tract price, provided the defendant was responsi- | to a hearing before a jury. The verdict was ble for the fire."

Plaintiff's allegations and proof were sufficiently broad to enable it to establish a cause of action based on negligence. When counsel and the trial court were thus led so to shape the course of the trial as to induce the defect of proof which is now complained of, this court should be at pains to minimize the consequences of the mistake, in order to prevent a perversion of justice.

properly set aside, because it was erroneously directed as to the amount of damages, but the complaint should not have been dismissed. A new trial should have been granted upon defendant's exceptions.

The judgments should be reversed, and a new trial granted, with costs to abide the event.

HISCOCK, C. J., and COLLIN, CUDDEBACK, CARDOZO, CRANE, and ANDREWS, JJ., concur.

Judgments reversed, etc.

(226 N. Y. 384)

In re WATSON'S ESTATE. (Court of Appeals of New York. May 20, 1919.)

TRANSFER TAX

[3] On the question of damages, the ruling was too favorable to plaintiff. On the theory that the judgment in the first action was conclusive, the amount of the verdict was directed at the amount of that judgment and interest, the sum of $32,304.36. The plaintiff offered evidence tending to show that defendant was responsible for the fire, but relied on the judgment to establish the amount. We are of the opinion that there has been no proof and adjudication of the amount of damage binding upon defendant. The Appellate Division in the first action (Lord Electric Co. v. City of New York, supra), which was brought by plaintiff to recover the full amount remaining unpaid on the contract, reversed a Tax Law, 221b (added by Laws 1917, c. judgment for plaintiff and dismissed the com- 700), imposing an additional tax upon those plaint on defendant's motion made at the which have not been assessed locally or paid the investments passing by will or distribution close of the evidence. The order of the Ap-state stamp tax, is constitutional. pellate Division thereon shows that the words "on the merits" were stricken out when the 2. EVIDENCE 5(2)-COMMON KNOWLEDGEorder was signed. ΤΑΧΑΤΙΟΝ. The city, on the trial of that action, made proof of damage to the bridge, and relied upon the final certificate of the architect to defeat plaintiff's recovery of the amount which it had withheld to cover such damage.

Plaintiff disputed the legal rule which made that amount deductible from the amount due it under the contract. While there was no dispute as to the amount, the Appellate Division made no finding thereon. It held merely that plaintiff was not entitled to recover. The nature of the former judgment is not free from doubt, but we think that it should be

taken as a nonsuit rather than a decision on

the merits, binding upon the parties to this action, on the question of damages. Deeley v. Heintz, 169 N. Y. 129, 134, 62 N. E. 158; Lindenthal v. Germania Life Ins. Co., 174 N. Y. 76, 81, 66 N. E. 629.

Other evidence of damage to the bridge structure appears on the record and it appears that the city compelled the plaintiff to pay a large sum for such damage. A jury should be permitted, on the evidence in this action, to render a verdict for such part of that sum as is shown to have been due to the failure of defendant to comply with the terms of its contract. The record presents two questions of fact: Did defendant negligently cause the fire in violation of its obligations under the contract? Did plaintiff establish damages? The plaintiff is therefore entitled

1. TAXATION 859(1)
STATUTE-CONSTITUTIONALITY.

It is a matter of common knowledge that under the system of taxation provided by Tax Law, art. 15 (§§ 330-340) and Laws 1911, c. 802, as amended, some owners submitted all or part of their bonded investments to the state tax, others paid upon a limited local assessment provided for by Tax Law, §§ 6, 8, and others not at all, and that a very large part of this kind of property went untaxed altogether. (Per Crane, Cuddeback, and Hogan, JJ.) 3. CONSTITUTIONAL LAW 45-CONSTITUTIONALITY OF STATUTE-DETERMINATION.

statute, the court is examining the question of In dealing with the constitutionality of a legislative power. (Per Crane, Cuddeback, and Hogan, JJ.)

4. CONSTITUTIONAL LAW 70(3)—CONSTITUTIONALITY OF STATUTE-WISDOM.

Whether the Legislature has acted wisely, unfair to a particular kind of property, is made proper choice, worked hardships, or been never indicative of a limitation; limitations being found in the words and intendment of the Constitution and the fundamental principles of government embodied therein. (Per Crane, Cuddeback, and Hogan, JJ.) 5. CONSTITUTIONAL LAW

68(4)—LEGISLA

TIVE POWERS-APPROVAL BY COURTS.

The taxing power, both direct and through an inheritance tax, is very broad and submits to few restrictions, and such laws need not be submitted to courts for their approval. (Per Crane, Cuddeback, and Hogan, JJ.)

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(123 N.E.)

6. TAXATION—859(1)—INHeritance Tax-| § 2), and was not passed with the intention of

CONSTITUTIONAL RESTRICTIONS.

