49 N.J.L. 1 | N.J. | 1886
The opinion of the court was delivered by
The two companies above named have been selected for the purposes of this opinion, as the representatives of the numerous prosecutors of the writs of certiorari now before the court, because in these two cases most of the important questions are presented for decision which are common to this entire class of litigants. It is to be understood, therefore, that whatever is adjudged touching such general topics, must be taken as a determination of the subject in each respective ease.
The prosecutors of these writs are before the court seeking a review of certain assessments of taxes made upon their property by the state board of assessors, under the statute entitled “An act for the taxation of railroad and canal property,” approved April 10th, 1884. Pamph. L., p. 142.
It is the sixteenth section of this enactment that imposes on this court its present duty, by giving to the company assessed, on the one side, and to the attorney-general on the other, the right to a certiorari, and by declaring that upon such writ relief may be had “ as well in cases where it is claimed that the amount of tax is excessive or insufficient as in cases where it is claimed that the principle upon which the assessment is made is erroneous.” By force of this provision the court is now appealed to, in behalf of these companies, to declare that certain parts of their assessments are erroneous, either because they are founded on exorbitant valuations of their property, which have been induced by error of judgment, or by the adoption of false principles of appraisal, or because the taxes themselves have been put upon them in disregard of the constitution of this state, or that of the United States.
Before, however, entering upon the consideration of these topics, it appears to us proper to premise that the mode adopted in bringing these procedures before the court must not be taken as an approved precedent for future action. In the present
The first exception in this vein is that instead of ascertaining the true value of the lands of these companies, the board, after ascertaining such value, multiplied the sum thus settled by the numbers two or three, and adopted the product as the market or true value of the property. It is insisted that by this course these officers have assessed these lands at two or three times their real value.
But we have failed to see either the illegality or injustice of this part of the proceeding. The problem is not what land for agricultural or building purposes is worth, but what a narrow strip of land, with valuable easements annexed to it, adapted to railroad uses, will bring in the market. That such strip of land, to be applied in such a manner, cannot be bought at the price that the adjacent lands sell for by the acre, is at once obvious. "When a railroad is located so as to pass through a building plot or a farm, the damage done to the part of the land not appropriated is generally many times the value of the land so taken, estimating its value by the acre, and consequently the owner of the required land will not sell it except at a price that will compensate him as well for the land he sells as for the damage sustained by the residue of his property. There is no reason to suppose that the land thus acquired, if sold in the market, for railroad purposes, will not bring a sum equal to the cost of its acquisition. The consequence is that even if we assume these valuations to have been made in the manner alleged by the plaintiffs, and which fact is disputed by the counsel for the state, still it is plain that the state board could not have reasonably estimated the lands in question by the measure of the value of the adjacent lands; and as there is nothing before us from which we can perceive that the result which has been attained by the methods used by the board is manifestly wrong or exorbitant, the appraisals in question cannot be annulled or reformed.
But it is again objected that the state board, in estimating the value of these roads and structures, took, as the absolute
We think-this premise is not to be conceded, for there is no evidence from which it can reasonably be inferred that so fallacious a measure of value was adopted. It is common knowledge that what a thing has cost is no infallible criterion of its market value; it is therefore to the highest degree improbable-that the officers composing this board, who have manifested,, so conspicuously, both capacity and knowledge with reference-to the multiform and intricate subjects embraced in these suits, could have fallen into an error so utterly puerile. That the board ascertained the cost of acquisition and construction is beyond doubt; it could scarcely perform its functions intelligently without doing so, for such cost, though not an incontestable evidence of exchangeable value, is nevertheless almost, always an important particular in the mass of circumstances laying the basis of a rational judgment touching the value of anything as an article of sale. That the state board used cost in the way thus indicated is clear, but it is not shown that it was used as an absolute measure. The inference drawn by counsel, that because the cost as ascertained and proved by the-engineers who were the witnesses called by the state very often agrees in amount quite closely with the valuations found by the board, therefore the standard of cost was adopted by the board is, we think, not warranted. Such approximations between these respective valuations were to be expected, for no reason is perceived why the property of a successful railroad is not worth about the sum that it would cost to replace it,, allowance being made for its depreciation from use.
Again, it is urged that it is not practicable to make a constitutional valuation of property for the purpose of taxation-by the distributive method defined in this statute.
