It is not and cannot be doubted that each State of the Union may tax all property, real and personal, within its borders, belonging to persons or corporations, although employed in interstate or foreign commerce, provided the rights and powers of the National Government are not interfered with. Delaware Railroad Tax case, 18 Wall. 206, 232; Telegraph Co. v. Texas, 105 U.S. 460, 464; Western Union Tel. Co. v. Massachusetts, 125 U.S. 530; Marye v. Baltimore & Ohio Railroad, 127 U.S. 117, 123, 124; Leloup v. Mobile, 127 U.S. 640, 649; Pullman's Co. v. Pennsylvania, 141 U.S. 18; Cleveland &c. Railway v. Backus, 154 U.S. 439, 445.
The principal grounds upon which the plaintiff contends that the statute of Indiana of March 6, 1893, c. 171, is unconstitutional, and the valuation and assessment of the plaintiff's property under it invalid, are that they necessarily included a taxation of franchises granted to the plaintiff by the United States, as well as of the plaintiff's property outside of the State of Indiana, neither of which was subject to taxation in that State; and also, by taking the market value of shares of the plaintiff's stock, in fixing the valuation of the entire property
But in each of these respects the case presented by this record appears to us to be governed by previous decisions of this court. The argument for the plaintiffs in error, in effect, if not in express words, invites the court to modify or to overrule those decisions. It becomes important, therefore, to state somewhat fully the scope and extent of those decisions, the reasons on which they proceeded, and the provisions of the statutes thereby construed.
The statutes of Massachusetts, the constitutionality of which was attacked by the present plaintiff, and upheld by this court, in the two cases of Western Union Tel. Co. v. Massachusetts, 125 U.S. 530, and 141 U.S. 40, were undistinguishable in any material respect from the statute of Indiana now before us, and may, as suggested at the bar, have been the model upon which this statute was framed.
The material provisions of those statutes of Massachusetts were as follows: Every corporation, chartered or organized in Massachusetts or elsewhere, and owning a telegraph line in Massachusetts, was required to return annually to the tax commissioner of the State a statement of the amount of its capital stock, the par value and market value of its shares, the locality and value of its real estate and machinery subject to local taxation within the State, the whole length of its lines, and the length of so much of its lines as was within the State. The tax commissioner was required to ascertain the true market value of its shares, and to estimate the fair cash valuation of all the shares constituting its capital stock; and the corporation was required to pay annually "a tax upon its corporate franchise at a valuation thereof equal to the aggregate value of the shares in its capital stocks," as so determined by the tax commissioner; deducting, however, from that valuation, such proportion thereof as was proportional to the length of that part of its line lying without the State, and also an
In the first of the Massachusetts cases, Mr. Justice Miller, delivering the opinion of the court, said that "the main ground, on which the telegraph company resisted the payment of the tax alleged to be due," was that it was a violation of the rights conferred upon the company by the provisions (which had been accepted by the company) of the act of Congress of July 24, 1866, c. 230, reënacted in section 5263 of the Revised Statutes, by which it was enacted that any telegraph company organized under the laws of any State, should "have the right to construct, maintain and operate lines of telegraph through and over any portion of the public domain of the United States, over and along any of the military or post roads of the United States," "and over, under or across the navigable streams or waters of the United States." 14 Stat. 221; Rev. Stat. § 5263. The argument then made by counsel and the decision of the court upon this point are shown by the following passages in the opinion:
"The argument is very much pressed, that it is a tax upon the franchise of the company, which franchise, being derived from the United States by virtue of the statute above recited, cannot be taxed by a State; and counsel for appellant occasionally speak of the tax authorized by the law of Massachusetts upon this as well as all other corporations doing business within its territory, whether organized under its laws or not, as a tax upon their franchises. But by whatever name it may be called, as described in the laws of Massachusetts, it is essentially an excise upon the capital of the corporation. The laws of that Commonwealth attempt to ascertain the just amount which any corporation engaged in business within its limits shall pay as a contribution to the support of its government upon the amount and value of the capital so employed by it therein." 125 U.S. 546, 547.