Assuming without deciding that the discretion to classify personal property which must pay an inheritance tax before passing by will or inheritance is limited to a classification which is based upon some reason, and not the mere caprice of the Legislature, Tax Law, § 221b, added by Laws 1917, c. 700, comes within such rule. (Per Crane, Cuddeback, and Hogan, JJ.) 7. TAXATION 859(1) TRANSFER TAX

STATUTE-VALIDITY.

That the beneficiary under the will is punished for misdeeds of the ancestor in not paying a local or state tax is not a valid objection to Tax Law, § 221b, added by Laws 1917, c. 700, imposing an additional tax-upon investments passing by will or distribution. Crane, Cuddeback, and Hogan, JJ.)

interfering with the local authorities. (Per
Crane, Cuddeback, and Hogan, JJ.)
14. MUNICIPAL CORPORATIONS 73-INTER-
FERENCE WITH LOCAL AUTHORITIES.

While the assessment of property for the
purposes of taxation in this state has always
been a function of local officers, their duties
may be modified or regulated by the Legislature
so long as there is no substantial impairment
of the right of home rule or no intent or at-
tempt to evade the constitutional provisions.
(Per Crane, Cuddeback, and Hogan, JJ.)
15. CONSTITUTIONAL LAW 48-CONSTITU-
TIONALITY OF STATUTE-PRESUMPTION.

Every presumption is in favor of the con(Perstitutionality of an act of the Legislature, and, if the Constitution and the act can be reasonably construed so as to enable the latter to stand, it is the duty of the courts to give them that construction. (Per Crane, Cuddeback, and Hogan, JJ.)

8. TAXATION 859(6)-TRANSFER TAX ON

PERSONALTY-STATUTE-VALIDITY.

There is no foundation in the authorities for the assertion or implication that the inheritance tax laws must look with indifferent eye upon the kind of property transferred and cannot single out personalty as distinguished from realty, and the like. (Per Crane, Cuddeback, and Hogan, JJ.)

9. CONSTITUTIONAL LAW

68(4)—TRANSFER

TAX-STATUTE—VALIDITY-JUDICIAL FUNC

Hiscock, C. J., and Collin and McLaughlin, JJ., dissenting.

Appeal from Supreme Court, Appellate Division, First Department.

In the matter of the transfer tax upon the estate of Charles W. Watson, deceased. From an order of the Appellate Division (186 App. Div. 48, 174 N. Y. Supp. 19), afrming an order of the surrogate (104 Misc. Rep. 212, 172 N. Y. Supp. 29) which denied an appeal by the Comptroller of the State of New York and confirmed report of appraisers in fixing a transfer tax, the Comptroller appeals. Reversed.

Lafayette B. Gleason, Alexander Otis, and John B. Gleason, all of New York City, for appellant.

Eustace Conway, of New York City, for respondents.

Rumsey & Morgan, Stetson, Jennings & Russell, and Louis O. Van Doren, all of New York City, and Brackett, Todd, Wheat & Wait, of Saratoga Springs, for interveners.

CRANE, J. [1] The question presented for determination is whether section 221h of the Tax Law (Cons. Laws, c. 60), added by chapter 700 of the Laws of 1917, is constitutional. The lower courts have held it to The section reads as

12. TAXATION 872 TRANSFER TAX-EX- be unconstitutional.

The exemptions specified in section 221 do

follows:

"Additional Tax on Investments in Certain

not apply to Tax Law, § 221b, added by Laws Cases.-Upon every transfer of an investment, 1917, c. 700, imposing an additional tax upon those investments passing by will or distribution which have not been assessed locally or paid the state tax. (Per Crane, Cuddeback, and Hogan, JJ.)

73-LEGIS

13. MUNICIPAL CORPORATIONS
LATIVE POWER-INTERFERENCE WITH LOCAL
AUTHORITIES.

The tax on investments (Tax Law, art. 15 (§§ 330-340]) is not an evasion or attempt to evade the home rule provision (Const. art. 10,

as defined in article fifteen of this chapter, taxable under this article, a tax is hereby imposed, in addition to the tax imposed by section 221a, of five per centum of the appraised inventory value of such investment, unless the tax on such investment as prescribed by article 15 of this chapter or the tax on a secured debt as defined by former article 15 of this chapter shall have been paid on such investment or secured debt and stamps affixed for a period including the date of the death of the decedent

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

or unless the personal representatives of de- | he died in August, 1917, leaving a net estate cedent are able to prove that a personal prop- of $470,256.95, $109,470.73 of this consisted erty tax was assessed and paid on such invest- of assessable bonds upon which his last asment or secured debt during the period it was sessment in 1914 amounted to only $30,000; held by decedent; or unless the decedent was since 1914 he had acquired securities valued actually engaged in the bona fide purchase and sale of investments as a business, and at the at $59,284.54 which had not been assessed time of his death had maintained an office or at all. The bonds had not been submitted under the state Tax Law. Thus Charles W. Watson had possessed for some years $168,755.27, of which only $30,000 had paid a tax.