The statutable direction referred to is that the state board shall value separately (1) the main stem, consisting of a strip one hundred feet in width, .with its superincumbent structures;. (2) the other real estate used for railroad purposes; (3) the-tangible personal property; (4) the franchises.
But it is further said that, admitting the constitutionality of the system just mentioned, the methods of valuation applied to the franchises of these companies are illegal and their results unjust and oppressive.
The state board has, in its return, specifically stated the mode it pursued in valuing this species of property. This is the language of the return : “And the said board do further certify and return that for the purpose of ascertaining the value of the franchise of the several corporations whose franchises were taxable under the provisions of the act above mentioned, they adopted the following rules and principles as equitable and just for the purpose, to wit: that the amount of the capital stock and of the funded and other debts of each corporation or person taxable under the act aforesaid should be ascertained, and that the value thereof should also be ascertained, and that in all cases where the aggregate amount of the value of the capital stock and of the securities representing said debts exceeded the value of the entire amount of the tangible property of such corporation, the value of the franchise should be ascertained by deducting from the aggregate amount of the value of such capital stock and of the securities representing said debts, the aggregate amount of the value of said tangible property, and that sixty per centum of the amount remaining in each case should be taken and held to be the value of the franchise of such corporation; and that in all cases where the amount of the value of the capital stock and of the securities representing said debts was less than the value of the entire amount of the tangible property of such corporation, the gross earnings of such corporation should be
At the outset of our inquiry into this article of objection, it is well to say that we do not feel that the duty is incumbent on us to express any opinion with respect to the formula by which the board arrived at the sum which it declared to be •the true value of these franchises. Our only concern is to know whether the properties, including the franchises, have been put at their true value. That there is a salable value in railroads that carry on a profitable business that is far beyond the naked value of the real and tangible property used for railroad purposes, we think is manifest, and it does no harm to any one to call such additional value, or some part of it, by the name of franchise. It seems to us unquestionable that the marketable value of a successful railroad is generally greatly in excess of the value of its road-bed, equipments and other tangible possessions. The location of the road, the places or territories it connects, its capabilities for future expansion, are all elements going to make up its productiveness as a vendible thing in the market. It would be unreasonable to affirm that a road connecting two hamlets would, under usual conditions, bring as much, if sold, as a road connecting two large cities, the cost or abstract value of the two being equal. This additional value of the road, imparted to it by reason of its location, &c., will be called, for the sake of brevity, its adventitious value.
We understand, then, that what this board has done is this, viz.: that it first ascertained the value of the road-bed, structures and tangible property, treating them as adapted to railroad uses, but without reference to the location of the particular road or its capabilities; and in those cases in which it was found that the market value of the stock of the company indicated an excess of value beyond this appraised value of its property, after the deduction of its debts, the board proceeded
Regarding the second method devised by the board for the ascertainment of the value of these corporate privileges, and which was applied to the class of roads that may be denominated unproductive roads, we have concluded that such method was plainly fallacious, and must accordingly be disapproved of by us. It will be perceived, from the report already quoted, that in all cases where the amount of the value of the capital stock and of the securities representing the debts was less than
Our conclusion, consequently, on this branch of the case is that the valuations of the franchises made in this latter method and on the basis of gross earnings, must be discarded, and in lieu thereof a merely nominal sum must be substituted.
The solution of the next question has been a work of some difficulty.
In the sixth section of the act we are considering will be found a provision in the following words, viz.: “ That whenever in any taxing district there shall be several branch lines of railroad belonging to or controlled by one company, 'or operated under one management, the assessors shall designate one of such lines as the main stem, and the value of the others shall be included in the separate valuation provided for in the second subdivision of section 3 of this bill.”
It will be found, upon consulting section 3 of the act thus referred to, that the property to be assessed by its force is required to be assessed at a higher rate than that put upon the main stem, so that in point of fact, in the execution of this
From this presentation of this statutory provision, as applied to the facts, it will be observed that here are railroad branches, identical in all essential characteristics, and applied to an identical use, separated for the purpose of taxation and assessed under a multiform rule, the result being that such properties, by an arbitrary legislative fiat, are unequally burdened. It appears from the proofs before us that in several instances where there were three branch roads in one taxing district, being under one management though owned by different companies, one of them has,, been denominated as a main stem by the state board, in compliance with the act, and has thus been assessed at a lighter rate than the other two. This selection of a main stem is made at the will of this official body, uncontrolled by any legislative standard, and unguided by any peculiarity in the individuals of the class to be selected from, for they are in all respects alike.
