U.S. Supreme Court Adams Express Co. v. Ohio State Auditor, 165 U.S. 194 (1897)
Adams Express Company v. Ohio State Auditor
Argued December 10-11, 1896
Decided February 1, 1897
165 U.S. 194
APPEAL FROM THE COURT OF
APPEALS FOR THE SIXTH CIRCUIT
The decision of the Supreme Court of Ohio entertaining jurisdiction of this case, and delivering a considered opinion, State v. Jones, 61 Ohio St.
492, adjudging the Nichols Law to be valid under the constitution of that state, will not be reviewed by this Court.
Although the transportation of the subjects of interstate commerce, or the receipts received therefrom, or the occupation or business of carrying it on, cannot be directly subjected to state taxation, yet property belonging to corporations or companies engaged in such commerce may be, and whatever the particular form of the exaction, if it is essentially only property taxation, it will not be considered as falling within the inhibition of the Constitution.
The property of corporations engaged in interstate commerce, situated in the several states through which their lines or business extends, may be valued as a unit for the purposes of taxation, taking into considerate tion the uses to which it is put and all the elements making up aggregate value, and a proportion of the whole fairly and properly ascertained may be taxed by the particular state without violating any federal restriction.
While there is an undoubted distinction between the property of railroad and telegraph companies and that of express companies, there is the same unity in the use of the entire property for the specific purposes, and there are the same elements of value, arising from such use.
The classification of express companies with railroad and telegraph companies as subject to the unit rule does not deny the equal protection of the laws; as that provision in the Fourteenth Amendment was not intended to prevent a state from adjusting its system of taxation in all proper and reasonable ways, and was not intended to compel a state to adopt an iron rule of equal taxation.
The statute of the State of Ohio of April 27, 1893, 90 Laws Ohio 330 (amended May 10, 1894, 91 Laws Ohio, 220) created a board of appraisers and assessors, and required each telegraph, telephone and express company doing business within the state to make returns of the number of shares of its capital, the par value and market value thereof, its entire real and personal property, and where located and the value thereof as assessed for taxation, its gross receipts for the year of business wherever done and of the business done in the State of Ohio, giving the receipts of each office in the state, and the whole length of the line of rail and water routes over which it did business within and without the state. It required the board of assessors to
"proceed to ascertain and assess the value of the property of said express, telegraph, and telephone companies in Ohio, and in determining the value of the property of said companies in this state, to be taxed within the state and assessed as herein provided, said board shall be guided by the value of said property as determined by the value of the entire capital stock of said companies, and such other evidence and rules as will enable said board to arrive at the true value in money of the entire property of said companies within the State of Ohio in the proportion which the same bears to the entire property of said companies, as determined by the value of the capital stock thereof, and the other evidence and rules as aforesaid."
(1) That, assuming that the proportion of capital employed in each of the several states through which such a company conducts its operations has been fairly ascertained, while taxation thereon or determined with reference thereto may be said in some sense to fall on the business of the company, it does so only indirectly, and that the taxation is essentially a property tax, and, as such, not an interference with interstate commerce.
(2) That the property so taxed has its actual situs in the state, and is therefore subject to its jurisdiction, and that the distribution among the several counties is a matter of regulation by the state legislature.
(3) That this was not taking of property without due process of law, either by reason of its assessment as within the jurisdiction of the taxing authorities or of its classification as subject to the unit rule.
(4) That the valuation by the assessors cannot be overthrown simply by showing that it was otherwise than as determined by them.
These are cases involving the constitutionality of certain laws of the state of Ohio providing for the taxation of telegraph, telephone, and express companies, and the validity of assessments of express companies thereunder.
The General Assembly of Ohio passed, April 27, 1893, an act to amend and supplement §§ 2777, 2778, 2779, and 2780 of the Revised Statutes of that state (commonly styled the "Nichols Law"), which was amended May 10, 1894. The law created a State Board of Appraisers and Assessors, consisting of the Auditor of state, Treasurer of state, and Attorney General, which was charged with the duty of assessing the property in Ohio of telegraph, telephone, and express companies. By the act as amended, between the first and thirty-first days of May annually, each telegraph, telephone, and express company doing business in Ohio was
required to file a return with the Auditor of the state setting forth, among other things, the number of shares of its capital stock; the par value and market value (or, if there be no market value, then the actual value) of its shares at the date of the return; a statement in detail of the entire real and personal property of said companies, and where located, and the value thereof as assessed for taxation. Telegraph and telephone companies were required to return also the whole length of their lines, and the length of so much of their lines as is without and is within the state of Ohio, including the lines controlled and used, under lease or otherwise. Express companies were required to include in the return a statement of their entire gross receipts, from whatever source derived, for the year ending the first day of May, of business wherever done, and of the business done in the State of Ohio, giving the receipts of each office in the state; also, the whole length of the lines of rail and water routes over which the companies did business, within and without the state. Provision was made in the law for the organization of the board, for the appointing of one of its members as secretary, and the keeping of full minutes of its proceedings. The board was required to meet in the month of June, and assess the value of the property of these companies in Ohio. The rule to be followed by the board in making the assessment was that,
"in determining the value of the property of said companies in this state to be taxed within the state and assessed as herein provided, said board shall be guided by the value of said property as determined by the value of the entire capital stock of said companies, and such other evidence and rules as will enable said board to arrive at the true value in money of the entire property of said companies within the State of Ohio, in the proportion which the same bears to the entire property of said companies, as determined by the value of the capital stock thereof, and the other evidence and rule as aforesaid."
As to telegraph and telephone companies, the board was required to apportion the valuation among the several counties through which the lines ran in the proportion that the length of the lines in the respective counties bore to the
entire length in the state. In the case of express companies, the apportionment was to be made among the several counties in which they did business in the proportion that the gross receipts in each county bore to the gross receipts in the state.
The amount thus apportioned was to be certified to the county auditor, and placed by him on the duplicate, "to be assessed, and the taxes thereon collected the same as taxes assessed and collected on other personal property," the rate of taxation to be the same as that on other property in the local taxing district.
The valuation of all the real estate of the companies situated in Ohio was required to be deducted from total valuation as fixed by the board.
Provisions were made for hearings, and for the correction of erroneous and excessive valuations, as follows:
"At any time after the meeting of the board on the first Monday in June and before the assessment of the property of any company is determined, any company or person interested shall have the right, on written application, to appear before the board and be heard in the matter of the valuation of the property of any company for taxation. After the assessment of the property of any company for taxation by the board, and before the certification by the auditor of state of the apportioned valuation to the several counties, as provided in section 2780, the board may, on the application of any interested person or company or on its own motion, correct the assessment or valuation of the property of any company in such manner as will in its judgment make the valuation thereof just and equal. The provisions of section 167 of the Revised Statutes shall apply to the correction of any error or overvaluation in the assessment of property for taxation by the state board of appraisers and assessors, and to the remission of taxes and penalties illegally assessed thereon."
Section 167 of the Revised Statutes, referred to, reads thus:
"SECTION 167. He [the auditor of state] may remit such taxes and penalties thereon as he ascertains to have been illegally assessed, and such penalties as have accrued or may
accrue in consequence of the negligence or error of any officer required to do any duty relating to the assessment of property for taxation, or the levy or collection of taxes, and he may from time to time correct any error in any assessment of property for taxation or in the duplicate of taxes in any county, provided that when the amount to be remitted in any one case shall exceed one hundred dollars, he shall proceed to the office of the governor and take to his assistance the governor and attorney general, and in all such cases may remit no more than shall be agreed upon by a majority of the officers named."
Instead of distributing the valuation as under the act of 1893, the state board, by the act of 1894, was to certify it to the auditor of state, whose duty it was made to apportion and certify the valuation among the counties.
In No. 337, the taxes for 1893 were involved; and in Nos. 338, 339, and 340, the taxes for 1894. These are appeals from the Circuit Court of Appeals for the Sixth circuit. In Nos. 398, 399, and 400, the taxes for 1895 were involved. These are appeals from decrees of the Circuit Court for the Southern District of Ohio.
The original suits were brought in the circuit court to enjoin the certification of the apportioned valuations to the county auditors, as to 1893, against the state board; as to 1894 and 1895, against the auditor of state.
The circuit court (Taft, J.), on April 23, 1894, after a preliminary opinion, filed opinions in the case of Western Union Telegraph Company against the State Board, 61 F. 449, and in No. 337, Adams Express Co. v. Poe, 61 F. 470, holding the Nichols Law to be invalid under the Constitution of Ohio. On the first of May following, the Supreme Court of Ohio decided that the Nichols Law was constitutional and valid. State v. Jones, 51 Ohio St. 492.
Thereupon the circuit court reversed its ruling and accepted the decision of the supreme court of the state, and Judge Taft filed a further opinion holding that the assessments were valid. 64 F. 9.
In all the cases, the final decrees of the circuit court dissolved
the temporary injunctions which had been granted, sustained demurrers, and dismissed the bills.
The circuit court of appeals affirmed the cases taken to it on appeal. 69 F. 546; 69 F. 557.