(123 N.E.)

be found in the words and intendment of the on account of education, charity, or religion, Constitution and the fundamental principles and frequently it is unreasonable, but that does of government embodied therein. The tax- not make it unconstitutional, even if the reing power, both direct and through an inher-sult is double taxation.

power to tax it is not bound to tax all pursuits or all property that may be legitimately taxed for governmental purposes. It would be an intolerable burden if the state could not tax any property or calling unless at the same time it taxed all property or all callings"-quoting from Connolly v. Union Sewer Pipe Co., 184 U. S. 540, 562, 22 Sup. Ct. 431, 440 (46 1. Ed. 679).

itance tax, is very broad and submits to "A tax may be imposed only on certain callfew restrictions. Such laws need not beings and trades, for when the state exerts its submitted to courts for their approval and can only meet with disapproval when some fundamental principle has been violated. In speaking of the legislative power, whether it be a police power, a taxing power, or any other power of like nature, we have no ready-made formula which can be easily applied, but must be governed by the principles developed in the law, either by a long series of legislation or by custom, or by judicial expression. However accurate may be our logical process, we must not start with assumed premises, but with those furnished us by the authorities.

Although repeating what has heretofore been said by this court, we turn to a few of these authorities to ascertain the rule which must be applied to the new state of facts arising in this case.

This court said, through Gray, J., in People ex rel. Eisman v. Ronner, 185 N. Y. 285, 289, 77 N. E. 1061, 1062, regarding the Mortgage Tax Law:

N. Y. 296, 306, 1 N. E. 777, 783, we find it
Turning to Genet v. City of Brooklyn, 99

there stated that

"The power of taxation being legislative, all the incidents are within the control of the Legislature. The purposes for which a tax shall be levied; the extent of taxation; the apporclass of persons the tax shall operate; whethtionment of the tax; upon what property or er the tax shall be general or limited to a particular locality, and in the latter case the fixing of a district of assessment; the method of collection, and whether the tax shall be a charge upon both person and property or only on the land-are matters within the discretion of the Legislature and in respect to which its determination is final."

119 N. E. 879.
See, also, Matter of Wendel, 223 N. Y. 433,

"I cannot perceive any valid reason why the Legislature could not devise a schéme for raising revenues for the general government and for the various local governments by the apportionment of the proceeds of a tax laid upon a certain species, or class, of possessions. * Passing from the consideration of the genIt [the Legislature] may change the methods, eral taxing power to the authorities touchor rate, of taxation, and may classify new subing the inheritance tax, we find the power jects for taxation. * * The purpose of a almost unlimited. The state having the system of taxation, the apportionment of a tax and the property, or persons, to be affected are matters within the legislative discretion. * There is no constitutional guaranty that taxation shall be just and equal; though underlying this great governmental power, and implied from the nature of our political institutions, is the principle that taxation shall be equal, in the sense that it shall not be arbitrary and that there shall be no discrimination against persons, by laying greater burdens upon one than are laid upon others in the same calling or condition."

We said in People ex rel. Hatch v. Reardon, 184 N. Y. 431, 77 N. E. 970, 8 L. R. A. (N. S.) 314, 112 Am. St. Rep. 628, 6 Ann. Cas. 515, regarding the constitutionality of the Stock Transfer Act:

"The classification made by selecting one kind of property and taxing a transfer of that only is assailed as so arbitrary, discriminating, and unreasonable as to deprive certain persons of their property without due process of law and to withhold from them the equal protection of the laws.

power to abolish testamentary dispositions and the right to pass property by distribution, we would naturally conclude that it could also determine the nature or kind of property that should pass, or could place a limitation or condition upon the transfer by death of any or all property. See what Mr. Justice Holmes said in Chanler v. Kelsey, 205 U. S. at page 479, 27 Sup. Ct. 550, 51 L. Ed. 882. But it is unnecessary for us to touch upon the extent of the power, as we shall confine our attention to the facts as presented and determine whether the power exists in this instance.

We have had occasion to say in Matter of Delano, 176 N. Y. 486, 491, 68 N.' E. 871, 872 (64 L. R. A. 279):

"The privilege of making a will is not a natural or inherent right, but one which the state can grant or withhold in its discretion. If granted, it may be upon such conditions and with such limitations as the Legislature sees fit to create. The payment of a sum in gross, or of an amount measured by the value of the property affected, may be exacted, or the right may be limited to one or more kinds of property and withdrawn as to all others."

"All taxation is arbitrary, for it compels the citizen to give up a part of his property; it is generally discriminating, for otherwise everything would be taxed, which has never The case of United States v. Perkins, 163 yet been done, and there would be no exemption U. S. 625, 627, 16 Sup. Ct. 1073, 1074 (41 L.