If the problem thus presented were to be solved by reasoning a priori, I should have no hesitation in declaring such an assessment to be illegal. But such is not the present posture of this question. When these cases, in their general phases, were before this court, the clause of the constitution of the state that prescribes “ that property shall be assessed under general laws and by uniform rules” was expounded to require the inclusion in the assemblage of things to be taxed of everything possessed of a like nature and of like characteristics, and that the things so brought into association should be subjected to an equable burden. By force of the requirement that the assessment should be made under “ general laws,” it was deemed that when a tax was sought to be imposed upon things possessed of a certain nature and characteristics, all the things corresponding in these particulars must be embraced in the act; that a part of such things could not be taxed and a, part exempted. And it was further thought that the second
It will be observed that the first question is whether the legislature could cause these branch railroads to be separated into groups, and direct variant rates of tax to be placed on such groups. As such roads, considered intrinsically and with respect to their uses, are not to be discriminated, such a dis
After a careful examination of the subject I have come to the conclusion that this question must be answered in the affirmative. It seems to me indubitable that it has been established in this state that property of any kind can be grouped for taxation arbitrarily by the legislature.
As has already appeared, that this court had decided that the legislature, in the course of taxing property, could not take part of a class and tax exclusively such part, and that the properties of railroad and canal companies, standing by themselves, were a group, and not a class, but the superior court held the contrary of this, declaring that such an assemblage of properties constituted a true class on which distinct taxes could be lawfully imposed. The ground of this conclusion was not that the things thus selected were, in their essential characteristics, alike, and that they were unlike other things belonging to other persons. Inasmuch as the land in the use of a railroad company did not in any important respect, differ from other land — inasmuch as a boat employed by a canal company did not, in any material feature, vary from other boats, it was obvious that such things could not be set apart from other lands and other boats by reason of their intrinsical dissimilitude. It was impossible for the court to declare that the real- and tangible personal property of a railroad was like the real and tangible personal property of a canal, and was unlike all other property, and on account of such likeness inter se, and such dissimilarity to other objects, could be placed in a group by themselves and separately taxed. It was self-evident that railroad property was unlike canal property, and no attempt was therefore made to assimilate them with a view to a classification, but they were applied to the same common use, and
From these extracts the ratio deaidendi is clearly apparent, and from the foundation thus laid it seems inevitably to follow that when the statute was vindicated the power of the legislature to taire at will part of a class of property, the whole class being devoted to the same use, and to tax such part exclusively, was likewise vindicated. For when it was declared that these two kinds of unlike properties, on account of their common use, would constitute a class to be separately taxed, it cannot be assumed that the fact was overlooked that such property was only a part of that devoted to such use. The
So we are necessarily led to the same conclusion when we turn our attention to another feature of this statute, and which has likewise received the approval of the court of last resort.
Consequently, accrediting to the legislative department of the government the prerogative just stated, no reason is perceived why the law-makers were not competent to separate these branch roads, already indicated, into groups, with a view to taxing them at different rates. Such an act is plainly mere arbitrary selection, but not more so than selecting the properties or railroads and canals, on the basis of their use, out of all other property employed in such use. The consequence is that had the legislature itself declared that where there were several branch roads in one taxing district a particular one of such roads should be treated as the main stem and taxed accordingly, and that the others should be taken as branches, and, as such, taxed at a greater rate, I could not have judicially pronounced, whatever my private views may be, such an exertion of power illegitimate, because the existence of such a power has been recognized, as I deem it clear, by the court of last resort. But the present problem does not stand before us thus simply conditioned ; the legislature has not itself declared which of these branches is to be selected as main stem, but has delegated the power to make such selection to the state board. In other words, this body of officers is authorized to say which branch, out of three or more, shall be chosen as main stem, and shall thereby be exempted from a part of the tax to which the rest will be liable. The legislature has not provided any standard by which the selection in question is to be made; everything in this matter being left to the unguided discretion of the designated officials. It has been held in this court on several occasions that in the exercising of the taxing power both the amount of the tax and the subjects to be subjected to it must be fixed by the legislature itself, or some standard must be provided by it whereby such matters may be plainly ascertained. Neither of such things can be left at large, to be decided by the judgment of any set of officers. Such we understand to have been the view heretofore taken of this subject. But as the matter now stands we do not feel that it is entirely
In the next place, it is objected that the real estate of these companies used for railroad purposes, other than main stem, has not been valued by the state board in accordance with the statutory direction.