The proceedings of the state board in making the assessments for 1895, and certain correspondence, are set forth in the records as if exhibits to the bills. The action of the board, relative to express companies, is thus given:
"The board having given each express company doing business in Ohio, whose property in Ohio is hereinafter assessed, opportunity to appear and be heard personally by the board, and having heard all companies which desired to be heard through their officers, agents, or counsel, and having carefully considered the facts set out in the returns, schedules, and supplementary statements of such companies, and all evidences of value and all matters bearing upon the question of the value of the property of the companies, which, in the judgment of the board, would assist it in arriving at the true value, in money, of the entire property of each of said companies within the State of Ohio, on motion, the state board of appraisers and assessors unanimously fix and determine the values of the property of express companies hereinafter named in Ohio, to be taxed therein, at the amounts set out in the following table:"
The Adams Express Company . . . . . . . . $533,095.80
The American Express Company. . . . . . . 499,373.60
The United States Express Company . . . . 488,264.70
This valuation was made July 24, 1895. On the second of August, counsel for the companies wrote the auditor requesting to be advised of the assessments when made, in order that they might apply for a correction. On the seventh of August, the secretary of the board informed counsel of the assessments. On August 10, counsel wrote, asking
"upon what calculation, if any, the apparently precise amounts of the assessments, especially in the case of the express companies, are based, and how the figures are arrived at."
The auditor replied for the board that
"the method pursued
by the state board of appraisers and assessors this year in assessing the property in Ohio of the Western Union Telegraph Company and the express companies you represent is not different from that followed in former years, has been sustained by the courts, and is set forth in the records of the board."
Attention was called to certain data lacking in the companies' returns, and counsel were informed that opportunity would be afforded for a hearing on September 2, at 10 o'clock a.m., but the three bills involving these assessments were filed August 14, 1895. Subsequently returns were filed, as of May 1, 1895, showing:
As to the Adams Express Company: Number of shares, 120,000. Market value, $140 to $150. Taxable value of real estate owned in Ohio, $25,170. Value of personal property, including moneys and credits, owned by company in Ohio, $42,065. Total value of real estate owned outside of Ohio, $3,005,157.52. Total value of personal property owned outside of Ohio, $1,117,426.05. Entire gross receipts, from whatever source, received within the state for the year, $282,181. Whole length of lines of rail and water routes over which the company was doing business, 29,647 miles. Length without the state, 27,518 miles; within the state, 2,129 miles.
As to the United States Express Company: Number of shares, 100,000. Par value, $100. Market value, $40. Taxable value of real estate owned in Ohio, $22,190. Value of personal property, including moneys and credits, owned in Ohio, $28,438. Entire gross receipts, from whatever source, derived within the state, $358,519. Length of lines within the state over which the company was doing business, 3,011 miles.
As to the American Express Company: Number of interests, 180,000. Par value, $100. Market value, $112. Taxable value of real estate in Ohio, $58,660. Value of personal property, including moneys and credits, in Ohio, $23,430. Total value real estate outside of Ohio, $4,891,259. Total value of personal property outside of Ohio, $1,661,759. Gross receipts within the state, $275,446. Whole length of lines, 35,295 miles; length within the state, 1,731 miles.
The companies made no return of their entire gross receipts of business, wherever done, nor of the terms of their contracts or arrangements for transportation.
These returns stated, and the bills repeated, that, aside from the real estate mentioned, the companies had no property in the State of Ohio "except certain horses, wagons, harness, trucks, safes, and office fixtures located at different points," and that their actual value was given. That
"the business of the company in the state consists in carrying packages on passenger and express trains, steamboats, and stages, in the care and custody of its employees, who accompany the packages. The express company has no ownership of nor interest in these means of conveyance, and simply pays to the railroad companies and the owners of the steamboats and stage coaches for the passage of messengers and their accompanying packages. The horses, wagons, and trucks are used by it in the collection and delivery of these packages. There is no peculiarity about this property. It is of an ordinary kind, whose true value in money must be measured by the ordinary standards, and is easily ascertained and determined."
Each of the bills in Nos. 398, 399, and 400 alleged that the scheme of taxation contemplated by the act,
"while professing to provide for taxation of property in the State of Ohio, does not in fact, do so, inasmuch as it directs the state board of appraisers, in determining the value of the property of express companies in said state for the purpose of taxation, to be"
"guided by the value of said property as determined by the value of the entire capital stock of said company . . . in the proportion which the same [ viz., the property of the companies within the state] bears to the entire property of said companies, as determined by the value of the capital stock thereof;"
"the value of the capital stock or shares of said company, and of express companies generally, is determined not so much by the value of the property and appliances which they use in carrying on their business as by the skill, diligence, fidelity, and success with which they conduct their business. Said company employs many thousands of men, who are constantly engaged in carrying express packages,
many of them of great value, from one part of the country to another, and its income and the value of its shares are largely the result of their efforts, fidelity, and integrity, and of skillful management and supervision of the business. Said company, furthermore, owns real and personal property of great value, aside from the appliances of its express business, which is not held or taxable in the State of Ohio, and some of which is not taxable at all, all of which, however, together with the business connections of the company, and the reputation and goodwill which it has earned in the course of more than fifty years of public service, enter largely into the value of its capital shares;"
that the market price of the company's shares does not
"afford any fair, reasonable, or just method of estimating the value of its property, or fixing the basis of value for the purpose of taxation, because the market price is speculative and variable, depending upon financial conditions not at all connected with this company, its business, or its property; and your orator insists that said scheme of taxation is unfair, illegal, unjust, and unequal, and is a regulation of and a tax upon interstate commerce, and a taking of its property without due process of law;"
that the act, and the assessments made thereunder, are in contravention of the Constitution of the United States, because act provides for the assessment of, and the assessments embrace, property not situated within the jurisdiction of the State of Ohio, and the property of the companies is therefore taken without due process of law; and that the scheme, as a special one, imposes an illegal burden on interstate commerce, and denies the equal protection of the laws.
MR. CHIEF JUSTICE FULLER, after stating the facts in the foregoing language, delivered the opinion of the Court.
No difference material to the determination of the controversy exists between the cases, and, as matter of convenience, the statement refers to the amended act and the records in Nos. 398, 399, and 400.
The contention that the act in question is invalid because repugnant to the Constitution of the State of Ohio has been disposed of by the decision of the highest tribunal of that state sustaining its validity. State v. Jones, 51 Ohio St. 492. These cases fall within no recognized exception to the general rule that the construction by the state courts of last resort of state constitutions and statutes will ordinarily be accepted by this Court as controlling.
It is suggested that the decision of the Supreme Court of Ohio should not be followed because the case in which it was announced did not involve a genuine controversy, but was prepared for the purpose of obtaining an adjudication, and, under the circumstances, ought not to have been considered by that court. But it was for that tribunal to pass on this question, and, as it entertained jurisdiction, and delivered a considered opinion, which appears in the official reports of the court as its judgment of the validity of the Nichols Law under the Constitution of the State of Ohio, it is not within our province to review its determination in that regard.
This brings us to the only inquiry which it concerns us to examine.
The legislation in question is claimed to be repugnant to the Constitution of the United States because in violation of the commerce clause of that instrument and because operating to deprive appellants of their property without due process of law and of the equal protection of the laws.
We assume that the assessments complained of were made in pursuance of the definite rule or principle of appraisement recognized and established by the Nichols Law, as construed by the Supreme Court of Ohio, and the question is whether the law prescribing that rule is valid under the federal constitution.
The principal contention is that the rule contravenes the commerce clause because the assessments, while purporting to
be on the property of complainants within the state, are in fact levied on their business, which is largely interstate commerce.
Although the transportation of the subjects of interstate commerce, or the receipts received therefrom, or the occupation or business of carrying it on, cannot be directly subjected to state taxation, yet property belonging to corporations or companies engaged in such commerce may be; and, whatever the particular form of the exaction, if it is essentially only property taxation, it will not be considered as falling within the inhibition of the constitution. Corporations and companies engaged in interstate commerce should bear their proper proportion of the burdens of the governments under whose protection they conduct their operations, and taxation on property, collectible by the ordinary means, does not affect interstate commerce otherwise than incidentally, as all business is affected by the necessity of contributing to the support of government. Postal Telegraph Cable Co. v. Adams, 155 U. S. 688 .
As to railroad, telegraph, and sleeping car companies, engaged in interstate commerce, it has often been held by this Court that their property, in the several states through which their lines or business extended, might be valued as a unit for the purposes of taxation, taking into consideration the uses to which it was put, and all the elements making up aggregate value, and that a proportion of the whole, fairly and properly ascertained, might be taxed by the particular state without violating any federal restriction. Western Union Telegraph Co. v. Massachusetts, 125 U. S. 530 ; Massachusetts v. Western Union Telegraph Co., 141 U. S. 40 ; Maine v. Grand Trunk Railway, 142 U. S. 217 ; Pittsburgh, Cincinnati &c.; Railway v. Backus, 154 U. S. 421 ; Cleveland, Cincinnati &c.; Railway v. Backus, 154 U. S. 439 ; Western Union Telegraph Co. v. Taggart, 163 U. S. 1 ; Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18 . The valuation was thus not confined to the wires, poles, and instruments of the telegraph company, or the roadbed, ties, rails, and spikes of the railroad company, or the cars of the sleeping car company, but
included the proportionate part of the value resulting from the combination of the means by which the business was carried on -- a value existing to an appreciable extent throughout the entire domain of operation. And it has been decided that a proper mode of ascertaining the assessable value of so much of the whole property as is situated in a particular state is, in the case of railroads, to take that part of the value of the entire road which is measured by the proportion of its length therein to the length of the whole, Pittsburgh &c.; Railway v. Backus, 154 U. S. 429 , or taking as the basis of assessment such proportion of the capital stock of a sleeping car company as the number of miles of railroad over which its cars are run in a particular state bears to the whole number of miles traversed by them in that and other states, Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18 , or such a proportion of the whole value of the capital stock of a telegraph company as the length of its lines within a 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, Western Un. Tel. Co. v. Taggart, 163 U. S. 1 .
