# Western Union Telephone Company v. Taggart

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United States Supreme Court
163 U.S. 1
Western Union Telephone Company v. Taggart
That the 'portion of said telegraphic plant situated within said state of Indiana is of the actual cash value of $686,126,-the said cash value being ascertained by taking the cost of original construction, as nearly as the same can be ascertained, and deducting therefrom a sum partially equal to the depreciation of the plant,-and could be replaced by an entirely new plant of the same extent and location, and of far more valuable and lasting material, for the sum of $1,226,625.'
That the pretended statute of March 6, 1893, was not a law of the state of Indiana (for reasons not insisted on in this court), and that on July 11, 1893, the plaintiff, reserving its rights to contest the validity of that statute, filed with the auditor of the state a statement and return, as therein required (a copy of which was annexed, and which included substantially the same objections as were stated in the bill, and showed that the entire mileage of the company was 189,576 miles, 6,436 of which were in the state of Indiana); that it had no real estate, machinery, and appliances in Indiana subject to local taxation. That the cost of its real estate in other states was $5,013,326, and the amount of its outstanding mortgage bonds was $1,211,000.
That the state board of tax commissioners on August 21, 1893, made its assessment and valuation of the plaintiff's property in Indiana, deducting the real estate, structures, machinery, and apparatus within the state and subject to local taxation, at the sum of $2,297,652, and at the rate of $357 per mile of telegraph line, 'and, in fixing said valuation upon complainant's said property in Indiana, acted under and by virtue of the assumed authority of said pretended statute, approved March 6, 1893, and placed upon complainant's said property additional values, beyond the true cash value of complainant's said property as measured by the cost of replacement of the same, making reasonable allowances for deterioration, by adding values of complainant's business, property, and good will, both in and outside of Indiana, and franchises granted by the state of New York, the United States, and foreign countries, and, in witness thereof, caused to be entered upon the official record of said board, required by law to be kept by said board, on said August 21, 1893, the following statement and certificate:
"In accordance with the requirements of the act of the general assembly of the state of Indiana approved March 6, 1893, the state board of tax commissioners, after full consideration, does hereby assess and value telegraph, telephone, palace-car, sleeping-car, drawing-room car, dining-car, express and fast-freight joint-stock associations, companies, co-partnerships, and corporations transacting business in the state of Indiana, which assessment and valuation is as follows, to wit: Assessment and valuation of telegraph and telephone companies in the state of Indiana by the state board of tax commissioners for the year 1893, exclusive of real estate, structures, machinery, fixtures, and appliances subject to local taxation within the state." The first line under that heading was: 'Western Union Telegraph Company. Miles, 6,436. Per mile, $357. Total, $2,297,652.'
'That the state board of tax commissioners, during its said session in the year 1893, did not attempt to specify or describe the property of complainant falling within the description of real estate structures, machinery, and appliances subject to local taxation.
'That in making said assessment said state board of tax commissioners assumed to take as the basis thereof the value of the entire capital stock of complainant, at a valuation per share based upon the price of the shares of complainant's capital stock dealt in in the stock-exchange market of New York City, dividing such aggregate value by the total number of miles of telegraph line of complainant, wherever situated, and both in and outside of Indiana, and thereby obtaining a pretended valuation per mile of the telegraph line of complainant, amounting to the said sum of $357 per mile, which said pretended valuation per mile said board, acting under the authority of said pretended statute, imputed to and imposed upon each mile of the whole number of complainant's telegraph line in Indiana, thereby imputing to and imposing upon the whole telegraph line of complainant in Indiana, which is of the length of 6,436 miles, said pretended valuation of $2,297,652, which said pretended valuation is grossly excessive and far beyond the true cash value of complainant's said property in Indiana.
'That said state board of tax commissioners, in reaching said valuation of complainant's said property in Indiana, did not consider and assess the value of the property of complainant situated in Indiana, otherwise than by pursuing the requirements of said pretended statute.
'That neither on April 1, 1893, nor at any time prior or subsequent thereto, was there any market value for all the shares of the capital stock of complainant.' That the whole number of shares was 948,200, of the par value of $100 each. That the number of shares sold or speculated in on April 1, 1893, on the New York stock exchange, was 1,168 shares, at the average price of $94.50, and only a part of those was actually delivered, and that the price so obtained did not fairly represent the actual value of the plaintiff's property.
'That any price at which any or all shares of complainant might be sold, by any holder or holders thereof, whether such price be calculated upon any market value, or upon actual value, includes, amongst other things, a consideration of franchises of great value, owned or exercised by complainant, granted by the state of New York, by the United States, by Canada, by Great Britain, by Cuba, and by other states, countries, and municipalities; a consideration of complainant's good will, its past earnings from every source, its probable future earnings from every source, the business ability, enterprise, and skill of the present managers of complainant's business, the probable continuance of business ability, enterprise, and skill in the future management of complainant's business, the contract and other relations of complainant to powerful railroad, telephone, and cable companies; a consideration of the real estate of complainant situated in the city of New York, which is of great value, to wit, of the value of $3,500,000, and in the city of Chicago, which is of great val e, to wit, of the value of $1,700,000, and of the real estate of complainant, of great value, situated in many other states and countries, none of which is situated in the state of Indiana; as well as the consideration of the actual value of all complainant's telegraph lines, poles, wires, cables, conduits, instruments, appliances, and office furniture, including that which is situated in Indiana, and taxable by the state of Indiana.