"While the State could not interfere, by any specific statute, to prevent a corporation from placing its lines along these post
"The tax in the present case, though nominally upon the shares of the capital stock of the company, is in effect a tax upon that organization on account of property owned and used by it in the State of Massachusetts; and the proportion of the length of its lines in that State to their entire length throughout the whole country is made the basis for ascertaining the value of that property. We do not think that such a tax is forbidden by the acceptance on the part of the telegraph company of the rights conferred by section 5263 of the Revised Statutes, or by the commerce clause of the Constitution." 125 U.S. 552. See also Reagan v. Mercantile Trust Co., 154 U.S. 413, 416, 417; Central Pacific Railroad v. California, 162 U.S. 91, 123.
It was further argued in that case, that the tax was excessive and invalid, because, in ascertaining the whole valuation of the stock, no deduction was made on account of the value of real estate and machinery situated, and subject to local taxation, outside of the State of Massachusetts; although it appeared that the company owned lands and buildings outside of the State, the cost of which was more than $3,000,000, and upon which it had been assessed and had paid taxes of more than $48,000. 125 U.S. 542, 544, 552.
The court, notwithstanding, declared that it did not feel called upon to defend all the items and rules by which the authorities of the State arrived at the taxable value on which its ratio of percentage of taxation should be assessed, or to
The same views were affirmed in the second case between the same parties. 141 U.S. 44, 45.
Those decisions clearly establish that a statute of a State, requiring a telegraph company to pay a tax upon its property within the State, valued at such a proportion of the whole value of its capital stock as the length of its lines within the State bears to the length of all its lines everywhere, deducting a sum equal to the value of its real estate and machinery subject to local taxation within the State, is constitutional and valid, notwithstanding that nothing is in terms directed to be deducted from the valuation, either for the value of its franchises from the United States, or for the value of its real estate and machinery situated and taxed in other States; unless there is something more showing than the system of taxation adopted is oppressive and unconstitutional.
We are then brought to a consideration of the statutes of Indiana, as construed by the Supreme Court of the State and by this court.
The statute of Indiana of March 6, 1891, c. 91, repealed previous laws, and established a comprehensive and complete system of taxation. By § 3, all property within the jurisdiction of the State, not expressly exempted, was declared to be subject to taxation; and by subsequent sections the property of all corporations owning or operating railroads within the State was classified for the purposes of taxation as follows:
By § 78, the "right of way, including the superstructure, main, side or second track, and turnouts, turntables, telegraph poles, wires, instruments and other appurtenances, and the stations and improvements of the railroad company on such right of way" (excepting machinery, fixtures and stationary
Each railroad corporation was required, by § 83, to return annually to the county auditor an inventory of all these kinds of property, except "railroad track;" and, by § 85, to return to the auditor of the State, to be laid before the state board of tax commissioners, a statement showing, among other things, "first, the property denominated `railroad track,' giving the length of the main and side or second tracks and turnouts, and showing the proportions in each county and township, and the total in the State; second, the rolling stock, whether owned or hired, giving the length of the main track in each county, and the entire length of the road in this State;" and also the amount of its capital stock, and the market value, or if no market value, the actual value of its shares, the total amount of its indebtedness except for current expenses, and the total listed valuation of all its tangible property in the State.
This court, at the last term, in several cases, affirming judgments of the Supreme Court of Indiana, held that the statute of 1891 did not, in the case of a railroad partly in that State and partly in another, require that the value of the part in Indiana should be determined absolutely by dividing the whole value upon a mileage basis; but only that the total amount of stock and indebtedness should be taken into consideration in ascertaining the value; and that the statute was constitutional. Pittsburg &c. Railway v. Backus, 154 U.S. 421, 430, 435, and 133 Indiana, 625; Indianapolis & Vincennes Railroad v. Backus, 154 U.S. 438, and 133 Indiana, 609; Cleveland &c. Railway v. Backus, 154 U.S. 439, and 133 Indiana, 513.