Doubtless there is a distinction between the property of railroad and telegraph companies and that of express companies. The physical unity existing in the former is lacking in the latter; but there is the same unity in the use of the entire property for the specific purpose, and there are the same elements of value arising from such use.
The cars of the Pullman Company did not constitute a physical unity, and their value as separate cars did not bear a direct relation to the valuation which was sustained in that case. The cars were moved by railway carriers under contract, and the taxation of the corporation in Pennsylvania was sustained on the theory that the whole property of the company might be regarded as a unit plant, with a unit value, a proportionate part of which value might be reached by the state authorities on the basis indicated.
No more reason is perceived for limiting the valuation of the property of express companies to horses, wagons, and furniture than that of railroad, telegraph, and sleeping car
companies, to roadbed, rails, and ties, poles and wires, or cars. The unit is a unit of use and management, and the horses, wagons, safes, pouches and furniture, the contracts for transportation facilities, and the capital necessary to carry on the business, whether represented in tangible or intangible property, in Ohio, possessed a value in combination, and from use in connection with the property and capital elsewhere, which could as rightfully be recognized in the assessment for taxation in the instance of these companies as the others.
We repeat that while the unity which exists may not be a physical unity, it is something more than a mere unity of ownership. It is a unity of use not simply for the convenience or pecuniary profit of the owner, but existing in the very necessities of the case -- resulting from the very nature of the business.
The same party may own a manufacturing establishment in one state and a store in another, and may make profit by operating the two, but the work of each is separate. The value of the factory, in itself, is not conditioned on that of the store, or vice versa, nor is the value of the goods manufactured and sold affected thereby. The connection between the two is merely accidental, and growing out of the unity of ownership. But the property of an express company, distributed through different states, is an essential condition of the business united in a single specific use. It constitutes but a single plant, made so by the very character and necessities of the business.
It is this which enabled the companies represented here to charge and receive, within the State of Ohio, for the year ending May 1, 1895, $282,181, $358,519, and $275,446, respectively, on the basis, according to their respective returns, of $42,065, $28,438, and $23,430, of personal property owned in that state -- returns which confessedly do not, however, take into account contracts for transportation and accompanying facilities.
Considered as distinct subjects of taxation, a horse is, indeed, a horse; a wagon, a wagon; a safe, a safe; a pouch, a pouch. But how is it that $23,430 worth of horses, wagons, safes,
and pouches produces $275,446 in a single year? Or $28,438 worth, $358,519? The answer is obvious.
Reliance seems to be placed by counsel on the observation of Mr. Justice Lamar in Pacific Express Co. v. Seibert, 142 U. S. 354 , that
"express companies, such as are defined by this act, have no tangible property, of any consequence, subject to taxation under the general laws. There is, therefore, no way by which they can be taxed at all, unless by a tax upon their receipts for business transacted."
But the reference was to the legislation of the state of Missouri, and the scheme of taxation under consideration here was not involved in any manner.
The method of assessment provided by the Nichols Law was as follows:
"The said board shall proceed to ascertain and assess the value of the property of said express, telegraph, and telephone companies in Ohio, and in determining the value of the property of said companies in this state, to be taxed within the state and assessed as herein provided, said board shall be guided by the value of said property as determined by the value of the entire capital stock of said companies, and such other evidence and rules as will enable said board to arrive at the value in money of the entire property of said companies within the State of Ohio, in the proportion which the same bears to the entire property of said companies, as determined by the value of the capital stock thereof, and the other evidence and rules as aforesaid."
And this provision was thus construed by the Supreme Court of Ohio in State v. Jones:
"The board, in determining the value of the company's property in this state for taxation, is not required to fix the value of such property upon the principle that the value of the entire property of the company shall be deemed the same as the value of its entire capital stock, thus making the respective values equivalents of each other. But, taking the market value of the entire capital stock as a datum, the board is to be only guided thereby in ascertaining the true value in money of the company's property in this state. The statute does not bind the board to find the value
of the entire property of the company equal to that of the entire capital stock."
The court further said:
"But the property of a corporation may be regarded, in the aggregate, as a unit, an entirety, as a plant designed for a specific object, and its value may be estimated not in parts, but taken as a whole. If the market value -- perhaps the closest approximation to the true value in money -- of the corporate property as a whole were inquired into, the market value of the capital stock would become a controlling factor in fixing the value of the property. Should all the stockholders unite to sell the corporate plant as an entirety, they would not be inclined to sell it for less than the market value of the aggregate shares of the capital stock. Besides, while the amount of the capital stock may be limited by the charter and the laws governing it, the real and personal property of the corporation may be constantly augmented, and may keep pace with any increase in the value of the capital stock. The market value of the capital stock, it is urged, has no necessary relation to the value of the tangible property of the corporation. But such is the well understood relation between the two that not only is the value of the capital stock an essential factor in fixing the market value of the corporate plant, but the corporate capital or property has a reflex action on the value of the capital stock. . . ."
"If by reason of the goodwill of the concern, or the skill, experience, and energy with which its business is conducted, the market value of the capital stock is largely increased, whereby the value of the tangible property of the corporation, considered as an entire plant, acquires a greater market value than it otherwise would have had, it cannot properly be said not to be its true value in money within the meaning of the constitution, because goodwill and other elements indirectly entered into its value. The market value of property is what it will bring when sold as such property is ordinarily sold in the community where it is situated, and the fact that it is its market value cannot be questioned because attributed
somewhat to goodwill, franchise, skillful management of the property, or any other legitimate agency."
"It will, we think, be conceded that the earning capacity of real estate owned by individuals may be considered in fixing its value for taxation. Take an office building on a prominent street in one of our large cities. It will not be doubted that, by care in the selection of tenants and in the preservation of the reputation of the building, by superior elevator service, by vigilance in guarding and protecting the property, by the exercise of skill and knowledge in the general management of the premises, a goodwill of the establishment will be promoted which will tend to an extra increase in the earning capacity and value of the building. For the purpose of taxation, it would be nonetheless the true value in money of the building because contributed to by the operative causes that gave rise to the goodwill. We discover no satisfactory reason why the same rule should not apply to the valuation of corporate property -- why the selling value of the capital stock, as affected by the goodwill of the business, should be excluded from the consideration of the board of appraisers and assessors, under the Nichols Law charged with the valuation of corporate property in this state, especially as the capital stock, when paid up, practically represents at least an equal value of the corporate property."
Similar views were expressed by the circuit court of appeals, Sanford v. Poe, 69 F. 554, Judge Lurton, delivering the opinion, saying:
"The tax imposed is not a license tax, nor a tax on the business or occupation, nor on the transportation of property through the state, nor from points within the state to points in other states, nor from points in other states to points within the state. It purports to provide for a tax upon property within the State of Ohio. Though this property is employed very largely in the business if interstate commerce, yet that does not exempt it from the same liability to taxation as all other property within the jurisdiction of Ohio. This proposition is too well settled to need argument. . . ."
"Neither does the fact that the property of the express
companies was valued as a unit profit-producing plant violate any federal restriction upon the taxing power of a state within which a part of that plant is found. The value of property depends in a large degree upon the use to which it is put. If a railroad may be valued as a unit, rather than as a given number of acres of land plus so many tons of rails and so many thousand ties and a certain number of depots, shops, etc., there is no sufficient reason why the property of an express company should not be treated as a unit plant. If the State of Ohio had a right to tax the property within the state, and to assess it at its true cash value, there is no federal restriction which will prevent such property from being 'assessed at the value which it has, as used, and by reason of its use. . . .'"
"That an express company owns no line of railway and operates no railroad does not prevent the value of its property from being affected by the relation of each part to every other part, and the use to which a part is put as a factor in a unit business."
The line of reasoning thus pursued is in accordance with the decisions of this Court already cited. Assuming the proportion of capital employed in each of several states through which such a company conducts its operations has been fairly ascertained, while taxation thereon, or determined with reference thereto, may be said in some sense to fall on the business of the company, it is only indirectly. The taxation is essentially a property tax, and, as such, not an interference with interstate commerce.
Nor, in this view, is the assessment on property not within the jurisdiction of the taxing authorities of the state, and for that reason amounting to a taking of property without due process of law. The property taxed has its actual situs in the state, and is therefore subject to the jurisdiction, and the distribution among the several counties is a matter of regulation by the state legislature. Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18 , 141 U. S. 22 ; State Railroad Tax Cases, 92 U. S. 575 ; Delaware Railroad Tax, 18 Wall. 206; Erie Railroad v. Pennsylvania, 21 Wall. 492; Columbus Southern Railway v. Wright, 151 U. S. 470 .
