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(182 N.Y.S.)

decisive of the questions which are here raised under an unusual situation.

"The power of taxation rests upon necessity, and is an essential and inherent attribute of sovereignty, belonging as a matter of right to every independent state or government, and it is as extensive as the range of subjects over which the power of that government extends." 37 Cyc. 715; People v. Pitt, 169 N. Y. 521, 62 N. E. 662, 58 L. R. A. 372.

[2] The power and authority to impose taxes is vested exclusively in the Legislature. That power is absolute, except as restricted by the Constitution of the state or nation. It is, for it to determine, and its determination is final, within said restriction, upon all matters involving the purpose of a tax, its extent, apportionment, upon what property or class of persons it shall operate, whether it shall be general or limited, whether it shall be a charge upon property, upon persons, or upon both, and the time and manner of its collection. All of the incidents of taxation are within the control of the Legislature. 37 Cyc. 724; 27 Am. & Eng. Enc. of Law (2d Ed.) 613; People ex rel. Griffin v. Mayor, 4 N. Y. 419, 55 Am. Dec. 266; Genet v. City of Brooklyn, 99 N. Y. 296, 1 N. E. 777; Gautier v. Ditmår, 204 N. Y. 20, 97 N. E. 464, Ann. Cas. 1913C, 960.

"In the absence of constitutional restrictions, the power of the Legislature in regard to taxation is practically absolute and unlimited." 37 Cyc. 728.

[3] The fact that the statute in question is retroactive does not make it unconstitutional. People ex rel. Eckerson v. Board of Education, etc., of School District No. 1 of Haverstraw, 126 App. Div. 414, 110 N. Y. Supp. 769, affirmed 193 N. Y. 601, 86 N. E. 1130.

[4, 5] The Legislature undoubtedly had the power, when it enacted the town unit school law (chapter 328 of the Laws of 1917), to pro-. vide that the expense of building a new schoolhouse in any district should all be paid by a tax charged against that school district as it existed before the enactment of said law. In that event the tax for the new school building would have been assessed against district No. 1. That would have required the appellant, a taxpayer in that district, to pay his share of the total cost of the new building. The power of the Legislature to enact such a law is not questioned. The fact that the Legislature did not make the whole cost of the schoolhouse a charge against district No. 1, but distributed it over the whole town school unit, resulted in a lower tax for the taxpayers of said district, including the relator. That fact did not, however, give the relator, and the other taxpayers of district No. 1, a vested right to have the said tax remain unaltered. The Legislature had the same discretion to reapportion such burden as it had in the first instance to determine the tax district which should bear the expense of the new building. What it could have done in the first instance it could do by subsequent enactment. The control of the Legislature over the subject did not end with the passage of the act in question. The new condition which arose when the town school unit act was repealed called upon the Legislature to enact a new law for the purpose of bringing about a just and equitable distribution of the burden.

Almost the exact situation disclosed in this case existed in the case of Durrett v. Davidson, 122 Ky. 851, 93 S. W. 25, 8 L. R. A. (N. S.) 546. A statute of the state of Kentucky provided for the building of turnpikes, and made one-half of the cost of the same a charge against the road district and the other one-half against the general district at large. It was subsequently discovered that the charge against the road district property owners was inequitable and unjust and the Legislature passed another act reapportioning the tax, shifting the burden from the road district property owners to the property owners in the general district, thereby greatly increasing the tax of the property owners in the general district, outside of the road district. The statute was attacked upon the ground that it was unconstitutional, and the same arguments were advanced as in this case. The court held the act to be constitutional. It held that the fact that it was retroactive did not affect its validity. In the course of the opinion the court said:

"The appellant had no vested right in immunity from taxation. It is not, of course, pretended that she had any special contract of immunity, and, in the absence of such, no vested right could accrue to her out of the fact that the Legislature, in the original apportionment of the burden for paying the turnpike bonds, placed upon her land less than might have been done. It is not disputed, and, indeed, cannot be, that the Legislature had the power, originally, to provide for the building of the turnpikes in question by a general tax over the whole county, which, of course, would have included appellant's land; that it did not do so, but placed upon her land only one-half the burden, may be considered an act of grace, not of right; and she has no complaint now that the grace of the sovereign has been withdrawn, and the burden reapportioned, as might originally have been done."