Ed. 287), dealt with a tax upon personal like circumstances and conditions, both in the property bequeathed by will to the United privilege conferred and the liabilities imposed. States. The opinion states: Mr. Justice Field said in Mobile County v. Kimball, 102 U. S. 691 [26 L. Ed. 238], that this court is not a harbor in which can be found a refuge from ill-advised, unequal, and oppressive state legislation. And he observed in another case: 'It is hardly necessary to state laws is not necessarily an objection to say that hardship, impolicy, or injustice of their constitutional validity.' * *

In

There is

of equality permits many practical inequalities. reasonableness of classification, and the rule And necessarily so. In a classification for governmental purposes there cannot be an exact exclusion or inclusion of persons and things. Bearing these considerations in mind, we can solve the questions in controversy."

"While the laws of all civilized states recognize in every citizen the absolute right to his own earnings, and to the enjoyment of his own property, and the increase thereof, during his life, except so far as the state may require him to contribute his share for public expenses, the right to dispose of his property by will has always been considered purely a creature of stat-therefore no precise application of the rule of ute and within legislative control. this view, the so-called inheritance tax of the state of New York is in reality a limitation upon the power of a testator to bequeath his property to whom he pleases; a declaration that, in the exercise of that power, he shall contribute a certain percentage to the public use; in other words, that the right to dispose of his property by will shall remain, but subject to a condition that the state has a right to impose. * * Thus the tax is not upon the property, in the ordinary sense of the term, but upon the right to dispose of it, and it is not until it has yielded its contribution to the state that it becomes the property of the legatee."

Referring to the fourteenth amendment and the state Inheritance Tax Laws, the case of Campbell v. California, 200 U. S. 87, 95, 26 Sup. Ct. 182, 185 (50 L. Ed. 382), gave occasion for Mr. Justice White to say:

"With the motives of public policy which may induce a state to prefer near relatives by affinity to collateral relatives, we are not concerned, since the fourteenth amendment does not deprive a state of the power to regulate and burden the right to inherit, but at the most can only be held to restrain such an exercise of power as would exclude the conception of judgment and discretion, and which would be so obviously arbitrary and unreasonable as to be be

The opinion also quotes a statement of Mr. Chief Justice Taney taken from Mager v. Grima, 8 How. 490, 493 [12 L. Ed. 1168]: * * The law in question is nothing more than an exercise of the power which every state and sovereignty possesses, of regulating the manner and terms upon which property, real or personal, within its dominion may beyond the pale of governmental authority." transmitted by last will and testament, or by inheritance; and of prescribing who shall and who shall not be capable of taking it. ** If a state may deny the privilege altogether, it follows that, when it grants it, it may annex to the grant any conditions which it supposes to be required by its interests or policy."

The principles enunciated in Magoun v. Illinois Trust & Savings Bank, 170 U. S. 283, 288, 18 Sup. Ct. 594, 596 (42 L. Ed. 1037), may be helpful:

"The right [says the opinion] to take property by devise or descent is a creature of the law, and not a natural right—a privilege, and therefore the authority which confers it may impose conditions upon it. From these principles it is deduced that the states may tax the privilege, discriminate between relatives, and between these and strangers, and grant exemptions; and are not precluded from this power by the provisions of the respective state constitutions requiring uniformity and equality of taxation."

The inheritance tax in this case was attacked as being arbitrary and causing discriminations and creating inequality in the burdens of taxation. Writing of the requirements of the fourteenth amendment and the equal protection of the laws to which all persons are entitled, Mr. Justice McKenna says:

The provisions of the New York Inheritance Tax Law, chapter 713 of the Laws of 1887, amending chapter 483 of the Laws of 1885, were under review in Beers v. Glynn, 211 U. S. 477, 484, 29 Sup. Ct. 186, 53 L. Ed. 290. A discrimination and inequality existed, for by this law the personalty of a nonresident decedent who owned realty in the state of New York was taxed, whereas no provision was made for taxing the personal

ty of a nonresident decedent who had not owned any realty within the state. Mr. Justice Brewer said:

"But though the operation of the statutes creates a difference, this even if intentional is not of itself sufficient to invalidate the tax. The power of the state in respect to the matter of taxation is very broad, at least so far as the federal Constitution is concerned. It may exempt certain property from taxation while all other is subjected thereto. It may tax one class of property by one method of procedure and another by a different method."

From what has been said it will be apparent that the discretion given to the Legislature to tax property passing by will or inheritance is very broad.

[6] Assuming without deciding that the discretion to classify personal property which must pay an inheritance tax before "It merely requires that all persons subjected passing by will or inheritance is limited to to such legislation shall be treated alike under a classification which is based upon some