In Pullman's Palace Car Co. v. Pennsylvania, the rule is considered that personal property may be separated from its owner, and he may be taxed on its account, at the place where it is, although not the place of his own domicile and even if he is not a citizen or a resident of the state which imposes the tax; and the distinction between ships and vessels and other personal property is pointed out. The authorities are largely examined, and need not be gone over again.
There is here no attempt to tax property having a situs outside of the state, but only to place a just value on that within. Presumptively all the property of the corporation or company is held and used for the purposes of its business, and the value of its capital stock and bonds is the value of only that property so held and used.
Special circumstances might exist, as indicated in Pittsburgh, Cincinnati &c.; Railway v. Backus, 154 U. S. 421 , 154 U. S. 443 , which would require the value of a portion of the property of an express company to be deducted from the value of its plant, as expressed by the sum total of its stock and bonds, before any valuation by mileage could be properly arrived at, but the difficulty in the cases at bar is that there is no showing of any such separate and distinct property which should be deducted, and its existence is not to be assumed. It is for the companies to present any special circumstances which may exist, and, failing their doing so, the presumption is that all their property is directly devoted to their business, which being so, a fair distribution of its aggregate value would be upon the mileage basis.
The states through which the companies operate ought not to be compelled to content themselves with a valuation of separate pieces of property, disconnected from the plant as an entirety, to the proportionate part of which they extend protection, and to the dividends of whose owners their citizens contribute.
It is not contended that notice of the time and place of the meetings of the board was not afforded, or that the companies were denied the opportunity to appear and submit such proofs, explanations, suggestions, and arguments with reference to the assessment as they desired.
We are also unable to conclude that the classification of express companies with railroad and telegraph companies as subject to the unit rule denies the equal protection of the laws. That provision in the Fourteenth Amendment "was not intended to prevent a state from adjusting its system of taxation in all proper and reasonable ways," nor was that amendment "intended to compel a state to adopt an iron rule of equal taxation." Bell's Gap R. Co. v. Pennsylvania, 134 U. S. 232 .
In Pacific Express Co. v. Seibert, 142 U. S. 339 , in which a tax on gross receipts of express companies in the state of Missouri was sustained, Mr. Justice Lamar, speaking for the Court, well says:
"This Court has repeatedly laid down the doctrine that diversity of taxation, both with respect to the amount imposed and the various species of property selected either for bearing its burdens or for being exempt from them, is not inconsistent with a perfect uniformity and equality of taxation, in the proper sense of those terms, and that a system which imposes the same tax upon every species of property, irrespective of its nature or condition or class, will be destructive of the principle of uniformity and equality in taxation, and of a just adaptation of property to its burdens."
The policy pursued in Ohio is to classify property for taxation when the nature of the property, or its use, or the nature of the business engaged in requires classification in the judgment of the legislature in order to secure equality of burden, and property of different sorts is classified under various statutory provisions for the purposes of assessment and taxation. The state constitution requires all property to be taxed by a uniform rule and according to its true value in money, and it was held by the Supreme Court of Ohio in State v. Jones that the Nichols Law did not violate that requirement.
In Wagoner v. Loomis, 37 Ohio St. 571, it was ruled that:
"Statutory provisions whereby different classes of property are listed and valued for taxation in and by different modes
and agencies are not necessarily in conflict with the provisions of the constitution which require all property to be taxed by a uniform rule and according to its true value in money."
And the court said:
"A faithful execution of the different provisions of the statutes would place upon the duplicate for taxation all the taxable property of the state, whether bank stocks or other personal property or real estate, according to its true value in money, and the equality required by the constitution has no other test."
The constitutional test was held to be complied with, whatever the mode, if the result of the assessment was that the property was assessed at its true value in money.
Considering, as we do, that the unit rule may be applied to express companies without disregarding any other federal restriction, we think it necessarily follows that this law is not open to the objection of denying the equal protection of the laws.
We have said nothing in relation to the contention that these valuations were excessive. The method of appraisement prescribed by the law was pursued, and there were no specific charges of fraud. The general rule is well settled that
"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."
MR. JUSTICE WHITE, dissenting.
Not being able to concur in the opinion and judgment of the Court in the foregoing cases, I am impelled by what I conceive to be the serious nature or the questions involved to state the reasons for my dissent.
It is elementary that the taxing power of one government cannot be lawfully exerted over property not within its jurisdiction or territory, and within the territory and jurisdiction of another. The attempted exercise of such power would be a clear usurpation of authority, and involve a denial of the most obvious conceptions of government. This rule, common to all jurisdictions, is peculiarly applicable to the several states of the Union, as they are by the constitution confined within the orbit of their lawful authority, which they cannot transcend without destroying the legitimate powers of each other, and therefore without violating the Constitution of the United States.
"All subjects over which the sovereign power of a state extends are objects of taxation, but those over which it does not extend are, upon the soundest principles, exempt from taxation. This proposition may almost be pronounced self-evident."
In Hays v. Pacific Mail Steamship Co., 17 How. 596, a tax imposed upon twelve steamships belonging to the company, which, while engaged in lawful trade and commerce between the port of San Francisco and ports and territories without the state, were temporarily within the jurisdiction of California, was held illegal. This Court, by Mr. Justice Nelson, declared that the vessels were not properly abiding within the limits of California so as to become incorporated with the other personal property of that state; that their situs was at the home port, where the vessels belonged and where the owners were liable to be taxed for the capital invested and where the tax had been paid.
In St. Louis v. Ferry Co., 11 Wall. 423, the validity of a tax assessed by the City of St. Louis upon the boats of a ferry company, an Illinois corporation, as property within the City of St. Louis, was considered. This Court held that Illinois was the home port of the boats, that they were beyond the jurisdiction of the authorities by which the taxes were assessed,
and that the validity of the taxes could not be maintained. It was observed (p. 78 U. S. 430 ):
"Where there is jurisdiction neither as to person nor property, the imposition of a tax would be ultra vires and void. If the legislature of a state should enact that the citizens or property of another state or country should be taxed in the same manner as the persons and property within its own limits, and subject to its authority, or in any manner whatsoever, such a law would be as much a nullity as if in conflict with the most explicit constitutional inhibition. Jurisdiction is as necessary to valid legislative as to valid judicial action."
In State Tax on Foreign-Held Bonds, 15 Wall. 300, a tax laid by the State of Pennsylvania on the interest paid by the railroad company on its bonds was held to be a tax upon the bonds, the property not of the debtor company, but of its creditors, and that so far as such bonds were held by nonresidents of the state, they were property beyond its jurisdiction. It was declared that no adjudication should be necessary to establish so obvious a proposition as that property lying beyond the jurisdiction of a state is not a subject upon which the taxing power can be legitimately exercised, and that "the power of taxation, however vast in its character and searching in its extent, is necessarily limited to subjects within the jurisdiction of the state." Of the act there under consideration, the Court said (p. 82 U. S. 321 ):
"It is only one of many cases where, under the name of taxation, an oppressive exaction is made without constitutional warrant, amounting to little less than an arbitrary seizure of private property. It is, in fact, a forced contribution levied upon property held in other states, where it is subjected or may be subjected to taxation upon an estimate of its full value."
In Morgan v. Parham, 16 Wall. 471, it was adjudged, upon the authority of the Hays case, supra, that the State of Alabama could not lawfully tax a vessel registered in New York, but employed in commerce between Mobile, in that state, and New Orleans, in Louisiana. The situs of the
vessel was held to be at the home port in New York, where its owner was liable to be taxed for its value.
The circumstance that the steamer might not actually have been taxed in New York during the years for which the taxes in controversy were levied was held to be unimportant. The Court said (p. 83 U. S. 478 ):
"Whether the steamer Frances was actually taxed in New York during the years 1866 and 1867 is not shown by the case. It is not important. She was liable to taxation there. That state alone had dominion over her for that purpose."
In Delaware Railroad Tax, 18 Wall. 206, this Court, in considering an objection interposed to a taxing act, that it imposed taxes upon property beyond the jurisdiction of the state, observed (p. 18 Wall. 229229): "If such be the fact, the tax to that extent is invalid, for the power of taxation of every state is necessarily confined to subjects within its jurisdiction."
In Gloucester Ferry Co. v. Pennsylvania, 114 U. S. 196 , at pages 114 U. S. 206 -209, MR. JUSTICE FIELD reviews the cases just cited. The Gloucester Ferry Company was a New Jersey corporation, and operated a ferry between Gloucester, New Jersey, and Philadelphia. The State of Pennsylvania laid a tax on the appraised value of the capital stock of the ferry company, which owned no property in Pennsylvania except the lease of a slip or dock, where its ferryboats put up in plying across the river between the two states.
In this Court, it was sought in argument to support the tax in question by advancing the theory of "a homogeneous unit." The counsel said (p. 201 [argument omitted from electronic version]):
"The tax is upon the capital stock of the corporation, 'not in separate parcels, as representing distinct properties, but as a homogeneous unit, partaking of the nature of personalty,' and taxable where its corporate functions are exercised or its business done. The franchise itself may constitute the material part of all its property, since not only its wharves and slips, but also its boats, might be leased, and in that case the tax would be measured by the value of the franchise, represented by the extent of its exercise within the state, and not by its tangible property situated there. The extent of its property
subject to the taxing power is immaterial. Its franchise would be worthless without the leasehold interest owned by it in the City of Philadelphia. The value of its franchise depends upon the leasehold, and it will therefore not do to say that it has no property within the jurisdiction of the taxing power. It does not seem necessary to inquire further as to an ownership of property within the jurisdiction of Pennsylvania."