'That, in estimating such market or actual value of the shares of the stock of complainant, the values of said intangible franchises, rights, contracts, earnings, business, business ability, enterprise, skill, and management and good will, and of all said real and personal estate of complainant, are blended so as to render it impossible to separate and distinguish the portions of value applicable to any or each of said elements of value of said shares.'
That the plaintiff was the owner of many thousand miles of telegraph in the states of Massachusetts, New York, Pennsylvania and New Jersey, and in other densely populated portions of the United States, of the cost and value of $2,500 per mile, on the average, and requiring great expenditures for the maintenance thereof; of many thousand miles of cable under the high seas, of the cost and value of $3,500 per mile, on the average; and of many thousands of miles of lines of telegraph in uninhabited, or sparsely inhabited portions of the United States and Mexico, which, by reason of the great cost of transportation of material, and cost of maintenance, were of great cost and value. That all the plaintiff's lines in the state of Indiana, by reason of the proximity to supplies of material, and the very cheap transportation, were of minimum value, as compared with the plaintiff's lines situated elsewhere, and that by reason of these facts the average mile of the telegraph line of the plaintiff within Indiana was of the value of 40 per cent. of the value of the average mile of the whole line situated outside of the state of Indiana, reckoning such value upon the cost of construction and maintenance, and making allowance for deterioration.
That 66 per cent. of the plaintiff's whole business in transmitting telegraphic messages, and 60 per cent. of its business in the state of Indiana, was interstate and international business, and that the average net earnings of a mile of the line in the state of Indiana amounted to only 60 per cent. of the net earnings of the average mile of its line outside of the state.
That the plaintiff duly accepted the provisions of the act of congress of July 24, 1866, c. 230 (now sections 5263-5269 of the Revised Statutes), that all the telegraph lines owned or operated by the plaintiff in Indiana were constructed upon railroads, streets, and other post roads of the United States, and thereby the plaintiff was an agent of the government of the United States in the transmission of intelligence by electricity, and that the statute of Indiana of March 6, 1893, and the assessment and valuation of the plaintiff's property under that statute, rendered its property in Indiana substantially valueless, and prevented it from performing its obligations to the United States.
That much of the plaintiff's capital stock, to the amount of $7,633,230, 'is invested in and represented by the capital stock and bonds of other telegraph and telephone corporations, whose telegraph or telephone plants are leased to or operated by complainant, which said telegraph and telephone corporations possess no property in the state of Indiana, and do not own or use any franchise granted by the state of Indiana, and are wholly situated outside of the state of Indiana.
'That the attempted and pretended valuation of complainant's said property by said state board of tax commissioners, in manner aforesaid, upon the value of complainant's shares of stock, whether said board pretended to value said property upon a basis which included the consideration or estimation of market value or actual value of the shares of stock of complainant, necessarily includes, and does in fact include, values which are no part of the true cash value of the property of complainant in Indiana, but are imputed and fictitious values, distributed to complainant's said property in Indiana, as portions of the value of the business, business ability, enterprise, and skill of complainant, of the real and personal estate owned and leased by complainant, and outside of the state of Indiana, and of complainant's franchises granted by states other than Indiana, and municipalities outside of Indiana, and by the United States, and by foreign states and nations, and of the contract relations and other relations existing between complainant and other corporations, all of which said property, things in action, and other things and matters of value, are beyond the jurisdiction of the state of Indiana, whether for the purpose of taxation, or for any other purpose.'
That the auditor of the state on September 15, 1893, certified the valuation aforesaid to the auditors of the counties through which the plaintiff's telegraph lines extended, and that the county auditors were engaged in apportioning and distributing the same among the townships, and were preparing to deliver tax duplicates to the county treasurers, to the end that they might collect the tax from the plaintiff.
That the statute of 1893, c. 171, was contrary to the constitution of Indiana, in various particulars pointed out (but not now relied on), and that this statute, and the assessment and valuation of the plaintiff's property by the state board of tax commissioners in compliance with its provisions, levied a tax upon interstate and international commerce, in violation of article 1, § 8, of the constitution of the United States, and deprived the plaintiff of its property without due process of law, and denied it the equal protection of the laws, in violation of the fourteenth amendment to the constitution.
The defendants demurred generally to the bill. The court sustained the demurrer, and, the plaintiff declining to amend its bill, entered final judgment for the defendants. The plaintiff appealed to the supreme court of Indiana, which affirmed the judgment. 141 Ind. 281, 40 N. E. 1051. The plaintiff thereupon sued out this writ of error.
John F. Dillon, for plaintiff in error.
[Argument of Counsel from pages 12-14 intentionally omitted]
Judson Harmon and Wm. A. Ketcham, for defendants in error.
Mr. Justice GRAY, after stating the case, delivered the opinion of the court.

## Notes

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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