In those cases, the objections to the constitutionality of that statute were answered by this court, speaking by Mr. Justice Brewer, as follows:
"It is not to be assumed that a State contemplates the taxation of any property outside its territorial limits, or that its statutes are intended to operate otherwise than upon persons and property within the State. It is not necessary that every section of a tax act should in terms declare the scope of its territorial operation. Before any statute will be held to intend to reach outside property, the language expressing such intention must be clear." 154 U.S. 428.
"It is obvious that the intent of this act was simply to reach the property of the railroad within the State." "No intent to
"It is not stated, in this statute, that when the value of a road running in two States is ascertained, the value of that within the State of Indiana shall be determined absolutely by dividing the gross value upon a mileage basis; but only that the total amount of stock and indebtedness shall be presented for consideration by the state board. Nevertheless it is ordinarily true that when a railroad consists of a single continuous line, the value of one part is fairly estimated by taking that part of the value of the entire road which is measured by the proportion of the length of the particular part to that of the whole road. This mode of division has been recognized by this court several times as eminently fair." 154 U.S. 430, 431.
In support of the last statement were cited State Railroad Tax cases, 92 U.S. 608, 611; Delaware Railroad Tax case, 18 Wall. 206; Erie Railway v. Pennsylvania, 21 Wall. 492; Western Union Telegraph Co. v. Massachusetts, 125 U.S. 530; Pullman's Palace Car Co. v. Pennsylvania, 141 U.S. 18; Maine v. Grand Trunk Railway, 142 U.S. 217; Charlotte &c. Railroad v. Gibbes, 142 U.S. 386; Columbus Southern Railway v. Wright, 151 U.S. 470.
"The true value of a line of railroad is something more than an aggregation of the values of separate parts of it, operated separately. It is the aggregate of those values, plus
"Now, when a road runs into two States, each State is entitled to consider, as within its territorial jurisdiction, and subject to the burdens of its taxes, what may perhaps not inaccurately be described as the proportionate share of the value flowing from the operation of the entire mileage as a single continuous road. It is not bound to enter upon a disintegration of values, and attempt to extract from the total value of the entire property that which would exist if the miles of road within the State were operated separately. Take the case of a railroad running from Columbus, Ohio, to Indianapolis, Indiana. Whatever of value there may be resulting from the continuous operation of that road is partly attributable to the portion of the road in Indiana, and partly to that in Ohio; and each State has an equal right to reach after a just proportion of that value, and subject it to its taxing processes. The question is, how can equity be secured between the States; and to that a division of the value of the entire property upon the mileage basis is the legitimate answer. Taking a mileage share of that in Indiana is not taxing property outside of the State." 154 U.S. 444, 445.
"The rule of property taxation is that the value of the property is the basis of taxation. It does not mean a tax upon the earnings which the property makes, nor for the privilege of using the property, but rests solely upon the value. But the value of property results from the use to which it is put, and varies with the profitableness of that use, present and prospective, actual and anticipated. There is no pecuniary value outside of that which results from such use. The amount and profitable character of such use determines the value; and if property is taxed at its actual cash value, it is
"It is enough for the State, that it finds within its borders property which is of a certain value. What has caused that value is immaterial. It is protected by state laws, and the rule of all property taxation is the rule of value, and by that rule property engaged in interstate commerce is controlled, the same as property engaged in commerce within the State. Neither is this an attempt to do by indirection what cannot be done directly, that is, to cast a burden on interstate commerce. It comes rather within that large class of state action, like certain police restraints, which, while indirectly affecting, cannot be considered as a regulation of interstate commerce, or a direct burden upon its free exercise." 154 U.S. 446, 447.