But this Court, speaking through MR. JUSTICE FIELD, completely answered the argument, as follows (p. 114 U. S. 205 ):
"If by reason of landing or receiving passengers and freight at wharves or other places in a state, they can be taxed by the state on their capital stock on the ground that they are thereby doing business within her limits, the taxes which may be imposed may embarrass, impede, and even destroy such commerce with the citizens of the state. If such a tax can be levied at all, its amount will rest in the discretion of the state. It is idle to say that the interests of the state would prevent oppressive taxation. Those engaged in foreign and interstate commerce are not bound to trust to its moderation in that respect. They require security."
Of the Gloucester Ferry case, it was observed by this Court in Philadelphia Steamship Co. v. Pennsylvania, 122 U. S. 344 , that
"it is hardly necessary to add that the tax on the capital stock of the New Jersey company in that case was decided to be unconstitutional because, as the corporation was a foreign one, the tax could only be construed as a tax for the privilege or franchise of carrying on its business, and that business was interstate commerce."
In Erie Railroad v. Pennsylvania, 153 U. S. 646 , this Court denied the power of the State of Pennsylvania to require a foreign railroad company doing business within its borders to deduct therefrom, when paying interest upon its obligations in New York, the amount of a tax assessed by the state upon the bonds and moneyed capital owned by the residents of Pennsylvania. The money in the hands of the company in New York was held to be property beyond the jurisdiction of Pennsylvania. The Court said that
"No principle is better settled than that the power of a state, even its power of
taxation, in respect to property is limited to such as is within its jurisdiction."
This inherent want of power in every government to transcend its jurisdiction is subject, as already stated, to an additional limitation as to the several states of the Union, resulting from those provisions of the Constitution of the United States which, insofar as they restrict the power of the states, necessarily create limitations to which they are all subject, and from which they cannot depart without a violation of the constitution. It will not be necessary to allude to every special restriction on the power of the states resulting from the constitution, but it will suffice for my present purpose to refer to one only, the necessary existence of which has often been recognized to have been one of the most cogent motives leading to the adoption of the Constitution, and upon the enforcement of which it has often been declared the perpetuity of our institutions depend, to-wit, the inhibition resulting from the provision of the Constitution of the United States conferring on Congress power to regulate interstate commerce.
Under the interstate commerce clause of the Constitution, as held by this Court, speaking through Mr. Justice Bradley in Leloup v. Mobile, 127 U. S. 648 ,
"no state has the right to lay a tax on interstate commerce in any form, whether by way of duties laid on the transportation of the subjects of that commerce, or on the receipts derived from that transportation, or on the occupation or business of carrying it on, and the reason is that such taxation is a burden on that commerce, and amounts to a regulation of it, which belongs solely to Congress."
The following cases were referred to as supporting the proposition thus enunciated: Case of State Freight Tax, 15 Wall. 232; Pensacola Telegraph Co. v. Western Union Telegraph Co., 96 U. S. 1 ; Mobile v. Kimball, 102 U. S. 691 ; Western Union Telegraph Co. v. Texas, 105 U. S. 460 ; Moran v. New Orleans, 112 U. S. 69 ; Gloucester Ferry Co. v. Pennsylvania, 114 U. S. 196 ; Brown v. Houston, 114 U. S. 622 ; Walling v. Michigan, 116 U. S. 446 ; Pickard v. Pullman Southern Car Co., 117 U. S. 34 ; Wabash &c.; Railway Co. v. Illinois,
118 U. S. 557 ; Robbins v. Shelby County Taxing District, 120 U. S. 489 ; Philadelphia & Southern Steamship Co. v. Pennsylvania, 122 U. S. 336 ; Western Union Telegraph Co. v. Pendleton, 122 U. S. 347 ; Ratterman v. Western Union Telegraph Co., 127 U. S. 411 .
The following cases, since decided, enforce the same principle: Asher v. Texas, 128 U. S. 129 ; Stoutenburgh v. Hennick, 129 U. S. 141 ; Lyng v. Michigan, 135 U. S. 161 ; McCall v. California, 136 U. S. 104 ; and Crutcher v. Kentucky, 141 U. S. 47 .
These authorities were reviewed by this Court in Brennan v. Titusville, 153 U. S. 289 , where, speaking through MR. JUSTICE BREWER, it was held that a municipal corporation could not lawfully tax a nonresident manufacturer of goods for the privilege of endeavoring to sell his goods by means of an agent sent into the state to solicit orders therefor. This Court there said (p. 153 U. S. 303 ):
"This tax is a direct charge and burden upon the business, and if a state may lawfully exact it, it may increase the amount of this exaction until all interstate commerce in this mode ceases to be possible, and, notwithstanding the fact that the regulation of interstate commerce is committed by the Constitution to the United States, the state is enabled to say that it shall not be carried on in this way, and to that extent to regulate it."
The question then arises, does the tax imposed by the State of Ohio upon express companies violate either of the two elementary propositions to which I have just referred?
Under the law of Ohio, express companies are taxed in three forms: first, their real estate is assessed for state, county, and municipal purposes, in the same manner as is real estate within the state belonging to other companies and persons; second, such companies are also taxed upon their gross receipts derived from business done within the state, 91 Ohio Laws, 237; and, third, they are additionally assessed by a state board, 90 Ohio Laws, 330, as amended by 91 Ohio Laws, 220. It is the assessment resulting from the last of these provisions which is involved in the cases now under consideration.
In compliance with the law, the companies returned to the state board a statement for the year 1893, showing first, the amount of capital stock, and its par and market value; second, a detailed account of the entire real and personal property of the companies, and its assessed value; and, third, their entire gross receipts during the taxing year for business done within the State of Ohio. For the years 1894 and 1895, the statements, under the requirements of the amendatory statute of May 10, 1894, 91 Ohio Laws, 220, exhibited first, the number of shares of capital stock, and its par and market value; second, a detailed statement of the real estate owned in Ohio, and its assessed value; third, a full and correct inventory of the personal property, including moneys and credits owned in Ohio and the value thereof; fourth, the total value of the real and personal property owned and situate outside of Ohio; fifth, the entire gross receipts of the company, from whatever source derived, of business wherever done for the taxing year; and sixth, the gross receipts of each company in Ohio, from whatever source derived.
It is proper here to notice that while the gross receipts in Ohio of express companies was required to be stated, there was no direction that mention should be made of the sum of the payments properly chargeable against such gross receipts, to-wit, disbursements to railroad companies or individuals for transportation facilities, wages of its army of employees, care and maintenance of its horses, and other operating expenses.
Although the assessment on the real estate and on the gross receipts may be relevant to some aspects of the controversy now examined, I eliminate them from consideration, as the direct issue here presented concerns the taxation asserted to be only upon the personal property.
The value of the personal property within the State of Ohio returned by the express companies was averred in each bill, and was conceded by the demurrer to have been correct. The valuation thus returned, and the amount of the assessment levied on such personal property by the state board, is shown in the following table:
Assessment for 1893
Value as Returned, and Value Assessed
as Alleged in the Bills by State Board
Adams Express Co. . . . . . $53,080 74 $460,033 08
American Express Co. . . . 27,300 00 400,576 45
United States Express Co. . 26,318 00 397,300 00
Assessment for 1894
Adams Express Co. . . . . . $41,102 60 $543,569 00
American Express Co. . . . 21,795 00 446,142 00
United States Express Co. . 26,333 00 481,348 00
Assessment for 1895
Adams Express Co. . . . . . $42,065 00 $533,095 80
American Express Co. . . . 23,430 00 499,373 60
United States Express Co. . 28,438 00 488,264 00
It thus appears that, for the year 1893, property possessing an actual value of but $106,698.74 was assessed as being worth $1,257,909.53; in 1894, property valued at $89,230.60 was assessed at $1,471,059; and for 1895, property worth but $93,933 was assessed at $1,520,734.10 -- a total valuation during three years of property worth only $289,862.34 at $4,249,702.63.
In addition to this enormous taxation, the real estate and the gross receipts of the companies have also been taxed for all state, county, and municipal purposes. It cannot, I submit, be asserted with reason that the nearly $4,000,000 of excess on the assessment of the tangible property laid by the state board resulted from assessing only the actual intrinsic value of such property, since to so contend would be not only beyond all reason, but would also be destructive of the admission by the demurrer that the companies possessed no other personal property within the State of Ohio but that returned by them, and that its actual and intrinsic value was correctly set forth. The assessment therefore must necessarily have taken into consideration some other property, or some element of value other than the real intrinsic worth of the property assessed.
The fact of the vast excess of the valuation over and above the admitted value of the property is not, however, the only mode by which it is conclusively demonstrated that the assessment resulted from the consideration and estimate by the state board of sources of value extrinsic to the property assessed. One of the assessments in controversy was made under the Ohio law of April 27, 1893, and the others under the law of May 10, 1894, and, although there is some difference between the two statutes, they both, as I have already said, substantially require express companies to make return of their real and personal property within the state, the value thereof, the number of shares of their capital stock, their market value, and a statement of the gross receipts for business done within the State of Ohio during the taxing year, from whatever source derived. Considering the obligation thus imposed to report the total value of the stock of the companies and all their gross earnings, as also the total routes over which their agents traveled, etc., and putting these things in connection with the extraordinary amount by which the valuation exceeds the actual value of the property assessed, it leaves no reasonable doubt that the sources of reported value, which were entirely outside of the territory and beyond the jurisdiction of the State of Ohio, were by some process of calculation added to the intrinsic value of the property within the state, thereby assessing not only the property within the state, but a proportion also of all the property situated without its territorial boundaries.
