant to any statute. The peculiar language of the section pertinent - to the system of percentages prevailing can hardly be tortured into referring to taxes pure and simple, and which are directly levied. The Legislature did not reconvene and re-enact this tax law with this important section engrafted in it without a purpose. It was intended to meet and adjust and harmonize the varying conditions existing. If it was framed to allow deductions for specific taxes, which are an ordinary municipal charge, a few plain words would have been all sufficient. In fact, the only deductions allowed, so far as I am able to perceive, are those by percentages. These corporations are charged with the payment of ordinary municipal taxes upon their franchises, the same as any other taxpayer of the city upon his assessablé property.

A few other objections may be noted. It is insisted that the Legislature did not intend to grant the right to the municipality to sell the franchise and then, after its exercise, take away the benefits of the sale. This is hardly a judicial statement of the action of the Legislature. It did permit a sale to be made for the benefit of the city, the revenues to be paid in a certain way, It then extended the benefits accruing to the city by the Special Franchise Tax Law,, imposing as a condition that the lesser benefits delegated be surrendered or merged in the greater. It is also claimed that when the Milburn agreement was entered into that the defendant might as well have agreed to pay five or seven per cent of its earnings as the lesser rate,'if all aré to be deducted from the tax now charged. Along the same line much is said as to the sale to the highest bidder being unnecessary if the whole percentage imposed is to be deducted: The fallacy of this position must be apparent when we consider that the Milburn agreement and all the other statutes imposing percentages were in force long prior to the enactment of the Special Franchise Tax Law, and the Legislature could not forecast the passage of that act. That law simply took hold of the situation then existing.

Nor is the franchise property of the city of the same character as tangible property which it may own. Its title coming from the sovereign power is for a special restricted purpose and not the unqualified ownership usually attaching to property.

• The record before us does not show that the “ great street surface railroad corporations of the cities of New York and Brooklyn were required to pay a certain percentage * * * amounting annually to many thousands of dollars.” We may assume, however, that the statement is correct. It is fair also to indulge the correlative proposition that each of these corporations is called upon to pay a far greater sum into the coffers of the city by reason of increased taxes laid upon it pursuant to the Special Franchise Tax Law.

Again it is stated that by an amendment of section 34 of the Rapid Transit Act (Laws of 1891, chap. 4, added by Laws of 1894, chap. 752, and amd. by Laws of 1900, chap. 616), passed since the Special Franchise Tax Law, a large percentage is imposed. By section 37 of that act (added by Laws of 1894, chap. 752, and amd. by Laws of 1895, chap. 519) the city of New York is authorized to issue bonds to provide moneys for the construction of the road. The rental required to be paid by section 34 of the act (supra) consisting, except as therein stated, of a sum equal to the annual interest upon the bonds and one per cent percentage on the amount of the bonds are to be applied toward the payment of the interest on these bonds and the balance is to go into a sinking fund for the purpose of meeting this obligation. The act itself fixes the status of these percentage payments, and they are probably not within the com-, pass of section 46 of the Tax Law (supra). Therein lies the clear, distinction between percentages paid for general purposes and those for a specific purpose which arise solely by reason of the expenditures created by the act requiring their payment. In the one general taxation is lightened by the payments and in the other no such benefit accrues. It is also to be noted that the act of 1900 does not regulate this percentage upon the income or revenue of the company, but upon certain bonds issued by the city, and which it is expected the railroads or construction company will pay as an obligation against it.

From our view of section 46 of the Tax Law (supra) it is-unnecessary for us to enter into a discussion of the grammatical construction of its language as has been done by the counsel for the appellants. Suffice it to say that we do not concur with the analysis-made. The payment referred to, we think, unmistakably relates back to the predicate of the sentence, and includes every sum to be deducted. As was said by the Court of Appeals in People ex rel. Met. St. Ry. Co. v. Tax Comrs. (174 N. Y. 438): “It commanded that all sums, in the nature of a tax, paid by the owner of a special franchise to a municipality for its exclusive use, should be deducted from the tax imposed for local purposes.”

The valuation of the franchise of the defendant made by the State Board of Tax Commissioners and the statement thereof filed with the city clerk was in a gross sum. It was placed upon the annual assessment roll of the twentieth ward of the city as an indivisible sum. The principal office of the defendant was in that ward. The contention of the appellants is that the assessment was void because not divided or apportioned among the various wards or tax districts of the city. We find nothing in section 42 of the Tax Law (supra) requiring this apportionment to be made. The tax receipts are payable to the city treasurer, and the deductions are a gross sum which by the statute" imposing them are to be paid to the city treasurer. This is further confirmed by the Milburn agreement which provides that the gross receipts or percentages are “ to be deemed a single, indivisible sum.” The assessors of the city are elected on the general tickets, and comprise the board for the entire city (City Charter [supra], §§ 129-136, as amd. by Laws of 1895, chap. 805), and that constitutes their tax district. The Tax Law (Laws of 1896, chap. 908, § 2, subd. 1) defines a tax district as follows; “‘Tax' district ’ as used in this chapter, means a political subdivision of the State having a board of assessors authorized to assess property therein for State and county taxes.”

Section 42 of the Tax Law (supra) requires the city clerk to" deliver a certified copy of the statement filed with him “ to the assessors or other officers charged with the duty of making local assessments in each tax district in said city.” He was, therefore, required to deliver a copy of the statement to the board of assessors and to no one else, and this was the authority for the assessors to spread the assessment Upon the roll.

Nor do we subscribe to the contention of the appellants that the imposition of the tax for the benefit of the city by the Special Franchise Tax Law is violative of the Milburn agreement. By the statutes in force at the time of the making of that agreement the defendant was obliged to pay certain sum's to the city by way of percentages. The burden which it undertook by virtue of that agreement was in substitution of the percentages imposed by statute. There is nothing in the agreement indicating an intention to relieve the defendant from any tax which the Legislature might impress upon its property.

We think the court erred in not allowing to be applied in reduction of its tax levied under the Special Franchise Tax Law the said sum which it had paid into the city treasury for percentages accruing to the city in pursuance of the Milburn agreement. For that error the judgment should be reversed and a new trial granted, with costs to the appellants to abide the event.

Williams and Stover, JJ., concurred; McLennan, P. J., dissented in opinion, in which Hiscock, J., concurred.