"It is true, there may be exceptional cases," "as, for instance, where the terminal facilities in some large city are of enormous value, and so give to a mile or two in such city a value out of all proportion to any similar distance elsewhere along the line of the road, or where in certain localities the company is engaged in a particular kind of business requiring for sole use in such localities an extra amount of rolling stock. If testimony to this effect was presented by the company to the state board, it must be assumed, in the absence of anything to the contrary, that such board, in making the assessment of track and rolling stock within the State, took into account the peculiar and large value of such facilities and such extra rolling stock." 154 U.S. 431.
By § 69 of the statute of Indiana of 1891, telegraph companies, incorporated under the laws of any other State, besides being taxable upon their tangible property in Indiana in the same manner as other tangible property was taxed, were required to make annual returns of their receipts from business in the State, including the proportion of gross receipts for business done in connection with the lines of other companies; and to pay a tax of one per cent on such receipts.
The supplemental and amendatory statute of March 6, 1893, c. 171, now in question, repealed that section of the statute of 1891, and substituted provisions very like those of the statutes of Massachusetts, above considered, for the taxation of the telegraph property, and not essentially different from those of the statute of Indiana of 1891 for the assessment of railroad property, except in being more favorable to the company by expressly providing for a deduction of the value of real property outside the State from the total valuation.
By § 1 of the statute of 1893, every telegraph company, whether incorporated under the laws of Indiana, or of any other State, engaged in telegraph business in Indiana, was required to return annually to the auditor of the State a statement of its whole capital stock, the par value of its shares, their market value, or, if they had no market value, the actual value thereof; its principal place of business; its real estate, machinery and appliances, subject to local taxation in each county and township within the State; its real estate outside the State and not directly used in the conduct of its business, and the sums at which such real estate was assessed for local taxation; the mortgages upon the whole or any part of its property; the whole length of all its lines, the length of its lines outside the State of Indiana, and the length of its
The Supreme Court of Indiana considered the present case to be governed by the decisions of this court in the cases of the Railroad Companies v. Backus, above cited; and, after referring to some of the passages above quoted from those decisions, added: "All that is thus forcibly and convincingly said as to the taxation of interstate railroad property is equally applicable to the taxation of interstate telegraph property. It is not easy to see how one mile of appellant's telegraph line connecting Chicago with New York could be of less value than any other mile of the same line. Cut out one mile, even though it be through a swamp or under a lake, and the value of the whole line is practically destroyed. The property is a unit, valuable as a whole and by reason of its several connections, and not by virtue of any part taken by itself. No way, therefore, by which the value of the lines in this State
In that court (as now in this) the telegraph company insisted that the statute of 1893, in applying the mileage basis of valuation to the lines of telegraph, compelled the state board of tax commissioners to add large outside values to the values of the Indiana portions of the lines, because the parts of the company's property outside the State were proportionately of greater value than the parts within the State. To which that court answered: "The act, it is true, provides a method of valuation, the mileage method, as a basis for the taxation of certain property within the State of Indiana. But this is simply a means for determining the true cash value of the property within the State; and if in the case of appellant's property, or in any other case, it is shown to the board, or is discovered by them, that still further deductions should be made, on account of larger proportional values outside of the State, or for any other reason, then the board must make such deductions, so that, finally, only the property within the State of Indiana shall be assessed, and that at its true cash value." 141 Indiana, 297.