The fact that it was by this method that the sum of the personal property liable for taxation was fixed by the board results clearly and unmistakably from the opinion of the Supreme Court of the State of Ohio in State v. Jones, 51 Ohio St. 492, in which case the court sustained the validity of the taxes here questioned. The Supreme Court of Ohio therein declared that the state board, whose duty it was to assess express companies, was
"not required * to fix the value of such property upon the principle that the value of the entire property of the company shall be deemed the same as the value of
its entire capital stock, thus making the respective values equivalents of each other. But, taking the market value of the entire capital stock as a datum, the board is only to be guided thereby in ascertaining the true value in money of the company's property in this state. The statute does not bind the board to find the value of the entire property of the company equal to that of the entire capital stock."
Although the requirement, in so many words, to assess property outside the state is thus said not to be found in the statute, yet that it in substance so provides is acknowledged, for, adds the Ohio court,
"the property of a corporation may be regarded in the aggregate as a unit, an entirety, as a plant designed for a specific object, and its value may be estimated not in parts, but taken as a whole. If the market value -- perhaps the closest approximation to the true value in money -- of the corporate property as a whole were inquired into, the market value of the capital stock would become a controlling factor in fixing the value of the property. . . . The market value of the capital stock, it is urged, has no necessary relation to the value of the tangible property of the corporation. But such is the well understood relation between the two that not only is the value of the capital stock an essential factor in fixing the market value of the corporate plant, but the corporate capital or property has a reflex action on the value of the capital stock. . . . If, by reason of the goodwill of the concern, or the skill, experience, and energy with which its business is conducted, the market value of the capital stock is largely increased, whereby by the value of the tangible property of the corporation, considered as an entire plant, acquires a greater market value than it otherwise would have had, it cannot properly be said not to be its true value in money within the meaning of the Constitution, because goodwill and other elements indirectly entered into its value. . . . We discover no satisfactory reason why the same rule should not apply to the valuation of corporate property -- why the selling value of the capital stock, as affected by the goodwill of the business, should be excluded from the consideration of the board of appraisers and assessors under the Nichols Law,
charged with the valuation of corporate property in this state, especially as the capital stock, when paid up, practically represents at least an equal value of the corporate property."
Now this language is susceptible only of one meaning -- that is, that in assessing the actual intrinsic value of tangible property of express companies in the State of Ohio, it was the duty of the assessing board to add to such value a proportionate estimate of the capital stock, so as thereby to assess not only the tangible property within the state, but also, along with such property, a part of the entire capital stock of the corporation, without reference to its domicile, and equally without reference to the situation of the property and assets owned by the company from which alone its capital stock derives value. In other words, although actual property situated in states other than Ohio may not be assessed in that state, yet that it may take all the value of the property in other states, and add such portion thereof as it sees fit to the assessment in Ohio, and that this process of taxation of property in other states, in violation of the Constitution, becomes legal, provided, only, it is called "taxation of property within the state."
I submit that great principles of government rest upon solid foundations of truth and justice, and are not to be set at naught and evaded by the mere confusion of words. In considering a question of taxation in Postal Telegraph Cable Co. v. Adams, 155 U. S. 688 , to which case I shall hereafter refer, this Court said (p. 155 U. S. 698 ): "The substance, and not the shadow, determines the validity of the exercise of the power." It seems to me that, to maintain the tax levied by the State of Ohio, this ruling must be reversed, and the doctrine be announced that the shadow is of more consequence than the substance. Such result would appear to inevitably flow from the holding referred to, now affirmed by the court. Nothing, I submit, can be plainer than the fact that the value of the capital stock of a corporation represents all its property, franchises, goodwill -- indeed, everything owned by it wherever situated. I reiterate, therefore, that the rule which recognizes that for the purpose of assessing tangible property in one state, you may take its full worth, and then add to the value
of such property a proportion of the total capital stock, is a rule whereby it is announced that the sum of all the property, or an arbitrary part thereof, situated in other states, may be joined to the valuation of property in one state for the purpose of increasing the taxation within that state. What difference can there be between an actual assessment by Ohio of property situated in New York, Pennsylvania, Massachusetts, or in any of the other states of the Union, and the taking by Ohio of an aliquot part of the value of all the property situated in such other states, and adding it, for the purpose of assessment, to the value of property in Ohio? The recognition of this method breaks down both of the well settled and elementary rules to which I have in the outset adverted.
First, the rule which forbids one state to extend its power of taxation beyond its jurisdiction to property in another state. If the express companies are domiciled in New York, and having millions of property there situated and subject to taxation, all of which gives value to their capital stock, and hence enters into the sum of its worth, how can it be that to tax a proportion of the value of all that property is not taxing the property itself? This proportion of the capital stock, added to the inherent value of the property in the State of Ohio, is therefore an actual taxation by the State of Ohio of property situated in the State of New York.
It seems to me that not only the illegality, but the injustice, of this taxation by the State of Ohio on these express companies, which is now upheld, is clear. Let me suppose that the bonds, stocks, other investments, and elements, which represent the capital of the companies, and therefore producing the resultant value of such capital stock, are situated in the states of New York, Pennsylvania, and Massachusetts. These items, thus making up the value of the capital stock, being so situated in such states, are, of course, entirely and wholly, at their full value, assessable in those states. The attribution of an aliquot share of the value of the capital stock to the State of Ohio, and the consequent right of that state to tax such value, in no way deprives the states of New York, Pennsylvania, and Massachusetts of their right to assess
the property within their borders for its full value. But, as attributing to the State of Ohio a proportion of such property gives that state the right to tax the proportion allotted, it follows, by an inevitable deduction, that the recognition of the right here claimed practically subjects the property in the states of New York, Pennsylvania, and Massachusetts to double taxation. unless those states voluntarily forego the inherent power of taxation vested in them to levy a tax upon all the property within their respective jurisdictions. Certainly the states of New York, Massachusetts, and Pennsylvania would if they were independent sovereignties, removed from the jurisdiction of the Constitution of the United States, be driven to protect, by retaliatory legislation, their citizens, as was the case between the states prior to the adoption of the Constitution. But, having entered into the Union, these states are bereft of all such relief, and must thus look for the protection of their citizens to the remedies afforded by the Constitution itself. The rule now announced allows Ohio to exercise an authority in violation of the Constitution, and thereby strips not only the citizens of the other states, but those states themselves, of all redress by depriving them of the safeguards which it was the avowed purpose of the Constitution to secure.
Second, as to the interstate commerce clause. It is clear that the recognition of a right to take an aliquot proportion of the value of property in one state and add it to the intrinsic value of property in another state, and there assess it, is in substance an absolute denial and overthrow of all the great principles announced from the beginning, and enforced by the many decisions of this Court on the subject of interstate commerce. This results from the fact that the necessary consequence of the ruling in this case is this: that a corporation -- and there is no distinction, in principle, in the particular here considered, between a corporation and an individual -- cannot go from one state into another state of the Union for the purpose of there engaging in interstate commerce business without subjecting itself to the certainty of having a proportion of all its property situated in the other states added to the sum of property,
however small, which it may carry into the state to which it goes, for the purposes of taxation therein. Under this system, not only is an appalling penalty imposed for going from one state into another state, but the carrying on of interstate commerce itself becomes hampered and loaded with a burden threatening its absolute destruction.
The contradiction involved in the proposition is well illustrated by the legislation and decisions of the State of Ohio. Thus, as I have said, in addition to the tax imposed on express companies which is here considered, the law of the State of Ohio, besides assessing their real estate, also imposes a tax on the gross receipts of such companies for business done within the state. In order to save the tax here in question, the law by which this last tax is imposed is careful to provide that nothing in the imposition of the tax therein provided -- that is, the tax on gross receipts -- shall be construed as impairing the right to the tax on tangible property already provided for (the tax here in question). Now in passing upon the validity of this tax on gross receipts, the Supreme Court of Ohio treats it as not a double tax, because the previous tax is considered as one on tangible property. Adams Exp. Co. v. State, 44 N. E. 506. We have therefore both the legislature and the court of last resort of the State of Ohio upholding the enormous valuation put upon the personal property for the purposes of the tax now before us on the theory that such valuation includes an aliquot part of the capital stock, and necessarily therefore also an equal portion of all the property and earnings of the company, both in and out of the state, and yet we have the same legislature and the same tribunal upholding the tax on gross receipts on the ground that the tax first provided is purely a tax upon tangible property. Thus, the departure from the pathway of principle is marked in this instance, as it is always marked, by confusion and injustice.
The wound which the ruling announced, if I correctly apprehend it, inflicts on the Constitution is equally as severe upon the unquestioned rights of the states as it is upon the lawful authority of the United States, because, while
submitting the states and their citizens to injustice and wrong committed by another state, it at the same time greatly weakens or destroys the efficacy of the interstate commerce clause of the Constitution.