Many cases are cited in a note to this case in 8 L. R. A. (N. S.) 546. [6] The law of this state seems to be settled, by a long line of cases going back to the earliest days, to the effect that what the Legislature could originally have done it can do by ratification and confirmation subsequently. That which the Legislature might have dispensed with altogether, by a prior statute, may be cured by a subsequent statute. The Legislature may validate retrospectively any proceeding which it might have authorized in advance. Statements of the general rule substantially like the above statement are found in many decisions. Vandeventer v. Long Island City et al., 139 N. Y. 136, 34 N. E. 774; Smith v. City of Buffalo, 159 N. Y. 427, 54 N. E. 62; People ex rel. Am. Ex. Nat. Bank v. Purdy, 196 N. Y. 282, 89 N. E. 838; In the Matter of Van Antwerp et al., 56 N. Y. 261.

In the case of People ex rel. Lucey v. Molloy, 35 App. Div. 136, 54 N. Y. Supp. 1084, affirmed 161 N. Y. 621, 55 N. E. 1099, on opinion below, the question was whether or not a statute was valid which attempted to charge against the city of Troy, at large, the amount of an assessment made against certain abutting property owners on a certain street, and which required the city to refund to such property owners certain taxes paid by them. The statute was held to be valid. In the opinion in the Appellate Division it was said:

"It cannot be said, with respect to the power of taxation, which is plenary except as limited by the Constitution, that the Legislature cannot by further legislation revise and correct its enactments, so as to accomplish in the final result the same justice which, it may be presumed, it would have provided

(182 N.Y.S.)

for in the first instance, if it could have foreseen the actual results to follow upon its first enactments. Genet v. City of Brooklyn, 99 N. Y. 301; State of New York v. County of Kings, 125 N. Y. 320; People v. Supervisors, 67 N. Y. 115; People ex rel. Otsego County Bank v. Supervisors, 51 N. Y. 409."

See, also, Matter of Lockitt, 58 Misc. Rep. 5, 110 N. Y. Supp. 32; People ex rel. Eckerson v. Board of Education, etc., of School District No. 1 of Haverstraw, 126 App. Div. 414, 110 N. Y. Supp. 769, affirmed 193 N. Y. 601, 86 N. E. 1130.

In the case of State of New York v. Kings County, 125 N. Y. 312, 26 N. E. 272, the court said:

"Principles of justice, as well as equity, require that irregularities produced by the operation of statutes should be remedied by the Legislature."

The question of how the equities shall be adjusted in this case is not here, as the school commissioner has not been allowed to proceed with the hearing as required by statute. It may be that such an adjustment will be made that the relator and all other taxpayers will be entirely satisfied. If they are not, they have a remedy by appeal provided in the statute. All we are required to pass upon is the constitutionality of the statute, and we are satisfied that it is a valid and constitutional act.

The only other case which has arisen under the statute in question which has been called to our attention is the case of People ex rel. Hill v. Williams, 190 App. Div. 534, 179 N. Y. Supp. 773, in the Second Department. There the question passed upon was whether or not the reapportionment made by the school commissioner was authorized by the statute. The court treated the statute as valid, and it does not appear from the opinion that the constitutionality of the statute was questioned.

Order affirmed, with costs. All concur.

(191 App. Div. 628)

PEOPLE ex rel. RECESS EXPORTING & IMPORTING CORPORATION v. HUGO, Secretary of State.

(Supreme Court, Appellate Division, Third Department. May 5, 1920.) 1. Corporations 71-Right to preferences for stockholders as to corporate stock held not affected by statute.

The right to make such preferences between stockholders as to its stock as may seem best in the certificate of incorporation of a business corporation is not affected by Stock Corporation Law, § 61, permitting a stock corporation to issue common stock and different classes of preferred stock, nor by Business Corporations Law, § 2, subd. 3, requiring the certificate to state the amount of capital stock and the proportionate amount of preferred stock.

2. Corporations

71-Preferences between preferred and common stock held not against public policy.

A certificate of reorganization of a business corporation, changing the common stock to stock without any nominal or par value, and providing that, upon liquidation, distribution of capital assets, dissolution, or winding up of corporation, the assets and funds shall be distributed so far as For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

the same may lawfully be done, among the holders of stock, by paying the preferred stockholders 120 per cent. of the par value, together with unpaid accumulated dividends and accrued dividends, and to the common stock the remainder of the assets, held not a preference so unreasonable and unjust as to be against public policy, in view of Stock Corporation Law, § 19, relating to stock issues.

Appeal from Special Term, Albany County.

Proceeding for a peremptory writ of mandamus by the People, on the relation of the Recess Exporting & Importing Corporation, against Francis M. Hugo, as Secretary of State, to require him to file relator's certificate of reorganization. From an order denying the application, relator appeals. Reversed, and writ granted.

