# Sanford v. Poe/Opinion of the Court

* Court Documents
* Case Syllabus
* Opinion of the Court
* Dissenting Opinion White
United States Supreme Court
165 U.S. 194
Sanford v. Poe
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, 37 N. E. 945. 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. Cable Co. v. Adams, 155 U.S. 688, 15 Sup. Ct. 268, 360.
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. W. U. Tel. Co. v. Attorney General of Massachusetts, 125 U.S. 530, 8 Sup. Ct. 961; Massachusetts v. W. U. Tel. Co., 141 U.S. 40, 11 Sup. Ct. 889; Maine v. Grand Trunk Ry. Co., 142 U.S. 217, 12 Sup. Ct. 121, 163; Railroad Co. v. Backus, 154 U.S. 421, 14 Sup. Ct. 1114; Railroad Co. v. Backus, 154 U.S. 439, 14 Sup. Ct. 1122; Telegraph Co. v. Taggart, 163 U.S. 1, 16 Sup. Ct. 1054; Pullman's Palace Car Co. v. Pennsylvania, 141 U.S. 18, 11 Sup. Ct. 876. 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 (Railroad Co. v. Backus, 154 U.S. 429, 14 Sup. Ct. 1114), 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, 11 Sup. Ct. 876), 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 (Telegraph Co. v. Taggart, 163 U.S. 1, 16 Sup. Ct. 1054).
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 Express Co. v. Seibert, 142 U.S. 354, 12 Sup. Ct. 254, 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.'
'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 good will 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 good will 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 good will, 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 good will 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 none the less the true value in money of the building because contributed to by the operative causes that gave rise to the good will. 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 good will 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, 37 U.S. App. 395, 16 C. C. A. 314, 69 Fed. 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, 22, 11 Sup. St. 876; State Railroad Tax Cases, 92 U.S. 575; Delaware Railroad Tax, 18 Wall. 206; Erie R. Co. v. Pennsylvania, 21 Wall. 492; Columbus Southern Ry. Co. v. Wright, 151 U.S. 470, 14 Sup. Ct. 396.
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 Railway Co. v. Backus, 154 U.S. 421, 443, 14 Sup. Ct. 1122, 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, 10 Sup. Ct. 533.
In Pacific Exp. Co. v. Seibert, 142 U.S. 339, 12 Sup. Ct. 250, 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.'
And see Kentucky Railroad Tax Cases, 115 U.S. 321, 6 Sup. Ct. 57; Home Ins. Co. v. New York, 134 U.S. 594, 10 Sup. Ct. 593.
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.' Indiana Railroad Tax Cases, 154 U.S. 434, 14 Sup. Ct. 1114; Telegraph Co. v. Taggart, 163 U.S. 1, 16 Sup. Ct. 1054.
Decrees affirmed.

## Notes

2 The italics here and elsewhere in this quotation are mine.
This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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