But the contention is that however sound, as an original question, may be the reasoning upon which the tax is assailed, its validity is not now open to question, because the theory by which the State of Ohio added the value of property outside of the state to the intrinsic amount of property actually within the state for the purposes of taxation is asserted to be concluded by many adjudications of this Court. The cases relied on to establish this proposition are cited in the opinion of the Court. I submit that the statement made by this Court in Pacific Express Co. v. Seibert, 142 U. S. 339 , is a sufficient answer to this contention, as regards all the cases relied on decided prior to that case. The Seibert case involved the question of the validity of a law of the State of Missouri imposing a tax upon the gross receipts of an express company in addition to the ordinary tax upon its tangible property. The Court, finding the tax to be only on the business of the company within the state, held it not to be a tax on interstate commerce, and therefore valid. The Court, through Mr. Justice Lamar, in speaking of the right of a state to classify express companies for the purpose of taxation, resulting from the fact that such companies were normally only owners of a small amount of tangible property in one state, said (p. 142 U. S. 354 ):
"On the other hand, express companies such as are defined by this act have no tangible property of any consequence subject to taxation under the general laws. There is therefore no way by which they can be taxed at all unless upon a tax upon their receipts for business transacted. This distinction clearly places express companies defined by this act in a separate class from companies owning their own means of transportation."
The argument here advanced in favor of the tax therefore simply is that what this Court said could not be done in a decision rendered in January, 1892, had theretofore been settled to the contrary by a line of adjudications. But the answer to
the contention in favor of the tax does not rest alone upon this view. All the cases relied upon and referred to in argument were considered and interpreted in Postal Telegraph Cable Co. v. Adams, 155 U. S. 688 . It becomes unnecessary, therefore, to review the prior cases in detail and analyze their reasoning, since this duty was effectually performed by this Court in the opinion announced in the Postal Telegraph case. The significance of the ruling in that case, and the controlling nature of the principles which the opinion there rendered inculcated, can better be understood by considering the controversy which that case determined and the aspect in which it was necessarily presented to this Court for adjudication. The case involved the validity of a tax imposed by the State of Mississippi on a telegraph company. The tax, in the mere form of its imposition, was undoubtedly on the occupation and business of the company, and therefore was an unlawful burden on interstate commerce, as the company was engaged in such commerce. The controversy came to this Court on error from the Supreme Court of the State of Mississippi. The attention of that court, in determining the issue presented to it, was called to all the previous decisions of this Court. Considering these previous adjudications, the Mississippi court said that there was undoubtedly language in opinions of this Court which seemed to support the validity of the tax there questioned, and there was also undoubtedly language in other lines of adjudication which seemed clearly to render the tax void under the Constitution of the United States. In view of the apparent conflict in the cases decided by this Court, the Mississippi court in its opinion marshaled the authorities upon both sides and expressed its hesitancy and diffidence in reaching a conclusion. The Postal Telegraph case therefore pointedly called the attention of this Court to all the previous cases, and accentuated the arguments on both sides of the issue presented, and rendered it absolutely necessary for this Court to construe and interpret all the previous adjudications. In this condition of things, in deciding the case and holding the tax valid, although in form a tax upon interstate commerce, this Court said (p. 155 U. S. 695 ):
"It is settled that where, by way of duties laid on the transportation of the subjects of interstate commerce, or on the receipts derived therefrom, or on the occupation or business of carrying it on, a tax is levied by a state on interstate commerce, such taxation amounts to a regulation of such commerce, and cannot be sustained. But property in a state belonging to a corporation, whether foreign or domestic, engaged in foreign or interstate commerce may be taxed, or a tax may be imposed on the corporation on account of its property within a state, and may take the form of a tax for the privilege of exercising its franchises within the state, if the ascertainment of the amount is made dependent in fact on the value of its property situated within the state (the exaction therefore not being susceptible of exceeding the sum which might be leviable directly thereon), and if payment be not made a condition precedent to the right to carry on the business, but its enforcement left to the ordinary means devised for the collection of taxes. The corporation is thus made to bear its proper proportion of the burdens of the government under whose protection it conducts its operations, while interstate commerce is not in itself subjected to restraint or impediment."
And again (p. 155 U. S. 696 ):
"Doubtless no state could add to the taxation of property, according to the rule of ordinary property taxation, the burden of a license or other tax on the privilege of using, constructing, or operating an instrumentality of interstate or international commerce, or for the carrying on of such commerce; but the value of property results from the use to which it is put, and varies with the profitableness of that use, and by whatever name the exaction may be called, if it amounts to no more than the ordinary tax upon property, or a just equivalent therefor, ascertained by reference thereto, it is not open to attack as inconsistent with the Constitution. Cleveland, Cincinnati &c.; Railway v. Backus, 154 U. S. 439 , 154 U. S. 445 ."
Referring to the opinion of the Supreme Court of Mississippi, which directly involved all the issues presented by this case, the Court said (p. 155 U. S. 697 ):
"And in the case at bar, the supreme court, in its examination of the liability of plaintiff in error for the taxes in question, said:"
"It will be thus seen at once that this is a tax imposed upon a telegraph company, in lieu of all others, as a privilege tax, and its amount is graduated according to the amount and value of the property measured by miles. It is to be noticed that it is in lieu of all other taxes, state, county, and municipal. The reasonableness of the imposition appears in the record, as shown by the second count of the declaration and its exhibits, whereby the appellant seems to be burdened in this way with a tax much less than that which would be produced if its property had been subjected to a single ad valorem tax."
"This exposition of the statute brings it within the rule where ad valorem taxes are compounded or commuted for a just equivalent, determined by reference to the amount and value of the property. Being thus brought within the rule, the tax becomes substantially a mere tax on property, and not one imposed on the privilege of doing interstate business. The substance, and not the shadow, determines the validity of the exercise of the power."
And, summing the whole up, the Court concluded (p. 155 U. S. 700 ):
"We are of opinion that it was within the power of the state to levy a charge upon this company in the form of a franchise tax, but arrived at with reference to the value of its property within the state, and in lieu of all other taxes, and that the exercise of that power by this statute, as expounded by the highest judicial tribunal of the state in the language we have quoted, did not amount to a regulation of interstate commerce or put an unconstitutional restraint thereon."
This construction of the previous cases decided by this Court elucidates and makes plain the fact that they proceeded upon and were intended to enforce the rule that the validity of a state tax would be determined by the substantial results of the burden imposed, and not by the mere form which it assumed, and although the form of the imposition might seem to bring the tax within the reach of the inhibition against levying a charge upon property beyond the jurisdiction of the state, or within the prohibitions of the Constitution of the United States
forbidding the laying of burdens on interstate commerce, this Court would not interfere therewith, provided the exaction, in substance, amounted to no more than the sum of the taxation which the state might lawfully impose upon the property actually within its jurisdiction, and provided that, in reality, the burden laid by the state was not an interference with interstate commerce. This explanation and this rule was the answer given to the question directly presented as to the significance and interpretation of the previous decisions now cited as authority for the proposition that it is within the power of a state not only to tax at will property beyond its jurisdiction, but also to substantially destroy interstate commerce by heaping direct and onerous burdens thereon. Such explanation and ruling were also reiterated in the recent decision in Western Union Telegraph Co. v. Taggart, 163 U. S. 1 , where, at page 163 U. S. 18 , it is clearly intimated that a taxing law could not be upheld which, in its necessary operation, was shown to be oppressive and unconstitutional.
Testing the tax in controversy by the rule laid down in the Postal Telegraph case, it becomes, in reason, impossible to conclude otherwise than that it is, both in form and substance, taxation by the State of Ohio of property beyond its jurisdiction, and that it also is an imposition by that state of a burden on interstate commerce. It cannot with fairness be argued that the amount of the tax is only such sum as would have resulted from a levy upon the property actually in the state when the record admits that the aggregate value of such property for the taxing years of 1893, 1894, and 1895 amounted only to two hundred and odd thousand dollars, while the assessment exceeds this amount by nearly four millions of dollars. It cannot be said that this vast excess does not embrace property situated outside of Ohio when both the text of the statute of that state and such text as expounded by the supreme court of the state clearly show that the sum of the excess is arrived at by adding to the property in the state the value of property situated outside thereof. Nor can it be contended that the tax here involved is not a tax on interstate commerce in view of the fact that, from the nature of the criteria of value adopted,
an aliquot part of the avails and receipts of the company of every kind is added to the taxing value in the State of Ohio, although that state had also imposed a tax upon the gross receipts from business of a purely state nature.