We find the provision on this subject expressed in the terms following, viz.:
Section 4. That if the assessed value of the real estate of persons, other than railroad or canal corporations, in any taxing district wherein such railroad or canal property may be found, as ascertained by the assessors of such taxing district, is relatively lower than that which has been laid upon the land of the several companies in said taxing district, the said board shall be required to accept said valuation of the assessors for
The complaint is that in executing this provision the state board refused to take the standard of valuation thus provided.
The facts forming the basis of this position are these: the board reported that “ the main stem and personal property of all railroads have been valued in accordance with the provision of the law at their full or true value, while the universal custom of local assessors is to value for taxation at a percentage of true value, ranging all the way from forty to eighty per cent., averaging, it is thought, about sixty-five per cent, of true value.”
It appears, therefore, that the board has taken true value as the standard, and has refused to discount anything from such estimation on account of the custom of the local assessors in that respect. It is now insisted that the standard erected by the legislature for the use of the state board was true value minus this percentage of deduction.
But if this be the proper interpretion of the section, the plain result is that the whole provision is absolutely void. It was not competent for the legislature to put in force such a procedure. The constitution says, in express terms, that property shall be assessed for taxation at “ its true value,” and if the legislature has authorized it to be assessed otherwise such direction is nugatory, and the act must necessarily be enforced without reference to it.
But it is not clear that this was tb.e legislative design • for, looking at the entire section in question, it is conceived it may be understood as providing for cases in which the judgments of the state board and the local assessors are in disagreement touching the true value of the property in the several localities, and when the true value found by such local officers is less than the true value as found by the board, the estimate of the former shall be the standard. When, therefore, it appears that the local officers find a given sum as value for the purposes of taxation, and at the same time state that such sum
The last exception which will be disposed of at this time relates to the mode. provided in section 9 of the act for the-taxation of railroad property put in use in this st-áte by foreign corporations.
The section referred to is in these words, viz.: “ That if the property of any railroad or canal company be leased or operated by any other corporation, foreign or domestic, the property of the lessor or company whose property is operated shall be subject to taxation in the manner hereinbeforedirected, and if the lessee or operating company, being a foreign, corporation, be the owner or possessor of any property in this-state other than that which it derives from the lessor or company whose property is operated, it shall be assessed, in respect of such property, in like manner as any domestic railroad or canal company; any tangible personal property of such foreign company, if used or kept but a part of the time in this state, shall be assessed such proportionate part of its value as the time it is used or kept in this state during the year preceding the 1st day of January, mentioned in section 21 hereof, bears to the whole year.”
Certain property of the Philadelphia and Reading Railroad Company, consisting of engines, cars, &c., which it has not derived, as lessee or otherwise, from any company whose property is operated by it in this state, has been taxed by the state
The question, therefore, arises, What jurisdiction has this state, for the purposes of taxation, over this property ?
It is obvious that these things have no situs in this state; they are merely here in transitu. The.circumstance that they pass over a road in this state leased by the owner of them cannot so annex them to the road as to make them taxable as a part of it. The owner of the property has a foreign domicile, which is the permanent situs of the property, it being brought into this jurisdiction solely in consequence of the general business followed by the corporation and which has been already characterized.
It will also be noted that this is not a tax on the business of this company, falling incidentally and in the distance on the property in question, but it is imposed with absolute directness upon these vehicles of interstate commerce. This is so plainly the case that the tax increases in proportion to the increase in the use of such vehicles in this state, and diminishes .as such is diminished. The case is therefore entirely aside
The leading case in this state on the subject to be disposed of is that of the Erie Railway Company v. State, 2 Vroom 531, in which it was declared in the court of last resort that a tax could not be laid on the business of foreign corporations, such business consisting in the transportation of persons and things from state to state, for the reason that it was an infringement of the clause of the constitution of the United. States which gave to congress the regulation of commerce between the several states. In that instance the tax was, in form, on the business of the company, but the court, looking beyond the form, considered that it was in substance on the persons and things carried, and was therefore illegitimate. In the case now before us the tax, as has been shown, is directly on the instruments essential to the commercial intercourse between the states, so that the present case appears to be plainly subject to the principle established in. the decision referred to.