The state court distinctly held that the statute of 1893, being supplementary to and amendatory of the statute of 1891, must be construed in connection therewith, and be treated as a part of one and the same general tax act; that the duties and powers of the state board of tax commissioners, as defined and prescribed in the statute of 1891, were not abridged or changed, in any respect, by the statute of 1893; and therefore, interpreting the statute of 1893 in the light of the provisions of the statute of 1891, (which have been cited above,) concluded "that in the act of 1893 the legislature provided the mileage method as the basis for the assessment of telegraph and other like property, both as to lines situated partly within and partly without this State, and also as to lines running through several counties or other subdivisions of the State; but that it was not the intention of the legislature, nor is it the meaning of that act, that any property
The statute of Indiana of 1893 regarding telegraph companies, therefore, as construed and applied by the Supreme Court of the State, like the statute of 1891 regarding railroad companies, while it takes, as the basis of valuation of the company's property within the State, the proportion of the value of its whole capital stock which the length of its lines within the State bears to the whole length of all its lines, makes it the duty of the state board of tax commissioners, to make such deductions, on account of a greater proportional value of the company's property outside the State, or for any other reason, as to assess its property within the State at its true cash value only; and is therefore governed by the same considerations upon which the provisions of the statute of 1891 for taxing railroad companies were held to be constitutional by the decisions of this court in the Indiana Railroad cases, above cited.
The bill in the present case was filed before those decisions were rendered; and is so drawn as to make it somewhat difficult to distinguish matters of fact alleged with such clearness and precision as to be admitted by the demurrer, from the
The bill alleges that the state board of tax commissioners, in fixing the valuation of the plaintiff's property in Indiana, (deducting the value of real estate, machinery and fixtures subject to local taxation within the State,) at the sum of $2,297,652, and at the rate of $357 per mile of telegraph line, placed upon that property, beyond its true cash value, as measured by the cost of replacing the same, making reasonable allowances for deterioration, additional values of the plaintiff's business, property and good will, both in and out of the State, and franchises granted by the United States, by the State of New York and by foreign countries. This allegation is made by way of preliminary and inducement to the concluding statement of the paragraph, that "in witness thereof" the tax commissioners entered upon their record a certificate and statement, which is set forth, and which has no tendency to prove anything of the kind, but merely shows an assessment and valuation made by the state board of tax commissioners, "after full consideration," and "in accordance with the act of the general assembly of the State of Indiana, approved March 6, 1893." Moreover, the cost of the property, or of its replacement, is by no means a true measure of its value; the bill, while it elsewhere states the value of the plaintiff's real estate in other States, and of its stocks and bonds of other companies, nowhere undertakes to fix the value of its franchises from the United States, the State of New York, and foreign countries; and the tax commissioners, by the authorities already cited, had the right and the duty, in estimating the value of the plaintiff's property in Indiana, to take into consideration those franchises and the other elements mentioned in this paragraph of the bill.
The bill further alleges that the state board of tax commissioners did not attempt to specify or describe the plaintiff's real estate, machinery and appliances subject to local taxation. But the statute did not require of them any such specification or description; nor does the plaintiff appear to have requested them, or to have done anything towards assisting them to do so.
The bill further alleges that there was no market value for all the shares of the plaintiff's stock; that the price obtained for a very few shares in the New York stock exchange did not fairly represent the actual value of the plaintiff's property; and that any price at which any shares might be sold by holders thereof, whether calculated upon any market value or upon actual value, included a consideration of the plaintiff's franchises, its contracts with other companies, its actual past and probable future earnings from many sources, skill and enterprise of its managers, and all its real and personal estate in Indiana or elsewhere, including real estate of great value in other States, all which were "blended so as to render it impossible to separate and disintegrate the portions of value applicable to any and each of said elements of value of said
The remaining allegations of the bill are either repetitions or amplifications of those already considered, or are averments of conclusions of law. The allegation that "the attempted and pretended valuation of complainant's said property by said state board of tax commissioners, in manner aforesaid," "necessarily includes, and does in fact include values, which are no part of the true cash value of the property of complainant in Indiana," is but equivalent to an assertion that the decision of the tax commissioners upon the question of fact committed by the statute to their determination was erroneous. As said by this court in Pittsburg &c. Railway v. Backus, above cited, "Whenever a question of fact is thus submitted to the determination of a special tribunal, its decision creates something more than a mere presumption of fact; and if such determination comes into inquiry before the courts, it cannot be overthrown by evidence going only to show that the fact was otherwise than as so found and determined." 154 U.S. 434, 435.