But, dismissing absolutely from consideration the authoritative construction of all the prior decisions of this Court announced in Postal Telegraph Cable Co. v. Adams, and conceding for the sake of argument that the previous adjudications now relied on are unexplained by that case, and that they substantially hold that there is a so-called "unit rule" properly applicable to the assessment for taxation of the continuous lines of telegraph and railroad companies, such concession does not in reason admit the validity of the method adopted by the State of Ohio for assessing the tangible personal property of express companies. Before proceeding to discuss this proposition, however, I call attention to the fact that I intentionally refrain from placing a sleeping car company in the same category with telegraph and railroad companies, because the decision in the case of Pullman's Car Co. v. Pennsylvania, 141 U. S. 18 , was not founded upon the theory, nor did it purport to assert that the property or plant of a sleeping car company was a unit, and that, of necessity, a part of such property may be measured by a rule applicable to continuous lines of road. In that decision, the Court merely emphasized the holding that the tax was one laid upon one hundred cars of the company, possessing an actual situs in Pennsylvania. In the statement of the case (p. 141 U. S. 20 ) the decision of the Supreme Court of Pennsylvania was quoted verbatim, in which it was declared that the tax on the capital stock of the Pullman Company was in reality but a tax on its property, that the coaches of the company were such property, and that the fact that the coaches might also be operated in other states would simply reduce the value of the property in Pennsylvania justly subject to taxation there. This Court practically adopted the views so expressed by the state court. When, however, it was said (p. 141 U. S. 26 ) that the method of assessment, to-wit, taking a proportion of the capital stock ascertained on the mileage basis, as the value of one hundred sleeping cars
was a just and equitable method, such statement was made with reference to the facts held to exist in the case before the court. What were those facts? The taxes demanded covered a period of eleven years, and, excluding interest from the time when payable and the attorney general's commission for collecting, aggregated but $16,321.89. 107 Penn.St. 158. Surely this Court might well say that a rule of taxation which operated to assess on one hundred sleeping cars a tax of less than $1,500 per annum was, in the absence of any showing to the contrary, just and equitable to the company. No such showing was made. The objection advanced by counsel to the method of taxation was not that the results produced were inequitable, but that (theoretically, not practically) the method adopted was improper. Indeed, the facts of that case caused the ruling there made to be but an example of the principle subsequently explicitly announced in Postal Telegraph Cable Co. v. Adams, ubi supra.
It is, I submit, undeniable that if there be such a unit rule applicable to the continuous lines of telegraph and railroad companies, its existence pushes the power of state taxation, as to these particular kinds of property, at least to the confines of the Constitution, and therefore if, under the rule of stare decisis, the cases which announce it should be followed, they should not be extended. The mere ownership, however, by an express company of personal property within a state presents no case for the application of a unit rule. What unity can there be between the horses and wagons of an express company in Ohio with those belonging to the same company situated in the State of New York? The conception of the unity of railroad and telegraph lines is necessarily predicated upon the physical connection of such property. To apply a rule based upon this condition to the isolated ownership by an express company of movable property in many states in reality declares that a mere metaphysical or intellectual relation between property situated in one state and property found in another creates, as between such property, a close relation for the purposes of taxation. But this theory, by an enormous stride, at once advances the unit rule beyond every
constitutional barrier, and causes such rule or theory to embrace property between which there is not, and cannot in the nature of things be, any real union or relation whatever. If mere intellectual union between property be thus adopted as a rule of taxation, then all the restrictions upon the power of a state to tax property arising from the fact that the situs of such property is beyond its jurisdiction, as well as of the restraints arising from the interstate commerce clause of the Constitution, are destroyed. Certainly the mere fact that the same owner has movable property in one state and movable property in another state does not, from the fact of the one ownership, create a link of continuity between the property for the purpose of taxation. The fact that the movable property situated in one state earns profits, and the movable property in the other likewise so earns, and that these profits go to the common owner, does not create such unity for the purpose of taxation so as to make the property assessable in each state. This Court has effectually determined that where a corporation is engaged in interstate business, no one of the states has the power to tax the receipts of such company derived from interstate commerce business, and that the power of the states as to taxation on earnings is limited to those derived from the business done within the state. This line of concluded authority is illustrated and referred to in the recent opinion in Osborne v. Florida, 164 U. S. 650 , decided at this term. It is therefore manifest that where property owned in common, belonging to the same person, and situated in different states, contributes to earnings, and the proceeds of these earnings go into the treasury of the owner, and lay side by side therein, the fact that there is a common owner, that there is a common business, and that all the results of the business are in immediate contact in the common treasury, gives no power to the state to tax the whole, but only to levy on that which comes from the state business alone. How, I submit, can it now be announced that there is an imaginary unity between personal property widely separated, because that property has a common owner, without at the same time reversing the settled
adjudications of this Court on the subject of the power of a state to tax the earnings from interstate commerce?
But a few illustrations will serve at once to make clear what I submit is the impossibility, in reason, of declaring that, as a legal fact or fiction, property is unified when between such property there is no unity or physical relation whatever.
Take, for example, the case of Brennan v. City of Titusville, supra. Of what value is the ruling in that case that a manufacturer cannot be compelled to pay a license for the doing, through his agent, of the business of interstate commerce by selling his goods in a state into which such agent enters for that purpose, if the mere fact that the agent takes into the state $1,000 worth of goods creates a supposed intellectual union between those goods and the vast stock and capital of the manufacturer located in another state, so as to enable the attribution of an aliquot part of the wealth of the manufacturer to the goods in the custody of the agent for the purpose of taxation? Would it not be as true in such case to say that the capital and wealth of the manufacturer facilitates and increases the capacity of the agent to transact business, and adds value to the property the agent has for sale, as to say that the horses and wagons of an express company in New York and its capital there facilitate and aid the agents of such company, and add value to the tangible property employed by such agents, in transacting business in Ohio? It certainly cannot, I submit, with reason be said that there is not the same unity between the operations of a manufacturer who makes his goods in one state, and sells them in another, as there is between the operations of an express company. The sale of the manufactured goods is as essentially necessary to the profits of the manufacturer as is the manufacture of the goods themselves. No profit can result from the one without the other, and to attribute a supposed unity to the business of an express company, and to deny such unity to that of a manufacturer, is, as I understand it, to declare that there is a difference when there is no possible difference.
If the rule contended for by the State of Ohio be true, why would it not apply to a corporation, partnership, or individual
engaged in the drygoods business, or any other business, having branches in various states? Would it not be as proper to say of such agencies, as it is of the agencies of express companies, that there is an intellectual unity of earnings between the main establishment and all such agencies, and therefore a right to assess goods found in an agency with relation to the capital and wealth of the original house and all the other branches situated in other states? Take the case of a merchant carrying on a general commercial business in one state and having connections of confidence and credit with another merchant of great capital in another state. If this rule be true, can it not also be said that such merchant derives advantages in his business from the sum of the capital in other states which may be availed of to extend his credit and his capacity to do business, and that therefore his tangible property must be valued accordingly? Suppose bankers in Boston, Philadelphia, and New York, of great wealth, owning stocks and bonds of various kinds, send representatives to New Orleans with a limited sum of money, there to commence business. These representatives rent offices and buy office furniture. Is it not absolutely certain that the business of those individuals would be largely out of proportion to the actual capital possessed by them, because of the fact that, reflexly and indirectly, their business and credit is supported by the home offices? In this situation, the assessor comes for their tax return. He finds noted thereon only a limited sum of money and the value of the office furniture. What is to prevent that official, under the rule of supposed metaphysical or intellectual unity between property, from saying:
"It is true you have but a small tangible capital, and your office furniture is only worth $250, but the value of property is in its use, and, as you have various elements of wealth situated in the cities named, I will assess your property, because of its use, at a million dollars?"
Such conduct would be exactly in accord with the power of taxation which it is here claimed the State of Ohio possesses, and which, as I understand it, the Court now upholds. To give the illustrations, I submit, is to point to the confusion, injustice, and impossibility of such a rule.
Nor, in conclusion, I submit, is there any force in the argument, advanced at bar, that we have entered a new era, requiring new and progressive adjudications, and that unless this Court admits the power of the State of Ohio to tax to be as claimed, it will enable aggregations of capital to escape just taxation by the several states. This assertion, at best, but suggests that unless constitutional safeguards be overthrown, harm will come, and wrong will be done. In its last analysis, the claim is but a protestation that our institutions are a failure, that time has proven that the Constitution should not have been adopted, and that this Court should now recognize that fact, and shape its adjudications accordingly. The claim is as unsound as the fictitious assertion of expediency by which it is sought to be supported. If it be true that by the present enforcement of the Constitution and laws property will escape taxation, the remedy must come not from violating the Constitution, but from upholding it.
Within the power lodged in Congress to regulate commerce between the states, ample authority exists to enact the necessary legislation to prevent the just relations between the states and the regulation of such commerce from becoming the pretext for avoiding the proper burdens of either state or national taxation. As the necessity arises, such apt powers will doubtless be brought into operation. The recognition of the right of taxation exerted by the State of Ohio in these cases must, if followed in other states, not only reproduce the illegality and injustice here shown, but greatly increase it, as every new imposition will be a new levy on property already taxed, and result in an additional burden on interstate commerce. If the principles by which such results are brought about be recognized as lawful under the Constitution, not only will Congress be deprived of all power to protect the citizens of the respective states, and the states themselves, from these conditions, but it will also be rendered impotent to devise, under the power to regulate commerce, any just and fair regulation to prevent the interstate commerce clause from being made a shield for avoiding taxation, and to cause property engaged in such commerce to be subjected to just and
uniform taxation on the part of the several states. Thus, by holding that the states possess the power claimed in this case to exist, not only will a wrong be committed, but that wrong will be permanently and without remedy ingrafted into our constitutional system.
I am authorized to say that MR. JUSTICE FIELD, MR. JUSTICE HARLAN, and MR. JUSTICE BROWN concur in this dissent.
* The italics here and elsewhere in this quotation are mine.