This subject has also received much consideration, particularly of late, in the Supreme and Circuit Courts of the United States. A conspicuous example in this train of decisions is that of Hays v. Pacific Mail Steamship Co, 17 How. 596. That company was a corporation of New York, being the owner of vessels, registered there, which plied between New York city and San Francisco, and different ports in Oregon. Its principal office was in New York, but it had agencies established in Panama and in San Francisco, having also a naval dock and shipyard at Benicia, in California, for the purpose of furnishing and repairing its steamers, which usually remained only long enough at San Francisco to land and receive passengers and cargo, and at Benicia only for repairs and supplies. Taxes bad been assessed upon these steamers in the State of California, and such was declared by the Supreme Court of the United States to be illegal, the grounds of judgment being assigned in the opinion in these words, viz.: “ We
The same doctrine was embodied in the decision of the similar case of the Gloucester Ferry Company v. Pennsylvania, 114 U. S. 197. That company was a corporation of this state, and ran its boats from this state to a dock in the city of Philadelphia, of which dock it was the lessee. The boats were registered in this state. Taxes were laid on the company in Pennsylvania, on the appraised value of its capital stock, which was adjudged to be illegal by the Court of Common Pleas of the city of Philadelphia, for the reason that there was. no other business carried on in the State of Pennsylvania, except the landing and receiving of passengers and freight, and which was a part of the commerce of the country, and which was, consequently, protected from the imposition of burthens by the state legislature. This judgment was affirmed, on the same grounds, by the Supreme Court of the United States.
We think the aptness of these decisions, as authorities in our present inquiry, is clear. These vessels were exempted from taxation by the states whose territories they merely touched in passing, as they were the means of commercial intercommunication between the states. Nor do we deem that it would in anywise have affected the judgments in these cases if it had appeared that these vessels, in passing, had carried passengers or goods from one port to another in the state imposing the tax, as the vessels were obviously not within the jurisdiction of the state for the purpose of prosecuting a local trade, such local transportation being but an incident to the general business in which they were employed.
The case which is, perhaps, more nearly in point for present
The judgments rendered by this court in the cases of State v. Engle, 5 Vroom 425, and State v. Carrigan, 10 Vroom 35, are authorities of similar import.
It will be observed that the only distinction which can be alleged to exist between the substantial facts of the cases cited and the present one is the circumstance that the Reading company is the lessee of these roads, over which it passes its trains in crossing this state. But, as we have already said., we cannot perceive that such peculiarity can at all affect the rule by which the case is to be governed, inasmuch as the property in question is not brought into the state as the local equipment of these roads, but comes here necessarily, in the course of the general business of the company, that business being the transportation of persons and property from state to state. If these engines and cars were, in substance and effect, the local appliances of these leased roads, they would then have a situs in this state, and could be taxed accordingly; but such is plainly not the case, for the local equipments of their lines belong to the lessors, and, though passing to the Reading company under the lease, have been properly taxed, by virtue of the statute, to such lessors. The proofs before us clearly demonstrate that in no proper sense can the property in question be regarded as the equipments of the roads used by this company in this state. We look upon that property, and which is owned by a non-resident, as being here in this state solely because it is an instrumentality of interstate commerce, and we think, under such conditions, that it cannot be, to any
This item of the tax must be deducted from the assessment.
But, from the foregoing view it is not to be understood that it is decided that a foreign railroad company, being possessed of no local equipment for a leased road lying in this territory, or having but an insufficient equipment, can, by means of its through trains, do a local business therein, and then claim entire exemption from taxation in this jurisdiction, on the ground that such trains were employed in the interstate commerce? "We think that in such cases the property is devoted to two uses, that is, in local as well as interstate commerce, and that, at least to the extent that it is employed in the former business, it is taxable by the state. Whenever, therefore, a foreign railroad company is using a leased line in this state, and has no adequate local equipment for such line, and does a substantial local business here, by many of. its trains in transitu, the property so used should be at least measurably taxed as being possessed of a situs in this state, and not to that extent being under the protection of the federal constitution. But when, as in the case of the Philadelphia and Reading Railroad Company, there is a reasonable local equipment used for local business, and the through trains of the company, in the prosecution, evidently, of its business of commerce between the states, and, as an incident to such business, takes up passengers or goods and transports them from one place to another place in the state, we think the property so employed is not subjected to the taxing power of this state.