Argued before JOHN M. KELLOGG, P. J., and WOODWARD, COCHRANE, HĚNRY T. KELLOGG, and KILEY, JJ.

Hornblower, Miller, Garrison & Potter, of New York City (Sherwood E. Hall, of New York City, of counsel), for appellant.

Charles D. Newton, Atty. Gen. (Frank S. Sharp and C. T. Dawes, Deputy Attys. Gen., of counsel), for respondent.

JOHN M. KELLOGG, P. J. The certificate of reorganization changes the common stock to stock without any nominal or par value, and provides that upon the liquidation, distribution of capital assets, dissolution, or winding up of the corporation, that the assets and funds shall be distributed, so far as the same may lawfully be done, among the holders of the stock, by paying the preferred stockholders 120 per cent. of the par value thereof, together with all unpaid accumulated dividends and the accrued dividends thereon, and to the common stock the remainder of the assets. The secretary of state, considering the provision illegal, refused to file the certificate.

[1] In the absence of statutory provision to the contrary, the certificate of incorporation of a business corporation may make such preferences between stockholders as to its stock as seem best. 14 C. J. 410, 411. Section 61 of the Stock Corporation Law (Consol. Laws, c. 59) permits a stock corporation to issue preferred stock and common stock, and different classes of preferred stock, if its certificate of incorporation so provides, or if all stockholders consent in writing, or upon a two-thirds vote of a stockholders' meeting called for that purpose, but contains no requirement as to what either kind of such stocks shall be. Section 2, subdivision 3, of the Business Corporations Law (Consol. Laws, c. 4) requires the certificate to state the amount of the capital stock, "and if any portion be preferred stock, the preferences thereof." These statutory provisions are in line with the general rule above stated.

Section 19 of the Stock Corporation Law was first brought into the statute in 1912. At the time of its enactment corporations were issuing various kinds of preferred stock; some stocks were preferred as to dividends, some as to principal, some as to both, and some had other preferences; and the statute must be construed with reference to the then existing conditions. Section 19 permits a corporation to issue stock

(182 N.Y.S.)

"Other than preferred stock having a preference as to principal, without any nominal or par value, by stating in such certificate: (1) The number of shares that may be issued by the corporation, and if any of such shares be preferred stock, the preferences thereof. If such preferred stock or any part thereof shall have a preference as to principal, the certificate shall state the amount of such preferred stock having such preference, the particular character of such preferences, and the amount of each share thereof, which shall be five dollars or some multiple of five dollars, but not more than one hundred dollars."

It also provides:

"Each share of such stock without nominal or par value shall be equal to every other share of such stock, subject to the preferences given to the preferred stock if any authorized to be issued. Every certificate for such shares without nominal or par value shall have plainly written or printed upon its face the number of such shares which it represents and the number of such shares which the corporation is authorized to issue, and no such certificate shall express any nominal or par value of such shares. The certificates for preferred shares having a preference as to principal shall state briefly the amount which the holders of each of such preferred shares shall be entitled to receive on account of principal from the surplus assets of the corporation in preference to the holders of other shares, and shall state briefly any other rights or preferences given to the holders of such shares."

The object of this section, as is indicated by its caption, was to provide for the "issuance of shares of stock without nominal or par value." While permitting such shares as to common stock, the right is denied as to stock preferred as to principal, which must be of the par value of $5, or multiples thereof, but not more than $100. There is no other limitation suggested as to the rights of the preferred stockholders. The certificate must state the number of shares of stock, and, if any of it is preferred, "the preferences thereof," and the stock certificate, where there is a preference as to principal, must state the amount of stock having such preference and the particular character of the preference. Again, the section provides that certificates for preferred stock, having preference as to principal, shall briefly state the amount which the holders of each of such shares shall be entitled to receive on account of the principal from the surplus assets, in preference to the other shares, and any other rights or preferences given to the holders of such stock. These provisions show that the par value of the stock is not the precise amount which the holder may receive from the surplus assets upon dissolution, but that that matter may be controlled by the certificate of incorporation. The words. "preference as to principal" are used in describing the stock, as distinguishing it from stock which is preferred as to dividends only. If the Legislature had intended to limit the preference to the par value of the stock, it would have used the words "par value," instead of speaking of "stock preferred as to principal." The word "principal," as used, is descriptive only, and not a limitation. The section does not purport to limit the preference, but only requires that it be made definite and certain.

[2] The question we are considering has no practical application to a going concern, but only becomes important when a corporation is retiring from business and after the creditors are paid. So far as

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